WHAT IS THE NEXT CHINA E-COMMERCE THREAT?

When asked what the next threat to EU retailers will be after Temu and Shein, my advice is:

▶️ Look at what’s happening in the US; Chinese companies normally launch there first.

▶️ Follow them back to China and see what their parent companies have done there.

Instead of writing it off as another ‘Wish’, Europeans should have looked at what Temu had already accomplished in the US and traced it back to Pinduoduo’s (PDD) success in China, where it conquered 20% market share from Alibaba.

Based on what I see happening in China, TikTok Shop might be the next threat ... and not because of live commerce. Its roadmap is based on what Douyin, the Chinese version of TikTok, has done in China. See:

So what's happening in China? After using live commerce and short-video commerce on Douyin, ByteDance launched search-based e-commerce on Douyin in 2022. ‘Retail customers’ tend to make more rational purchasing decisions than ‘livestream customers’. Therefore, it can reduce returns, increase settlement GMV, and lower merchants' operating costs.

A few facts from a Latepost article:

▶️ Douyin's e-commerce GMV grew >30% in the first ten months of this year. Expected 2025 GMV: >RMB 4 trillion, approaching PDD's level (based on payment volume).

▶️ Alibaba’s Taobao payment GMV is ~6 trillion yuan. Douyin could overtake Taobao within a few years. However, Douyin's return rate is much higher, so the paid GMV gap remains significant.

▶️ Douyin's lifestyle services business (group-buying coupons for restaurants, hotels, etc) grew nearly 60% in the first ten months. Expected 2025 GTV: >RMB 800 billion. Meituan's in-store GTV in 2024 was ~RMB 1 trillion.

▶️ Redemption rate for Douyin's lifestyle services, driven by user-initiated searches (50%), is about 10 times that of orders placed directly through short videos.

▶️ Douyin wants to catch up in market share in every industry, then surpass others, and ultimately maintain its leading position. After surpassing competitors in a featured category, Douyin will switch to another category. Douyin's featured categories included pets, alcohol, flowers, and fresh produce. This year, consumer electronics have been added. These have lower return rates than clothing and cosmetics (in which Douyin is strong), come with higher unit prices and more deliberate consumer decisions.

▶️ With the rise of Douyin e-commerce, ByteDance has surpassed Alibaba to become the company with the highest e-com advertising revenue in China.

▶️ >10% of traffic is allocated to e-com content and advertising. To avoid user churn, Douyin needs to balance commercialisation (measured by commissions and advertising revenue) and user experience (measured by user lifecycle).

Stop seeing TikTok Shop as just a channel with livestreams and short videos. Search-based sales might be its biggest threat.

-Ed