Braving torrential downpours, over 200 shop owners in Wenzhou, China, gathered at a university in June, filling an entire lecture hall. They were there to meet representatives of Douyin—ten or so business development (BD) staff from its local lifestyle business. This was the first time they met anyone from Douyin, despite most of them having conducted business on the platform for over two years.
The long-overdue session was intense yet discreet. Douyin’s spokespersons had to raise their voices at times to reach the gargantuan crowd, but when discussing crucial data, they chose to speak in hushed tones, wary of eavesdroppers.
“It’s a critical moment to win the city battles,” declared the founder of an F&B multi-channel network company during the session, seeking to persuade those present to seize the opportunity of cooperating with Douyin while other shop owners are still reluctant, as resources will favor those who do so.
This fervor was soon dampened by an unexpected visitor. Midway through the session, a figure slipped in through the back door: the city manager of Douyin’s main competitor, Meituan, in Wenzhou.
When asked what brought him here, the Meituan manager nonchalantly replied, “Nothing much, just here to listen.” He found a seat, said no more, but his gaze swept the audience, seemingly identifying any “traitors” among them. Proceedings soon resumed, but the atmosphere had turned awkward. Some merchants subtly sank lower in their seats.
This is a snapshot of the ongoing battlefield in China’s internet sector. The contest between Douyin and Meituan, one relying on extraordinary traffic generation capabilities and a deep understanding of human nature, and the other on effective management skills and a robust ground force, has seen each winning tough battles in their respective fields.
To better understand the current chapter that both companies have engaged themselves in, 36Kr first zoomed in on what’s happening in Wenzhou, over a thousand kilometers from ByteDance’s headquarters in Beijing.
Wenzhou, a city in one of China’s wealthiest provinces, ranks low in GDP. It is both affluent and grounded. This city, designated as one of 46 key cities targeted by Douyin’s local lifestyle business in March this year, has not had a directly operated Douyin office for over two years.
Both sides have invested heavily to come out on top. A person close to Douyin told 36Kr that, during internal meetings, it was informally disclosed that the local lifestyle business has lost RMB 10 billion (USD 1.3 billion), though this figure could include various costs like salaries, subsidies, and most importantly, traffic discounts.
The number may sound alarming but is relatively small when compared to Meituan’s past losses. In the three years since Douyin entered the sector, Meituan’s market value once plunged by as much as RMB 2 trillion (USD 274.9 billion).
The competition unfolding between Douyin and Meituan is quite different from how internet companies used to contend in the past. Under ByteDance’s overall strategy of cutting costs and enhancing efficiency, and Meituan’s core goal of reducing losses, both players have engaged in more restrained maneuvers, cognizant of investors who, in this era, care more about profits than anything else.
Such factors bring a different color to the competition between Douyin and Meituan, as witnessed by Wenzhou’s merchants, service providers, and workers.
How Douyin ambushed Meituan in Wenzhou
“In 2022, I alone achieved a GMV of RMB 10 million on Douyin,” said Zhang Kan.
This 20-year-old man currently studies at a technical college in Wenzhou while also working as a Douyin service provider. When he met with 36Kr, Zhang Kan sported a slick hairstyle, often rubbed his bead bracelet with his left hand, and habitually held a cigarette in his right hand—smoking about a pack a day. Save for the youthful expression that props up when he occasionally smiles, Zhang Kan rarely showed his true age.
His clients are mostly between 30–60 years old, whom he calls “my bosses.” These clients come from various industries, including catering, foot massage, beauty and hairdressing, and car repair.
Every Wenzhou business owner’s office is likely to have a tea table. When discussing business with Zhang Kan, they constantly boil, pour, and refill tea, busy from the start of the conversation to the end.
Feeling bloated from all the tea, Zhang Kan smokes while analyzing how to market his clients’ businesses on Douyin—investing in traffic, achieving the desired ROI, and avoiding Douyin’s current red lines.
The people across from him are well-versed in their own industries but not familiar with Douyin’s operations. However, they all firmly believe there is a large share of the traffic pie waiting for them to take a cut from, needing this 20-year-old to guide them to the table. Now, it has become very difficult for small Wenzhou business owners to meet this local celebrity.
But Zhang Kan wasn’t always so popular, at least not in 2021. That year, Douyin had just established a directly operated center for local lifestyle services, launching the “Eat, Drink, Play, and Enjoy” channel in the process.
The synthesis of traffic demand and traditional BD gave rise to a budding period not long after, but Wenzhou’s first Douyin office vanished amid this clash.
“Two and a half years ago, Douyin did have an office in Wenzhou, with a team of up to 300 people. Later, due to collective corruption by the BD staff, Douyin shut down the office entirely,” said a local service provider. It has since maintained this vacancy.
The year the Wenzhou office was closed, 2021, was also Zhang Kan’s first year of college and first year in the industry. That was a time when the market was not knowledgeable enough yet. The said corruption methods involved leveraging official statuses to get merchants listed on Douyin, then “selling” them to service providers, charging “gratitude fees” in the process. Merchants who first saw the traffic opportunity were eager to get on Douyin, filling the coffers.
“A BD staff’s monthly salary was only a fraction of the corrupt earnings,” a Wenzhou service provider said.
Freshman Zhang Kan also sensed a money-making opportunity. He opened Meituan and listed all the shops in the commercial district behind his school that were only on Meituan, visiting each one to promote in-person.
Zhang Kan would show them how Douyin works, pointing to shops with good traffic, saying that, for a paltry sum of RMB 20,000 (USD 2,750), he can help them achieve the same effect.
“At that time, many merchants were still unfamiliar with Douyin’s group buying feature and would dismiss me right away,” Zhang Kan recalled.
But in 2022, Zhang Kan’s work suddenly became easier. It wasn’t because his sales skills improved significantly, but because Douyin started launching an aggressive campaign. Early that year, ByteDance set a gross merchandise value (GMV) target of RMB 50 billion (USD 6.8 billion) for its local lifestyle business. In reality, it achieved RMB 77 billion (USD 10.5 billion).
Using traffic to outwit Meituan’s 100,000-strong team
While Meituan dominated the market with its army of 100,000 representatives, sweating to conquer every shop, street, and city, ByteDance sought to replicate the results with traffic alone.
In Wenzhou, a city famous for business legends in the 1990s, this was particularly true.
Wenzhou people are known for being shrewd, pragmatic, and open to new things. Just like factories that mass-produce popular female clothing and shoes, they are quick in replicating what works.
Initially, it was just a video of a long line in front of a stall selling yogurt-flavored dough twists on Wuma Street in Wenzhou that went viral on Douyin’s local page.
Soon, people willing to pay RMB 20,000 for a franchise fee flooded the stall owner’s Douyin inbox. Three months later, over 100 franchise stores had sprung up across the counties and towns of Wenzhou.
Now, Zhang Kan is offered tea whenever he visits stores. Over the next two years, by helping business owners get listed on Douyin, shooting videos, live streaming, and organizing group purchases, Zhang Kan handled millions in GMV annually.
Wenzhou is only a microcosm of the overarching Chinese market. At first, this seemed like a contest of vastly different strengths—Meituan appears to have an unshakable foundation in Wenzhou, as it does in any Chinese prefecture-level city, with a local team of over 100 people covering almost all restaurants, foot massage parlors, and nail and hair salons. Yet, until April this year, Douyin did not even have an office in Wenzhou.
But unlike metropolitan areas, the situation in lower-tier markets is much more complex. In the counties that surround Wenzhou, it is hard to find a phone without Douyin installed, though many elderly people have never used Meituan.
For ByteDance, targeting lower-tier markets is like taking an open-book test. A ByteDance employee said she was once worried that her mother, who is over 70, might be addicted to the internet—spending nearly ten hours a day on Douyin, half of which was spent watching live streams and taking quizzes from a health product’s official store to receive RMB 2–3 (USD 0.3–0.4) cash coupons.
Recently, when Zhang Kan dined at small restaurants, customers from neighboring tables often handed him their phones, asking him to teach them how to buy group coupons. They had been dining at the same restaurants for years but discovered for the first time that group buying could save them RMB 3–4 (USD 0.4–0.5).
Of course, winning over Wenzhou’s business owners requires more than just traffic—it also needs real money. From the first day, Douyin offered much lower commission rates than Meituan—for instance, Meituan charges a 5–10% commission for F&B, while Douyin only charges 2.5%.
Platform benefits also translate to personal benefits for those working in BD. During the time Douyin went without an office in Wenzhou, the city was considered a “shared asset” of ByteDance’s BD staff from Hangzhou, Ningbo, and even Anhui. Whenever there was pressure to meet KPIs, those from surrounding cities would take the high-speed train to Wenzhou, sign up a batch of new stores, and then return.
In this almost effortless manner, Douyin staged an ambush on Meituan’s local lifestyle business in Wenzhou. A long-established service provider in Wenzhou told 36Kr that, in the five years since Douyin entered the sector, at least one-third of the shops in Wenzhou and its surrounding counties have joined Douyin—despite ByteDance not having a single BD staff based in the city.
Unofficial “employees” lend Douyin a hand
But relying solely on traffic, without an official crew on the ground, has its drawbacks. When merchants are troubled by malicious returns, pricing adjustments, or unexplained negative reviews, whom can they turn to?
They can only seek out people like Zhang Kan. “Why does Douyin want to do local lifestyle services? Because there are many people like me willing to help them,” said Zhang Kan, who likens himself to an “unpaid ByteDance employee.”
In Meituan’s ecosystem, even in a small city like Wenzhou, Meituan typically has a substantial team of over 100 people, with personnel specifically assigned to each area. The staff responsible for Wanda Plaza patrols the area like a security guard every day. Merchants needing to adjust packages or list services can always find someone immediately.
If a store posts a transfer notice on its glass door, Meituan’s representative will instantly log the information into the system. When a new store takes over and starts renovations, Meituan’s department managers will have visited it several times.
Delivery, group buying, procurement, payment, and even power banks—Meituan arranges for personnel to handle everything. When the business owner calls to inform the company that renovations are complete, the store will immediately appear on Meituan.
In such a tightly woven network, service providers have little room to survive. But Douyin is different—its looseness provides others with opportunities to join the feast.
The double-edged sword of Douyin’s strategy
Last year, Zhang Kan discovered that many Meituan merchants were listing on Douyin in large numbers. After some investigation, he found that a Meituan service provider had set up a new business using his wife’s ID and rented a room next to his office to provide Douyin-related services too.
By transferring Meituan customers to Douyin, more money can be made. “Wenzhou people stand by tangible profits,” said a local who transitioned from Meituan to Douyin.
Many people are exploiting opportunities to share in this bounty. Under Douyin’s laissez-faire approach, service providers once proliferated like weeds.
A former Douyin BD representative in Hangzhou recalled that, when Douyin first opened up service provider positions, the rules were stringent, involving selection, multiple interviews, and resource checks. But from May 2022, Douyin greatly relaxed the standards, qualifying service providers as long as they could pay a RMB 100,000 (USD 13,750) deposit.
In April last year, Douyin’s official data showed that service providers were growing at a monthly rate of over 20%, with transaction volumes handled by them increasing by more than 30% each month.
With so many service providers, there were also a string of secondary agents under each service provider. These are companies without qualifications, subcontracted under service providers to provide services to merchants. In Wenzhou, these agents were usually local influencers.
At its peak, a service provider could have seven or eight agents.
“I am against influencers becoming service providers. They have traffic but do not understand operations. Merchants don’t understand this; they think that just finding an influencer can boost their business,” said Guo Tedi, the head of Qianqianhui’s Wenzhou site.
Qianqianhui is one of the first providers of local lifestyle services to join Douyin, cooperating with hundreds of thousands of merchants nationwide and creating over a thousand cases with over one million GMV.
But the reality is, in the towns around Wenzhou, it is generally the agents who teach merchants how to use Douyin. “Many small business owners don’t understand what a secondary agent is or what ROI is—they do business based on experience,” Zhang Kan said.
The emergence and proliferation of such agents are partly due to Douyin’s laissez-faire approach. Yet, what they bring isn’t always pleasant.
Zhang Kan once handled a case where an optical store owner asked him for marketing help. He discovered the owner’s agent had signed a service contract with a 35% commission rate, arguing that, since glasses are a high-profit item, such a rate was justified.
When the owner realized the account discrepancies, she instinctively but fatally guided consumers to collectively return and refund purchases. As a result, the high return rate attracted Douyin’s attention, downgrading the store’s ranking in its platform system. By the time Zhang Kan took over, the store was already in a half-dead state.
Service providers and their agents have almost ruined Douyin’s credibility. Some service providers, after obtaining Douyin licenses, held agent recruitment meetings, pocketing over a million RMB before running off with the money. The agents lost their money, and Douyin’s ability to select service providers was thrown into question.
When real harm emerged, Douyin started taking action. Last May, Douyin began cracking down, announcing that the recruitment of secondary agents was a violation, and the platform had the right to withhold deposits and terminate partnerships. A month later, it changed the self-registration mode for service providers to an invitation-only model and started large-scale clearance procedures and stricter controls over the remaining service providers.
However, outside the shiny office buildings of internet companies, the real world has its own rules. 36Kr found that, in the lower-tier counties of Wenzhou, these agents continue to exist in large numbers. This is also a result of market choices.
Wenzhou governs four districts, five counties, and three county-level cities. In these small counties, information asymmetry is prevalent and business owners often need someone to solve problems hand-in-hand. From listing stores, operating accounts, finding influencers, editing videos, to live streaming, each is a new issue.
Meituan’s approach is to recruit local employees directly. They do not need to come to the main city office, only solving problems in their county. Douyin employees have yet to reach that level of penetration.
Lower-tier markets are also seeking harmonization with Douyin’s larger ecosystem, which requires local people who can arrive within ten minutes when problems arise.
Local protectionism has existed since ancient times, and this is a problem Douyin cannot solve. Before Douyin establishes a high-density team control like Meituan, secondary agents will not disappear.
In fierce competition, Douyin’s service providers and their agents have pierced Meituan’s network. According to data from Meritco, the overlap between Douyin and Meituan merchants reached 87% as of March 2023.
Recently, a Douyin employee in Wenzhou discovered that merchants sometimes refused their visits because agents claimed to be official BD representatives of Douyin when doing business—leaving genuine officials mistaken as shams. To this day, Douyin is still rueing the effects of this artifice.
How Meituan countered Douyin’s advances
The counterattack came quickly. In Q4 2023, under the directive of Meituan executives, the company expanded its direct operation model nationwide, replacing agency operations in lower-tier cities.
“The most important advantage of the direct model is efficiency and precise cost control,” said Yu Huo. In the franchising model, almost every link has room for corruption by intermediaries and service providers—a problem Douyin also encountered.
Yu Huo is a longtime Meituan employee who has witnessed the company’s battles against Ele.me, Baidu Waimai, and other rivals.
By expanding direct operations to cover lower-tier cities, Meituan strengthened its deployment. In April, Wang Puzhong was also appointed as the CEO of Meituan’s core local business, after the company reached a consensus that Wang is “especially capable of fighting,” Yu Huo said.
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At Meituan, there is a core team that sets KPIs for employees. In the last week of each month, they set the KPIs for the following month. This means the work focus of BD staff can shift monthly and, in the most competitive times, even weekly.
Every BD representative working for Meituan holds a list, including merchants not online on any platform, those exclusively online on Douyin, and those with stores on both Meituan and Douyin. The job, according to Yu Huo, is to bring the unlisted online, persuade owners of Douyin-exclusive stores to join Meituan, and make stores on both platforms become Meituan-exclusive. Each month, they must convert a certain number of stores or risk affecting their income.
Meituan’s relentless pursuit of victory
Under Meituan’s ever-increasing standards, the pressures are enormous. “For example, if you achieve a 50% listing rate this month, you need to achieve 60% or higher next month,” Yu Huo said. The leaders do not care whether you use soft persuasion or any means to win over merchants. You either meet targets or leave.
Giving gifts, doing work in stores, and helping improve reviews are common practices. For particularly tough cases, some might resort to unconventional methods.
Some choose to spread false news. For example, they might claim that Douyin’s subsidies will cease the following month, but they can continue to get support if they go online with Meituan, but this offer would only be valid for the current month. Sometimes, they even bribe people from Douyin, bringing them in to confirm rumors or cause trouble for the owners.
Meituan, which dislikes subsidies, also spent real money. Last winter, Meituan launched a concentrated counterattack during the peak season of the spa and wellness industry. Meituan’s staff knocked on the doors of foot massage parlors, offering exaggerated commission discounts.
Guo Tedi’s clients were tempted, hoping to close their Douyin stores even if it meant breaching contracts—meaning Guo Tedi’s previous efforts would go to waste.
“I can only respect the merchants’ decisions,” Guo Tedi said. Some business owners who found that traffic on Meituan did not meet expectations later returned to work with Douyin service providers, and Guo Tedi continued to receive them.
Almost all interviewed service providers told 36Kr that Meituan had snatched quite a few of their clients.
Commission discounts are the most commonly used tactic, though Zhang Kan saw more complex tricks being used.
A small foot massage parlor with a monthly revenue of RMB 20,000—a client of Zhang Kan’s—previously listed only on Meituan. In the first month Zhang Kan took over, the store achieved RMB 120,000 (USD 16,500) in GMV on Douyin.
The next month, however, Meituan’s BD staff approached the parlor’s owner, asking him to switch to Meituan via its direct operation model, promising higher traffic support.
Meituan’s enthusiasm surprised Zhang Kan. In his experience, Meituan wouldn’t be interested in such small stores. But in exceptional times, exceptional measures applied, and they took his client.
In the second month, with the same packages, this store’s sales on Meituan increased from RMB 20,000 to RMB 200,000 (USD 27,500).
When two sides fight, a third party benefits. Merchants started gaining the upper hand as Douyin and Meituan acted like two suitors, trying to win their favor. Any slight mistake made by either platform could cause a shift toward the other, empowering small merchants with bargaining power for the first time.
Yet, this could be short-lived. Word of Meituan’s restructuring this year has spread among business owners in Wenzhou. Specifically, Meituan has integrated its in-store and at-home (delivery) businesses, leaving them discussing whether this integration would give Meituan more bargaining power in the future. For now, things remain the status quo.
Ushering in a more restrained phase of competition
On April 1 this year, Zhang Kan’s busy life was spiced up with new developments.
Douyin’s local lifestyle team opened a new office on Wenzhou’s busiest Chezhan Avenue, crowded with people from Jiangsu, Zhejiang, and Anhui. But even before the furnishings were complete, the new employees received two pieces of news:
- First, salaries would be performance-based. To make money, BD staff need to generate GMV growth.
- Second, structural adjustments meant they could no longer cross districts to secure business, focusing instead on creating value in designated areas.
Cao Hengming, previously responsible for Douyin’s undertakings in Hangzhou’s F&B industry, took charge of Wenzhou operations after the news spread. As one of the 46 key cities highlighted by Pu Yanzi, head of lifestyle services, Douyin finally had its own office in Wenzhou.
Pu has high expectations for these 46 cities—after taking over ByteDance’s lifestyle services department last November from Zhu Shiyu, she raised the 2024 GMV target from RMB 500 billion (USD 68.7 billion) to RMB 600 billion (USD 82.5 billion).
The sights at the Wenzhou office cut quite a different picture. When Zhang Kan visited, the office did not even have a sign. Everyone was too busy running around, making calls, and organizing materials to care about such details.
In this small office, phones rang constantly, with one end complaining about unjustified negative reviews on Douyin and another end seeking answers for perceived traffic restrictions.
Recently, Zhang Kan has occasionally received calls from Douyin’s BD staff inviting him to “play” at the office. This is usually during company events that pit Wenzhou’s BD team against other cities based on performance.
Zhang Kan understood that the BD staff hoped he would mobilize merchants to invest more, buy traffic, and thereby increase GMV. Every event was crucial for them to meet targets and earn bonuses, often working until close to midnight. The BD representative who brought the highest GMV to Wenzhou was the one they most wanted to see.
But so far, most business owners in Wenzhou don’t invest in traffic. Even if they do, it’s a maximum of RMB 200 (USD 27.5). Because of this, last year, the ROI of almost all Zhang Kan’s F&B clients was over 1:50.
In Douyin, this figure would make its e-commerce bosses weep. It is now common knowledge in the industry that, without a significant budget, one shouldn’t enter the game.
Local lifestyle services and e-commerce observe completely different principles when it comes to traffic investment. For example, a restaurant’s capacity is far more limited than the production capacity of a clothing factory. Therefore, restaurant owners don’t need to invest heavily in traffic to get more orders—they just need people in the vicinity to see their videos and fill their tables for the day.
Lifestyle services operate internally in a mode seemingly very unbecoming of ByteDance: heavy on personnel investment, high on traffic allocation, but low in profit margins.
So, how low is ByteDance’s tolerance for non-profitability? An insider told 36Kr that the department heads at Douyin’s local lifestyle business are increasingly concerned with making money. In meetings, they increasingly emphasize “GMV,” “new stores,” and “hard work,” interspersed with threats of “work if you can, if not, resign yourself.”
Anxiety stems from a realistic reason—allocating the same traffic to the e-commerce department can generate more revenue for the company. But now, the lifestyle services business holds the traffic and is losing money.
Increasing GMV becomes new priority for Douyin
In 2024, the appointment of Pu, known for her commercial prowess, marked a move to gradually withdraw its generosity—at least for most stores. While Douyin continues to provide traffic support in general, it has become more inclined to allocate traffic to top-performing merchants. These are typically large chain stores with big ad budgets.
This change soon became palpable. In April, Douyin’s BD staff from Hangzhou and Wenzhou were asked to manage a maximum of 250 merchants each, proving that increasing GMV had become a higher priority than expanding new ones.
Recently, the newly formed Wenzhou team’s results have been good. They spent half a month tackling Metersbonwe’s Wenzhou branches, listing them on Douyin’s group buying platform, and achieved RMB 10 million (USD 1.3 million) in GMV within two days.
On-demand retail is an area where Douyin is consolidating its moat. Clothing, leather goods, watches, and automotive parts—these non-core categories of Meituan are currently the focus of Douyin’s Wenzhou team.
In mid-April, Douyin’s staff and service providers in Wenzhou posted extensively on social media, prompting merchants in these categories to open Douyin stores. Merchants previously categorized as “other” by Meituan finally saw a day of being valued.
No clear winners or losers
Meituan isn’t a company that likes subsidies, but it dislikes losing even more, Yu Huo said. So, when Douyin offers lower commissions to merchants, Meituan tends to follow suit. When Douyin emphasizes profits, Meituan seizes the opportunity to reduce subsidies. In Q1 this year, Meituan’s marketing expenses were RMB 13.89 billion (USD 1.9 billion)—up 33.6% year-on-year, but down 16.8% quarter-on-quarter, far below the market expectation of RMB 16 billion (USD 2.2 billion).
The tug-of-war has replaced ambushes that colored the early battles between Meituan and Douyin, subsiding the price war, at least for now. According to LatePost, in Q1 2024, Douyin racked up around RMB 100 billion (USD 13.7 billion) in sales of local lifestyle services, but did not narrow the gap with Meituan’s in-store business. Over the past six months, the market shares of both companies remained at a 1:2 ratio—both in Wenzhou and nationwide.
Douyin picked up markets where Meituan fell short, while Meituan recaptured some territories at the cost of concessions.
Reflecting on the stock price, although Meituan once lost RMB 2 trillion in market value after Douyin’s entry, its stock price has surged 95% since this year’s spring. This has inspired belief among some investors that Meituan has held its ground, and the worst is over.
But merchants still miss those best days that have characterized the past five years. One merchant, whose head was previously turned by Meituan and chose to delist from Douyin’s takeaway platform, eagerly looks forward to the day ByteDance buys Ele.me, despite the rumor being denied multiple times by officials.
“If Douyin’s in-store group buying business replicates its success in e-commerce, what reason would ByteDance have not to buy Ele.me and take over the at-home business as well?” The merchant believes the showdown is far from over.
Of course, this is pure speculation. In today’s stringent world, even the giants can no longer afford disorderly mergers and subsidies.
The relentless subsidy wars of yesteryear are unlikely to happen again, with prolonged skirmishes, accounting, and restraint close at hand.
The business world runs its cycles in ebbs and flows. As 36Kr departed Wenzhou, some business owners were noted studying Xiaohongshu and WeChat Channels because they heard these platforms are planning to delve into local lifestyle services. BD staff from Xiaohongshu held its first presentation in Wenzhou this March, attracting owners of female-focused businesses such as entertainment, hairdressing, and aesthetic medicine.
Battles come and go, but the struggle never ends, with new challenges always on the horizon.
Note: Zhang Kan, Yu Huo, and Guo Tedi are pseudonyms.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Wang Yuchan for 36Kr.