Written by | Wu Xianzhi

Edited by | Wang Pan

New leaders often set three initial fires upon taking office. The launch of the "Divine Membership," an "S"-level project, is Wang Puzhong's first blaze since assuming his position. Starting in May, the core local commerce business of Meituan under his leadership has been systematically connecting home delivery and in-store services, city by city.

The most recent city is Chengdu, where the full integration of in-store and home delivery services was achieved on July 4th. Photon Planet understands that as early as the end of April, Meituan began sharing this plan with merchants and gradually opened up recruitment. "Chengdu is considered a city where integration was achieved relatively late, as cities like Guiyang had already implemented it one or two months ago."

Being late has its advantages, as Meituan's BD team can use successful cases from earlier launches to more easily persuade merchants to join.

A promotional page showcasing the event's effectiveness for Chengdu merchants provides four anonymous case studies from other cities. These cases show an average increase of 17% in transaction orders, 20% in actual paid GTV, 4% in order conversion rate, and approximately 16% in new brand customers.

According to internal sources, the "high-quality" traffic from home delivery is being channeled into in-store services.

Macroscopically, the fierce competition between home delivery and in-store services continues to intensify. Douyin's food delivery service has been operating for two years and has recently shifted to instant retail, while Kuaishou suddenly announced its entry into the food delivery market. Douyin's e-commerce platform, which has shifted to instant retail, will be fully launched in mid-July.

Meituan Aims to "Leverage" Merchant Budgets

According to a Meituan BD, the "Divine Membership" integration goes beyond just food delivery to in-store services, encompassing all in-store businesses such as hotels, supermarkets, entertainment, and more.

For merchants, the Divine Membership is essentially a platform-wide marketing tool. The platform primarily provides merchants with traffic and new play methods, including an entry for Divine Membership on the App's homepage, a "Guess Your Favorite Coupon" tag, search tags, quick filters/search listing pages, and store shelf pages. In other words, for merchants, the primary role of the Divine Membership is growth, independent of store discounts and product discounts.

Specifically, the Divine Membership offers two tiers: basic and expanded. Merchants bear 3 yuan for the basic tier, with the rest covered by the platform. The expanded tier is divided into four ranges based on the merchant's discounted group purchase price, with the platform subsidizing the excess. According to platform calculations, the expected fee rate ranges from 3.5% to 8.3%. Except for prices below 100 yuan, the higher the discounted group purchase price after each tier, the lower the corresponding fee rate.

It is worth mentioning that on June 17th, Meituan changed the exclusivity of store discounts and product discounts to coexistence in 18 cities, including Chongqing, Jilin, and Changchun. According to official suggestions, if merchants want to maintain previous revenue, they need to adjust discounted products from 5-7.5% off to 6.21-9.04% off. Combined with the Divine Membership fee rates, we can see that Meituan is attempting to consolidate its pricing power through a combination of memberships and merchant operations.

While Meituan is "leveraging merchant budgets," Douyin's life services are going in the opposite direction.

At the end of June, Douyin's life services announced its software service fee notice for the third quarter of this year. Among the 18 first-level categories, commissions for accommodations, weddings, beauty, and jewelry categories have been adjusted. Accommodation commissions have increased significantly, with all second- and third-level categories for domestic accommodations rising from 4.5% to 8%, and overseas accommodations (including Hong Kong, Macao, and Taiwan) rising from 3% to 8%. Additionally, beauty and body care commissions have increased by 1%-2%.

Meanwhile, commissions for weddings, jewelry under shopping, body shaping under beauty, and other third-level categories have decreased by 3%-7%.

An informed source told Photon Planet that Douyin's life services have three considerations for adjusting commissions.

Firstly, the internal team hopes to validate whether there is room for commission increases in certain categories, with the possibility of adjusting back if this quarter's results are unsatisfactory. Secondly, after structural and personnel adjustments in the first half of the year, the life services sector faces a profit and loss balance assessment. Finally, the third quarter is the peak season for hotels and travel, with the goal of improving sales of vacation hotels and travel products. Douyin's life services also hopes to ride this "wave."

After discussing commission increases with a domestic listed hotel chain, the chain's Douyin representative privately told Photon Planet that the current incremental value of Douyin is limited, and simply relying on traffic to increase commissions during peak seasons will lead to a reevaluation of the partnership.

Live Streaming and Short Videos are in a "Disenchantment" Phase.

A typical case is the previous trend of Zhapi Tihua (a type of braised pig skin dish). Through continuous output of massive store visits and live streams, various Zhapi Tihua stores sprung up like mushrooms in the Sichuan-Chongqing region. However, this trend came and went quickly. The failure of Zhapi Tihua demonstrates that relying solely on content and traffic infusion cannot sustain prosperity.

"For many small stores and small chains, the review system is crucial. Douyin's life services have not cultivated similar products, ultimately failing to retain these merchants," mentioned an industry insider. Despite the difficulties of IPOs for domestic catering chains, the primary market still considers review data as an essential reference. "Investors will definitely not rely on Douyin as an investment basis."

Low-Tier Memberships, High-Tier Goals

Over the past three years, Meituan's in-store business has continuously faced content competition from Douyin. The efficiency of content-to-planting-to-low-price conversion has shown merchants a possible way to acquire customers without relying on "reviews."

Meituan has tried various methods, including content transformation as a countermeasure, but none have been as effective as city BD efforts.

Since last year, Meituan has proposed to some small and medium-sized chain merchants the requirement to "benchmark" against Douyin's group buying. If merchants agree, they will receive subsidies and traffic coupons. This strategy has had an immediate effect, with multiple chains reporting that Douyin's verified sales were halved within two months of benchmarking.

In comparison, the effectiveness of Meituan's Sharpshooter live streams has been questionable.

We learned from multiple merchants participating in live streams that Sharpshooter's traffic lacks both breadth and depth. "White-collar workers are the primary group for takeout, and they genuinely don't watch 30-minute live streams to place orders. Mothers with time, middle-aged, and elderly people are not the primary users of takeout," said one merchant.

A service provider posted two consecutive days of live stream data for a store on their WeChat Moments. The screenshots show that the store broadcasted for 2 hours each day, with an average of around 500 viewers per session, transaction amounts exceeding 3,000 yuan, and single-digit new follower counts. While the scale is small, the conversion rate is exceptionally high.

The most prominent feature of Meituan's O2O scenario search is its LBS attribute, making both supply and demand incomparable to search ads in other scenarios. This issue also restricts Meituan's live streaming. While search can rely on precise matching (recall) and expanding the LBS range, coupled with structural methods like "stock up for later use," live streaming's effectiveness is relatively limited.

Since live streaming still requires exploration in the short term, Wang Puzhong has focused his efforts on the Divine Membership since taking office.

Photon Planet understands that to quickly grasp the membership system, Wang Puzhong and other executives previously consulted with multiple research firms on predecessors like Taobao's 88VIP, JD.com's PLUS membership, and Sam's Club membership. Among them, the positive impact of 88VIP on Ele.me was particularly attractive to the management team.

After thorough research, it was decided to first launch the "Divine Membership" for home delivery, screening high-net-worth users, and then using the "Divine Membership" as a "highway" for traffic infusion, directly reaching the in-store sector.

Membership systems like Tmall's 88VIP, JD.com's PLUS, and Sam's Club aim to screen existing customers with cost-effective benefits and stimulate consumption.

88VIP serves as a valuable reference. 88VIP users on the Ele.me platform have a 20% higher average order value than regular customers, primarily because 88VIP users are high-net-worth individuals selected by big brands, who tend to have more purchasing power.

Although there is no data yet on how much the Meituan "Divine Membership" will boost in-store business, LatePost previously mentioned that the average order value for flash purchases is 80 yuan, 1.6 times that of catering takeout. The Divine Membership effectively screens low-order-value takeout users, attracting them to high-order-value in-store services. It's like encouraging those who order takeout to save money to instead enjoy more expensive group purchase discounts through the Divine Membership.

Additionally, Meituan's first-quarter report mentioned that the average order value for takeout and express delivery declined year-on-year, primarily due to Meituan's use of low-order-value services like Pinhaofan since last year to counter potential low-price competition from Douyin.

As an essential means to achieve pricing power, Meituan has established two sets of divine coupon systems. One is free divine coupons that direct private traffic to mini-programs, with usage thresholds. These coupons either specify a minimum spend or designated stores. In contrast, the divine coupons in the Divine Membership's savings wallet are actually paid for and have no usage thresholds.

Group Buying Doesn't Need Moats

In-store services are relatively easy to access, while home delivery is more challenging. After Douyin, Kuaishou, Xiaohongshu, and even WeChat's video numbers are all dipping their toes into in-store services.

In-store services are a rare open-loop business where transactions are only considered complete after users redeem their purchases on any platform. However, the sole driving force for user redemption lies in price differences – when group purchases offer lower prices than regular in-store dining, users naturally prefer group purchases.

In the hotel and accommodation sector, the open-loop nature is even more pronounced. As long as merchants are willing to eliminate the price difference between in-store and online group purchases, the commissions and service fees they would otherwise pay turn into profits. In fact, during the past three challenging years, many hotels have struggled to unlock this skill.

The open-loop nature also allows any platform to venture into in-store services, from early payment providers like Ant Group to content platforms, communities, and even WeChat mini-programs. Meituan hopes to recreate a dimension that connects merchants and users, and hence, the Divine Membership emerged at this time.

The face of the "Divine Membership" is membership, but its essence is a series of low-price coupons, emblazoned with Meituan's anxiety and determination to make its in-store business "great again."

In-store services are crucial to Meituan's past, present, and future. Meituan started with group buying, built barriers through its takeout network, and in the future, home delivery will always be a low-margin business. Only in-store services can truly generate thicker profits for merchants.

Born in 1984, Wang Puzhong wants to accomplish what is said in "1984": "Who controls the past controls the future; who controls the present controls the past."