Text: Yang Yuexin, Yicai Business School
2023 is the year of high hopes after life is back on track.
The dormant ones have not yet fully awakened, and the unexpected ones have followed. Consumer psychology is like a long whip, gradually transmitted from the consumer end to the merchants, platforms and industries.
When the market value of Pinduoduo was about to catch up with Alibaba, Ma Yun posted a blessing on the intranet, as if toasting to Huang Zheng, who posted on Weibo to pay tribute to Taobao a few years ago......
Change doesn't happen overnight. The past is planting seeds for the present, and it is also the lead to the future.
We summarize the business changes over the past year with 10 key words. Try to open 2024 in a way that looks back at 2023.
Today is the first article, "The New Globalization".
In 2023, the world is becoming more similar in a way that Chinese people have never imagined and are familiar with.
In the past, Chinese companies only relied on "made in China" to achieve simple commodity export. Nowadays, a new wave of strong going overseas has realized a full set of output from commodities, lifestyles to business models, making the form and connotation of going overseas richer.
At the level of commodity output, cross-border platforms such as Shein make commodity turnover more efficient, and at the lifestyle level, short video platforms represented by TikTok, chain restaurants represented by Mixue Bingcheng and Haidilao, and spiritual consumption represented by ReelShort, a cool drama app of Bazong, allow foreigners to live a "happy life" of live broadcast rewards, drinking milk tea and watching short dramas.
Hard commodities, or the reverse output of soft power, the common driving force behind it is the domestic supply chain capabilities that have been repeatedly tempered, and the innovation of the e-commerce platform operation model - among them, represented by the cross-border e-commerce platform Temu launched by Pinduoduo, its full custody model greatly reduces the threshold for merchants to go to sea, and attracts cross-border e-commerce to imitate.
Commodities going overseas: the "fast reverse mode" supported by a strong supply chain
Shein was first founded in 2008, initially engaged in cross-border wedding dress business, in 2012 to the fast fashion women's independent station (cross-border e-commerce independent station, that is, not to open a store on the e-commerce platform, but to do its own independent website) transformation, vigorously integrate upstream suppliers, establish a set of supply chain system managed by the digital system, and integrate more than half of the clothing stalls in Panyu, Guangzhou into this system.
The production capacity and production progress of all suppliers will be uploaded to the system in real time, and the system will decide the number of new orders for each batch of new models according to the data analysis and distribute them to the suppliers. According to the CICC Research Report, it only takes 7-15 days for a new Shein product to be designed to be finished product, and more than 20,000 new SPUs (standard product units) can be released every week, surpassing any fast fashion company in the world.
Relying on the launch speed faster than Zara, Shein's market share quickly surpassed Zara. Shein accounted for nearly one-fifth of the global fast fashion market in 2022, surpassing Zara (11%) and H&M (20%), according to Coresight. In 2020, the revenue reached nearly 10 billion US dollars, with a growth rate of more than 100% for 8 consecutive years. Shein's GMV is expected to reach $32 billion in 2023, ranking first among the "Four Tigers Going Overseas" (AliExpress, Shein, Temu, and TikTok Shop).
The growth model of relying on fast and diverse launches to attract users and obtain traffic gradually touched the ceiling 2 years ago, and Shein also began to transform into a platform-based cross-border e-commerce. Compared with simply selling women's clothing and other clothing, the scale of the platform for integrating brands is more malleable and imaginative, and it is also a story that the capital market loves to hear for Shein, which seeks to go public.
In May 2023, Shein officially announced the transformation platform model to promote Shein Marketplace to the global market. To this end, Shein has hired executives from Amazon to lead the category strategy, open third-party sellers to attract investment, free commission and no traffic fees for the first 3 months, and also bear the cost of return shipping. In addition, Shein began to establish large-scale distribution centers in the United States, Eastern Europe and other places to further reduce the fulfillment time.
Lifestyle to go to sea: rewards, new tea drinks and boss dramas
While Shein is emptying the wallets of America's veterans, TikTok is constantly taking up more of their time. In January 2023, the average daily usage time of TikTok users in the United States was nearly 1 hour (Insider Intelligence data), surpassing the 47.5 minutes of YouTube (including YouTube TV), and the average daily usage time of TikTok users increased to 1.5 hours in October.
20 years ago, Chinese people watched Hollywood commercial blockbusters in movie theaters, and now American people are addicted to dancing on TikTok, buying virtual currency to give gifts to anchors, and striving to be "Uncle Sam". By selling virtual currency, TikTok will become the world's first non-gaming app with revenue of more than $10 billion in 2023 (data.ai data).
In addition to the reward monetization of content creators, TikTok is also replicating the development path of Douyin's interest e-commerce, and will launch TikTok Shop Indonesia for the first time as early as 2021 to complement the live streaming and commodity card functions in addition to short videos. LatePost previously reported that Kang Zeyu, who was in charge of international business at Douyin in 2021, was transferred to the head of TikTok Shop's UK e-commerce team, shifting his strategic focus from short video e-commerce to live e-commerce.
Due to the limited acceptance of live streaming by overseas users, TikTok Shop has launched shelf e-commerce again, and will begin to test the mall section in the UK in August 2023, completing the "people looking for goods" scenario and product categories and supply chains, and at the same time completely prohibiting external links that lead to brand independent stations. In September, TikTok Shop officially launched its e-commerce service in the United States. In the testing stage, 200,000 merchants settled in, and more than 100,000 TikTok Shop influencers participated. After the completion of the closed-loop e-commerce in the United States, brands can find influencers to bring goods in a similar way as in China, that is, to track the effect of influencers planting grass and bringing goods with CPS (billing by sales volume).
In addition to e-commerce platforms, entertainment brands such as restaurants have also accelerated the speed and density of overseas deployment in 2023. Southeast Asian countries are often the first stop, where brands gain a firm foothold and then expand to the core cities of developed countries in Europe and the United States. The logic of this path is not difficult to understand: the Chinese in Southeast Asia have deep cultural roots and a cultural atmosphere similar to that of China, and the geographical proximity to China makes it cheaper to transport goods and raw materials.
There is also "electronic mustard" that makes overseas people go up. Starting in November 2023, the short drama App ReelShort launched by Maple Leaf Interactive, a subsidiary of Chinese Online, exploded in Europe and the United States only 3 months after its launch overseas. In mid-November, it once surpassed TikTok to top the list of downloads in the United States, with 11 million downloads (Sensor Tower), driving the valuation of the parent company Chinese Online to US$3 billion (about 22 billion yuan).
In addition to paid memberships, ReelShort's hybrid monetization model also includes paid unlocked episodes and ad placements that are familiar to Chinese people. These short dramas are only about 1 minute per episode, and they come to an abrupt end at key points in the plot, and viewers need to watch commercials and tasks to watch the next episode, and impatient viewers can pay directly. According to Xiaguang News, it costs at least $40 to watch the hit short series Fated to My Forbidden Alpha in a paid mode, while the Netflix standard plan costs only $12.99 per month.
In the past, popular overseas dramas, such as "Huanzhu Gege" and "The Legend of Zhen Huan", were often works that were successful in China first, and then directly translated and exported. At present, the overseas popular short dramas produced by Maple Leaf Interactive have evolved a "one-stop" production chain with domestic and overseas cooperation - the content uses the template of domestic popular dramas, and sets the cultural elements and local actors welcomed by overseas audiences;
The Chinese lifestyle of tipping, drinking milk tea, and watching cool dramas can transcend regional and cultural differences, proving once again that the commercial value of emotional consumption and people's need for social entertainment and stories are always the same.
E-commerce operation model goes overseas: hosting services have become the mainstream of the platform
In September 2022, Pinduoduo launched Temu (Duoduo Cross-border) in a high-profile manner, attracting cross-border merchants to settle in with extremely low thresholds and large subsidies. At that time, Shein had already pushed the price and turnaround time of FMCG products on North American e-commerce platforms to a very low level, so many merchants believed that Pinduoduo's low-price strategy might not pose a threat to the existing e-commerce landscape, but was just an opportunity to dump tail goods. The reality is that in 2023, Temu has long been in the top 10 of the list in the number of downloads in the Apple and Google Play stores in North America, and the expansion rate has exceeded all expectations.
The secret of Temu's success is not new, it just replicates Pinduoduo's human game of "chopping a knife", lucky wheel and opening red envelopes to withdraw money in China, which is also the origin of the name Temu - Team Up, Price Down. Users can get coupons, free prizes or direct cashback by inviting newcomers to download the app or share a discount code. Since then, discount code forwarding and "cut order" invitations have spread on social media such as Twitter, TikTok, Facebook and Instagram, you get a free thermal printer, I receive a free kennel, and North American users have reaped the joy of consumerism.
"Chopping a knife" is only the appearance of Temu's rapid overseas expansion, and the more critical driving force behind it lies in the innovation of the e-commerce platform operation model, which enables Temu to have an expansion speed that cross-border platforms cannot have before.
At the beginning of Temu's launch in September 2022, it provided Pinduoduo merchants with "one-click overseas" + full hosting services, attracting a large number of domestic merchants with no previous cross-border experience. Under the full custody model, merchants only need to open stores and deliver goods, and bear the inventory and logistics costs brought by the platform's returns, and the platform is responsible for the operation, logistics, fulfillment and after-sales links, and the merchants no longer need to bear the costs, so that the threshold for domestic merchants to get involved in overseas markets is greatly reduced.
For the platform, the benefit of the fully managed model is to "concentrate on doing big things". Rapid large-scale investment promotion to improve the richness of the platform's commodities; the platform's centralized cross-border distribution can give full play to economies of scale in warehousing and logistics, so as to reduce costs as a whole and provide more competitive fulfillment services on the user side; in addition, the platform can control the pricing and operation of commodities on the platform with the help of big data and other technical means, which can improve the overall operational efficiency.
After the launch of the fully managed model, Temu saw an astonishing increase in the number of merchants, products and overseas users, and was soon imitated by the other three of the "Four Tigers Going Overseas" (AliExpress, Shein and TikTok Shop). In addition to full custody, the platforms soon launched different degrees of "semi-managed" models according to the needs of different merchants. For example, the semi-managed service launched on Ali International Station in early January 2024 is between the merchant's own operation and the platform's sales, providing merchants with exclusive marketing activities, door-to-door logistics fulfillment and reverse return solutions, while the merchants themselves are responsible for production and sales.
In 2024, cross-border platforms will continue to compete for domestic supply chains and overseas consumers, and merchants and brands will continue to step up their overseas store expansion, in order to catch the "sky-high wealth" in this round of overseas expansion.