China E-commerce Marketing Trends: Live-streaming E-commerce Rapid Growth

Chinese E-commerce

Against the backdrop of a moderate recovery in the macroeconomy, the trend of consumption stratification is likely to continue, and cost-effectiveness remains the core competitiveness of China's e-commerce industry; live-streaming e-commerce is further seizing market share, but its growth rate has slowed down; cross-border e-commerce has broad market potential and maintains strong growth momentum, becoming an important source of incremental growth.

Online consumption is gradually recovering. From January to October 2023 , China's total retail sales of consumer goods increased by 6.9% year-on-year , achieving a steady recovery. Among them, online retail sales increased by 11.2% year-on-year, faster than the overall market growth rate. From January to October , online retail sales of physical goods increased by 8.4% year-on-year , and its share of total retail sales of consumer goods rose from 26.2% in the same period last year to 26.7% . Specifically, sales of food , clothing , and daily necessities increased by 11.3%, 7.6%, and 8.2% respectively .

Value for money remains a core competitive advantage, and China's live-streaming e-commerce continues to erode market share. With a moderate recovery in the macroeconomy, price and value for money remain the most important core competitive advantages for e-commerce platforms. Leading e-commerce platforms all use " low price " as one of their core selling points, which has intensified industry competition and is expected to impact industry profit margins. Short video platforms, leveraging their strong traffic advantage, continue to drive the rapid growth of live-streaming e-commerce, expanding their market share . Their " Double Eleven " GMV growth significantly outperformed the overall industry average. Furthermore, short video platforms are actively expanding into e-commerce platforms as a supplement, potentially further squeezing the market share of traditional comprehensive e-commerce platforms.

Overseas markets are contributing to incremental growth. With the decline of the Chinese e-commerce industry's growth dividend and intensified competition, overseas markets have become the next important battleground for Chinese manufacturers. For Alibaba, although Taotian Group faces significant growth pressure, Alibaba's international business has maintained rapid growth, achieving double-digit growth in the past few quarters, with a year-on-year growth rate of 53% in FY2Q24 . Lazada, AliExpress, and Trendyol have shown strong growth. Alibaba is still preparing for external financing for Alibaba International Digital Commerce Group to support its business expansion, and international commerce is expected to be one of the company's important growth drivers. Pinduoduo's overseas brand Temu has become the company's second growth engine. In 2023 , Temu accelerated its expansion, with the platform showing that it has opened sites in 48 countries / regions and ranks high on the App Store 's free shopping charts in dozens of countries and regions . As the company's business continues to expand, the market space is expected to further open up, and Temu is expected to become an important source of future growth for the company. Overseas markets provide vast market space for Chinese e-commerce platforms.

Douyin continues to increase its investment in local services. Leveraging its powerful traffic and promotional advantages, Douyin continues to increase its investment in local services.

In terms of food delivery, Douyin still relies on third-party logistics for delivery. Due to the high fulfillment requirements of food delivery and the need to cultivate user awareness, the competitive landscape of food delivery is expected to remain stable in the short term.

In terms of in-store business, Douyin's video marketing model can stimulate users' demand for stockpiling and group buying, and it has a traffic advantage. However, at the same time, Meituan has also shifted from defense to offense, continuously increasing subsidies and investing heavily in live streaming, group buying and other businesses to consolidate its market share. The industry competition is still quite fierce.

In the travel and hospitality business, Douyin is accelerating its expansion, upgrading hotel and tourism to a first-level department under its lifestyle services and gradually improving its service capabilities such as hotel booking verification. However, its overall back-end booking capabilities still lag behind those of OTAs . OTA platforms' strong supply chains and comprehensive services have built competitive barriers, and the competitive landscape of the industry is expected to remain relatively stable in the short term.

China's Short Drama Market

Profit margins for general video companies are expected to continue improving, and long, medium, and short videos may enter an era of comprehensive profitability. As mid-term user targets are achieved, the strategic goals of various platforms may gradually shift from user numbers to paid subscription rates and ARPU . The popularity of micro-dramas brings new growth, and industry consolidation promotes healthy growth. The short video sector is experiencing traffic growth and user stickiness, and is accelerating diversified commercialization based on its traffic advantages.

Micro-dramas are characterized by their distinct features and cater to fragmented viewing time. Each episode is approximately 1-2 minutes long, with a fast-paced plot structure and plot twists at its core. Micro-dramas often feature themes such as war gods, underdog stories, and time travel. As a form of cultural fast food— " exhilarating dramas"—they cater to users' fragmented time, striving to attract paying users with the strongest emotional impact. The target audience for micro-dramas is typically people aged 35-55 in lower-tier cities . Micro-dramas have short production cycles, low filming costs, and relatively shorter payback periods. The main revenue model is membership fees, where users pay 1-2 yuan to unlock a single episode, averaging nearly 100 episodes. Other revenue streams include product placement.

The explosion of short dramas has brought incremental growth, while industry rectification promotes healthy development. The Chinese online short drama market reached 37.39 billion yuan in 2023 , a year-on-year increase of 268% , and is projected to grow by 35% year - on- year in 2024. In the third quarter of 2023 , 150 online short dramas were released in China , nearly double the total for the entire year of 2022. Currently, the short drama industry is seeing an increasing number of entrants, leading to severe content homogenization and uneven quality. On November 15th , the State Administration of Radio and Television of China announced that it would take multiple measures to continuously regulate online short dramas, and major broadcasting platforms have actively responded. Industry rectification will help push short dramas back from unchecked growth to healthy development.

China's SaaS Industry

China's SaaS industry is still in a period of adjustment, awaiting the release of pent-up demand. The overall IT budget expenditure of Chinese enterprises determines the market demand size for the Chinese SaaS industry. According to data from the National Bureau of Statistics, profits of large-scale industrial enterprises nationwide fell by 7.8% from January to October . This contraction in corporate profits will also affect IT procurement, significantly weakening the market demand for SaaS . Furthermore, Alibaba Cloud, as China's largest cloud computing service provider and considered a barometer of the entire Chinese SaaS market, saw its revenue growth rate in the first three quarters drop to a low single digit, reflecting relatively weak downstream demand to some extent.

Currently, the profitability of most SaaS companies in China remains weak, primarily due to high marketing costs and R&D investment. On the one hand, SaaS is still in its early stages of development in China, and significant R&D investment is needed for product optimization and enrichment. On the other hand, small and medium-sized enterprises (SMEs) are too fragmented, resulting in relatively high customer acquisition costs. Furthermore, suppressed demand impacts revenue, making profitability a challenge for most SaaS companies.

The integration of SaaS and AI is a long-term trend. AI will accelerate industry restructuring and enhance its capabilities in content generation, data analysis, and decision-making. Furthermore, the concept of MaaS (Model as a Service) proposes a development paradigm centered on AI models, building a cloud computing technology and service architecture that is open to large-scale model startups and developers. MaaS allows developers to deploy machine learning models into applications and provides automated services encompassing model training, inference, deployment, fine-tuning, evaluation, and productization. The emergence of MaaS may further lower the barrier to entry and increase the adoption rate of large-scale models.