Can Douyin’s food delivery service take away Meituan’s business?

In 2022, Douyin tried food delivery and joined the food delivery business with life services as the starting point. In today's fierce competition in local services, why does Douyin want to develop food delivery business? What changes will its growth bring to this industry? This article explains in detail the performance of Douyin food delivery in the past year, and I hope it will be helpful to you who are interested in Douyin and local services.

Over the past year, Douyin’s food delivery service has grown at a speed that cannot be ignored.

On December 5, 2022, Douyin reached a cooperation with Dada, SF Express, and Flash Express to provide "group purchase and delivery" services for Douyin life service merchants, and gradually realize the "average 1-hour delivery across the city" of group purchase packages. On December 7, Henan local instant delivery platform UU Running Errands also announced a "group purchase and delivery" cooperation with Douyin Life Service, and will provide group purchase and delivery services for Douyin local life users in the future.

Prior to this, on August 19, 2022, Ele.me and Douyin announced a partnership to jointly explore the scene upgrade of local life services, bringing a new experience of local life services of "watch immediately, click immediately, and arrive immediately" in the video era.

Douyin's trial of food delivery shows that short videos are moving towards heavy verticalization. The fundamental reason is that the platform is under great pressure to increase revenue. Half a year has passed from the trial launch to the official announcement of cooperation with multiple food delivery platforms and local logistics. Who would be more willing to order food delivery on Douyin? Where has Douyin food delivery come to now? What problems are there to be solved?

1. After two years of trying to deliver food, what has Douyin done?

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

At the turn of spring and summer in 2022, dine-in services were suspended in various places due to the epidemic. The surging demand for "live streaming + takeaway" from merchants and the user experience problems caused by self-delivery by a large number of merchants prompted Douyin to pay attention to the takeaway business again.

At present, Douyin Takeaway has developed two links:

——Ele.me Douyin Mini Program: Proprietary delivery channel + joint marketing project

On August 19, 2022, Douyin and Ele.me jointly announced a partnership. Afterwards, the "Ele.me Douyin Mini Program" takeaway business model has been opened for pilot testing in Nanjing and officially landed. It is understood that there are more than 50 brands participating in the first batch of pilots, and it is expected to cover more than 2,000 Nanjing stores, including Jianghuai specialty brands such as Little Kitchen Lady, Nanjing Dapaidang, Lion Palace, and Chenxiang Duck, as well as national chain brands such as Xijie Fried Skewers and Yuanji Cloud Dumplings.

When users browse short videos or live broadcasts on the Douyin platform, they can browse the specific products of merchants through the short video POI or the live broadcast "small house". After they are interested in buying and click on the products, they will jump to the "Ele.me Douyin Mini Program" to place an order and pay. At the same time, merchants accept orders through the "Ele.me Douyin Mini Program" and match the Ele.me proprietary delivery system to deliver the products to users, realizing convenient, fast and accurate delivery.

The "Ele.me Douyin Mini Program" supports the "shopping cart" function, and users can combine and purchase items by themselves. At the same time, partner merchants also have the opportunity to participate in the joint marketing activities of Douyin Life Service and Ele.me, and obtain platform traffic, operational support, training and other support.

——Group purchase delivery: multiple delivery methods + marketing combination

Merchants can choose to deliver food on Douyin through the “group purchase and delivery” method.

Merchants can display products from multiple angles in Douyin's short videos or live broadcasts in the form of packages. After users are "planted" with the products in the short video or live broadcast room, they can immediately purchase the products through the POI of the short video or the small house in the live broadcast room.

Screenshot of Douyin group buying expert video

There are multiple delivery methods to choose from in the "group purchase delivery" link, for example, using the third-party aggregated delivery resources provided by Douyin Life Service or choosing self-delivery. Currently, Douyin Life Service has reached multi-party cooperation with high-quality partners such as SF Express, Flash Express, and Dada Express, which meets the diversified, omni-channel delivery needs of merchants and improves the delivery efficiency of goods.

In addition, the "group purchase and delivery" link supports merchants to reuse the existing catering influencer ecosystem for content management and position management; they also have the opportunity to participate in various marketing projects such as platform replenishment, marketing IP, node marketing activities, etc. For example, Kas previously reported how catering merchants relied on Douyin to do a good job in takeaway business during the World Cup. (Single-day GMV 416 million, who reaped the World Cup dividends on Douyin?)

Currently, the "Ele.me Douyin Mini Program" and "Group Purchase Delivery" are in the exploration stage and are temporarily only open to merchants in pilot cities.

2. Why is Douyin obsessed with “delivering food”?

Local life has always been a big market, and coupled with the impact of the epidemic on offline markets, online channels have become an important growth point.

According to 36Kr, in the first half of 2022, the GMV of Douyin Local Life was about 22 billion yuan, exceeding the 20 billion yuan target that was not achieved in the whole year of 2021. As of June 2022, Douyin Local Life has expanded to 33 cities, and the annual plan is 50-55 cities.

Douyin Life Service's target for 2023 is 150 billion, which is about twice the GMV of the previous year. This figure has exceeded one-third of Meituan's annual in-store hotel and travel transactions. Specifically broken down into each business line, catering undertakes half of the GMV target, with a plan to achieve 75 billion, comprehensive plans to achieve 45 billion, and hotel and travel plans to achieve 30 billion.

Takeaway is the "last mile" of Douyin's catering business. Douyin is targeting takeaway, focusing on the monetization effect it brings and the formation of a closed loop within the platform.

"In-depth Analysis of the Short Video Industry: A Perspective of the Competitive Landscape" points out that the current growth in the user scale and duration of the domestic short video industry has slowed down significantly, and the industry has entered a normalized slow growth. In the slow-growing short video industry, the core of increasing revenue lies in advertising. To improve the efficiency of advertising monetization, you must find a large track, such as tourism and takeaway catering, which are the core tracks of life services.

As the epidemic recurred, takeout has evolved from a "supplement to dine-in" to a dual-home model, becoming an important channel for restaurants to increase revenue.

According to the "2022 Catering Enterprise Research Report under the Background of the Epidemic", nearly 50% of the interviewed catering companies have developed takeaway and group buying businesses during the epidemic. According to the National Bureau of Statistics, in the first quarter of 2022, online catering sales increased by 20.8% year-on-year. Among them, in-store dining and takeaway sales increased by 67.8% and 14.8% year-on-year respectively.

According to the forecast of China Business Industry Research Institute, the market size of China's takeaway catering industry will reach 941.74 billion yuan in 2022. The takeaway catering market is huge, and Douyin also has certain advantages. The launch of group purchase and delivery is bound to affect the entire market.

Compared with Meituan and Ele.me, Douyin takes content and interest as its core driving force. It has a huge traffic pool with over 600 million daily active users and a dynamic video display format. It can display the characteristics of products more comprehensively and intuitively, stimulate consumers' desire to consume, and guide the transaction of takeaway products with high unit price.

3. What are the pain points of Douyin food delivery?

Even with its traffic advantage, it is not easy for Douyin to get a piece of the pie when traditional food delivery platforms have already occupied most of the market.

The launch of the "group purchase and delivery" function is a step for Douyin to enter the local food delivery business. Even with its traffic advantage, Douyin's food delivery still has shortcomings.

First of all, the operating costs of merchants are high, and labor and marketing expenses are inevitable. Moreover, adding a platform operation means more pressure and risks. For example, in the form of group buying, some dishes in the store are usually sold at extremely low prices to attract consumers to dine in the store. Generally speaking, only consumers who experience it for the first time can enjoy a relatively large discount. If the discount is too large, once the original price is restored, even consumers who are satisfied with the food will hesitate.

Secondly, whether consumers can settle down and repurchase depends on the actual quality of the product and the merchant’s own user operation strategy. If the short-term attempt fails, how many merchants are willing to stay in Douyin for a long time? Will Douyin takeaway only retain large chain brands? These are all important questions.

If Douyin wants to create another "Meituan", from merchants to self-built delivery, Douyin needs to build and accumulate step by step. In terms of content distribution technology, Douyin may be better than Meituan and Ele.me, but it may not have an advantage in local promotion capabilities.

Take Meituan’s business as an example. In 2021, rider costs accounted for 71% of Meituan’s total food delivery revenue. Its founder Wang Xing once mentioned in an interview, “This has been repeatedly proven that traffic alone is not enough. He must have actual merchants, an entire operating system, and be willing to do hard work.”

If short video platforms such as Douyin want to do well in the local life track, they must find their own positioning differences in order to demonstrate their competitive advantages.

It is worth noting that Meituan is also recruiting talents to try to make up for its content shortcomings.

In January 2023, Meituan launched the WeChat mini program "Meituan Circle Store Exploration", which provides a matchmaking service for merchants and store explorers. According to Tech Planet, Meituan will name the new business "Worthy of Grabbing", embed Meituan Circle in the homepage navigation bar, and list it alongside Meituan Youxuan, shared bikes and other businesses.

Screenshot of Meituan Quanquan·Store Exploration Mini Program

At present, Meituan Quanquan Store Exploration supports expert certification in five channels: Dianping, Weibo, Douyin, Kuaishou, and Xiaohongshu. It also provides transaction matchmaking services within the platform, expert docking services for merchants, and order acceptance and revenue settlement services for store exploration experts.

In fact, Meituan Quanquan Store Tan is secretly competing with Douyin for the resources of store explorers and transferring the content to Meituan and its partner platforms. However, the low commission is destined to only attract some small and medium-sized store explorers to join and transfer. Currently, the progress of business order recruitment in the mini program has been shown as 0, and the number of orders that can be accepted is also very few.

Since 2019, Douyin has joined hands with service providers to continuously increase its investment in local life by leveraging its content and traffic advantages, using content created by over 600 million daily active users and countless store explorers to "attack Meituan from a dimensionality reduction perspective", expanding from various group purchases to food delivery, and continuously attracting merchants with low commissions and traffic, frequently testing Meituan's basic base.

What kind of fierce battle will be staged in the food delivery track in 2023? The answer will be written by each platform.

Author: Lou Xingchui

Source: WeChat public account "CaasData" (ID: caasdata6)