Original by BCC Global
October 10, 2024 | 9:30 AM
Introduction
In 2024, China’s in-store services market is experiencing a new phase of rapid growth, with Douyin showing particularly strong performance. In the third quarter of 2024, Douyin’s sales reached a record high of 170 billion yuan. Meanwhile, platforms like Meituan and Kuaishou are constantly adjusting their strategies to respond to challenges from short video and content platforms. In this fiercely competitive market, Douyin and Meituan have adopted different operational models and market strategies. This article provides an in-depth analysis of the competitive dynamics between two models—content-driven and LBS-driven—exploring how each framework positions itself in the market and evaluating which platform demonstrates the greatest potential for long-term leadership.
Business Structure Comparison: Douyin Focuses on Key Accounts, with a Stronger Presence in Dining
Strategic Merchant Choices:
Douyin relies heavily on nationwide key accounts (NKAs) and city chain accounts (CKAs), which together contribute 76% of its gross merchandise value (GMV), establishing its leadership in the high-end market. In contrast, Meituan focuses on small and medium-sized merchants, which contribute 70% of its GMV, allowing it to cover a wide range of daily life services for users.
Core Business Distribution:
Douyin’s in-store services primarily focus on dining (45% GMV), hospitality (32%), and general services (24%), emphasizing expansion in chain restaurants and tourism services. Meituan, however, focuses more on high-frequency consumption scenarios, with general in-store services accounting for 39%, dining at 38%, and hospitality at 23%.
Operational and Recommendation Differences: Douyin Relies on Content Creation, While Meituan Offers Personalized, Location-Based Services
Recommendation Algorithms and Traffic Distribution:
Douyin follows a “content-commerce” logic, recommending services through short videos and live streams. Merchants’ exposure is determined by factors like their popularity and fanbase, which benefits top merchants with the resources to buy traffic. Meituan, on the other hand, uses a location-based service (LBS) strategy, recommending services based on users’ geographic location and past behaviors. This ensures nearby services can quickly reach users, improving the user experience and order conversion rate.
Operational Teams and Execution:
Douyin has a relatively weak local operational team, particularly in business development, relying more on online traffic. Meituan boasts a strong offline business development (BD) team, with extensive coverage that even reaches small county towns. This allows Meituan to significantly boost merchant sales activity, achieving a monthly activation rate of 72%, compared to Douyin’s 64%.
Commercial Strategy: Douyin Attracts Merchants with Lower Commissions, Meituan Focuses on Operational Support and Dynamic Adjustments
Commission Rates:
Douyin charges a commission rate of approximately 2.5% for in-store dining, while Meituan’s rate is 5.5%. This makes Douyin more attractive to merchants in terms of commission. However, Meituan’s stronger operational capabilities and larger user base ensure merchants remain profitable, even with higher commission fees.
Dynamic Commissions and Promotional Events:
Douyin lowers commission rates and increases subsidies to boost merchant activity. Meituan adjusts commission rates based on merchant performance, offering lower quarterly commissions to high-volume merchants, encouraging them to participate more actively in platform promotions.
Marketing and Advertising Costs:
Meituan’s marketing fees are lower at 5.5%, making it more appealing to small and medium-sized businesses. Douyin’s marketing costs are higher, with total merchant marketing expenses reaching as much as 14.5%.
Market Share and Growth Strategy: Douyin Expands Quickly, Meituan Focuses on Profitability
GMV Comparison:
In the first quarter of 2024, Douyin’s local services GMV reached 103 billion yuan, grew to 115 billion in the second quarter, and is expected to hit 170 billion in the third quarter. Meituan’s GMV, however, was 200 billion yuan in Q1, 230 billion in Q2, and is projected to exceed 250 billion in Q3. While Douyin is catching up quickly, it still trails behind Meituan.
Differing Growth Goals:
Douyin is focused on rapidly increasing its market share by expanding its merchant base and offering subsidies to fuel growth. In contrast, Meituan is working to solidify its market share while aiming to improve commission rates.
Key Challenges for the Future: Douyin Needs to Improve Redemption Rates, Meituan Needs to Boost Content Marketing
Platform Differentiation:
Douyin’s strength in traffic and content distribution gives it a unique appeal to large chain merchants, but its penetration in the long-tail market is weaker. Meituan, with its strong offline network and wide merchant coverage, dominates the long-tail market. Moving forward, Meituan must enhance its content marketing capabilities, particularly in using short videos and live streaming to attract younger audiences.
Redemption Rate Disparity:
Douyin’s current redemption rate is 60%, while Meituan’s stands at 81%. Douyin needs to further optimize its platform experience and better support small and medium-sized merchants, while Meituan must invest in entertainment content to increase user engagement.
Balancing Revenue and Profit:
Douyin, as it scales up, needs to gradually transition from traffic growth to revenue generation. Meituan, meanwhile, must maintain its market lead while optimizing advertising spend and commission strategies to achieve long-term profitability.
Conclusion
The competition between Douyin and Meituan in the local lifestyle services sector is not just a matter of differing business structures but also a clash of market strategies and operational models. Douyin is quickly catching up with its powerful traffic and content distribution capabilities, while Meituan’s deep offline network and extensive merchant coverage help it hold its leading position. The future of this race hinges on both platforms’ ability to address their weaknesses and leverage their supply-side advantages to scale efficiently. Which platform will emerge victorious in this “content-driven” versus “location-driven” battle? Only time will tell.
Disclaimer: The above content represents an analysis of relevant events and does not constitute investment advice. All information is based on publicly available sources, expert opinions, and BCC research. No liability will be assumed for losses arising from the use of this information. Investing involves risks; proceed with caution.