Douyin takeaway, the sound gradually fades

Douyin Takeout has gradually adjusted its plan since its hot start last summer. Why has there been such a change? What is the development path of Douyin Takeout? There are many takeout apps on the market, why is Douyin Takeout not the first choice? The author gives the answers one by one, let's take a look.

Last summer, live streaming of crayfish was very popular on Douyin, and Douyin takeout also became famous. This summer, crayfish is still the "top stream" in the food industry, but the market share of Douyin takeout has gradually declined.

Not long ago, there was news that Douyin's food delivery business lowered its goal of achieving a GMV of 100 billion yuan this year and adjusted it to 5 billion yuan. GMV will no longer be the most important indicator for the team in the second half of the year, and the focus will shift to diversified exploration of business processes.

From entering the food delivery business with great fanfare to lowering GMV expectations today, what is the development path of Douyin Food Delivery? Why is it difficult for Douyin Food Delivery to become the first choice of users?

1. How is the progress of Douyin food delivery?

As early as 2018, Douyin established a POI team (POI refers to a type of geographic positioning. Douyin corporate users can attach their own store POI when posting videos) and started a location-based group buying recommendation business.

In 2019, Douyin launched a regional marketing tool called "Doudian" for local stores, initiating dining coupons on merchant pages and using discount coupons to connect online and offline.

In 2021, Douyin's local life business became an independent first-level department. Douyin officially entered the local life track and confronted head-on with leading local life players such as Meituan and Ele.me. One of the manifestations is that Douyin began to explore the food delivery business in turns.

In July of the same year, Douyin launched an internal test of "Xindong Takeaway" and invited major catering brands such as KFC and Heytea to join. However, the hot scene did not last long, and Douyin later issued an announcement that "Xindong Takeaway is in the internal testing stage and is not open to external investors for the time being." A few months later, the internal testing of Xindong Takeaway business was suspended, and the related mini-programs were also temporarily removed from the shelves.

Until May 2022, when Beijing suspended dine-in meals, many businesses tried to find new revenue channels through Douyin. The crayfish business was still hot, so Douyin's shelved takeaway business was put on the agenda again. When shopping, consumers receive coupons through the merchant's live broadcast room and place orders. The store then uses express delivery such as Shansong, SF Express, and Dada to deliver the goods. However, the delivery time is relatively long, ranging from about two hours to half a day, and the delivery fee is also higher.

The phenomenon of merchants receiving explosive orders on Douyin has also accelerated Douyin's progress in promoting food delivery. In August 2022, Douyin officially announced its cooperation with Ele.me. Based on Douyin's open platform and using mini-programs as a carrier, Ele.me, together with Douyin, has helped millions of merchants provide local life services from content planting, online ordering to instant delivery to Douyin's 600 million daily active users through rich product scenarios and technical capabilities.

This year, Douyin Takeaway has not developed well due to its cooperation with Ele.me. According to data from LatePost, Douyin Takeaway's GTV (total transaction volume after write-off) in January and February continued to fall to 50 million yuan, and a slight rebound in March was only 100 million yuan. From January to March this year, Douyin Takeaway's daily average order volume remained at 10,000-20,000 orders. In May, driven by platform subsidies, the daily order volume rebounded to more than 100,000 orders at one point, but it is still far from the GMV target of 100 billion yuan. Not long ago, Douyin Takeaway's annual GMV target was lowered from the original 100 billion to 5 billion.

Image source: Tik Tok screenshot

At present, there is no obvious entrance for Douyin Takeout on the Douyin main interface. There is a "Nearby Food" module on the mall interface. Judging from the merchants that have settled in, they are basically merchants with a customer unit price of more than 100 yuan. The number of merchants is not large, and the main business promoted is in-store group buying. Among the limited merchants that have settled in, only some of them have opened takeout services.

2. Traffic is not a panacea

The food delivery business is a system that requires the joint participation of merchants, customers, riders, and platforms. Merchants connect with customers through the platform. After customers place orders online on the platform, riders complete the offline delivery process. The food delivery business not only involves many parties, but also requires online and offline linkage, which is actually not an easy task.

With more than 600 million daily active users on the platform, Douyin wants to leverage the local life market through traffic. For Douyin's food delivery business, merchants and riders are its weak links.

In order to attract merchants to join, Douyin adopts the method of "giving up profits". It is understood that the fees currently charged by the Douyin platform to food delivery merchants are only: software service fees, promotion service fees and related fees. As for the delivery part, merchants can choose to deliver by themselves, or choose a third-party platform for delivery and pay the delivery fee.

According to the "Takeaway Merchant Cooperation Agreement" released by Douyin on February 23, the software service fee is still the same as the version released in June last year, and the service fee for food is only 2.5%. Compared with the 20% fee of Meituan circulating in the market, Douyin's lower commission rate is indeed more attractive to merchants.

However, the delivery problem is still a major obstacle for merchants to join the platform. For small and medium-sized merchants, because they do not have their own delivery system, they rely heavily on the transportation capacity provided by the platform in the delivery process. Therefore, a large number of riders is crucial, which is also one of the reasons why Meituan can occupy a high market share. Guosen Securities research shows that Meituan’s small and medium-sized merchants account for 90%-95%, and contribute about 90% of GTV.

Douyin is also constantly making up for its shortcomings in delivery services. In December last year, Douyin reached cooperation with delivery providers such as SF Express, Flash Express, Dada, and UU Running Errands. Although the purpose at that time was to serve Douyin's "group purchase delivery" service, as the business gradually expanded, these delivery providers also began to expand their services to the "takeout home delivery" business.

However, judging from the service quality of Douyin’s food delivery, compared with other platforms’ longer delivery time and higher minimum delivery amount, Douyin’s investment in fulfillment and delivery is far from enough.

In this regard, Douyin will focus on brand merchants with high customer unit prices and their own distribution systems, but it is not easy to promote. Chain restaurant brands generally have their own store management systems, procurement ERP, CRM (customer relationship management) systems, and distribution payment systems. There are also differences between the systems of different brands, so it takes a certain amount of time and financial costs for brands to connect with external platforms.

In addition, Douyin is very dependent on the influencer ecosystem. If merchants want to obtain more traffic, in addition to relying on their own live broadcasts or short video content to attract users, they also need to get greater exposure through influencer store visits and influencer promotions. Although Douyin's commission is relatively low, merchants need to bear more operational pressure and will also pay more "hidden costs" in obtaining traffic, and the promotion effect is also uncertain.

A person in the catering industry revealed, "Meituan is based on LBS positioning, which at least ensures that the restaurant is ranked high based on geographical location and can be seen by people nearby. However, Douyin must rely on content to go viral, so small businesses have little chance."

In addition, user retention is also a difficult problem that Douyin Takeaway needs to overcome. The core users of takeaway have their own consumption platforms. During the short period of subsidy discounts, Douyin Takeaway has difficulty in cultivating users' consumption mentality, and users are likely to churn after the subsidy ends.

3. Surrounded by many competitors, the takeaway business is not doing well

The high growth, high frequency of transactions, and high monetization rate of local life service businesses have made them a hot commodity in the eyes of many Internet giants. In addition to Douyin, there are also many other companies such as Kuaishou and WeChat participating in the competition. Meituan did not "sit and wait for death", but actively fought back, making Douyin's food delivery business even more difficult.

For example, Kuaishou reached a cooperation with Meituan in 2021, and Kuaishou users can place orders from Meituan on the platform. But Kuaishou is not satisfied with this. According to Ebrun, Kuaishou Local Life is building its own transaction links in addition to third-party mini-programs, and has invited chain brands such as catering and tea to join in a small range. Kuaishou users in cities such as Beijing and Hangzhou can directly complete group purchase transactions through the new transaction links and then consume in stores.

WeChat is testing a mini-program express delivery service, the new project is called "Store Express Delivery", and the entrance is set in the mini-program on the WeChat Discover page. Currently, the open categories include food, tea, fresh food and general merchandise, and you can see big-name catering businesses such as Weiduomei, KFC, Heytea, Shanghai Auntie, Meituan Maicai, Baiguoyuan, Guoquan Food, etc.

Image source: WeChat screenshot

Meituan's response is to consolidate its existing advantages and make up for its shortcomings. Currently, when you open the Meituan APP, you can see the "Meituan Live" section and the "Special Group Purchase" section on the homepage. Their positions are very conspicuous. Meituan is officially confronting Douyin head-on. A Meituan insider said: "There is no extra gameplay, just benchmarking Douyin. What Douyin has, Meituan must also have."

During the "God Coupon Festival" event on June 18 this year, Meituan sold takeout and in-store discount coupons through takeout live streaming, stimulating consumers' desire to buy and allowing them to place orders during non-meal times, thereby leveraging more non-immediate demand. In order to increase momentum, Meituan also invited celebrities such as Huang Zitao to sit in the live broadcast room, constantly exploring ways to promote the stars and compete closely with Douyin.

Image source: Meituan screenshot

In general, Douyin has the confidence to enter the local life with its trump card of traffic, but the food delivery business requires the cooperation of multiple parties such as the platform, merchants, and riders, which involves complex technical logic adjustments and capability iterations, which is not an easy task for Douyin. Douyin's food delivery also faces competition from new entrants and counterattacks from Meituan, so it will take a long time for the food delivery business to develop smoothly.

Author: Aries

Source: WeChat public account "TopKlout"