China’s two largest short video platforms, Douyin and Kuaishou, have embraced cross-border e-commerce. This further illustrates how these short video platforms are building out their e-commerce capabilities.
Last December, Douyin flagged its intentions to help merchants sell through Douyin via cross-border e-commerce. It subsequently started onboarding merchants in January 2021. Kuaishou quickly followed and began onboarding cross-border e-commerce merchants in May 2021.
This means overseas brands can launch an e-commerce presence on Douyin and Kuaishou, China’s largest short video platforms, without having a local Chinese business entity.
Why Douyin or Kuaishou For China Cross-Border e-Commerce?
When people think of China cross-border e-commerce, they typically think of Tmall Global. By GMV share, Tmall Global is the leader in China’s cross-border e-commerce channel. However, there are compelling reasons why Douyin or Kuaishou may be suitable for China market entry for cross-border e-commerce.
- Douyin and Kuaishou are among China’s largest apps. Douyin is reported to have 600 million Daily Active Users. That places it as one of China’s largest apps. Kuaishou is no slouch, either. It has Monthly Active Users.
- Douyin and Kuaishou have significant e-commerce ambitions. By GMV, last year Douyin transacted around $28 billion and Kuaishou transacted $56 billion in GMV. These figures pale in comparison to established e-commerce players, such as Alibaba ($1.2 trillion of GMV in 2020), JD ($398 billion of GMV in 2020) and Pinduoduo ($255 billion of GMV in 2020). However, these com[anies have grand ambitions for e-commerce. Douyin’s parent company, Bytedance, has ambitions to triple e-commerce GMV this year. Kuaishou reckons its GMV will double this year. As such, the excitement around Douyin and Kuaishou’s burgeoning e-commerce businesses comes from future potential, rather than current scale.
What Are The Advantages of China Cross-Border e-Commerce?
Cross-border e-commerce in China holds a specific distinction. International companies are allowed to sell certain goods to Chinese consumers online, through platforms such as Tmall Global, Kaola, Douyin and Kuaishou at preferential duty rates and without a license to operate a business in China. As you can imagine, that’s a significant reduction in red tape. It also lowers the cost of doing business in China.
As we’ve previously discussed, launching via cross-border e-commerce also has a number of advantages:
- Test Market Demand: A launch via cross-border e-commerce allows new market entrants to de-risk their entry into China and assess market demand over a 12 or 18-month period, before looking to commit further resources and explore distribution opportunities within China’s massive consumer market.
- Validate Market Entry Business Case: North American and European brands prefer test-and-learn approaches to market entry. Entry through e-commerce allows brands to gauge what sort of effort and resource commitment they’d need to pursue entry into China. In addition, it also allows newcomers an opportunity to test and finesse assumptions about their unique value proposition, marketing, pricing, merchandising and relative strength against domestic and international competitors.
- Build in-Market Presence: Although there are indirect channels to reach Chinese shoppers (like overseas influencers and airport retail), these don’t deliver the return-on-investment that in-market presence does.
What Are The Next Steps To Enter China via Cross-Border e-Commerce?
Overall, cross-border e-commerce is an effective channel for overseas businesses to test and learn market entry China. With Douyin and Kuaishou in the mix, brands have more choices about which cross-border e-commerce channel they enter China with – they can enter through Tmall Global, Kaola, Douyin, Kuaishou or even Pinduoduo. If you’d like to know more about cross-border e-commerce, please get in touch with one of our team.
