"Speed is everything, and it is an indispensable factor in competition," said Jack Welch, former CEO of General Electric.

Similarly, in the e-commerce industry, delivery speed determines everything: the timeliness of products, the turnover of manufacturers, the convenience of users, and more. To this end, Kuaishou announced the launch of its hour-delivery service on September 10th, accelerating its e-commerce business in instant retail.

However, looking at the broader picture, since Meituan launched Meituan Instant Buy in 2018, Taobao, JD.com, and Douyin have also successively launched their own hour-delivery services. Why did Kuaishou, which seems to have arrived late to the game, choose to join the competition now? And facing fierce competition across the industry, can Kuaishou catch up from behind? With Douyin and Kuaishou, both known for their live streaming e-commerce, increasing their focus on instant retail and competing with Meituan and JD.com for market share, does this signal a shift in the entire content-based e-commerce industry?

Kuaishou e-commerce slows down and seeks growth in instant retail

First, it's due to industry trends. The 2023 "Instant Retail Research Report" shows that in recent years, the growth rate of instant retail has consistently maintained an average annual level of over 50%, with the market size expected to triple by 2025 compared to 2022. This high growth rate indicates that consumers' demand for instant services is rapidly increasing and far from being met.

Second, it's due to Kuaishou's own strategy. While Taobao and JD.com started as online malls and Meituan focused on local life services, Kuaishou entered the e-commerce market through live streaming, leveraging the massive traffic generated by short videos and live streams to achieve rapid growth.

Data shows that from 2020 to 2021, Kuaishou's e-commerce transaction value grew by 539.5% and 78.4%, respectively.

However, from 2022 to 2023, Kuaishou's e-commerce transaction value growth slowed significantly to 32.52% and 31.43%, respectively. By the second quarter of 2024, this figure had dropped to just 15%.

Why has Kuaishou's e-commerce growth slowed so dramatically?

From the merchant perspective, live streaming e-commerce channels have historically grown faster than the industry as a whole. As a result, brands and merchants often viewed them as a strategic opportunity to achieve rapid growth and invested heavily in live streaming.

However, as sales through live streaming increased, the low return on investment (ROI) became apparent. Live streaming e-commerce has a more complex operational chain than traditional e-commerce, with intermediaries like influencers and service providers adding to the cost of goods distribution.

Therefore, as price wars intensified, live streaming e-commerce's cost-effectiveness advantage gradually diminished. Rising channel costs forced merchants to reassess their strategies and shift focus to more cost-effective channels.

From the consumer perspective, amid a general preference for cost-effectiveness, live streaming e-commerce's ability to inspire and influence purchasing decisions has shown signs of weakness. High-profile influencers have been caught selling low-quality, overpriced products, eroding consumer trust.

As consumer interest in live streaming wanes, conversion rates have dropped significantly. Coupled with traditional e-commerce platforms' enhanced low-price strategies, consumers are naturally turning to cheaper alternatives rather than paying a "fan tax" in live streaming rooms.

From this perspective, Kuaishou urgently needs a new business to drive GMV growth, hence the launch of its hour-delivery service. By tapping into the instant retail market, Kuaishou hopes to alleviate its growth anxiety.

Short video platforms eye local life services, but Meituan is not pleased

However, it's not easy for short video platforms to venture into instant retail. Currently, Meituan Instant Buy dominates the market.

Kuaishou's hour-delivery service must compete not only with Meituan but also with Taobao, JD.com, and Douyin.

Meituan Instant Buy's success stems from the platform's long-standing experience and expertise in local life services, which it leverages to accelerate the development of new business lines. In the first quarter of this year, Meituan Instant Buy processed an average of 8.4 million orders per day, up 59.7% year-on-year. CFO Shaohui Chen predicts that the platform's annual order volume growth will far exceed that of food delivery, potentially more than doubling.

Take fulfillment (delivery) as an example. Meituan's nearly 7 million couriers can support Instant Buy, and the platform's operational experience and technical tools can be quickly reused. In contrast, Kuaishou, which originated from short video content, lacks sufficient fulfillment capabilities in local services, posing a significant challenge.

However, Kuaishou's challenges with hour-delivery are not unique. Douyin's hour-delivery service also underwent extensive business adjustments:

In 2022, Douyin piloted its "Douyin Express Delivery" service in Guangzhou and Shenzhen, launching the "Douyin Supermarket" concurrently. In 2023, Douyin expanded its hour-delivery service to 15 cities nationwide and introduced a dedicated entry point within the Douyin app.

To support its hour-delivery business, Douyin recruited independent fulfillment service providers in Changsha and Wuhan and store expansion service providers in Beijing, Shenzhen, and Hangzhou, covering categories such as supermarkets, convenience stores, pet stores, and fresh produce shops, further enriching its product offerings.

Despite Douyin's efforts, results were disappointing. Starting in May, Douyin suspended its city expansion plans for hour-delivery, limiting operations to Beijing, Shanghai, Hangzhou, and Chengdu. Douyin's hour-delivery service failed to make significant inroads into Meituan Instant Buy's market position.

Furthermore, Douyin also struggled with fulfillment capabilities in its food delivery business. Some fulfillment service providers in the industry noted that Douyin's crowdsourced delivery model often led to third-party riders cherry-picking high-value orders, leaving lower-value orders unfulfilled, resulting in poor service experiences.

From this perspective, Kuaishou may face similar concerns. To succeed in hour-delivery, Kuaishou must enhance its fundamental logistics and supply-demand capabilities, comprehensively upgrading its retail competencies to compete with Meituan.

Who will win the final battle between content-based and shelf e-commerce?

From JD.com and Meituan learning from Douyin and Kuaishou in live streaming e-commerce to Douyin and Kuaishou now learning from JD.com and Meituan in instant retail, content-based e-commerce is undergoing a "rebalancing" of channels. Essentially, as content-based e-commerce reaches its growth ceiling, it seeks incremental growth from shelf e-commerce.

Cheng Yixiao, CEO of Kuaishou, has publicly stated that e-commerce is a critical growth engine for Kuaishou's future and the centerpiece of its commercial ecosystem. However, he also acknowledges that the growth ceiling for content-based e-commerce will eventually be reached, leaving more room for imagination in shelf e-commerce.

For content platforms, building a more comprehensive shelf e-commerce system has become a direct strategy to address market changes and competition. In response, Kuaishou has already taken action:

In April, Kuaishou launched the "Kuaishou Selection" program, adopting a managed model commonly used in cross-border e-commerce to streamline uncertainties in business operations and enhance the platform's control over the product supply chain. Additionally, the platform is actively balancing the interests of merchants and consumers, adjusting discount rules, designing tiered pricing logic for short videos, and efficiently utilizing traffic. Standard user benefits such as buy now, pay later and logistics guarantees have also frequently appeared in Kuaishou e-commerce marketing materials.

Douyin, however, has moved even faster. In 2022, it introduced the concept of omnichannel interest-based e-commerce and launched a comprehensive independent e-commerce platform, Douyin Mall, replicating the full online shopping experience of search, price comparison, ordering, and after-sales service into a standalone scenario. The prominent placement of sections like "Douyin Supermarket" and "Hour-Delivery" underscores the platform's business focus.

From this perspective, both major content-based e-commerce players are strengthening their shelf e-commerce offerings, indicating not only the continuation of competition between Douyin and Kuaishou in this new arena but also a gradual concentration of competition within the e-commerce industry towards shelf e-commerce.

For platforms already established in shelf e-commerce, competition will only intensify. Each platform must consider how to refine operations to enhance competitiveness, grasp consumer needs and habits, and provide differentiated and innovative user experiences.

Source: Hong Kong Stocks Research Institute