Douyin heats up food delivery segment

Chinese short video platform Douyin, which is owned by tech company ByteDance, is considering gradually expanding its list of pilot cities for its group-buying delivery business nationwide, a move that industry experts said will intensify competition in the lucrative food delivery sector currently dominated by Meituan and Ele.me.

The company said on Wednesday that its group-buying delivery service is being tested in Beijing, Shanghai and Chengdu, Sichuan province. Depending on the pilot situation, Douyin will consider expanding the pilot program gradually. However, there is no specific timetable at present.

Media reported that Douyin, the Chinese version of TikTok, will launch a food delivery service nationwide on March 1, with internal tests ongoing in Beijing, Shanghai, and Guangzhou, Guangdong province. Shares of Meituan tumbled 6.48 percent to close at HK$153.1 ($19.50) in Hong Kong on Wednesday.

Meanwhile, ByteDance has been recruiting senior operation managers for food deliveries, staff to provide solutions for the takeaway industry and senior managers of livestreaming catering businesses.

Douyin is ramping up efforts to expand its presence in the food delivery and local life services segment. In August, Douyin teamed up with Alibaba's food delivery arm Ele.me, which allows Douyin users to place takeout orders on Ele.me through the short video app.

The company joined hands with major on-demand delivery platforms, including Dada Group, SF Express and Shansong, so as to provide intra-city group-buying delivery services for catering merchants in December.

Data from industry research company ChinaIRN.com showed Meituan held a 69 percent market share in the country's food delivery industry in 2020, while Ele.me had about a 26 percent share.

According to the State Information Center, China's food delivery sector has witnessed robust growth in recent years, with revenue reaching 1 trillion yuan ($147.4 billion) in 2021, up 50.23 percent year-on-year.

"Douyin, which has already gained an upper hand in the livestreaming segment, has more than 700 million daily active users, and the immense data traffic is the core competitiveness of Douyin," said Chen Liteng, senior analyst at the Internet Economy Institute, a domestic consultancy. He estimates competition in the food delivery sector will intensify.

Chen said Douyin's entry into the local life services sector will help the company diversify its revenue sources and speed up its monetization push. "However, the food delivery business has higher requirements for logistics and distribution efficiency, which are currently weak links for Douyin and will have an impact on users' shopping experience."

Pan Helin, co-director of the Digital Economy and Financial Innovation Research Center at Zhejiang University's International Business School, said Douyin's core advantages still lie in short video and social interaction, and more efforts are needed to improve delivery efficiency and user experience, as well as build efficient and flexible delivery networks nationwide.