The average GMV per game is less than 25,000. The Oriental Selection has hit a wall.

Oriental Selection recently developed a new business, but the results were not ideal. Let’s read this article to find out.

Oriental Selection has entered a new river.

On April 8, Oriental Selection announced its partnership with JD Logistics to officially launch the “Hourly Delivery” service, first targeting the Beijing market. Goods will be delivered to JD Logistics’ forward warehouse in Beijing, and the delivery range covers 80% of the area within the Fifth Ring Road of Beijing, and will cover more cities in the future.

Oriental Selection has been planning to launch this new business for a long time. At the beginning of this year, Oriental Selection began to test the delivery service in one hour, covering Shanghai and Beijing. At that time, Shanghai mainly included Hongkou District and Xuhui District, and Beijing included the Shilihe area of ​​JD.com's warehouse.

As of April 18, @东方甄選小时达 has 124,000 followers on Douyin, and the store has 45 items on sale, including seafood, grains, oils, instant food, paper products, etc., all of which are sold by Oriental Select, with a unit price of around 39 yuan to 139 yuan.

Screenshot of @东方选小时达TikTok homepage

The account homepage shows that its live broadcast time is roughly from 2 pm to 10 pm. The initial operation feature is that the young anchor group of Oriental Selection will serve as deliverymen to deliver goods to users on electric bikes, and their work Vlogs will be posted on the relevant accounts of Oriental Selection; in addition, the anchors will perform talent shows such as singing and playing, which adds to the highlights.

From self-operated products, launching membership-based e-commerce apps, deploying platforms such as Taobao and Xiaohongshu, opening an independent live broadcast room @与辉同行 for Dong Yuhui's team, to now entering the instant retail track, Dongfang Zhenxuan has been trying to diversify its business layout. How much growth and imagination space can the "hourly delivery" business bring to Dongfang Zhenxuan? How far has Douyin's hourly delivery business come?

1. Oriental Selection’s Preliminary Study on “Hourly Delivery”

On April 9, the Douyin account @东方选小时达 launched its first live broadcast, with the slogan "live broadcast with goods delivered to your home within 1 hour", and Dada Express took over the delivery. According to statistics from Chanmama, the estimated sales volume of the first live broadcast was 750-1,000 pieces, with cumulative sales of 50,000-75,000 yuan.

According to Kas's initial observation, compared with the instant retail business of Meituan, JD.com and other platforms, the main differences of Oriental Selection lie in its brand and anchors.

• On the one hand, the brand value of Oriental Selection comes with traffic aura and fan stickiness, and its new business will inevitably be supported by loyal users.
• On the other hand, at the operational level, Oriental Selection creates differentiated advantages for its delivery services by leveraging the personal charm of its anchors.

The large-scale anchor team of Oriental Selection will participate in the delivery process and randomly deliver goods to the doorsteps of users who have placed orders. Among them, anchors such as Tian Quan, Ming Ming, Feng Feng, and Jing Wen all have a certain number of fans and popularity. When users receive goods personally delivered by the experts on the other side of the screen, it has an extra layer of meaning compared to shopping on Meituan and JD platforms.

Screenshot of the live broadcast room of Oriental Selection Hourly

The account was able to gain over 100,000 followers in just a few days, thanks to its operational strategy of providing emotional value to users. However, whether this emotion can last and how long it can last remains a big question mark.

According to Chanmama data, as of press time, @东方选拾時時達 has broadcast 10 live shows, with an estimated cumulative sales of 100,000 to 250,000 yuan. After the first live show, sales have declined, and the current estimated sales per show is 5,000 to 7,500 yuan.

Let’s look at the core of the live broadcast room - the products. Oriental Selection Hourly Delivery did not show many highlights.

The essence of "12-hour delivery" is to bring local products or local merchants online. The cost of merchants doing 12-hour delivery on Douyin includes "warehousing management cost + online operation cost + logistics and distribution cost", which will inevitably lead to product prices being much higher than local retail prices.

The business model of delivery within 24 hours determines that the live broadcast room needs products with high gross profit, differentiated selling points and emphasis on freshness to cover the cost of delivery and distribution and complete conversion. However, the products of Oriental Selection’s delivery within 24 hours have not yet reflected these characteristics. Shrimp, grilled sausages and paper towels are all popular products that do not require much timeliness, and the SKU supply is not rich enough, so users are more likely to place orders on comprehensive platforms.

"The data (of the first live broadcast) was within expectations, but it is obviously not an ideal number, because compared with the scale of the e-commerce business, the hourly delivery module is still far behind," said Li Hao, founder of Kas Consulting.

Li Hao believes that users are not sensitive to the timeliness of many categories of goods, and that delivery within one hour is only applicable to a very small number of categories (such as medicines, hot pot, flowers, cakes, etc.). Under the circumstance of limited categories, the market target volume of delivery within one hour cannot be compared with the original target volume of e-commerce. Dongfang Zhenxuan cannot do a good job in the delivery within one hour business as well as its self-operated business.

As Li Hao said, merchants of different categories have very different feelings about "hourly delivery". According to Tech Planet, a flower merchant who joined Douyin's hourly delivery service said that through local recommendations and live broadcasts, his performance in September 2023 increased by 30% month-on-month.

At present, we have not seen any particularly outstanding players emerge under the business model of "hourly delivery + live broadcast", which also reflects the operational difficulty behind it.

Similar questions are often discussed in the industry: Can merchants find a more profitable way to play on Douyin's "hourly delivery"? What kind of product structure and warehousing configuration can run the "hourly delivery" business on Douyin?

Some people have suggested that streamlining SKUs (only selling high-unit-order items that are suitable for short video displays and have unique selling points) and setting up at least 10 outlets in provincial capital cities is a more reasonable approach.

Chen Weilong, an instant retail entrepreneur, expressed a view on his WeChat official account: "Most of the Douyin hourly delivery players now have only one outlet. In order to cover the entire city, the delivery radius is 10-20 kilometers, and the delivery cost is extremely high. This is very unreasonable. By increasing the number of outlets, the delivery radius can be shortened and the delivery cost can be reduced, but this will also lead to an increase in the total inventory of outlets and a decrease in turnover, which needs to be matched with the goods, sales volume, etc. My opinion is that each provincial capital city needs at least 10 outlets."

2. Douyin’s Instant Retail Battle

Since the target user base of "hourly delivery" is relatively small and the business is difficult to expand, why does Oriental Selection still want to engage in "hourly delivery" at this time?

A new sales channel will provide some new stimulus to the capital market.

Since the official launch of the Oriental Selection live broadcast room at the end of 2021, it has been exploring diversified businesses. For example, it emphasizes supply chain construction, focuses on self-operated products, and launches an independent APP; in addition to the main account live broadcast room, it has set up matrix live broadcast rooms such as @东方选美丽生活, @东方选看世界, and @与辉同行; and expanded cultural and tourism products in the hope of finding a second growth point besides agricultural products.

Oriental Selection Douyin Matrix Live Room

The latest financial report shows that Oriental Selection's revenue has increased but its profit has not, and its market value has fallen by more than half from its peak. From June 1 to November 30, 2023, Oriental Selection's total revenue was 2.795 billion yuan, a year-on-year increase of 34.4%; net profit was 249 million yuan, a year-on-year decrease of 57.4%; adjusted net profit was 595 million yuan, a year-on-year decrease of 13.3%. During the same period, Oriental Selection has more than 264 self-operated products, with revenue of about 1.9 billion yuan, and self-operated products accounted for 67.98% of total revenue.

In its financial report, Dongfang Zhenxuan revealed that it will continue to expand the number of self-operated products, expand the scale of factories, strengthen and cultivate excellent live broadcast talent teams, and invest in technology research and development. It will also increase investment in supply chain construction and cooperate with third-party logistics companies to carry out forward warehouse pilot projects in first-tier cities such as Beijing to further improve logistics efficiency and ensure the supply of fresh and high-quality products.

Of course, there is another reason that cannot be ignored.

Li Hao believes that "Dongfang Zhenxuan may not want to try the business of hourly delivery, but when Douyin e-commerce launches new business, it is likely to hope to enter the market through benchmark MCN institutions to do this business and drive others to join the market."

Douyin has been planning its "instant retail" business for two years.

In August 2022, Douyin Supermarket released investment details and started a pilot in Shenzhen two months later. During the pilot period, local life merchants provided "hourly delivery" services, with the main commodity categories being vegetables, fruits, and flowers, and merchants directly providing users with same-city delivery services.

In February 2023, after Douyin Supermarket was officially launched, "Hourly Delivery" appeared in the Douyin Supermarket interface, alongside "Douyin Supermarket". In May, the test scope of Douyin's "Hourly Delivery" was further expanded, with pilot cities expanded from Shenzhen and Guangzhou to Wuhan, Tianjin and other places.

In October 2023, Douyin opened an independent entrance for "Hourly Delivery" under the mall channel on the homepage, and users can search for "Hourly Delivery" through Douyin to directly enter the page. The "Hourly Delivery" entrance previously embedded in the "Douyin Supermarket" interface is still retained.

Tik Tok Hourly Home Page

It is worth noting that instant retail is divided into platform model and self-operated model, and Douyin adopts the platform model.

Similar to Meituan Flash Purchase and JD.com, the Douyin platform does not directly own the goods, but instead cooperates with local merchants. After users place an order on the Douyin platform, the platform takes a commission on the order.

Currently, Douyin’s 1-hour delivery service covers multiple categories, including fruits and vegetables, meat, eggs, seafood, snacks, mobile phones, digital products, genuine medicines, etc. These products come from offline supermarkets such as Yonghui Supermarket, Dingdong Maicai, Wumart Supermarket, and PuPu Supermarket, as well as branded retail stores such as Xiaomi Home and Miniso.

The self-operated model means that the merchant owns its own forward warehouse or store, and users can place orders through the merchant’s separate mini-program or app. Oriental Selection Hourly Delivery, Dingdong Maicai, Meituan Xiaoxiang, Hema, etc. all fall into this category.

According to data from the Ministry of Commerce, the number of instant retail orders exceeded 40 billion in 2022, with a market size of 504.286 billion yuan. It is expected that the market size will reach three times that of 2022 in 2025.

Due to the rapid growth, major companies are continuously increasing their investment in instant retail business, making this track even more inward-looking.

In March 2023, Taobao launched the “1-hour delivery” service. Sellers and products that meet the entry requirements can display the “1-hour delivery” service logo, and users can see a special 1-hour delivery collection when searching for products. At the same time, Hema also launched the “1-hour delivery” service.

In August 2023, Meituan announced a partnership with SF Express, Flash Express, and UU Running Errands to improve delivery services and efficiency. In December, its Meituan Grocery Shopping app was upgraded to Elephant Supermarket, upgrading from fresh food categories to a more comprehensive supermarket category.

In November 2023, Ele.me announced the launch of the "Double Hundred Plan", working with 100 retail brands to achieve 100% growth in two years.

According to LatePost, JD.com will make the same-city business one of the four "must-win battles" in 2023. In 2024, "instant retail" will still be a core business, which shows how much JD.com values ​​it.

In the face of strong competitors, Douyin's advantage lies in its huge daily active users and the promotion of content to purchase conversion. As a means of attracting traffic, short videos and live broadcasts can show the appearance and user experience of products in multiple dimensions, and anchors with fan appeal can also stimulate fans' desire to buy.

However, users’ first impression of a platform is often deeply rooted and difficult to change. In the eyes of most users, Douyin may be associated with “fun and entertaining”, but definitely not “fast”. The core selling point of instant retail is “speed”, and Meituan is the one that can best capture users’ minds in terms of speed. Therefore, many people have not yet developed the habit of using Douyin’s “hourly delivery” service.

Looking at the industry, when Douyin entered the instant retail market, Meituan was already the industry leader, and the three giants occupied 75% of the market.

Ranked by transaction volume in 2022, Meituan, including Meituan Flash Purchase (platform) and Meituan Grocery (self-operated forward warehouses), had an annual total sales of 160 billion yuan, ranking first with a market share of 34%; followed by Ele.me (excluding takeout), with an estimated transaction volume of 108 billion yuan and a market share of 26%; JD.com ranked third, with a total transaction volume of 63 billion yuan and a market share of 15%.

In 2023, Meituan will maintain steady growth in its instant retail business by leveraging its advantages in logistics and distribution and its accumulated resources in the local life sector. The performance report shows that Meituan's instant delivery orders reached 21.9 billion throughout the year, a year-on-year increase of 24%.

How can Douyin Hourly Delivery, which came later, carve out its own path among many competitors? To what extent can the advantages of traffic and algorithm distribution affect the instant retail market? These are all questions worth continuous consideration.

Author: Kas Data

Source: WeChat public account "CaasData (ID: caasdata6)"