Douyin group buying: huge traffic "troubles" offline merchants

This article introduces several major problems that have arisen with the continued development of Douyin group buying: merchants cannot handle the traffic, service providers have varying quality, and influencers have relatively limited income.

Douyin continues to focus on local life, but problems follow.

Since February, Douyin's local life service team has been expanding and integrating, and a considerable number of ByteDance employees have also taken the initiative to apply for transfer to this department. According to an employee of the local life service department, almost all the R&D personnel of the original real estate business Xingfuli have been transferred to the life service department, leaving only a few people to maintain operations. "The overall business direction has shifted from occupying the market to a profitable structure." The person said. At the same time, the above-mentioned person said that in February, the takeaway business has fully launched scaled demand internally, including scaled capacity and scaled entry.

It is reported that Douyin's food delivery service was previously only a small-scale pilot, with the first batch of pilot cities only in Beijing, Shanghai and Chengdu. According to an insider close to Douyin, during the three-city pilot period, Douyin's food delivery service had a daily GMV of less than 2 million. On March 5, according to Ebrun, Douyin launched food delivery services in 15 cities across the country. So far, it has covered about 18 cities across the country.

But then, Douyin said that 15 new cities were added as pilot cities for the Ele.me Douyin mini program. In fact, the pilot was launched several months ago and was not added recently. As early as February 7, Douyin had clearly denied the plan to "launch food delivery services nationwide on March 1" and disclosed two pilot projects: the Ele.me mini program and Douyin group purchase delivery.

Since Douyin and Ele.me announced their cooperation in August 2022, the two sides have been constantly exploring new scenarios for local life services. According to an employee of ByteDance who is close to Douyin's food delivery business, the cooperation between Douyin and Ele.me is to divert traffic to Ele.me through Douyin on the one hand, and to share Ele.me's data, including merchant data, transportation data, member data, etc. on the other hand.

"What we are really cooperating with is their data, and bringing their merchants directly in." Public reports show that Douyin's local life transaction volume in 2022 was close to 90 billion yuan, and Douyin's life service target for 2023 is 150 billion yuan.

Another aspect of the rapid growth of transaction volume is that when Douyin entered the offline market, service providers that provide training, traffic diversion, and live broadcasting for offline merchants also began to pour in, but the qualifications of each party varied. "There are service providers in the market that charge service fees and those that charge commissions. There are many forms of cooperation. In order to attract more new customers and expand the market quickly, some chaos is inevitable." said a Douyin group buying merchant.

In addition, when online demand is converted into huge traffic, the offline real world cannot fully accommodate it, which leads to a decrease in the write-off rate and a high order cancellation rate. According to a homestay owner near Beijing, he had previously invited an anchor to do a live broadcast and sold more than 1 million, but the final write-off rate was only 40%. The reason is that the group purchase order is only for weekends and has a time limit. When all rooms are fully booked, it is impossible to book any more rooms, and users have no choice but to cancel the order.

The waves stirred up by Douyin local life are stirring up the entire offline market. The considerable traffic conversion brought by store exploration videos and live broadcasts has attracted merchants, service providers and speculators who are ready to move in.

1. Unable to handle traffic

In November 2022, Wang Cheng, the owner of a billiard hall in Daxing District, Beijing, wanted to connect to Douyin group buying. He called Douyin official, and the customer service connected him to a service provider called Qianqianhui. After that, the service provider helped him open the backend system, formulate group buying packages, and sent influencers to the store to shoot videos and live broadcast for promotion. Sales were not ideal in the first few months after the connection. In November 2022, the revenue from Douyin group buying was only more than 300 yuan, and more than 1,000 yuan in December; in January 2023, the revenue reached 3,000 yuan; in February, it ushered in a wave of traffic peaks for the first time, and the revenue exceeded 10,000 yuan.

"Douyin solves the problem of attracting people to come, mainly for publicity and traffic generation." In the past, Wang Cheng's store had a maximum of 10 orders per day, sometimes even in single digits. On the day of the interview with the power plant, his store sold 31 group purchases and wrote off 26 of them. In February, a total of more than 200 orders were written off. Traffic generation, attracting new customers, and increasing customer flow are almost the main reasons why existing merchants want to connect to Douyin. A foot massage shop located in Chaoyang District had an average daily customer flow of 30 to 50 people before connecting to Douyin. After connecting to Douyin, the daily customer flow reached more than 300 people. The store owner said, "Only with customer flow can there be revenue, and only then can we retain technicians and maintain normal store operations."

A hot spring homestay hotel in the vicinity of Beijing used to have a low season before and after the Chinese New Year, with almost no sales. But this year, after a live broadcast, they sold more than 200,000 rooms, and wrote off 70,000 to 80,000 in a month. Now the daily occupancy rate can reach 60 to 70 percent, and sometimes there are even queues for full rooms.

"We mainly cooperate from Sunday to Thursday. In the past, this period was off-season, so this is equivalent to supplementing our income." said the owner of the homestay. For most businesses, access to Douyin group buying is almost all about attracting users through price advantages, which is a form of small profits but quick turnover. On this basis, service providers and Douyin influencers also have to take commissions at a certain rate as promotion service fees, and the profits are even slimmer. According to Li Feng, an operator of a service provider, the commission rate of service providers to merchants varies depending on the industry.

Generally speaking, the ratio for catering is about 10%, for hotels and travel it is 10%-30%, and for the beauty industry it is as high as 70% or even 80%. It is reported that the highest commission ratio designed by Douyin backend is 80%. "50-80% is called drainage products, which are more for secondary conversion in stores." According to Li Feng, the cost of acquiring customers in the beauty and hairdressing industry is extremely high. If a third-party agency is entrusted, the cost of acquiring a precise user is usually around 60-150 yuan.

However, on Douyin group buying, users are attracted to the store by offering a super low price of 39.9 or 59.9 yuan, and then recommended to apply for a card after entering the store, thus achieving secondary conversion. "So sometimes, they are willing to give you 100%." ​​However, whether they can handle the huge traffic is a big test for offline merchants. The above-mentioned homestay owner said that because the offline rooms were fully booked and there were no extra rooms to book, a large number of users cancelled their orders, and the cancellation rate was only 40%.

2. Certification service providers are mixed

After visiting and interviewing many merchants, the power plant found that most merchants launched Douyin group buying around October or November 2022. The reason is that in October 2022, the Douyin service provider platform "Douyin Linker" was officially launched.

By joining the platform, you can become an officially certified service provider. Douyin's entry standards for service providers are that they must have a complete business license, no debt disputes, a registered capital of no less than 500,000, a team of at least 20 people, and no less than 20 business resources and 20 talent resources. "This entry standard and requirement is basically equivalent to no restrictions. Douyin actually hopes that more service providers will expand new businesses and achieve rapid new acquisitions." said a Douyin service provider operator.

On the other hand, the improvement of the accounting system has also dispelled the financial concerns of many merchants. According to the above-mentioned person, before the launch of Douyin Linker, service providers settled commissions with merchants, but now the Douyin backend system settles directly.

According to 36Kr data, in 2022, the number of contracted service providers on Douyin's life service platform has increased 23 times compared to the beginning of the year, and now exceeds 1,000. According to a data report released by Douyin's official platform, in 2022, Douyin's cooperative stores exceeded 1 million, covering more than 370 cities.

Li Feng joined the company that is now a Douyin service provider in October 2022. According to him, in order to attract new users, the official commission rate of the Douyin platform is only 2.5%-8%, and merchants are given free Blue V certification, and new users are free of commission for 60 days. His company, like most service providers on the market, mainly helps merchants build Douyin backend systems, invite influencers to make videos, and provide live broadcast promotion and other related services. However, they do not charge service fees, but only take a certain percentage of commission from the verification orders.

But in today's offline market, the entire service provider ecosystem is a mixed bag, and charging standards vary from person to person. Many so-called "service providers" will charge "basic fees" ranging from several thousand yuan to tens of thousands of yuan for various reasons.

Previously, a picking garden owner said that the operating team he found charged a basic fee of 20,000 to 30,000 yuan in the early stage. The power plant had previously asked a service provider whether a certain basic fee would be charged in the early stage. The service provider said, "It is indeed charged because it helps to open and operate the backend system, and there are some operations including streaming services. It will not be too high, 2,000 yuan will be fine."

In addition to charging a certain basic fee, they will also extract a certain percentage of commission from the verification orders. Many of these so-called service providers are Douyin group buying merchants. After they have operated for a period of time and feel that they have enough experience and resources, they start to form a team to become service providers themselves.

A shop owner who runs an amusement park in Beijing said that he started operating Douyin group buying independently in October 2022, and he made 150,000 yuan in 15 days. So, around January this year, he quickly formed a team of 14 people, set up several Douyin accounts to make videos and live broadcasts, and started a service provider business. But recently he found that after removing various costs, it felt unprofitable.

The best live broadcast he had done before had a GMV of over 1 million. The data looked promising, but the commission rate for that live broadcast was 5% of the orders that were written off. If all the 1 million orders were written off, he could only get 50,000 yuan at most. "I haven't seen anyone say that they have made a lot of money. This industry should become more and more competitive in the future," said the store owner.

3. Neither subsidies nor competition exist

After operating for a period of time, Wang Cheng found that the low-priced group purchase packages in the store had basically no retention rate and low conversion rate, but the higher-priced group purchase packages were better. He believed that price-sensitive users would have a price comparison mentality and always hope that the price is as cheap as possible, but users who are not price-sensitive can settle down better.

"In fact, Douyin is for promotion, just like sending out paper brochures in the early days. How many people can come back with brochures?" Wang Cheng said that he certainly has concerns, but he still has no clear idea of ​​how to retain users. The owner of the homestay mentioned above also has concerns about this. His approach is to add WeChat after the guests arrive at the store to conduct private domain operations.

But he believes that the final retention rate still needs to be cultivated internally and differentiated. But for more businesses, the retention rate is not the focus of their consideration at this stage. The owner of the foot massage shop said, "First of all, don't think about it. When there are guests, take them with you. But in essence, you still have to do a good job of the hardware and software conditions of the store itself."

In addition to Douyin group buying, most businesses also operate Meituan and Dianping. The power plant visited a large shopping mall, and most of the catering brands in the mall said that they have invested about the same amount of money in the three platforms of Douyin, Dianping, and Meituan. At present, they do not particularly focus on any one platform, and the prices of group buying products are almost the same. However, for brands that want to promote traffic, they will reduce the price on the Douyin platform. For example, Wang Cheng's billiard hall's Douyin group buying price is much lower than Meituan, and Douyin's group buying is more favorable.

In the past two years of operating Meituan, Wang Cheng's store has an average daily revenue of 200 to 300 yuan, and at most 300 to 400 yuan. But in February, they processed more than 200 orders on Douyin, with revenue exceeding 10,000 yuan. Judging from the number of orders alone, the number of orders brought by Douyin is much higher than that of Meituan.

Wang Cheng believes that this is related to the different attributes of the two channels. Meituan users are more random. For example, after having a meal nearby, they may search for Dianping and Meituan when they want to find a place to rest. However, during all the fragmented time when users are watching videos on Douyin, they may be attracted by a video or live broadcast and actively complete the transaction.

More importantly, Douyin has brought new customer acquisition channels to offline merchants: short video store visits and live streaming. However, due to the low entry threshold of this industry, the qualifications of influencers, the quality of the video content they shoot, and the final conversion rate vary greatly. For merchants, it is difficult to distinguish the quality of influencers, and they don’t know who users will like. So usually, they will cast a wide net and use different influencers in multiple matrices for promotion and dissemination.

There are also speculators in this industry. A Douyin influencer told the power plant that he opened a Douyin account at the beginning of the year in order to do Douyin group buying. Now, after three months of operation, he has more than 8,000 followers. He also has three or four other accounts, but the number of followers is not too high. The videos he posted, including store exploration videos, have low traffic. The video with the most likes in his account has only 61 likes, and some videos even have only single-digit likes.

There are quite a few similar influencers on Douyin. Although it is relatively difficult to get orders, they can still get orders, but their income is relatively limited. At present, it usually costs 500-1000 yuan for influencers to shoot videos in stores, and then a certain percentage of commission is taken from the orders. The cost of a live broadcast ranges from 4,000 to 5,000 yuan.

But the sales of store exploration videos and live broadcasts are usually difficult to guarantee. Wang Cheng also thought about building his own Douyin operation team, but the high labor costs made him give up this idea. As an offline development staff of a Douyin service provider, Li Feng has not felt too much competitive pressure from his peers in the market. "There is definitely competition with Meituan, but not much at the moment." But recently he discovered that Meituan has also started to do store exploration by experts. Recently, according to media reports, Meituan is testing a WeChat applet called "Meituan Quanquan Store Exploration", which mainly provides comprehensive services such as order acceptance and revenue settlement for store exploration experts. (Wang Cheng and Li Feng are pseudonyms.)

Author: Liu Weiqi

Source: WeChat public account "Power Plant (ID: wonder-capsule)"