If you don’t know what that is, don’t worry – this one hasn’t made it big outside China. Yet. In China, 18 June has become an annual cyber shopping extravaganza. First introduced by domestic e-commerce giant JD.com, the event has now been adopted by virtually every online retailer in the country. The shopping frenzy kicks off as soon as May ends, with major e-commerce platforms competing to gain customers’ attention with steep discounts and exclusive offers.
It might not come as a surprise that China has introduced yet another online shopping festival. After all, e-commerce is booming in the country. According to an analysis from GlobalData, China has the highest rate of e-commerce of any market and experienced an even bigger boost during the coronavirus pandemic. Estimates project that, in 2020, the sales channel was worth $1tn in China, up from $862bn in 2019.
Something that may come as news, however, is the speed at which short-video apps and live streaming e-commerce are taking over. Relatively new to the 618 game are social media platforms Douyin (China’s version of TikTok) and similar apps Kuaishou and Xiaohongshu, which are rapidly making their mark in the world of e-commerce.
These apps have achieved something that traditional online retailers have long neglected: seamlessly merging shopping with entertainment. Chinese ‘netizens’ are increasingly turning to social media platforms to make purchases. In the West, TikTok is not yet widely associated with the idea of e-commerce, but this may soon change.
Recently, TikTok announced that it has entered into partnerships with several companies, including Walmart, Shopify and L’Oréal, to bring the app’s e-commerce platform to a Western audience. We may soon find a cohort of Millennials and GenZs not only learning their latest dance moves from TikTok but also buying their daily products, a trend that may threaten well-established e-commerce behemoths such as Amazon.
Moreover, social media platforms have introduced new forms of cybershopping. Soon short-video advertisements and live broadcasts may replace the traditional search and click model of online retail.
e-commerce short video – Coming to you live
One of the market leaders for entertainment e-commerce is ByteDance-owned company Douyin, and online events such as 618 are ideal arenas for the platform to showcase its unique approach to social shopping. In 2021, the company announced it would again join the shopping festival, boasting that its short-video broadcasting approach put forward the concept of “interest e-commerce”, keeping consumers engaged and making online shopping fun.
Earlier this year, Douyin introduced the short video challenge. Using the hashtag ‘#douyin681goodsfestival’, shoppers could send in creative videos highlighting how they were engaging with the event. Winners would receive coupons that they could exchange for goods during the festival period.
Another 618 trend that’s taking China’s e-commerce by storm is live stream sessions. These are similar to product videos in that they show product details up close. Some retailers may even feature live stream clips on their product detail pages. However, there’s one big difference: live streams are interactive. This makes the process a highly efficient and entertaining way to learn about new products and ask questions.
“Live streaming seems to be the newest craze in China and has received a boost from COVID-19,” says GlobalData analyst & e-commerce specialist Luke Gowland. “The biggest e-commerce players in China have all been involved and approximately 300m Taobao users watched live streams during the 11.11 sales period from 1 November to 11 November.”
In a way, it’s a lot like walking into a physical store. The host greets the consumer, asks what they are looking for and provides recommendations. Although users can’t speak to the host directly, they can send text messages, which show up in the chat history for everyone in the room. Clothes sales, for example, feature an option to mimic in-store try-on experiences: Users can ask models to wear a particular item and walk around displaying the piece.
During the 618 festival period, Douyin is launching tens of thousands of e-commerce-related live broadcasts, including festival- and brand-themed live broadcast rooms. Over the course of two weeks, the app will host a wealth of live events featuring numerous brands from different sectors and a whole array of celebrities to promote the products.
“It’s clear that this trend is gaining significant traction in the Chinese market, and western tech companies are taking note,” says Gowland.
The amalgamation of e-commerce and social media – ‘social e-commerce’, perhaps – is blurring the lines between online entertainment and online shopping, a trend that may soon become more widespread in other countries.
In 2019, Amazon launched Amazon Live, while Facebook has introduced live shopping and Walmart has partnered with TikTok to launch live stream shopping.
“I think the Walmart/TikTok partnership will be a threat to Amazon,” believes Gowland. “It’s no secret that Walmart sees Amazon as its biggest rival and getting a leg up on live streaming would be advantageous if live streaming in the US mirrors the success of China.”
Another widely used short-video social media app turned e-commerce retailer is Kuaishou. In January, the company made its stock market debut in Hong Kong, raising $6bn; the city’s largest IPO so far this year. In addition, there’s Xiaohongshu, also known as RED, another popular social networking e-commerce platform tailored specifically to a female audience.
Seeing e-commerce stars
One common theme among these social e-commerce platforms is the strategic use of China’s celebrity culture. During the 618 festival period, different retailers feature national celebrities to promote their products while also entertaining users. In 2021, Douyin featured over 50 celebrities ranging from Chinese actors to international pop stars.
Meanwhile, influencers who have made their fame through social media are also gaining traction. The so-called ‘wanghong’ economy – literally meaning internet celebrity economy – is based on influencer marketing, which has also seen a massive boom during COVID times.
According to Chinese consultancy firm 1421, the Chinese influencer economy generated over CNY100bn (US$15.6bn) in 2019 and the industry is growing rapidly. Estimates suggest the market tripled in 2020 under the impetus of COVID, hitting a new high of over CNY300bn in revenue.
The wanghong economy business model is based on two aspects: online retail and social media advertising. Chinese social media apps such as Douyin and Kuaishou seemed to have found the magic formula that combines these two aspects.
Top influencers have their own shows and appear each night for several hours at a stretch from about 8pm until midnight – prime-time, so to speak. It’s their job to sell highly-curated products, often at steep discounts. Brand owners get the chance to pitch to the influencers, who get to decide which products get featured. With this amount of power, show hosts can negotiate with brand owners to get the lowest prices possible.
These hosts are known as KOLs (key opinion leaders) and live stream e-commerce has turned them into well-paid national celebrities. They’re compensated differently than in the US, where influencers are typically paid a flat fee for each post. In China, KOLs usually receive an appearance fee plus a significant commission on top for products sold.
TikTok, who’s there? Your delivery
This form of internet culture and e-commerce is now also expanding to other markets. TikTok has already announced various plans to introduce shopping features in North America and Europe.
The company says it is “running an e-commerce pilot in the UK and Indonesia to give brands a new way to drive sales directly through exciting short videos and live streams: on their own TikTok accounts through a product showcase, or in collaboration with TikTok creators”.
Just last month, TikTok said it will test in-app sales features in Europe. The company said details would be revealed in due course but confirmed that streetwear brand Hype is one of the companies involved in the pilot.
Earlier this year, the app announced the expansion of its partnership with Shopify to Europe, meaning that businesses in France, Germany, Italy, Spain and the UK will be able to create in-feed shoppable video ads directly with Shopify.
“The company is in an interesting position as it has managed to captivate the western markets in a way that other Chinese social media/e-commerce companies have yet to achieve,” Gowland explains. “The Biden administration will also take a far less anti-TikTok stance than Donald Trump previously held, which will also be advantageous for the company.”
TikTok is also experimenting with commerce opportunities and testing new features with a limited group of merchants and creators in the UK: “The test enables merchants to engage customers through their TikTok account profiles, their organic video posts and by working directly with creators.”
Over the past year and a half, with consumers around the world quarantining at home because of the pandemic, TikTok has seen an explosion in users, which shows no sign of slowing down, despite countries slowly emerging from lockdowns. In May, downloads for the app jumped 35%, continuing its streak as the world’s most popular social media platform.
The future is now
Social media e-commerce platforms will also change how consumers shop and search for items. According to Gowland: “There has been a discrepancy between mobile traffic and mobile sales. I think things like live streaming and AR will help to bring traffic and sales closer in line.”
Moreover, algorithms will play an even more important role. Right now, it’s still common to search for items you want to buy when going on Amazon or Walmart’s website, but soon the platform may know what you are looking for before you’ve even realised yourself.
One of TikTok’s main selling points is its recommendation system. Almost like magic, the app’s ‘For You’ page suggests videos specifically tailored to each users’ taste. Last year, the company gave more detailed insight into the workings of its algorithm, saying that “the system recommends content by ranking videos based on a combination of factors – starting from interests you express as a new user and adjusting for things you indicate you’re not interested in, too”. Now, imagine it’s not only showing you your favourite dog videos or dance trends, but exactly the item you were thinking of buying.
All of this will undoubtedly affect traditional e-commerce. For one, it might be a good turn of events for smaller brands and slower-growing sectors. As in the US, the shift from mega-influencers to micro-influencers is benefitting less well-known brands that simply don’t have the cash to hire major celebrities or create expensive ads.
TikTok’s move into the western market may also threaten well-established e-commerce giants, as Gowland explains: “As it is the gatekeeper of the western e-commerce market, I think Chinese e-commerce companies entering the western market will be a significant threat to Amazon. The company struggled to compete against Alibaba and others in the Chinese market, failing to keep up to speed with same-day delivery and free shipping.
“With Alibaba facing regulatory headwinds in China, its next option to sustain its current levels of growth is to look to western markets.”