Credit: Visual China
BEIJING, January 9 (TMTPOST) – Chinese e-commerce giant Pinduoduo has confirmed the abortion of its plan to introduce local services, covering catering, hotels, and tourist attractions, on its group-buying platform Duoduo Maicai, saying that the platform was operating normally.
In mid-December 2023, Duoduo Maicai started to invite stores to board their local life platform. Restaurant vouchers, hotel vouchers, and movie tickets were handed out for business promotion.
Previously, the new business was expected to be launched nationwide after the Chinese New Year in February 2024. However, in the final week of 2023, some investment promotion personnel received instructions stating that the project was suspended, and the restart would depend on further notice.
Compared to e-commerce and community group-buying business, which Pinduoduo is good at, local life business is a more complex business with intricate delivery processes, requiring a deeper understanding of offline business scenarios.
Accustomed to success in online business, the e-commerce giant may have encountered a tough challenge this time.
Pinduoduo long coveting the local life business
Last year, Pinduoduo gradually began to enter the local life business.
In July 2023, a local life channel could be found on the Pinduoduo app. However, compared to the local life business models of platforms like Meituan and TikTok, which display information about offline stores, Pinduoduo's local life channel mainly focuses on various vouchers and package discount coupons. The major brands covered include Walmart, KFC, McDonald's, and Starbucks.
These coupons can be purchased individually or through group-buying. After purchasing a package, customers can redeem it at the store using the corresponding voucher. This coupon-based business model continues Pinduoduo's previous shopping patterns. However, the businesses currently selling these coupons are not official brand stores. This indicates that, after nearly half a year of experimentation, Pinduoduo has yet to establish a solid local life cooperation channel with the brands.
In comparison, Pinduoduo's community group-buying platform, Kuai Tuan Tuan, has made more rapid advancements in the local life business. As early as March 2023, the platform opened for local life business investment. By May, local life products were already available on it. The range of products includes not only dining but also travel accommodations, entertainment, hairdressing, and various life services.
Reportedly, Kuai Tuan Tuan's local life products are mainly concentrated in cities like Shanghai, Beijing, and Shenzhen. Among them, Shanghai, as the headquarters of Pinduoduo, is the region where Kuai Tuan Tuan's local life business has progressed the fastest and most comprehensively.
As a newcomer, Kuai Tuan Tuan offers relatively low technical service fees, only at 0.6%. The commissions are currently negotiated among the parties. In addition, it provides freedom for service providers, imposing no requirements on the size of businesses.
Although merchants can potentially earn higher income on Kuai Tuan Tuan compared to other channels like Meituan and TikTok, due to its private domain model, some merchants and service providers have reported less-than-ideal results in their tests on the platform.
Local life sector garners much attention
The local life sector has been a focus of attention for e-commerce giants, although Pinduoduo temporarily closed its local life business.
According to IResearch Consulting data, the market size of local life services was 19.5 trillion yuan in 2020, expected to reach 35.3 trillion yuan by 2025. In 2020, the online local life service market reached 4.7 trillion yuan, projected to reach 10.9 trillion yuan by 2025.
Meituan has long dominated the market and reaped substantial profits. Its Q3 2023 financial report shows a quarterly revenue of 76.5 billion yuan, a 22.1% year-on-year growth rate. In the third quarter, the combined revenue of its home delivery and in-store businesses reached 577 billion yuan, with a 24.5% year-on-year increase.
However, with the entry of new competitors and the impact of new models, Meituan has also needed to adjust its strategies. It has accelerated its foray into live streaming and further increased marketing expenses.
Among the new competitors, TikTok stands out. According to a recent report from the platform, the total transaction volume on its life service platform grew by 256% in 2023, with store coverage in over 370 cities.
However, compared to Meituan, the operational threshold for TikTok is much higher. Therefore, despite its greater effort and scale in the local life business, it still fails to challenge Meituan's position.
Xiaohongshu (Little Red Book), a social media and e-commerce platform, is another competitor that should not be underestimated. In April 2023, it began testing group-buying functions, and in July 2023, it launched its first local life service platform. Although significant profits have not been observed yet, every step it takes is a layout for its local life business.
Besides, several other major platforms, including Kuaishou and WeChat, continue to experiment with the local life business.
First Shanghai Securities Ltd. said in its research report that the local life sector seems to have returned to the situation in 2019, where multiple players strived to win. It is expected that from 2020 to 2025, the online penetration rate of local life will increase from 24.3% to 30.8%.
As an area with significant potential, the local life business is expected to witness even fiercer competition. Behind Pinduoduo's temporary withdrawal from this market may be just a comprehensive restructuring. As almost all giants are eyeing this market, a new round of battle may soon unfold.
(Note: 1 yuan equals $0.14.)
(This article was first published on the TMTPost App. Author | Xie Xuan; Editor | Fang Yu)