Meituan just launched Douyin, can it “follow” Video Account?

The author of this article analyzes the current situation of Meituan and introduces and interprets a way to catch up with short video platforms - becoming an "ally" with Video Account.

If time goes back a few years, Meituan would never have thought that its strong rival would be a short video platform. At present, in the local life field, content platforms such as Douyin, Kuaishou, and Xiaohongshu have all emerged and become the "new force" that threatens Meituan.

Among them, Douyin is the most difficult one. Last year, Douyin launched a "surprise attack" and launched a head-on confrontation with Meituan, which once caused considerable pressure on the latter.

According to a report by Haitong International, Douyin's local life GTV (total transaction volume after write-offs) will be close to 200 billion yuan in 2023, and the vast majority of it will be contributed by the in-store business. According to a research report by Bocom Securities, it is estimated that Meituan's in-store business GTV will be around 600 billion yuan during the same period - Douyin's local life transaction volume is close to 1/3 of Meituan's in-store business.

This is an amazing catch-up. You should know that Douyin only officially launched its local life business in early 2021, and it has only been more than 3 years, while Meituan has been deeply involved in it for more than 10 years.

Meituan’s response to this is mainly to “improve internal strength” - consolidate the basic shelf base and improve content. Last year, live broadcast and short video portals were both listed on the homepage of Meituan App.

In addition, Meituan may consider "bringing in external aid" and forming an "ally" with Video Account - in Tencent's March earnings call, Tencent President Martin Lau said that in the local life sector, Video Account may cooperate with platforms such as Meituan to help promote its local services.

What this means is that the local life business of Video Account does not seem to be prepared to do the "heavy" work itself like Douyin, but instead chooses to connect to the supply of platforms such as Meituan.

Tencent and Meituan have always had a close relationship. In Meituan's previous development stages, Tencent has provided financial or business support. To this day, in the WeChat "Shopping and Consumption" grid, Meituan still occupies two seats, namely takeout and special group buying.

Now, the two are expected to join forces again, which may bring new variables to the fierce battle for local life.

1. Meituan VS Douyin: Mutual advantages, each with its own shortcomings

In previous battles, Meituan and its rivals competed in the same business logic, but this time it is completely different. Douyin and Meituan are in a misaligned competition, with each other's advantages and weaknesses. This is quite similar to the e-commerce battle between Douyin and Taobao.

First of all, the starting points of traffic for the two are different.

According to data from iResearch Qianfan, in April last year, Douyin had 760 million monthly active users, while data from QuestMobile showed that Meituan had 530 million monthly active users during the same period.

Admittedly, Douyin may not be able to convert all of its users into local life users, but such a huge pool of traffic is enough to bring a lot of incremental space.

From the data, we can see that the "2023 Annual Data Report" released by Douyin shows that the total transaction volume of Douyin's life services in 2023 increased by 256% year-on-year, among which the short video transaction volume increased by 83% year-on-year, and the live broadcast transaction volume increased by 5.7 times year-on-year.

Secondly, the two meet different demand scenarios.

Douyin is an interest-based recommendation platform that stimulates user interest through content and leads to consumption. It is a “store finding people” model that can drive unplanned consumption. Meituan’s model is a shelf model with stronger search attributes. It is a “people finding stores” model that mainly undertakes planned consumption.

The two models have their own advantages and disadvantages. Interest-based consumption will take away some planned consumption, but in the short term, Meituan’s basic foundation will not be shaken.

This can be seen from its growth trend. The financial report shows that in 2023, Meituan’s core local business revenue was 206.9 billion yuan, a year-on-year increase of 28.7%, and its operating profit was 38.7 billion yuan, a year-on-year increase of 31%.

Source: Meituan Financial Report

The reason is that, on the one hand, Douyin’s infrastructure such as merchant supply and evaluation system is not as good as Meituan, and the demand scenarios it can meet are limited.

Taking merchant supply as an example, the "2023 Annual Data Report" shows that at the end of last year, there were 4.5 million Douyin life service partner stores, while Meituan’s financial report shows that as early as the end of 2022, Meituan’s annual number of active merchants was as high as 9.3 million.

On the other hand, Meituan’s core business base consists of small and medium-sized businesses. Guosen Securities’ research report last year showed that the number of Meituan’s small and medium-sized businesses accounted for 90%-95%, and their contribution to GTV accounted for about 90%.

For them, it is very costly and unaffordable to find users from Douyin's general traffic through short videos, live broadcasts, expert store visits, etc. This is the long-tail supply that Douyin finds difficult to leverage.

A Douyin operator took the baking industry as an example and did some calculations. With a gross profit margin of 40%-50%, after deducting 20% ​​for labor costs, 8% for water, electricity and rent, and 2.5% for the platform commission, only about 10% is left for marketing and promotion. Whether you use this space for live streaming or hire an agent to operate, there is basically no profit left. "So after trying out Douyin, small and medium-sized businesses have basically returned to Meituan."

However, Meituan cannot just sit back and relax. In the long run, Douyin’s shortcomings have the opportunity to be improved, supply can be supplemented, and search mentality can be cultivated, which may have a greater impact on Meituan’s shelf advantage.

Douyin’s evolution in the e-commerce field is a "lesson learned". It has expanded from interest e-commerce to shelf e-commerce. The Douyin Mall independent app launched on March 22 has generated impressive downloads in a short period of time. According to Qimai data, as of March 26, the total number of downloads of the Douyin Mall App on the Android system has exceeded 400 million, of which the downloads of Huawei and OPPO app stores have exceeded 100 million.

Douyin Mall App

Currently, Douyin is trying to make up for the shortcomings of local life and expand its business boundaries. For example, in January, it recruited life service providers in 50 low-tier cities to boost the supply of merchants in the sinking market; at the end of last year, it also invited users with a rating of Lv5-Lv8 on Dianping and a Douyin rating of Lv3 or below to join, and gave certain upgrade rewards to vigorously build a review system.

Douyin's attack on local life will only be more fierce in 2024. According to Wandian.com, after Pu Yanzi took over Douyin's life service at the end of last year, she raised the sales target for 2024 from the original 400 billion yuan to nearly 600 billion yuan, a year-on-year growth rate of nearly 100% compared with 2023.

Meituan must be prepared to respond, but in this misaligned competition, both parties can only try their best to expand their own boundaries to balance the boundaries of the other party.

The final situation may be as judged by Meituan Senior Vice President Zhang Chuan in an internal letter in January this year. No one will invest unlimited resources, and the final result of the elimination round will be to confirm where the boundaries of each strong player are.

2. Should Meituan hold on to its video account?

In terms of expanding its boundaries, Meituan’s idea is to “strengthen its strengths and overcome its weaknesses.”

On the one hand, while maintaining the basic shelf space, new users are attracted by expanding more low-priced supplies.

Zhang Chuan believes that "shelves + low prices" is the core positioning of future in-store business and the guide for all work.

This does not rely solely on the "special group buying" section, but requires the establishment of a new supply model of "everyday low prices" . To this end, the operating methods, team assessment and merchant cooperation methods must be adjusted.

For example, in the past, Meituan merchants’ packages and prices could remain unchanged for a year, but then they have to change with the times and the people; the team used to mainly assess the “number of newly signed merchants,” but will later pay more attention to communicating more proactively with merchants about prices; the operations side will use offline marketing and WeChat groups to spread the word about everyday low prices and drive user growth.

On the other hand, Meituan is also learning from its competitors to make up for its shortcomings in short videos and live broadcasts.

In July and August last year, the live broadcast and video entrances were launched on the homepage of the Meituan App respectively. In March of this year, Meituan added a "Theater" channel to the video section to further supplement the content of film and television commentary.

Judging from the current results, the traffic of the short video section is still relatively low. Most videos in the recommendation stream have only a few thousand likes, which is a big gap compared to the tens of thousands or hundreds of thousands of likes on Douyin. The output of live streaming is obvious. According to 36Kr, the GMV of Meituan Live exceeded 2 billion yuan in October last year.

However, there is no data to verify how much of the incremental demand was generated and how much of the original search demand was simply converted.

At present, Meituan Live includes official live broadcasts, merchant live broadcasts and expert live broadcasts, but official live broadcasts are the main ones. According to a report by 36Kr in December last year, more than 70% of GMV was contributed by official live broadcast rooms. It can be seen that Meituan Live has not yet entered the right track of merchant self-operation.

In fact, the significance of live streaming and short videos to Meituan may be more about increasing the length of stay of existing users in order to drive conversion and repeat purchases. However, to achieve an ecological effect like Douyin, relying on content to attract a large number of new users and then becoming a business base for influencers and merchants is not realistic, at least in the short term.

The fundamental reason is that it is difficult to change the mindset of users who view Meituan as a tool. Meituan’s content scenarios are more of a supplement to the shelf scenarios, and its influence is basically limited to the platform and difficult to radiate to a larger external group.

Therefore, if Meituan wants to expand further, it needs the help of "external aid".

Coincidentally, the main strategy of Video Account in its local life layout is to introduce a service provider system, which has created cooperation opportunities between the two.

At present, Video Account provides two entry paths for local life merchants. One is that merchants can open a Video Account store, or connect to the Video Account local life component. After putting the products on the shelves in the store or mini program respectively, they can sell them through live broadcast or short video.

The model was launched in May last year, but it was only targeted at a few leading brand merchants, such as Burger King China, KFC, McDonald's, etc.

The second method is suitable for more merchants, which is to cooperate with third-party service providers. Merchants need to settle in the service provider’s video account store or mini program to upload products. After the review is passed, they will enter the video account product selection center, so that they can bring the products themselves or distribute them through influencers.

According to Yibang Power, the model started testing around August last year. Currently, merchants in cities such as Beijing, Shanghai, Shenzhen, Guangzhou, Foshan, Shantou, Chengdu and Xi'an have been connected, mainly for catering group buying.

These third-party service providers include Meituan, Delicious Different, Xiangcunku, Lianlian Peripherals, Tanchi Mall, Chenji Store, etc.

For Meituan, connecting to the video account is equivalent to using the strengths of the video account to make up for the shortcomings of its own content ecology.

First of all, the huge traffic pool of Video Account provides Meituan with more incremental mining space.

According to QuestMobile data, as early as June 2022, the monthly active users of Video Account had exceeded 800 million, and it is still in its rising stage, backed by WeChat's more than 1.3 billion monthly active users.

Based on this, Meituan can build its own official account to sell goods. At present, Meituan has established an account matrix on the video account, among which "Bao Tuantuan", "Meituan Surrounding Tours", "Meituan Outbound Tours" and other live broadcast rooms have been broadcast from time to time.

Secondly, and more importantly, Meituan can leverage the video account expert ecosystem for distribution.

Previously, Meituan had tried to build its own expert store exploration and distribution system. It launched the "Meituan Circle" private domain distribution mini program and the "Meituan Circle Store Exploration" mini program in 2020 and 2022, respectively. However, the latter can no longer be searched, and the former did not make much splash.

After connecting to the video account, Meituan can distribute goods in a lighter way and drive GMV growth.

3. Don’t want to do the “heavy” work on Video Account?

At this stage, the strategy of local life of Video Account is mainly to connect to third-party service providers such as Meituan, rather than directly connecting to merchants. Of course, this is not just to benefit others, but also has its own considerations behind it.

First, local life is a tough nut to crack. If the platform connects directly to merchants, it needs to carry out a lot of supply and service infrastructure, such as negotiating with merchants, helping them to settle in, etc.

On the one hand, these hard work requires a sufficient operation team to support. For example, according to a report by Wandian in March, Douyin's life service sales team alone has 5,000 people.

But "piling up people" is not WeChat's style. WeChat has always advocated solving problems with products . According to a recent report by Shijie.com, the entire WeChat team has about 4,000 people, and the team size of Video Account is even smaller. The data announced by Zhang Xiaolong at the 2021 WeChat Open Class was one or two hundred people. There has been an increase in recent years, but it is speculated that it will not exceed one thousand people.

On the other hand, Video Account has lost its first-mover advantage in local life. Building the entire system from scratch requires huge investment costs, which may drag down the profit level of the entire group.

Taking Alibaba and Meituan as examples, Meituan experienced years of losses and did not achieve annual profits until 2019, while Alibaba's local life sector is still losing money.

It is also speculated that Duoduomaicai suspended its local life projects at the beginning of this year due to this consideration.

Second, the current higher priority business of Video Account is e-commerce, not local life . "Local services are not our current focus," said Liu Chih-Ping in the earnings call.

Given the limited size of the team, Video Account can only make trade-offs, and at this stage, entering the market as an access service provider is more cost-effective.

Firstly, by leveraging the merchant resources of service providers, especially Meituan’s nearly 10 million merchants across the country, Video Account can build content supply more quickly and save promotion costs and time.

In fact, this strategy was also used by Douyin and Kuaishou in the early stages of their development, and they both cooperated with Meituan.

When Douyin was developing its hotel and travel business in 2018, it chose to cooperate with third parties such as Meituan, Ctrip, and Tongcheng to achieve closed-loop transactions through the third-party booking mini-programs in Douyin. However, Douyin was not satisfied with just directing traffic, so it started to connect directly with merchants in 2019.

Kuaishou reached a cooperation with Meituan at the end of 2021. At that time, Kuaishou users could purchase group purchase coupons through Meituan's mini program on Kuaishou. However, the link seems to have expired. Although the group purchase list is still displayed on the Meituan mini program, the group purchase details page does not display the actual content.

Secondly, service providers such as Meituan will connect with merchants to help them complete tasks such as settlement, product management, and finding influencers for distribution. Video accounts will reduce a lot of management pressure, especially since there are a large number of small and medium-sized businesses in local life, which are difficult to manage.

This is similar to e-commerce. When introducing e-commerce merchants in industrial belts, Video Account also cooperates with service providers.

The video account itself can focus on being a good tool, acting as a "water seller" and collecting commissions - according to a report by Ebang Power in May last year, the commission charged by the video account to local life merchants is around 1%.

In summary, the cooperation between Video Account and Meituan is a strong alliance, with each side using each other's strengths to make up for their own weaknesses.

However, for Video Account, it is still unknown whether this is a choice made in response to the circumstances at the current stage or a route that will be adhered to in the long run.

Whether Video Account will cut off this cooperation link in the future like Douyin and Kuaishou is a variable that Meituan needs to consider.

However, for now, holding on to this "ally" is still an excellent choice for it to fight against TikTok.

Written by: Wang Shuran, edited by: Wan Tiannan

Source: Financial Stories Collection (ID: cjgshui)