New players, new changes, what will local life be about in 2024?

The local life industry has recently derived new ways of playing. Let’s take a look at them together~

In-store, home delivery, live streaming and group buying, the development of the local life industry is changing our lives and consumption behaviors. New players such as Douyin, Video Account, and AutoNavi are gearing up for the game, and old players are launching a long-awaited counterattack. The local life track is in a rapidly changing moment.

One of the new players is Xiaohongshu. After the update, Xiaohongshu added two entrances in the top bar: "Nearby" and "Spring Festival". The "Nearby" entrance displays local restaurants and attractions in the form of a map, with three different content entrances: notes, live broadcasts, and group chats. How will the new players in local life make their moves in 2024? What opportunities and risks are hidden in local life behind the platform melee?

1. What are the differences in the gameplay near the entrance of Xiaohongshu?

In the newly added "Nearby" entrance of Xiaohongshu, in addition to the scenic spot map, there are also fun games such as "Adopt a Pet" and "Dig", which are more sophisticated and fashionable, in line with the aesthetic preferences of Xiaohongshu's mainstream users. Among them, the three entrances of notes, live broadcasts, and group chats are light social gameplay explorations. Notes are the "selection" of community UGC content, and will be recommended according to "tag matching and high quality".

In the "Everyone's Spring Festival" interactive event created by Xiaohongshu, three of the six task gameplays are linked to "Nearby", aiming to attract traffic to the "Nearby" entrance. Currently, Xiaohongshu provides four major traffic entrances for local life group buying, which are relatively secretive. The first is to "discover" the store exploration content with links in the note information flow; the second is to search for "Xiaohongshu group buying" and click on the exclusive channel to make purchases; the third is to accurately search for merchants and click on the group buying page under the store account to make purchases; the fourth is to explore on the map of the nearby page.

Xiaohongshu has been paying attention to the local life track for a long time. In 2023, Xiaohongshu's multiple actions together indicate that Xiaohongshu will accelerate its entry into local life. At the beginning of 2023, Xiaohongshu established a local life advertising team to accelerate the commercialization process of local life.

In April 2023, Xiaohongshu launched the local life official account "Tuboshu", which is dedicated to publishing local life activities and policy information. Soon after, Xiaohongshu officially launched the group buying function, opening up the business chain, and took the lead in launching it in Shanghai, Guangzhou, and Shenzhen. On the merchant side, the influencer side, and the user side, the "Food Power Shop Plan", "Searchlight Plan", and "100 Store Exploration Plan" were successively launched to attract merchants, service providers, and store exploration bloggers through benefits and services such as commission reduction, traffic support, and content guidance.

It is worth mentioning that Xiaohongshu’s reconstructed network structure marketing can reach users more accurately, which further determines that Xiaohongshu’s user mindset is more inclined towards planting grass rather than transactions.

Although the traffic entrance and service framework have been built, Xiaohongshu's user mindset, merchant entry, and even commercial monetization model are not yet mature enough.

Xiaohongshu’s current group buying still maintains the reserved principle of “not engaging in price wars”. Some of the merchants that have settled in will provide packages that are different from Douyin and Meituan to avoid low-price competition.

Most of the merchants that have settled in the platform are small and beautiful coffee shops, restaurants, and bakeries. There are no well-known chain brands like KFC and McDonald's. Most group meals have a high average customer price, such as a bagel for 16.9 yuan and a hot pot meal for two for 178 yuan. Low-priced group meals starting at 9.9 yuan are rare. One merchant once said, "The platform will deduct 5% of the group purchase price, and the rest is exactly the same as Douyin and Dianping."

The store exploration blogger told the media that merchants on Xiaohongshu lack enthusiasm. When he was a Douyin store exploration blogger, he had to go to different merchants to shoot videos almost every day, and the commission fee was between 200 yuan and 500 yuan. The number of business orders on Xiaohongshu was obviously not enough. "Xiaohongshu has not yet run a model for commercial realization. Sometimes users will not go to this store when they see that it is a promotion. After all, the discount is not very big."

Xiaohongshu entered the local life market relatively late and its movements were relatively slow. It did not invest a lot of BD offline point-to-point "crazy visits and crazy orders" like Meituan. The speed of recruiting merchants and the efficiency of expanding cities need to be improved. Since its launch in April 2023, it has only been online in four cities: Shanghai, Guangzhou, Chengdu and Shenzhen.

The live broadcasts, group chats and gameplay currently available lack clear direction, such as the public rating mechanism and ranking content of Dianping.com. Click on the introduction of any restaurant, and the notes mainly recommend related dishes and check-in guides, and the information is relatively subjective.

Especially in the local life commercial model of Xiaohongshu, it is to take commissions from merchants and also want to do traffic advertising business. A person in charge of a Douyin service provider once concluded that the most difficult thing for Xiaohongshu is to prove to merchants that the traffic is effective.

The traffic value of Xiaohongshu will be put on the other side of the scale to be compared with Douyin and Meituan. "What local life services lack the least now is channels and traffic... WeChat and Meituan are for pictures and texts, and Douyin and Kuaishou are for videos. Especially now, it is not an era where you can spend money recklessly to get channels."

2. Meituan vs. TikTok: A low-price trench war

The battle between Douyin and Meituan has been protracted. Zhang Chuan, senior vice president of Meituan and president of the in-store business group, has defined this war as "this is not a short-term war, but a brutal and torturous trench war."

According to public data, Douyin's local life GTV (gross transaction volume) will be nearly 200 billion yuan in 2023, which is nearly one-third of Meituan. According to the "2023 Local Life Service Report", as of April 2023, the number of overlapping users of Meituan and Douyin exceeded 300 million, and the proportion of overlapping users in Meituan users was as high as 81%.

In response to this, Meituan strengthened its defenses through live streaming, content IP, business collaboration and low prices.

First, on February 2, Wang Xing, CEO of Meituan, announced a large-scale restructuring of the organization after two years, integrating core local business such as store delivery, home delivery, and Meituan platform. Meituan's move is to integrate and develop businesses with certain overlaps in infrastructure, supply side, and fulfillment services, improve organizational efficiency, and further improve consumer experience.

Secondly, Meituan created the live broadcast IPs "Shen Qiangshou", "Bao Tuantuan" and "418 Shencoupon Festival" for takeaway live broadcasts, and invited celebrities and top KOLs to drive traffic for the live broadcasts; diverted the traffic recommended on the homepage to the live broadcast entrance, and connected the live broadcast content with the shelves; tested the "Video Earning" short video function for users to increase user usage time.

Live streaming IP helps merchants achieve conversion. According to reports, when Meituan Live and its portal were first launched, the monthly GMV of live streaming was about 500-600 million yuan. In October, the monthly GMV exceeded 2 billion yuan. A third-party agency showed that the average conversion rate of Meituan Live orders was 30%-40%.

Third, on the merchant side, Meituan reduced the service commission of some catering merchants from 8% to 4% in response to Douyin's 2.5% platform commission, and promised to strive for resources and live broadcasts for merchants. On the user side, large coupons of 18 yuan and 8 yuan off for purchases over 20 yuan were issued through live broadcasts, flash sales, and short videos to stimulate consumer motivation and demand.

Following Douyin's low-price strategy, Meituan paid a lot of marketing expenses. In the third quarter of 2023, Meituan's sales and marketing expenses reached 16.9 billion yuan, a year-on-year increase of 55%, sacrificing advertising and commission income, and even high growth in operating profits.

In his New Year's message, Zhang Chuan, president of Meituan's Daodian business group, said that the Internet has now entered a stage of competition for existing users and the "knockout round" has begun. The opponents are no longer the same as those in the previous stage and are very versatile.

Among Meituan’s competitors, the most eye-catching one is Douyin. Douyin’s weapons are low prices and traffic, but its weaknesses are mainly high operating costs for merchants, and relatively low write-off and repurchase rates.

Based on the "goods find people" model that attracts users with interesting content, Douyin has set high requirements for the live broadcast operation capabilities of local life merchants. One merchant said: "Douyin live broadcast is based on the logic of pushing hot products alone, which requires high requirements for the anchor's speech skills, and requires the anchor to use professional skills such as "forcing orders" to continue to capture the audience." In addition to the package concessions, anchor and verification labor costs, Douyin's traffic investment costs are also increasing, and the cost increase has further increased the operating pressure of merchants.

In response to this, Douyin chose to strengthen cooperation with service providers and developed a series of service tool apps to help businesses reduce operational pressure. Douyin has launched a number of management and operation products, including "Douyin Visitors", "Linker", "Douyin Stars", "Douyin Sales Helper APP" and the official life service data platform "Business Tips" for businesses, service providers, MCN agencies, and sales.

In response to the issues of group purchase redemption rate and repurchase rate, Douyin has started to adjust the group purchase channel, launching three major sections: "Discount Group Purchase", "Popular List" and "Free Trial"; rectifying the business order of merchants and restricting fake store exploration content by experts; improving the review system, inviting users with Dianping Lv5-Lv8 and Douyin evaluation level below Lv3 to join, covering 21 cities across the country. If you can reach a certain level within a single month, you can also get large coupons.

Douyin hopes to strengthen consumers' group buying mentality through refined traffic operations, shorten consumers' decision-making links and costs through real and high-quality content, improve consumer experience, and achieve the goal of increasing the write-off rate and repurchase rate. Low prices are one of the means to establish consumers' minds. After low prices, it is time to compete with endurance and organizational efficiency.

3. New battlefield for new players

There are countless new Internet players waiting to enter the trillion-dollar local life track, looking for new growth in the high-frequency and rigid-demand life consumption track. According to public data, in 2021, the online penetration rate of local life is only 12.7%, and the scale of the local life market will grow to 35.3 trillion yuan by 2025, which means the market space is very broad.

Among the new players, Tencent and Kuaishou are the most eye-catching. These big companies have not taken a high-profile stance, but have kept a low profile amid the fierce competition.

Tencent's Hope video account has officially launched the local life component in May 2023. Merchants can access it through live broadcast and short video scenarios, and the initial commission rate is only about 1%. In October, the video account authorized some service providers to allow influencers to distribute, and added third-party mini-programs and third-party video account store entrances.

At present, the local life of video accounts is still cautious. As the commercialization of video accounts accelerates, local life business will undoubtedly play an important role. Most of the local life infrastructure has long been available in the WeChat ecosystem, whether it is mature payment tools, mini-program merchants, and up to 1.04 billion MAU by the third quarter of 2023... Everything is ready, only the east wind is missing.

In addition, Kuaishou has entered the local life market with a "differentiated competition strategy". Kuaishou continues to expand its pilot cities and takes a different path by penetrating local life group purchases in low-tier cities. In 2023, Kuaishou will launch a series of support plans to encourage merchants, content service providers, and influencers to settle in; launch an official local life app to build a closed transaction loop; launch a B-end merchant APP... A replicable city model, expanding from the C-end to targeting the B-end business, a series of actions indicate that Kuaishou will usher in a faster expansion in 2024.

However, some large companies are conservative about local life. Pinduoduo has entered a wait-and-see attitude. At the beginning of 2023, its group buying platform Kuaituantuan began to attract investment in multiple fields such as catering, entertainment, and beauty; in May, local life products and group buying coupons were launched one after another; in December, the community group buying platform Duoduo Maicai began to attract investment in local life, but announced a complete suspension only half a month later.

The "Local Life" entrance of Pinduoduo's main website, which was launched in July, is currently operating normally and can provide group purchase coupons from multiple large chain restaurant merchants. However, judging from the number of merchants and sales volume, Pinduoduo's traffic is not much and its business advancement is not fast.

In any case, the local life battlefield in 2024 will be more intense, and higher requirements will be placed on the giants entering the market. The refined operation of traffic, how to improve consumer experience, and whether discounting can become the norm will all become challenges.

Author: Laisheng WeChat public account: TopKlout