8 insights from Douyin e-commerce new brand growth report

The new consumption track in the past two years has been extremely turbulent. First, there was a surge in new brands and capital support, and then the industry was "overheated" and "cooled down". Public opinion fluctuates, but the core issue has become blurred.

The so-called "core issues" are nothing more than these two: 1. Has new consumption really been unpopular? 2. What changes have taken place in the current new consumption compared with the past?

Judging from the situation on both the venture capital and venture capital ends, the consumer industry is still very hot - investment and financing news is frequently reported, including cases where the valuations of leading projects have soared. Insiders still have a consensus that new consumption is a "structural opportunity", the industry trend has not changed, and new consumption still has a long way to go.

The wind direction has not changed, but the way of "riding the wind" has changed. Compared with previous years, the story of relying on traffic dividends to achieve explosive growth is objectively difficult to sustain, and the industry is also re-examining overly aggressive traffic-driven paths. Entering a new stage, new consumption requires new ideas and new methods.

Where do new ideas and new methods come from? It may be a good idea to pay attention to the latest developments of new brands on the front line.

After observation, we found that new brands are constantly entering Douyin e-commerce and using it as their main business base. Recently, Douyin E-Commerce released the "2022 Douyin E-Commerce New Brand Growth Report" (hereinafter referred to as the "Report"), which fully demonstrates the development status of new brands in Douyin E-Commerce, and summarizes the ability model for the growth of new brands in Douyin E-Commerce.

The new brands mentioned in the report were established in 2016 or later, are good at using emerging digital channels and innovative marketing methods, and correspond to new consumer demands. By understanding their actions, we can have a more intuitive grasp of the growth of new brands in the new stage.

Based on long-term observation of the new consumer industry, the "Report" and the "Capability Model", we summarize 8 insights into the growth of new brands.

Product capability is the starting point of everything

In the past few years when new consumption has been booming, there have always been various products that "stitch" popular concepts but fail to meet real consumer needs. This type of product team may be good at telling stories and generating traffic, but if time goes on for too long they will disappear in the craze.

The problem is very simple: if the wrong product is chosen, all subsequent work will become a waste of time. To create a good product, there are three steps: product selection, product testing, and product optimization.

Good product selection requires clarifying the core user portrait, refining the unique "selling point", and adapting the expression style of the "selling point" to the operating scenario. Finding strong or blue ocean categories on the platform can also provide a good start for new brands.

At present, new brands in Douyin e-commerce are mainly concentrated in the beauty, food and beverage sectors. This is the conclusion drawn by the report based on the industry distribution of new brands on the market. At the same time, categories such as clothing, shoes and bags, personal care and household cleaning products, 3C digital appliances, maternal and child books, and smart homes also have the potential to grow into core categories because the products themselves can be supplied in a diversified manner and consumers have high demand in these areas.

After product selection is completed, product testing can quickly release product potential or stop losses in time. If you don’t take this step, it’s easy to fall into the “pseudo-demand” trap, and the end result can only be that a large number of products become inventory or flow to stores selling near-expiry products.

For new brands operating on Douyin e-commerce, the most efficient way to confirm the market potential of products is to use platform resources to distribute potential products to influencers, industry vertical users, etc. for short video or influencer live broadcast evaluation, sales, and collection of market feedback; at the same time, through the brand’s own live broadcast room, test the product combination with the highest user acceptance, and then launch the combination of products in short videos and influencer live broadcast rooms to expand product sales.

A small boat is easier to turn around. During the growth stage of a new brand, such an efficient and accurate method can enable the new brand to quickly confirm the product’s effectiveness - if the effect is good, increase investment to make it a hit; if the effect is not good, stop and adjust in time.

The significance of "hot-selling products" to brands is significant. In the short term, the creation of hit products will provide sales guarantees for the brand. The report shows that the purchase rate of Douyin e-commerce's hot-selling products is 76%, the proportion of consumers who give positive feedback to hot-selling products is 60%, and the proportion of consumers who purchase hot-selling products more than once a month is 73%. At the same time, since the release of the Douyin hot-selling list, the number of selected products under new brands has increased by more than 4 times in 7 months.

Creating a hit product is just the beginning for a new brand. New brands also need to continue to collect user feedback and constantly track and optimize their products to maintain long-term advantages. Only with the accumulated brand assets can the new brand become a true "brand".

Content capability is a must for new brands

How much growth can content drive? Procter & Gamble in its early years provided a reference sample.

Since 1920, P&G has sponsored and participated in the production of radio and television dramas aimed at women. Since the first radio drama sponsored by P&G was named after its soap powder "Oxydol", the series of dramas it subsequently sponsored and produced were collectively referred to as "soap operas." The soap operas produced by P&G have been broadcast for decades, with a total of tens of thousands of episodes, and fans of the soap operas have also become loyal users of P&G.

This "soap opera" story reflects the value of content to brand penetration and the new opportunities brought about by media changes. Today's consumers are spending more and more time on live broadcasts and short videos, so making good use of new content carriers and polishing out high-quality content has become a compulsory course for new brands.

What can be done specifically? For example, new brands need to use a good first impression to attract users' attention and increase user retention time in the Douyin e-commerce live broadcast room, and cleverly use methods such as raffles and questions to guide user interaction and drive the popularity of the live broadcast room. In addition, clear and highlighted product introductions during live broadcasts can also allow consumers to quickly understand the product's usage scenarios, thereby quickly converting.

Cashmere clothing brand Hongling increases the storytelling and knowledge content of live broadcasts and treats live broadcasts as "programs" to strengthen fans' trust in the brand and promote user conversion. At present, Hongling’s two matrix accounts broadcast six shows a day, and achieved a transaction volume of 99.7 million yuan in November 2021.

Watch the short video again. The report shows that in the first half of 2021, the usage rate of short video platforms in China has reached nearly 88%, and the scale of short video users has reached 890 million. During the same period, the scale of online shopping in China was approximately 810 million people. Because mainstream short video platforms have the characteristics of both communication channels and sales channels, users' purchasing habits will also be reshaped. Creating high-quality short video content will be of great significance to brand acquisition and conversion.

Creativity is the soul of short videos. New brands need to constantly add new content and gameplay to attract the attention of young people. For example, the pre-prepared food brand Fanhu has created a "short video promotion trilogy", innovatively transforming "hard advertising recommendations for products" into "content about interesting usage scenarios of food products" to attract users to buy. At present, the overall investment-output ratio of Fanhu’s expert promotion has reached over 3.0.

In addition to attractive and creative short videos, brands also need the support of content capabilities when placing advertisements. As for advertising content, new brands on Douyin e-commerce can break down selling points from the perspectives of concept and function, and implement advertising based on their own characteristics and crowd portraits to cultivate user minds.

For example, Wang Xiaolu, a brand of braised snacks, is well versed in the creation and dissemination of advertising content. Through its spokesperson advertising featuring Qiao Shan and its fun brand advertising titled "Airplane", it has achieved tens of millions of exposures and hundreds of thousands of direct interactions on Douyin, triggering widespread discussion and brand dissemination beyond the circle.

Use new ideas to get traffic and make good use of it

One fact that needs to be acknowledged is that in the industry context where the "traffic dividend" is gradually fading, it is not realistic to operate a business solely relying on natural traffic. How to leverage the combination of natural traffic and paid traffic to improve operational efficiency is a question that new brands need to think about now.

The significance of the cooperation between natural traffic and paid traffic is that paid traffic can, on the one hand, help the live broadcast room to cold start, help the business snowball to accelerate expansion, and help merchants achieve larger-scale growth. At the same time, the accumulation of natural traffic can in turn optimize the matching degree of the population reached by paid traffic, thereby improving the conversion efficiency of paid traffic.

Of course, if you still want to ask whether there are any "depressions" that can be utilized, the answer is yes. The "search" traffic of Douyin e-commerce is a rich mine waiting to be developed.

Search is important because it means that users have a close relationship with the brand. In his book Marketing Revolution 4.0, Philip Kotler proposed the 5A model concept to represent the relationship between users and brands: Aware, Appeal, Ask, Act, and Advocate. The "Ask" link corresponds to "active search".

Search traffic is playing an increasingly important role in Douyin e-commerce. Data from the "Report" shows that since 2021, search traffic has peaked at various activity nodes of Douyin e-commerce, such as the 55 Trendy Shopping Season, 818 New Trendy Goods Festival, Douyin National Day New Trend Week, Douyin Double 11 Goods Festival, etc., especially the 818 New Trendy Goods Festival, the related search content of new brands increased by 60% month-on-month.

More importantly, search can not only allow products to reach users faster, but it is understood that Douyin e-commerce will increase its investment in search and malls in the future. For new brands, the cost-effectiveness of deploying "search" traffic at this time is self-evident.

Accurately match talents to help brands break through the circle

Different from traditional shelf-based e-commerce, Douyin e-commerce has strong content attributes, and these contents are inseparable from the creation of influencers. How to leverage the platform’s expert resources to drive growth will determine the growth rate and effectiveness of new brands in Douyin e-commerce.

New brands can select suitable influencers based on their own needs from both rational and emotional dimensions. The rational dimension is to refer to the influencer data and estimate the cooperation effect from data indicators such as the number of fans, average number of views of works, interaction rate, completion rate and sales data; the emotional dimension is mainly to examine whether the influencer's content type, style and tone are consistent with the target audience, so as to improve brand promotion and conversion value.

CHICCO MAO, a Chinese women's wear designer brand, will comprehensively consider the data indicators of influencers when selecting cooperative influencers, and requires influencers to convey brand concepts in addition to selling products to enhance users' perception of the brand. Judging from the effect of selling goods, the strategy of "rationality + sensibility" has achieved remarkable results. In April last year, CHICCO MAO cooperated with the influencer Ruogu for the first time, and the sales of a single game exceeded 6.3 million yuan. In August, CHICCO MAO cooperated with Xiaoxiong Chumo, and the sales of a single game exceeded 10 million yuan, successfully breaking the brand circle.

Screening talents requires both rational and emotional considerations. Similarly, the evaluation of the effectiveness of cooperation with talents can also be measured by the two dimensions of short-term value and long-term value.

Short-term value refers to brand-oriented and effect-oriented value. The former can be considered through changes in completion rate, number of likes, number of comments, brand voice, and crowd portrait; the latter focuses on more direct GMV, ROI and its efficiency improvement performance.

On the one hand, long-term value includes the follow-up investment value of expert material advertising. Excellent materials have long-term traffic effects. New brands can purchase the authorization of excellent materials and carry out longer-term delivery to obtain greater value. This value is mainly measured by the GMV/ROI brought by expert material advertising.

At the same time, new brands can also conduct long-term value assessment of influencers through LTV (lifetime value). This indicator mainly focuses on the mid- and long-term conversion of the recommending population and the repurchase of the purchasing population, and is generally tracked and evaluated in cycles of 30/60/90 days.

Digging deep into the value of live streaming is not as easy as you think

The consumer industry has shifted from being centered on "place" to being centered on "people". How to quickly reach consumers and obtain feedback are key issues for consumer brands to improve operational efficiency.

Overseas brands implement DTC through their official websites, but domestic consumers are more accustomed to shopping on platforms, so the DTC of new brands will inevitably require a model that is more in line with national conditions. In terms of "directly reaching consumers", the advantage of Douyin e-commerce is that new brands can conduct self-broadcasting on Douyin e-commerce, thereby quickly establishing connections with users, obtaining feedback, and better iterating products.

According to the report, from January to November 2021, the number of self-broadcasts and the number of viewers of new Douyin e-commerce brands showed a significant upward trend. During the same period, the viewing volume and live broadcast transaction volume of fans of new brands in some typical industries were basically corresponding. Since February 2021, PMPM, an original Chinese skincare brand, has been broadcasting its own content on Douyin e-commerce. At present, the brand live broadcast room has contributed more than tens of millions of yuan in additional growth to PMPM.

Many people will focus on the live broadcast, but there are more to live broadcasting than just the front stage; how to make preparations before the live broadcast, as well as the data analysis and review after the live broadcast, determines whether the brand can really rely on live broadcast to leverage growth.

Before the broadcast, new brands need to arrange the product composition according to the specific goals of the live broadcast. For example, they can use traffic-generating items to increase the popularity of the live broadcast at the beginning of the broadcast, intersperse profitable items when the popularity of the live broadcast room is high to increase store profits, and at the same time intersperse topical "explosive items" to promote conversion and achieve sales targets, and use low-priced, limited-quantity, and highly applicable welfare items to attract fans to stay.

At the same time, the selection and training of anchors before the live broadcast and the design of the live broadcast scene are also very important. The former will affect key indicators such as user retention time, click-through rate, conversion rate, etc., while the latter directly affects the user's first impression when entering the live broadcast room, which also affects the user's retention time.

After the live broadcast is over, the new brand’s review of the live broadcast data is an important way to maximize the total business volume, because any mistakes or omissions in the live broadcast operation will be reflected through "data".

For example, is the total GMV of the live broadcast room increasing or decreasing? What are the differences between the portraits of viewers and buyers, and between non-fans and fans? New brands need to understand the overall live streaming situation through data. To further improve the live broadcast effect, brands need to summarize and review more detailed real-time data indicators, namely popularity indicators, interaction indicators, product indicators and order indicators.

Attaching importance to live streaming capabilities has a direct effect on the growth of new brands. The domestic sleep brand Yimian has improved its live broadcast room operation capabilities by optimizing the decoration configuration of the live broadcast room and repeatedly studying the live broadcast room data. Its live broadcast room sales exceeded one million in the third month of operation, the conversion rate of the live broadcast room exceeded 7%, and the GPM reached 4000+.

Service capabilities need long-term development

So far, we have discussed various ways to grow new brands. Grasping the code for growth is always attractive, but how to take over and accumulate the growth is a great test of the brand's service capabilities, which is something that start-up brands can easily overlook.

For new brands, efficient marketing communications are certainly important, but if service capabilities cannot keep up, resulting in poor user experience, long-term operation is out of the question. The essence of improving service capabilities is to allow consumers to have a good shopping experience in every aspect of the shopping experience, that is, the store needs to have comprehensive service capabilities.

In Douyin e-commerce, the indicator for measuring the comprehensive service capabilities of this store is "experience score", which includes three dimensions, namely the merchant's product experience, logistics experience and service experience in the past 90 days. The experience is scored on a 5-point scale, with the lowest being 3 points. The scoring weights of the three dimensions are 50%, 15% and 35% respectively.

For new brands, attention should be paid to the segmented indicators under each dimension of service capabilities. For example, product experience includes product bad review rate and quality return rate; logistics experience includes collection timeliness rate and order delivery time; service experience includes complaint rate, dispute commercial responsibility rate, IM3-minute average response rate, autonomous completion time for refund only, and autonomous completion time for return and refund.

Repeat purchases determine life and death, and brands thrive

Hot-selling products often have a life cycle. A brand cannot succeed simply by creating a few hot-selling products, but only by being able to continuously gain the attention of consumers can it go long-term.

When building brand power, "repeat purchase" is a core keyword. In the eyes of many investors and entrepreneurs in the new consumer sector, repeat purchases are more important than ROI. This is because repeat purchases actually look at "user retention", which measures a brand's ability to build reputation and continuously attract consumers over the long term. It is also a hard indicator to prove that "branding" is successful.

From a methodological perspective, the key to increasing repurchase rates for brands lies in understanding consumer needs, improving stickiness with consumers, and ensuring that consumers continue to pay attention to the brand and consume products. Therefore, it is crucial for brands to understand user portraits, conduct refined population operations, and improve consumer conversion efficiency.

In Douyin e-commerce, new brands can divide the crowd into public domain crowd, passive interaction behavior crowd, shallow interaction behavior crowd, deep interaction behavior crowd, brand consumption behavior crowd, and brand fans according to the closeness of the relationship between the crowd and the brand, and operate in a targeted manner to accumulate relationship assets and increase the stickiness between the brand and consumers.

New brands in Douyin e-commerce can also use the massive cloud map to view their own brand performance in Douyin e-commerce, understand the gap between their own brand scale, brand efficiency, brand image and the industry, and make targeted improvements.

Choose the right position and the team will adapt to local conditions

If we were to summarize the above insights in one sentence, it would be: understand the logic of the platform and adapt to local conditions in business operations.

This is also the commonality of all new brands that have achieved growth on Douyin e-commerce. There are thousands of business methodologies, but only those that match both platform logic and new brand logic can become a lever for growth. The "matching" mentioned here refers not only to product matching, but also to the matching of the internal organizational structure of the new brand.

To put it more bluntly, if a new brand wants to use Douyin e-commerce as its business base, then the company's internal business divisions should match the characteristics of the platform, and should be a "top-down" match.

Douyin’s e-commerce business operations include short videos, live broadcasts, searches and shopping malls. In order to operate these four fronts well, new brands need to build an independent operation team, construct personnel around the five dimensions of live broadcast and short video content production, product management, service guarantee, advertising, and expert operation, and build the team's long-term operation capabilities in all aspects.

The key to how this independent operation team can cooperate tacitly and achieve efficient operation on Douyin e-commerce lies in a strong CEO leading the team. The operation of new brands on Douyin e-commerce is actually a CEO project. Only when the CEO fully mobilizes resources and coordinates all parties can the most efficient use of resources be achieved.

On TikTok e-commerce, it is not uncommon for CEOs to personally do live broadcasts.

Back to the original question, new brands entering a new stage need new ideas and new methods. Growth is still happening, but single-point breakthroughs are no longer possible. In the new stage, achieving growth requires comprehensive coordination from the inside out and from top to bottom, and Douyin e-commerce will be an important place for future coordination and growth.

Author: Deep Sound

Source: Deep Sound