Douyin, Kuaishou, and Meituan’s food delivery “Three Kingdoms”

Driven by the wave of digitalization, the local life service market has ushered in new changes. Today, with the entry of short video giants such as Douyin and Kuaishou, the food delivery market presents an unprecedented "Three Kingdoms" situation. Meituan, as the leader of the food delivery industry, is facing unprecedented challenges. This article will deeply explore the logic and trends behind this market change, analyze the strategies of each platform and possible future development paths.

Recently, the food delivery platforms Douyin and Kuaishou have been making continuous moves, and Meituan is also strengthening its "enemy defense" strategy.

Starting from June 15, the "group purchase and delivery business" under the original Douyin Life Service, that is, the food delivery business, will no longer allow new merchants to settle in, and the group purchase and delivery products are expected to be removed from the shelves on July 15, and no new orders will be received. The group purchase and delivery business will be migrated to the Doudian Daojia food delivery platform under Douyin e-commerce, and the food delivery business of merchants' own delivery mini-programs will not be affected.

In March this year, Kuaishou also optimized the product delivery function. In the group purchase packages sold by merchants, Kuaishou not only added the label "only supports delivery" in the service guarantee, but also added the "takeout to home" function service, which is technically supported by Kuaishou's local life open platform.

At the same time, Meituan, the leading food delivery platform, made three structural adjustments within the first three months of this year, which indirectly reflects its anxiety in dealing with a number of new entrants such as Douyin, Xiaohongshu, and Kuaishou.

1. Douyin Takeaway has been adjusted many times

In November last year, Douyin's local life business also announced adjustments. Pu Yanzi, head of Douyin's commercialization, will also serve as head of the life service business, and Zhu Shiyu, the former head of the life service business, will be transferred to be in charge of the first-level department "Growth and Business Solutions".

In February this year, according to relevant media reports, the organizational structure of Douyin's life service department and commercial sales department will undergo major adjustments, and some middle-level managers of the two businesses will also rotate in both directions. That is, the division of labor of the various departments under Douyin's life service will be adjusted from industry to region. At the same time, some middle-level backbones of the original commercial department were transferred to the life service department.

Due to the integrated reporting of Douyin's multiple centers, Douyin's food delivery business was sluggish in the life service department. Douyin tried to allocate the three key revenue-generating businesses of mass consumption, self-service customers, and local consumption to three middle-level managers, thereby alleviating the work pressure of insufficient staff after some middle-level managers were transferred.

The following month, Douyin Takeaway was adjusted from the local life business line to the Douyin e-commerce business line, and integrated with the hourly instant retail business. However, most of the merged categories are fresh fruits and supermarkets.

In order to focus on food delivery, the local life department and the e-commerce department are competing against each other. In June this year, some merchants said that the original Doudian instant retail service has been changed to Doudian home delivery, and the "group purchase and delivery business" under Douyin Life Service will also be moved here. In other words, in addition to fresh food and department stores, categories such as catering can obtain more traffic.

In addition, in the past, local life delivery methods were based on short videos, live broadcasts, searches, and shelves. Group purchase delivery methods are directly operated by the platform or through the Douyin takeaway app, and merchants need to build their own transportation capacity or access third-party transportation capacity.

After this adjustment, Douyin's e-commerce department still provides food delivery services based on short videos, live broadcasts, searches, and shelves. However, in the latest "Admission Announcement for Home Delivery Content Service Providers", Douyin stated: It will serve home delivery merchants, help home delivery merchants operate food delivery businesses on the Douyin e-commerce platform, and provide full-case operation and live broadcast services (not involving delivery fulfillment-related services), and use the commissions negotiated and confirmed with merchants as operating income to help merchants operate healthily in the Douyin e-commerce ecosystem.

It can be seen that Douyin specifically mentioned that it does not involve delivery and fulfillment related services. It believes that if it follows the traditional delivery model, it will be difficult to catch up with competitors such as Meituan and Ele.me in the short term, and it will also be difficult to bring incremental growth and business changes to the industry. It is better to first leverage the traffic advantage and do other services well.

According to media reports, in the first quarter of this year, Douyin's life services (mainly composed of in-store catering, in-store comprehensive and hotel and travel businesses) had sales of more than 100 billion yuan before write-offs. In April, Douyin's life services had sales of about 35 billion yuan. Therefore, Douyin's local life services still have a long way to go to achieve the established goal of 600 billion yuan.

Now, with the launch of Douyin's food delivery platform and the integration of home delivery into e-commerce, Douyin's life service can focus more on in-store services. Douyin's food delivery can also have new developments, or spark with other platforms and achieve more breakthroughs.

At the same time, there have been recent news that, following Douyin, Kuaishou has also launched group buying and delivery services and tried out the catering takeaway business.

2. Kuaishou focuses on food delivery and faces the same difficulty as Douyin in fulfilling its contract

Seeing that Douyin is constantly making moves in local life, Kuaishou has also begun to increase its investment in food delivery. The Kuaishou Local Life Division was established in October 2022. In the early stage, it mainly provided in-store services such as catering, hotels and travel by connecting to platform-based merchants such as Ctrip and Meituan.

At the end of 2021, Kuaishou and Meituan reached a strategic cooperation on interconnection, declaring that they would integrate content scene marketing, online transactions and offline fulfillment service capabilities to achieve "one-stop" complete consumption. However, during the implementation process, the two parties did not go deep into the offline fulfillment link, and the cooperation was limited to Meituan's opening of Kuaishou mini-programs and group purchase coupons, mainly for in-store scenarios, and less involved in home delivery.

In September 2022, Kuaishou upgraded its local life department to a first-level business unit, standing shoulder to shoulder with the main site, commercialization, e-commerce, and internationalization, and the entire business segment began to accelerate.

By the end of 2023, as the number of local life merchants on Kuaishou increased significantly, some merchants began to sell takeaway group purchase packages and arranged door-to-door delivery. In March of this year, Kuaishou began to optimize the group purchase delivery project, but at this time, most of the takeaway merchants served were large brands, high customer orders, and weak time-efficiency merchants such as KFC, Haidilao, and Xiaolongxia. After users purchase a package on Kuaishou, they need to fill in information and place an order on a third-party platform.

Specifically, users can now open the "discount group purchase" in the Kuaishou local section and search for keywords such as takeout to find some takeout products, most of which are marked with "delivery to home" or "takeout to home". However, users need to find a third-party platform to fill in the delivery information after placing an order.

In other words, if merchants want riders to accept orders from Douyin and Kuaishou, they can only increase the delivery price when relying on third-party delivery. This will cost more than Meituan. Kuaishou food delivery faces the same problem as Douyin, namely, lack of transportation capacity. Both sides are currently looking for a solution.

When developing advertising, live streaming and other businesses, the two short video platforms, Douyin and Kuaishou, were used to going light and using the simplest path to make the most money. In the subsequent business, both parties are also racking their brains to simplify the path, hoping to invest less money and use the leverage of traffic to leverage greater profits. Douyin and Kuaishou also follow this idea when doing food delivery, relying on third-party transportation to deliver food, which is actually in line with their early cooperation with Meituan and Ele.me.

However, the food delivery business, as well as other local life businesses, are all asset-heavy businesses. Large investments in both online and offline operations are required to improve the infrastructure. These infrastructures allow businesses to simplify their operations and users to ensure a good experience, ultimately forming a virtuous cycle.

In contrast, Douyin and Kuaishou can leave the fulfillment of contracts to merchants or third parties, which is easy for them, but merchants and consumers have to bear higher costs and worse experience. Day by day, Douyin and Kuaishou's content and traffic advantages in the food delivery field will become smaller and smaller, and the growth rate will not increase.

In addition, let's look at Kuaishou's basic market. In the first quarter of 2024, Kuaishou's actual monthly active users were 697 million, a decrease of 0.4% from the previous quarter. In the "peak season" of the Spring Festival holiday, it still showed a trend of loss; at the same time, although the average daily usage time of Kuaishou's daily active users increased month-on-month, it still decreased compared with the third quarter of 2023.

This may have a multi-faceted impact on Kuaishou's commercialization, such as a decline in advertising revenue, and a reduction in the conversion rate and profitability of e-commerce, live streaming and other businesses. Therefore, Kuaishou urgently needs to find other business growth points to maintain the stability of commercialization. Food delivery is a starting point, but Meituan will not sit idly by as Douyin and Kuaishou develop food delivery.

3. How does Meituan “hold” its position?

On January 7, Zhang Chuan issued an internal letter stating that "opponents are getting stronger. In the past, all the opponents that Meituan defeated had weaknesses, but now they are all all-round players."

In the first quarter of this year, the growth of Meituan's core local life business exceeded expectations. In the catering takeaway sector, in addition to "Shen Qiangshou" and "Pinhaofan", Meituan also launched a new model of "brand satellite store".

Meituan founder Wang Xing also mentioned at the earnings conference that since mid-May, Meituan has upgraded the "God Member" program in several pilot cities. The internal expectation is to "enhance the transaction frequency of users of instant delivery and bring substantial growth to catering merchants."

Faced with TikTok's strong offensive in the field of local life services, Meituan is working hard to make up for the shortcomings of the content ecology and is making every effort to promote the development of short video and live broadcast businesses.

Recently, Meituan added a theater channel to its APP, adding short video explanations of movies and TV series to this section, striving to compete with Douyin through differentiated content formats.

This means that in the competition with Douyin, Meituan is gradually regaining more initiative.

On the other hand, Xiaohongshu has already launched the "Official Store Exploration Cooperation Center" and introduced the "100 Store Exploration Plan"; Amap and SF Express have also entered the market by integrating with Alibaba's local life and live streaming respectively; and this year, WeChat Video Account has also released a policy for the entry of local life merchants.

Recently, Tencent Video Account announced that it will suspend the entry of 114 third-level e-commerce categories from June 21, mainly in the local life field. There are rumors that Tencent plans to vigorously develop local life business and separate it from Video Account e-commerce for independent development; however, people close to Video Account told the media that this is a normal adjustment, the purpose of which is to further standardize the operation of related categories and products and better serve the needs of users and merchants.

In short, in the local life market, Meituan is still the strongest player. It's just that Douyin and Kuaishou are now fighting each other, and the local life battle is escalating. At the beginning of 2024, Meituan, Douyin, and Kuaishou have all ushered in local life organizational changes and business upgrades, which seems to indicate that the industry is about to usher in more new changes and new situations.

There is never a lack of war in local life, and the one who laughs last in the game is the winner.

Author: Hu Duzhi This article is written by the author of Operation Party [Jingshang], WeChat public account: [Jingshang], original/authorized to be published on Operation Party, and any reproduction without permission is prohibited.

The title image is from Unsplash, based on the CC0 protocol.