As Douyin enters a strategic defensive phase in local life services, can Meituan rely on live streaming to strengthen its moat?

The lively local life services battlefield has recently witnessed significant changes.

In June, Douyin's group buying and delivery business was migrated to its Doudian home delivery platform, while Kuaishou launched a group buying and delivery service. These moves by the two short video giants suggest a subtle shift in the landscape of local life services. Facing Meituan head-on, Douyin seems to be transitioning from heavy to light, de-emphasizing food delivery and focusing on its asset-light advertising business for future commercialization. Meanwhile, Kuaishou, targeting the lower-tier markets, appears intent on strengthening its position there through differentiated strategies from Meituan.

Short video's invasion of local life services has entered a new phase, and all parties seem to have explored their respective boundaries from the outbreak to the current state of balance.

Among the remaining few variables, changes in the live streaming battlefield may become the key to future success or failure. Since April last year, Meituan has launched its first live stream and subsequently introduced IPs such as "Lightning Hands" and "Boom Group Buy." In successive quarterly financial reports, live streaming has been mentioned multiple times by Meituan. While Meituan has fortified its live streaming moat in catering, Douyin, on the other side of the battlefield, has shown hesitation. During last year's 618 shopping festival, Douyin invited celebrities like Huang Shengyi, Liu Genghong, and Wang Zulan to participate in live streams for local life services. However, this year, according to various public information, Douyin's local life services have taken a step back.

Judging from the conclusions of many insiders, this attitude seems to signal a retreat, which also means that Meituan has successfully defended its stronghold in local life services despite the intense attacks from cross-border players like Douyin over the past year. In the secondary market, Meituan's share price has continued to rise after its performance rebounded, nearly doubling from its low point.

However, this victory seems tinged with a touch of "luck." The trend of low-priced, cost-effective consumption, to some extent, objectively benefits Meituan, which invests heavily in assets. In contrast, the original advantages of short video giants, such as influencer marketing and content-driven strategies, are gradually being marginalized by mainstream consumers in the current environment. Breaking through will require even greater investments, which may not be cost-effective for short video giants like Douyin at this point.

But from another perspective, whether Meituan's victory can be sustained and how it can further expand into larger areas while maintaining its core business in the face of declining consumer spending power remain questions that Meituan needs to answer.

The local life services market seems to have temporarily entered a rare period of calm, but the undercurrents beneath the surface will likely persist for a long time.

01

Meituan's New Growth "Secret Recipe"

Based on public information, the launch of Meituan Live Streaming seemed to carry significant pressure and urgency. When Meituan launched its first live stream in April 2023, Douyin's invasion of local life services was at its peak. According to 36Kr, Douyin's local services business generated nearly RMB 60 billion in GMV in just 10 months of 2022, and the growth continued in 2023, with total transaction volume increasing by 256%. The GMV driven by influencers alone approached RMB 100 billion, and the overall GMV far exceeded this figure. On the other hand, Douyin's strong traffic and user engagement seemed to boost confidence in its ability to change local life services. According to QuestMobile, the average daily active user time on Douyin was 125 minutes in 2022, compared to 133 minutes on Kuaishou and only 16 minutes on Meituan.

It was against this backdrop that Meituan Live Streaming, born with multiple objectives such as content creation, defensiveness, and addressing shortcomings, was officially launched.

Instead of following Douyin's successful path of using top influencers and traffic stars to boost GMV, Meituan Live Streaming focused on official broadcasts and subsequently introduced two IPs: "Lightning Hands" and "Boom Group Buy," with the former targeting home delivery and the latter targeting dine-in experiences.

Looking back, official broadcasts appear to be a more suitable route for Meituan, eliminating the costs and dependence on top anchors while offering relatively low barriers to entry for Meituan, which already has a strong merchant resource base. However, the risk is also prominent: in a fierce battlefield, this approach seems slow to gain traction.

But in the local life services market, the traffic logic is not entirely content-driven as in short videos. The high-frequency nature and strong purpose of local life services do not necessarily require eye-catching IPs. With this judgment, Meituan's IPs began their expansion journey.

In July 2023, "Boom Group Buy" occupied a prominent position in Meituan Live Streaming with a multi-category, multi-city approach. According to previous exclusive disclosures by Ebrun, Meituan further expanded "Boom Group Buy's" coverage in December, recruiting service providers in 21 cities.

In addition to its own app, "Boom Group Buy" live streams have also gained momentum on WeChat Video Accounts. By September 2023, a group of service providers entered WeChat Video Accounts to broadcast for Meituan using authorized accounts. According to Ebrun's statistics, no fewer than 15 "Boom Group Buy" accounts were live.

As the live streaming format gradually solidified, Meituan continued its strategy of emphasizing low prices. According to Huxiu, Meituan consistently used real subsidies to guide users to shop in live streams. To ensure that products in Meituan's live streams offered the "lowest price on the internet," Meituan directly offered users coupons and vouchers.

This low-price mindset gradually translated into traffic, further attracting merchants to join and driving a larger market size. According to Meituan, under this model, users could discover and purchase a greater number and variety of products. The weekly per capita purchase price of loyal fans in live streams quadrupled from late March to early May, and the per capita number of products increased from 2.6 to 4.1.

Meituan Live Streaming's overall closed loop was thus formed. Besides catering, sources close to Meituan also revealed that in addition to existing IPs like "Boom Group Buy" and "Lightning Hands," Meituan would launch a series of city mixed broadcasts titled "Eat, Drink, Play, and Stay in XX" for tourist cities, leveraging the structural attributes of out-of-town traffic and users' stronger browsing preferences. This would further replicate the existing model, helping out-of-town users plan their trips and local users find high-quality, cost-effective local businesses.

With its efficient official broadcasts and low-price strategy, the gradually maturing Meituan Live Streaming seems to have defended its core business while achieving growth. The formation of this path is also a response to the current consumption ecosystem. So, is it time for Meituan Live Streaming to relax?

02

Not Yet Time to Relax

In the 2024 rankings of internet giants, Ctrip's sudden rise has overturned people's perceptions of this old internet platform. In June, Ctrip's market value surpassed Baidu, ranking seventh among internet giants. As a long-term competitor of Meituan in areas such as hotels and travel, Ctrip's renewed growth is also inspiring for Meituan.

In summary, according to founder James Liang, Ctrip's advantages lie in three areas: its strong relationship with high-end hotels, resulting in thicker profits; its higher-dimensional competition in outbound tourism; and its international vision.

Public data shows that in 2023, as the focus and profits of the tourism industry shifted towards outbound travel, Meituan's local mid-tier and low-tier merchants still accounted for over 90% of its revenue, while high-end hotels accounted for nearly 10% of room nights.

The reasons for Meituan's past victories seem to be undergoing some degree of reversal. Although this situation has not occurred in the more vertical food delivery sector, hidden concerns persist.

For Meituan Live Streaming, existing categories focus on top chain brands and urban chain brands.

In comparison, the long tail of local life services, including small and medium-sized businesses run by couples or families, remains relatively marginalized in live streaming. These small and medium-sized businesses, with their focus on local, three-to-five-kilometer businesses and relatively fixed customer groups, are limited by their geographical locations and store traffic capacity, making them ill-suited for live streaming's capabilities. To some extent, these businesses neither need nor can afford live streaming operations with high traffic and branding capabilities.

Returning to top brands, Meituan Live Streaming's pursuit of low prices has led to a lack of richness in content direction. If observed closely, it can be seen that Meituan Live Streaming has limited appeal for stronger brand directions, such as scenic spot tickets or locally distinctive destinations. In comparison, Douyin has already produced hits like Zibo Barbecue, Tianshui Spicy Hot Pot, and various travel destinations, but for Meituan, such directions seem scarce at present.

An industry insider once boldly stated that the embarrassment of Meituan Live Streaming lies in its inability to provide brand marketing and customer acquisition capabilities for large brands or merchants in categories like hotels and travel that require live streaming, while the platform's large number of small and medium-sized merchants do not necessarily need live streaming.

With its core business gradually fortified, how Meituan Live Streaming can break through to a larger scale seems to be the next important focus of Meituan's development.

03

The "Sword" Hanging Over the Industry

According to a report by CNR, China's catering industry revenue exceeded RMB 5.2 trillion for the first time in 2023, setting a new record high and increasing by 20.4% year-on-year. The growth rate of catering revenue exceeded that of total retail sales of consumer goods by 13.2 percentage points.

However, competition has intensified, with more players entering the market and consolidation accelerating. According to Qichacha data, in 2023, the number of newly registered catering enterprises in China reached 3.1869 million, while the number of cancellations and revocations reached 1.4002 million, more than double the total for 2022 and setting a new high since 2020.

With profit margins narrowing, innovation in formats will also be affected to some extent. Industry leaders like Xiabu Xiabu have stated to the media that in 2023, the company will focus more on adjusting store types and building private traffic rather than live streaming operations. This change reflects the industry's response to the current situation.

Of course, Meituan Live Streaming still has reasons to remain optimistic. According to previous reports by 36kr, in July, when the primary entry for live streaming was just launched, Meituan Live Streaming's monthly GMV was approximately RMB 500-600 million, with a month-on-month growth rate of 20%. However, it quickly rose to RMB 1-1.2 billion in August and subsequently produced live streams with GMV exceeding RMB 100 million. By October, monthly GMV exceeded RMB 2 billion.

In the first quarter of this year, Meituan's revenue reached RMB 73.3 billion, an increase of 25% year-on-year, with both the number of platform users and merchants reaching record highs.

Behind these figures lies Meituan Live Streaming's precise prediction of the current consumption situation. However, insufficient consumer spending power is a challenge facing the entire industry. Blindly competing on low prices will fundamentally affect the enthusiasm of industry players. According to media reports, Douyin's local services learning center rules show that in 2023, the platform reduced the service fee rebate ratio for catering merchants from 50% in 2022 to 5%, and tightened preferential policies for newly joined merchants. If the industry enters a negative feedback loop of contraction, it will undoubtedly have a greater impact on industry leaders.

As the leader in the industry platform, how Meituan can further break through the ceiling and build a more advantageous business model may require even more contemplation.