2024-07-15
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Dingjiaoone original
Author | Liming
Editor | Wei Jia
As Internet giants continue to enter the market, the most intuitive feeling of ordinary consumers is that there are more platforms that can save money.
Meituan, Douyin, Kuaishou, Xiaohongshu and even Video Accounts are all moving various offline consumption scenarios online - catering, hotels, manicures, car washes, tickets. The platforms issue group purchase coupons to users and combine short videos, live broadcasts and other fashionable gameplay to bring a steady stream of new customers to merchants while bringing benefits to users.
There were truck drivers in fourth-tier cities who got to taste Luckin Coffee for the first time through Kuaishou group coupons; there were migrant workers who stayed at home all year round and got cost-effective suburban camping packages through group purchases; and there were also many young people in small towns who were accustomed to buying snacks with group coupons in live broadcast rooms.
Buying coupons first and then going to the store is one of the typical characteristics of local life. Compared with offline physical stores, the price after using up the coupons online is cheaper, the product introduction is more detailed, and the experience is more diverse.
For the giants, this is a 35 trillion market. Especially when people in the new line market "go online" through short video platforms, the strong consumer demand is activated, creating more consumption scenarios and business opportunities.
Compared with the fierce competition and ineffective internal circulation in many industries, local life is a rare blue ocean market, and the competition has not yet reached a high level of saturation. Recently, Kuaishou and Meituan announced that their strategic cooperation will be fully upgraded, and the scope of cooperation between the two parties will be expanded to "hundreds of cities and tens of thousands of stores" across the country, which will bring variables to this uncertain battlefield. After the giants formed alliances and raced to grab land in first- and second-tier cities, their focus has gradually shifted to third- and fourth-tier cities.
What will the trillion-dollar local life industry compete for in 2024? The answer may be hidden in the mobile phones of users in the new market.
A new bag of snacks on the shelf needs to reach consumers' field of vision as soon as possible. In the past, this might have been through signboards in the store, but now it can be done with the help of coupons in the live broadcast room.
Zhao Yiming Snacks is a fast-growing mass-market snack brand in the past two years. After a crazy offline "conquest", it opened its 5,000th store in June this year. When the stores inevitably go inward, it begins to turn its attention to the online market.
Some people found that starting from April this year, Zhao Yiming snacks could often be seen in Kuaishou live broadcast room, especially during the Children's Day, when Zhao Yiming snacks were linked online and offline, and real-life immersive live broadcasts were conducted, and a large number of vouchers were issued. Many people found out through these vouchers that a new snack shop had opened near the community, and they walked into the store for the first time and became members.
The new store started quickly. According to statistics, within less than two months of entering Kuaishou, Zhao Yiming Snacks had gained more than 400,000 new customers and Kuaishou's incremental GMV exceeded 25 million, reaping the new dividends of the old iron market.
This is happening in many third- and fourth-tier cities. Even though Zhao Yiming Snacks has stores all over the country, Kuaishou still brought it a large number of new customers in June, with at least one new customer for every three orders.
Many people have dreamed of opening a store, but today, the way to open a store has changed. With the power of digitalization, the service consumption industry is undergoing profound changes.
It is not just snacks that have been changed. Coffee and tea, attraction tickets, fitness and nail art, hotel travel, and various offline formats can move their entrances online, thereby reconstructing the entire consumption process and transaction links.
After Mixue Ice City joined the short video platform, some die-hard fans even queued for dozens of minutes to redeem a cup of lemonade. After joining Kuaishou, a scenic spot in a northeastern city famous for rafting achieved a GMV of over 8 million in the second month through the matrix of self-broadcasting by merchants and influencers. They all reaped the dividends of local life.
Behind these radical figures, people in third- and fourth-tier cities are being drawn into the consumption boom of local life. On the one hand, consumer brands such as Luckin Coffee and Zhao Yiming Snacks are accelerating the expansion of new market lines, and on the other hand, short video platforms such as Douyin and Kuaishou are assisting them and activating the consumer demand hidden under the iceberg.
According to FeiGua data, as of Q4 2023, the user scale of Kuaishou local life in new-tier cities (third-tier and below) accounted for 54.5%, 9% higher than that in second-tier and above cities. The same trend is also seen in terms of GMV growth. In Q4 2023, compared with Q1, GMV in new-tier cities increased by 664.6%, and that in second-tier and above cities increased by 511.8%. The new-tier market has also become a new space for various Internet platforms to tap into consumption potential.
People in third- and fourth-tier cities have a characteristic: they are not so eager to work, have a relatively leisurely life, have some money in their pockets, are sensitive to prices, and are willing to try new things. More importantly, almost everyone watches short videos.
Xiao Tao is a grassroots civil servant in a fourth-tier city in the north. He has no mortgage or car loan, and his monthly salary is less than 5,000 yuan, all of which is "disposable income." His daily entertainment, besides playing cards with friends, is watching short videos. Short videos fill up all the fragmented time in his daily life. He is used to shopping on his mobile phone, looking for local discounts, and seeing what new things the local active influencers have discovered.
There is a local store explorer who is Xiao Tao's childhood friend. Xiao Tao followed his childhood friend's store exploration and found many treasure stores hidden in the alleys. This Mother's Day, Xiao Tao bought a bouquet of flowers for his mother for the first time through his childhood friend's live broadcast room. He took a short video holding the flowers at the door of the store, and his friends liked it.
The way these people get information and their consumption habits are changing. Some of them are attracted by low prices, some are based on their trust in influencers, and some just think it’s fresh and fun and want to give it a try. The longer they stay on the short video platform, the more they know about local catering, shopping, leisure and entertainment information, and the more frequently they place orders.
For users, this is a brand new consumption experience; for merchants, capturing this incremental population means obtaining the code for business growth.
Why does the combination of local life and short videos have such great power?
Let’s take flowers as an example to see how short video platforms “transform” merchants in the three major aspects of customer acquisition, marketing, and transactions.
Xiao Wei runs a flower shop in a southern city. The shop is located next to a bus station with a large flow of people, which is a prime location. Later, the bus station moved and several large restaurants opened at the original location, and the flower shop's business plummeted.
"The most important thing about opening a store is site selection. The location determines the traffic. Where the traffic is, there is business," she concluded.
After losing her position advantage, Xiaowei began to try short videos, posting a few videos explaining flower materials on Kuaishou every now and then, occasionally broadcasting live, and sending out coupons from time to time. She found that group buying live broadcasts sometimes suddenly brought in a large number of orders, especially when sending out coupons.
When customers come to the store to check out, she takes the initiative to chat with them and finds that many people don't even know there is a flower shop here. Some people buy flowers online for the first time because of the big discounts, and some are veteran players who were attracted by her previous short videos. She previously had a video about flower arrangement techniques and some aesthetic knowledge, which received very good responses.
Someone made a vivid metaphor for the short video platform: it is like a huge supermarket, where every product comes with a video demonstration and product description. It is a place that can fully mobilize consumer demand, allowing people to discover needs and stimulate consumption.
Short videos and live broadcasts can break through the limitations of time and space, and push information and services to a wider range of potential consumers through big data and artificial intelligence algorithms. This kind of traffic is very accurate and has a high conversion rate. For merchants with poor geographical locations, Kuaishou is equivalent to a new position for them to acquire customers at a low cost and accurately.
The development of new customers is very important. In the past, opening a new offline store often required a long cold start period. Now, with the help of short video preheating, local promotion, coupons and flash sales, it can quickly cover nearby people. Zhao Yiming Snacks used Kuaishou to preheat short videos and local promotion, shortening the cold start period of the new store opening.
There is a very important point here. After the content platform has opened up the business processes of local life, it has achieved "planting and pulling in one".
Take Kuaishou as an example. In the past, Kuaishou was just a short video live streaming platform where users watched videos, read news, and entertained themselves without necessarily spending money. Users were attracted by a delicacy in the video, but could not "pull it out" - they looked at it with envy, but could not eat it. Now, users can directly buy coupons after watching the video, and can immediately go to the store to redeem and experience it.
In fact, when users browse related content, they have already expressed very clear and accurate consumption intentions. For users, the best experience is what you see is what you get. When you see interesting attractions, hotels, and restaurants while watching short videos, it is best to browse, consult, and place orders without having to jump to other platforms. Moreover, the products should be as complete as possible and the transactions should be guaranteed.
Through Kuaishou's online platform, merchants can realize functions such as online ordering, online payment, and membership operations, which greatly simplifies business processes, improves operational efficiency, reduces manpower and material resources, and brings better performance outputs.
Moving local businesses online, increasing traffic through integrated marketing on the content side, making good use of platform resource support, using vouchers to improve product price competitiveness, and promoting new customer conversions, this combination of measures will become an essential skill for merchants in the future.
According to iResearch Consulting data, the size of China's local life service market was 19.5 trillion yuan in 2020, and this figure will grow to 35.3 trillion yuan by 2025.
Kuaishou is one of the variables in the local life industry. It started its business in October 2022 and quickly ran its business model.
Kuaishou entered the local life business relatively late, and its transaction volume is relatively small, but it has unique advantages. Kuaishou has 700 million old iron users, and old iron users in new-tier cities account for about 60%. Not only is the scale large, but the overlap rate with other Internet platforms is low, which is a sharp sword for Kuaishou. This part of the new-tier market users is the incremental market of local life at present, and is also the target of competition among various platforms.
This means that at the current stage, Kuaishou Local Life still has a lot of room for development. Merchants will not be so aggressive in promoting on the platform, and can obtain sufficient traffic at a lower cost. Moreover, Kuaishou intends to create a huge incremental pool for local life track players. In the first half of this year, Kuaishou Local Life proposed to use "1 billion-level platform subsidies and 100 billion-level traffic" to create a group buying outlet.
Kuaishou had reached a cooperation with Meituan as early as 2021. Users who want to buy products can directly go to the Meituan mini program within the Kuaishou APP to buy them. This is the first cross-border cooperation between a short video platform and a local life platform.
On July 12, the cooperation between Kuaishou and Meituan was fully upgraded, and the scope will be expanded to "100 cities and 10,000 stores" across the country. The production and research of both parties will carry out more basic and systematic product construction to ensure a smooth user experience.
Meituan wants to get Kuaishou's 700 million loyal users, and Kuaishou wants to get Meitu's high-quality product supply. Both parties get what they need.
For Meituan, low-tier cities are the front line of user growth. According to Meituan CEO Wang Xing, the transaction volume in low-tier cities has brought Meituan a 50% increase, accounting for 60% of the total order volume. Meituan will continue to increase investment and increase penetration, especially among young groups.
Since Kuaishou has a unique community ecosystem, the upgraded cooperation will be more conducive to integrating various merchant resources in the new line market, allowing Kuaishou to form a complete local life service ecosystem and establish a closer cooperative relationship with offline merchants.
Following the "east wind" of Kuaishou's layout of local life, small restaurants, barber shops, gyms, beauty salons, car washes, and various offline stores related to service consumption can be included in Kuaishou's service system. Service consumption is accelerating to sink, providing users with a more convenient and diverse experience.
This can not only expand Kuaishou's business boundaries, but also accelerate commercial realization. Kuaishou's revenue mainly comes from advertising and commissions. More merchants will bring more advertising, which will in turn promote more transactions between users and merchants, and Kuaishou will get more commissions from it.
Looking at the entire Internet industry, local life is one of the few areas that is still growing rapidly and has traffic dividends. It is also one of the few industries that is being fought over by giants and has an uncertain pattern. Like all industries, the penetration of the Internet into offline entities is a process from shallow to deep. From first-tier cities to new-line markets, the coverage is gradually expanding. Some players have profited from the competition, while others have been forced to withdraw.
Kuaishou and Meituan have deepened their cooperation, allowing the "bullet" of local life to fly further. After all, no industry can turn a blind eye to 700 million old friends.
*The title image and accompanying images in the article are from Pexels.
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