Ready For A Food Fight? Douyin Poses Video Challenge To Takeout Leader Meituan

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As an aged saying goes, we eat first pinch our eyes. And China’s type of TikTok is putting that adage to nan trial by utilizing appetizing video clips to beforehand repast deliveries.

Over caller years nan Douyin short-video work has been expanding into livestreaming, contented creation and e-commerce. Now nutrient transportation is connected nan menu. In a motion of its ambitions, nan video-sharing level has placed occupation ads for managers to tally nutrient transportation services connected nan recruitment website of parent, Beijing ByteDance Technology Co. Ltd. (BDNCE), which besides owns TikTok.

With nan latest venture, Douyin would beryllium entering a marketplace dominated by nan shopping colossus Meituan (3690.HK) (OTCPK:MPNGF, OTCPK:MPNGY). Shares successful Meituan fell sharply connected Feb. 8 aft a report that Douyin would motorboat its nutrient transportation work successful March. The shares plunged 9% astatine one constituent and ended pinch a nonaccomplishment of 6.5%, wiping HK$65.6 cardinal ($8.4 billion) disconnected Meituan’s marketplace worth successful a azygous day.

An executive successful complaint of Douyin’s section life services portion later played down nan talk of a March motorboat for nutrient transportation services. However, Douyin has so been testing a characteristic successful ample cities specified arsenic Beijing, Shanghai and Chengdu that enables restaurants to waste its users “group packages”, group meals consisting of respective dishes connected a standardized menu. If nan aviator strategy goes well, it could beryllium expanded to much cities.

Meituan, Ele.me (ELEME) and different companies developed independent platforms for takeout orders, but Douyin simply allows nutrient merchants to beforehand meals successful their short videos aliases livestreams. The assemblage tin spot orders done embedded links and person nutrient delivered by third-party services specified arsenic Hangzhou SF Intra-city Industrial (9699.HK), Dada Nexus (DADA) and FlashEx. The full process is akin to shopping successful Douyin’s livestreaming room.

Douyin has been biding its time

In nan competitory world of China’s mobile internet, short videos person overtaken different forms of communication, e-commerce and gaming successful nan fame stakes. Data from analytical patient QuestMobile shows that short videos were nan biggest online tie successful 2021, accounting for astir 26% of nan clip users spent connected nan Internet.

Propelled by nan immense postulation successful short videos, Douyin branched retired into e-commerce successful caller years. Last twelvemonth Douyin’s full income exceeded 1 trillion yuan, making it nan 4th biggest e-commerce level successful China, according to nan Chinese business news outlet LatePost. Now, nan video-sharing level is migrating from online to offline, expanding its section life and metropolis unit businesses, frankincense encroaching connected Meituan’s territory. A conflict could beryllium brewing.

In March 2020, Douyin launched a group-buying usability successful its app, establishing a strategy of influencer-oriented nutrient marketing. The usability allows nan usage of group-buying coupons astatine restaurants aliases for takeout orders, but nan nutrient was really delivered by Ele.me and Meituan astatine nan time. In July 2021, Douyin tested a “Heartbeat Delivery” applet, but nan work ne'er made it to nan motorboat shape owed to logistical challenges and institution restructuring.

By 2022, arsenic Covid disrupted dine-in services, immoderate restaurants spontaneously flocked to Douyin to livestream their nutrient for delivery. Douyin past worked pinch third-party transportation agents specified arsenic Ele.me and Dada to meet nan demand.

Meituan’s on-demand nutrient transportation work depends connected users’ progressive searches for desired nutrient providers, while Douyin’s exemplary uses merchants’ self-made promo videos that tin beryllium channeled to willing customers, requiring a much blase algorithm.

Meituan, arsenic a accepted section life app, has agelong classed first successful usage for in-store consumption, specified arsenic dining, intermezo and education, pinch a comparatively precocious complaint of existent transactions, according to investigation from China’s Sealand Securities.

Meanwhile, Douyin has been little bully astatine turning online postulation into transactions successful its section life business, arsenic users whitethorn scroll done videos simply for pleasure. But nan greater measurement of Douyin’s users and nan longer clip spent online compared to Meituan connection benefits for caller businesses looking to break into nan market.

Meituan’s roadworthy to “self-sufficiency”

Local commerce remains Meituan’s halfway business. In nan 3rd 4th of past year, nan institution reported revenue of 62.62 cardinal yuan, up 28% twelvemonth connected year, and non-IFRS adjusted EBITDA of 4.8 cardinal yuan. The section commerce business, which includes nutrient transportation and “Meituan Instashopping”, brought successful gross of 46.33 cardinal yuan, up astir 25%, while its profit much than doubled to 9.32 cardinal yuan.

In addition, Meituan has been actively branching retired into caller businesses, including groceries, car hailing services and motorcycle sharing, bringing successful 16.29 cardinal yuan successful nan 3rd 4th of past year, a emergence of astir 40%, while losses from caller businesses narrowed astir 33% to 6.77 cardinal yuan.

It was Meituan’s first wide profit aft 7 consecutive quarters of losses. CEO Wang Xing said astatine nan time: “We person been capable to support financing and business maturation self-sufficient.”

Although business is backmost connected track, Meituan managers person warned that Covid lockdowns successful galore Chinese cities precocious past twelvemonth will person dampened net for nan 4th quarter.

But pinch Covid controls lifted, Meituan is expected to rate successful connected a surge successful dining, edifice and nutrient transportation demand. Meituan has said that mean regular depletion successful China roseate 66% during this year’s lunar caller twelvemonth festival, compared pinch nan aforesaid play of 2019, while 37% much merchants offered nutrient transportation than successful nan erstwhile caller year, and catering income jumped 71%.

Despite its battered stock price, Meituan still boasts a forecast price-to-earnings (P/E) ratio of 59.5 times, while counterpart JD.com (JD; 9618.HK) is only 17.9 times. The premium indicates investors are optimistic astir Meituan’s prospects.

For now, Douyin is simply testing nan waters pinch its aviator nutrient transportation service, posing nary contiguous situation to Meituan’s marketplace dominance. The marketplace will person to hold and spot whether nan short-video platform’s ambitions will beryllium to beryllium a game-changer.

Disclosure: None.

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