Meituan compromised and Douyin changed its direction. Has the local life strategy changed?

The business model of large companies is to gradually expand from the local market to a wider range of markets, but it seems that Meituan and Douyin are no longer limited to this. The local market is an important part of the market segmentation. What does it mean to change the business strategy? What changes will local life undergo as a result?

As Internet giants shrink their footprints and cling to their core businesses, local life, as one of the few incremental markets, has become the core battlefield for all the companies to compete. Meituan has managed to keep most of its business footprint, turn losses into profits, and its stock price has rebounded.

At the same time, Douyin has taken over some of Meituan's weak markets, with sales of local life service sector exceeding 100 billion in the first quarter. Recently, Kuaishou announced in-depth cooperation with Meituan, aiming at various vast sinking markets.

In addition, Video Account, together with WeChat Pay, is also making its mark in the field of local life services... Participants focusing on local life business are showing off their "special skills".

For Meituan and Douyin, which have been fighting the most fiercely in the past two years, this is no longer a close-range boxing match, but a long game of Go. Both sides look for weaknesses, calculate points, and strive for opportunities in the back-and-forth game.

As a long-time observer of this event, Crawley wants to explore in depth in this article:

In the first half of 2024, what effective strategies have all the participants adopted in the field of local life services? What are the key factors for the success of this business? As the battlefield gradually sinks to the third- and fourth-tier cities, who will stand out in this protracted battle and become the ultimate winner?

1. Douyin targets chain brands, what will happen to small shops?

Local life business is a broad concept, and different companies have different definitions and focuses. Meituan mainly focuses on food delivery, flash sales, in-store, hotel and travel, etc., while Douyin mainly focuses on group buying, cultural travel, food delivery, etc.

According to the "2023-2024 China Local Life Service Industry Market Monitoring Report", by 2025, my country's local life service market will reach 2.5 trillion yuan. Its huge market potential has made it the focus of competition among all parties.

Many local life business practitioners have emphasized that local life is a large market, and the competition is not essentially a competition for existing stocks. However, the incremental market does not mean that there is no competition for local life businesses. The resources of high-quality merchants are limited, especially in the field of local promotion.

Unlike traditional e-commerce, merchants in local life businesses, especially catering merchants, have a strong regional characteristic in their radiation circle. Characteristics such as small range, high density, and low population turnover determine that local life has always been closely linked with offline promotion.

As the "tentacles" of local life businesses in various places, local sales capabilities have, to a certain extent, become an important indicator for measuring the service capabilities of platform merchants.

In fact, in the “Thousands of Group Wars” 10 years ago, Meituan was the last one to laugh thanks to its in-depth field promotion team, refined operations, and continuous business strategies.

Former Alibaba President Guan Mingsheng once said: "The Thousand Group War is essentially an offline advertising war. If it is aimed at merchants, no matter how good the advertising is, it is not as good as strong execution to promote the team; if it is aimed at consumers, the effectiveness of online advertising far exceeds offline brand advertising."

Meituan’s video portal In recent years, Meituan has continued to increase its ground promotion efforts, consolidating and expanding its market position through the strategy of “crazy visits and crazy orders”.

"My new store has been open for two months, and five or six groups of people from Meituan have come to ask me if I want to do group buying activities." The owner of a boutique coffee shop in Beijing said this at the end of 2023.

Compared with Meituan's local marketing teams in various cities, Douyin mainly relies on experienced third-party companies in the local area, that is, service providers. Service providers may have experience in live broadcast operation, merchant store operation experience, or transformation from payment business.

To a certain extent, the existence of service providers has provided convenience for Douyin Local Life to capture small town businesses. The Douyin platform only needs to manage service providers and does not need a large-scale ground promotion team. But on the other hand, the existence of such "wild spokespersons" also buries hidden dangers for Douyin's management, and there are cases where service providers develop secondary agents under the official banner.

Given that Douyin has failed to significantly shake Meituan's position in the local life market after three years of traffic competition, its strategic direction has quietly changed.

According to the news from Jingxuan Pro, Douyin's live service has recently been increasing the GMV share of NKA (national chain brand), and plans to increase it to 50% of the entire live service in the future; CKA (regional chain brand), as a city manager, focuses more on scale capabilities; roughly estimated, the combined share of the two will be at least 60%; small stores are not the focus, and need to develop their own content capabilities.

In this context, chain brands will undoubtedly become Douyin's next key target, indicating that the traffic inclination towards small stores will be weakened, and small store owners need to be prepared to adapt to the new environment.

An in-depth analysis of the business logic of local life services shows that the current platform's profits can only be absorbed from the B-end. B-end merchants value platform traffic in order to obtain more economic benefits. Only when the platform provides B-end merchants with sufficient sales can B-end merchants reduce their fixed costs.

Image source: TikTok

Faced with the fierce competition between Douyin and Meituan for small store resources, merchants once had the freedom to choose their side. However, with the shift in strategic focus, if small store merchants want to remain competitive in the competition, they must invest more energy in content creation, improve content quality and attractiveness, and cope with the challenges brought about by changes in traffic sources.

2. How is price competitiveness reflected?

For platforms and merchants, low-price strategies have always been a key lever to leverage traffic and user attention. In the first half of 2024, the competition between Meituan and Douyin has further intensified, and many consumers have intuitively felt that platform subsidies and low-price discounts seem to have returned to their field of vision, becoming a highlight of the market.

Take Meituan as an example. Its "Pinhaofan" business, which it launched in 2020, accurately positioned the sinking market from the beginning, using low-price takeout as its core competitiveness, and successfully penetrated and won the favor of users.

As its business scope expanded to first-tier cities such as Beijing and Shanghai, Pinhaofan not only achieved a leap in daily order volume to 3 million, but also built Meituan's price competitive advantage in the food delivery market.

In addition, Meituan has also created the live broadcast IPs "Shen Qiangshou", "Bao Tuantuan" and "418 Shenquan Festival" takeaway live broadcasts, and invited celebrities and top KOLs to drive traffic and build momentum for the live broadcasts.

The recommended traffic on the homepage is tilted to the live broadcast entrance, and the live broadcast content is connected with the shelves to make up for the shortcomings of its own content. According to a third-party agency, the conversion rate of Meituan's live broadcast orders is 30%-40% on average, showing strong market potential.

Image source: Meituan

For Douyin, which has relied on low prices and traffic to gain popularity, low prices have long been its "weapon". Through the efficient operation of live broadcast rooms and the strategy of hot products, Douyin has successfully attracted and converted a large number of users. Its sales in the first quarter exceeded 100 billion yuan, and its low-price strategy has once again proved its market appeal.

However, in the long-term battle of local life, traffic is only the starting point. To stand out from the competition, a virtuous cycle of traffic, conversion and retention must be achieved. It is understood that many merchants continue to lower their prices to attract traffic, but traffic is difficult to retain, and monthly sales have increased, but the repurchase rate has not increased.

Therefore, while continuing to deepen the low-price strategy, the platform and merchants have begun to explore diversified development paths. Meituan is accelerating the promotion of group buying business. Local group buying is based on the advertising business attributes of LBS and can well undertake the activation and conversion functions after attracting new customers.

Merchants need to focus on improving service quality, building a user-centric service system, ensuring that traffic is converted into loyal users, achieving sustainable development, and combining public and private domains in order to retain traffic.

3. After low prices, Kuaishou aims at the lower-tier markets

In recent years, the county economy has been widely reported as an important force in boosting consumption, and is considered to be an important area for supporting consumption today.

The penetration of local life in first- and second-tier cities has always been obvious to all, but in the broader third- and fourth-tier cities and county towns, especially among non-youth groups, there is still a lot of room and potential for local life business.

According to the QuestMobile report, in April 2023, combined with the penetration rate of the entire network, the penetration rate of comprehensive services (mainly group purchasing), which are an important supporting sector in local life, was less than 40%, and the penetration rate of takeaway services was only 15.6%.

It is worth noting that the strategic cooperation between Kuaishou and Meituan was recently successfully renewed and announced to be fully upgraded. This move has undoubtedly injected vitality into the local life service in the sinking market characterized by the "old iron" culture.

Image source: Kuaishou

Specifically, the cooperation between Kuaishou and Meituan not only includes group purchase products, but also a combination of various marketing forms such as voucher products, membership products, and flash sales products. Kuaishou's users complement Meituan's product supply, creating more possibilities for Kuaishou's local life business.

Although Kuaishou has made early plans, its investment in local life has always been limited. Until last year, Kuaishou launched a series of support plans to encourage merchants, content service providers, and influencers to settle in, and launched an official local life mini program to build a closed transaction loop. In half a year, Kuaishou's local life payment GMV has increased 9 times.

Entering 2024, Kuaishou will increase its investment in local life business. In the coming year, Kuaishou also plans to invest more than 4 billion traffic to support high-quality creators, help creators across the platform realize more than 100 billion yuan in monetization, and shout out the slogan "All group purchases are worth redoing on Kuaishou", aiming at the sinking market.

However, many people have also questioned the local life services in the county town scenario, questioning whether the consumption habits of the sinking market are consistent with the local life business.

Despite this, the success stories of companies such as Pinduoduo have fully demonstrated the huge consumption potential and demand of the sinking market. Therefore, in the field of local life services, whoever can accurately capture and effectively meet the unique needs of the sinking market is more likely to stand out in the fierce market competition and win the future market opportunities.

As to whether it will be Kuaishou, it is worth further observation.

4. Video Account, no longer restrained?

In a situation where Meituan and Douyin are fighting fiercely and Kuaishou is quietly coming to the fore, the emergence of Video Account has added fuel to the local life battlefield.

Video accounts’ attempts to enter the local life sector can be traced back to March last year, when they were still cautious, testing local life component interfaces only on a very small scale to meet the initial needs of specific brand merchants, rather than a comprehensive strategic deployment. In the early days, Video accounts’ operational investment and market feedback were relatively flat, facing challenges such as insufficient traffic and low write-off rates.

However, in April 2024, Video Account officially announced an important move, officially opening up applications for entry into Video Account stores of the "local life" business type to merchants in the two major industries of catering and hotel tourism, marking a substantial step forward in its layout in the local life field.

This transformation is inseparable from the strong support and promotion of the WeChat Pay team. Its deep merchant resources and data accumulation provide solid backing for the video account.

It is worth noting that the natural fit between the payment team and local life services has long been apparent, and the early development of Douyin's local life services benefited from the extended services of the payment business.

Today, Video Account has also cleverly borrowed this model, focusing its local life business on well-known chain brands such as Luckin Coffee and Mixue Ice City.

However, in general, the local life business of video accounts is still in its infancy. Take the Luckin Coffee brand as an example. In the past six months, it has only launched three live broadcasts, most of which were mainly to promote new products.

Image source video number

In May of this year, in an article titled "With 1.3 billion users, can video accounts become the "catfish" of local life?", Clour summarized several current methods of redemption of video accounts. It is understood that there are currently three main methods of redemption of video accounts:

First, for group purchase orders from merchants' self-operated video account stores, a virtual product delivery system will be temporarily used. Merchants click to ship (no actual delivery is required), and users confirm receipt in the order center, which is considered to be completed.

The second is the group purchase orders of the service provider's video store, which sends the verification code and group purchase code to the user in the form of text messages. The merchant can complete the verification by scanning the code or entering the number through the system provided by the service provider;

The third is to jump to the group purchase order of the mini program and verify it through the original system of the mini program.

From the perspective of product verification, Video Account shows a verification method that is different from existing platforms. It is exposed that Video Account has not been connected to the cash register system on the market, and the verification process is relatively cumbersome. The clerk needs to input the orders one by one and then verify them.

The motivation behind Video Account's involvement in the local life field is not only to counter the expansion of competitors such as Meituan and Douyin in the local life territory, but more deeply, it may be to take advantage of the traffic dividend of local life services to attract traffic to the Video Account live e-commerce sector and expand the business boundaries.

The importance that Tencent’s senior management attaches to Video Account is self-evident. At this year’s annual meeting, Ma Huateng once again emphasized the importance of Video Account and stated that he will make every effort to develop Video Account live streaming e-commerce. Video Account is also known as “the hope of Tencent.”

However, it is worth noting that judging from the configuration of the WeChat team, it is believed that products and light operations have always been its characteristics. It is understood that the current WeChat team has more than 4,000 people, and the video account has even fewer people.

However, whether it is live e-commerce or local life, past experience shows that focusing on operations is the solution. Take Douyin as an example. According to Wandian.com, Douyin’s life service sales team alone has more than 5,000 people.

In general, video accounts have a large number of untapped users and have certain potential. In addition, video accounts are backed by the WeChat ecosystem and have the inherent advantages of revitalizing private domains and expanding public domains. ‍‍‍However, in order to retain a place in the fiercely competitive local life battlefield and do a good job in the "heavy" business of local life, more attractive chips need to be put forward.

5. Write to the end

Zhang Chuan, senior vice president of Meituan and president of the in-store business group, once defined the competition between Meituan and Douyin over local life as "this is not a short-term war, but a brutal and torturous trench war."

Overall, Meituan's local life business is still a well-deserved strong player, so strong that it can still stand firm under the fierce attack of Douyin. Douyin's sales of 100 billion yuan should not be underestimated. The focus of chain brands is obviously more in line with Douyin's platform attributes than small stores. The entry of video accounts and Kuaishou has once again muddied the market.

The long struggle for local life is far from over.

Author: TopKlout

Source: WeChat public account "TopKlout"