ByteDance-owned short-video platform Douyin, China’s equivalent to TikTok, has set RMB 150 billion ($22.2 billion) as its annual target for local life service sales in 2023, twice its actual gross merchandise volume (GMV) of RMB 77 billion in 2022, Chinese media outlet 36Kr reported on Jan. 15. Douyin’s local life services unit head told 36Kr that the figure of 77 billion for last year was inaccurate, but declined to give specific data.
Why it matters: Climbing sales for local life services – encompassing food delivery, travel bookings, and other retail sales – point to the business becoming increasingly important for Douyin’s revenue growth in 2023 as the platform continues to take on established delivery and life services giant Meituan. ByteDance CEO Liang Rubo previously acknowledged that the company saw slower revenue growth than expected in 2022, while growth in daily active users for its products was also lower than the targets set early in the year.
Details: Douyin is confident of hitting the full-year 2023 sales goal of RMB 150 billion for its local life services unit, as internal estimates show the unit’s GMV ceiling to be between RMB 260 billion to RMB 280 billion, a source told 36Kr.
- The food and restaurant segment comprises half of Douyin’s life services sales target, with in-store business and hotel and tourism expected to bring in RMB 45 billion and RMB 30 billion, respectively.
- The business development team at Douyin’s local life services unit has shrunk from 3,000 to around 1,000 personnel as the video platform pushes more work to help merchants improve their operational capabilities onto third-party service providers, the report cited an unnamed source as saying. Douyin subsequently denied that this downsizing had taken place.
- The local life services division underwent a new round of organizational restructuring after ByteDance put former products and commercialization strategy leader Zhu Shiyu in charge of the unit last October. Notably, the business development team was resegmented by industry, instead of geographic region.
- Douyin’s widespread popularity is largely thanks to its addictive algorithms. A person close to the platform told media outlet Huxiu that each new Douyin user enriches the labeling process, and that this method is also now being applied to local life services. The unit divides users into three categories: people who purchased a certain product, people who searched for, followed or liked a certain product, and potential customers based on their age, work, and lifestyle.
Context: Douyin’s entry into local life services, which began in 2021, is seen as a big threat to industry giant Meituan, which brought in RMB 129 billion in revenue from core local commerce, including food delivery, in-store purchases, and hotels and travel in the first three quarters of 2022.
- Douyin still performs weakly in terms of the order completion rate of its group buy offerings, which at only 60% in 2022 is unchanged from 2021. Meituan’s rate, by comparison, is nearly 90%.
- Douyin users are seemingly still hesitant about the platform’s content-driven group buying feature, in which users purchase coupons prior to consumption via in-feed videos, the 36Kr report noted. Users can apply for a refund if they decide not to use the coupons, but take-up has still been slow compared to Meituan, where users usually buy coupons after completing in-store consumption.
- Some agents in Meituan’s low-tier markets have asked merchants to pick a side as competition hots up, encouraging them to cooperate with either Douyin or Meituan, according to 36Kr.
- In December, China’s three major express courier platforms – JD backed-Dada, SF Express’ SFTC, and Shansong – announced that they would begin providing same-city logistics services for Douyin’s local life services arm in a major expansion of ByteDance’s push in the sector.
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