The traffic tide of Douyin determines the fate of merchants

Is the current status of Douyin e-commerce promising? Is there any new impetus for the traffic-driven business model? This article provides some analysis.

“Doing business on TikTok is as exciting as dancing on a Ferris wheel.”

An e-commerce merchant made a joke on Xiaohongshu, which attracted a lot of responses in the comment section. Merchants expressed their discomfort and confusion about Douyin.

From a certain perspective, their complaints are not without reason.

Taking local life as an example, it was clearly making rapid progress by relying on the flood of traffic, but when Meituan fought back with all its might, it changed its focus and saw a decrease in traffic.

This is confirmed in the business data. As shown in the figure below, the overall GTV growth rate of Douyin's local life in the first half of 2023 has increased fivefold, but the monthly performance is uneven - for example, GTV fell 1% month-on-month in June, and increased 13.3% month-on-month in July.

The situation is even worse for e-commerce business. Some relevant sources said that the speed of rule changes in traditional e-commerce over 10 or 15 years cannot keep up with the "iteration" of Douyin in one year.

It is said that a good business model has a stable cooperative experience, but why is the story different with Douyin?

We have conducted in-depth research and found that the change in rules is just a means. Behind it is the "traffic tides" that have been set off in the process of Douyin's ultimate pursuit of commercial value .

For example, if we review the ups and downs of local life, we will find that the changes in Douyin's rules, although like June, also have a "certain rhythm": the marketing cycles of e-commerce and local life merchants have obvious seasonality, but they happen to be staggered, and traffic migration often follows the peak season of each field.

In fact, such ups and downs have been repeated in the e-commerce sector. For example, some merchants habitually said, " Treat Douyin e-commerce like a scumbag. If it changes, you must change too. "

In these waves dominated by platforms, the merchants who are swept forward have experienced the ups and downs of fate.

1. The harder merchants try to get something for free, the bigger the wave of traffic diversion will cause

“No matter how hard you try this year, it’s hard to get free traffic.”

This is a clothing merchant who recently shared on social media platforms. She felt that she could not get involved and said, "Maybe I shouldn't have touched the Douyin business in the first place."

But in fact, the situation she faces has nothing to do with how hard she works, because the problem lies at the source.

According to expert minutes, starting from 2022, the proportion of Douyin's e-commerce traffic will drop from 13% to 9%+; at the same time, the proportion of paid traffic will continue to increase.

To put it bluntly, the traffic pool provided by the platform to e-commerce has become smaller, and the majority of it has been used for monetization, so the flow of free money for merchants has become shallower.

Not only that, Douyin has also changed the rules for the irrigation of natural traffic. Many service providers and merchants have stated that on the basis of the original GPM (sales amount per thousand impressions) assessment, the OPM (number of orders per thousand impressions) assessment weight has been added.

To put it simply, in the same type of track, the evaluation criteria for natural traffic distribution have changed from focusing on "sales volume" to focusing on "sales volume" .

In this way, merchants who continue to use the GPM strategy and focus on transaction amount will naturally fall out of favor.

The combined flow of these two traffic tides is obviously not something that the original "vested interest" merchants can resist. After all, no matter how vigorously the fish swim, they cannot change the direction of the water flow.

But the question is, why is the free traffic, which has created countless GMV myths such as Oriental Selection, suddenly restricted and diverted?

Just look at the situation at the water-making end and you will know.

In the past year, the increase in Douyin e-commerce DAU was not very good. The expert minutes in June 2022 indicated that the number of users placing orders in 2021 was 330 million, and it was hoped that it would reach 450-470 million in 2022. However, according to the minutes in November: the effective e-commerce DAU was about 370-380 million.

At the same time, old users are no longer as active as before.

According to the "2023 Douyin E-commerce Semi-annual Report" by Chan Mama, the year-on-year growth rates of likes and barrages in Douyin e-commerce live broadcast rooms in the first half of the year were -29.6% and -18.5%, respectively. The audience's willingness to interact decreased and the length of stay shortened.

Affected by this, from May 2022 to May 2023, the year-on-year growth rate of Douyin's e-commerce GMV dropped from 220% to 80%.

This is obviously not a good sign for Douyin, which needs high growth. As a result, the core contradiction of Douyin e-commerce has returned to attracting new customers.

Compared with the GPM assessment method that focuses on GMV, the OPM assessment method that focuses on transaction volume is obviously easier to attract new customers. The reason is simple: GMV assesses both transaction volume and average order value, while OPM assesses transaction volume by only attracting new customers.

It can be seen that players who comply with the new incentive mechanism have been rewarded.

For example, the live broadcast room of Nanmimi Group, which follows the "coconut tree style" route and features beautiful fashion shows, has emerged recently - almost 80% of the traffic to the live broadcast room comes from the platform's free streaming, driving monthly sales to over 100 million.

It was chosen by the platform, on the one hand, because most of the products selected in the live broadcast room are sold very cheaply (basically below 100 yuan), everyone can buy them without any effort, and it is easy to increase sales.

On the other hand, male users account for as high as 79% of the fans in its live broadcast room.

And this is exactly the new traffic that Douyin is eagerly looking forward to . After all, its e-commerce users have always been mainly female groups. According to data from Chanquanquan, female users accounted for 70% in the first half of 2023.

Under the horse racing mechanism and benchmarking effect, many merchants rushed in and began to compete to lower prices to increase OPM in exchange for free traffic opportunities. For new e-commerce users, low-priced products have little trial and error costs and are easier to get started.

The harder merchants work to get free traffic from the platform, the bigger the waves created by the TikTok wave will be.

The continuous addition of new e-commerce traffic means that GMV has returned to the high-speed train, and once converted and labeled, it becomes high-quality commercial traffic. The platform can resell it to merchants with paying capabilities and earn advertising fees.

However, this wave of adjustments did not affect major advertisers, such as brand merchants. According to LatePost, Douyin operates brand merchants and non-brand merchants separately, with brand merchants paying more attention to GMV and non-brand merchants paying more attention to order volume.

On the other hand, the entry of new e-commerce traffic can also improve the experience of users who are frequently interrupted.

In general, whether it is the amount per thousand impressions or the number of orders per thousand impressions, they are just strategic means for Douyin at different stages. When it is necessary to attract new users, the OPM weight will be increased, and when it is necessary to increase GMV, the GPM weight will be increased.

Such a traffic tide fully "mobilizes" the initiative of merchants, makes sufficient contributions to the platform, and speeds up the operation of the money printing machine.

2. The shelf scene where traffic is directed, some people grow peaches, some people pick peaches

Many people may have noticed that many brand merchants have entered the Douyin Mall this year.

According to "Zhaobo" report, they tried to join hands with Douyin to create popular products in the "Brand Pavilion" and "Super Value Purchase" - the platform bears half of the price difference subsidy and reduces the selling price by 10% to 20% lower than that in the live broadcast room.

You know, more than a year ago, the wind direction was not like this.

At that time, the newly launched Douyin Mall wanted to use the "DOU2000" project to attract the top 2,000 brands in terms of sales on Tmall to join the mall. But the reality is that the plan is difficult to implement, as many brands come here to do live broadcasts and have little desire to operate shelves.

So why did the two levels suddenly reverse? This can be traced back to the reason why they are so keen on shopping malls.

In Douyin’s original conception, the mall model was a win-win move:

• User side: Avoid pushing too much e-commerce content in the information flow to restrain from disturbing users.
• Merchant side: It solves the problem of low repurchase under the information flow model and provides a channel suitable for long-term operation.
• Platform side: Breaking through the GMV ceiling under the information flow model, adding a new advertising monetization model - search advertising.

But people watch Douyin for short videos and entertainment, not to go shopping. It's like when you go to an amusement park, you go for the roller coaster, Ferris wheel, etc., not to visit the supermarket.

The ambiguous attitude of users naturally affects the choices of brands and merchants. Just as a beauty and personal care service provider said: Most brands (especially standard products) have limited SKUs and limited brand budgets, so they will only invest resources in the things that have the greatest chance of success.

Douyin is obviously aware of this. Friends who often shop should have discovered that since this year, Douyin can be said to have "all roads lead to the mall."

You can go directly to the mall by swiping left on the short video interface; from swiping to the product recommendation video to clicking to enter the shopping interface, the mall entrance is recommended many times, and if you swipe one more time, you will be drawn to the mall recommendation.

To put it bluntly, the algorithm understands your shopping psychology, caters to your preferences, and does everything possible to make you develop the habit of placing orders in the mall.

On the other hand, they no longer "kneel down and lick" brand merchants, but instead attract small and medium-sized merchants with weak financial resources. For example, this year's measures include individual store opening, no deposit required, and no commission for product card (referring to the card that displays product information in the shelf e-commerce scenario).

According to a report by Doujiao, a food category operator said that without investing in traffic, product cards can bring in 40% of GMV. This is equivalent to using Douyin shelves to make up for the GMV that can be brought in by the front end (short videos, live broadcasts).

With new traffic pools to be used for free, small and medium-sized businesses naturally flocked in. Relevant disclosures show that in terms of quantity alone, small and medium-sized businesses account for more than 50% of the businesses that use Douyin shelves as their main business base.

With the efforts of the above two aspects, shelf e-commerce has naturally become "lively". According to official disclosures, as of May this year, Douyin e-commerce shelf scene GMV accounted for 30%.

When peaches are ripe, the peach pickers - brand merchants will naturally come . As the founder of a food brand once said, "We prefer to wait until the commercialization path of the shelf market matures before making investments."

As a result, the commercial imagination space of Douyin Shelves has become beautiful. It seems that everyone has got what they need and everything is happy.

But little do people know that behind the glamorous family reunion, there is another group of people who are carrying the heavy burden forward.

In fact, the traffic that Douyin uses to cultivate users' "mall ordering" habits is part of the merchants' advertising fees.

Taking socks advertisements as an example, you see an advertisement from Merchant A and click on it. The introduction page will show the same products from Merchant B, Merchant C, etc. in the mall, and they may even have lower prices. In the end, you may abandon A and choose B or C.

In other words, part of the merchant's advertising fee is used as a "tribute" to attract new traffic to the mall. Such diversion has reduced the merchant's traffic investment ROI to a certain extent and increased the traffic investment cost - the same advertising fee has lowered the conversion rate.

It should be noted that under the above-mentioned traffic restrictions and reroutes, merchants who cannot get free rides have flocked into the paid traffic pool, which has already caused the cost of traffic investment to "rise with the tide." Some merchants reported that "Qianchuan's advertising fees have skyrocketed since the second half of 2022."

This means that for small and medium-sized businesses that do not set up shopping malls and continue to charge fees, their path will become increasingly narrow.

Even if small and medium-sized businesses follow the tide of traffic, adjust in time, and move into the mall, using "free traffic" - the platform uses the merchants' own money to pay them rewards for "running through the shelf scenes", it only buys them a chance to breathe.

After all, brand merchants have already rushed in, and the traffic pool is expected to become crowded again.

3. Traffic tides are difficult to guard against, and the overall return rate is high

Two months ago, at the "Douyin E-commerce Open Day" event, someone brought the topic of "Douyin's high return rate" to the real person.

The on-site management explained that from an industry perspective, the return rate in live streaming scenarios is indeed higher than that in shelf scenarios, mainly because users in shelf scenarios have clearer shopping goals.

To put it bluntly, the root of the problem is consumers - they make impulse purchases in live broadcast rooms and easily regret it afterwards.

But it stands to reason that live streaming e-commerce has been developing for three years, and the proportion of impulse consumption should gradually decrease. However, the situation on Douyin is getting worse.

It seems that there is a hidden reason behind the high return rate of Douyin. After sorting out the relevant information, we found that it is still closely related to the "traffic tide of Douyin" .

In fact, at the "Tik Tok E-commerce Open Day", the management also said another sentence: When consumers have the need to return or exchange goods, we must protect their right to conveniently return or exchange goods. To this end, we have been optimizing the corresponding products and operational capabilities.

One of the operational capabilities mentioned is to use traffic as bait to encourage merchants to provide freight insurance. For example, an operator of a fashion women's clothing brand mentioned that merchants must provide freight insurance when they want to get resource positions or participate in activities.

Some merchants also said: "If you don't include shipping insurance, fewer customers will buy. If the relevant data is not good, the platform will not allow natural traffic to come in."

As a result, many businesses began to encourage consumers to return goods in the live broadcast room. Every few minutes, the anchor would repeatedly remind people in the live broadcast room to buy with confidence and return the goods if they are not satisfied. We have freight insurance and returns are convenient and free.

In addition, combined with the above, the core contradiction returns to attracting new Douyin e-commerce, increasing the OPM (number of orders per thousand impressions) assessment weight, redirecting traffic, and encouraging merchants to run volume.

Under such an incentive mechanism, merchants will compete fiercely on prices in order to grab free traffic.

Take clothing as an example. People no longer compete for innovation. Instead, one merchant launches a hit product, and others quickly follow suit and imitate and sell the same product. Moreover, many merchants use inferior fabrics and cheaper zippers, and lower the price to half of the original hit product.

When seeing the same product at a cheaper price, users will most likely return the original product first, regardless of the quality. And if they receive the cheaper product and find that it is not what they described, they will naturally return it.

This has already raised the return rate, and merchants will then find that much of the free traffic they are scrambling for may be general traffic released by the platform (users who have not purchased anything on Douyin).

For example, a merchant complained to Xinbochang: "Faced with general traffic from people who are not the target consumer group, if we don't work hard to convert them, the traffic weight of the live broadcast room may be reduced; but if we work hard to convert them, the final result is a high return rate."

With so much pressure and cumulative influence, the overall return rate can be imagined.

The high return rate not only indirectly raises marketing costs - calculated based on an ROI of 1:8, when the return rate is 50%, the marketing rate is 25%; when it rises to 70%, the marketing rate will increase to 40%; it will also cause inventory backlogs.

This naturally has a huge negative effect. For example, a Douyin e-commerce merchant said, "Now most of the funds are tied up in these goods, and the existing funds may not last long."

Overall, Douyin’s traffic tide is “impossible to guard against”, which undoubtedly increases the danger of the wave and also puts higher demands on the businesses that “ride the wave”.

IV. Summary

"When you evolve from ancient man to modern man, you will find that the people competing with you are all Trisolarans. You will most likely lose your 10 million. It is better to turn back now."

In the crowded live broadcast room, the blogger put aside the overwhelming purchasing information and earnestly advised a big brother who left a message saying "I want to enter the live broadcast e-commerce now".

As it said, Douyin is no longer a "wealth-making place" with gold everywhere. As it continues to pursue high-speed operation of the platform machine, the businesses in it will inevitably be forced to serve its profit maximization.

In the waves of traffic triggered by the adjustment of traffic rules in live broadcast rooms and the shift of platform business focus, the law of survival of the fittest is constantly being played out.

Author: Zhang Ranran, Hei Yinke, Editor: Fu Xiaoling; Data support: Insight Data Research Institute

Source: Inside and Outside the Table (ID: excel-ers), Insight Data Research Institute.