Will Americans Adjust to Kuaishou/Douyin-style Social E-Commerce?
The Chinese Version of Instagram — or Amazon?
Kuaishou went IPO last month and reached a stunning market cap of over $200 billion (USD), more than the valuation of Twitter and Uber combined. The product is a simple mobile app that provides endless entertaining short videos. It looks like YouTube Shorts (with short-form video only), Instagram Reel, or Snapchat Spotlight.
But hold on, if you look at its financial report, you see a completely different story: $51.5 billion worth of e-commerce transactions were facilitated on Kuaishou in the first eleven months of 2020. Yes, they are not e-commerce ads, as on Youtube or Instagram. They come from real e-commerce transactions. So Kuaishou is somehow doing the business of Amazon!
Is Kuaishou the Chinese version of Instagram, or are they replicating Amazon? The answer? Both.
In the US, this concept might be harder to grasp, but it’s commonplace in China. Douyin, a.k.a. the Chinese (and original) version of TikTok, which operates primarily in China, has facilitated $77 billion worth of e-commerce transactions in 2020, even more than Kuaishou. These two short-video apps are already common shopping places for Chinese consumers.
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On Kuaishou and Douyin, endless scrolling through a fun, personalized feed is a familiar part of the day. If you haven’t got it yet, just try TikTok or Instagram Reels. What people have yet to understand is why others regularly shop on a short-video app!
Social Entertainment Platforms Easily Convert Shoppers.
In the past two years, online retail in China was affected by a strong shift as social video entertainment and shopping have merged.
An ever-increasingly amount of people now shop on these two short-video apps: Kuaishou and Douyin. People open these platforms for entertainment, but while scrolling through videos, if they bump into video creators promoting products, either by short video or live streaming, many viewers opt to buy right from the app. This social shopping behavior is becoming mainstream in China.
In the US, shopping on a social video app is far from mainstream and counter intuitive. Americans are more comfortable with a separation: Amazon is for shopping, while YouTube and Instagram are for entertainment.
In China, online shopping used to be similar until the rise of two short-video apps, Kuaishou and Douyin. The short-video apps are incredibly engaging and addictive, so the line between entertainment and shopping blurs as the algorithm continuously feeds users with magically personalized fun videos.
Users don’t go to Kuaishou and Douyin purposely to watch any specific episode or celebrity. They enjoy whatever the platform presents them using a recommendation algorithm because it’s so damn good. Then they enjoy the product recommended by the content creators. With talented content creators, it is getting harder daily to delineate whether a video is sharing a personal story or is a product promotion. Many videos selling products are now already as fun as those personal shares. The joy from shopping on the video app is as powerful as watching the videos.
This intuitive behavior has a real-life example. A video app is like a museum for sightseeing, and a shopping app is like Costco. We go sightseeing and shopping at different places with clearly defined purposes. That is, until we arrive at the Las Vegas Strip. There, we are so overwhelmed by the fun experience that when we spend cash, we don’t really care whether we are shopping or sightseeing. We are doing both on the Strip. Now, with their addictive visuals and churning sales, Kuaishou and Douyin are the digital Strip.
Content Creators Are Powerful Sellers.
As the video app becomes people’s shopping destination, some content creators have discovered a new, lucrative career. On Kuaishou and Douyin, many creators sell products directly to their audience, and receive commission from each transaction. They create short videos or broadcast live-streaming to explain product features, ignite product/service desire, and convert audience traffic to sales.
Many creators set up their own stores on the video app or on other third-party shopping sites. They work with product suppliers, brands, or directly with manufacturers to bring in products to sell. Some creators with large fan bases are powerful enough to create their own brand. They are not only video creators or influencers, they are marketers, sellers, store owners, and brand creators.
Among these creators, some sell a stunning range of SKUs and generate higher revenue than a department store. One single influencer on Kuaishou, called Xinba, sold 35 million items which are worth $2.1 billion during the Chinese Black Friday Week (called Double Eleven Shopping Festival in China).
On Kuaishou, the number of influencers who made over 10 million RMB (1.5 million USD) worth of sales per month is over 500. When the social media influencers in the US feel blessed when big name brands like Nike or Nordstrom select them for a marketing campaign, the influencers in China are creating their own “Nike”, or establishing their own “Nordstrom.”
And it is not just a few celebrity influencers that contribute to the jaw-dropping sales volume. On Kuaishou, there are more than one million active sellers. Many of those influencers had no followers or personal brand before starting their Kuaishou creator journey. They grew on the platform, sold their products and made their fortune digitally.
But Rome Was Not Built in a Day.
Overnight success did not happen for this mixture of social media and shopping destinations. It’s not Kuaishou or Douyin that defined this big change. The foundation was built over years. Here are several essential parts:
1. Universal and Seamless Payment
Today we know China has the most convenient online mobile payment service, and it spans across every device. Making payment in any app is just a snap of the fingers. No setup process, no credit card number needed. All done by two clicks, zero friction.
2. 4G and the Boom of Short Videos
Thanks to 4G’s pervasive coverage, and the low cost data plans in China, one billion people can watch short videos on their phones at any time. Now short videos have become the king of entertainment, and the champion of time-killer.
3. Algorithm Rules
A disruption led by ByteDance, the creator of Toutiao, Douyin, and TikTok, has changed the way people find entertaining content: the content finds you.
The algorithm now plays an increasingly decisive role on what we read (news), what we watch (video), and now — what we buy (shopping). Content is handed to people by a predictive feed (and often more than they need) before they look for it.
4. Competition in E-commerce Between Kuaishou and Douyin
Kuaishou and Douyin share many similarities as short-video apps, and they compete fiercely over user numbers, revenue, etc. The competition pushes Kuaishou and Douyin to meticulously optimize their in-app shopping experiences to help creators sell better than on the rival platform. Starting from creator-made product recommendations it only takes 15 seconds pause for a consumer to make a purchase and return to watching videos.
Why Instagram and Facebook Haven’t Turned to Social E-Commerce Yet?
In the US, this social/shopping combination hasn’t occurred yet, and it looks like Americans still have a ways to go. Facebook/Instagram has been reluctant to explore this, most factors we’ve listed are slowly put into place: shopping cart, product, brand and payment. But shopping on the app has not taken off yet. We often like to blame the cultural differences between the West and the East, and easily conclude the Kuaishou/Douyin shopping experience is very Chinese and won’t fly in the US. But if you really compare the shopping experiences between Instagram and Kuaishou/Douyin, you might notice how broken Instagram’s version is.
First of all, the “shopping button” feature is not given to individual creators, but only to the registered brands, which accounts for only a small percent of Instagram accounts. Even for those brand products, which do have a shopping button on Instagram, the user is forced to go through 10 ridiculously lengthy steps, and click the screen over 50 times from start to completion of a purchase.
The shopping button is only available for a very small portion of video creators who register as a brand with Instagram. Good luck for the creators without a shopping button that still want to sell to their audience. They have to find several creative workarounds. They have to leave Instagram and rely on third party tools like LikeToKnowIt to guide their audience to buy the product shown in their content.
Remember that the audience comes here for entertainment, taking two minutes away from the main video stream is too much interruption for users. Imagine someone promoting a product when you are having fun on the Las Vegas Strip, but her store is a 10-mile-drive from The Strip. She cannot blame cultural differences for losing the sale.
Although in 2020, TikTok’s twin brother, Douyin, had already gained $77 billion worth of e-commerce transactions in China, according to the latest news, TikTok is still conservative for opening up their Douyin shopping experience.
The broken shopping experience is not the only reason why the Kuaishou/Douyin shopping experience is suppressed in the US. There are more barriers, and I just list a few:
1. Sparse Shoppable Content
The Kuaishou social shopping experience is not here yet probably because people rarely see anything worth buying. There won’t be many shoppers if the platform prevents creators from selling quality items to their audience.
2. The Monopoly of the Social Media Ads Giant
Allowing creators to sell products helps them make money, but it might be at a cost toads inventory. When the social media ads giant can take more percentage of the profit from ads with no competition, the intention to help creators sell and take lower cuts than ads income is probably quite low.
However, this might change if a new social media platform emerges and starts to help content creators to sell Kuaishou-style. If the ads giant does not follow the change, creators will move to the new platform. In China, the creators benefit from the competition between Kuaishou and Douyin on the e-commerce revenue. The companies compete to attract and retain creators by helping them earn more profit.
3. Affiliate Links and Unattractive Prices
We still use the fifteen-year old affiliate link technology, and claim it’s fair to creators. If the audience wants to buy the product featured in the video, but buys later, the creator gets nothing.
Seriously, the audience must love the product so much that they will exit the app to take 10 steps and several minutes to make a purchase immediately.
On Kuaishou, not only does the customer journey only take 15 seconds, but it also benefits the video creators by enhancing sales with exclusive discounts, bundle rewards, and limited time discounts. These all create stronger urges to buy. With the laid back affiliate link and lame price, even top sellers on Kuaishou/Douyin can hardly convert.
The Near Future
Is it a special case that only Chinese do the shopping on social video apps, or will it also fly in the US soon? It is debatable, but The Economics suggest a closer look at China for the future of e-commerce. Some industry gurus also predict the new Chinese way of social shopping is starting in the US: Live shopping is here, but it’s also coming. (by Eric Feng, Facebook’s head of commerce incubations.
After all the video content creators are probably the ones who most hope for the Kuaishou/Douyin type of social e-commerce. Once it is here, it will be their time to shine.
Next Article
With Kuaishou and Douyin, how do you work with influencers to create e-commerce videos and convert users to purchase? How is it different from existing influencer digital marketing for brands? I will explore this topic in my next article.
About The Author
Jing Zhao is the CEO of Flipboard China and the founder of Brandify China. Flipboard China builds a popular news and interest community platform with tens of million fans in China. Brandify China provides global brands the digital and social marketing solutions tailored for Chinese market. It also helps global companies develop Chinese compatible product and technology solution in China.
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Twitter: zhaojing
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LinkedIn: https://www.linkedin.com/in/jing-zhao-8087685/
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