When will Douyin’s food delivery service become a big hit?

Do you still remember "Xindong Takeaway"? That was Douyin's first takeaway business, but it was offline after just a few months. Last year, Ele.me and Douyin announced a partnership, which once again caused an uproar. In the past two days, many media reported that Douyin will launch a nationwide takeaway service in March. Is the news true? Can Douyin takeaway stir up a huge wave in the takeaway industry? Let's take a look at the author's interpretation~

The takeout industry is in turmoil again.

On February 7, according to multiple media reports, it was learned from informed sources that Douyin will launch a nationwide food delivery service on March 1, and is currently conducting internal testing in Beijing, Shanghai and Guangzhou.

At the same time, ByteDance’s official recruitment website has posted relevant positions such as senior operations manager for takeout products, takeout industry solution operations, and senior manager for catering live broadcast expert operations.

The news that Douyin launched a nationwide food delivery service quickly became the number one trending search on Weibo, attracting widespread attention and heated discussions.

01 Douyin has been testing the food delivery business for a long time

Xinpinlue Caiguan (formerly NBS Xinpinlue) noticed that Douyin has already tried its food delivery service and has been conducting pilot projects in multiple cities over the past two to three years.

As early as 2021, Douyin began internal testing of the "Xindong Takeout" mini program, trying to develop the takeout business, but the mini program was taken offline after a few months and was ultimately not officially launched. This can be regarded as Douyin's first trial of the takeout business.

On August 19, 2022, Ele.me and Douyin announced a partnership, and the two parties began to explore the upgrading of local life service scenarios, calling for a local life service experience of "watch, click, and arrive" in the short video era.

Immediately afterwards, on December 5, 2022, Douyin reached a cooperation with Dada, SF Express, and Flash Express to provide "group meal delivery" services for Douyin's life service merchants, and gradually realize the group meal "average 1-hour delivery across the city" service.

Douyin has not only reached cooperation with national express delivery service platforms, but also explored the market. On December 7 last year, Henan local instant delivery platform UU Paotui announced that it had reached a group purchase and delivery cooperation with Douyin Life Service.

Overall, Douyin’s previous pilot food delivery business has a simple service model. First, it cooperates with merchant brands to attract users to place orders by browsing short videos or live broadcasts. Second, merchants choose to do food delivery on Douyin through group purchase and delivery.

From internal testing to continuous pilots in multiple cities, although the market information previously conveyed by Douyin was mainly about providing group meal services, more and more information and signs show that Douyin will sooner or later fully enter the food delivery business.

Douyin takeout is getting closer and closer to us.

02 The takeaway business is so attractive that Douyin wants to “eat it”

Douyin is testing the food delivery business, and this is reported by the media every once in a while. Why is Douyin focusing on the food delivery business?

In the view of Xinpinlue Caiguan (formerly NBS Xinpinlue), Douyin's involvement in the food delivery business is due to a variety of comprehensive factors, including the attractiveness of the food delivery market, Douyin's own advantages and urgent real-world business needs.

First of all, food delivery is a trillion-dollar market, and the huge market size is the primary attractive factor.

Local life services have always been an important manifestation of the development of the Internet industry. From Internet search services in the traditional PC era, to O2O, and then to the mobile Internet era, consumers can consume food, drink, and entertainment with just the movement of their fingers. This is why Meituan has developed into an Internet giant platform.

Data shows that the market size of China's takeout industry has increased 50 times from 2012 to 2021, and the growth rate of takeout is higher than the overall level of the catering industry. The number of takeout users has exceeded 500 million. According to data from the China Business Industry Research Institute, the market size of China's takeout catering industry will reach 941.74 billion yuan in 2022.

However, the general market view is that the scale of China's food delivery market has already exceeded one trillion yuan. In the post-epidemic era, the penetration rate of the food delivery market will further increase, and the scale of the industry market will continue to expand.

Faced with such a huge existing market and incremental market, the food delivery business will remain a rigid demand service and a traffic monetization point in the future.

Secondly, Douyin’s local life service ecosystem has been formed and its business model has taken shape.

Today, Douyin is no longer just a short video platform. The local life service business ecosystem has been formed and the results of business model exploration are very significant.

After several years of exploration, Douyin's local life service categories and scope include food, drink, entertainment, catering services, air ticket booking, hotel booking, performances, ticketing, communications, life services, life payments, travel services, coupons, etc.

Douyin's local life services have formed characteristics and service models around Douyin's user base and visual forms of traffic through cooperation with merchant brands, anchor store visits, video recommendations, short video sharing, live streaming and other methods.

The 2022 Douyin Life Service Data Report released by Douyin on January 3 this year shows that in the past year, Douyin Life Service has covered more than 370 cities and more than 1 million cooperative stores. There are 1.67 billion short videos and 2.35 million live broadcast rooms, providing netizens with 2.19 million food choices and 710,000 places to relax and unwind.

The huge traffic advantage can bring commercial realization to Douyin, such as advertising business, recommendation business, etc. Data shows that in 2022, Douyin's local group buying advertising business will achieve about 8.3 billion yuan, higher than the target of 4.5 billion yuan, with impressive data growth.

Third, the actual need for Douyin to realize commercial value.

Douyin is making great efforts to promote traffic monetization and increase business revenue. Local life services are one of the important fulcrums of Douyin's business monetization. Therefore, the food delivery business is a practical need for Douyin to accelerate commercialization and monetization.

Douyin Life Service has set a target of 150 billion yuan for 2023, which is twice the GMV of the previous year. According to 36Kr data, Douyin Life Service achieved a GMV of about 77 billion yuan in 2022.

The annual target data set by Douyin has exceeded one-third of Meituan’s annual in-store hotel and tourism transaction volume. If the business targets are to be further split, catering will be responsible for half of the GMV target, and the plan is to complete 75 billion.

03 What “killer weapons” does Douyin Takeout have?

The trillion-dollar food delivery market has always attracted Douyin. So, what are Douyin's core advantages in food delivery? What "killer weapons" does Douyin have?

Xinpinlue Caiguan (formerly NBS Xinpinlue) summarized it as "user advantages, traffic advantages, and scenario advantages."

First of all, in terms of user advantages, Douyin is already the leader in the domestic short video industry, firmly sitting in the top spot, and its position in the industry is unshakable.

This is based on the user advantage that Douyin has had for so many years. According to the latest data, the number of Douyin users in 2022 is about 842 million, and the number of daily active users exceeds 700 million. The huge user base is enough to support Douyin's food delivery business.

Second, Douyin has the traffic advantage. Douyin has become one of the main ways of entertainment in people’s daily lives, and it has huge user stickiness and usage habits.

Douyin users have high daily activity, and the average daily usage time per user is as long as 140 minutes, which is more than two hours. This is Douyin's huge traffic advantage.

Another key point is that those who order takeout are young people or office workers. Douyin's user base is concentrated among young people aged 24 to 30, accounting for 40% of all users.

Third, the scene advantage. If Douyin e-commerce is interest-based e-commerce, then the biggest feature and highlight of Douyin takeaway can be said to be interest-based takeaway.

The biggest features of short videos are immersive experience, visual impact and interactivity, which are the key factors that attract users. The live streaming shopping model that emerged during the epidemic relies on one keyword: interest.

Xinpinlue Caiguan (formerly NBS Xinpinlue) has noticed that food videos or food live videos are also very popular. Many food short video bloggers have grown up with over 10 million fans, and watching chefs cook live has become a hobby.

Watch short videos and order takeout. If you don’t know what to eat for lunch, you can order takeout when you are interested in watching short videos. When staying up late to watch a TV series, you can watch what the protagonist eats and order takeout when you are interested.

The era of watching videos, following interests, and ordering takeout is coming.

04 When will Douyin’s food delivery service take off?

Can Douyin's accelerated trial of its food delivery business stir up a huge wave in the food delivery industry, and especially what impact will it have on the current food delivery giant Meituan?

The takeout market has undergone years of development and industry reshuffle. Judging from the current market structure of takeout platforms, the concentration of online takeout platforms is very high. The three major mainstream takeout platforms, Meituan Waimai, Ele.me and others, account for 92% of the market share.

Among them, Meituan's industry status, market share and competitive advantages are the most prominent. According to data from the China Report Hall website, Meituan's food delivery accounted for 69% of China's food delivery market share in the first half of 2022.

After the news that Douyin’s food delivery service will be launched became a hot topic, Douyin officials responded quickly.

According to the Daily Economic News, a person in charge of Douyin's life service said that the "group purchase and delivery" project is still under pilot testing in Beijing, Shanghai and Chengdu. Recently, self-service settlement has been opened for merchants in these three cities. In the future, depending on the pilot situation, the company will consider gradually expanding the pilot cities. There is no specific timetable at present.

At least at this stage, Douyin's food delivery business is still in the pilot stage and will not have a major impact on the food delivery market in the short term. The industry structure is unlikely to change in the short term.

The full launch of Douyin’s food delivery business is only a matter of time. When Douyin’s food delivery business will “take off” depends on the progress of future pilot explorations of the food delivery business. However, Douyin’s food delivery business is still worth looking forward to.

However, Douyin has advantages in various aspects. If it launches group purchase and delivery services, or even personal food delivery services in the future, it will inevitably affect the entire market.

Although Douyin has advantages in traffic, users, scenarios, etc., the existing food delivery market already has some industry drawbacks, such as the high share ratio of food delivery platforms, high operating costs for merchants, and high discounts that squeeze merchants' profit margins.

Douyin’s future food delivery business must also try to “avoid pitfalls” and find its own characteristics and “killer weapon”. Interested food delivery can bring new consumption experiences and a sense of freshness to consumers. More importantly, it must be “steady and long-lasting” to retain users.

Douyin is not the only one eyeing the trillion-dollar food delivery market. Douyin's competitor Kuaishou, as early as December 2021, Meituan reached a strategic cooperation with Kuaishou on interconnection, relying on the Kuaishou platform to open up content scene marketing, online transactions and offline fulfillment service functions.

At the beginning of 2022, Kuaishou cooperated with SF Express again, with the latter providing instant delivery services.

Internet technology giant JD.com has long revealed information about its involvement in food delivery. In June 2022, JD Retail CEO Xin Lijun revealed in an interview with the media that JD.com is studying the possibility of entering the food delivery field.

Faced with new competitors, Meituan will naturally respond. Meituan is accelerating its recruitment and trying to make up for its own content shortcomings.

In January 2023, Meituan launched the WeChat mini program "Meituan Circle Store Exploration", providing services for merchants and store exploration experts. Meituan has elevated this business to a core business, placing it in a prominent position in the homepage navigation bar, alongside Meituan Youxuan, shared bicycles and other businesses.

Today, veteran food delivery platform players such as Meituan and Ele.me continue to maintain their dominant market position, and latecomers are eager to try. Players such as Douyin, Kuaishou, and even JD.com will join the food delivery market in the future, and competition will only become increasingly fierce.

Xinpinlue Caiguan (formerly NBS Xinpinlue) believes that the food delivery service is a trillion-dollar market. The more players there are, the more choices consumers will have. Intensified competition will drive industry progress and push the food delivery industry from its past focus on delivery speed to development in the direction of quality, service, high-end and customization.

Author: Wu Wenwu, WeChat public account: New Product Finance View (ID: nbscaijing)