E-commerce giants suffer from "traffic anxiety"

Why do e-commerce giants suffer from "traffic anxiety" this year? This article will take you to explore the reasons. Of course, this article is also recommended for individuals or companies working in the e-commerce industry.

Since the beginning of this year, several major e-commerce platforms have been competing in service - trying every possible way to be good to users. Low prices and refund-only policies are all products of this strategy. It has been a long time since online shoppers have been held in the palm of their hands by e-commerce platforms, fearing that they will "run away".

How exaggerated is this? During the 618 period, a user saw a sunscreen on JD.com. During the gap between placing an order, he checked Douyin and the merchant sent him a red envelope. He received the red envelope but placed an order without paying. He then compared prices on Taobao. At this time, JD.com sent him a big promotion red envelope via SMS. In the end, the order was completed on JD.com.

A trivial traffic factor, an order of less than 200 yuan, exposed the traffic anxiety of e-commerce platforms. It is good for users, not because the platform has a change of heart, but because traffic is more valuable.

Traffic is a high-frequency word in the Internet industry. Every person who uses the Internet can be abstracted as traffic. When you chat on WeChat, you become Tencent's social traffic. When you watch short videos on Douyin, you become ByteDance's entertainment traffic. Once these traffics are in the hands of the platforms, they will eventually be "squeezed dry". The best form of monetization is games, followed by advertising, and then e-commerce.

E-commerce is a traffic black hole.

In the past, e-commerce platforms liked to divert traffic from content platforms. Alibaba, JD.com, and Pinduoduo spent tens of billions of yuan on purchasing traffic. Before Douyin started its own e-commerce business, Taobao spent 600 million to 700 million yuan a year on purchasing traffic from Douyin. JD.com and Pinduoduo also put a lot of advertising on Kuaishou.

Now, as the new Internet traffic has dropped sharply, Douyin and Kuaishou have set up their own e-commerce platforms, and WeChat Video has focused on live streaming and selling goods. All e-commerce platforms have begun to vigorously develop content. Pictures and texts, live broadcasts, short videos, short dramas, and all kinds of content that can generate traffic have been installed in shopping apps.

Where to obtain traffic and how to "drain" existing traffic have become difficult problems facing e-commerce giants.

1. Where do people come from and where does money go?

E-commerce platforms’ insecurity about traffic has existed since the moment the platforms were born.

Take Taobao as an example. Unlike content platforms such as Xiaohongshu and Douyin, it does not have its own traffic from the beginning. It needs to look for traffic outside the site (outside Taobao), the so-called "full network marketing, Taobao transactions".

Many companies have served as traffic portals for Taobao. More than a decade ago, there were even a number of platforms dedicated to directing traffic to Taobao, such as Fanli.com, Mogujie, Meilishuo, Zhe800, and Chuchujie. They first attracted users with content information, coupons and rebates, and special sales guides, and then directed orders to Taobao.

But these shopping guide platforms basically declined later. Once they occupied a certain proportion of Taobao's external traffic sources, they would be restricted - Taobao did not want to be controlled by a single platform.

This insecurity, in the words of Jack Ma: Taobao's traffic source should be grassland, not forest. If some big trees have problems, it may threaten Taobao as a whole.

Based on this guiding ideology, Alibaba has previously cut off many external links, stopped supporting a single traffic entrance, and invested in content companies such as Weibo and Xiaohongshu that have their own traffic.

But the Internet has a characteristic that traffic always concentrates on the top platforms. Baidu in the PC era, WeChat in the mobile Internet era, and Douyin in the short video era are the three major super traffic platforms that no e-commerce platform can bypass. E-commerce platforms spend money to buy traffic from them, and traffic platforms have grown into towering trees.

This traffic purchasing relationship has continued to this day. During the 618 shopping festival this year, some people saw Taobao ads in the information flow of WeChat subscription accounts.

Taobao ads in WeChat subscription account information flow

For e-commerce platforms, traffic diversion from giants has both advantages and disadvantages.

At that time, Taobao purchased a large amount of traffic from Baidu, which resulted in users conducting shopping searches on Baidu. The traffic entrance and user data fell into Baidu's hands. Not long after, Baidu started its own e-commerce C2C platform "Youa".

Later, Taobao sellers used various methods to divert traffic from WeChat, and millions of Taobao customers, like worker bees, profited by diverting traffic from WeChat to Alibaba. Taobao, alert, blocked WeChat and required that all links to Taobao directly prompt users to download the Taobao Mobile APP.

Alibaba has always been unwilling to allow traffic giants to acquire e-commerce capabilities and become its competitors. Baidu failed in e-commerce, and neither did Tencent. Tencent used WeChat’s huge traffic pool to support two agents—JD.com and Pinduoduo.

The rise of JD.com and Pinduoduo proves the power of traffic giants. JD.com has gained a first-level traffic entrance in WeChat's nine-square grid. For a long time, more than a quarter of JD.com's new users came from WeChat. Tencent led a $110 million financing for Pinduoduo in 2016, and Pinduoduo's user base exceeded 100 million that year.

In the era of short videos, traffic was quickly transferred to the two super apps, Douyin and Kuaishou, and all e-commerce platforms began to purchase traffic from them. At the end of 2018, Douyin opened the shopping cart function and connected to third-party e-commerce platforms. Taobao signed an annual traffic diversion agreement with Douyin, with an amount of tens of billions of yuan.

ByteDance is different from Tencent. It has accomplished what Tencent failed to do. In 2020, after Douyin figured out the ins and outs of e-commerce, it kicked Taobao away, cut off Taobao's external links, and started Douyin e-commerce. Since then, it has been eroding the market share of Taobao e-commerce. Kuaishou, another major traffic platform, has also started Kuaishou e-commerce.

An industry insider attributed the core reason for the rise of Douyin e-commerce to a misjudgment by Xiaoyaozi, who thought that Douyin was just a traffic entrance like WeChat, but he did not expect that Douyin would do so well.

Today, China's e-commerce world has formed two camps and five major players: the classic "Cat and Dog" is driven by transactions; the new "Douyin and Kuaishou" is driven by content. Among them, "Douyin and Kuaishou" not only generate traffic but also control transactions. In the battle of e-commerce, they are both combatants and arms dealers.

The only variable is the video account. Tencent has always wanted to do its own e-commerce business. Now that the video account is on the right track and has become the "hope of the whole village", Tencent has rekindled its e-commerce ambitions, which may change the industry landscape.

Under such circumstances, it is inevitable that Taobao, JD.com and Pinduoduo will face traffic anxiety.

In the existing traffic pool, the pattern of traffic platforms has solidified, with only a few large platforms left , namely what Jack Ma calls the "traffic forest". The "traffic grassland" that once flourished with a hundred flowers - various small and medium-sized sites, blogs, Weibo, and shopping guide websites have either been taken over by large platforms or eliminated by giants, and the degree of traffic centralization is getting higher and higher.

This pool is no longer expanding . After Douyin, Kuaishou, and Xiaohongshu, there has been no super traffic platform in the Internet industry for a long time. This has turned the competition between e-commerce platforms into a naked stock game, which is the case mentioned at the beginning of the article - when a user has Taobao, JD.com, Pinduoduo, and Douyin installed on his mobile phone at the same time, where to place an order is a problem.

In the past, when e-commerce competition was fierce, everyone could still find growth. Pinduoduo's misaligned competition and Douyin's overtaking were both looking for markets that had not yet been fully developed. Now, the meat in the pot has been divided up, and if you want to grow again, you can only grab it from others.

2. Conversion or duration?

Pinduoduo and JD.com stopped releasing user data two years ago. At that time, 880 million people shopped on Pinduoduo at least once a year, and now this number will only be larger.

For Taobao and Pinduoduo, when the vast majority of netizens have already registered as users, attracting new users is of little significance. Even JD.com, which has a majority of male users, has reached 600 million annual active users, which is about to hit the ceiling.

It is more important to wake up these users from time to time, extend their stay time, and encourage them to place more orders. The solution that e-commerce giants have come up with is to create content.

Pictures and text recommendations, short video live broadcasts, and short dramas, all of which seem to have no direct connection with selling goods, have been added to e-commerce apps.

In the past few years, live broadcast and shopping have been the two core content fields in Taobao APP. After the merger last year, live broadcast, short videos, pictures and texts have been connected on Taobao. Taobao short dramas are also making efforts and have customized many brand cooperation dramas.

JD.com has been focusing on live streaming this year. A landmark event is that JD.com turned its boss Liu Qiangdong into a digital person and put him in the live streaming room to conduct online business.

Liu Qiangdong Digital Man

JD.com is a typical shelf e-commerce. In the past, users' shopping trajectory on JD.com was: users entered JD.com with clear shopping needs, just went to the shelf to find the goods they wanted, and left after buying.

This is completely opposite to the logic of content e-commerce. For example, on Douyin, users come in to watch short videos, and when they see a good product, they place an order. Based on interest, they are attracted by the content and then make a transaction.

The shelves are cold, but the content is interesting, and users are naturally willing to stay on the content platform, so JD.com also needs to do live broadcasts to retain users.

Pinduoduo also needs content. Although Pinduoduo has always said that it is "goods looking for people" rather than "people looking for goods", and the platform distributes goods to people in need through algorithms and social relationship chains, it also needs to use content to strengthen user stickiness. Last year, "Duoduo Video" became the first-level entrance to the Pinduoduo APP homepage. This year, Duoduo Video launched a large number of free short dramas to increase user stay time.

Screenshots of the short drama in Pinduoduo

Some industry insiders said that Pinduoduo bought a bunch of "outdated" short dramas from outside at very low prices. Although the content is neither exclusive nor new, it is enough for users to watch.

From simply selling goods to actively creating content, the traffic distribution mechanism of e-commerce platforms has also changed. From pictures and texts to videos, from focusing on transaction efficiency to focusing on attention retention, the platform appears to be less utilitarian, but in fact it has lengthened the realization cycle and laid the groundwork for subsequent realization.

It is not easy for e-commerce platforms to generate native traffic like Tik Tok and Kuaishou. Just like the payment war between WeChat and Alipay, WeChat won in the end because it is easy for users to use WeChat as a payment tool, and social traffic can be instantly converted into transaction traffic, while Alipay is the opposite, it is just a tool, and what it lacks is traffic.

Therefore, Alipay is still working hard to build a content ecosystem and even entering the live streaming e-commerce market. It recently announced that it will invest 1 billion in cash subsidies and set aside 100 million in advertising resources to provide creators with more monetization opportunities in short videos and live streaming e-commerce.

The live streaming sales page in the Alipay APP

Back to the e-commerce platform, ever since the formation of the three-legged pattern of Taobao, Pinduoduo and JD.com, China's e-commerce has been in a state of product overload and insufficient effective traffic.

Now the platform is frantically rolling out content, on the one hand to ease traffic anxiety, but also to point out another way for merchants - if they can't afford advertising space and it's too expensive to invest in traffic, there may still be opportunities to make short videos and live broadcasts. After all, Douyin e-commerce has proved that content fields with short videos and live broadcasts as the core can gather e-commerce traffic. Merchants will have traffic if they make good content, and they will have business if they have traffic.

3. Becoming more and more like the enemy

Since the beginning of this year, several major e-commerce platforms have become more and more similar in both form and approach.

Short videos and live broadcast columns have now become standard features of Taobao, JD.com, and Pinduoduo. Taobao and Pinduoduo allow you to watch short dramas, and JD.com even allows you to watch highlights of various European Cup events.

JD.com page

Originally, you might have been planting grass on Xiaohongshu, watching videos on Douyin, watching live streaming on Taobao, and buying things on Pinduoduo. Now all the steps can be completed on one platform, which is the "closed loop" that the giants always talk about.

Although the resources of each platform are different, they are all learning from their competitors. Even Douyin has begun to learn from Xiaohongshu, pushing pictures and text messages on the homepage, various clothing outfits, travel experiences, etc., which subtly plant seeds for users.

Tik Tok Home Page

Douyin is also directing business to traditional shelf e-commerce. Under some Douyin videos, there are traffic-guiding tags such as "Swipe left to visit Douyin Mall". The display pages of traditional e-commerce platforms such as malls, searches, and stores have been added to Douyin stores, becoming a direct traffic entrance. This means that Douyin will not only be able to harvest content traffic, but also directly undertake e-commerce traffic, becoming an online large shelf like Taobao and JD.com.

Douyin also has traffic anxiety. The biggest drawback of content e-commerce is that when the proportion of advertisements in the content exceeds a certain threshold, the user experience becomes worse - I came to watch the video, but what I see is nothing but advertisements? Are they trying to make money from me?

Douyin listed the mall as a strategic direction in 2022, and allocated more power to shelf e-commerce. In just one year, shelf e-commerce accounted for more than 30% of the overall GMV. This is a good result, but it also shows that the monetization pressure of Douyin's recommendation page is very high, and more monetization methods are needed.

Some people believe that before live streaming e-commerce and short video e-commerce reach bottlenecks or ceilings, Douyin will not easily give traffic to shelf e-commerce.

The development of shelf e-commerce has put Douyin officially on the opposite side of Taobao and Pinduoduo, which is another battlefield.

In the live streaming e-commerce field where Douyin excels, anxious Taobao and JD.com are scrambling to compete with Douyin for traffic. In the past two years, Taobao has been stepping up its efforts to recruit anchors from outside the site, including Luo Yonghao and Li Dan, who were originally from Douyin.

Taobao is also learning from Xiaohongshu. Taobao has built a "Xiaohongshu" in the secondary menu of the "live broadcast" button on the homepage to increase the attractiveness of "browsing" for users.

In addition to products, all e-commerce platforms now raise user experience to an unprecedented level. JD.com is fully promoting the low-price strategy, and Taobao is following the "refund only" policy. On the one hand, this is due to Pinduoduo's influence, and on the other hand, it is also the inevitable path for the platform after the high-growth era. After all, in the e-commerce business, no matter where the platform ultimately directs traffic or how it monetizes, C-end users are the ultimate payers. Whoever treats users well will get traffic.

Looking to the future, unless disruptive new technologies emerge, it is unlikely that the domestic e-commerce landscape will undergo major changes. Even if there are any, it will only be an internal migration of traffic and a rise and fall in market share, with the major platforms getting closer and closer to their respective ceilings.

How do e-commerce giants solve their "traffic anxiety"? The answer may lie overseas.

Pinduoduo, Alibaba, and ByteDance have been vigorously expanding overseas e-commerce markets in the past two years to ease the pressure of domestic growth. ByteDance's TikTok has its own traffic and can be directly monetized, while Pinduoduo's Temu and Alibaba's AliExpress can only buy traffic from outside.

Temu is a traffic "money-making beast". Every time it enters a country, its standard move is to place a large number of advertisements to make the APP rush to the top of the app store download list. Temu has placed video ads in the most expensive advertising space in the United States, the "Super Bowl", for two consecutive years, with the first time costing nearly 100 million yuan and the second time about 150 million yuan. This year, AliExpress sponsored the European Cup for the first time.

The weaker the domestic growth is, the stronger the motivation to go overseas is.

However, overseas, Chinese e-commerce giants still cannot escape anxiety. Complex multilateral relations and rising trade barriers are uncertainties for e-commerce going overseas, and TikTok Shop is a lesson for us.

Perhaps this is how business is, nothing is ever completely certain. E-commerce giants always have their own ways to deal with it.

Author: Li Ming; Editor: Wei Jia

Source: WeChat public account: "Dingjiaoone (ID: dingjiaoone)"