The Four-Way Battle in Local Services: In-Store and Food Delivery

📌 Background

The Chinese local services O2O market has entered a stage of stock competition. By 2026, the industry scale is expected to exceed 6.8 trillion yuan, with an online penetration rate reaching 30.8%. The market landscape is dominated by four giants: Meituan, Douyin, Alibaba, and JD.com. The focus of competition has shifted from early large-scale subsidy wars to a comprehensive battle over fulfillment efficiency, content ecosystems, and digital services for merchants. Instant retail is deeply integrated with in-store scenarios, and consumer expectations for delivery speed and service experience continue to rise.

👤 Target Customers

Primarily consumers who access local services via online platforms, as well as local catering, retail, and service merchants in need of digital operational capabilities, traffic, and fulfillment support. Consumers pay for orders, while merchants pay commissions and advertising fees.

💰 Revenue Streams

1. Food delivery commission: A percentage-based commission charged to merchants based on order value, covering platform delivery fulfillment costs and generating profit; 2. In-store group-buying commission: Platforms take a cut from transaction values after users purchase group-buying vouchers or packages for in-store consumption; 3. Merchant advertising and traffic acquisition: Merchants bid for ads or purchase traffic slots within the platform to increase exposure and orders, generating ad revenue for the platform; 4. Technical SaaS service fees: Subscription or service fees charged based on software usage cycles or features for providing merchants with digital operational tools such as POS systems, ordering, and membership management.

🧮 Cost Structure

Major costs include: rider delivery fulfillment labor costs and related insurance, R&D costs for large-scale technical teams, market subsidies and coupon investments for users and merchants, data center and server maintenance costs, and expenses for field sales and merchant acquisition/retention.

🛡️ Moat

Meituan has built an extensive and high-density instant delivery network, which serves as its core fulfillment moat. Major platforms have increased merchant switching costs through differentiated technical SaaS, membership systems, and marketing tools. Douyin utilizes short video and live-streaming content scenarios to create a unique discovery-based consumption conversion path, which is difficult for other platforms to replicate in terms of leveraging content to drive transactions.

🔑 Keys to Success

• Fulfillment efficiency and delivery network density
• Efficient integration of content traffic and in-store scenarios
• Depth and stickiness of merchant digital operational services

⚠️ Risks

• Although high-frequency subsidy wars have slowed, price competition continues to erode platform gross margins.
• Rising compliance costs related to anti-monopoly regulations, rider social security, and labor protections may significantly increase operational pressure.
• As merchants operate across multiple platforms, their comprehensive operating costs rise, increasing the risk of merchant churn for individual platforms.

🏢 Cases

• Meituan
• Douyin Local Services
• Ele.me
• JD.com

📊 SWOT Analysis