Douyin draws the sword, Meituan strikes back

Douyin has gradually created a bigger wave in the local life track. For example, the emergence of Douyin food delivery has brought more changes to the current food delivery market to a certain extent. So what can we observe from the perspectives of transportation costs and business strategies behind the new battle in the food delivery industry? Let's take a look at the author's interpretation.

“We only launched Douyin Takeaway and Ele.me, and Meituan’s cut is too high.”

"The prices on Douyin are cheaper, and Meituan delivers faster. In order to cooperate with influencers, we give up some of our profits."

After Douyin’s food delivery service was launched in 18 cities on March 5, in just half a month, Douyin’s strategy of “traffic is everything” seemed to be gradually taking effect on the merchant side.

A business manager who recently joined Douyin said that some influencers would not cooperate with small shops at all, but by joining Douyin Takeout, there are opportunities for cooperation, which is a point that they value more and are willing to make concessions.

As a chain brand of meat jerky, Bee Cheng Hiang currently has 12 stores in Beijing, all of which have launched Douyin and Ele.me takeaway services. In comparison, Douyin takeaways are mainly set meals, and the overall price is cheaper than that of Ele.me.

"Zi Quadrant" placed an order for food delivery through Douyin in Beijing and found that the delivery was carried out by third-party transportation platforms such as SF Express. The front desk of Douyin food delivery and the back-end of SF Express have been connected. Riders can clearly grab orders for Douyin food delivery in the back-end, and the front desk of Douyin can also display the food delivery status and the location of the rider in real time. According to the delivery rider, he received 14.2 yuan for the delivery fee, but "Zi Quadrant" only paid 5.5 yuan for the delivery fee.

According to Yibang Power, as of March 5 this year, Douyin’s official group purchase and delivery in Beijing, Shanghai and Chengdu refers to the transportation capacity established by Douyin in cooperation with third-party delivery parties such as SF Express, Flash Express, Dada Express, and UU Running Errands. In the remaining 15 cities, delivery is carried out in cooperation with Ele.me.

The cooperation between Douyin and Ele.me is very similar to the "alliance with Wu to fight against Cao" during the Three Kingdoms period, and Meituan is also actively seeking change in its position as the leader in the food delivery platform.

According to exclusive information from "Zi Quadrant", Meituan will be the first to launch the "Salary Power Model" in Beijing at the end of April, that is, changing from the original ladder system based on the number of orders to a service star and length of service system: the service star ranges from 1 star to 6 stars, and the higher the star of the rider, the higher the unit price. A 6-star rider can get between 60 and 80 cents per order. Calculated at 1,000 orders per month, the monthly salary will increase by 600 to 800 yuan; the second is the length of service award, which is a level of 3 months. Completing about 800 orders per month is the passing standard and can continue to advance.

The boss of a Beijing rider recruitment company commented: "Meituan's salary model can be regarded as a drastic reform, giving riders a portion of the pie that originally belonged to the outsourcing company. This is a good thing for experienced riders who can take more orders, but for new riders and part-time riders, they will definitely not be able to outperform full-time riders, and their income will be significantly reduced compared to before. Meituan's move is obviously to filter out high-quality riders."

Although it is still unclear whether Meituan’s reform of the “salary power model” is due to the pressure from the entry of Douyin Takeout, it is certain that the addition of Douyin Takeout is bringing new competition and vitality to the takeout market that has been solidified for many years.

Even though it is difficult for Douyin to build its own food delivery team from scratch in a short period of time, as it gradually makes up for the shortcomings in delivery through different means, a new battle is brewing in the trillion-dollar food delivery industry.

1. The transportation capacity war behind food delivery

Meituan has always relied on ground promotion and riders to build two steel plates.

Judging from the current situation of Douyin's local promotion and the service provider strategy, local promotion in some regions seems to have been conquered, and delivery service is the last hurdle for Douyin to conquer. Therefore, Meituan's big fuss about the salary structure of riders at this time can't help but make people guess that it is a defensive move against Douyin.

According to "Zi Quadrant", the implementation of the salary power model is obviously to improve the delivery efficiency and service quality of the riders. Overtime, bad reviews, complaints, and order volume will become the standards for service star rating, but it is also to slim down the current "bloated" Meituan delivery team.

According to the "2022 Meituan Rider Rights Protection Social Responsibility Report", 6.24 million riders earned income through Meituan in 2022. "Zi Quadrant" contacted a number of Meituan riders in Beijing, and they all reflected that the number of orders has been declining significantly since the beginning of the year. The core reason is that Meituan's stations are all expanding on a large scale. A small station may have more than 100 riders. There are too many monks and too little meat, so the number of orders allocated to each person is naturally not as abundant as before.

However, according to data in Meituan’s financial report, at the end of 2021 and the beginning of 2022, there was no significant growth in the number of active users and active merchants of Meituan, which means that the number of orders did not increase, but the number of riders increased a lot.

▲ Image source: Futu NiuNiu

▲ Image source: Futu NiuNiu

The above-mentioned rider recruitment company stated: Ele.me and Meituan have more than 400 stations in Beijing, but the number of Meituan stations may be 40% more than that of Ele.me. This is mainly because Meituan has many mixed business stations. In one area, in addition to Meituan’s own stations, there are also supplier stations. In some cases, there may be 4-5 stations.

"It is not recommended for newbies to drive for Meituan now. There are many pitfalls in food delivery. Office buildings and inpatient departments during peak hours are orders that experienced riders avoid. Newbies don't understand these and may not last more than three months and will be eliminated because of their low star rating." said a Meituan delivery rider.

Another Meituan rider said: "After the salary reform, the minimum standard for delivery in Beijing has been lowered. Now the minimum standard in Beijing is 7 yuan. In the early stage, the riders who could only get 1 star will definitely be charged a lower price than 7 yuan."

Compared with Meituan’s reform, Ele.me seems to be much more relaxed after joining forces with Douyin.

"Zi Quadrant" contacted a recruitment manager of Ele.me in Beijing, who told us: "Ele.me will not implement a salary-based model. The number of people to be recruited is planned according to the size of the station. Small stations have 20 dedicated riders, medium-sized stations have 20-40 dedicated riders, and large stations may have about 100 people. Some areas are single-store and single-station types. As long as the Ele.me orders in the area are delivered by one station, a medium-sized station has 37 dedicated riders, responsible for delivery within a 3.5-kilometer radius."

It cannot be denied that Meituan and Ele.me have been fighting for many years, and have stations and a large number of riders in various regions across the country. This aspect is what Douyin is least good at and is also the most solid barrier for food delivery.

Considering that the heavy investment in the delivery team built later dragged down the group's revenue, if the delivery team is not built, the fulfillment cost cannot be reduced and the user's consumption experience will be affected. However, in this regard, Douyin can no longer work as hard as before.

Through an investigation of Douyin's delivery chain, "Self-Quadrant" found that in addition to directly cooperating with platforms such as Flash Express, SF Express, and Dada, Douyin also opened its life service interface to third-party aggregation platforms such as Douyin and Julaike.

Taking Julaike as an example, after a customer places an order on Douyin, the order will be automatically synchronized to Julaike and call dozens of transportation companies such as SF Express, Meituan Delivery, Fengniao Express, UU Running Errands, Dada, etc. to accept the order. Merchants can directly set the "lowest price delivery" mode, and the system will automatically compare prices and select the lowest price to place an order.

This is not difficult to understand. Someone on Douyin once revealed that he ordered takeout on Douyin and the delivery by Meituan rider was a "misunderstanding".

In fact, in February this year, WeChat launched the "Store Express Delivery" mini-program aggregation platform, and the transportation capacity behind it was also cooperated with such third-party delivery platforms. Such platforms are also the key to Douyin's current transportation capacity and services.

A Meituan flower shop owner told us: "If you use Meituan delivery, Meituan's commission is relatively high, about 10-15%. Later, we cooperated with a third party and chose self-delivery on Meituan, with a rate of about 8%. The monthly comprehensive cost is actually lower."

"If the group purchase delivery GMV can possibly fulfill ByteDance's plan, Douyin will most likely move from the current high customer orders to low customer orders. As for the delivery team, we speculate that it may be completed through the acquisition/merger of a third-party aggregation delivery company." A Douyin partner commented.

2. Douyin “loses money” delivering food

High growth, high-frequency transactions, and high monetization rates have made local life a hot topic for giants, but from the perspective of monetization efficiency, food delivery is a typical dirty and tiring job.

According to Meituan’s financial report, its average gross profit margin is around 25%, but its net profit margin has fallen to a negative value since 2021. Although the scale of losses has gradually narrowed in 2022, it has rebounded from a loss of 12.32% to a loss of 3.5%.

In order to develop local life, Douyin has built a life service team of about 4,000 to 5,000 people. It has also conducted many pilots and transferred a large number of internal employees to form a local promotion team, but the results have all come to nothing. However, this time the official delivery in Beijing, Shanghai and Chengdu has indeed put a lot of pressure on Meituan.

A Meituan merchant BD in Chengdu told "Zi Quadrant": "It is speculated that specific countermeasures are being discussed internally. In less than a year, Douyin's group buying has affected Meituan's basic market, which is quite impressive, but the food delivery business is more complicated. In addition to the back-end fulfillment capabilities, Meituan's front-end ecology has also formed certain barriers."

Taking "Zi Quadrant"'s order on Douyin as an example, the same meal package from the same merchant has the same price, and the delivery fee is also around 5 yuan, but Meituan has various subsidies: 5 yuan off the delivery fee, 2 yuan off for new customer red envelopes, and 3 yuan off for daily coupons. All in all, it is about 12 yuan cheaper than Douyin.

The Meituan merchant BD mentioned above told us: "The subsidy structure includes platform subsidies and merchant subsidies. For example, the 5 yuan discount on delivery fees should be an activity aimed at promoting the activation of specific business districts by the platform."

Obviously, compared with the local life empire accumulated by Meituan over the years, Douyin still has gaps in ecological construction, team operations and other aspects.

This forces Douyin to lower its commission rate and rely on a "low-price" strategy to attract merchants.

According to the official statement on the Douyin Laike APP, the software service fee for Douyin's food delivery service is calculated as order transaction amount × software service fee rate + actual delivery fee paid by the user × 0.6%. For new users who open food delivery services on Douyin for the first time, Douyin has also launched a preferential policy of service fee reduction.

▲ Image source: Douyin Guest APP

You should know that in recent years, merchants have long suffered from high service fees. Compared with Meituan’s commission rate of 15%-22%, under the rigid bidding mechanism, merchants can only increase the average order value to cover the additional costs brought by high commissions.

A Meituan merchant told ZiQuandian: "I sell a pancake for 8 yuan at offline stalls, but after selling it on Meituan, I have to sell it for about 12 yuan, including the commission, to ensure that I get 8 yuan. If I place an order on WeChat and have someone run errands to deliver it, it's still more cost-effective than on Meituan."

On the other hand, Douyin is also gradually developing its own competitiveness. As the merchant mentioned in the introduction, it is not cost-effective for a small store to find influencers for promotion alone, as the selection range is small and the cost is high. However, the official Douyin platform cooperates with many influencers, and with the official platform as a medium, the merchant's choice and bargaining power are much higher.

For Douyin, the relevant ecosystem for short videos has been built very completely.

According to a third-party service provider who revealed to Zi Quadrant: "At present, the company has begun to undertake the store exploration video shooting business of takeaway merchants. The company is responsible for contacting experts for the preliminary shooting. Merchants need to pay a certain basic fee in the first stage, and then according to the link orders mounted by the experts, a commission of 6%-10% will be taken."

However, it is still unclear whether the model of low price + recommendation by short video experts can work. Some merchants gave feedback to "Zi Quadrant": "Many customers will buy takeaway coupons and store them first, and then consume them when they have demand, but the return rate is also very high. 40% of the coupons are automatically returned if they are not consumed within 2 days."

Another Douyin merchant also said: "In terms of delivery, merchants basically bear a delivery cost of 5 yuan per order, and users pay 5-6 yuan per order. If the rider's fee is higher, it should be subsidized by the platform. Douyin is now opening up the market without making any money, and even some orders with low customer unit price are losing money."

▲ Image source: Douyin Guest APP

For this reason, "Zi Quadrant" also contacted the official of Shunfeng Express, and Shunfeng Express replied: The specific form of cooperation with Douyin is not convenient to disclose at present, but the income of Shunfeng Express couriers has not been affected.

According to the real data from SF Express, the delivery fee for a delivery within 3.5 kilometers is 14.2 yuan, and the Douyin platform must subsidize at least 4.2 yuan. Combined with the rate settlement method of Douyin, there is indeed the possibility of "losing money" in delivering food.

However, cases of "spending money to gain market share" are common on the Internet. For Douyin, the key lies in whether it can cultivate the market in the early stage and use low prices + short video scenarios to make users change from passive reception to active search and form habits. At present, some users have actively searched on Douyin and Meituan to see which one is more favorable due to price comparison.

This will fundamentally undermine the consumer structure that Meituan and Ele.me have formed over the years.

Douyin needs a new story, and so does Meituan. Over the years, Meituan has changed from a "challenger" to a "defender", from raiding Didi to snatch the taxi business, spreading its tentacles across group buying, food delivery, games, health and other fields, to now defending Douyin from invading its hinterland, Meituan's boundaries are shrinking.

However, what is certain is that after experiencing the "Thousands of Group Wars", the second half of takeout may be more interesting than the first half.

Author: Cheng Xin, Editor: Yun Tianming; Public Account: Zi Quadrant (ID: zixiangxian)