Traditional e-commerce does not make money by doing Douyin? How to break through the profit model?

1. The challenge of traditional e-commerce, is live streaming not profitable?

Traditional e-commerce has three characteristics when entering Douyin:

① Currently, there are only three categories: women's clothing, beauty and food and beverage. The other categories are still in the early stages, with a small scale, and of course there are great opportunities.

② Brand self-broadcasting has not yet been done, and more than 80% of GMV relies on experts to bring goods . Therefore, the brand lacks control. Referring to Taobao Live, the proportion of Taobao brand self-broadcasting in 2021 has exceeded 60%!

③ Whether it is experts selling goods or brand broadcasting, ROI is not very good-looking and does not make much money for many brand owners. Except for some native Douyin merchants, experts, anchors and MCN institutions that have found ways to make money , other traditional brand companies’ profits on Douyin have not met expectations, and are even generally lower than other channels.

Douyin presents a world of ice and fire, popular popularity and traffic, short video hits and live broadcast rooms for top experts; ice is the losses of new consumer brands and the ROI of traditional merchants...

Why do many traditional e-commerce and traditional brands not make money by making Douyin?

First, the reason why experts don’t make money by selling goods is because of the price war in live broadcasts, which leads to low gross profit margin; and the anchor’s commission and pit fees are very high. Causes uneven accounting. For example, the listed home textile brand Mengjie once asked a leading anchor to sell goods three times, and sold a total of 8.12 million yuan, paying the anchor 2.13 million yuan, with a fee of 26%! The price of this live broadcast hit is very low, and it would be great if the gross profit margin is equal to the live broadcast fee! Therefore, brands usually use the sales of leading experts such as Li Jiaqi as advertising channels, and the loss-making rights are used as advertising fees.

Second, brand self-broadcasting does not make money because the brand account has few fans and must buy traffic in the public domain. As analyzed in the previous article, Douyin's traffic accuracy is very low. If you are not careful, a large amount of invalid traffic comes in, which consumes a lot, has low conversion rate and low ROI, so it is easy to lead to losses.

The hardest hit areas for Douyin e-commerce to burn money are those new consumer brands. In the second half of 2021, thousands of new consumer brands that received venture capital were shouting the slogan of "integration of product and efficiency", and sales collectively declined, ushering in huge losses. Where are the money losing money? The main reason is that it is on TikTok. Although the data is beautiful on the surface, new customers are like tides, market share is the first, and the company's valuation is extremely high, users who spend money to burn have no loyalty and repurchase rate! So once you have no money and spend it, you will be left with a mess and investors will be trapped collectively.

Judging from big data, Douyin has more than 500 million monthly active users, and its user scale is comparable to JD.com. However, JD.com's GMV in 2021 was 3200 billion, while Douyin e-commerce GMV was only 800 billion. This data also shows that Douyin e-commerce has great potential and has not been fully tapped. The times create heroes, perhaps this is a new opportunity for traditional e-commerce and traditional brands. So, how can traditional merchants subvert the native Douyin business and reshape the Douyin ecosystem?

2. Traditional e-commerce will promote change and reshape the Douyin ecosystem

Zhang Yiming once said that algorithms have no values. Douyin is a arena, and there are only three types of players in the future that can survive:

First, it has a strong content output team similar to the cast and crew.

Second, traditional e-commerce and traditional brands with mature products, supply chains and e-commerce teams.

Third, new e-commerce companies that have received capital support have both the advantages of being the first and second in the front.

In addition, live broadcast MCN agencies and agency operating companies will also exist as third-party services.

As mentioned earlier, the main reason for Douyin’s low conversion efficiency is business logic. From content to e-commerce, there is a gap between the two, and Douyin has been hovering between content and e-commerce.

For example, if you sell goods, just sell goods more quickly, and you have to ask the boss to perform a piece of talent first and then sell goods? This is inconsistent with modern business logic, and it seems to have retreated back to the era of street hawking.

Especially those brands with personality design , the boss or boss lady is kidnapped by the platform, and they are broadcasting live every day, acting as salesperson. So who can decide the strategy, lead the team, manage the company, develop products, and build brands? For those companies that are addicted to selling goods themselves, the boss becomes the ceiling of the company!

At the same time, Douyin's algorithm has brought every new work back to zero and re-race, increasing business uncertainty and making it difficult for traditional e-commerce and traditional brands to adapt. Traditional merchants used to be very interested in making Douyin, but except for the three major categories of women's clothing, beauty makeup and food and beverage, there are very few other categories, and many merchants can only try it out.

Although Douyin is vigorously supporting Douyin-based native content e-commerce, traditional e-commerce and traditional brands are the main force. The GMV of the e-commerce market in 2021 is 16 trillion. If the Douyin e-commerce GMV (5%) and Kuaishou e-commerce GMV (4%) are excluded, the remaining 91% of the shares will be in the hands of traditional e-commerce and traditional brands. At the same time, a large part of these 5% and 4% are contributed by traditional merchants.

Therefore, Douyin is also vigorously investing in traditional e-commerce and traditional brands. At the same time, Douyin e-commerce will surely make changes in the future. Douyin is moving closer to e-commerce and traditional e-commerce is moving closer to content. After a long process of mutual domestication, the two sides will move towards integration and establish a new model in repeated games. This process will not happen overnight, and Douyin e-commerce still has a long way to explore.

3. The biggest advantage of traditional e-commerce is the product and supply chain

The biggest advantage of Douyin’s e-commerce is the traffic depression, and the biggest disadvantage is that Douyin’s native merchants, experts, content creators and MCN institutions do not understand e-commerce very well, and they lack the support of products and supply chains. Most Douyin merchants do not have the ability to integrate goods. For example, the most popular "sourceless e-commerce" in Douyin is currently inspiring newbie to start a business and sell goods. This is the weakness of Douyin and the opportunity for traditional merchants!

The top 30 Douyin brand sales list in 2021, including Yaya, Yalu, Peacebird, Xuezhongfei, La Chapelle, Winnie Bear, Three Squirrels, Liangpinpuzi, Huaxizi and other well-known domestic brands. They are all traditional brands and traditional e-commerce companies, and Douyin native merchants are basically absent (only one store that makes second-hand luxury goods on the list). Although Douyin has been supporting new brands, new categories and new ways of playing, the new brands incubated by Douyin have not yet formed a climate.

Doushang is good at content operations and has short video and live broadcast genes, but lacks e-commerce genes. The traditional e-commerce companies that Dou Shang and Taojing compete are not the same group of people, and the overlap is still very low. Traditional e-commerce companies have also entered Douyin, but more than 90% are only in the exploration stage, and Douyin's contribution to performance is still very low. Douyin's original goal in 2021 was to exceed 1 trillion yuan, but in fact it only achieved 80%, mainly due to the drag of goods and supply chains.

As Internet traffic gathers on short video platforms, traditional e-commerce and traditional brands have also begun to pay attention to Douyin e-commerce channels. With a deep understanding of the market, users and products, relying on the advantages of products, brands and supply chains, it will crush Douyin native merchants and become the real main force of Douyin e-commerce.

4. The big opportunity for traditional e-commerce is population/category penetration

First, choose the incredible categories to enter and penetrate . Categories other than women's clothing are still in the early stages and have great potential to tap; women's clothing categories themselves also have many opportunities to penetrate sub-categories.

The development of Douyin e-commerce categories is unbalanced, and merchants are too concentrated in a few highly competitive categories. As analyzed in the previous article, the Taobao system is an all-round e-commerce company, and Douyin is seriously oriented towards science and technology. In the Douyin e-commerce structure in 2021, the three giants have not changed over the years: clothing and underwear account for 36.44%, beauty accounts for 9.64%, and food and beverage accounts for 8.07% . Following closely behind are 8.04% of household goods, 5.44% of shoes, boots, luggage, and 4.70% of mother and baby pets. Other categories account for a small proportion and are ignored for the time being.

Among Douyin imported products, beauty (73%) and food and beverage (18%) are two giants, and other categories can be ignored.

Obviously, don’t compete in groups. You should choose blank categories to enter and deepen category penetration. For example, categories such as 3C digital home appliances, personal care home cleaning, gift cultural and creative, toys and musical instruments, virtual recharges have a certain sales on Douyin, and at least it has been verified that these categories are in line with the purchasing scenarios of Douyin people. The penetration of Douyin categories and categories also requires more attempts and exploration by merchants, and not all categories and products are suitable for Douyin.

Second, targeted population penetration and precise users are key, product selection and price positioning are the keys. Although content production is important, it is more important to study whether our company's products meet the Douyin purchase population and scenarios. Many well-known Tmall brands perform very mediocrely on Douyin, and they have no self-broadcasting volume. They also lose money when looking for experts and internet celebrities to sell goods. The team has no tricks and the boss has no confidence, so he gives up after a while. The main thing is that there is no quasi-tik Tok group's pulse, and they directly sell a plate of goods on Tmall, which does not match the Douyin group or the purchase scenario.

Of course, there are also costs and risks when re-engaging in a new plate of goods. TikTok women's clothing can be made quickly, in addition to matching the goods with people, it is also because women's clothing has operational experience in new product testing + quick response.

Third, re-exploring the profit model. Douyin's traffic is very cheap, but the value is very low, so you should avoid traps when investing. As we all know, Tmall and JD have always had brand models and effect models, and the so-called "product and effect integration" is a combination of the two. ① Effect model, fine operation, investment promotion/SD promotion, and make big and stronger step by step; ② Brand model, striving high, strategic losses, loss of money to attract new market share, and then make profits by accumulating old customers and repurchasing. However, both models will not work on Douyin, and Douyin e-commerce needs to explore new profit models.

Fourth, be the only one in the major category and be the first in the minor category. Merchants should keep up with the pace of the category waiter. Douyin e-commerce is still growing wildly, the pattern of each category is not determined, and the heroes have not yet been scheduled to sit, everything is possible. The platform official has been learning from Tmall and JD.com, and has also dug up many Tmall waiters to do category operations. Tmall waiters have copied the Taobao category investment promotion gameplay and the support model for top merchants, and have also begun to invest in clothing, home textiles, home furnishings, maternal and infant industries.

For the leading merchants in sub-categorized categories, we should pay attention to the docking with the waiter on the Douyin platform, fully demonstrate the company's strength and pattern, and closely cooperate and interact. The waiter also has pressure to perform performance appraisal and needs to rely on capable merchants to achieve their goals. This is a tried-and-eat experience and a must-see for many TOP merchants . They can enjoy a large wave of bonuses supported by category and gain a first-mover advantage.

5. The breakthrough of traditional e-commerce is brand self-broadcasting

As mentioned earlier in this article, Douyin live streaming sales account for more than 80% of the overall GMV. In other words, Douyin short video sales account for less than 20%. Therefore, the main way for Douyin e-commerce is live broadcast; short videos are mainly used to plant grass, rather than the main force in selling goods.

For example: maternal and child pets, beauty makeup, clothing and underwear, shoes, boots, luggage, second-hand idleness, virtual recharge, jewelry and entertainment, luxury goods and other categories, more than 90% of sales come from live streaming, and short videos basically contribute very little. The sales of food and beverages, toys and musical instruments, household goods, gifts, cultural and creative products, fresh food, sports outdoors, and 3C digital home appliances account for 75% to 80%, and short videos contribute relatively more.

In Douyin live streaming, brand self-broadcasting accounts for less than 20%, mainly because it is experts who are selling goods. Referring to the 2021 Taobao live broadcast GMV, brand self-broadcasting accounts for more than 60%, which is a relatively healthy business model. Therefore, Douyin merchants must dominate their own destiny and create a profit model. The future breakthrough will still be brand self-broadcasting.

Taobao live broadcast experience shows that most categories have the basis for developing brand self-broadcasting, and consumers should be guided to recognize brands rather than recognize personality. Last year, the 113-year-old famous brand L'Oreal was "banned" by Li Jiaqi and Via, which is worthy of reflection on the brand.

The process of brand self-broadcasting development is to find the target users from large traffic and accumulate loyal users. This is the process of building a brand , so it is of great significance.

At the same time, the creation of brand self-broadcasting capabilities does not happen overnight, but requires long-term investment and patience. The rules of making products: either invest money or invest in people. Unless you get a large amount of financing, it is not recommended to raise money high and spend money as soon as you start. Instead, we should pay special attention to building professional teams. Without the support of the organization and team, any business dream is a fantasy.