ByteDance looks at China’s $ 1.7 trillion e-commerce sector Business and Economy News

Zhang Yiming-ek ByteDance Ltd. it was built by the world’s most valuable private company through a chain of blockbuster apps like TikTok, which challenged Facebook and other actors on their field. His ultimate goal: Alibaba.

The 38-year-old AI coding genius, looking for ByteDance’s next big action, has put his focus on China’s $ 1.7 trillion in e-commerce. The co-founder has hired thousands of employees and Xiaomi Corp. he has roped in among the company’s big sponsors like entrepreneur Lei Jun in what he calls his next “major breakthrough” to focus on global business – selling things to consumers through his short videos and addictive fun. This effort will test not only Zhang’s magical touch, but also its application creation and ByteDance’s AI witchcraft, as well as one of the world’s most anticipated IPOs for reception technology.

His startup has already started to make waves in Jack Ma’s Alibaba Group Holding Ltd. and JD.com Inc. in a long-controlled industry that sold about $ 26 billion in makeup, clothing and other merchandise by 2020, reaching its first year. what Alibaba’s Taobao did to turn six. It is filming for more than $ 185 billion by 2022. Douyin, the Chinese twin at TikTok, is expected to bring in more than half of the company’s $ 40 billion in home ad sales this year, driven in part by e-commerce.

“Short video platforms have so much traffic, and they can basically do any business,” said Shawn Yang, CEO of Blue Lotus Capital Advisors. “Not only are there ads in Douyin, but there is also live streaming, e-commerce, local life services and searches. That takes a lot of imagination. ”

An e-commerce business could help when the company goes public with a $ 250 billion valuation, in the face of Beijing’s crackdown on the country’s Internet behemoth. They say they are preparing a list that would be one of the hopes of world premieres. It is working with consultants on the launch of the offering, and is choosing between Hong Kong and the US as a site on the list, according to those familiar with the matter. Although ByteDance will not handle sales or merchandise itself, it expects to sell more ads to merchants, increase traffic and reduce business.

The internet giant is entering the late Chinese social commerce scene, where agents are offering products to fans like the Gen-Z version of the Home Shopping Network. The format that Alibaba pioneered as a marketing tool in 2016 developed its own life last year when Covid-19 boosted the demand for home entertainment. Last year, Alibaba’s Taobao Live generated more than 400 billion yuan ($ 62 billion) in gross commodity value, and Kuaishou Technology’s social platforms received 381 billion yuan transactions, more than double Douyin’s.

ByteDance relies on recommendations based on its artificial intelligence interests to help it capture its e-commerce business. At a prestigious one-year business outing party last month, executives explained that the company intends to repeat its success by using AI algorithms to feed users ’content into online shopping. By scrolling through the endless stream of social content, now more than ever tied to physical goods, Douyin’s users won’t be able to resist the urge to buy, they said.

“It’s like shopping on the street,” said Bob Kang, 35-year-old head of e-commerce at Douyin, at a ceremony in Guangzhou with hundreds of spectators. “As people get richer, they don’t go to shopping malls or boutique stores considering specific things, they only buy if they see something they like.”

Kang, a former Baidu Inc. engineer who was robbed by ByteDance in 2017, is one of a rapid rise in the number of young lieutenants Zhang has ordered to open new avenues for the company. He previously led ByteDance’s Helo technology app, one of India’s most widely used social sharing platforms like video sharing – until the South Asian nation closed it last June along with dozens of Chinese apps for national security reasons.

Since Kang took over as head of e-commerce, Douyin has banned direct senders from selling items listed on third-party sites and invited them to open their own app stores, Alibaba and JD.com Inc. avoid rivals like his traffic. A group of customer service staff has grown from about one hundred to one hundred to hire counterfeits and hire more than 900 other positions to support the business. ByteDance also has an online matching system that helps merchants connect with agents and their agencies, and lays the physical foundation for storing live senders and merchandise, much like Alibaba does.

The initiative gained attention from sponsors of celebrities like Lei, whose founder Xiaomi has organized live streams that promote her Mi TVs and phones. Luo Yonghao, a top entrepreneur who once wanted to challenge Apple Inc. with his smartphone business, is another major player, changing more than $ 17 million in merchandise in his first live show on the platform.

Smaller retailers are following suit, such as Zhou Huang, who set up a Douyin storefront in October for his jewelry business, avoiding traditional platforms like Alibaba’s Taobao. Instead of charging platform operators a large circulation fee, it has managed to create around 20,000 people by creating videos that offer practical tips on how to choose the right size when buying a bracelet online.

“It’s a challenge for new merchants like me to attract Taobaon customers,” says Huang, who broke into Douyin’s store after just three months. “Sometimes people come to our store not for shopping, but for entertainment. But when we have enough visitors, we can make a sale. “

ByteDance is giving a hand. In Foshan, Huang and 200 other jewelry vendors are trained in all that records quality videos to record and market in the store. 24-hour technical support is available: Huang says ByteDance technicians come to the rescue immediately every time his live channel goes down.

Huang is one of the one million creators of Douyin’s e-commerce sales since January, attracting an additional 600 million daily users to the platform. The platform – which brings in commission fees as new revenue for retailers – aims to merge more than a thousand brands this year into the creation of Douyin stores like Suning.com Co., and that number could double fivefold by 2022, the company predicted in an internal statement. GMV could reach 600 billion yuan this year, before doubling to 1.222 trillion yuan in 2022.

ByteDance’s intentions are not limited to Alibaba. The company has also started allowing users to book hotels and restaurants through Douyin, offering lifestyle services similar to super-apps like Meituan and Tencent’s WeChat.

Douyin’s e-commerce attempt in China could provide a roadmap for TikTok, as it began testing water in online shopping with WalMart Inc. and Shopify Inc., a Canadian e-commerce company in December. -commerce, combined with live streaming and short videos, offers an even greater opportunity outside of China, according to attendees who have asked not to be identified. The company is quietly building a team of engineers in Singapore to create new e-commerce operations for TikTok.

ByteDance’s boost in online shopping is facing other headwinds. To grow video games, ByteDance has been buying development studios, but such successful successes as Tencent Holdings Ltd.’s Honor of the Kings could be a success and China has already kicked off the sector before. In online tutoring, regulators have tried to control excessive marketing and the competition is fierce against a number of deep-pocket startups like Alibaba-sponsored Zuoyebang.

In April, Zhang was one of 34 corporations commissioned by antitrust guards to conduct internal investigations and correct abuses. And although the payment service has just come out of the ground, ByteDance and its partners suffered extensive cuts in fast-growing financial operations after a meeting with regulators including the central bank last month.

But the same analysis could help the owner of TikTok enter China’s e-commerce, the world’s largest online marketplace. Alibaba JD.com and Pinduoduo Inc. it has held back rivals over the past decade through practices such as allegedly forcing traders to make exclusive deals. Since then, regulators have registered a $ 2.8 billion fine on the iconic Jack Ma company and managed to eliminate “picking two” twice as one of the main goals of the antitrust campaign, creating space for new professionals like ByteDance.

For now, ByteDance’s biggest and most immediate boost to e-commerce lies in advertising revenue, which still accounts for the bulk of its profits. As Douyin’s number of merchants has increased, so has the cost of marketing on the platform. Strong e-commerce projects that can surpass games to be the biggest contributor to ad sales. In the Kuaishou rival, traders contributed about 20%, the company said in March.

“Otherwise, it’s getting a bigger share of the advertising cost of brands that would spend money on platforms like Alibaba,” said Michael Norris, a senior analyst at the Shanghai market research firm China. “That’s where the threat to Alibaba comes from.