Kuaishou wants to get a piece of the trillion-dollar local living market. But here's the challenge: Meituan and Douyin are getting stronger.
In the past few years, Meituan and Douyin have been in close combat in in-store catering, wine and tourism, takeaway, instant retail and other sectors. Today, the battle lines of the two platforms tend to be stable, but the two sides are not losing both, but are getting stronger and stronger.
In the first quarter of this year, Meituan's revenue reached 73.3 billion yuan, a year-on-year increase of 25%; The number of users and merchants on the platform reached an all-time high. At the same time, Meituan's selling expense ratio decreased from 22.7% to 18.9%, and its gross profit margin increased from 34% to 35%. Despite the slowdown in the growth of selling expenses, Meituan still achieved rapid growth at the operating and financial levels, indicating that its competitive pressure has been eased.
At the same time, Douyin gradually stepped out of low-price competition and began to increase the monetization of the local life sector.
On June 24, Douyin updated its software service fee (roughly equivalent to transaction commission) policy, in which the accommodation fee rate will be increased from 4.5% to 8%. This commission ratio for wine and tourism merchants surpasses Kuaishou and Channels and is close to Meituan and Ctrip.
Earlier in June, the Douyin group buying channel launched a "staggered peak special" area. Merchants can set cheaper packages for off-season or leisure time, which is claimed to be "accurate to the second"; Once purchased, users can only use it for a limited period of time.
Increasing the commission ratio and increasing the packages for subdivided scenarios all show from the side that Douyin life services do not worry about the supply of merchants, and the users are abundant and diverse.
The local life sector of the two giants is working well, and it is more difficult for Kuaishou to "share the cake".
At the 2023 results call earlier this year, Cheng Yixiao, founder and CEO of Kuaishou, defined last year as "the first year of Kuaishou's local life business in the true sense", achieving many breakthroughs from 0 to 1. This momentum is being extended into 2024: in the first quarter, the average daily payment users of Kuaishou Local Life increased nearly 9 times year-on-year.
At the Kuaishou Cohesion Ecological Conference three months ago, Xiao Gu, the head of Kuaishou's local life division, shouted that "all group purchases are worth redoing in Kuaishou", announcing that he would launch a billion-level platform subsidy and 100 billion traffic to create a new outlet and new increment for online consumption in service retail.
However, after nearly two years of running in small steps, Kuaishou's local life business is still small and difficult to compete with Meituan and Douyin.
According to the financial report, as of the third quarter of 2023, Kuaishou Local Life has 16 key operating cities, including nearly 50 cities with agent services. In contrast, Meituan and Douyin both cover three to four hundred cities, and their operations are spread across the country.
Kuaishou has increased its support for takeaway businesses this year, trying to attract more catering businesses by cultivating users' habits of ordering takeaway, so as to enrich the supply of goods in local life. However, Kuaishou does not have the ability to fulfill and deliver, and merchants need to deliver food by themselves, which greatly drags down the user experience; In addition, the short video platform is good at "planting grass", rather than meeting immediate needs, and under the constraints of various shortcomings, it is difficult for Kuaishou to make a name for itself in the field of food delivery.
But in front of Cheng Yixiao, there is also a "shortcut" to catch up with competitors, that is, Kuaishou may wish to consider acquiring Ele.me and quickly establish a local life "base".
If Kuaishou wants to make a difference in the field of local life, it needs Ele.me's brand, merchants, users and platform infrastructure; In particular, millions of "blue knights" will instantly solve the shortcomings of performance. Facing the double squeeze of Meituan and Douyin, Ele.me has slipped from the TOP2 in the local life track to the third place, and the gap is widening, and it also needs Kuaishou as a strong reinforcement.
The greater imagination lies in the fact that if Kuaishou and Ele.me are integrated, the domestic Internet will give birth to the first local life platform with both video content ecology and O2O service capabilities.
Kuaishou can go off the rails, establish differentiated advantages, and accelerate the pace of catching up with Douyin; After being suppressed by Meituan for many years, Ele.me will also have the opportunity to jump out of the existing competitive landscape and open up new growth space. The two "10,000-year-old two" will leap into a new development track together.
A
At one point, Kuaishou tried to gain a foothold in the local lifestyle sector by partnering with Meituan.
In December 2021, Kuaishou and Meituan announced a strategic cooperation on connectivity. Meituan will launch a mini program on the Kuaishou Open Platform to provide Meituan merchants with product display such as packages, vouchers, and reservations, as well as services such as online transactions and after-sales services, which can be directly accessed by Kuaishou users through the Meituan Mini Program.
But less than a year later, Kuaishou decided to take matters into his own.
On the one hand, the overlap between Kuaishou and Meituan users is not high. According to data from market research agency QuestMobile, in April 2023, Kuaishou and Meituan will have 139 million overlapping users, accounting for 35.3%. Kuaishou's "old iron" is concentrated in the so-called new line cities, or sinking markets.
This means that Kuaishou and Meituan are essentially sending new users to the latter for free.
Kuaishou, on the other hand, is beginning to realize the great value of local living. As Cheng Yixiao said, in addition to contributing GMV (gross merchandise value), the local life business can also precipitate vertical content such as store visits and travelogues, acting as a supply of high-quality content, better meeting user needs and improving user stickiness. Kuaishou didn't want to give this cake away.
In October 2022, Kuaishou established the Local Life Division. In February of the following year, Kuaishou started urban verification of local life in Shanghai, Qingdao and Harbin, and the results were quite good. Taking Qingdao as an example, Kuaishou achieved a GMV of more than 5 million yuan in one month, and there were also influencers with monthly sales of 200,000 yuan.
According to Xiaogu, Kuaishou has "seen business trends and run through business models" in the past year. However, Kuaishou, who runs in small steps, still faces the problem of small volume and few merchants.
So far, Kuaishou has not announced the specific number of local lifestyle businesses, but has emphasized rapid growth. As of December 2023, Kuaishou Local Life's brand merchants increased by 4.17 times year-on-year, cooperative merchants increased by 2.77 times, group buying influencers increased by 1.91 times, and the number of users who placed orders increased by 23 times.
Judging from the growth rate alone, Kuaishou is far ahead of Douyin. However, Kuaishou local life has just completed from 0 to 1, and with the strong support of the platform, it is not surprising that the year-on-year growth rate is several times or even dozens of times. In absolute terms, due to the small number of Kuaishou local life Kaicheng, its merchant volume is likely to be an order of magnitude smaller than that of Meituan and Douyin.
According to public information, by the end of 2022, the number of active merchants in Meituan had reached 9.3 million, and Kuaishou's local life was just starting at that time. Another major player, Douyin, disclosed at the end of 2023 that it has 4.5 million cooperative stores for life services, while Kuaishou is still in its "first year of local life".
Local living is a business that focuses on economies of scale. The more cities the platform covers and the richer the merchants, the more users it can attract, which in turn gathers more supply, forming a virtuous circle. Expanding the scale as soon as possible is the top priority of Kuaishou Local Life.
At the Juli Ecological Conference at the end of March, Kuaishou launched a series of measures, including investing in billion-level platform subsidies, 100 billion traffic, and supporting 1,000 million GMV brands, all of which are aimed at expanding supply. In addition, Kuaishou began to increase takeaways, such as adding exclusive logos to pure takeaway merchants, in order to introduce more types of merchants.
However, offline businesses operating on local life platforms require additional investment in manpower, material resources and funds. Most merchants are already accustomed to entering Meituan or Douyin; Kuaishou's fulfillment ability is not as good as Meituan's, and the traffic scale is not as good as Douyin's, so if you want to persuade merchants to "jump ship" or operate on multiple platforms, you not only need to transfer benefits, but also need to spend time and patiently push.
In this case, if Kuaishou wants to "cut through the mess" and squeeze into the local table as soon as possible, acquiring Ele.me may be one of the most effective options.
Although it lags behind Meituan in terms of volume, Ele.me has been fighting in the field of local life for many years, and has also achieved large-scale coverage of domestic cities and businesses. According to public information, Ele.me currently provides users with instant e-commerce services including takeaway and retail in more than 2,000 districts and counties across the country.
In addition, as of 2022, Ele.me has 1.14 million riders. Although it is not as good as Meituan's 6.24 million in the same period, the millions of "blue knights" are still the core competitiveness of Ele.me, and they are also the puzzle pieces of the offline fulfillment ability that Kuaishou's local life urgently needs.
B
Kuaishou needs Ele.me's "assist", and Ele.me also needs to find strong foreign aid as soon as possible.
Ele.me started as a takeaway, and in its early years, it once competed with Meituan. After the acquisition of Baidu Takeout in 2017, Ele.me occupied half of the takeaway market, and it was in the limelight for a while.
However, in the following years, Meituan relied on Tencent's major traffic pools, and the scale of users grew rapidly. After being acquired by Alibaba, Ele.me failed to go to the next level, and its takeaway market share continued to decline, and was finally overtaken by Meituan, and the pattern of Sanqikai continues to this day.
In the local life scene, Meituan's advantages are more obvious, while Ele.me does not have a high sense of presence.
After being placed under Ali in April 2018, Ele.me was once pinned on high hopes. In October of that year, Ele.me merged with Alibaba's Koubei to add a store segment in addition to the takeaway business. At that time, Meituan was far less powerful than it is today, and if Ele.me had managed properly and made full use of Alibaba Group's many longboards, it would have had a good chance of gaining a head start in the local life market.
However, word-of-mouth has never become a major player in local life, and after some tossing, it has become smaller and worse. In March 2023, Ali split the reputation from Ele.me and handed it over to AutoNavi to be responsible; Ele.me has returned to the main battlefield of takeout.
A year later, Ali Local Life Group changed its leadership, and Yu Yongfu, chairman of Ali Local Life, who was also the CEO of Ele.me, stepped down. Han Liu, the new CEO of Ele.me, said that Ele.me should first do a good job as a home-delivered catering platform, and secondly, it should do instant retail and real-time logistics network that meet the characteristics of Ele.me.
It is not difficult to see that Yu Yongfu's Ele.me hopes to go home and store at the same time; After Han Liu became CEO, Ele.me's strategic focus was on Daojia. This makes the already not very strong local life business of Ele.me even worse.
However, the alphabet list (ID: wujicaijing) believes that it is still necessary for Ele.me to arrive at the store.
In the local lifestyle sector, the home-to-home business is a costly traffic engine and the in-store business is a lucrative cash converter, and the two complement each other and are indispensable. "Partial science" takeaway and lame arrival at the store are the fundamental reasons for Ele.me's long-term losses.
Reflected in the financial performance, it achieved a unit economic benefit from negative to positive in the second quarter of 2022, that is, each order has a gross profit; But in the fourth quarter of 2023, Ele.me still lost more than 2 billion yuan. In comparison, Meituan achieved an operating profit of about 13.4 billion yuan and an adjusted net profit of 23.3 billion yuan in 2023.
Although the integration of word-of-mouth was not successful, Ele.me could not give up the in-store scene. If it marries Kuaishou, Ele.me will receive the blessing of the video content ecology and become the only "content + transaction" local life platform in China.
In the realm of local life, Meituan and Douyin are powerful, but they are not invulnerable.
Meituan is strong in brand, merchant resources, user scale and fulfillment infrastructure; Douyin uses pan-local life videos such as store visits and check-ins to cut in, and the traffic is surging, and the financial strength is stronger than Meituan, but the lack of self-built transportation capacity has led to the slow progress of the Daojia sector.
Kuaishou and Ele.me ranked second in the short video and food delivery fields, respectively. Kuaishou's traffic is not as good as Douyin, but it is also known as "700 million old iron", with nearly 400 million daily active users; Ele.me is further away from Meituan, but it is also home to hundreds of large and small businesses in the city, and has millions of riders.
If the two swords are combined and play their own longboards, it is likely to produce a 1+1>2 effect. Kuaishou's local lifestyle business will take off, and Ele.me will also resolve the embarrassing situation of relying solely on takeaways, laying the foundation for a future turnaround.
C
If the acquisition of Ele.me is successful, Cheng Yixiao will lead Kuaishou to truly leap to the next stage.
At the end of 2021, with Su Hua stepping down as CEO, Kuaishou entered the era of Cheng Yixiao. In the past two years, Cheng Yixiao has led Kuaishou to achieve a lot of achievements.
In terms of business, Kuaishou's various user indicators continued to grow, the content ecology improved significantly, and it occupied a place in the field of short dramas. Live e-commerce has maintained its previous momentum, with GMV exceeding 1 trillion yuan in 2023, and it has also established a signboard of "trust e-commerce".
In terms of finance, Kuaishou's profitability has been significantly improved through measures such as reducing costs and increasing efficiency, accelerating commercialization, and its revenue will exceed 100 billion yuan for the first time in 2023, and its profit will exceed 10 billion yuan.
It can be said that compared to when Su Hua handed over the stick, today's Kuaishou is much healthier and much stronger. However, in the capital market, Kuaishou is still unpopular, and its stock price has been depressed for a long time.
In the past period, the share price of Kuaishou Hong Kong stock has hovered around HK$50. When Cheng Yixiao became CEO, Kuaishou's share price was about HK$100. Of course, this is due to the overall weakness of Hong Kong stocks, but Kuaishou's lack of new stories and inability to provide imagination space are also important reasons.
Compared with the Suhua era, Cheng Yixiao's transformation of Kuaishou has been successful on the whole, and it has also brought about a real improvement in business and financial performance. However, so far, Cheng Yixiao has only brought quantitative changes, not qualitative changes that have changed Kuaishou's life.
Kuaishou under Su Hua's rule, whether it is short video, live broadcast or e-commerce, lags behind its biggest rival Douyin. After Cheng Yixiao led the team, Kuaishou narrowed the gap with Douyin in some indicators; But few people think that if Kuaishou moves along the current path, it will be able to catch up with Douyin, or even replace it.
For the second place in the same track, the capital market will not give a "market dream rate" that exceeds common sense. Unless Cheng Yixiao and Kuaishou can jump out of the current development paradigm and tell a new story that is logically self-consistent and intriguing, Kuaishou's market value will return to the peak of trillions.
Kuaishou is looking for new stories, including the big AI models that are hot right now. The Keling model, which was announced at the end of June, can generate videos up to 3 minutes long based on text, and various indicators can even compete with OpenAI's Sora.
But the far water of the AI large model can't quench Kuaishou's thirst. Buying Ele.me may be a more concise and powerful option.
As a large Internet company, Kuaishou has not invested or acquired much before, and well-known targets include Zhihu, CMGE, Station A, etc., and most of the rest are unknown. This is not difficult to understand: Kuaishou, who suffered serious losses at that time, did not have much spare energy and funds to hit the potential stocks in the primary market.
Now that Kuaishou's financial situation has improved significantly, the acquisition of Ele.me is not entirely impossible. Cheng Yixiao can also use this shocking deal to mark the new stage of Kuaishou.
Tencent's investment in Kuaishou, wanting to buy Alibaba's Ele.me, may have been a fantasy a few years ago. However, in the context of the interconnection of the two giants and the dilution of the color of the mountain, the marriage between Kuaishou and Ele.me may not be vetoed by the backers, and may even make Tencent Ali feel relieved.
Taking a step back, even if Kuaishou's acquisition of Ele.me fails, the outside world's interest in Ele.me will also be raised. At that time, even if Douyin seeks to "cut off the beard", it will inevitably need to pay a greater price and time, and Kuaishou will indirectly benefit.
After completing the journey from 0 to 1, Kuaishou Local Life needs the help of Ele.me to complete the leap from 1 to 100. If this stunning deal is completed, Kuaishou will gain a foothold on the battlefield of Meituan and Douyin and pave the way for a return to the main stage of the Internet.
Resources:
Alphabet List, "After Douyin was frustrated, did Kuaishou win takeaways? 》
Hedgehog Commune, "Xiaogu set a flag for Kuaishou's local life"
Red Star Capital Bureau, "Douyin Life Service Will Increase Accommodation Commission Rate, from 4.5% to 8%"
Inside and outside, "Meituan Finds Calm"
New eyes, "After saying goodbye to Yu Yongfu, where are you going if you are hungry?" 》