36Kr has learned exclusively that Douyin E-commerce’s gross merchandise value (GMV) for the second quarter of 2024 ranged between RMB 760–770 billion (USD 104.7–106.1 billion). For the first half of this year, the total reached approximately RMB 1.4 trillion (USD 193 billion).
An insider revealed that Douyin E-commerce’s target for the first half of the year was RMB 1.5 trillion (USD 206.7 billion), indicating that the current results have not met Douyin’s initial expectations.
Although the gap to reach the target might seem minor, growth has always been Douyin’s driving force. In 2023, Douyin E-commerce maintained a robust monthly GMV growth rate between 50–70%. However, according to LatePost, Douyin E-commerce saw a year-on-year growth rate decline for the first time in March this year, dipping below 40%. By the end of the second quarter, the growth rate further slid below 30%.
A Goldman Sachs report corroborated this trend, detailing data for the 618 shopping festival from May 20 to June 18: Taobao’s GMV growth rate was between 10–15%, JD.com saw single-digit growth, Pinduoduo grew by 15–20%, and Douyin posted over 20% growth. Although Douyin’s growth rate remained the highest, it was no longer as dominant.
The decline in Douyin E-commerce’s GMV growth rate may be linked to its low-price policy. A source close to Douyin E-commerce told 36Kr that, in 2023, the average transaction value for Douyin E-commerce’s mall and search features hit RMB 100–120 (USD 13.8–16.5), but it has now dropped to around RMB 80 (USD 11), a decline of 30–40%.
At the start of this year, Douyin E-commerce prioritized price competitiveness for 2024, relegating GMV to the back seat. However, the unexpected rapid decline in GMV growth during the first half of the year prompted a strategic pivot, placing GMV back at the forefront.
Douyin is not alone in this approach. In the first half of the year, low-price strategies were prevalent among Pinduoduo, JD.com, and Taotian Group (Taobao and Tmall). But as 36Kr recently reported, Taotian has already shifted away from its absolute low-price strategy, reverting to distributing search weight based on GMV.
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Many merchants have voiced their frustration, claiming that Douyin’s price comparison system forces them to sacrifice profits for traffic support. This strategy has hampered their advertising efforts.
The low-price policy has affected merchants’ retention rates and marketing budgets, subsequently impacting Douyin’s advertising growth. A source close to Douyin E-commerce told 36Kr that, in the second quarter, the retention rate of active selling merchants fell from 81% at the beginning of the year to about 59% by the end of the second quarter. Currently, fewer than 2 million merchants are actively selling each month, out of approximately 4 million total merchants.
Merchants advertising on Douyin account for about 25% of active sellers, currently around 400,000–500,000. Douyin initially planned to increase this number to 900,000 by year-end, but this goal now seems challenging.
When Douyin introduced its low-price strategy, it attracted a significant number of white-label merchants. Although the platform no longer emphasizes low prices, it still aims to expand its variety of white-label products to boost monetization. According to an unnamed source, in the first quarter, white-label products accounted for nearly 40% of Douyin E-commerce’s GMV, with a target to increase this to 44–46% by year-end.
“In the coming years, the proportion of white-label products is expected to continue rising but won’t exceed 60%. In the short to medium term, it will likely remain around 50%,” the source said.
36Kr sought confirmation from Douyin regarding the above information, but the company stated it is untrue.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Wang Yuchan for 36Kr.