Image source@Visual China
Text | Dong Gui talked about science and technology
If it had been said ten years ago that Meituan and Byte would have a fight, no one would have believed it.
At that time, Meituan had just come out of the "100-group war" and launched the "beach-grabbing action" to enter the food delivery market while competing with Dianping; Toutiao, a two-year-old subsidiary of Bytes, was using a recommendation engine to meet the wave of media content, competing for Baidu's traffic and print media business.
If it had been said five years ago that Meituan and Byte would have a fight, most people would not have believed it.
At that time, Meituan was grabbing Ctrip's hotel business, while focusing on "eating", and Alibaba was anxious in the field of local life services; Byte surpassed Baidu and Tencent to become the second largest digital advertiser in China, and the cash cow business promoted the company's boundary expansion, social networking, games, education, fearless giants, rampage.
However, in 2023, Byte will have a big impact on Meituan.
In the capital market, it has become the most concerned topic for Meituan investors. In terms of business operations, Meituan has also become a strong competitor in the field of local life: in 2022, the live broadcast related to local life on the Douyin platform increased by 925% compared to the previous year, and the related GMV also soared from 10 billion yuan in 2021 to more than 70 billion yuan. The food delivery business also cooperated with Ele.me to launch an all-out attack on Meituan.
How much of an impact will Douyin ultimately have on Meituan?
In 2018, someone asked Daniel Zhang how he thought of Pinduoduo. Daniel Zhang believes that "some users have been lost in the short term, but a large number of users have flowed to Taobao." You should think that you are helping me develop the rural market and educate users. "Later, as a result, everyone saw that the educated users still chose Pinduoduo, and the growth rate of the two companies was significantly different.
Coincidentally, "Latepost" reported that some Meituan people believe that "although Douyin has taken away part of Meituan's market share, Douyin is also helping Meituan to educate the sinking market, and after users gradually mature, Meituan can make up for lost users and even get more growth from the sinking market." [1]
The structure, results, and tone of this judgment are almost exactly the same as the evaluation of Pinduoduo in 2018. Therefore, it is not surprising that it is used for comparison.
However, in all probability, this judgment is not the idea of Meituan's core executives. Or rather, there is, it's before.
When it is seen that Pinduoduo's revenue and market value have surpassed those of old e-commerce, it is impossible for every Internet company executive not to be touched by "challenge and replace". Especially when Meituan's market capitalization shrinks by 80% from its peak, the negative news will be amplified, and any business challenges will have to be responded to.
Therefore, in the New Year's message to the employees of Zhang Chuan, president of Meituan's in-store business group, it can be seen that he admitted that Meituan was in a hurry when he arrived at the store and was beaten to the point of friction by the opponent; he used the metaphor of "war" to highlight the seriousness of the impact on the business; he also emphasized that the opponents are becoming stronger and are all-rounders; and pointed out that Meituan's combat methods and army building thinking must also be changed. [2]
Zhang Chuan's attention to Douyin can be seen.
Although Meituan and Byte were two seemingly unrelated companies ten or five years ago, a review of the development of the two companies shows that they both share similar "borderless expansion" concepts and business initiatives.
Frontal conflict also seems inevitable. The opportunity to grab food from the tiger's mouth and the interpretation of the two tigers competing are undoubtedly the focus of the Internet spotlight.
01 Meituan's flowers
The fourth weekend of August 2019 was a joy for Meituan Wang Xing. The second-quarter results disclosed on the 23rd show that the company has achieved overall profitability for the first time, and has been in business for nearly ten years, ushering in a milestone.
On Monday, the exchange opened. Meituan's share price opened higher as scheduled and closed up nearly 9%, exceeding the initial price in 2018 and also "snowing" the "previous shame" of a 40% decline in the three months of listing in 2018.
Meituan's performance and profitability this time are both beautiful and man-made.
The second quarter was the best weather, not too hot and not too cold, with sufficient takeaway capacity, low distribution costs, and relatively strong demand, which drove the core catering takeaway business, and the profit turned positive for the first time.
At the operational level, after the acquisition of Mobike in 2018 and the entry into fresh food, Meituan has also begun to reduce costs and increase efficiency, and has been improving operating efficiency and reducing losses in the past few quarters. Bike-sharing has increased the cost of riding, and online car-hailing has launched an aggregation model. Baby Elephant Fresh has also closed several stores.
Full of warmth and lust, the faucet wants to make money. At this time, Meituan has a huge merchant partnership, a stable consumer group, a takeaway brother who is difficult to replicate, an efficient local promotion team, and consumers' mental occupation in terms of life service needs, and the moat is still quite wide. In the takeaway market, the market share of about 75% is difficult to shake, and the gross profit margin of the in-store business is as high as 86%, which is also a proof of market position.
In Wang Xing's words, Meituan should adhere to an ROI-oriented investment strategy. In the vernacular, you want to make money.
In 2019, Meituan's overall gross profit margin increased from 13.8% year-on-year to 18.7%. Among them, the gross profit margin of the in-store business continued to increase to 88.8% from a high of 86.8%. In 2020, despite the impact of the epidemic, Meituan's operating profit margin still improved, with the food delivery business rising from 2.6% to 4.3%, and the operating profit margin of the in-store business rising from 37.7% to 38.5%, with a net profit of 4.71 billion yuan.
While the operation is improving, Meituan's stock price is also booming. After the epidemic in 2020, the Federal Reserve released water and foreign capital poured into the Hong Kong Stock Exchange, and Meituan also hit new highs along with technology stocks, with its market value starting from the lowest of more than 200 billion yuan in 2018, and successively exceeding 1 trillion and 2 trillion yuan.
In 2019, the Meituan app and other interactive ports were changed to a unified "yellow", and there was public opinion at that time that Meituan had entered a "golden age". Standing at the end of 2020, I will only sigh that "it is really the flower of Meituan".
Prosperous trade routes are often the most attractive to pirates, and prosperous cities are also the easiest to attack.
Meituan naturally understands this truth. But looking at the advantages of local life at both ends of supply and demand, you can also be calm. 36Kr reported that the Douyin team said, "Every time we take a new step, we think that Meituan is going to fight back and follow up immediately, but the result is nothing." ”[2]
It's not that Meituan doesn't fight back, it's just that in the early days, Meituan really "looked down" on Douyin.
02 Tik Tok's stealing tower
High frequency plays low frequency, this is the obvious way of playing on the Internet. As a result, Douyin, which has 760 million monthly active users and an average daily usage time of 100 minutes per person, will naturally expand without borders: education, games, finance, e-commerce, and local life. In the user's high-frequency usage habits, it is cost-effective to use the funnel model to screen out a small part.
But the expansion of Douyin did not happen overnight. In 2018, Douyin kicked off with the establishment of a POI team (i.e., any point of non-geographical significance) to strengthen the "local" attribute. In 2019, Douyin was launched, allowing merchants to select the corresponding POI map location when uploading Douyin videos to guide users to offline consumption.
Zhang Yiming once mentioned the principle of company expansion: don't do what people do well. Therefore, in the early days of Douyin's entry into local life, the transaction level chose to cooperate with companies such as Meituan and Ctrip. After all, the coverage of merchants and the transaction process of consumers require teams and time.
Using one's own traffic to do other people's business, this spirit of "selflessness" is rare. Even if WeChat diversion is empowered, it still gives priority to affiliated companies.
Because of making wedding dresses for others, Douyin's income in terms of local life has not improved. According to the report, there is also a controversy within Douyin about "not doing local life and how big the market can be". According to Tencent's "Periscope", the person in charge of Douyin POI has also changed no less than 5 times.
Perhaps it is precisely because of this cooperation experience that Meituan has further dispelled its vigilance against Douyin's entry into local life. But at this time, Meituan also ignored one of the characteristics of bytes, which is "fast error correction".
When Byte found out that he was making a wedding dress for others, he quickly closed the loop for himself. In August 2020, Douyin launched the "Life Service Scenario Access Solution", replacing Meituan's external links with Douyin merchant mini programs. Subsequently, 10,000 employees were also deployed to set up a dedicated localization development team.
When Byte found that the takeaway business was too heavy and difficult to manage the little brother team, it canceled the "Heartbeat Takeaway" business and switched to cooperating with Ele.me in 2022.
When Byte found that the transaction link still needed time to build and was not the current advantage, it increased its investment in "content" and started "talent with goods" in June 2020. And "talent" has become an important breakthrough point in Douyin's local life business.
In 2012, the documentary "A Bite of China" was released and received rave reviews immediately. For food, the number of words is written in thousands of words, so it is better to watch the video. The video of the talent visiting the store is not only a good content, which makes foodies watch it with relish, but also an advertisement, which stimulates the desire of consumers and brings orders to merchants. Subsequently, this form also changed from the guidance of byte officials to the trend of spontaneous participation of users.
There is an expert in Hebei who claims to have 4 million followers, and he doesn't want to pay when he goes to the store to eat and show off the number of fans. There are also people who said that the UP owner who visited the store brought seven or eight people to eat the overlord meal.
Despite some chaos, KOL planting has been quite effective, and it has also expanded from catering to other areas of life. For Douyin, traffic, content, and transactions have finally achieved a closed loop, and the logic of "impulsive consumption" and "goods looking for people" has been verified.
In 2021, the GTV of Douyin's local life reached 10 billion yuan, and in 2022, it reached 77 billion yuan. Although this volume is still only about 1/3 of Meituan's, the rapid growth has to remind people of the case of fuel vehicles and electric vehicles.
At least, for Meituan, the high profit margins of local life are about to be cut, and the opponents who "look down" are forced to change from lying down to winning.
03 Border between the two sides
Meituan and Douyin are very different in the field of local life.
Meituan focuses on efficiency, Byte focuses on interest, Meituan's advantage lies in transactions, Byte's advantage lies in content, and users actively consume in real time on Meituan, and impulsively delayed consumption on Byte. These differences will be reflected in the operating data, and they will also shape the boundaries of each other.
For example, judging from the write-off rate, that is, the data that users place orders and actually spend money, the proportion of Meituan has reached 90%, while Douyin is around 60%. There is an opinion that this is the gap, where bytes need to work hard, but in reality, this is just a difference, which comes with different attributes. If the write-off rate of interest recommendations can reach 90%, it is conceivable that the algorithm is terrifying.
Therefore, the expansion of the two sides has both bridged the gap and reduced the difference, but basically starts from "supply" and "demand".
On the supply side, it is necessary to look at both the number of merchants covered and the number of users presented.
Wang Xing and Zhang Yiming are both code farmers, and sales are not their core competencies. Therefore, Wang Xing invited Gan Jiawei during the "Hundred Group War" to create a strong local push team for the company, visiting and placing orders wildly, and now Meituan has 41 categories of local life coverage and 9.3 million active merchants.
The number of active merchants on Douyin just exceeded one million at the end of 2022. Traffic is the biggest advantage of Douyin to attract merchants. However, due to the use of short videos for marketing, there is still a threshold for small and medium-sized businesses and long-tail customers, and the efficiency may not be the highest.
Therefore, Douyin's current customers, mainly large customers, including chain restaurants, brand customers, etc., are also more likely to create popular products. For example, Haidilao's "breakup package", T97 coffee, etc.
The full coverage of KA merchants is the first boundary of Douyin on the supply side. The expansion of small and medium-sized businesses is where the second boundary lies.
Douyin is improving the "shelf" model, and has adopted a display similar to Meituan in the group buying and local columns to reduce the operational difficulty of small and medium-sized customers. In addition, Douyin shared at the conference that 80% of customers are new customers of case customers.
For small and medium-sized merchants, new traffic is important, but old customers who repurchase are more precious and have lower operating costs. How to manage old customers?
Douyin Internet celebrities know that even if they have tens of millions of followers, they can't guarantee the number of views of each video. After all, traffic is given by the algorithm, not by the stickiness of fans. This means that it is difficult to accumulate Douyin's private domain traffic. Correspondingly, on Meituan, merchants can continue to operate with users by building fan bases.
Another powerful tool to attract merchants is "low cost". To this end, in the early stage of Douyin's expansion, it will provide commission reductions, price subsidies and other measures for merchants who have settled in. However, according to the research report of Guosen Securities, with the weakening of Douyin's preferential efforts, the comprehensive cost of merchants on Douyin is gradually rising, and even after taking into account the traffic advantage, the comprehensive cost is almost the same as Meituan, or even higher. [3]
The starting point of Douyin is naturally for profit. After all, in the current environment, wild growth is a thing of the past. However, given the immediate effectiveness of price wars on market share gains, Meituan may also be used as a counter-weapon. It is still too early to assert that competition is slowing down.
While increasing the number of coverage, Douyin also needs to break through the "display ceiling". According to the operation of Douyin, the traffic ratio of 8% is basically the ceiling that users can accept commercial information. [4] Therefore, another important topic is how to guide consumers to open the business information in Douyin even when they are not watching the video.
This is the other element of the border between the two sides, the consumer side. Meituan is believed to firmly occupy the minds of users in the "instant and active consumption" scenario. But consumer demand has changed in recent years: low prices are more popular. This leaves it to the possibility of TikTok.
04 Voldemort's transposition
Meituan has been "forced" to change.
For example, special group purchases have been added, live broadcasts have been added, and video columns have been added to the homepage. The content is also high-traffic jokes such as "beautiful women with long legs, KTV points to school flowers". Maybe it's because I'm a new user, and I'm pushing the system's default new user preferences. This is very similar to Douyin, it seems that male users default to start with these contents.
But Meituan's response is still very indescribable. Let me think of Li Xiang's words for the first time, we have never met such a strong opponent, and we have no power to fight back for a long time.
However, just as those who learn from Meituan will not be able to defeat Meituan, those who learn Douyin will definitely not be able to defeat Douyin. Meituan still needs to build on its strengths and avoid its weaknesses.
I once gave Wang Xing the nickname "Voldemort".
Volt refers to envisioning the future in a high-profile manner, operating in a low profile, and learning to wait patiently for the best opportunity. Land refers to Meituan's two major weapons, "local push and local delivery", to get the merchants and fulfillment. Magic means that he will choose those fields with false moats, and when the competition in the industry is weakened and there is no big money willing to re-enter, he will quickly gain market share from the existing leaders by playing seven inches and other tactics.
This feature has made Meituan win in the fields of food delivery, hotels, and even power banks. It's just that at this moment, Meituan has become a leader and defender in the field of "false moat" of local life.
More importantly, as Meituan Zhang Chuan said, the current opponent is an all-rounder, with funds, momentum, playing style, strong error correction, and good learning. Defense, too, is not easy. Therefore, just as some Meituan employees are confused, Meituan's investors in the capital market are also confused:
When will the competitive landscape improve? When will Meituan's stock price bottom?
Unfortunately, the answer to this question does not depend on Meituan in the first place, but on bytes: Does Douyin's local life want to achieve 30% or 70% of Meituan's revenue?
Secondly, it is Meituan's response. How much effort can be used to make the two sides realize their respective boundaries and reach a tacit understanding of business such as takeaway.
Thirdly, it is Xiaohongshu, Kuaishou, Pinduoduo, etc., whether they are still willing to play after seeing the fierce competition in local life.
However, unlike previous years, the current competitors, no one can afford a subsidy war regardless of the cost, and the competition between the two sides needs to show more micro-manipulation and patience.
05 Epilogue
Sharks are the kings of the ocean, but sharks don't have an easy time. Because sharks do not have swim bladders, they have to swim forward to keep not sinking, and because they do not have gill covers, they have to swim constantly to allow the water to get oxygen through the gills and avoid suffocation.
The use of sharks to describe Internet companies could not be more vivid. If you don't move forward, you will sink, and if you don't improve efficiency, you will fall behind. Hoping that the moat will lie down to win, it will lie down in the long river of history.
Resources:
- [1] Late Exclusive丨Meituan, Douyin's new opponents: Duoduo Grocery Shopping is eyeing local life, which has now been suspended
- [2] Zhang Chuan, President of Meituan's In-Store Business Group: This is not a short-term war, nor a long-term war, but a brutal trench war
- [3] Local Life Series No. 3: Meituan vs Douyin: Meituan responds positively, and the competitive situation is slowing down at the margin
- [4] Late Exclusive丨The ceiling of live broadcast e-commerce is approaching, and Douyin has found a new way out