E-commerce bifurcation: Taobao, Jingdong and Douyin compete on price, while video accounts compete on brands

Video accounts are gradually moving towards a more mature e-commerce, focusing on "brand power" and starting to customize gameplay based on their own characteristics and user groups. Video accounts and other e-commerce platforms are heading towards a fork in the road of "brand power" and "price power". Why do they do this? How do they do it? What will happen in the future? Let's take a look at the author's analysis.

While Taobao, JD.com and Douyin are collectively targeting the "price power" strategy, Video Account is going the other way and emphasizing "brand power" . After Video Account raised the certification requirements for brand merchants from "the brand's sales volume and number of reviews on three external sites, Tmall, JD.com or Douyin, is greater than 10" to "greater than 20" in September last year, it has recently upgraded the new rules again.

According to a recent report by Yibang Power, in early February this year, Video Account updated the brand merchant entry certification rules. It no longer requires the provision of qualification certificates from external sites such as Taobao, JD.com, Pinduoduo, and Douyin. Instead, it turns to refer to the brand power grading entry standards officially formulated by Tencent, including brand listing status, WeChat index, public account fans and other evaluation dimensions.

Many practitioners said that the threshold for certifying video account brand merchants has been raised, and some categories are even higher than the above-mentioned platforms.

A home furnishing merchant who opened a flagship store on Tmall said that the video account flagship store certification he recently applied for failed because of "lack of brand power."

Industry insiders have different interpretations of this brand certification upgrade.

A live broadcast operator said, to put it bluntly, there will be fewer and fewer unscrupulous businesses in the future.

E-commerce analyst Li Chengdong believes that this reflects the cautious attitude of Video Accounts. "Video Accounts are still in the exploratory stage, and problems are prone to occur when they develop rapidly. Tightening the certification of high-quality brands is conducive to protecting user experience."

Gong Haihan, CEO of Baizhun, a video account marketing technology company, believes that this is an important step for Video Account to become a more mature e-commerce platform. It is equivalent to forming its own "Basic Law", which means that Video Account has begun to customize its gameplay based on its own characteristics and user groups.

WeMall, the official operating service provider of Video Account Live, shares the same feeling. It believes that the new regulations for Video Account adopt entry standards that are more in line with the characteristics of Tencent's ecosystem, creating a fairer and more unified business environment for merchants. At the same time, the standardization and transparency of Video Account ecosystem management, and even the efficiency of resource empowerment are expected to be improved.

Regardless of the interpretation, it reflects Video Account’s attention to “brand power”. Video Account and other e-commerce platforms are heading towards a divergence in “brand power” and “price power”.

1. Video accounts do not compete on low prices, but on brands

In fact, Video Account has paid great attention to brand power since the beginning. Unlike Pinduoduo and Taobao's route of "first introducing white-label merchants, creating low prices, attracting users, and then introducing brand merchants", Video Account started the certification of brand merchants in the early stage (end of 2022) and launched a brand merchant incentive plan in early 2023. Of course, it also introduced industrial belt service providers to guide white-label merchants to settle in and expand the overall scale.

Regarding the background of the video account upgrading the brand certification rules to "no longer benchmark against external platform qualifications", Gong Haihan told "Financial Story Collection" that this is because there have been many merchants who "fake" data before. Such merchants may cause a certain degree of damage to the user experience and are not the high-quality brands that the platform really wants.

The reason is that according to the policies previously released by Video Account, brand merchants enjoy higher weights than ordinary stores in many aspects, including incentive policies, opening of authorized matrix accounts, opening of preferred alliances, etc. This means that brand merchants have more development space and opportunities to reach users in Video Account, which greatly affects the user experience and ecological tone.

In addition, Gong Haihan believes that the shift of video account brand certification to its own dimensions, such as public account fans, may drive WeChat native merchants to transform into "WeChat e-commerce" . "These merchants may have already established a foundation in the WeChat ecosystem through public accounts, mini-programs, etc. They understand WeChat and Tencent ecosystem better and have better brand qualifications."

It is worth mentioning that Video Account’s emphasis on original content is not only for merchants, but also for influencers. The content of the 2024 WeChat Open Class shows that in 2024, Video Account will continue to provide original content and influencers on the main battlefield of Video Account with commission and traffic incentives, and at the same time, the operation of such influencers will be more detailed and clear.

In general, the above-mentioned rules of Video Account are essentially to protect the user experience and the healthy development of the ecosystem.

This is its consistent value proposition.

In an earnings call last May, Tencent President Martin Lau said that the most important thing (for video account live streaming e-commerce) is to ensure the high quality of the transaction ecosystem.

At a merchant conference in July last year, the person in charge of the video account also stated that there is no rush to pursue large-scale growth in GMV this year, and the first priority is to pay attention to the user's product experience.

However, brand power is also a "double-edged sword" - it is difficult to have both high quality and low price. Between "good" and "saving", each platform can only try to find a balance.

Taobao, Jingdong and Doupin have chosen to conform to the current mainstream consumption concept and lean towards "savings".

Last year, Taobao and JD.com promoted the slogan of low prices, and now, Douyin has also set the tone. According to Wandian.com, Douyin e-commerce has set "price power" as the highest priority task in 2024. The core strategy for 2024 is to compare prices across the entire network, and launch the "hot item bidding" function - if a product has a lower price than similar products, it can participate in the bidding and receive large amounts of traffic exposure support.

Video accounts have chosen another path. They have never openly encouraged low prices and strictly prohibit illegal behavior of selling at ultra-low prices.

For example, in March last year, the revised version of the "Implementation Rules for Unfair Marketing of Video Account Showcase Experts" stipulated that if products are promoted or advertised at prices lower than the market average through live broadcasts or spoken content, severe penalties will be imposed.

For example, in October last year, the official account of Video Account said that it would step up efforts to investigate low-price promotion. Violating accounts will be banned from broadcasting, window functions will be blocked, and serious cases will be permanently blocked and the store will be closed. Products with a minimum price of less than 5 yuan will temporarily not be allowed to enter the alliance, and products below 5 yuan will no longer be promoted in the alliance. At the same time, merchants are prohibited from holding back orders or promoting low-priced products with poor after-sales reviews from a large number of merchants, and promotional activities such as "exploding benefits" and "second kill benefits" that use low inventory to attract high traffic are prohibited.

2. Why does the video account compete with brands?

At this stage, it is necessary for video accounts to pay attention to brand power. On the one hand, although brand merchants are accelerating their entry, there are still relatively few brand merchants on video accounts.

Data from WeChat Open Class shows that in 2023, the GMV of brand stores on video accounts increased by more than 226%, the number of brands entering the market increased by more than 281%, and the number of brand stores with more than 10 million users increased by more than 860%, but the GMV contributed by brand merchants accounted for only 15%.

This figure is much lower than other platforms. According to Wandian.com, 70% of Taobao and Tmall's revenue in 2022 came from brand merchants; according to 36Kr, in 2021, Douyin's brand GMV accounted for nearly 60%.

The gap between the live broadcast frequency of brand merchants on Video Account and other platforms can also confirm this problem. According to a sampling of Finance Stories, some well-known brands have formed regular live broadcasts on Douyin, but only "occasionally" on Video Account.

For example, the live broadcast updates of the official Douyin accounts of Lancôme, L'Oréal Paris, and vivo all show that they have been live streaming on Douyin every day since the beginning of this year. On the video account, the official accounts of Lancôme and L'Oréal Paris show that "the live broadcast started 1 month ago", while vivo shows that "the live broadcast started 2 months ago".

It can be seen that Video Account still needs to make up for its shortcomings in building brand power.

On the other hand, the entry of brand merchants is quite beneficial to the current video account - the video account is still in its early stages of development, and infrastructure such as team resources and management mechanisms needs to be improved. Attracting brand merchants with better quality control and more complete logistics and after-sales services can alleviate the platform's management pressure to a certain extent.

In addition, compared with ordinary merchants, brand merchants will contribute more to the platform's advertising commissions and other revenues.

Taking Alibaba as an example, a research report by Southwest Securities shows that with the launch of Tmall in 2011 and the gradual increase in its market share, Alibaba's monetization rate has increased rapidly, from 2% to 3.6% between fiscal year 2012 and fiscal year 2019.

In fact, the ecological tone promoted by the video account not emphasizing price power can also enhance its attractiveness to merchants.

After all, low prices will reduce profits at every link. What merchants need is not another Douyin or Pinduoduo, but the unique value of the video account that no one else has - "Based on the strong private domain attributes brought by social logic, merchants can more easily achieve the "personality foundation" of the video account, and have a deeper emotional connection with users. The products thus gain a stronger "trust" endorsement, and have the opportunity to obtain premium space," said WeMall.

The high-end women's clothing brand Lancome once told "Financial Story Collection" that the video account has created a healthy competitive environment for merchants, allowing them to focus on improving their quality and brand.

Gong Haihan believes that there is not much significance in Video Account becoming a low-cost e-commerce platform. In other words, Video Account cannot defeat Douyin in the way Douyin did, nor can it defeat Pinduoduo in the way Pinduoduo did.

This is also the tone that Tencent has set for its video account. "We cannot follow others and do the same thing. Instead, we must combine our own characteristics to make short videos for social interaction among acquaintances," Ma Huateng said in his 2024 speech.

In addition, Video Account’s focus on brand power is not just the platform’s “wishful thinking”, but is also in line with the consumption concept of the Video Account user group.

Let’s first look at the user portrait of Video Account. At the 2024 WeChat Open Class, the relevant person in charge stated that consumers in first-tier, new first-tier and second-tier cities account for more than 60% of Video Account, and people aged 30-50 contributed 40% of the increase in Video Account.

This is a group of treasured people in China's e-commerce field with strong consumption power. According to the 2024 WeChat Open Class data, in 2023, the average customer unit price of video accounts in various industries was 180 yuan, higher than the level of peers. For reference, in June 2022, Xiao Gu, then head of Kuaishou's e-commerce, revealed in an interview that the customer unit prices of Taobao Tmall, Douyin and Kuaishou were 120-150 yuan, 90 yuan and 50-60 yuan respectively.

Moreover, the survey found that video account users have a high degree of brand preference. According to the survey data of Growth Black Box in September last year, 47.7% of video account users prefer well-known brands, 38% prefer less famous brands, and only 14.2% prefer completely unknown or even no brands.

Source: Growth Black Box

It can be said that the brand power strategy of Video Account has a sense of "the right time, the right place, and the right people".

3. Others "fight each other", while the video account "keeps itself out"

At present, Taobao, Jingdong, and Douyin are in a "fighting" situation. According to Wandian.com, Taotian Group listed Douyin e-commerce as its number one competitor in early 2024; another person close to Pinduoduo said that Pinduoduo is worried that Douyin e-commerce will follow its own strategy, introduce white-label products, and then compare prices to achieve low prices.

However, the e-commerce "newcomer" video account seems to be outside the competition, "living in a corner" and "keeping itself safe".

The confidence comes from the fact that, on the one hand, Tencent does not currently rely on e-commerce as its main revenue source, and revenue from diversified businesses such as games and enterprise services still has considerable room for growth.

The financial report shows that Tencent's revenue in Q3 2023 increased by 10% year-on-year, of which value-added service revenue including games accounted for 49%, an increase of 4% year-on-year; online advertising revenue accounted for 16%, an increase of 20% year-on-year; financial technology and enterprise service revenue accounted for 34%, an increase of 16% year-on-year.

Source: Tencent Financial Report

As the saying goes, "If you have food in your hands, you won't be worried." This gives Video Account the confidence to not participate in price wars to seize the market. As Ma Huateng mentioned in his speech, "It seems that we are the only one among BAT that can sprout new things, including mini-programs, search, mini-games, etc."

In contrast, for other platforms, e-commerce is their main business. For example, in Q4 2023, Alibaba Taobao's revenue accounted for 49.6%, and in Q3 2023, JD.com's retail revenue accounted for 85.6%. The main business is facing challenges, and the pressure is naturally greater.

On the other hand, Video Account and other platforms are at a different stage of development. Other platforms seem to be in a "midlife crisis" and have more or less encountered growth bottlenecks. They must inevitably defend themselves against low-price competition.

For example, Alibaba's financial report shows that Taotian Group's revenue in Q4 2023 was 129.1 billion yuan, a year-on-year increase of only 2%; according to LatePost, Douyin's e-commerce payment GMV exceeded 2.2 trillion yuan in 2023, close to the team's predicted ceiling of 2 trillion to 3 trillion yuan, with a year-on-year growth rate of about 40%, lower than 100% in the previous year.

The video account is still in its "youth" stage, the driving force is clear, the upward trend is set, and it has the confidence to maintain its own pace.

Data from WeChat Open Class shows that in 2023, the GMV of live streaming sales on Video Accounts increased nearly three times year-on-year, the supply quantity increased by more than 300% year-on-year, and the number of orders increased by more than 244% year-on-year.

In 2024, the growth imagination of this "young" video account will be further expanded. Ma Huateng set the tone in his speech, "This year, we can fully develop the video account live e-commerce, and e-commerce and advertising complement each other."

The content of the WeChat open class shows that in 2024, Video Account will release new dividends in various aspects such as infrastructure, traffic, and incentives.

In terms of infrastructure, the team will continue to increase in the new year, and it is estimated that the team will expand by hundreds of people.

In terms of incentive policies, Video Account will increase its investment and support in 2024, providing at least twice the resource support. For reference, according to Yibang Power, in 2023, Video Account’s cumulative investment in commission reductions and exemptions exceeded 500 million yuan, and traffic incentives exceeded 300 million yuan.

There will also be new breakthroughs in advertising traffic. WeChat plans to launch new advertising products in conjunction with AMS (Tencent's marketing service) to help WeChat Beans and ADQ integrate deeply, so that merchants can explore more efficient traffic methods based on this.

At the same time, the combination of public and private domains will also be a focus in 2024, and new solutions and products combining public and private domains are expected to be launched. He Di, general manager of Tencent Smart Retail Vertical Industry Ecology, once said that Video Account will become a typical case of the combination of public and private domains in 2024.

It can be seen that none of the above policies are related to low prices, but instead focus on increasing the certainty of merchants in operating video accounts.

In the e-commerce war in 2024, Video Account will continue to follow its own rhythm and tone and compete with other e-commerce platforms.

Written by: Wang Shuran, Edited by: Chen Jiying

Source public account: Financial Story Collection (ID: cjgshui), experienced observer, cautious commentator, original and in-depth interpretation across finance and technology.