(Yicai Global) April 27 -- Douyin, the Chinese counterpart of TikTok, is no longer hiding its ambition to expand its footprint in China’s local services market as its competition with industry giant Meituan is getting direct and fierce.

The local life services market is worth more than CNY10 trillion (USD1.4 trillion) and encompasses a wide range of business types, Zhu Shiyu, head of ByteDance-owned Douyin’s life services business department, said at a recent event.

“I believe it’s a promising market,” Zhu said.

The event, which was held for partners along Douyin’s industrial chain, including commercial clients, business partners, and featured internet influencers, was the largest of its kind for Beijing-based Douyin since launching its life services business in 2021.

For outside observers, the event signified that Douyin has officially become a direct competitor with Meituan, one of China’s biggest providers of on-demand online services such as home food deliveries.

Douyin’s Entry

The so-called ‘in-store’ business was the first type of local life service Douyin entered, whereby consumers buy services through its platform and consume them at partner stores.

According to data released by Douyin last October, the social media giant has already begun offering local services in 377 Chinese cities, with more than one million partner stores that offer more than 80 types of products or services.

Douyin charges merchants a 3 percent to 4 percent commission, the lowest among similar platforms in China, a five-star hotel marketing manager told Yicai Global. In comparison, Meituan takes about a 10 percent cut from each purchase. But as of now, Meituan still brings more orders to the hotel than Douyin, the manager noted.

The so-called ‘to home’ business is another type of service Douyin has striven to enter. It has launched pilot operations with Alibaba Group Holding’s takeout platform Ele.me in major cities, including Beijing, Shanghai, and Chengdu, offering its clients’ products through its video sharing app, while deliveries are made by Alibaba’s unit.

The service is a direct challenge to Meituan’s main business, as the latter is China’s biggest player in the restaurant food delivery market.

Though the ‘in-store’ business earns more money for Douyin, it would not like to be absent in the ‘to home’ business as that can boost its online traffic, a source in the takeout industry told Yicai Global.

And though Douyin is still a small player in its new business field compared with Meituan, the social media titan is bringing a breath of fresh air to it, bringing in partners never seen before such as multi-channel network agencies and influencers, which together with popular short videos featuring local life have the potential to convert more viewers into new buyers.

Douyin’s local life videos are already very popular, and can help to spur the habit of using the platform to buy services.

Meituan’s Defense

Douyin already poses a real threat to Meituan’s business, Zhuang Shuai, founder of Bailian Consulting and a retail and e-commerce expert, told Yicai Global. He anticipates a bigger shakeup of market shares this year.

Besides the usual practice of offering deeper discounts, Beijing-based Meituan is also borrowing from its rival’s arsenal to enhance its competitive edge. The online food takeout giant now offer its own short-video and live-streaming broadcasts to draw customers away from the intruder. There are 94 jobs related to short videos and 59 to live-streaming advertised on its website. 

Zhuang expects Meituan to boost its investment in short videos and live-streaming, while continuing to strengthen its on-demand retail business. But whether those efforts can bring back vendors and paying customers remains to be seen.

However, Meituan still has a strong competitive shield against the newcomer, according to Zhuang. The firm’s business scale in terms of takeout riders, merchants, and customers is still overwhelming, and its capabilities in regional operations as well as in business coordination should never be underestimated, he said. 

Meituan is also looking within to boost efficiency. The company continues to downsize and adjust the cash-burning ride-hailing and group-buying businesses. These are seen as signs that Meituan is taking steps to cut costs, raise efficiency, and improve the profitability of emerging businesses.

Editors: Tang Shihua, Emmi Laine