Tik Tok’s channels have surged, what should we do with our “weak” business?

Among multiple e-commerce platforms, it is better to say which one is different than which one is better. Douyin channel sales have soared. How should e-commerce people view the relationship between traditional e-commerce and content e-commerce? In this article, the author sorts out the viewpoints and summarizes the corresponding business and operation strategies to answer the question, hoping to give you some inspiration.

A wave of anxiety is spreading in the e-commerce circle.

Lin Shen has worked in traditional e-commerce for five years and is now the channel manager of a clothing company with a revenue of approximately 1 billion yuan. He is independently responsible for the flagship stores of its brands on Taobao and JD.com.

A year ago, the company’s e-commerce channel ranking (by sales) was “Taobao Tmall, JD.com, Douyin, and others”, but now it has become “Douyin, Taobao Tmall, JD.com, and others”.

Douyin surpassed Taobao and JD.com, and the traditional e-commerce that Lin Shen was in charge of suddenly went from being the main force to being the "second". Generally speaking, whoever is in charge of different channels of the same company has higher sales and has greater say, and can obtain more resources and budget.

For Lin Shen, there has never been a moment as anxious as it is now in the past five years. He does not know where to place traditional e-commerce companies such as Taobao, JD.com and Pinduoduo, and what new solutions are there for traditional e-commerce companies with sluggish growth.

Lin Shen is not an isolated case, and his anxiety is not unsolvable.

With the sharp increase in sales on Douyin channels, how should e-commerce professionals view the relationship between traditional e-commerce and content e-commerce? How should they re-evaluate the business value and growth logic of traditional e-commerce? In terms of practical operations, what strategies and new practices are there?

Yibang Power conducted research on e-commerce platforms, merchants and service providers, and found that Lin Shen’s situation resonated with many merchants. More than a dozen survey subjects were involved in industries such as clothing, luggage, home decoration, outdoor, and mother and baby.

Of course, some businesses also hold opposing views, believing that the impact of individual operational capabilities on business growth cannot be ignored, nor can the overall situation be denied.

The other side of anxiety is often that the underlying logic of business evolution has changed. The author tried to sort out the views of merchants and summarize the corresponding business and operation strategies.

01 "The era of buying with your eyes closed and expecting appreciation is over." Instead of comparing who is better, it is better to find differences.

Recently, Lin Shen consulted many experts, and a brand growth operator told him, "Ali's apparel (industry) has declined the most, and all the efforts have been transferred to Douyin. (Apparel brands) may have chosen the wrong direction by focusing on Taobao. The choice is more important than the effort."

This is equivalent to negating all the work of Lin Shen and his team, which makes people feel discouraged.

However, the founder of an outdoor brand has a different view. He said: "Recently, I have been almost all in on the Douyin track. Traditional e-commerce is driven by search traffic, while content e-commerce is driven by content creation. The key is to calculate the cost of organizational efficiency from what angle. It is better to be 'different' than 'better' ."

For platforms such as Douyin, Taobao, JD.com, Kuaishou, and Xiaohongshu, brands should not compare which platform is good, which platform is bad, or which platform is better than which platform. Instead, the key is to figure out the characteristics of different platforms and what operating strategies should be used.

"Just like buying a house, the era of buying it blindly and expecting it to appreciate in value is over. We can only accept it, actively adapt, and do refined operations ."

An e-commerce person familiar with the home improvement industry said that when the total retail sales of the society do not change much, we should see the impact of individual operational capabilities on growth; even if Douyin is fierce and traditional channels are weak, we have to admit that there are still many merchants on Taobao with good growth, and there are also many merchants on Douyin who cannot make money.

For example, shower heads are a small sub-category in the bathroom sector with many product styles. The black version is the best-selling model on Taobao because it looks high-end in the pictures; the silver polished version is more popular on JD.com, which is more popular among male users; while on Douyin and Kuaishou, the gun gray version has become the hot-selling model because it is highly personalized and has good video effects.

"The key is that merchants need to comply with platform rules and keep the right marketing rhythm, and on this basis, make a good combination of people, goods and places ." An e-commerce person in the home improvement industry told Yibang Power.

At present, most merchants have reached a consensus: from the perspective of the general trend, Douyin has a strong growth momentum and is worth more investment by merchants, but Tmall and Taobao still have a large user base and transaction volume. For many companies, it is still an important position and needs to be continuously operated. "Although (Taobao and Tmall) have declined sharply, they are still a giant." A luggage merchant said with a smile.

So in the future, do we need to shift our business focus to other platforms? Several e-commerce veterans have the following suggestions:

1. In the short term, the importance of traditional e-commerce channels such as Taobao Tmall, JD.com, and Vipshop will be ranked behind Douyin and Video Account, but they still need to be retained;
2. In the future, traditional channels may become like the brand’s official website. They may not be the most prosperous places for business, but they cannot be absent. The key is to do a good job in attracting traffic.

02 From ROI to ARPU, investment, allocation and assessment from different growth perspectives

"Growth rate is growth rate, and scale is scale." The head of e-commerce of a sports brand told Yibang Power that when the e-commerce platform develops to a certain stage, a slowdown in growth is an inevitable result. The bonus period will bring high growth rates, but the bonus period will also experience bottlenecks.

Moreover, traditional e-commerce channels such as Taobao Tmall and JD.com are not growing slowly, but the yardstick for measuring growth is changing.

Zhang Xia, head of a multi-channel clothing brand, said: "We are still in the middle position (on Tmall) and there is still room for growth, but it is not like before where 'as long as you spend money on (on-site) promotion, you can bring in sales'. Now we are doing more comprehensive and matrix-style content marketing."

In Zhang Xia's opinion, the revenue model of Taobao merchants has changed, from focusing on ROI to focusing on ARPU (annual/monthly average revenue per user). In the past, if you invested 1 yuan in advertising, you could earn 10 yuan back on the same day, but now you can only earn 5 yuan, or even less. ROI has seriously declined, and focusing on ROI is no longer feasible. From the perspective of ARPU, if you invest 1 yuan in marketing today, although you can only earn 5 yuan back on the same day, it can bring 500 yuan in revenue throughout the year.

In other words, today's perspective on growth should not be limited to a single channel, short time and ROI alone .

This is also what Zhang Yong, Chairman and CEO of Alibaba Group, meant. At a recent earnings conference, Zhang Yong said:

"After reaching the milestone of 1 billion active consumers last year, our future work focus will shift from increasing the absolute number of users to serving existing users well. In fact, our 1 billion consumers cover almost all active consumers in China. We can serve these consumers well, operate them in different levels and categories, and increase the wallet share of each level of users."

In other words, the previous goal of Taobao and merchants was to attract enough users. As long as there were enough users, GMV would not be low. Now the goal has become to serve existing users well, improve service experience, and then improve repeat purchases and increase average order value.

A sports brand with a scale of tens of billions, although the proportion of sales through Tmall and Taobao channels in total sales has been declining, it is still ranked first. The brand is increasing the frequency of activities and continuously activating members, and the evaluation has also changed to repurchase rate and member order ratio.

At this stage, the business strategy of many brands is to evaluate traditional e-commerce platforms such as Taobao and Tmall, focusing on the market share and profit margin of core categories to see whether they are reasonable and stable ; temporarily shelving large-scale, daily operations to attract new customers, and focusing resources on special nodes where new concepts, products and creativity emerge, and gradually forming full-case marketing and promotion activities across different platforms.

Ebrun’s research found that there are several typical voices among brands at present, such as “Brands should calculate the overall ledger of the entire region, and there is no need to compare the profit margins of various platforms” and “In the rapid growth of Douyin, the most important thing is the (GMV, user) growth rate. Relatively speaking, lower profits are not a problem.”

For example, the brand where Lin Shen works has rapidly expanded its Douyin channel business, and the team size is more than ten times that of the traditional e-commerce team. The promotion fee rate of the Douyin channel is as high as 15%, while the promotion fee rate of the traditional e-commerce channel is less than 5%. Therefore, it is conceivable that the profit margin of the Douyin channel is relatively low.

03 Brands are global and users are mobile

User data from Lin Shen’s company shows that buyers on Douyin and Taobao are not the same group of people; the only overlap between the two is that when a Douyin hit appears, users will search for keywords such as brands and products on Taobao and enter the store to complete the purchase .

The founder of another camping equipment brand had similar feelings. "Douyin can sell hot products and can be used as a traffic entry point, which can eventually be converted to Tmall and Taobao for transactions. Douyin's content has strong explosive power, but Tmall and Taobao are more stable."

In other words, at present, the strengths of content e-commerce platforms such as Douyin e-commerce lie in the promotion of high-quality content and the creation of explosive products, while the strengths of traditional e-commerce platforms such as Tmall and Taobao lie in their profit-friendly nature and stable transactions.

This also means that for brands, platforms such as Douyin, Taobao, JD.com, and Kuaishou should not be separated. Users flow between different platforms, and brands should also be managed across the board . No brand wants to become a single Douyin or Taobao brand.

"First you have to survive, then you can live a better life." Zhang Xia believes that at this stage, Taobao is still a "cash cow" of profits. To stabilize Taobao's basic foundation and innovate around price, experience, and efficiency, we must be prepared for what will be a long and difficult journey .

At the same time, merchants are expanding channels such as Douyin as a source of brand growth. "Taobao is definitely not as good as Douyin in terms of leveraging free traffic with good content and triggering a short-term burst of communication," the merchant said, but we must also be fully aware of the uncertainty and instability that new channels may have.

The traffic of traditional e-commerce platforms is mostly search-based traffic, and users have strong purchasing mentality, sufficient budget and motivation; the traffic of content e-commerce platforms can be divided into content (entertainment) traffic and e-commerce traffic. The accuracy of e-commerce traffic is slightly lower, which is one of the sources of instability.

"Tik Tok follows the logic of hit products, which means that once a hit product is sold out, if the next hit product is not developed in time to fill the position, there will be a large window period in between; if you want to fill the position later, you have to start all over again." Zhang Xia said.

Traditional e-commerce platforms are making up for their shortcomings in content, while content e-commerce platforms are urgently making up for their shortcomings in the shelf scene. The current situation is that "Taobao boils frogs in warm water, Douyin boils frogs in boiling water, and Pinduoduo spends money to buy firewood to boil frogs." Although this is a joke among merchants, it also reflects the urgency of the growth anxiety of merchants on various platforms.

From the incremental era to the stock era, the focus of platforms and merchants has shifted to user retention and conversion. Only by making good use of existing channel resources, launching a combination of measures, retaining users, and turning users into buyers can they maintain their moat in the second half of e-commerce.

(All characters in this article are pseudonyms)

Author: Liao Zilin

Source: WeChat public account "Yibang Power"