Expanded Collaboration Between Kuaishou and Meituan

Kuaishou and Meituan Expand to Hundreds of Cities and Thousands of Stores

Recent developments:

Recent data from third-party providers suggest that Kuaishou experienced a significant slowdown in its GMV growth rate at the beginning of April. However, the growth rate rebounded to about 15% in May.

Despite the rebound, Kuaishou’s performance remains disappointing when compared to Douyin, which reported a year-over-year growth rate of 26.2%. This difference of more than 10% highlights Douyin’s stronger position in the market.

Both Kuaishou and Meituan have faced concerns regarding their relatively smaller user bases, even though each has about 700 million users. This number is still smaller than Douyin’s user base, potentially giving Douyin an edge.

As a consequence, the share prices of Kuaishou and Meituan have declined, reflecting market concerns about their competitive standing and growth potential in comparison to Douyin.

Meituan and Kuaishou join forces:

Yesterday, it was announced that Kuaishou and Meituan have joined forces to enhance their collaboration in the local life services sector. This strategic partnership aims to leverage each company’s strengths to better compete in the market, particularly against dominant players like Douyin.

Their initial partnership in 2021 was a forward-thinking move to capitalize on emerging trends in the Chinese consumption market. Over three years later, this collaboration has deepened. Kuaishou and Meituan plan to expand their cooperation to “hundreds of cities and thousands of stores” nationwide over the next three years.

Shift in Consumption Trends

The primary trend driving their collaboration is the shift in China's consumption market from commodity consumption to service consumption. According to the "2024 China Consumption Research Report," by 2030, service consumption in China is expected to exceed 50% of the total consumption, with per capita service consumption levels surpassing 20,000 yuan. Data from the National Bureau of Statistics shows that in May 2024, the total retail sales of consumer goods reached 3,921.1 billion yuan, a year-on-year increase of 3.7%. This growth includes a 5.0% increase in catering revenue and a 3.6% increase in commodity retail sales.

Unique Value of Local Life Services

Local life services offer unique advantages such as flexibility, authenticity, emotional value, and immediate fulfillment, which traditional e-commerce cannot replicate. This has led to a significant rise in service consumption. Data from June 2024 shows that the GMV of Meituan merchants on Kuaishou increased by more than 38 times year-on-year, and the number of orders increased by over 10 times. Meituan's supply to Kuaishou will now include a broader range of products and marketing formats, ensuring a seamless user experience.

Complementary Strengths

Kuaishou and Meituan bring complementary strengths to their partnership, each providing what the other lacks:

Kuaishou's Strengths:

• User Base: Kuaishou boasts a massive user base of 700 million users, predominantly in third-tier and lower cities.

• Engagement: Kuaishou users spend over 2 hours daily on the platform, with high engagement rates driven by short videos and live streaming.

• Social Interaction: Kuaishou's platform fosters familiar social interactions and community trust, which are essential for local life services.

Meituan's Strengths:

• Meituan also has about 700 million users, mainly in higher-tier cities, which nicely complements Kuaishou’s user base.

• Service Portfolio: Meituan offers a wide range of local services, including food delivery, group buying, and instant retail.

• Logistics: Meituan has a highly efficient logistics network, capable of rapid delivery and fulfillment.

• Commercial Partnerships: Meituan provides diverse promotional resources and service content, such as exclusive vouchers, member-only discounts, and flash sales.

Synergy and Cultural Alignment

The collaboration leverages the strengths of both platforms to create a comprehensive local life service offering. Kuaishou's extensive user base and high engagement provide Meituan with a ready market for its services. In turn, Meituan's robust logistics and diverse service offerings enhance the user experience for Kuaishou's users.

Kuaishou's user base aligns well with the market positioning of Meituan, particularly in third-tier and lower cities. The cultural attribute of familiar social interactions on Kuaishou matches the strategies of Meituan's brand merchants, fostering a sense of trust and community. This alignment is crucial in providing a local life scene that meets consumers' needs to enjoy services leisurely, particularly in lower-tier markets.