Newcomers Douyin and Kuaishou takes on tech giants to refresh the face of e-commerce
According to 2022 figures, the distribution of China's e-commerce market share in 2021 stood at 53% for Alibaba, 20% for JD, 15% for Pinduoduo, 5% for Douyin and 4% for Kuaishou. In 2018, these figures were 58.2% for Alibaba, 17.3% for JD and 5.2% for Pinduoduo - Douyin and Kuaishou had not entered the e-commerce space.
Douyin, Kuaishou and Pinduoduo each took about three years to grow from 0% to 5% market share, but many have overlooked the unprecedented nature of this growth in China and the world.
Fast growth of newcomers
One distinct trend is that Alibaba's "fast followers" - JD, Pinduoduo, Douyin and Kuaishou - have raised their market share, with Pinduoduo showing the best growth by tripling its share within three years. Douyin and Kuaishou have also shown impressive growth, increasing their share to 5% and 4% respectively in about two years. JD's growth has been slowest, averaging less than 1% annually.
Douyin, Kuaishou and Pinduoduo each took about three years to grow from 0% to 5% market share, but many have overlooked the unprecedented nature of this growth in China and the world. Pinduoduo founder Colin Huang and his team were in the e-commerce sector for nearly a decade before setting up Pinduoduo, while Douyin and Kuaishou are typical companies that started with traffic and content, and entered the e-commerce market from the ground up, and so their growth are noteworthy.
Douyin and Kuaishou started a new era of content-based e-commerce through live streaming and short videos. In contrast, the core of traditional e-commerce operators such as Alibaba, Amazon, JD and Pinduoduo is led by its search and categorisation function. Users search for what they want to buy on platforms such as Taobao and Amazon, which rank and recommend items based on those searches. The users can also browse items on their frequently viewed sections or the platform's recommended sections, which are based on the users' search, browsing and purchase history.
From the big data perspective, platforms collect all types of data on user behaviour, but spending behaviour is the core data e-commerce platforms use to generate recommendations and search results. This is also known as the "people seeking goods" (人找货) model.
'People seeking goods' vs 'goods seeking people'
Content platforms such as Douyin and Kuaishou operate differently. They claim to be "interest-based e-commerce platforms" (兴趣电商), whereby their users are mostly seeking entertainment to pass the time and are not on the platform for the purpose of making purchases. While they are aimlessly "browsing", they may come across a short video about a product that interests them, and can immediately buy it on the platform. This "goods seeking people" (货找人) model is the opposite of traditional e-commerce.
... e-retailers such as Douyin and Kuaishou represent a new type of e-commerce model, and e-retailers where "goods seek people" and "people seek goods" will together form the future of e-commerce.
Pushing a new product quickly to new consumers can be challenging on traditional e-commerce platforms. For example, on traditional e-commerce platforms, VR game consoles are usually recommended to people who are interested in traditional game consoles. However, a recommendation featuring a picture and a paragraph of text would hardly appeal to those who have never purchased game consoles.
But interest-based e-commerce platforms are different. A video of a person shooting a gun in a virtual world might pique the interest of outdoor and shooting enthusiasts, and stimulate demand for the product. The same could be applied to various other products - tape that can easily mend water pipes at home, special bolsters to prevent discomfort in the arms during sleep, convenient and nifty kitchen gadgets, outdoor camping equipment that keeps the bugs away - they can easily go viral and become unique Douyin top-selling products.
So, going beyond their rapid growth, e-retailers such as Douyin and Kuaishou represent a new type of e-commerce model, and e-retailers where "goods seek people" and "people seek goods" will together form the future of e-commerce.
Notably, interest-based e-retailers first gained prominence in China where short-form videos first matured. The opportunities are also present in the US, India, and Southeast Asia, where short videos are rapidly maturing. It is worth watching whether Douyin and Kuaishou with their broad global short video market share can start to challenge traditional e-commerce giants overseas such as Amazon.