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E-commerce in China: Tmall, Douyin or both?

Tmall, Douyin, Xiaohongshu and Kuaishou all offer something different to Chinese consumers, so how do you know which is best for your brand?

by Robynne Tindall
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Platforms like Douyin and Kuaishou are occupying an increasing share of China’s lucrative e-commerce market. So should you still be putting all of your eggs in Tmall’s basket or should you be taking a more diversified approach?

China is the world’s leading e-commerce market, generating 50% of all global transactions. Attempts to pin down the value of the country’s e-commerce market vary, but they are always in the trillions, with estimates suggesting the market will be worth over US$3.5 trillion (£2.8 trillion) by 2024.

It’s clear that Chinese consumers are very comfortable buying online, but how and where they buy is continuously in flux, presenting both challenges and opportunities for international brands. The rise of over 200 million Gen Z’ers as a driving consumer force is setting new trends in communicating with target customers, the most salient of which is the decentralisation of the e-commerce landscape.

For years, Alibaba’s Tmall and rival JD.com have been the first port of call for both consumers and international brands. But the winds of change are increasingly blowing consumers towards social commerce platforms like Douyin, Xiaohongshu (RED) and Kuaishou, that bring together entertainment and shopping. And brands are having to follow suit.

In this article, we review some of the latest developments in the social commerce field so that you can choose the right platforms for your brand.

launchpad CBBC

Foreign brands can now sell directly through Douyin

In the past few years, the social commerce platform Douyin (China’s version of TikTok) has been making waves as it establishes itself as a leader in e-commerce live streaming (also called live commerce) and short videos. Douyin was already a top player in this category, having reached a GMV from live streaming of $1.5 trillion in 2022 and launched Douyin Mall, a shopping interface like Tmall that can be accessed directly from the app. And Douyin’s share of the pie is only going to get bigger as it has now started allowing all brands – including foreign brands – to apply to sell products on the platform directly through cross-border e-commerce.

As Sandra Weiss from RedFern Digital notes, “Brands can now sell directly on Douyin without setting up a domestic entity or establishing a business license within mainland China. This means that they can take advantage of Douyin’s massive social influence and link products directly in short videos and live streams, decreasing the loss of traffic when driving customers to make purchases.”

Weiss adds that the ability to sell directly on Douyin emphasises the need to explore brand-run content, especially live streams, rather than relying solely on influencers. “Over 50% of sales on Douyin among the top 500 brands on the platform came from brand-run live streams in February 2022, and in 2023, the market share of brand live streaming is estimated to exceed 50%.”

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Kuaishou records first profit in several years

China’s second-largest short video company and major Douyin rival, Kuaishou, recently realised its first quarterly profit, reporting an adjusted net income of RMB 42 million (£4.8 million) for Q1 2023 compared to a loss of RMB 3.7 billion (£423 million) in 2022, according to Technode. A large portion of this success can be attributed to the platform’s e-commerce business, which achieved total sales of RMB 2.25 trillion (£257.45 billion) in Q3 last year.

Kuaishou users are typically located in lower-tier cities (think Shijiazhuang, not Shanghai) and have a fairly even age spread – while most of the users are young, like any app, just under a quarter are over the age of 50. They are also on the lookout for bargains, with lower-priced clothing and cosmetics and everyday household items selling well in Kuaishou KOL live streams (note: unlike Douyin, Kuaishou doesn’t have its own built-in mall yet).

This means that Kuaishou won’t necessarily be a good fit for every international brand looking to enter the Chinese market, but it could work for budget-friendly products or companies that already have a fun, tongue-in-cheek brand aesthetic (think along the lines of what Duolingo has been doing on TikTok).

Xiaohongshu remains a game changer for product discovery

Xiaohongshu, on the other hand, is the perfect launch site for boutique high-end brands. Its main users are affluent, educated women who are actively looking for new products to try, using it to share product and brand experiences and give and obtain recommendations and tips. As one of the most popular platforms in China, Xiaohongshu currently has over 150 million monthly active users, representing a 50% growth in traffic compared to January 2020.

Xiaohongshu has introduced commerce to the platform, allowing users to either buy directly from a brand-owned Xiaohongshu store or by linking externally to a Tmall or WeChat store to purchase. However, as Mark Bellamy from Aiken Digital cautions, “user-generated content (UGC) is still the lifeblood of Xiaohongshu, so when it comes to standing out and succeeding, recommendations are everything. To get brand exposure, it is not about how much you pay, but how big your brand’s tribe of followers is.”

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Don’t forget to localise your branded website

An often-overlooked channel is direct sales through brands’ own global .com sites. Consumers often visit retailers’ and brands’ websites to cross-check information they have seen on platforms like Xiaohongshu. While many customers will then move on to an e-commerce platform to make their final purchase, having a good localised website is still an important part of creating a complete brand experience.

“Unlike Amazon platforms, with their quick-in-and-out transactional stores, China’s e-commerce stores are much more information-rich and as much a marketing channel as a sales channel. Many consumers still look up products on e-commerce platforms, even if they are buying it somewhere else,” notes Mark Tanner from the China Skinny.

However, many brands are still not making simple adjustments, such as adopting Chinese payment methods like WeChat Pay and Alipay or ensuring sites load quickly in China. The relatively low-cost investment in these adjustments is often well worth it because they typically have a higher conversion and average basket than in the home market.

What does the social commerce revolution mean for your brand in China?

“There is no golden rule for determining which e-commerce platform to sell on in China, and brands should evaluate the platforms based on their target audience, category and objectives,” says Mark Tanner from China Skinny.

It is also essential to look for growth opportunities across all platforms to meet the consumption patterns and preferences of a changing shopper. As emerging platforms look to expand their brand portfolio, there is a burgeoning opportunity for international merchants to diversify their sales channels.

From a risk management perspective, a decentralised approach to e-commerce avoids the difficulties of being overly reliant on one channel or influencer to drive revenue. Different challenges arise around pricing management and ensuring no SKUs become over-distributed and devalued. Both can be managed with adequate planning and resource.

China Consumer 2023

This article was produced as part of a series for China Consumer 2023.

Learn more about CBBC’s flagship consumer event of 2023 here.

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