EqualOcean's "Overseas Insights in 7 Questions" series invites members of the EqualOcean GoGlobal Committee of 100 (GGC100) to share their experiences and insights in various overseas markets and industry sectors, providing firsthand value and unique revelations for those interested in going global.
The first edition of "Overseas Insights in 7 Questions" focuses on the local life service industry, gathering insights from entrepreneurs and investors deeply rooted in markets like North America, Europe, and Australia. They discuss entrepreneurial motivations, experiences, and future prospects in the industry. EqualOcean has organised these insights into seven key questions as a conclusion of this edition.
Besides China, are there other fertile grounds for the development of local life services?
The term "Local life service" seems to have first risen to prominence in China, referring to various services specific to certain regions or communities, including dining, housing, transportation, entertainment, and more. Local life service industry centers on people's daily lives within specific regions, integrating deeply with local culture, customs, and needs. It is an industry closely connected with people's daily lives, characterized by strong localization.
Globally, China, or perhaps the East Asian region, boasts the most comprehensive development in the local life service industry, holding the largest market scale and revenue. With the rapid development of the mobile internet, China's local life services have flourished over the past fifteen years. This growth has spawned leading food delivery platforms represented by Meituan and Ele.me, fresh grocery e-commerce platforms like Hema and Dingdong Maicai, travel platforms like Ctrip and Qunar, as well as entertainment platforms like Damai and Maoyan. Each subsector has seen the rise of dominant companies. Furthermore, China leads globally in terms of local life service market scale, user count, and market revenue. It has undeniably become fertile ground for the growth of local life services and will spawn various new product forms under the innovation and reforms of internet companies. As Eric Liu, CEO of HungryPanda, stated in an interview with EqualOcean, China has become the "trendsetter" in the local life service industry.
While China is a hotbed for local life service development, other countries and regions also possess the potential and opportunities for growth in this sector, which is currently in a rapid development phase. For instance, India, with a vast consumer base and high mobile internet penetration; the six Southeast Asian countries with growing e-commerce and mobile payments amidst large populations; Latin American nations like Brazil and Mexico with substantial urban populations; and the Middle East with a strong demand for improved quality of life and diversified economy. Additionally, regions like Canada, the US, the UK, and Australia have already established services in areas like food delivery, ticketing, and lodging. These regions all possess certain "soils" similar to China, characterized by mobile payments and urbanization. However, the reasons for the development of local life services and the first mature sub-sectors differ across these areas.
Who are the leading players in the local life service industry across different markets?
Local life services encompass many sub-sectors, and the situation in each must be viewed against its specific market backdrop. Generally speaking, in the local life service track, more mature sub-sectors with longer development histories tend to have a dominant few or even one major player. In the U.S. fresh e-commerce and food delivery industry, the top two companies command nearly 90% of the market. According to data published by Statista in 2023, DoorDash, founded by three Chinese individuals, holds around 65% of the market share, while UberEats stands second with a 23% market share. Similar dominance can be seen in the travel and accommodation industry, such as Booking.com, the world's number one travel website, which had over 70% market share in Europe (based on revenue) in 2021.
In the food delivery and fresh e-commerce sectors, North America is represented by DoorDash and UberEats, Europe has UberEats and Deliveroo, while the Southeast Asian market has GrabFood under Grab, and Gofood under Indonesia's Gojek. In the travel and lodging industry, besides Booking.com, Expedia, Airbnb, Trip.com, and Tripadviser are the industry leaders. In the mobility sector, North America and Europe feature Uber, Bolt, and Freenow, while Southeast Asia is served by Grab and Gojek, with the MENA region dominated by Careem. In entertainment, Europe's Ticketmaster offers tickets for shows, concerts, and events; BookMyShow provides tickets for movies, concerts, and other entertainment activities in Indonesia; SISTIC is the primary ticketing and event platform in Singapore; and Platinumlist offers various show and event tickets in the UAE.
Globally, Chinese entrepreneurs are actively venturing into the local life service industry. Several food delivery and fresh e-commerce platforms have deeply cultivated their respective local markets, holding leading positions in the local Chinese communities, boasting an annual compound growth rate in revenue exceeding 20%. However, in terms of overall market share, in North America, Europe, Australia, and the Middle East, they still occupy more peripheral positions, primarily targeting Chinese consumers.
Motivation: Why enter?
From a growth perspective, local life services are globally on the rise. Take the food delivery industry as an example; Statista predicts that the global takeout market's revenue will reach 1.45 trillion USD by 2027. According to Precedence Research, the global food delivery service market size was estimated at 59.8 billion USD in 2022 and is expected to reach approximately 314.3 billion USD by 2032, projecting a Compound Annual Growth Rate (CAGR) of 18.1% from 2023 to 2032.
From a demand viewpoint, many entrepreneurs mentioned in interviews with EqualOcean that their initial motivation for starting up was to meet personal or group needs. For example, Anthony, the founder of Chanmao in Canada, noticed there was no delivery software connecting businesses and consumers in Canada. Similarly, Randy Wu, the founder of Fantuan Delivery, noticed a gap in the Canadian market for Chinese food delivery software while he was studying there. These entrepreneurs transitioned from recognizing a market gap to wanting to fill it, marking their shift from being consumers to entrepreneurs. Additionally, in situations where specific local market demands are already met, should one still enter the market? Randy Wu identified two criteria when assessing the right time to enter the market: growth and profitability. Entrepreneurs not only need deep industry insights but also unique strategies and innovations, cash flow management, and the capability to grow and profit simultaneously.
Strategy: Pursuing Flow or Precision Targeting?
Local life services in China began with a scramble for traffic, followed by an expansion into various categories – transitioning from food delivery to delivery of everything – eventually evolving into an "on-demand economy" characterized by immediate needs, purchases, deliveries, and gratifications. This year, internet companies such as TikTok (Douyin), Kuaishou, Pinduoduo, and Xiaohongshu ventured into the local life service track, attempting to reshape the business model using live streaming, short videos, and community-building. Established giants like Meituan and Ele.me show no signs of yielding ground, suggesting that the local life service scene in China has fully entered the "red ocean" phase.
Looking at China's success stories, some overseas local life services companies began to study or even mimic the strategies of Chinese enterprises. UberEats researched the business model of China's Meituan, and several unicorn companies made trips to China to learn. In August, EqualOcean hosted Brazil's leading food delivery unicorn, iFood, and facilitated visits to ByteDance, Xiaohongshu and other companies, fostering interactions between company leaders and core teams. Some companies adopted Meituan's "Customer-to-Shop" model and invested heavily in local business development teams to build merchant networks. After securing a position in specific markets, they expand into other business modules or markets.
However, China's context might not necessarily apply to other regions. Situations where a segment is vast enough that focusing solely on niche markets can still ensure profitability may not resonate with other countries' realities. Many companies adapted their business models based on local conditions, resulting in the rising popularity of "super apps." With limited growth potential in niche markets or significant business gaps, some companies opted for a multifaceted approach, integrating services like food delivery, fresh e-commerce, ticketing, car rentals, mobility, bill payments, etc. Additionally, overseas companies frequently leverage social media as a channel for advertisements and user acquisition. Social media platforms themselves have incorporated various local services, such as ticket booking and restaurant reservations.
What factors should be taken into consider?
From the perspective of industry development, highly localized lifestyle services need to consider local culture, social habits, population density, and infrastructure. Driven by people's needs, the primary motivation and pursuit of many enterprises is to facilitate the local residents' day-to-day activities in terms of food, entertainment, and transportation. When deciding on what kind of service to provide, one must consider the demands of the local populace, the prerequisites for establishing a business, and how to maximize profits.
Take the food delivery industry as an example. Factors like whether dining has a social attribute in the culture, the pace of urban life and work, and whether local labor costs are low, are all critical considerations before launching. The acceptance or potential acceptance of food delivery to some extent determines the market's ceiling. However, city population density, labor costs, road infrastructure, and algorithmic systems (like optimizing routes) can influence the average order value and ROI. These profit indicators, in turn, prompt businesses to reassess their cost structures and adjust their strategic direction.
Another human dimension is that the development of local lifestyle service enterprises is closely related to team building. For Chinese entrepreneurs venturing abroad, cultural differences present challenges. The adaptability to these cultural differences is a subtle and long-term challenge. Eric Liu incorporated non-Chinese managers with over ten years of experience into his core management team. He applied Western market modeling and meticulous calculation for market research, generally adhering to existing European and North American management methods. Moreover, Anthony pointed out that when a diverse team encounters cultural differences, the core issues must be addressed rather than just respecting or sidelining differences, which won't solve the problems.
Question on Identity: Discussing the universality and uniqueness of "Chinese"
The term "Chinese" is a label that carries an indelible cultural foundation and connects an entire overseas community. For a highly localized industry like local lifestyle services, it's challenging for "Chinese" entrepreneurs or "Chinese companies" to gain an advantage in foreign lands based on identity or branding alone. However, if they recognize and utilize the uniqueness of this identity, opportunities still exist.
In the interviews, many touched on the pros and cons of a Chinese identity. First, being Chinese provides an advantage when tapping into local Chinese communities abroad, allowing them to be the initial users and building a solid foundation for the business. Those with similar backgrounds and a common language, both as consumers and as service providers or partners, have a lower communication barrier and their needs and habits are easier to understand.
Moreover, overseas Chinese communities typically comprise immigrants, students, and workers. Their habits and acceptance levels of Chinese enterprises can vary based on the duration of their stay abroad and generational differences. It's essential not to stereotype and remember that being Chinese or non-Chinese is just an identity label and not an absolute determinant of one's thinking or habits.
Lastly, the proportion of Chinese in overseas markets is limited. If companies only provide "Chinese-style" products and services, they may hit a growth ceiling. Therefore, some companies position themselves as global brands from the outset. Others start with a Chinese customer base and then expand their offerings to attract non-Chinese clientele, achieving growth in the process.
With the continuous rise of AI, what new innovations can we expect in local lifestyle services?
Many interviewees predicted the impact of artificial intelligence on the local lifestyle industry. On one hand, AI's advancement will drive innovation in online local lifestyle service apps, such as smart scenarios, intelligent interactive robots, route optimization, delivery sequence optimization, and product recommendation mechanisms. As a result, companies might develop new products and achieve cost savings and efficiency improvements with the help of AI.
On the other hand, AI might change the way sectors like warehousing, logistics, and customer service operate. It could also be used to analyze consumer habits, reshaping the breadth of human roles in the local lifestyle services industry and restructuring the interactions between merchants, consumers, platforms, and other service providers.
In general, there's an optimistic outlook on the development of AI in the local lifestyle service industry. While technology will drive innovation, the core business value still lies in human interactions. This industry, grounded in human needs and emphasizing human interaction, ultimately needs to refocus on its human-centric business logic.