Live e-commerce has been around for a long time in China, but its huge success is still tempting newcomers to join and raise their wagers. The "WeChat Channels Store'' was released by Tencent on July 21, further challenging Douyin's live streaming e-commerce business. Douyin is the sister app of TikTok in China.
The debut of the new service is designed to replace the previous online store based on WeChat, the instant messaging tool, making sellers more dependent on “WeChat Channels," which features short videos and live streaming.
In response to the increasing popularity of domestic short video platforms, social media behemoth Tencent debuted "WeChat Channels" in 2020. The platform, much like its competitors, Douyin and Kuaishou, enables users to upload short films or live streams, but it has an unrivaled advantage since it is embedded in WeChat, China's ubiquitous app with 1.2 billion monthly active users.
With WeChat serving as the gateway, "WeChat Channels", which is just three years old, has expanded swiftly. The short video service had 500 million daily active users (DAUs) in 2021, a 79% increase over the previous year, and per capita use time topped 35 minutes, an 84% increase over 2020. By 2022, it is anticipated that the number of daily active users will reach 600 million.
The DAU figure of WeChat Channels is astounding considering that Kuaishou, the second-biggest short video/live broadcast platform in China, has an average DAU base of 323.3 million while Douyin, the largest, has an average DAU base of 600 million.
The potential to commercialize has been granted to the short video platform as a result of its massive user base, and live e-commerce has become the most desired alternative. Without providing a particular figure, Tencent stated that the GMV of WeChat Channels increased 15-fold in 2021 compared to the previous year.
Although WeChat Channels, which launched later than Kuaishou and Douyin, is still not on par with them in terms of GMV, its successes have strengthened Tencent's resolve to develop an e-commerce business on the short video platform. The WeChat Channels Store is the most recent example: the new e-commerce service incorporated into the short video platform has replaced the prior WeChat-based service, resulting in a more streamlined and unified live e-commerce experience. Obviously, this also provides the short video platform with additional control.
This tactic has been adopted by Douyin and Kuaishou. Initially, retailers were permitted to link products from other e-commerce sites to these two. Gradually, as the business evolved, Douyin and Kuaishou launched their own online store services, encouraging merchants to list products on their own sites rather than providing external links.
Kuaishou began blocking external links from Alibaba-owned e-commerce platform Taobao and online retailer JD.com in March, while Douyin began blocking external links in 2020. Currently, suppliers may only offer their products through the two companies' respective e-commerce platforms, Kuaishou Store and Douyin Store.
To compete with established e-commerce firms, short video platforms must reduce their dependency on third parties as much as possible, obtain more control over the entire buying and selling process, and collect more in-depth information on purchases. They can better fine-tune their e-commerce ecosystem with increased control. According to Kuaishou, in December 2021, Kuaishou Store contributed 98.8% of the company's total e-commerce transactions.
Despite the rapid rise of WeChat Channels users, the company cannot be excessively confident about its e-commerce operation since it still has a number of shortcomings in comparison to industry veterans.
WeChat Channels, the latecomer, is dwarfed by rivals in terms of time spent by users. On average, Douyin users spend 108.7 minutes per day on the app, whereas Kuaishou users spend 118.9 minutes. Comparatively, the average WeChat Channels user spends only 35 minutes per day, or less than a third of the time spent on Douyin and Kuaishou.
According to renowned Internet analyst Pei Pei, WeChat Channels should not focus on increasing live e-commerce at this time because they lack the ability to build supply chains and delivery networks, as well as provide adequate after-sales service. He continued, "Live e-commerce cannot survive without a well-developed advertising infrastructure, and WeChat Channels are currently underperforming in this area."
While WeChat Channels can't generate as much ad revenue as their rivals right now, they're working to make up for it. “In-feed ads”, which are now only being tested internally, will be introduced into WeChat Channels. The feature will allow users to make a purchase more smoothly while watching: After clicking on the ad in the video, a mini-program or a website of the brand/seller will pop up, directing you to the page the brand/seller wants you to visit without interrupting the video or live stream.
Future projections indicate that in-feed advertising will be the most lucrative source of revenue for WeChat Channels. After the short video platform begin deploying In-feed advertising, ad revenue is anticipated to reach 37 billion yuan, according to a CITIC Securities study.