Douyin instant retail brings in a “new ally”

In recent years, Douyin has been developing in many directions, especially in the local life aspect, and has spent a lot of effort and hard work. Not long ago, a new account "Wumart Supermarket" was opened on Douyin. Is this because Douyin is going to enter the instant retail market? The author of this article has analyzed this, let's take a look.

Supermarkets that focus on offline experience have brought the local life service of "one-hour delivery" into the live broadcast room.

Recently, a new account "Wumart Supermarket" was opened on Douyin. Its operating entity is shown as "Beijing Wumart Supermarket Co., Ltd." and the associated Douyin store has more than 1,000 products in 10 categories and has held five live broadcasts in the past seven days.

In this live broadcast room, the goods ordered by consumers are shipped from Wumart Supermarket (Beijing Daxing Longhu Store) and received within 1 hour, which is similar to "ordering takeout". Supermarket live broadcasts are no different from ordinary live broadcasts at first glance, except that the source of goods has changed from brand merchants on Taobao, JD.com, and Pinduoduo to supermarkets that you can see every day.

But the essential difference is that as a core player in near-field e-commerce, firstly, supermarkets can achieve shorter delivery times and faster delivery; secondly, due to the time advantage, they have a certain imagination in the delivery of fresh food and other categories.

In August this year, Douyin officially announced a partnership with Ele.me. Ele.me entered Douyin in the form of a mini program, providing Douyin users with a new experience of local life services from content seeding, online ordering to instant delivery. This is seen as an important signal that Douyin is entering the food delivery market.

Now, following the “order takeout on Douyin”, Douyin has brought in large supermarkets, trying to get you to arrange “online supermarket shopping” as well - although supermarket door-to-door delivery is no longer uncommon, but on food delivery platforms such as Meituan and Ele.me, you can’t see the live broadcast room, and e-commerce platforms such as “Maogoupin” that excel in express delivery across the country find it difficult to shorten the delivery time to 1 hour.

Douyin has combined the three elements of "sufficient supply, efficient delivery, and live streaming and cloud shopping". It starts from local life and finds roles such as takeaways and supermarkets. The higher-frequency near-field e-commerce is not only a means for Douyin e-commerce to replenish "goods", but also an opportunity to open up a new situation in instant retail.

However, for supermarkets that want to catch the express train of live streaming e-commerce, there are hidden challenges in every link of warehousing, logistics, distribution, and settlement. Looking at the financial reports of various supermarkets, it is not a simple business for supermarkets to make money through live streaming.

01 Live broadcasts with sales of less than 1,000 yuan

Wumart's live streaming trial can be traced back to October this year. At that time, Wumart Group piloted supermarket scene live streaming in Beijing and sent products to the whole country for the first time through the Douyin account of "Wumart flagship store".

Unlike ordinary live broadcast rooms, Wumart set up the live broadcast room directly at the Wumart hypermarket Shuangjing store, and broadcast it for 6-8 hours a day. From September 16 to October 11, the account broadcast nearly 60 live broadcasts in total, with sales exceeding 3 million yuan.

Lu Shan, head of Wumart's new media department, revealed two key pieces of information in an interview:

1. In the future, Wumart will establish a vertical account matrix on Douyin, "for example, there will be accounts dedicated to selling rice, flour, grain and oil, accounts for alcohol, and accounts for family and personal care products";
2. It may utilize the backend processing system and distribution system of Wumart’s multi-point Dmall to promote instant delivery services in live broadcast rooms.

“For example, after consumers in Zhejiang see the product information in the live broadcast room and place an order, the store will pick up and deliver the goods nearby. This can be understood as the live broadcast version of takeout.” Wumart said that by optimizing logistics, it will take the lead in conducting a live broadcast instant delivery pilot in Beijing in the future.

At the end of November, an account named "Wumart Supermarket" released its first short video. At present, this is also the main account for Wumart's live streaming and instant delivery.

Unlike the "Wumart flagship store", the live broadcast of "Wumart Supermarket" is not held in the supermarket. The anchor sits in the live broadcast room to introduce the products, which is very regional. Click on the small yellow cart, and the product link is marked with "Wumart Supermarket (Daxing Longhu Store)". Consumers cannot switch stores. When purchasing products in the live broadcast room, the delivery address is limited to Beijing.

The anchor said that the goods can be delivered within an hour, "but for now it can only be delivered to Beijing, and there may be new areas in the future."

The reporter observed the broadcast on December 26 and found that the account sold eight categories of products on that day, including fresh food, grains and oils and seasonings, personal care, instant drinks, clothing cleaning, paper wipes, alcohol, and snacks and specialties.

These categories of goods are not limited to Douyin Stores. Douyin Stores have more types of goods, but they are more concentrated in fast-moving consumer goods. Even in the fresh food category, most of them are daily necessities such as vegetables, while fruits are mainly kiwis, lemons, and grapefruits that have a longer storage period.

The fresh produce sold in the live broadcast room includes relatively delicate products such as strawberries and longans. The products on sale also show signs of being "carefully selected" in conjunction with the upcoming New Year's Festival.

Left: Live broadcast room Middle: Live broadcast room categories Right: Douyin store categories

The reporter went through the ordering process and after filling in the delivery address, it was basically no different from ordering takeout.

Wumart Supermarket (Daxing Longhu Store) ships the goods, but the delivery cost is higher. Consumers need to pay a delivery fee of 5 yuan and a packaging fee of 1 yuan. The delivery fee can be waived if the purchase is over 51 yuan. Consumers can choose to pay with Douyin or Alipay.

However, some commodities are prone to out of stock. Wumart does not have online customer service, only a contact number. Consumers can only choose "official customer service", and the official customer service is shown to be from "Douyin e-commerce supermarket platform customer service." The other party stated that Douyin is not responsible for delivery and merchants have their own riders.

Although the overall ordering experience was smooth, sales were not satisfactory.

As of press time, "Wumart Supermarket" has accumulated 2,818 fans and has broadcast five shows in the past seven days. According to Chanmama data, the average number of viewers per show is 318, with sales of less than 750 yuan. The category with the highest sales is fresh fruit, accounting for 56%, and the remaining sales are mostly food and beverages.

In comparison, the "Wumart flagship store", which is not limited to one-hour delivery, is not so regional, and can ship nationwide, has broadcast five shows in the past seven days, with sales ranging from 25,000 to 50,000 yuan, which is already a good result. The one-hour live broadcast version of the takeaway business is not as easy as imagined.

02 Wumart starts live streaming, but its real purpose is not to sell goods through live streaming

In the two years when live broadcasting/short videos were the most popular, almost all apps were engaged in live broadcasting and short videos. However, local life service platforms such as Meituan and Ele.me, as well as JD.com, which has a heavier self-operated business, basically did not make much movement.

Ultimately, it’s not about conservatism, but the problems they encounter are similar to the challenges faced by supermarket live streaming.

Compared with Meituan and Ele.me, their strong regionality makes their profits rely more on economies of scale, and there is a clear upper limit on the orders that can be generated in a small area. Compared with JD.com, its category structure is dominated by fast-moving consumer goods and has a transparent gross profit margin under diversified sales channels, just like traditional offline supermarkets. It is also not suitable for live streaming with a heavier model - the essence is that the input-output ratio is too low.

In 2020, when the epidemic was at its worst, many supermarkets tried online live streaming. However, to this day, many supermarket live streaming is still for the purpose of "publicity and promotion" rather than live streaming to sell goods.

Walmart, RT-Mart, Carrefour, and Yonghui Supermarket have all opened Douyin accounts, but none of them have opened Douyin stores. These accounts are limited to sharing "food secrets" and "treasures", but they do not use short videos to promote products and rarely broadcast live. Wumart is the first to move products into Douyin stores and live broadcast rooms. Many supermarkets' self-operated apps have also abandoned the live broadcast/short video section.

"This is because we know that the supermarket retail model and the live streaming e-commerce model are highly mismatched." Zhuang Shuai, founder of Bailian Consulting, told reporters that there are currently two ideas for retail companies to start live streaming. One is that the e-commerce business is completely independent, and the other is to carry out the business with "physical stores" as the core.

"The former sets up a separate warehouse and does not ship from stores. In fact, it is equivalent to a new business. It just borrows the name of 'xx supermarket' and has a certain brand value, but its essence has deviated from the traditional supermarket format, so there is no way to talk about supermarket live broadcasting, just like Tmall Supermarket; here we discuss the latter, store delivery, store warehouse integration, under this model, if you want to sell goods through live broadcasting, it actually belongs to same-city delivery and instant retail, which is very difficult."

Carrefour also tried live streaming, primarily because of the mismatch between the strong regionality and the scale effect of live streaming.

A supermarket of about 20,000 square meters can have hundreds of thousands of SKUs. Offline supermarkets are typical examples of "wide SKUs and shallow inventory", with a wide variety of goods but small stock quantities. Live streaming sales, on the other hand, are just the opposite, with "narrow SKUs and deep inventory", with profits coming more from hot-selling products, and the sales of a single product can sometimes even reach hundreds of thousands of pieces.

In this case, supermarkets have too little stock to support the scale effect of live streaming; but if they have too much stock, with store-warehouse integration and store shipments, there will be a clear upper limit on the customer base and regions that can be covered, and the limited consumers cannot support a large enough number of orders.

Secondly, due to the difference in product category structure, supermarkets are more likely to meet the daily needs of consumers, with transparent profit margins, and the input-output ratio of live streaming is low. The gross profit margin of supermarkets is generally not high. Data shows that in 2020, Wumart Group's gross profit margin was 22.7%. Among them, the gross profit margin of Metro China acquired by Wumart in 2020 (April 23 to December 31) was only 18.1%. "The product categories sold in traditional supermarkets have low profits, and the average customer spending in supermarkets basically does not exceed 100 yuan. Revenue mostly relies on covering more areas (opening stores) to achieve efficient turnover, but this runs counter to the live streaming model."

On the other hand, most of the goods sold in supermarkets are fast-moving consumer goods, which, unlike strong categories such as clothing and beauty products sold through live streaming, do not require strong experience demonstrations. In the past two years, some supermarkets have also tried to expand more non-standard products. For example, Yonghui Supermarket once sold clothing and launched its own clothing brands including Nadian, DD Shangpin, and TUTU, but the revenue they contributed was very limited.

Zhuang Shuai believes that "when consumers have not developed the mentality of going to supermarkets to buy specific goods, supermarkets will still use shelf-based e-commerce and search-based e-commerce as their main business logic, and opening live streaming instant delivery services cannot balance revenue and costs." Based on this, the cooperation between Wumart and Douyin is more likely to be achieved not because of live streaming e-commerce, but to expand new channels in order to tap into the centralized traffic of Douyin Mall.

03 The new battle of Douyin instant retail

Wumart's live broadcast is not about "live broadcast with goods" itself, but about exploring new models. In this way, the sales of five live broadcasts are less than 1,000 yuan - the sales volume may not be an important measure of the results of this cooperation.

In comparison, this is more like a strategic cooperation between Wumart and Douyin on new directions of instant retail based on technological exploration.

Since the beginning of this year, Douyin has attracted many allies in the field of instant retail. On August 19, it officially announced its cooperation with Ele.me, which tied itself to the new gameplay of "ordering takeout" that can be seen, ordered and delivered immediately; on December 5, it reached cooperation with Dada, SF Express and Shansong, and the latter will provide "group purchase and delivery" services for Douyin life service merchants in the future, and gradually realize the "average 1-hour delivery of group purchase packages throughout the city"; now, Wumart, which has rich experience in the field of digital retail, has been brought into the same camp.

However, instant retail is also one of the most difficult markets to conquer. Merchants, platforms, riders, and consumers need to work together, especially supermarkets, which are essentially "offline platform" partners. Online and offline, between platforms, whether in the setting of consumption links or the opening of data interfaces and management systems, the challenges to be overcome are hidden beneath the surface.

Zhuang Shuai cited Wumart and other supermarkets as examples, “A big difficulty in instant retail is the synchronization of financial settlement systems.

In the Chinese market, many large retail companies have opened stores in multiple locations, all in the form of branches. Each store is a branch, and the financial affairs are also confirmed with the location of the store. However, this makes it difficult to synchronize the settlement system and product allocation between different stores.

In addition, in the physical retail model, consumers pay for goods immediately after purchasing them, and the goods are sold. However, when selling on online platforms, supermarkets no longer need to manage physical goods, but inventory management.

That means a virtual inventory system is needed. When goods are shipped, they are shipped out, but once they are returned, they need to be put back into the warehouse. A corresponding return and exchange system, distribution system, etc. are also needed. "The real competitive barrier for players who once stood out in the instant retail industry, such as Meituan, is to open up the online and offline system connection with merchants, but the cost is also huge.

For Douyin, bringing in Wumart is another important step to enter the instant retail market; but for Wumart, conducting live streaming sales centered on physical stores, as explained above, it is difficult to generate substantial revenue.

But this does not mean that there are no new opportunities for offline supermarket live streaming. If measured by price and timeliness, the latter is the advantage of supermarket door-to-door delivery, but the user mentality of instant delivery can be influenced by multiple factors.

"For example, when the goods in supermarkets are expensive and sold fast, consumers may choose to give up the 'fast' aspect and instead go to platforms such as Pinduoduo to buy the same goods at a better price. Supermarkets want to change this situation, unless they are both cheap and fast, but we all know that this is difficult to achieve, so the only way left is to be both good and fast." Zhuang Shuai explained that differentiated products that others do not have are the key to achieving this "good".

"Wumart, which has been deeply involved in the Beijing market, still has a great advantage in this regard. This is because regionalization has allowed it to accumulate rich data on Beijing consumers, which it uses to customize products and strengthen its own brands. When the live broadcast room has items that consumers are willing to buy, it will be more likely to run this model successfully."

At present, by entering Douyin, Douyin stores drive natural traffic, and have lower labor costs than live streaming sales. The multi-channel layout is undoubtedly an increase for Wumart, but how live streaming sales will develop still needs to be carefully observed.

Author: Wang Yaqi; Editor: Si Wen

WeChat official account: E-Commerce Online (ID: dianshangmj), see sharpness and insights, and focus on innovative media on the Internet and new business.