China Consumer

Taking on Taobao

Bytedance, the $75 billion ‘upstart’, now wants to challenge Alibaba as well

Zhidian-w

Zhidian: shop and read the news

For every successful business venture, there are often several dozen failures. That’s especially true in China’s e-commerce industry. While Pinduoduo, the Tencent-backed start-up that married social media with group buying, became an internet sensation when it went public on Nasdaq in August, many others have failed to crack the highly competitive sector.

Take Baidu, for instance. Back in 2008, the internet search giant unveiled youa.com to take on Alibaba’s Taobao. It also launched another e-commerce joint venture with Japan’s retail giant Rakuten.

By 2011 youa.com had quietly folded. The year after, Baidu’s JV with Rakuten also fizzled out.

Can China’s latest internet darling Bytedance avoid the same fate as Baidu? The Beijing-based firm operates leading news aggregator Jinri Toutiao and popular short video app Douyin. It recently launched an online shopping app as well.

The app is called Zhidian, which roughly translates as ‘value point’. Employing AI technology to push items to buyers, it also incorporates newsfeed from Toutiao so shoppers can read the latest headlines while they buy.

At the moment, Zhidian mainly offers products like clothing, kitchen utensils, food and beverages. Zhidian operates like a “dollar-shop”, carrying mostly low-priced goods that cost as little as Rmb1 (16 American cents) to appeal to lower-income shoppers.

Zhidian is not Toutiao’s first foray into the e-commerce sector. In 2014 it launched Remai (which means ‘hot sale’). Users can click on links to the personalised product recommendations within Toutiao and be redirected to e-commerce platforms like Alibaba and JD.com

But Zhidian’s debut suggests that Bytedance, which was recently valued at $75 billion, is not satisfied with just being a middleman.

At the moment, the three largest revenue generators on the Chinese internet are advertising, online game-playing and e-commerce. Toutiao is already making the bulk of its revenue from the digital ad market. Online gaming, while lucrative, faces extensive government regulation, not to mention that it is also dominated by Tencent. On the other hand, Pinduoduo’s recent success suggests that there could be room for more players in the online shopping space, says Entertainment Capital, a zimeiti.

E-commerce could also play to Bytedance’s focus on artificial intelligence: connecting user data on reading and shopping habits will enhance the accuracy of its algorithms, enabling the platform to provide more tailored product recommendations.

“The thinking is that if the one billion users on WeChat can bring 300 million active users to Pinduoduo – so that within three years the start-up could go public on Nasdaq – Toutiao’s 700 million users can replicate its success,” reckoned Entertainment Capital. “And besides, Pinduoduo is wildly successful because it has managed to court consumers in third and fourth-tier cities. These are the shoppers Taobao and JD.com have failed to cover. Reaching these people is not a problem for Toutiao, since its main readers are from these lower-tier cities.”

Data from Analysys shows that as of August this year, Toutiao’s average daily active users hovered around 156 million, and average app usage time per day was 99.2 minutes. Men account for over 70%, while 50% of its users are over 35.

Not everyone is supportive of Bytedance’s foray into e-commerce. After all, Baidu is not alone in its failure to grow an e-commerce business – the same is true for tech giant Tencent. It sold its e-commerce portfolio to JD.com in 2014. (Tencent’s investment in Pinduoduo is a minority stake.)

And if Bytedance wants to replicate Pinduoduo’s rapid success, it will also need to cultivate a compelling network of suppliers. “After all, web traffic is vital to an e-commerce platform but traffic alone does not directly translate to GMV (gross merchandise value),” tech news portal iKancai cautioned.


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