What is the connection between offline businesses and Douyin?

Douyin's live e-commerce is doing very well, but this does not necessarily mean that Douyin's life services will also be successful. This article details the current status of Douyin's life services and its impact on offline stores. I hope it will be helpful to you.

Hello everyone, today we are going to talk about the local life war.

Since last year, Douyin has been eyeing the lifestyle service market. If you frequently use Douyin, you should be more likely to see live broadcasts and videos of local businesses. According to my understanding, Douyin has allocated a portion of its recommended traffic to local businesses in its algorithm.

Douyin's entry into lifestyle services is clearly a head-on showdown with Meituan. Zhang Yiming and Wang Xing, good friends who believe in "boundaryless expansion", have finally started to stab each other.

Of course, facing Meituan’s status in the life service industry, Douyin was relatively low-key at the beginning, and acted like “I’m just trying it out”, which confused Meituan to a certain extent.

It is said that Douyin is very cunning in confusing its opponents. It likes to intentionally reveal a relatively small KPI target through the media, using this fake KPI to paralyze its opponents and relax their vigilance. However, the real KPI target may be several times higher than the fake KPI.

For example, at the beginning of this year, a large number of media reported that Douyin's life service target for 2023 was 150 billion. Later, "LatePost" reported that 150 billion was a target set by Douyin to confuse the outside world (obviously mainly referring to Meituan), and the real business target was 400 billion.

When I first heard about this kind of thing, I was quite surprised. I thought that Douyin was playing a spy game with the media and Meituan, deliberately giving out false information to the media and using the media as a gun. This hurt the media teachers' hearts. But then I thought about it and it was Douyin's doing, so it felt reasonable.

But the interesting thing is that Meituan was really blinded by Douyin, giving Douyin's life services a window of opportunity for wild development.

It is said that Meituan conducted an internal assessment last year and felt that Douyin had little impact on Meituan, especially in the field of home delivery (i.e. food delivery). Meituan has a strong offline fulfillment system, which Douyin cannot achieve in a short period of time. Therefore, Meituan has been ignoring Douyin last year, which surprised many Douyin employees. Why did Meituan not react at all? Where did the wolf spirit go?

I think Meituan has been living comfortably for too long. There is little competition in the local life market, which has made the team sluggish. After all, since the "Thousands of Groups War" and "Meituan Dianping Money War" in the early years, Meituan's position in the local life market has been stable. As for Ele.me, it can only be said to be a weak chicken, and it is not a player of the same level as Meituan.

It was not until the first quarter of this year that Meituan suddenly woke up and launched a series of radical red envelope subsidy actions. Now Meituan food delivery has also started live streaming. Can you believe it? It is obviously a counterattack against Douyin. It must be said that Wang Xing is very ruthless when he is ruthless.

Back to Douyin, Douyin's lifestyle services are mainly to tell a bigger story for the Douyin Group. It is said that Douyin's ultimate goal is to become an all-encompassing super APP. In the lifestyle services sector, Douyin will make a lot of investment in 2023, and it must make some achievements. By next year, Douyin may not mindlessly spend money in the lifestyle services market. This is very much in the style of ByteDance's "great effort to achieve miracles".

We have to admit that Douyin’s live e-commerce is doing very well, but this does not necessarily mean that Douyin’s life services will also be successful. The needs of local merchants and e-commerce merchants are very different. The key question is whether Douyin can meet the core needs of local merchants, or just want to reap a wave of local merchants, just like it harvested a large number of new consumer brands in the past.

1. The closure of offline stores brought new business to Douyin

I have come into contact with some Douyin sales staff in the past few years, and I found that they also like to pretend to be ignorant even though they know the truth.

When communicating privately, they actually know that it is already very difficult for companies to make money on Douyin. The advertising fees and traffic costs are very high, and it is already difficult for most companies to make money. However, in order to achieve the sales KPI set by the company, they still have to keep persuading companies to do Douyin. If you say that you have not made money on Douyin, then there must be something wrong with the way you do Douyin. Come and participate in the training of Bytedance.

Many entrepreneurs feel that they are working for the platform. The few profits they make are all used to buy platform traffic. They don’t really get much, and the majority of the profits go to platforms like Douyin. Just like the wages of workers, they are all taken away by the landlord in the end. You see, from the perspective of the platform, business merchants are actually just high-level workers.

I have often said before that over-reliance on platform traffic will cause companies to fall into a traffic trap and become unable to extricate themselves. When traffic costs rise sharply, the company's business model may no longer be established. From the platform's perspective, the platform obviously hopes that traffic can be sold as expensively as possible, until the business merchants can barely survive after paying the traffic costs, so that the platform's interests can be maximized.

In fact, the price of some traffic is not entirely determined by the bidding of merchants, because in some vertical fields, there are not many merchants, and they may form a price alliance to lower the traffic bidding. Therefore, the platform does not let bidding determine the traffic price, but determines the traffic price based on the marketing budget of the merchant itself. This phenomenon has occurred in the Baidu advertising system.

In the past few years, new consumer companies have been completely reaped by Douyin e-commerce. Many new consumer brand owners found that they had worked for the platform and KOLs for several years, until the consumer industry was sluggish in the past two years, and the companies finally couldn't hold on and went bankrupt.

It may be that new consumer companies have become more sophisticated, or it may be that new consumer companies really have no money, so Douyin began to seduce local businesses. History is so surprisingly similar.

A large number of offline businesses (especially catering businesses) have a short life cycle. Data shows that the average life cycle of offline catering stores is less than one and a half years, and during the epidemic in the past two years, the average survival time has been shortened to 9.3 months. The high elimination rate has increased the desire of local businesses for external traffic, and Douyin has appropriately become a new life-saving straw.

For Douyin, the continuous closure and reopening of offline stores has brought a steady stream of new business to its life service business. Just like our A-shares, when leeks grow rapidly in waves, the bankers can always make a lot of money.

I am reminded of a classic quote from Buffett, which I would like to share with local businesses: "When you sit at the poker table, if you can't tell who the fool is, then that fool is you."

2. Offline stores should build business models based on offline natural traffic

In my opinion, local businesses that really have brains don’t actually need Douyin’s traffic. And if your store is not doing well and is about to go bankrupt, it will be difficult for Douyin to help you make a lot of money.

The reason behind this is that offline stores themselves should build their business models based on offline natural traffic.

For merchants, your store rent is actually the cost of purchasing offline natural traffic. For example, if you are a community store, you cover the customer flow of the surrounding communities. Normally, your business model needs to be based on the customer flow of these communities, rather than relying on online platforms such as Douyin to bring you new external traffic.

This is because natural traffic can achieve high-frequency repurchases, while non-natural traffic mostly comes just to try out new consumption and it is difficult to form a stable repurchase habit.

For example, if you have a foot massage shop in Tongzhou, your business model must of course be built based on the natural traffic around Tongzhou. You cannot expect people living in Haidian to come to your store every day to consume and become your high-frequency customers. At most, they will just come occasionally to try something new.

Therefore, in offline business, the value and significance of online traffic is not that great. If you think about how to get traffic on Douyin every day, it can only mean that your business model itself is not well constructed. You might as well spend more time thinking about how to convert offline natural traffic.

If not many people come to consume in your milk tea shop in the mall, what you need to think about is how to attract people shopping in the mall to come into the store to consume, rather than looking for new customers on Douyin, otherwise you are going in the wrong direction.

In fact, few people around me will buy in-store through group buying. In most cases, they will check whether there are discounts on Meituan Dianping after buying in-store. Because offline business formats are constantly expanding, I think few people will buy in-store through group buying first and then travel across half a city to shop in-store.

I also had brief chats with some local businesses, and some of them are indeed very interested in doing Douyin, but when I look back at their stores, most of them are in a bleak state, and some are even on the verge of bankruptcy.

I don’t believe that Douyin can bring their store back to life, because this is not a simple marketing and customer acquisition issue. The natural traffic from their store is not converted well, and spending time on Douyin cannot solve the fundamental problem. For example, many mom-and-pop stores around the community have firmly grasped the natural traffic in the community, so there is no need to do online business at all.

So local businesses should not think that Douyin can help you in any way. Everything depends on whether you have a good business model.

3. The growth of offline business is achieved by opening new stores

Unless you want to turn your store into an Internet celebrity store to attract people to check in, then external non-natural traffic will become very important. In this case, it is indeed necessary to do Douyin and online communication.

But please think about it carefully. There are not many Internet celebrity stores in a city. Creating an Internet celebrity store is obviously a low-probability event. You don’t think you can succeed, right? So what is your purpose of doing Douyin?

It is also worth noting that the store capacity of local merchants is actually limited, and the cost of the store can actually be flexibly controlled to a certain extent. This offline characteristic makes local merchants not have a strong demand for online platforms such as Douyin.

For example, if your store becomes popular because of a hit video on Douyin, resulting in a large number of consumers coming to the store in a short period of time, your store actually cannot absorb so much customer traffic.

On one hand, this will lead to a large number of in-store consumers leaving, pushing up your marketing costs and lowering your write-off rate; on the other hand, it will also lead to a decline in user experience and store ratings due to crowded waiting areas in the store, ultimately leading to a decline in store reputation.

Again, because the design of store seating and experience is based on offline natural traffic, even if you bring in a large number of new customers through Douyin, the store will not be able to digest it, so there is no need to do it.

The growth of offline business is not achieved by the growth of traffic in a single store, but by opening new stores. The revenue of a single store has a ceiling, which is different from online e-commerce. Therefore, the profit demand of local business owners lies in the expansion of new stores, rather than bringing more traffic to the old store or turning it into an online celebrity store.

At the same time, when the store traffic is insufficient, local merchants can respond to it by reducing personnel costs to offset the cyclicality. Of course, the root cause of the problem of insufficient traffic is likely that there is a problem with the store's business model, and the products and services need to be upgraded and iterated.

4. Online platforms will not be a lifeline for offline merchants

I think the most suitable consumer category for Douyin’s life service is the cultural tourism category. It can be said that offline online celebrity stores are actually a kind of cultural tourism product in the same city. With the end of the epidemic at the beginning of the year, cultural tourism has also rebounded.

In the life service market, hotel and travel products have higher profits, and in-store hotel and travel has always been a stable cash cow business for Meituan. Douyin's life service hotel and travel business is said to be doing well. Douyin recently promoted the hotel and travel business to a first-level department, which is obviously a benchmark against Meituan and is determined to grab a piece of the hotel and travel pie.

Douyin does have a clear advantage in displaying cultural tourism products. Since its birth, Douyin has created a large number of Internet celebrity attractions and Internet celebrity stores, the latest of which is Zibo BBQ. In fact, I don’t know why people have to go to Zibo to eat barbecue. Is it because Zibo barbecue is more delicious? Or is it that the way Zibo barbecue rolls are eaten is not the same in other places?

It can be seen from this that even an ordinary cultural and tourism product can become an Internet celebrity attraction through the spread of magical Internet memes, and Douyin happens to be good at this.

Whether scenic spots and attractions can become popular may also depend on whether the Douyin platform will promote them. The platform's content operation strategy can effectively influence users' cultural and tourism consumption decisions. Douyin happens to be the source of the hotel and tourism business. At the same time, cultural and tourism products do not involve home delivery, so Douyin can also avoid Meituan's same-city delivery advantage and achieve a counterattack in the life service market.

In general, I think that for most local businesses, there is no particular need to do Douyin, but they need to build their own business model based on offline natural traffic. However, for offline businesses such as cultural and tourist attractions, hotels, and Internet celebrity stores that have IP attributes and obvious cross-regional consumption, Douyin can indeed amplify their own value, and Douyin operations are also worth trying.

Due to the extremely high turnover rate of offline businesses, I estimate that Douyin will still make a lot of money by taking advantage of the business anxiety of local merchants, but truly smart offline merchants will never rely on online traffic for their offline business.

Online platforms such as Douyin will not be a lifeline for offline businesses. It can even be said that the more difficult the offline businesses are, the happier Douyin will be.

Author: Zhou Zai'an

Source: WeChat public account "Spread Gymnastics (ID: chuanboticao)"