When Douyin Reached Critical Mass for Ecommerce in China
With China’s online shopping festival season now in full swing, some readers will have noticed a flurry of coverage about Chinese ecommerce in the news. If it was 2013, you’d probably be trawling the news and updates hungry to learn more about ecommerce. But much like the Singles’ Day festival itself, Chinese ecommerce may not seem very new and novel anymore, with less mystique around the promised land of online sales in China.
On the surface, that is a fair call. New service introductions and platforms have been less pronounced and growth numbers less spectacular than the golden years of the 2010s. Yet there has still been an impressive, albeit more gradual, evolution of selling online in China.
For some years, we have seen a diversification away from just selling on Alibaba platforms, and even the Ali-JD combo. In 2018, the unthinkable happened when ecommerce upstart Pinduoduo (PDD) surpassed JD for user numbers, just 3 years after launching, before outdoing Alibaba in 2020. Although shoppers spent much less on PDD than the other platforms, it was still symbolic that the duopoly was penetrable. Tencent has known this for years, turning WeChat’s ubiquitous user base into shoppers over the past decade to become a powerful sales channel. Over the past couple of years, popular short video platforms Douyin and Kuaishou have stepped up their efforts to drive ecommerce on their platforms, alongside RED, Bilibili and pretty much every social and video app-cum-sales channel.
The diversification of ecommerce platforms has been driven by four main subjects: 1. Platforms see commerce as one of the most effective ways to monetise their traffic, and easy integration with hugely-popular mobile payments platforms, coupled with new crazes such as livestreaming, has made it relatively frictionless to do so; 2. Brands who have seen margins on Alibaba tanking, have been increasingly open to other channels with better ROI and customer ownership; 3. Consumers have been lured by more social and engaging platforms to spend their time on screens and share of wallet; and the Government, wary of tech monopolies, shifted the playing field, making it much harder for a single company to dominate.
Competition is great for consumers and brands, driving innovation and making platforms more accommodating to brands. This Singles’ Day competition, coupled with lower consumer sentiment, has seen them dig deeper into their pockets to subsidise shoppers’ love of discounts. We’re talking real subsidies on already discounted wares. For example, for every ¥300 ($41) spent on Alibaba and JD, consumers get ¥50 ($7) back. Douyin, hungry to be a real ecommerce contender, is offering ¥30 on every ¥200 spent, in addition to numerous vouchers and larger subsidies when buying more. It is also doubling down on its new Douyin Mall feature as part of the festival, which provides a more structured stage for sales. Here's what Douyin Mall looks like.
Douyin has already cannibalised Alibaba and JDs’ revenue and it is hoping to chip away a little more this Singles’ Day. Foreign brands have been slow to jump on Douyin and Kuaishou commerce bus. Sales of imports make up a significantly lower portion of sales on the platforms than they do on Alibaba, JD, and even WeChat. Yet with the critical mass likely to be shopping on Douyin from this month, the platform deserves more consideration.
There is no golden rule for determining which ecommerce platform to sell on in China, and brands should evaluate the platforms based on their target audience, category and objectives. ROI for ecommerce shouldn’t be assessed as only raw sales either. In every customer journey study that China Skinny does, ecommerce platforms are consistently among the most influential channels for discovering and researching products and brands. Unlike Amazon platforms, with their quick-in-and-out transactional stores, China’s ecommerce stores are much more information-rich and as much a marketing channel as a sales channel. Many consumers still look up products on ecommerce platforms, even if they are buying it somewhere else.
Although there are some positive signals that China may open up next year, and new innovations to vaccinate the public such as inhalable Covid vaccines, Beijing appears committed to its Covid-Zero approach. Until China does open up, ecommerce remains the most common channel Chinese consumers use to buy and learn about foreign products in most categories. Even traditionally ecommerce-shy luxury products are increasingly bought online. As a result, brands should ensure that ecommerce is a key part of their Chinese marketing and sales strategy. Contact China Skinny to learn how to best achieve that.
