SHEIN and TikTok will eventually have a fight

It is said that zhang Yiming's personality will not let it go because SHEIN paid for advertising.

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Author | Dai Runze

Edit | Wang Yafeng

In the previous series, we discussed the timing and location of SHEIN, as well as the disciples and competitors of SHEIN, and interestingly, in the discussion about SHEIN's direction and the analysis of future opponents, TikTok is the most mentioned name in the background.

On the surface, SHEIN is the leader of independent stations, and TikTok is a super platform similar to Facebook, and there is a clear distinction between the two.

But the impermanence of the army, the impermanence of the water, the platform OFHEIN began to attract investment independently, and the acceleration of the TikTok e-commerce business is also just around the corner, with the mutual expansion between the two emerging giants, both began to attack the common imaginary enemy Amazon, and more importantly, the needs of young users aged 18-35 overseas on both sides completely overlapped, which determined that there was a war between the two.

Of course, in the foreseeable year of 2022, the probability of the two sides meeting each other is almost zero.

So, why do we say that SHEIN and TikTok must have a war, but will not start a war in 2022, what kind of undercurrent the two sides are currently in, what kind of evolution will be in the future, and how to rewrite the direction of the global e-commerce industry, is the solution for this article.

1

Rip it up and don't clean it up

SHEIN and TikTok's relationship

After the Spring Festival, Byte's independent station, Dmonstudio, was quickly shut down less than 100 days after being exposed, causing industry discussion. One view is that TikTok wants to be a super platform, and it should not go down to do business such as independent stations and grab profits with the people.

In other words, SHEIN is also one of TikTok's big customers, spending $100,000 a day on TikTok advertising, $36.5 million a year. Overall, an independent site seller H said that last year he operated independent site marketing, carefully calculated in the growth stage of the website advertising marketing costs in 20-30%, and SHEIN's current state is the repurchase period, in his experience, the cost of advertising marketing should be 10-15%. So, based on the anecdotal revelations that last year's revenue was $15.7 billion, SHEIN should spend between $1.6 billion and $2.4 billion on advertising and marketing. As a result, SHEIN's presence on TikTok accounts for 1.5% to 2.3% of overall advertising marketing.

SHEIN is not only generous, but also willing to spend time working closely with the TikTok e-commerce team, such as the newly launched TikTok for business in 2021, SHEIN is the first wave of cooperation companies. Moreover, on SHEIN's TikTok account, there are often talented people shooting review videos for SHEIN, and they are very popular, such as the newly opened Brazilian account, a period of dressing videos attracted a lot of people's attention, currently accumulating 150,000 likes and more than 600 comments.

However, SHEIN has not been monetized on TikTok, one explanation is that SHEIN's main battlefield is in the United States, the traffic accounts for about 46%, and TikTok has not opened a small yellow car in the United States, the United Kingdom that opened a small yellow car is not a heavy position in SHEIN, and Indonesia is a sad place for SHEIN, and they just announced their withdrawal half a year ago. But a more reasonable explanation is that SHEIN prefers to reverse traffic from TikTok to its own independent station to deal.

Leifeng network believes that just because SHEIN is a big advertising customer of TikTok, TikTok will throw a rat taboo to shut down its own independent station, so it is inevitable that Zhang Yiming and ByteDance do not have much understanding of the company.

In fact, the traffic wool of social media, TikTok is not untouched. At the beginning, TikTok frantically invested money in advertising on Facebook, importing traffic into its own platform, and the relevant people working on Facebook revealed to Leifeng Network, at first Zuckerberg did not care, but the rapid development of TikTok and Facebook launched similar competitors, at this time there were two voices within Facebook, one was to stop TikTok's behavior of no longer providing services. The other is the pain in the advertising fees that TikTok contributes every day. The latter prevailed, it is said that the head of facebook's advertising department gave Zuckerberg to see TikTok's poor retention rate at that time, saying that TikTok with such a retention rate is actually not competitive, but TikTok itself is precisely calculated, in the case of insufficient traffic import, the matching of the recommendation engine is not perfect, and as the traffic grows, the recommendation engine can crawl more and more user behavior, and it is more accurate, and the corresponding user experience will be better and better. Retention is also getting higher.

In the end, Facebook did not block the development of TikTok, as of the end of 2019, the number of TikTok downloads in the United States alone reached 165 million, the global download volume exceeded 2 billion, and in December 2020, App Annie's data showed that TikTok surpassed Facebook to become the most downloaded APP in the world.

Since you escaped from Facebook in the past, do you think TikTok would give SHEIN a similar opportunity? Both sides should know what they need.

One of our core points is that in the next five years, TikTok and SHEIN will launch an impact on Amazon, which we have elaborated on in the previous SHEIN Five Questions, and will be expanded in the future, here we focus on TikTok.

In December 2020, Zhang Yiming proposed three key new business directions in his internal goals, including cross-border e-commerce, and Byte has also been stepping up deployment.

In terms of internal incubation, in 2019, Byte launched TikTok Shopping, and in November 2021, it launched Fanno for the European market, developed by the team "Magellan XYZ"; externally, Byte has made a number of strategic investments, including leading brand companies Patoson and Star Link, as well as logistics companies, deeply rooted in Europe and the United States to Zongteng Group and the Middle East logistics company iMle.

L, a cross-border tycoon in the era of e-commerce on a platform, told Leifeng that from the perspective of these enterprises invested, TikTok is like a long wooden stake inserted into the hinterland of the industry in the layout of cross-border e-commerce.

Like Aner and Zebao, Patoson, known as Amazon Sanjie, was founded in 2012, received 12.5 million Series A financing in 2015, received 295 million yuan from Cross-Border Connect in December of the same year, increased capital by 449 million yuan in October 2016, raised 270 million yuan in January 2018, and was valued at 2.7 billion yuan in the same year. In the past two years, the growth rate of Patoson is obvious, and the data shows that in 2019, sales reached 3.439 billion yuan and net profit was 178 million yuan, compared with 4.94 billion yuan and net profit of 310 million yuan in 2020. At the end of 2021, Xiaomi and Shunwei Capital entered the shares, Patoson officially entered the Xiaomi ecological chain, SHEIN, Zongteng and other major manufacturers in the industry, coupled with the addition of ByteDance, such a combination of immortals can be called a trump card. However, in 2021, Amazon's large-scale suspension, Pattoson has also been implicated, but with its team's learning ability and talent, it is only a matter of time before it rises again.

In September 2020, StarLink started in 2017, and won a round of financing of up to 300 million yuan, with investment institutions such as Xiangfeng Investment, Sequoia Fund, Tiantu Investment and Lingxi Capital; in 2021, Tiantu Capital was blessed, and Zongteng Group and ByteDance joined, which shows its popularity. The founder of the company is actually one of the super strongmen in the traffic circle, he used to do shopping guide website business in Beijing, and in July 2017, he came to Shenzhen at the invitation of the founder of Patuoson. Starling is good at traffic, Andathos is good at products, so Starling's first office in Shenzhen was placed in a small corner of The Paterson company. In 2021, affected by Apple's privacy protection policy, Facebook's advertising costs soared, thousands of people marketing costs reached $30, the founder found that the company's incubated projects, women's shoes sales are the most stable, cut off other projects, strengthen the refined operation of women's shoes, but also from the source of the supply chain to control product quality, the company's business gradually picked up, is currently expanding the team of women's shoes.

Regarding the investment of Zongteng Group, in August 2021, Byte invested in this cross-border logistics industry of tens of billions, and the company's founder Wang Zhan is Zhang Yiming's Fujian compatriot. Wang Zhan graduated from the Department of Software Engineering of Fuzhou University in 2007, and after graduating from university, he founded Fujian Zongteng Network Co., Ltd. and entered the cross-border e-commerce market as a seller. In 2014, Wang Zhan led the company from a seller to a logistics service provider, and after 2019, it was favored by capital, when Zongteng Group completed two rounds of financing with a total of more than one billion yuan, the B round investors were Zhong Ding Capital, Kaihui Fund, GLP, and in 2020, the B+ round was raised to 500 million yuan, and the investors included Taikang Life, Xiamen C&D, Zhejiang Innovation Capital and other institutions. Nowadays, Zongteng's well-known brands include overseas barns and small package special lines.

Interestingly, behind Patoson and Starling, there are not only bytes, but also SHEIN, which is also an important partner of the cloud business.

If the competition for investment targets is still in a state of relative peace, but in the competition for technical talents, the two sides have begun to have a taste of gunpowder. Informed sources revealed to Leifeng Network that Byte Shenzhen has poached hundreds of people from SHEIN, considering that most of the operating talents are SHEIN's headquarters in Nanjing, so these hundreds of people are more technical talents. In Silicon Valley, SHEIN also directly hit TOP with Byte on talent. Interestingly, perhaps out of concern for data security, SHEIN Silicon Valley recruitment has an important plus is whether there is a U.S. identity, and leader this is a prerequisite, although it intercepts many candidates, but SHEIN is willing to give money, basically to the byte salary, many positions are higher than the byte, and even many positions are twice as fast. Kuaishou Visual Inspection has begun to lose its appeal to technical talent, which is a sad but emotional story.

2

SHEIN began to super-platform

The highlight moments that belong to SHEIN are wave after wave.

As spoiled at the beginning of our series, SHEIN valuation will reach 100 billion US dollars, for which there is also media confirmation that SHEIN is secretly raising a new round of financing of at least 1 billion US dollars, this round of financing led by General Atlantic and another large investment group willing to invest 700 million US dollars, tiger tiger fund and Sequoia fund and other old shareholders to follow, the industry believes that if this round of financing is completed, SHEIN's valuation will be as high as 100 billion US dollars, which means that it will exceed H& The sum of M and Zara.

This valuation is enough to make SHEIN ranked among the top three unlisted companies, but it also caused confusion among many industry players, and as soon as our SHEIN five-question series came out with a view that SHEIN is worth $100 billion, the most asked by backstage readers is why SHEIN is worth more than H&M+Zara.

In fact, there is an answer, that is, SHEIN is the platform, and H&M and Zara are brands, although the brand is not ready to build, but every year there will always be a new brand, but the platform is only one in ten years.

Speaking of the essence of SHEIN, Cheng Weixiong, an independent analyst in the footwear industry, once told the "Daily Economic News" that SHEIN is a platform provider, and its success lies in the pre-sale system, and a large number of styles are put on the platform for users to choose. However, Cheng Weixiong has said that SHEIN is not a brand owner, at most a channel provider, that is, another Anchor.

It is said that SHEIN and Anker used to feel sorry for each other, optimistic about their own development path and peeping into each other's good future, and there are common investors, so they are still thinking about exchanging shares, bundling together to develop, and thinking about it is also some good and natural feeling. However, the follow-up involves many issues such as consideration in operation, so it is more just verbal.

SHEIN is still more than one level higher than Anker, which can be seen from the capital chase in the market, and it is also what SHEIN deserves to continue to invest in the invisible business system of technology middle office, supply chain services and global logistics circulation. Of course, Leifeng Network does not mean that Anker has not invested enough in these fields, Anker has expanded the category in recent years, and it is to go to China, and it is to enhance its overall brand recognition, and it is also active enough in new media, and it is still serious and down-to-earth, and it also maintains the benchmarking position of the entire Chinese manufacturer on Amazon, but the overall potential is insufficient, and the root problem of not being high enough in dimension has not been solved.

In the end, it is still the starting point of the business model, as Tongtuo founder Lao Liao said, independent stations and from Amazon seem to be just the difference in path choices, but in fact, it is caused by the confidence in their future development, independent stations are longer-term, start slower, but follow-up skis longer.

The platform is different from the brand, SHEIN is mainly price-oriented, the newly launched underwear brand Luvlette is priced at $9.9, and the average price of Amazon Essentials is $20. A supplier of SHEIN said that in addition to price, SHEIN mainly fights for speed and production capacity, and the brand fights for manufacturing, packaging, and cultural values.

Xu Yangtian did not plan to make SHEIN a brand at the beginning, Leifeng network once talked with Li Peng, one of the founders of SHEIN, SHEIN was different from Nike and ZARA positioning, and it was not a brand route at all, such as the clothes purchased on SHEIN are not trademarked, Li Peng believes that SHEIN itself is a high-quality clothing platform that provides good-looking, cheap and fast logistics.

In order to continue to make this platform run at high speed, Xu Yangtian has not raised the price, which also makes SHEIN have a super deep barrier in price. An Amazon platform seller believes that the proportion of SHEIN's marketing expenses may not exceed 20%, coupled with the large volume of logistics costs can be further compressed, coupled with the average price of 7 US dollars of the basic model, no matter who, want to compete with SHEIN, in addition to the supply chain in China, but also to bypass the price range of 10-20 US dollars.

For investment promotion, SHEIN will set its sights on enterprises in Jiangsu and Zhejiang, a sheIN in Ningbo a yoga clothing OBM supplier said that in 2021 they and SHEIN's investment team to talk about cooperation, they will provide sheIN with styles, after passing the test will first produce dozens of orders, sales are good and then reverse orders. However, the supplier's headache is inventory, because if the models they develop are not sold, they are always piled up in the warehouse. Therefore, SHEIN as a platform has passed some of the R&D and inventory pressures to suppliers.

In addition to suppliers, according to people familiar with the matter, SHEIN is also inviting sellers to settle in internally, SHEIN provides traffic support, and sellers sell independently, but the specific categories have not yet been determined, and Mr. N believes that it is likely to still focus on the field of fast fashion.

In terms of category expansion, SHEIN mainly promoted the underwear brand Luvlette this year, after launching high-end clothing brand MOTF, pet brand PETSIN, and beauty brand SHEIGLAM.

Speaking of SHEIGLAM, a brand that started out on the SHEIN website, spun off in 2020 and turned into a standalone site, backed by Shopify. Looking at it, this site has a lot of SHEIN shadow. Taking price as an example, SHEIGLAM's products are between $1-13, and most of them are around $5. For example, lipstick, the same affordable products Revlon, Maybelline New York, KIKO, etc., the price of lipstick will not be less than 7 US dollars, 30 ml of foundation liquid about 15 US dollars, and the most expensive lipstick on SHEIGLAM is only 4 US dollars, the price of the foundation liquid is 9 US dollars, the price advantage is very large.

Regarding its own traffic, in 2021, affected by Apple's privacy protection, Facebook recommendation effect is not accurate, a large number of independent sites have been impacted, ROI once fell to 2 or even lower, but SHEIN was affected very little, because its App and website have enough fans, has formed organic traffic, similarweb data shows, In March, SHEIN's visits reached 141 million, with an average visit time of 8 minutes and 44 seconds, and visits to Brazil in emerging markets increased by 28.63%, accounting for 8.98%, accounting for the second most visited by SHEIN in the world.

As a result, SHEIN, as a platform, is moving step by step in the direction of the super platform.

3

TikTok is growing rapidly in the Southeast Asian market

You must know the famous article "Waiting for Godot", and the cross-border e-commerce of the entire Chinese Internet is still waiting for its own Godot as always, and this Godot is TikTok.

In July 2021, the average monthly use time of TikTok users in the United States reached 24 hours, more than YouTube's 22 hours and 40 minutes, while in the United Kingdom, the difference is even wider, in May 2021 TikTok is close to 26 hours, while YouTube is less than 16 hours, and according to Similarweb data, TikTok visits reached 1.7 billion in March 2022, accounting for 67.13% of direct clicks, only 0.28% It is paid traffic, and its development speed is amazing.

Nowadays, as a newcomer to cross-border e-commerce, TikTok has a traffic platform in his hands, coupled with the blessing of supply chain and logistics, the days of competing side by side with e-commerce giants are not far away. TikTok also uses Southeast Asia and the United Kingdom as the first battlefield for a big push into the e-commerce industry.

In 2021, TikTok launched TikTok Shopping, and the news we got was that TikTok e-commerce would have a GMV of about $6 billion in 2021. Relevant sources revealed that TikTok e-commerce 2022 GMV target to reach 12 billion US dollars, almost double that of 2021, and even reach a market size of 100 billion US dollars in five years.

70% of TikTok's existing e-commerce revenue comes from Indonesia and about 30% from the UK. According to the data, in 2020, Indonesian e-commerce sales were 32.2 billion US dollars, and TikTok had about 200 million downloads in Indonesia, accounting for more than 40% of the entire Southeast Asian users.

After the Indonesian market gained a foothold, TikTok also increased the deployment of other countries in Southeast Asia, and in March the official said that it would open the Vietnam, Thailand, and Malaysia markets, and relevant sources revealed that they would also open the Philippines.

Southeast Asia itself is a market where Chinese sellers entered the market relatively early, such as Ali's investment in Lazada in 2016 and Tencent's investment in Shopee. Mr. N, founder of a cross-border e-commerce MCN agency, believes that Lazada is like domestic Taobao, Tmall, Shopee is more like Pinduoduo, and the new player TikTok is very similar to the domestic Douyin of that year.

W, an investor in a cross-border e-commerce investment institution, revealed to Leifeng that as far as she knows, TikTok's team has been doing e-commerce research and studying brand management for nearly half a year, and she believes that TikTok's brand priority will be higher. The TikTok e-commerce team is doing systematic planning and thinking, studying how to plan the brand echelon, how to plant grass and harvest transactions for users, W said that TikTok may do a selection channel similar to the Douyin e-commerce selection alliance model, this model is through the selection alliance platform to expose the goods, the red people then select the goods through the selection alliance to add to the window, and finally sell goods through short videos and live broadcasts.

W said that at present, the main brands and MCN agencies that consume ads on TikTok are Chinese overseas. Therefore, the aforementioned N communicates very closely with TikTok. Leifeng network learned that in the past year, TikTok's personnel in the Southeast Asian e-commerce business have increased by nearly a thousand people, from various departments, some for sellers, some for users, some for logistics, payment, and MCN institutions.

As an MCN agency, N and the team need to search for a large number of celebrities on TikTok and YouTube, but also need to find the right brand side for service, so the brand side has a high traffic demand, Mr. N recalled that when the brand side completed several large customers and made certain achievements, the number of viewers in the live broadcast room of an e-commerce platform from dozens to 2000 to 3000, ROI to be no less than 5, TikTok sent the team to offer cooperation, after communication, the two sides hit it off, N's company became a Tier 1 agent for TikTok traffic and a TSP service provider. According to N observation, in 2022, TikTok will continue to expand and refine cooperation with MCN institutions, there are currently more than 70 TSP service providers in China, according to the convention, some service providers are involved in the task of carrying TikTok GMV.

N said that in the process of cooperation, when seeing the potential TikTok brand account and celebrities, TikTok staff will immediately recommend to the team of TSP service providers, the two sides discuss cooperation methods, real-time communication in the exchange group, encounter such as the red live broadcast "after the wonderful continuation of the advertisement" oral broadcast problem, everyone immediately responded to develop a solution. Because live e-commerce needs to be refined operation, each link has a lot of details to control, TikTok's cooperation method makes N and the team feel very inclusive and open, N also admitted that live e-commerce needs to review and analyze every time, and when communicating with foreign local celebrities, language and cultural differences should also be considered, in fact, this process is not easy.

Regarding the effect, N said that at present, through their team service, TikTok ROI can reach 5 or even 10, of course, including the TikTok traffic bonus period and subsidies, but even if the subsidies are removed, TikTok is now more competitive than Facebook.

In terms of price, TikTok's cpm (thousand person marketing price) averages $10, while Facebook has reached $30. Regarding subsidies, for merchants, TikTok will be for activity grading subsidies, such as A-level and S-level activities, different traffic gradients will correspond to open traffic, Mr. N said and Douyin e-commerce ratio, which is equivalent to TikTok free to merchants drainage; for users, for different categories such as 3C, beauty, there will be different subsidies, physical goods such as 29 minus 9 US dollars, logistics such as 19 US dollars free shipping. If you remove TikTok's subsidy policy, Mr. N said that ROI can also do 4, thanks to TikTok's tag logic and content distribution, unlike Facebook's pure advertising implantation, TikTok is still based on content and how to operate their own fan logic, can be through a variety of ways such as live broadcast or short video, and the traffic distribution mechanism is also similar to Douyin, the country is in accordance with 5% of the existing traffic plus 95% of the organic traffic distribution, so N believes, Even if TikTok's traffic dividend has passed, focusing on doing content well can make the account up.

Anker's TikTok account has done a very good job, and has opened accounts in Indonesia, Vietnam and Thailand in Southeast Asia, with a variety of content, including pure product exposure, recommendations from celebrities, and short videos combined with life and products. Among them, Indonesia's account is the largest, with about 6.6 million followers, a cumulative number of likes reaching 2.5 million, and an average of about 1500 likes per video.

Although there is still a big gap compared to Amazon, Shopee, and Lazada, it is clear that TikTok is slowly catching up. For example, in the Southeast Asian market, we are gradually improving the layout of e-commerce, launching payment functions such as cash on delivery, and cooperating with Jitu to ensure the timeliness of logistics in local first-tier cities, and even next-day delivery and one-day delivery.

Referring to the difference between the UK and the Southeast Asian market, N said that in fact, the UK is a fully open market, the threshold for sellers is very low, if the account holder is at least 18 years old, the account publishes five videos and gets more than a hundred likes, basically can apply. And unlike Southeast Asian countries, the UK does not need local companies to prepare goods locally, and users can directly take the domestic cross-border parcels when placing orders, or they can find local overseas warehouses. N believes that many sellers with no cross-border e-commerce experience can try the UK market first.

However, the British market is not as tolerant of live e-commerce as Southeast Asia, a TikTok seller Y said that his store is aimed at British users, but he often has only a few hundred dollars in transaction volume, and logistics accounts for 15-20%, which makes him feel pressure.

Both N and Y believe that the development path of TikTok will be very similar to that of Chinese Douyin, and there will be some head anchors in the future, as well as landmark events such as Luo Yonghao's goods. However, from the perspective of e-commerce business, TikTok is still in its infancy, and now, TikTok is currently more inclined to extremely cheap products, such as 0.99, 1.99, 2.99 US dollars to cultivate user habits, short entry time, and now there are external link jumps, which means that a complete closed loop has not been formed.

An important trick in the British market relies on strong subsidies and 3C products to drive traffic, and a domestic e-commerce company is accustomed to an iPhone to give 20% subsidies.

4

Written on the back,

How will TikTok harvest SHEIN?

This year's TikTok is the year of TikTok, and the answer is 2020.

Only on TikTok exposure and direct delivery and 2020 before the Douyin e-commerce situation is similar, a washing brand founder Mr. T told Leifeng Network that in 2018 their company caught the first wave of dividends of Douyin live broadcast with goods, the method is very simple, find dozens of Internet celebrities live broadcast, the users attracted from Douyin directly to Tmall stores, the year's double eleven by this means directly brought tens of millions of sales.

However, in October 2020, Douyin closed the external link to form a closed loop, and behind this landmark event, relevant people broke the news that the advertising revenue of Douyin e-commerce was very high that year, ranking second only to Ali in the country. According to public data, the GMV of Douyin e-commerce in 2020 exceeded 500 billion yuan, three times more than in 2019, but more than 300 billion of them jumped to Taobao, Tmall and JD.com to trade. Bloomberg has reported that in 2020, ByteDance's advertising revenue reached 183 billion yuan, of which Douyin accounted for 60%, calculating about 100 billion, while Ali's advertising revenue ranked first with 253.5 billion yuan. The data shows that after turning off the external link, the transaction volume of the Douyin small shop in January 2021 increased by more than 50 times compared with January 2020. According to this reference, once the total advertising revenue reaches 40% of the target target, and the proportion of self-owned traffic rises to 40%, it is a process from quantitative change to qualitative change. So, when TikTok's e-commerce revenue is 40% of SHEIN, will the relationship between the two parties part ways?

Many of the businesses and investors we interviewed also agreed that when the advertising revenue and GMV reach a certain scale, TikTok will definitely close the external link to form a closed loop.

As for whether this ratio is 40%, it will take time to test. In this regard, Leifeng Network will continue to pay attention.

END