TikTok has joined the price war, but which sheep is being fleeced?

Now more and more platforms are engaging in price wars, hoping to attract audiences with low prices. For example, Douyin has joined the "low price" camp. According to public information, Douyin will position "price power" as the highest priority task in 2024. How to interpret it? Let's take a look at the analysis in this article.

Recently, according to public information, Douyin will position "price power" as the highest priority task in 2024. The label "lowest price on the entire network" has also appeared in the current Douyin mall. Following Pinduoduo, Alibaba, and JD.com, Douyin has become another platform that regards "low price" as an important strategy.

As early as 2023, when Pinduoduo rose against the trend, Taobao and JD.com successively played the "low price" card, and the fate of Douyin undoubtedly made this low-price competition gradually fierce.

When all platforms are competing for the "lowest price" on the Internet, why does Douyin e-commerce also use low prices as its main strategy? How can Douyin's content help this? Which side will benefit from this low-price competition?

1. White-label products and small and medium-sized businesses: a breakthrough in low prices

In 2024, low price becomes an important strategy for Douyin e-commerce.

It is reported that recently, Douyin e-commerce officially clarified its "price power" strategy, identifying 49 key categories in the low-price range and 87 absolutely low-price categories.

It is reported that Douyin e-commerce will tilt its traffic towards low-priced and similar low-priced products on the entire network, which means that low-priced products will be more easily displayed, and low-price labels will appear in the content field and on the shelves.

So, why does the rapidly growing Douyin e-commerce also use low prices as a strategy?

To explore this question, we need to understand the positioning of Douyin e-commerce as a global interest e-commerce. Different from Taobao, JD.com, and Pinduoduo, the rise of Douyin e-commerce comes from the coordinated development of content and shelf fields, forming a flywheel effect. In the early days, a large number of short videos, live broadcasts, and pictures and texts built Douyin's content field.

As the content market continues to improve, Douyin has begun to actively increase its e-commerce infrastructure. In 2023, Douyin's e-commerce malls, search and other shelf markets have been continuously improved, and the traffic of content and shelf markets has been continuously interconnected, and the pan-shelf market has become the source of growth for most merchants.

As the concept of global interest e-commerce was formed, a group of "Pinduoduo-style" small and medium-sized businesses also poured in. For these businesses, due to reasons such as size and time, both short videos and live broadcasts require a certain amount of initial costs, and the form of shelf market is more suitable for their entry.

Not long ago, according to Late News, Douyin e-commerce's low-price strategy in 2024 will be extended to the content field - the mall and short videos will vigorously recommend low-priced goods, and the live broadcast room will continue to carry high-priced goods mainly from brands.

As a platform, Douyin uses low prices as a guide to create a low-price mentality in the mall and leverage overall business growth. To a certain extent, Douyin e-commerce hopes to retain consumers through low-price hooks and deepen the mentality of "people looking for goods" in shelf e-commerce.

Although the strategy was just proposed, a review of Douyin e-commerce's recent actions reveals that related layout has already begun.

In May 2023, Douyin e-commerce broke up the original operation group and merchant development center into two groups, one responsible for brand merchants and the other for non-brand merchants. For non-brand merchants, that is, this group mainly composed of white-label merchants, order volume has become an important indicator. In addition, Douyin e-commerce has also launched sections such as the 10,000-person group purchase and the 9.9 special price channel to support low-priced white-label products in all aspects.

Douyin's "price power" strategy has a certain positive effect on small and medium-sized businesses. In the later stages of content e-commerce development, the importance of supply chain capabilities has been rediscovered, and small and medium-sized businesses with certain supply chain capabilities have been invited back to the table.

However, low price is a double-edged sword. Low price does not mean low quality, and low price does not mean low service. For small and medium-sized businesses, if they want to survive in the low-price competition market, they will undoubtedly have higher requirements.

In general, Douyin’s low-price strategy targets white-label products and small and medium-sized businesses.

2. Where does the lowest price come from? Where does the lowest price on each platform come from?

From the perspective of e-commerce platform strategies, either the platform provides subsidies to compete for the "lowest price on the entire network", such as Pinduoduo's 10 billion yuan subsidy. Or the algorithm recommends giving low-priced products more traffic, such as affixing a "low price" label. However, whether it is platform subsidies or encouraging merchants to break prices, there are limitations that make it difficult to develop in the long run.

Therefore, at a time when competition among e-commerce platforms is fierce, industrial belts have become a battleground for all parties.

On February 27, Douyin E-commerce released the data report "2023 Douyin E-commerce Industrial Belt Development in One Year". The report shows that in the past year, Douyin E-commerce has covered 684 characteristic industrial belts across the country, the number of industrial belt merchants has increased by more than 194%, and the number of live broadcasts with goods has exceeded 1.09 million. By the end of the year, the sales volume of industrial belt products on the platform increased by more than 66%, of which the sales volume of shelf scenes increased by 103%.

These industrial belts are mainly distributed in Zhejiang, Guangzhou, Suzhou, etc. Among them, Guangzhou women's clothing, Yiwu accessories, Shenzhen digital products have become the most popular industrial belt products.

The head of Douyin's e-commerce said that by continuing to help the real economy upgrade and innovate, more small and medium-sized businesses will be able to develop, and more white-label products will become domestic brands, making practical contributions to the high-quality development of industrial belts, promoting consumption, and driving employment and rural development.

Merchants in industrial belts may have high-quality products, but they may not be good at operations.

Therefore, in 2023, Taobao launched the "Taobao Star Origin" plan, which strictly selects cost-effective products from 20 industrial belts within a year to help them explode in multiple dimensions. In the Nantong home textile traceability special event on Double 12, the transaction amount exceeded 50 million that night.

At the same time, Alibaba's wholesale e-commerce platform 1688 was also upgraded to Alibaba's first batch of strategic innovation businesses. With the influx of young people and the downgrade of consumption, 1688 has been recognized by more people again.

As for Pinduoduo, in March last year, Pinduoduo launched the "Strive for a Better Life" series of live broadcasts together with CCTV News with a 10 billion yuan subsidy, inviting CCTV hosts to recommend products to netizens, and at the same time providing "tens of millions of free traffic support" to attract small and medium-sized businesses from all over the country.

For e-commerce platforms, the industrial belts are close to the source, which not only means the products are of high quality but also have lower costs. The platforms can achieve the goal of "eliminating middlemen and making a profit from the price difference."

In addition, the platform has certain user preference data, which can reflect consumers' user needs to a certain extent. Merchants can make production adjustments based on changes in demand to meet consumers' latest needs.

In fact, it is not new for platforms to build industrial belts. The early 1688 is a typical example. However, under the current e-commerce landscape, each platform has begun to show different characteristics in building industrial belts, and the support for industrial belts has been further increased, especially in the context of low-price competition.

3. E-commerce melee in 2024

The rise of Douyin e-commerce has made all e-commerce companies realize the importance of content.

In 2023, the GMV of Douyin's e-commerce exceeded 2.2 trillion, of which the GMV of shelf e-commerce accounted for more than 35%, and the GMV of live streaming e-commerce accounted for more than 60%. Douyin's e-commerce is constantly narrowing the gap with traditional e-commerce platforms such as Taobao, JD.com, and Pinduoduo.

On the one hand, Douyin e-commerce encourages content to bring low-priced goods and form a shelf market mentality. On the other hand, traditional e-commerce Taobao is catching up in the content field.

In 2023, Taobao Live will collaborate with TVB, Street Dance of China and other classic IPs to carry out various live broadcasts, which to a certain extent built Taobao's content strength and cultivated a group of anchors.

However, in this process, there were no top anchors like Li Jiaqi and Dong Yuhui. Recently, Taobao officially established a live broadcast e-commerce company to provide "nanny-style" full-hosting operation services for new anchors, celebrities, KOLs, and MCN agencies who are interested in starting broadcasts on Taobao.

If Douyin e-commerce has allowed everyone to see the power of content, then the low-price wave brought about by Pinduoduo has undoubtedly swept up every e-commerce merchant.

On November 29, 2023, Pinduoduo’s financial report showed that its U.S. stock market value exceeded Alibaba for the first time. In that quarter, Pinduoduo’s transaction service revenue reached 29.15 billion yuan, a year-on-year increase of 315%, far exceeding the industry growth rate.

Pinduoduo once again proved to other e-commerce platforms the importance of low prices, and prompted various platforms to "take action" one after another.

In 2023, JD.com called on Pinduoduo to stop blocking in the live broadcast room of purchasing and sales, and compared prices, accurately matching Pinduoduo's 10 billion subsidies and "refund only", which made Pinduoduo cut off JD.com's price comparison link. Taobao's merchants and products began to move back to Taobao one after another, and Taobao also made many reforms in algorithms and entrances to direct traffic to low-priced goods.

With Douyin launching a low-price strategy, another e-commerce platform has joined the ranks of those that are “encircling and suppressing” Pinduoduo. In 2024, the e-commerce market may see a more intense round of price wars.

Under the wave of low prices, can Taobao leverage its industrial advantages to win back small and medium-sized businesses? Can the low-price strategy accelerate the flywheel effect of Douyin? After the Spring Festival Gala, can JD.com and Xiaohongshu get the sinking market they want? Under the siege of low prices, can Pinduoduo maintain its current high-speed growth?

Under the current market structure, we look forward to various platforms continuing to break through and find a low-price path that benefits consumers as soon as possible.

Author: Guang Ye

Source: WeChat public account "TopKlout (ID: TopKlout)"