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The app is known as TikTok in the West. In China, its name is Douyin — which means, literally, ‘shaking sound’ in Chinese. Owned by China’s Bytedance, they both serve as a platform for young people to play with short-form videos.
Now Douyin wants to muscle in on China’s huge e-commerce sector. And the app could benefit from the support of Chinese regulators, who are keen to encourage more competition in a sector dominated by giants Alibaba and JD.com.
In late March, Douyin launched flagship stores for brand accounts, offering a more attractive opportunity for brands to sell on the app, ranging from mass-market to high-end luxury. The dedicated pages aim to create a more seamless and trustworthy shopping experience for the app’s 600 million daily active users.
Where Douyin goes, TikTok is likely to follow. Innovation in the hyper-dynamic e-commerce sector in China is watched closely in the slower-moving West, so Douyin’s moves ahead of sister app TikTok come as no surprise.
Before the launch, Douyin users were able to buy and sell through the platform by linking products to third-party platforms like JD.com, Tmall and Taobao or via Douyin mini-programs, lightweight apps that exist inside the main application’s larger ecosystem.
The launch of flagship stores is an upgrade on both options. Brands must submit a trademark to be officially opened, ensuring the legitimacy and authenticity of products sold, explains Man-Chung Cheung, analyst at Insider Commerce. The stores give brands a platform to place products front and centre to the users’ experience, representing a significant step-up. “Douyin is hoping that the flagship store model will help it compete better with other platforms including Tmall, JD and WeChat, all of which have gained momentum in selling luxury goods,” he says.
Douyin has proven successful in driving traffic generated by its highly entertaining content to other e-commerce platforms and has enabled some luxury products to go viral. The app now wants to keep that traffic in-house and capitalise on its ability to build awareness and brand engagement.
“What [flagship stores] bring is an ability to monetise the attention Douyin triggers in an even more seamless way. That’s why the luxury industry is looking very seriously at this opportunity,” says Pablo Mauron, managing director China and partner at Digital Luxury Group. “Douyin represents the only way to have live streaming with a broad audience that potentially generates direct sales outside of the Tmall ecosystem. For brands, that is very interesting.”
Since its launch in 2016, Douyin has grown exponentially, surpassing 600 million daily active users and adding popular capabilities like live streaming, which last year helped the app to reach a reported RMB 170 billion ($26.4 billion) in gross merchandise value.
This success has not left Douyin owner Bytedance immune to the ongoing Chinese government pressures on big tech companies. Founder Zhang Yiming surprised investors this month by announcing he is stepping down as CEO ahead of a planned IPO: analysts have speculated that this was a pre-emptive move to reassure the government.
The luxury brand opportunity
For Dior, which launched its official account on the app in April 2018, the viability and effectiveness of launching flagships on Douyin is something for further down the line, as the app is still going through a process of development, a spokesperson said. “We would not take such a step until totally satisfied that everything was in place to meet our requirements, and thus correspond to the expectations of our clientele.”
That hesitancy is par the course for luxury brands, who took several years to even test Douyin.
Over the last three years, brands like Burberry and Prada have created branded accounts, primarily for marketing and advertising purposes. Some brands, including Tiffany & Co., Celine, Gucci and Chloé, are making limited use of Douyin’s e-commerce offering by linking products to .cn brand sites and Tmall flagship stores, points out Asa Mazor-Freedman, specialist advisor at Gartner.
The broader fashion and beauty market has been more willing. Within weeks of launching the new flagships, at least 220 domestic and international brands have opened flagship stores on Douyin. Digital Luxury Group counts Make Up For Ever, Maybelline, Sephora, Elizabeth Arden and Avène among early adopters. Hong Kong jeweller Chow Tai Fook is one of the few luxury brands to have a flagship store.
According to Mauron, this is a familiar route: domestic, mass-market and beauty brands serve as early adopters, with luxury brands as more cautious followers. Now that the app’s role as a strategic communication platform for luxury brands in China has been clearly established, expect faster progress in the months ahead. “I know for a fact that fashion and jewellery brands are looking into it now — it’s a work in progress,” says Mauron.
The pros and cons for luxury
The biggest upside of opening a flagship store on Douyin is the opportunity to connect with China’s Gen Z netizens. According to Insider Intelligence, they account for nearly half of all Douyin users. This generation is already a significant contributor to the latest surge in luxury spending in China – it’s the fastest-growing demographic in Tmall’s luxury fashion and lifestyle market.
Chinese brands know this all too well. “We live in a digital age in which the success of future-oriented fashion business is closely associated with how it connects with Gen Z and millennials, who are the digital natives,” says Wei Li, director of the e-commerce strategic business unit of Peacebird Women, one of China’s largest domestic apparel companies, which has a flagship store on Douyin. “It’s hard to ignore Douyin’s significance as a platform that attracts China’s younger online population.” The brand reports “pretty successful” sales on the app.
By processing transactions directly on Douyin flagship stores, brands can retain consumer data previously lost to third-party platforms. “[Previously] brands spent a lot of money generating content, but then they lost the consumer [to other platforms], so in the end, they had no idea of how much of their investment and advertisement did convert users into shoppers,” says Elena Gatti, managing director Europe at China e-commerce consultancy Azoya. “Converting on Douyin itself creates a closed e-commerce loop, which makes total sense from a brand perspective.”
There will be no easy wins for luxury brands in an ultra-competitive market, warns Mazor-Freeman. A return on investment is likely to take time, so brands should prepare for a mid- to long-term commitment and focus on entry-level products that resonate with a very young audience, says Gatti. “For that, Douyin is a perfect match.”
A very competitive arena
Douyin’s ambitions in the e-commerce sphere have been clear for some time. In 2019, parent company ByteDance launched an e-commerce division to integrate commerce with its content platforms. In August, Douyin also limited link-outs to third-party platforms from its live-streaming channels and in January 2021, launched Douyin Pay to compete with Ant Group’s Alipay and Tencent’s WeChat Pay.
A reported forthcoming upgrade on its partnership with JD.com, which will enable Douyin to access JD.com’s logistics and customer care services, is also a step towards reinforcing its e-commerce credibility with consumers and brands. The partnership is considered “totally natural” by Gatti. “Douyin is a pure internet content company, it doesn't have any of the hard features of e-commerce,” he says. In return, JD.com will have access to Douyin’s expanding user base and tap into a way of shopping that is decidedly different from its own. “If you are on Douyin, you purchase because you are inspired,” says Gatti. “JD could get access to this customer base mainly driven by inspiration and interest.”
Chinese e-commerce platforms have long courted luxury brands, but it’s only in the last couple of years that widespread adoption of Tmall and JD.com has occurred (decisively boosted by the restrictions of the pandemic). For Douyin, takeup by luxury brands of the new opportunities could be quicker now that western luxury brands are more familiar with the Chinese e-commerce ecosystem.
The government anti-competition crackdown on Alibaba and other tech giants may also play to Bytedance’s advantage. “The wind is at Douyin's back with that push in e-commerce,” says Mazor-Freedman. “[Regulators] want more competition in the space. They think that Alibaba appears monopolistic and Douyin has the traffic to compete — and the scale.”
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