Small business victory: how a small company can beat its big competitors?
Amidst the overall downturn in the second-hand car market, a young man turned around his second-hand car shop business with the help of Douyin.
It was in May 2020, months after the outbreak of the Covid pandemic. Most industries in China were experiencing their hardest time ever in years, including a car shop owned by Akon，a friend of Zongyan Huang. Their livelihoods were at stake.
Akon was anxious and feeling helpless because, during that period, his car shop could only sell one car each month, which could hardly cover rent and salaries. He was so envious of those who were making videos on Douyin because, in his mind, Douyin is the only industry that has not been compromised by Covid but, instead, benefitted from it. An idea came to his mind: can his car shop sell cars on Douyin? Then, it occurred to him that Zongyan Huang, his old friend, worked with Douyin content and made it a commercial company.
“To be honest, I wasn’t confident about his idea at the beginning, ” Zongyan said. “Cars are unlike products with low unit prices and can easily be sold on Douyin. The company I work for sells second-hand smartphones, which is much cheaper than cars, and yet, they find it difficult a lot to sell on Douyin.”
Short-video social apps have become widely used in China, but these are even more popular and widespread when compared to Facebook and PayPal.
Douyin lowered the threshold so that more users to can express themselves via short videos. In addition, Douyin e-commerce also lowered the threshold for users to open new stores. Although Douyin’s top bloggers have huge numbers of followers like those on YouTube, the new platform will intentionally decentralize their traffic to provide support to those bloggers who are under-developed.
In this e-commerce scenario, Douyin pays more attention to brand participation. For instance, short videos are the best medium to promote brands. According to the 2021 white paper Tiktok Private Domain Operations, the number of accounts on Douyin Enterprises has reached 8 million as of July 2021.
In January 2021, at least 2,648 Douyin stores had sales of over 1 million and GMV reached 11 billion, which accounted for more than one-third of the monthly GMV of Douyin e-commerce. Moreover, more than 200 stores over 10 million in sales volume.
Douyin has a strong preference for categories. For instance, the top three Douyin categories embracing e-commerce include clothing, shoes and bags, cosmetics and daily cosmetics, and food and beverage. One common characteristic of these three categories is that the unit price is low, and it is easy for customers to engage in impulse buying. Due to the low unit price and large daily demand of customers, the conversion rate of these three categories is more than 7% per month, which is much higher than that of other categories.
According to Mother Chan, a business analytics company, although the overall sales of Douyin e-commerce have maintained a growing trend, the growth momentum is mainly driven by the unit price of goods, which is generally about 60 Yuan (6 pounds). Items with unit prices higher than 300 Yuan (30 pounds) had a total sales of only 1%. In comparison, the prices of cars sold by car shops average at more than 500,000 Yuan (50,000 pounds).
“After several talks with him, I learned that his car shop sells second-hand BMW M-series, not just any brand of second-hand cars. This makes the selling strategy much easier because the market for sports cars is more focused，and that’s what the Douyin algorithm is capable of: to help videos find key customers,” says Zongyan Huang.
When a blogger uploads a video on the Douyin platform, the video is put into an initial traffic pool, where the algorithm will recommend the video to about 250 users and then watch and wait for their reactions. If users consider the video content as good and like, write comments, or click the favorite button, the video hits the standards for the secondary recommendation. Then the video will enter the second traffic pool, which has from 500 to 5000 users, where the process is repeated. Then the video can get into the larger third-flow pool, then into the fourth-flow pool, and so on. This process determines how many users will see the video.
This process continues until the likes, comments, favorites, and completion rates of the video fail to meet the criteria for entering the next stream pool. In the process, the Douyin algorithm adjusts the target users based on the reactions of users in the traffic pool. For example, if the Douyin algorithm determines that the users in the traffic pool who like cars also like the video more than other users, then the algorithm will put more users who like cars into the next traffic pool.
To Akon’s surprise, it only took a few days after Huang came to work with him for his car shop to sell a BMW M3, a result of the video that they had uploaded on Douyin. Moreover, the growth of his used-car collection was also beyond his expectations.
When Huang decided to join Akon’s car shop, his agreement with Akon was that he won’t accept a salary but only take a commission for any cars sold.
“I will only receive a commission from buyers or cars sold on Douyin, so the first thing I need to do is to start creating content,” Huang said. “The car shop has several used-car inspectors who are responsible for examining the cars that customers want to sell. One of the inspectors joined us as a blogger on Douyin.”
Huang teamed up with two workers in the car shop to make the video content. Just like other beginners on Douyin, they were unsure about what video content is suitable for selling cars online. However, Huang had an idea.
“I was thinking that, since the inspectors examine used cars every day, and because these are not brand-new cars from factories, the inspectors must spot all the flaws in the cars and declare a fair price to those who want to sell the cars to us,” Huang says. “Why can’t this inspection procedure be our video content on Douyin?” Huang said.
Huang and his team decided to upload their car inspection videos on Douyin to show how they evaluated cars and what kind of defects led to each car’s depreciation. Compared to the sales strategies of other traditional second-hand car stores, this was a rather bold move.
“In this market, we are the only car store that provides transparency to customers. Usually, a car shop profits from the gap between buying and selling. Many car shops see this as the grey area where they can make more money. However, when customers want to buy a used car from us, we let them know how much we paid for the car. This is the secret about selling cars on social media – creating trust between us，” Huang said.
Since they uploaded their first video on Douyin on Aug 18, 2020, they have put up 100 more videos and gained 60 thousand followers. In the comments section under each video, viewers discuss the cars in each video, while others ask how to do business with them. Even customers who have completed a transaction with them can receive videos on Douyin and interact in the comments section.
Huang included the store’s contact information on his Douyin front page so that viewers can click on the store profile and see the Wechat ID, a widely-used Chinese social app similar to WhatsApp.
“Having 60 thousand followers on Douyin is not very remarkable, believe me. I once had a million followers before I resigned from my last employer. I have to give that up because that was company property,”Huang sighed. “But thanks to Douyin’s algorithm, I don’t need much exposure to find customers. For instance, the Douyin algorithm can recognize when my video is about sports cars and publish it on other relevant For You pages on Douyin. The algorithm ensures that every single viewer who sees our videos are interested in sports cars. Those are our key customers.”
In February 2021, Douyin’s recommendation algorithm was listed as one of the top 10 breakthrough technologies of 2021 by the MIT Technology Review magazine. Other rated breakthrough technologies that year included RNA vaccines. The magazine stated that, unlike other social media platforms, Douyin has the potential to provide instant fame to anyone who appears on the “Recommended for You” page. Videos are repeatedly recommended by Douyin’s recommendation algorithm to users who share the vloggers’ interests, hobbies, or specific identities, which enables specific content to spread quickly.
Douyin’s recommendation algorithm does not judge a blogger’s number of fans or the popularity of a video. The recommendation depends on the video title, sound, and tag, on the content captured by the user, and the video field liked by the user.
“Before we joined Douyin, our store could only sell one car a month. Most important, we could not find people who want to sell their cars to us. However, after we started publishing our videos on Douyin, countless numbers of people came to enquire, and we can now sell about 10 cars a month. The problem we face now is that there are so many people who want to sell their cars to us, but we can only buy 10 cars a month because of the limited cash we have,” Huang said.
A year after Huang joined Akon’s car shop, the store is now the No. 1 second-hand car seller in the entire market, which includes dozens of car stores. This experience increased Huang’s confidence on Douyin and made him think bigger.
“My next step is to open my own studio to make content and sell products on the Douyin products section. This will bring me more profit. Several friends have already joined me, including my girlfriend. I only need to recruit one editor. I’m going to be an e-commerce blogger on Douyin with my own studio. I ‘m going to have my own start-up,” Huang said excitedly.
“ I never imagined that I can start my own business this soon but, after this experience with the car store, I learned much more than I did in my previous job,” Huang explained.
“Being a Douyin e-commerce blogger is a career that is worthy of full attention,” Wenwen Wei, president of Douyin e-commerce, said during the 2021 Douyin E-commerce Expert Summit held in Hangzhou, Zhejiang, China.
As content creators and agents of connection and values, e-commerce bloggers play an indispensable role in the e-commerce ecosystem. Wei added that e-commerce talent is valuable, rewarding, and can be a full-time career.
With the rapid development of Douyin e-commerce, the number of bloggers involved in e-commerce transactions continues to increase. The transaction scale is also steadily increasing.
Mu Qing, Douyin e-commerce vice president, pointed out that, from January to August 2021, more than 1.5 million Douyin e-commerce talents carried goods, at least 120,000 e-commerce bloggers accumulated more than 100,000 GMV, and more than 4,300 e-commerce bloggers accumulated more than 10 million GMV, which exceeds one of the goals of the previous “Got Bloggers UP Plan” of supporting 100,000 annual sales of 100,000 bloggers.
During the conference, Douyin launched a new program called Dream UP to encourage more bloggers to participate in Douyin e-commerce.
Wei proposed that, in the coming year, Douyin e-commerce will guide the career of every e-commerce blogger through the DREAM UP program and help millions of e-commerce bloggers double their annual income.
“I have always dreamed of having my own company. If it was not for Duoyin, I won’t be able to achieve my dream so easily and so quickly. Did you ever imagine that, after having been through all these, I am only 23 years old?” Huang said.