Douyin is reportedly abandoning its goal of achieving RMB 100 billion ($14 billion) in total sales this year, as the business’ progress in the first half of 2023 has only reached one-tenth of the yearly target, falling extremely short of internal expectations.
Local media outlet LatePost first reported the news on June 10, citing a source close to the matter. While GMV is no longer the most important metric for the unit, the report said that exploring various ways to successfully run the food delivery business is now a more urgent priority for TikTok’s Chinese sibling.
Why it matters: Due to a lack of its own delivery logistic team, Douyin has relied on selling higher-priced set meal kits (which cut down the frequency of deliveries) and third-party delivery companies to offer its food delivery service. The approach is currently presenting challenges in scaling up the business.
Details: Starting in mid-2022, the short video platform has been testing food deliveries in Beijing, Shanghai, and Chengdu. Users in these three cities are able to order food for delivery within Douyin. But unlike market leaders Meituan and Alibaba’s Ele.me, restaurants selling goods on the Douyin platform need to use delivery riders from another service or deliver the food themselves, making the delivery cost run higher.
- Typically priced over RMB 100, meal kit takeaways are designed for several people to share and have longer delivery times compared to other platforms that prioritize individual sales and more timely delivery.
- In contrast to Meituan, which recorded a peak of 60 million in daily order volume for food deliveries last August, Douyin’s takeaway orders have experienced limited growth, with its average daily order volume from January to March reportedly remaining at around 10,000 to 20,000 units.
Context: Meituan and Ele.me now dominate the food delivery market in China, holding a more than 90% share of the market between them, highlighting the challenge for Douyin. Meituan has already begun a counteroffensive to maintain its leading position in the face of this new challenger.
- In March, Meituan introduced a marketing event called Shen Qiang Shou for merchants, which is currently being trialed in Shenzhen and Beijing. The promotional event allows users to purchase discounted coupons through Meituan’s own livestreaming or short-form videos, which can be redeemed for real goods within a specified timeframe.
- For consumers, Meituan conducts regular live commerce promotional events on the 18th of every month, with influential merchants selling discounted goods with the aim of stimulating demand. According to a Meituan statement, takeout vouchers worth RMB 86 million were sold on its first livestream shopping event, which lasted 11 hours on April 18.