Over the past four years, Douyin, unwilling to be just a traffic business, has been aggressively testing Meituan's core local life services, but with little success. It wasn't until the pandemic, when a large number of local merchants flocked to Douyin livestreams to "survive" and sell products, that Douyin finally found its breakthrough.

On August 19, Douyin and Ele.me announced a high-profile partnership, officially entering the food delivery sector of local life services. The announcement was full of sincerity, painting a fresh, fun, attractive, and convenient future for merchants and consumers. Oddly, this "promise" did not include a specific timeline.

Now, half a month after the announcement, what progress has Douyin's food delivery business made? What countermeasures has Meituan taken? What impact will Douyin's entry have on the industry? New Distribution spoke with several local merchants about their views on Meituan and Douyin, revealing the real situation behind the scenes.

01 Douyin vs. Meituan: Who Subsidizes More?

While people lament that Meituan's discounts are getting harder to come by, they unexpectedly discover a wealth of surprises on Douyin.

On August 19, Li Yang (pseudonym), a Beijing resident, posted a late-night "food poisoning" post on his Moments. The photo showed a crispy, golden lamb leg roasting over charcoal, sizzling with oil, making mouths water. He captioned it, "Douyin coupons are amazing, directly half price."

That evening, Li Yang purchased a special four-person set meal originally priced at 579.2 yuan at Beijing's Black Forest Charcoal Grilled Lamb Leg (Xiaoying branch), and enjoyed the delicious roast lamb leg at half price. For Li Yang, who hadn't gotten such a great deal on a platform in a long time, it was a pleasant surprise.

In fact, as early as 2021, Douyin had begun piloting local life "group buying" in Beijing, Shanghai, and other cities, with a "same city" entry already on its page, though it wasn't loudly promoted at the time.

On the same day Li Yang used his Douyin group buying coupon, Douyin and Ele.me jointly announced a partnership to provide consumers with "see, order, and receive" local life services. From then on, Douyin officially entered the food delivery industry, targeting Meituan's core business.

However, as of now, Douyin and Ele.me have not taken substantive action, neither launching an Ele.me mini-program nor adding a food delivery entry.

How should Meituan respond to Douyin's aggressive offensive? "Defensive moves" are essential. It is known that Meituan Waimai has removed all its mini-programs on Douyin, replacing them with links to claim coupons, directing customers to its own app. All of Meituan's official accounts on Douyin, which previously linked to Meituan mini-programs, now show virtual phone numbers or app download links.

Screenshots of search results for "Meituan Waimai" and "Meituan Mini Program" on Douyin, showing redirects.

At the same time, Meituan is rapidly advancing co-branded partnerships with top brands. For example, it partnered with Starbucks to offer a 19-yuan delivery Frappuccino, an unprecedented discount. Although Douyin has not yet secured big names like Starbucks or Häagen-Dazs, it has already captured many small and medium-sized chain brands and is not lagging in subsidies.

From August 22 to August 25, a 50% off Frappuccino with free delivery was available on the Meituan app.

"Some use Meituan coupons, but more guests use Douyin coupons." In the past two months, many customers at Beijing's old chain restaurant Beiping Shifu have used Douyin group buying coupons for dine-in. A staff member told New Distribution: "For the same four-person premium set meal, buying on Douyin is not only 60 yuan cheaper, but the dishes are also more popular with guests."

Sales of group buying coupons at Beiping Shifu on Meituan (left) and Douyin (right).

Similarly, a staff member at coffee chain Tims in Beijing said: "We have coupons on Meituan, Dianping, and Douyin; you can buy whichever you think is suitable. But many drinks on Douyin are indeed more cost-effective than on other platforms." When asked if Douyin provides subsidies to support brands' "money-throwing," the Tims staff member said they were not sure.

However, according to customer service for "Douyin Laike," newly registered food delivery merchants since June will sign a commission rebate agreement with the platform, with a 60-day protection period. During the protection period, the platform only charges a payment channel service fee of 0.6% of the verified amount. After the protection period, the platform will charge a 2.5% software service fee.

Compared to Douyin's "2022 Life Services Software Service Fee Standard Description," which states an average software service fee rate of 4%, with a minimum of 2.0% and a maximum of 8%, the catering software service fee is lower than the average and lower than most categories.

Screenshot from the official website of Ocean Engine: "2022 Life Services Software Service Fee Standard Description."

"The platform does not provide per-order subsidies for merchants' group buying coupons." As for other preferential support, customer service said there is none for now: "If you want traffic boosts or influencer recommendations, you can pay for them in the app."

Ele.me also recently urged merchants: "Do targeted operations, such as separate dishes, separate activities, and separate discounts, to seize the traffic high ground in the new battlefield." The platform does not provide more real subsidies; all the "wool" comes from merchants themselves. However, many merchants still hold a positive view of Douyin's entry into local life services.

Data shows that from January 2021 to March 2022, just over a year after Douyin Life Services launched, more than 700,000 local life service merchants had joined, covering over 370 cities. In 2022, GMV grew 234 times compared to the same period last year.

Douyin's rapid rise has made Meituan, which has long dominated the food delivery industry, feel the crisis.

02 Douyin Attacks, Meituan Defends

Business is tough right now, and merchants are racking their brains to attract customers, not letting any traffic platform go. Although Douyin is a "newcomer" with the halo of a newbie benefit period, Meituan, as an established platform, cannot be abandoned.

"We have a partnership with Douyin, starting about a month and a half ago; each person can buy up to 5 group buying coupons per month." Tims Coffee's Douyin page shows that its best-selling medium latte has sold 156,000 cups, and the dessert "Tianqu Ball" has sold 124,000 portions, with four other products selling over 10,000 units.

On Meituan, Tims' product offerings differ, but sales data pales in comparison to Douyin; even half-year sales have no product exceeding 100,000 units.

Comparison of Tims Coffee group buying coupon sales on Meituan (left) and Douyin (right) in Beijing.

It is understood that in July this year, Tims partnered with Douyin to launch a month-long "Heartbeat Summer with Coconut" campaign. Like many merchants, Tims attempted to find new ways to stimulate revenue growth through Douyin's influencer short videos, corporate account livestreams, and influencer livestreams.

Douyin's daily active users have grown rapidly in the past two years, exceeding 600 million in 2022. Livestream commerce has unleashed astonishing energy, making it almost a must-have for merchants. Douyin Life Services' advantages are not limited to short video promotion; it can also combine merchant location to reach more "precise" customer groups and expand merchants' business radius. Merchants can also use video content to present dining experiences, store environments, and other consumption experiences upfront, shortening consumers' decision-making cycles.

Meituan's disadvantage lies precisely here. The era of text and images is over, and video is prevalent; consumers prefer short videos and livestreams that engage all senses. Meituan, constrained by "content and traffic," has tried to build its own traffic ecosystem and experiment with livestreaming, but with little success.

However, when asked if Douyin offers delivery, the Tims staff member replied: "Douyin doesn't have delivery yet; you can only dine in. If you want delivery, you can order on our own app or Meituan." Despite the joint statement with Ele.me, nearly half a month has passed, and Douyin has not yet launched a food delivery feature. It seems that delivery capacity remains a bottleneck for Douyin's local life services.

Screenshot of customer service response from "Douyin Laike" app when asked if Ele.me delivery can be used.

As the veteran in the food delivery industry, Meituan has an undeniable advantage in delivery capacity. Its massive rider network allows for more flexible and efficient logistics. For local life services, delivery capability is just the basic threshold; local supply capability is the decisive factor. After years of accumulation, Meituan has a clear advantage in local supply, with resources like local physical supermarkets, offline stores, and front warehouses. Douyin, a newcomer, even with Ele.me's help, will find it hard to catch up in the short term.

With such advantages, Meituan is exploring new growth points. Recently, Meituan's financial report classified "Meituan Flash Delivery" under core local commerce, indicating that Meituan is preparing to aggressively enter "instant retail," leaving Douyin behind in local life services.

Whether Douyin can keep up remains to be seen.

03 Local Life: The Last Fertile Ground

After Douyin announced its partnership with Ele.me, industry insiders speculated that this move would accelerate JD.com's entry into local life services. Not only JD.com, but Alibaba, Pinduoduo, Kuaishou, and Xiaohongshu are also eyeing local life services.

Why local life? Because it's a trillion-yuan market and one of the few incremental markets within that scale. According to iResearch, the size of China's local life services market was 19.5 trillion yuan in 2020, and it is expected to grow to 35.3 trillion yuan by 2025, with a compound annual growth rate of 12.6%.

At the same time, with the expansion of new scenarios like online dining and online group buying, the online penetration rate of local life services will also increase significantly, from 24.3% in 2020 to 30.8% in 2025. With such a fertile ground, why wouldn't major giants accelerate their efforts to grab a share?

Douyin is betting on local life to solve its urgent need for traffic and monetization. Currently, ByteDance, Douyin's parent company, has seen its domestic advertising revenue peak. As ByteDance's largest revenue source, the stagnation in advertising revenue has forced ByteDance to seek new avenues, and local life is Douyin's latest and most important growth curve.

As early as 2018, Douyin formed a POI team to use POI to carry seed-planting videos, attempting to "snatch food from the tiger's mouth" of Meituan. In 2019, Douyin launched a "Merchant" page where users could check various promotions and discount information, and support "online booking." In 2020, it successively launched group buying, "influencer store visits," hotel booking, and ticket booking services. In 2021, it established a "Local Direct Sales Center" to expand local life services, added a "Food, Drink, Fun" channel and map at the top of the same-city page, and added a group buying entry in the "Wallet" function.

However, over the four years, Douyin's frequent moves had little impact. It wasn't until the first half of 2022, when many people were forced to stay home due to the pandemic, that Douyin unexpectedly broke the deadlock in local life services. It launched the "Douyin Laike" app to gather local merchants and rapidly advance its local life business.

On August 19, Douyin and Ele.me joined forces. It's foreseeable that while complementing each other's strengths in traffic and delivery, they will also open up new gameplay in the food delivery industry, like a timely disruptor injecting new vitality into the entire industry.

Consumers can now enjoy a one-stop service from seed-planting, ordering, payment, to delivery in a video-based scenario—an unprecedented experience. For merchants, they can rely on two big trees, gain insights into consumer needs at any time, iterate products promptly, innovate continuously, and leverage low costs to drive high sales, reaping the dividends of the video era.

Looking at other giants, Alibaba's local life advancement is hindered, JD.com and Pinduoduo lack the strength, and Xiaohongshu, despite launching same-city features, has seen little progress.

The smoke has already risen. Douyin's emergence has led industry insiders to speculate that it might compete with Meituan. At that time, whether it's a multi-polar standoff or winner-takes-all, the one who can stand firm will be the one that offers real benefits to merchants and consumers.

Source: New Distribution Business Review (ID: xinzhainews), Author: Heli