China's E-commerce Market: Douyin TikTok Leading the New Landscape
Introduction: In recent years, China's e-commerce industry is growing rapidly and the overall market size is expanding. Among the many e-commerce platforms in China, TaoBao (Alibaba), JD, Pinduoduo and Douyin (TikTok China) are known as the four giants. Before 2019, the original e-commerce landscape has been formed, with TaoBao and JD having a stable market share. Most people thought that a monopoly had been formed and that there was no chance for other platforms to rise again, but as a result, Pinduoduo broke the deadlock first. Then Douyin e-commerce broke out by "live shopping" and became one of the top four e-commerce platforms with the fastest growth rate. In 2022, the GMV (Gross merchandise value) of TaoBao and Tmall (another of Alibaba’s high-quality e-commerce platforms extended from TaoBao) platforms reached 7.17 trillion RMB, with a decrease of 7% year-on-year. JD GMV is more than 3 trillion RMB, decreasing 8.81% year-on-year. Douyin e-commerce 2022 GMV nearly reached 1.5 trillion RMB, an enormous increase of 76% year-on-year. And in 2023, Douyin’s GMV still increased by more than 80%, with the average daily live shopping sessions reaching 2.9 billion views and the platform selling 30 billion items throughout the year.
The rapid rise of Douyin e-commerce has also been one of the reasons why the stocks of three major platforms - Alibaba, JD Group, and Pinduoduo - have fallen.
How did Douyin e-commerce break the deadlock and rise to the top in a Chinese e-commerce market that has almost been carved up?
Unlike TaoBao's "high-quality e-commerce", JD's "digital e-commerce", and Pinduoduo's "low-price e-commerce", Douyin e-commerce has positioned itself as "interest-based e-commerce"." Interest-based e-commerce" is based on people's desire for a better life, to meet the potential shopping interests of users and improve the quality of life of consumers.
The core of “interest-based e-commerce” is to proactively help users discover their potential needs. In “interest-based e-commerce”, consumer needs are unclear, Douyin identifies these potential needs and stimulates consumers to buy products or services in Douyin stores to satisfy these potential needs.
All the other e-commerce platforms sell products when "people looking for goods", but Douyin has come up with the idea of "goods looking for people", and has successfully built its interest-based e-commerce world.
In early 2022, Douyin announced that it would upgrade its "interest-based e-commerce" to a "full range of interest e-commerce". This includes both "content e-commerce", which uses short videos and live-streaming to stimulate consumption potential, and "shelf e-commerce", which focuses on channels such as the Douyin Mall function, search function, and Douyin online stores. The “shelf e-commerce” already accounts for over 30% of GMV in the platform and is expected to exceed 50% in the future.
The positioning of Douyin e-commerce is distinctively unique and the direction of future development is obvious. That's why it has huge growth potential and good growth momentum.
As the world's largest short video platform, Douyin has a huge pool of loyal users and enormous traffic. These are the "capital" and "confidence" of Douyin e-commerce.
Douyin has over 809 million users and has managed to gain over 600 million DAUs (daily active users) with short videos and live streaming.
Douyin allows creators to attach shopping links to their videos, so that once consumers are attracted to the products in the videos, they can click on the links directly to purchase them. This approach has attracted a large number of Douyin users to spend money on Douyin stores. At the same time, sellers recommend products to consumers through interesting live-streaming sessions with purchase links attached to them, which has also driven a large number of users to try Douyin e-commerce.
However, Douyin's image as an entertainment platform is deeply rooted in users' hearts, meaning that most users open the app for "entertainment" rather than "shopping", so the conversion rate is not as high as traditional e-commerce platforms such as TaoBao. Many Douyin users have not yet established the habit of shopping in Douyin stores.
On the other hand, according to the huge increase, Douyin e-commerce will become more and more popular, and more and more Douyin users will establish the habit of shopping in Douyin stores. At that time, Douyin e-commerce will probably have even stronger growth.
The "traffic potential" of Douyin e-commerce has not yet been fully exploited. As the fastest-growing e-commerce platform, Douyin is bound to have an even larger market share and scale in the future
Douyin’s earliest way to break the deadlock in the e-commerce market was through "live shopping". Live shopping refers to a new type of service that uses engaging interactive live-streaming to showcase, consult and answer questions and guide the sale of goods online. There are two specific ways to do this: the store opens its own live room, or a professional live shopping anchor makes a recommendation.
The live-streaming economy started to spread across China in the second half of 2019 with the advantages of strong offers and interactivity. The most representative one is TaoBao professional anchor Li Jiaqi. In the 2023 618 promotion event, he reached an enormous GMV of 4.98 billion RMB in a single day in his own personal live room. He could be described as TaoBao's "strongest trump card".
In 2019, Douyin has already developed the "live shopping" function, but because it still relied on other e-commerce platforms and hasn't built its own e-commerce closed loop, its GMV in 2019 only reached 10 billion RMB. However, in 2020, with the improvement of Douyin stores and other functions and the maturity of the e-commerce closed loop, the GMV of Douyin e-commerce grew to 500 billion RMB, a 50-fold increase in just one year.
Although the live shopping ability of TaoBao and other e-commerce platforms to sell goods cannot be underestimated, as a short video platform, Douyin has a natural advantage in live shopping. Douyin has huge traffic, strong interactivity, a strict content audit mechanism, and abundant brand cooperation resources that can all be used to push live shopping.
Douyin has become the world's largest short video platform because of its powerful algorithm and traffic distribution mechanism. Its personalized recommendation algorithm is also applicable to Douyin e-commerce.
Every action a user takes on Douyin serves as a "clear instruction," allowing the platform to determine the user's preferences and categorize them as high-quality, silent, churned, or recoverable users.
Relying on powerful algorithms, Douyin can more accurately match users and consumers, allowing sellers to pinpoint the target audience while allowing buyers to find products that they are interested in. The integration of entertainment and shopping can be realized through this way.
The Chinese e-commerce monopoly led by TaoBao and JD has been broken. Douyin is growing at a phenomenal rate and has become one of the four largest e-commerce giants in China. Douyin has an identifiable positioning of itself and a clear direction of development. Moreover, when looking at the huge user base, it still has great potential and momentum for growth.
What's more, Douyin has formed an "entertainment, promotion and consumption" model by virtue of its own short video promotion advantage and live broadcast advantage. This model is different from the previous one of advertising on one platform and consuming on another. It not only allows sellers to promote products and increase brand awareness, but also promotes instant consumption, transforming "propagation" into "consumption" immediately, which forms a sustainable Douyin e-commerce ecosystem.
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