Travel agencies are set up, group buying is on the front page, and Douyin's local life is quietly changing.

With the development of local life, more and more platforms are increasing their investment in local life. Recently, Douyin has been active in both the hotel and travel business and the in-store business. Why did Douyin choose the hotel and travel business as a breakthrough? Let's take a look at the analysis in this article.

With the strong recovery of the cultural tourism market and offline consumption after the epidemic, the local life service market has started to take off again. This wave of challengers mainly seized the content platforms with upstream traffic, led by Douyin.

Recently, Douyin has been active in both the hotel and travel business and the store business. On the one hand, while Douyin upgraded its hotel and travel business to the first-level life service department, it indirectly held shares in a travel agency whose business covers tourism and ticketing. On the other hand, Douyin is also testing to upgrade the "Same City" tab on the App homepage to "Group Buying". Although the GMV in the first half of the year was lower than expected, Douyin wants to take advantage of the hot market and catch up in the second half of the year through product and operation means.

In addition to Douyin, platforms such as Kuaishou and Xiaohongshu have also increased their investment in the local life market, but they are all in the early trial stages, and not every one of them can replicate Douyin's success.

1. Why did Douyin Hotel and Travel choose scenic spots as a “breakthrough point”?

Whether it is setting up a travel agency or upgrading the hotel and travel business to a first-level life service department, parallel to the in-store business, Douyin's ambition to go from a traffic-generating platform to "personally involved" is obvious. The reason why it chose ticketing services as the entry point is a roundabout tactic to bypass the advantages of Meituan and Ctrip.

In the hotel and travel market, although Douyin, Kuaishou, Xiaohongshu and other grass-seeking platforms have emerged, they have not been able to shake the user's habit of screening and price comparison when making instant consumption. When consumers choose hotels and restaurants, they are often subject to multiple restrictions such as itinerary, location, and price. Consumption decisions do not depend on the grass-seeking content, but on the richness of merchants, especially the number of long-tail merchants. Therefore, even if celebrities and influencers can easily sell hundreds of millions of yuan in hotel and travel orders in the live broadcast room, the final write-off rate of in-store consumption is as low as single digits. The impulse in the live broadcast room cannot withstand the multiple restrictions and rich choices in instant consumption.

The supply barrier is difficult to break through in a short time, so Douyin chose to start with tourist attractions. According to media reports, Douyin has recently begun to try the "underwriting" strategy in the hotel and tourism business, that is, to complete the sale of all tickets for this scenic spot within a specific time period. On the one hand, due to the uniqueness of tourist attractions, the conversion rate of content seeding is significantly higher than that of hotels and restaurants.

It is understood that some scenic spots have received 40% of the total online orders on Douyin, which exceeds the proportion of OTA channels. For Douyin, this is a "low-hanging fruit" that can be easily picked. On the other hand, when users start to get used to buying scenic spot tickets on Douyin, they are also likely to check the surrounding restaurants and accommodations. While encouraging users to lock in travel destinations in advance, Douyin is also encouraging users to make consumption decisions in advance through low-price group purchases and linkage with hotels and travel.

On August 10, the Ministry of Culture and Tourism announced the expansion of the national scale of outbound group business. According to Ctrip data, the instant search for outbound travel products has increased by more than 20 times. This means that OTA platforms are still the direct vane of travel demand and firmly occupy the minds of consumers, not to mention the "hard bone" of business hotel travel that Meituan cannot chew. Whether it is call center or platform docking and process management, there are very high human, resource and technical thresholds. Although high-end hotel groups such as Accor have settled in Douyin, it is more of a marketing cooperation. It is not a one-day job to open up reservations and services, and it is not enough to simply launch the hotel "calendar room" online.

Recently, the booming tourism market has also made the "hotel assassin" phenomenon a hot topic on the Internet. In addition to reflecting the imbalance between supply and demand in the hotel market, it also reflects the gap between the demand for "consumption upgrade" of young groups and reality. From 2020 to 2022, the number of domestic economy hotels decreased by 3.559 million. The shortage of supply has increased the bargaining power of hotel chains with OTA platforms on the one hand, and reduced the demand for the development of emerging channels on the other.

However, the short supply of chain hotels provides an opportunity to break the current market structure, and it can be expected that a new round of hotel openings will emerge soon. The competition for incremental supply in the hotel market will become the focus of the next stage of competition. In addition to striving to shorten the distance from "planting grass" to "placing an order", Douyin also needs to further expand the breadth of hotel and travel categories and complete the after-sales service chain.

2. The "low-price strategy" was blocked by Meituan, and Douyin opened up a "local traffic pool" in the store

According to Latepost, Douyin Life Service's GMV in the first half of the year exceeded 100 billion yuan, mainly contributed by the in-store business and hotel and travel business, which is less than half of Meituan's GMV of the same business, and only completed one-third of the annual target (290 billion yuan). The reason why Douyin Life Service did not meet expectations in the first half of the year was not only because of the failure of the food delivery business, but also because the "low-price strategy" of the in-store business was targeted by Meituan.

Last year, data from Douyin's huge engine showed that in 2020-2021, the search volume of Douyin's "life service" related keywords was comparable to that of "epidemic" related keywords, and the proportion of transactions based on content search was increasing. A service provider told the entertainment value officer that Douyin's local life in second-tier provincial capital cities has a strong search mentality. Many users are accustomed to searching and comparing prices between Douyin and Meituan before consumption. The low-price strategy not only successfully cultivated the search mentality of Douyin users, but also weakened Meituan's advantage in the evaluation system (Dianping) in the store, separating consumer decisions from consumer behaviors, and breaking through the "moat" that Meituan has operated for many years.

However, not only is it impossible for Douyin's own group buying business to maintain its low gross profit margin for a long time, but Meituan will not sit idly by and will launch a targeted counterattack. Starting in 2023, Meituan will exert its strength on the sales side, through subsidies, merchant operations, etc., to lower the price of catering group buying on the platform to the same level as Douyin, or even more favorable. Once the price advantage is gone, the search mentality cultivated by Douyin's local life services may be brought back to square one.

Because low prices are unsustainable, the operation direction of Douyin's store business this year has also shifted from a low commission strategy to traffic subsidies. Although Douyin has abundant traffic, it still cannot withstand the "overgrazing" of e-commerce, advertising, local services and other businesses. Compared with e-commerce, due to the limited business radius, the traffic cost-effectiveness of local businesses is not high, and they do not have an advantage in the competition for traffic. This is why Douyin launched the "Same City" section very early, opening up another "local traffic pool" outside the main site.

Recently, Douyin started grayscale testing to upgrade the "Same City" entrance on the homepage to "Group Buying". From "Same City" to "Group Buying", it means that local social networking, local information and other content will give way to local businesses, and consumer information and life information will be completely separated. For local businesses, this not only means further traffic stimulation, but also screens out more purposeful consumer traffic, which will help solve the problem of low write-off rate.

Just like the "mall" channel on the homepage, Douyin also wants to cultivate "group buying" into a local mall, and cultivate users' habit of searching for information about food, drink and entertainment. In the past, Douyin users may be disgusted by the high density of group buying information in the same city channel, but in the future, they will gradually change from passive exposure to active exploration. Of course, whether the "group buying" channel can arouse consumers' interest like the low-price strategy remains to be verified.

3. Kuaishou launched “dare to compare prices” and followed the old path of Douyin, while Xiaohongshu’s “official store visits” failed to promote “visits to stores”

On the evening of August 10, Alibaba Group announced its first quarter financial results for fiscal year 2024, showing that from April to June, driven by the strong growth of Ele.me and AutoNavi, the local life group's revenue increased by 30% year-on-year. It is generally expected that Meituan's local business will also have a bright performance in the second quarter. At present, content platforms such as Douyin, Kuaishou, and Xiaohongshu have entered the local life business, but have not yet posed a substantial threat to traditional players.

Yesterday, Kuaishou launched the "Flying Bird Plan" to support local life creators, and disclosed its business data for the first half of the year. In June this year, compared with January, the number of Kuaishou local life consumer users increased by 498%, and the payment GMV increased by 848%. In July, Kuaishou local life launched the "Dare to Compare Prices" service, and the official price of participating goods and services (excluding flash sales and coupons) is lower than that of other platforms.

It can be seen that Kuaishou is clearly trying to copy Douyin's "low-price strategy" in the past two years to quickly occupy the minds of consumers. However, judging from the fact that Kuaishou's e-commerce is much lower than the average customer price of other platforms, Kuaishou users are more "price sensitive", which means that local merchants need to make greater concessions, and may even disrupt their pricing system. Not only that, Kuaishou's e-commerce model of "small profits but quick turnover" is not applicable to local merchants because their coverage and reception capacity are limited. This will become the biggest obstacle to the in-depth development of Kuaishou's local business. At present, it seems that Meituan will not follow up as it did with Douyin.

In April this year, Xiaohongshu launched the group purchase function and officially entered the local life market. In July, Xiaohongshu launched the first local life transaction cooperation service platform, the "Official Store Exploration Cooperation Center". However, Xiaohongshu is still testing the waters in the local life field, and it is more of a marketing activity under the banner of store exploration and promotion, and its purpose is not to directly guide in-store consumption.

Xiaohongshu is more like the 2.0 version of Dianping.com, and is more open and transparent than Dianping.com. Its significance in avoiding spoilers is even greater than that in promoting products. Merchants, influencers, and platforms cannot fully control users’ consumption decisions, and influencers’ store visits and “experiences” are likely to be offset by the real evaluations of ordinary consumers. Therefore, in the field of local life, Xiaohongshu may have the longest path from “promoting products” to “placing orders.”

From the recent challenges of Douyin's local life strategy, we can see that it is gradually giving up the shortcut of "price war" and turning back to patiently cultivate users' consumption habits and find a balance between main site traffic and local traffic. As a pioneer, this will also be a path that other content platforms will find difficult to bypass. If you want to make the local business stand out, you can't help but redistribute the traffic within the site and adjust the product logic. This is destined to be a battle that can't be decided quickly.

Author: Zhang Yuan; Editor: Mei Qi

Source: Public Account: Cultural and Entertainment Value Officer (ID: wenyujiazhiguan), value deconstructor of cultural entertainment, new consumption, and commercial technology.