<blockquote>
&#34;The advantage of Meituan lies in its ability to control delivery times for takeout within 30 minutes, relying on Meituan's artificial intelligence algorithms and cloud computing team.&#34; Douyin &#34;does not have such genes and cognition&#34; to possess this capability.
</blockquote>
Delivering takeout is not something everyone can succeed at.
Recently, Douyin's takeout business has undergone adjustments. The Douyin Life Service Learning Center announced that the original &#34;group purchase delivery&#34; business will gradually transition to the &#34;SuiXinTuan&#34; business starting November 1, meaning that the same group purchase item will support both in-store redemption and home delivery.
In response, a person close to Douyin's takeout business, Qiao Mu (pseudonym), told a reporter from the Daily Economic News that this adjustment can be seen as Douyin's &#34;strategic relinquishment&#34; of the takeout business. &#34;(Takeout performance) has not grown and has always struggled to fulfill orders.&#34; As of the time of publication, Douyin has not responded regarding the reasons for this adjustment.
Meituan (03690.HK, stock price HKD 199.9, market value HKD 1,216.4 billion) and Ele.me have already connected points in the takeout market, making it difficult for anyone entering the market to find a gap. According to predictions from CMB International, in the 2024 food delivery market, Meituan's market share will reach 65%, while Ele.me will account for 33%.
&#34;Today, only a collaboration between Douyin and Ele.me could create a miracle,&#34; Qiao Mu revealed to the Daily Economic News reporter, noting that Douyin and Ele.me have had multiple discussions since 2022, &#34;and by the end of last year, they were already discussing a sale.&#34;
From publicly available information, in December 2023 and mid-January 2024, Ele.me indeed refuted rumors of being acquired by ByteDance twice. In a performance analyst conference call in February this year, Alibaba (09988.HK, stock price HKD 95.65, market value USD 183.22 billion) executives again denied rumors of &#34;imminently selling Ele.me,&#34; stating that &#34;(Ele.me) is a very important asset in the 'near field.'&#34;
With the difficulty of penetrating the takeout market, Douyin is &#34;taking a detour&#34; to accelerate one-hour delivery, focusing on instant retail as a key layout for local life. In Qiao Mu's view, the outcome of Douyin's strategic implementation is unknown, but the approach is certainly correct.
In fact, regardless of how effective Douyin's current attempt is, giants like ByteDance, Alibaba, and JD.com have been increasingly penetrating the local life market in recent years, enough to make Meituan feel that uncertainties are approaching.
<h2>&#34;Performance has not grown,&#34; Douyin &#34;takes a detour&#34; from takeout</h2>
After experiencing a series of changes such as business reallocation and organizational restructuring, the takeout business remains a &#34;hot potato&#34; that Douyin cannot hold onto.
New changes are coming again. Douyin's original &#34;group purchase delivery&#34; business will gradually transition to the &#34;SuiXinTuan&#34; business starting November 1, meaning that the same group purchase item will support both in-store redemption and home delivery.
The announcement released by Douyin indicates that the types of merchants joining &#34;SuiXinTuan&#34; must be chain merchants that have opened group purchases, with dining merchants needing at least 3 stores, and light meal merchants such as snacks and fresh fruits and vegetables needing at least 10 stores
The reporter from &#34;Daily Economic News&#34; noticed on Douyin that in the Beijing area, the stores currently offering Douyin delivery are mainly chain fast-food brands with delivery capabilities, such as KFC and McDonald's, as well as some leading and mid-tier brands in categories like roast duck, hot pot, and desserts. The number and variety of stores available are far less than those on Meituan and Ele.me, and the delivery time for the same store is longer than that of Meituan and Ele.me.
The reporter randomly interviewed several merchants who have opened Douyin delivery services and learned that, apart from merchants with their own delivery teams, the delivery services of other merchants are handled by Meituan riders and Ele.me riders, with &#34;further orders being called flash delivery.&#34;
The reporter learned from several individuals close to Douyin delivery that Douyin's life services business has undergone multiple adjustments in the past two years. For example, in the first half of this year, Douyin reclassified its existing in-store dining, in-store non-dining, and hotel travel services by region.
One industry insider told the reporter that it was the right decision for Douyin life services to delegate the management of various business segments to different regions. &#34;We need the commanders to hear the sound of gunfire... and the development situation in each region is different. For example, the delivery business is more developed in East China and South China, while it is slightly weaker in North China, and even weaker in Central China, Southwest, and Northwest. A national policy cannot be universally applicable.&#34;
However, multiple adjustments have not had a significant effect on performance. Qiao Mu revealed to the &#34;Daily Economic News&#34; reporter: &#34;(Delivery performance) has not grown... Douyin life services' latest adjustment direction is to increase investment in instant retail, which is definitely the right strategy.&#34;
<h2>Douyin Group Buying Challenges, Meituan Adjusts</h2>
Local life services have always been Meituan's &#34;stronghold.&#34;
Financial report data shows that in the second quarter of this year, Meituan's core local business revenue grew by 18.5% year-on-year to 60.7 billion yuan, accounting for about 74% of total revenue during the same period; operating profit increased by 36.8% year-on-year to 15.2 billion yuan, with the operating profit margin rising by 3.3 percentage points year-on-year to 25.1%, making it the core business driving Meituan's operating profit growth.
At the same time, during the reporting period, Meituan's annual transaction users and active merchants reached a historic high, with nearly 6.2 billion instant delivery orders, averaging nearly 68 million orders per day.
Maintaining all of this is not simple. Meituan has felt the pressure of internal and external challenges over the past year—competitors like Douyin and Alibaba are changing their pace in local life services, and consumer behavior and the market itself are also changing.
In the first quarter earnings call this year, Meituan CFO Chen Shaohui stated that in the current macro environment, consumers have become more price-sensitive, leading to a year-on-year decline in average transaction value across each vertical category in Meituan's in-store, hotel, and tourism businesses.
Against this backdrop, the low-price initiative &#34;Pin Hao Fan&#34; has gained more attention within Meituan. In the first quarter financial report, Meituan mentioned this already launched service for the first time, stating that the daily order peak for &#34;Pin Hao Fan&#34; reached a new high in the first quarter; the second quarter report also brought good news, with the daily order peak for &#34;Pin Hao Fan&#34; in the second quarter hitting a new high, surpassing 8 million orders
On one hand, while adapting to market adjustments, Meituan must constantly fend off attacks from various giants. As its foray into the local lifestyle sector becomes increasingly smooth, the weight of group buying on the Douyin platform is also continuously rising.
Data released by Douyin shows that in 2023, the total transaction volume of Douyin's life service platform grew by 256%, with over 4.5 million stores joining, and the number of service providers increased by 1.79 times, while the number of group buying influencers grew by 2.89 times. According to research reports from Haitong International, the total transaction volume of Douyin's local life in 2023 has accounted for about one-third of Meituan, nearing 200 billion yuan.
&#34;Meituan didn't expect to be suddenly ambushed by Douyin,&#34; Qiao Mu revealed to the Daily Economic News. To counter Douyin's offensive, Meituan established a department specifically responsible for special-priced group buying under its in-store business group in the first half of last year, &#34;directly overseen by Zhang Chuan, the former president of the in-store business group, internally referred to as the 'Iron Army Corps,' and by the end of last year, the in-store group buying business had seen some recovery.&#34;
It can be seen that Meituan has been continuously seeking change this year. According to incomplete statistics from the Daily Economic News, as of the end of September this year, Meituan has undergone six structural adjustments within the year, mainly focusing on the integration of core business segments and personnel appointments.
The most recent adjustment was on September 27, when an internal email from Meituan's core local business announced the establishment of &#34;Core Local Business/Hotel Travel,&#34; covering the accommodation division, ticket vacation and transportation division, and homestay division; and the establishment of &#34;Core Local Business/Pharmaceutical Health Division,&#34; covering the original pharmaceutical division and the original comprehensive in-store division related industries.
After launching multiple sets of combined strategies, Meituan's confidence in holding its ground has significantly increased. In the conference call following the release of the second-quarter financial report this year, Meituan executives discussed industry competition, stating that the main competitors have different business models and competitive advantages compared to Meituan, leading to different focuses on category combinations and merchant levels, resulting in significant differences in the redemption rates of the two platforms. This year, Meituan has shifted its focus to the market share of core categories' redemption GTV (total transaction volume).
<h2>Corporate Genes and Boundary Expansion</h2>
Regarding Douyin's yet-to-be &#34;lifted&#34; takeaway business, e-commerce strategy analyst Li Chengdong told the Daily Economic News that the takeaway business is an essential part of the local lifestyle layout that cannot be bypassed. He explained specifically that, taking Meituan as an example, although the profit from the takeaway business itself is not very high, it can bring in advertising revenue for in-store services and enhance and improve service capabilities. &#34;Douyin cannot give up on the takeaway business. It can be developed gradually.&#34;
Why has takeaway become a challenge for Douyin?
Gong Yinglong, founder of the China New Catering Industry Alliance, pointed out to the Daily Economic News that the key issue preventing Douyin's takeaway business from succeeding lies with the delivery riders. &#34;Meituan and Ele.me have a strong position in the takeaway industry precisely because they have a large fleet of riders.&#34;
Qiao Mu revealed that the executives in charge of Douyin's takeaway business at its inception were from the management team of Baidu Takeaway. He believes that Baidu failed at that time because it did not build a rider team, and Douyin has also not attempted to build its own rider team, which is a smart move and aligns with Zhang Yiming's (in terms of business style) approach. There are very few &#34;heavy&#34; businesses in ByteDance's commercial landscape
Li Chengdong also believes that Douyin's current self-built delivery team is not cost-effective, &#34;It can choose merchants with self-delivery capabilities and third-party logistics; self-building does not have a cost efficiency advantage.&#34;
However, beyond food delivery, there lies greater potential in local life. Gong Yinglong stated in an interview with the Daily Economic News that in the local life sector, instant retail will become one of the most important parts, even surpassing the current market size of food delivery.
The China Hotel Association recently released the &#34;2024 Annual Report on China's Catering Industry,&#34; which shows that the market size of food delivery in 2023 is approximately 1.2 trillion yuan. Meanwhile, the Development Report on the Instant Retail Industry released by the Ministry of Commerce's International Trade and Economic Cooperation Research Institute in October this year indicates that the scale of instant retail in China reached 650 billion yuan in 2023, a year-on-year increase of 28.89%, and is expected to exceed 2 trillion yuan by 2030.
&#34;Douyin does well in instant retail, such as delivering fresh produce, but the reason it struggles with food delivery is that the average order value is low,&#34; Gong Yinglong stated. &#34;The strength of Meituan and Ele.me lies in the fact that the same rider can deliver multiple orders during the fulfillment process, which allows for a lower average order value.&#34;
&#34;The advantage of Meituan is its ability to control food delivery times within 30 minutes, relying on Meituan's artificial intelligence algorithms and cloud computing team.&#34; In his view, Douyin &#34;does not have the genes and understanding&#34; to possess this capability.
Qiao Mu also pointed out to the Daily Economic News that JD.com and SF Express have both experimented with food delivery, but the logic of food delivery and express delivery is not the same. &#34;Point-to-point multi-item delivery and multi-point-to-multi-point delivery are completely different, and within JD.com's entire organizational structure, there are no individuals particularly familiar with local life.&#34;
After major companies have built their own moats, they all want to try to expand their boundaries, redoing each business in their own way. The &#34;genes&#34; of enterprises are hard to change; in this race for local life, everyone started from different starting lines. However, the race is long, and variables may arise at any time.
Author: Yang Xinyi, Source: Daily Economic News, Original Title: &#34;Strategic Release&#34; of Food Delivery? Douyin's Attack on Instant Retail, Does Meituan Need to Be Cautious of the Birth of a &#34;New King&#34; in Local Life?

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Douyin's takeaway business is undergoing adjustments, with the original "group purchase delivery" service migrating to "Sui Xin Tuan" starting November 1, supporting in-store redemption and delivery. Industry insiders describe this move as Douyin's "strategic relinquishment" of its takeaway business, as there has been no growth in takeaway performance. Meituan holds a market share of 65% in the takeaway market, while Ele.me has 33%. Douyin has had multiple discussions with Ele.me, but no acquisition has been reached. Douyin will shift its focus to instant retail to accelerate its local lifestyle layout

- Meituan maintains a competitive edge in the food delivery market by leveraging AI algorithms and cloud computing to ensure delivery times within 30 minutes.  
- In contrast, Douyin's recent shift from "group purchase delivery" to "flexible group" services reflects its struggle to gain traction in the food delivery sector, with insiders suggesting a strategic retreat due to stagnant performance.  
- As Douyin pivots towards instant retail, the competition intensifies, with Meituan's market share projected to reach 65% in 2024, highlighting the challenges Douyin faces in establishing a robust delivery network.

"Strategic Release" of Takeout? Douyin Targets Instant Retail