Douyin Becomes Beauty Brands’ Marketing Mainstay in China
Douyin, the Chinese version of the original TikTok, is expanding its presence as an e-commerce platform in China. We analyze the current status of Douyin — an emerging threat to the Alibaba Group, which has established a dominant position in the Chinese e-commerce industry, and the secret behind its influence and strength.
Douyin Surpasses Alibaba in GMV Growth
Alibaba Group’s slowing growth was a hot topic in the year of China’s big sale event, “Double Eleven 2021,” and the full-year results showed similar sluggish growth. The slowdown was particularly evident in the beauty sector. According to local media, Alibaba’s GMV (gross merchandise value) for skincare products grew a mere 0.3% to 181.6 billion yuan (US$27.7 billion) in the January-November period of 2011, while sales in the makeup category declined 9.1%.
Instead, competitors increased their market share, especially Douyin, operated by ByteDance. The company’s GMV for cosmetics during the same period reached 367.82 billion yuan (US$57.9 billion).
The trend looks set to continue into 2022, with Alibaba’s cosmetics GMV down 27% to 13.666 billion yuan (US$2.15 billion) in January, while Douyin’s has surged 364.5% to 6.243 billion yuan (US$982.6 million). Douyin has now become a force to be reckoned with for beauty brands.
Douyin has a high affinity with beauty brands and is often linked to RED
According to the “2021 Douyin & RED Cosmetics Industry Marketing Report" by Chinese research firm Youmi Yousu, Douyin is by far the largest marketing budget invested by cosmetics brands in SNS, accounting for 43.5% of the total, with RED in second place at 29.4% and Tencent’s WeChat was 9%, and Sina’s Weibo was 3.1%.
Douyin and RED together account for over 70% of the total, making SNS marketing impossible for beauty brands without either platform. The report analyzes that Douyin and RED go hand in hand, creating a “sow with RED, reap with Douyin ‘’ flow.
For example, GIRLCULT, a new brand of make-up items, was initially marketed to students via “bilibili” at the time of its establishment, but after entering a growth phase, it expanded its target to office workers, with RED accounting for 60%, Douyin for 30%, and Weibo for 10%. The company is developing its marketing in a proportionate manner.
The company uses top KOLs (Key Opinion Leaders) on RED, mid-level KOLs on Douyin, and ordinary KOCs (Key Opinion Consumers) on Weibo, aiming for inflows from RED and Weibo and eventual conversions on Douyin, and Posts about GIRLCULT can also be seen as announcements of live commerce on Douyin.
However, there is a large gap between the number of users on Douyin and RED, with Douyin having over 650 million MAUs (monthly active users) in December 2021 and RED having over 170 million. Despite these differences, the affinity for the beauty sector is the same: in 2021, engagement with posts began to rise in April, ahead of the “618” sale event and exceeded 122.7 billion on Douyin through June. RED, on the other hand, peaked in August and October before the Double Eleven event, with engagement numbers exceeding 1.5 billion each.
The two also have segregation in terms of the beauty genres in which they specialize. Comparing engagement numbers by genre, Douyin has the highest engagement rate for skincare at 44.8%, while RED has the highest engagement rate for makeup at 62.3%. These aspects also contribute to the good compatibility of the two platforms.
Chinese brands that value Douyin, such as Florasis and Perfect Diary
Douyin has also had strong relationships with Chinese brands. Douyin has grown significantly through live commerce, and the 2021 Douyin & RED Cosmetics Industry Marketing Report shows that the top GMV from live commerce on Douyin in 2021 is “Florasis”, with “Perfect Diary” in second place, and in recent years L’Oréal Paris is in third place. But other than that, Chinese brands occupy the top seven positions.
PROYA, a Chinese brand that places particular importance on Douyin, has been focusing on live commerce on Douyin since the company first entered the EC market, and has more than 3.58 million followers at its flagship store. The company actively used influential personalities to boost sales, and on July 28–29, 2021, the company conducted over 48 hours of live streaming, which was viewed by more than 100,000 people and boosted GMV.
PROYA’s Q1-Q3 2021 sales grew 31.5% YoY to 3,012.25 million yuan (US$474.3 million), of which more than 80% came from online. A major contributor to this was Douyin, with GMV reaching 575 million yuan (US$90.5 million) in the same period.
Perfect Diary also leverages Douyin, with its flagship store on Douyin having over 5.59 million followers, and with Tmall sales, which have accounted for about 40% of Perfect Diary’s sales, on a downward trend, Yatsen, the operator, has decided to allocate more of its marketing budget to Douyin. Douyin is now a very important factor in the growth of the brand,” said Huang Jinfeng, CEO of the company.
The company’s flagship store is estimated to have generated 33.61 million yuan (US$5.1 million) in sales this January 2022, which made Perfect Diary 13th place Douyin’s top 20 cosmetics category in terms of sales.
Among the top Chinese brands in the same ranking are Florasis in second place with 136.57 million yuan (US$20.9 million) and more than 7.47 million followers in its flagship store.
In addition to its flagship store, Florasis operates eight accounts on Douyin, including one dedicated to cosplay posts and another to teaching makeup techniques. To increase user stickiness and meet diverse needs, it is necessary to have a variety of accounts and content.
Furthermore, Florasis is more focused on live commerce conducted by its own staff than KOL, and tends to be less dependent on KOL, with 25% of its sales from live commerce on KOL.
Alibaba’s risks today are also Douyin’s tomorrow
It is now a risky situation for beauty brands to rely solely on Tmall for sales, and it appears that the main battlefield for sales is shifting to Douyin. Douyin is expected to continue to expand its influence for the time being, but this expansion of influence also entails risks similar to those experienced by Alibaba.
At the end of 2021, viya, a top KOL whose main activities are on Alibaba’s e-commerce platform, was caught for tax evasion and ordered to pay a fine of 1.341 billion yuan (US$204.9 million). viya is said to have contributed significantly to Taobao and Tmall sales, which could have a negative impact on Alibaba. Since then, viya has not been seen in the public eye, and her future is uncertain.
These incidents are a concern for Douyin as well. Douyin, with its high level of live commerce by celebrities and KOLs, naturally faces the same risk: the more GMV expands, the more prominent the distributors become, and the more likely they are to attract the attention of the authorities.
In the booming Douyin market, companies are looking for ways to increase their brand presence without relying on KOLs as much as possible, such as moving away from KOL-dependent marketing to using their staff, as seen with Floasis. In addition, companies should consider diversifying their marketing budgets across multiple platforms.
Text: Ching Li Tor
Original text (Japanese): Team Roboteer
