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E-commerce Firms Cash In On Short Video Market In China

This model is based on the ability of content creators to attract traffic to their channels banking on the trust users place on them.

Nov 1, 2018 by A. Alfaro
E-commerce Firms Cash In On Short Video Market In China

Almost all leading e-commerce players in China believe that the short video fever that is sweeping through the country is a new sales channel for them.

Unwilling to let the chance go by, most of them have rolled out their own short-video platforms.

In October, tech giant Alibaba (阿里巴巴) for instance, rolled out Wow Video (哇哦视频), a short video platform that can be accessed on Alibaba’s e-commerce wing Taobao ( 淘宝 ) . This comes after the tech behemoth launched Lu Ke (鹿刻), another video content provider in September.

Suning (苏宁), one of China’s most important retailers, also added a short-video feature on its main app.

Interestingly, the idea to marry short videos and e-commerce is not a one-sided concept. Tik Tok, the most successful short-video app, has been adding e-commerce features to its service over the last few months.

On Tik Tok, content creators can open their own electronic stores on their channels. Other apps such as Kuaishou (快手) and Meipai (美拍) have established similar features.

This model is based on the ability of content creators to attract traffic to their channels banking on the trust users place on them. Video platforms usually do not get any income from these sales.

E-commerce platforms follow a more direct approach. When one enters Lu Ke, it becomes apparent that video titles are sales-oriented: “Which toy should you buy for your little boy”, “the most attractive nail polishers,” are some of the titles that greet users.

Most videos have a direct link to Taobao stores to facilitate the shopping experience. By offering these services, e-commerce platforms are just giving an official version of the videos in which creators recommend or compare a product, a common phenomenon in the Chinese video ecosystem.

So how did the idea to marry user-generated content with selling dawn on these players?

Perhaps e-commerce platforms are learning from Xiao Hongshu (小红书), a cross-border e-commerce app in which consumers write reviews and share their shopping experiences. Mainly focused on female shoppers, Xiao Hongshu, founded in 2013, has 100 million registered users and was valued at USD 3 billion in June 2018. Originally, it was an app in which users would recommend products to each other and compare beauty products. The app successfully implemented e-commerce features. Many Chinese stars share their shopping and their lifestyle advices on the platform. This has created a perfect hybrid of user-generated content and e-commerce.

Alibaba found inspiration from Xiao Hongshu to launch Lu Ke. Tencent-created short-video e-commerce app Shuashuakan (刷刷看) but adopted a slightly different model based on Q&A videos. Shuashuakan also developed an in-app currency (called “gold coin”) to encourage content creation from users. Those gold coins can be exchanged for products. Unlike Xiao Hongshu, Shuashuakan recruits its own influencers, adopting a KOL (Key Opinion Leaders) approach. No matter what approach they follow, these apps’ goal is clear: use short-videos as a shop-assistant in order to attract traffic to e-commerce platforms.

A hasty move though it may seem to be, but the decision to launch their own short-video apps has been on the e-commerce players’ minds for quite some time. Taobao has been experimenting with video services for the last two years. The platform has Taobao Live for live videos of shoppers and short videos were already part of the stores’ showrooms.

Wen Zhong, director of content at Taobao, declared a year ago that fifteen per cent of products on Taobao had their own short video back then.

Now, 42% of products have dedicated short videos. Since March, these videos have gradually become more visible to the general users on Taobao (on August Taobao broadcast 1.9 billion videos daily), only recently they got their own unified app on Lu Ke. Suning followed a similar path, mixing “stars+products+short-videos.”

Huajuan Mall (花卷商城) is another e-commerce platform that is also based on short videos. The app relies on influencers to advertise the products. Also, the app exploits the experts’ knowledge about the products to create “video-classes” that teach users how to apply cosmetics, for example. This model of mixing influencers and professional knowledge to marketing products has attracted the attention of investors. In 2017, Huajuan Mall raised USD 40 million in its second investment round.

According to sources from within Taobao consulted by news portal Jiemian, “Short videos are becoming an indispensable part of the e-commerce ecosystem. If you are an e-commerce platform but you do not produce short videos, then you are losing valuable traffic.”

Short videos are a way for these platforms to create a community based on content. The apps are still in their early stages. Browsing them reveals that they have not yet attracted many users. Videos just have a few likes and comments are scarce on Lu Ke.

Shuashuaka seems to be performing better, probably because users are encouraged with the in-app currency system. However, their direct sales-oriented format could put off some users. They are both still very far from Tik Tok, the global short-video behemoth.

The apps still need time to attract quality-content creators and build a big userbase. According to the analysis by Jiemian, these apps have hurriedly launched the apps without ensuring the quality of the content. The sales-focused model could ruin the app experience for users, who are not very attracted by the content to begin with.

Jiemian reports when that Alibaba launched Lu Ke, it expected to reach 10 million daily users by the end of the year. But that figure now seems difficult to reach. These short-video e-commerce platforms will have to work hard if they want to make short-videos a significant sales channel for them.

A. Alfaro

A. Alfaro is a Beijing-based freelance reporter. He focuses on China's politics, culture and society. He can be reached at varofaro@gmail.com. 

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