BEIJING, August 9 (TMTPost)—  TikTok’s Chinese version Douyin is facing more challenges in expansion of the local services when the Covid-19 restrictions were lifted.

Credit：Visual China

The gross merchandise value (GMV) of Douyin’s local life service division topped RMB100 billion in the first six months of this year, mainly driven by dining and other in-store services as well as travel and hotel-booking, though the GMV was still less than half of value of the same business under Chinese food delivery service giant Meituan, Chinese news media outlet LatePost learned.

Douyin’s local life service experienced a significant slowdown after a boom amid the Covid-19 pandemic and lockdowns. During the pandemic, brick-and-mortal stores struggled for survival, so they  had to resort to high-traffic online platforms like Douyin for marketing, and even voluntarily sacrifice their profit margin to offer price cuts to attract online shoppers. But when China winded down its zero-Covid policies since late 2022, the offline retail started to see recovery in traffic, some merchants turned into hesitate to maintain their advertising spending on Douyin as before. 

Performance of Douyin’s local life service in the first half of the year reflected the shift of trending. LatePost learned that the business failed to meet Douyin’s internal expectation in the first quarter, while April saw a modest rally of GMV due to users’ stock-up for the upcoming seven-day Labor Day Holiday starting from May 1. GMV of Douyin’s local services in May was said to drop again, but it has resumed rapid growth since the mid-year, which was mainly fueled by the hotel and travel business ahead of the traditioanl peak travel season in the summer.

Douyin also took advantage of the season to launch initiatives, such as promotions in the 618 event, the second largest online shopping festival in China running from late May to mid-June. In addition to promotion, Douyin tried to adopt one of  Meituan’s key strategies—exclusive sales of tickets for tourist attractions, which means to book all the tickets of a specific scenic spot in a certain period with a fixed payment, and the online platform will bear losses or earnings of the ticket sales. With the new strategy and promotions, GMV of Douyin’s local life service was said to exceed RMB30 billion in July, hitting the monthly record.  

However, Douyin’s new efforts seemed hard to launch disruptive challenge to Meituan. A person close to Meituan told LatePost that the company still maintains a relatively high growth rate as it enjoys a relatively large competitive advantage in the local service market. In face of Douyin’s moving into its key food-delivery sector, Meituan was reported to have carried out pilot projects in some Chinese cities since the start of the year, aiming to cut food prices of group purchase to the same level as Douyin, or even more favorable. 

Douyin released in April that its local life service business had a seven-fold increase in sales last year compared with the year 2021. The business is now available in more than 370 cities in China, with more than 2 million partnered stores to offer local services. Chinese digital news media 36Kr reported the same month that Douyin has upgraded its food delivery business to a separate division, led by Li Wei, vice president of local life service division.  The new division has its sub-units such as business, operation and business strategy, and all the leaders of these units directly report to Li Wei, according to the report.