TikTok E-Commerce a Success—In China, That Is
October 11, 2022
Douyin, TikTok’s predecessor and home-nation counterpart, made a very fruitful decision to emphasize e-commerce in 2020. As owner ByteDance sought to export that success via TikTok, however, the effort has been less lucrative. In an effort to understand why, Rest of World‘s Rui Ma takes a step back and examines “How TikTok Became and e-Commerce Juggernaut in China.” One key factor was live stream shopping events, an arena Douyin dominates despite entering a year after rival Kuaishou and several years after e-commerce titan Alibaba. The interloper chose to focus on brands themselves and smaller sellers instead of major influencers whose audiences could evaporate with a single PR blunder. Ma considers:
“So how does Douyin actually make money from live streaming e-commerce? If you guessed ‘by commission,’ you would only be half-correct, as the platform actually charges very little — typically 1%–5% of sales value, depending on the category of goods being sold. The take rate is low, partly because of the stiffly competitive environment, and partly because this helps boost turnover as more sellers are encouraged to use the platform. But in order to succeed, most of those sellers will have to pay Douyin in other ways, via different forms of advertising. Sound familiar? That’s right — much like how Amazon sellers pay to show up in top search results, Douyin allows you to advertise your live stream in users’ feeds. TikTok has just one option for creators to have paid posts (straightforwardly called ‘Promote’). But Douyin has at least two more, targeted towards boosting the live streams of business accounts. Together, these are believed to be a significant revenue stream for Douyin, and presumably, still part of the playbook TikTok hopes to bring overseas. Since Douyin requires live stream e-commerce transactions to be completed on the platform instead of being redirected elsewhere, this all forms a ‘closed loop,’ where the user never strays from the app. It’s the ideal flywheel, and the envy of platform companies everywhere.”
Then there is Douyin Partners, an imitation of Alibaba’s Taobao program. Third-party partners will set up and operate a seller’s account, from advertising strategy to storefront to logistics. We are told ByteDance has not yet tried to insert Partners into TikTok. Why did step one, the live streaming e-commerce approach, fail in Europe and the US? We are not sure, but it does not look like ByteDance is ready to throw in the global aspiration towel just yet. Stay tuned.
Cynthia Murrell, October 11, 2022
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