By Tian Feng

Source: Bowang Finance

Entering its sixteenth year, Double 11, once the most anticipated event for e-commerce each year, has created one GMV milestone after another, continuously pushing the boundaries of the e-commerce industry. However, it's unclear when change and innovation became the focus for e-commerce platforms.

Yet, when consumers hear stories evolving from 'low prices' to 'the longest Double 11,' it indicates that there has been a lack of novelty for quite some time. This also implies that the e-commerce industry is quietly undergoing a reshuffle, and it's not just the platforms that are suffering but also the brands that coexist with them.

01

Beauty E-commerce: From Best Partner to Growth Struggles

International luxury beauty brands and Chinese e-commerce platforms have witnessed each other's glory.

Thirty years ago, luxury beauty brands entered China with a bang. Pioneers like Estée Lauder, from setting up their first sales counter in Shanghai to opening an online sales channel on Tmall, have established themselves as the undisputed top beauty brand, both in terms of brand recognition and sales. Their star product, 'Little Brown Bottle,' was once a must-have for fashionable girls, and their La Mer Cream was the top choice for many girls upgrading their skincare routine.

However, after the glory, a downturn is often inevitable. Estée Lauder is now facing its 'tough times.'

According to WWD, Jane Lauder, Chief Data Officer and Executive Vice President of Corporate Marketing at Estée Lauder Companies, will resign at the end of the year. With Jane Lauder's departure, no member of the Lauder family will be involved in the daily operations of Estée Lauder.

In fact, Estée Lauder's performance has been underwhelming in recent years. As of June 30, 2024, Estée Lauder's net profit declined by 61%. Except for a slight 1% increase in fragrance sales, hair care, scalp care, and color cosmetics businesses all declined.

Tmall, once a golden sales channel, has also underperformed. According to Qingyan Data, Estée Lauder's skincare sales on Tmall declined year-on-year in eight out of the past 12 months. During the same period, its color cosmetics products also declined year-on-year in five months.

Besides Estée Lauder, international brands like L'Oréal, La Mer, SK-II, Helena Rubinstein, and Lancôme are also facing similar difficulties. Data shows that beauty sales on Tmall decreased by 17.69% year-on-year in the first half of 2023. In general, Tmall's beauty sales are entering a decline phase.

With top-selling brands declining and the golden age of beauty being redefined, e-commerce platforms are also accelerating their reshuffle. Taobao and Tmall, the veterans of e-commerce, are either undergoing or about to undergo their own 'singularity moment' of change.

02

Crisis for Taobao and Tmall: Traditional Shelves Fail, Content E-commerce Fades Away

Do you still watch live streams on Taobao? Most people would hesitate to answer that.

According to statistics, Taobao Live's annual GMV in 2023 was approximately RMB 980 billion, still failing to reach the trillion-yuan club. Since pioneering live e-commerce in 2016, Taobao has lagged behind content platforms like Kuaishou E-commerce and the newly rising Xiaohongshu Live E-commerce.

This 'internal withering' began with the fall of 'big streamers.' This Double 11, 'Eyebrow Boy' Li Jiaqi, who has not escaped public opinion crises, is still the 'top streamer' on Taobao Live. In the highly centralized trading field of live e-commerce, traffic equals negotiating power, and the performance of the top streamer reflects the entire platform ecosystem to some extent.

However, both viewers and the platform itself know that Li Jiaqi, who is both loved and hated, is no longer the optimal choice for Taobao. Keeping him in this position already indicates Taobao Live's growth struggles. During this period, Taobao has also introduced external big streamers, but they have faced landing issues and gradually faded away.

As a pioneer in domestic e-commerce, Taobao keen sensed in 2016 that 'shelf e-commerce' had developed to a certain extent and a new shelf model needed to be considered. Therefore, it began to focus on 'content e-commerce,' such as Taobao Wander and live e-commerce.

However, Taobao originally established itself as a 'shelf e-commerce' platform, positioning itself as a 'trading platform.' This means that users choose to buy their favorite products on Taobao only after considering their options. On the one hand, this indicates sufficient vertical traffic and a high conversion rate. On the other hand, as e-commerce growth reaches a certain bottleneck, the strong transaction-oriented model makes it difficult for Taobao to obtain more traffic and lacks touchpoints to increase user consumption frequency.

Therefore, Taobao attempted to complement its shortcomings by introducing 'content e-commerce.' However, due to inherent differences in e-commerce genes, users' perceptions and habits on Taobao have already formed, making it difficult to change the internal traffic structure. This has made content e-commerce incompatible on Taobao, especially with the lack of big streamers and unchanged e-commerce operation models, leading to a decrease in the volume of Taobao's content e-commerce.

On the other hand, Taobao's shelf e-commerce performance is also unsatisfactory. Meanwhile, the entire e-commerce market has become more crowded and competitive with the entry of Pinduoduo, Douyin, Kuaishou, and Xiaohongshu. The decline in beauty sales is just one aspect of Taobao's dim outlook. The real crisis lies in Taobao's e-commerce model, which has become difficult to adapt to the new era. However, just as 'a big ship is hard to turn around,' when we realize the platform's decline, it indicates that some changes have already quietly taken shape.

This may also be the reason why Tmall Beauty has experienced a wave of 'store closures' this year. Makeup brands like VNK, Japanese cosmetics brand Kose, French perfume brand Marc Jacobs, and well-known brands under L'Oréal such as NYX and TAKAMI have all announced the closure of their Tmall overseas flagship stores or official flagship stores this year.

Beauty brands are collectively reevaluating their approach to Tmall.

03

E-commerce Reshuffle: Market Changes, Brands Realign

How do you usually shop now?

Perhaps the definitive answer used to be, 'When I want to buy something, I go to Taobao,' but now it might be, 'I get inspired by watching videos online and buy something while I'm at it.'

This actually reflects the changing shopping habits of consumers. Thirty years ago, shopping habits moved from offline to online. Five years ago, e-commerce shopping shifted from demand-driven to content-based interest-driven. When online shopping becomes a consumption habit, it means that e-commerce has somehow become 'infrastructure,' capable of stimulating users' consumption interest through various forms based on e-commerce. As a result, the action of 'placing an order' occurs earlier in the user consumption chain.

This opens up new growth space in terms of user base size and consumption frequency, potentially accelerating the formation of new user consumption habits and further shaping the landscape of the e-commerce market.

For brand owners, cooperation with e-commerce channels must achieve a '1+1>2' effect. Therefore, they need to actively embrace changes during the transformation and iteration of e-commerce platforms.

There are two main considerations here: firstly, the characteristics of the target users and their consumption habits; secondly, the development trends and channel characteristics of the platform itself.

Taking beauty as an example, the target users pursue 'beauty' itself and pay attention to the quality of life. Content is an excellent presentation carrier, showcasing beauty products' features and application scenarios in an all-round way. It can not only stimulate users' consumption interest but also provide sufficient information to meet their consumption decision-making needs, which is missing from traditional channels like Tmall.

With fierce competition in shelf e-commerce, the differentiation between different platforms has decreased. Luxury beauty brands need fancier platforms to connect with more precise users, such as Xiaohongshu, which can simultaneously satisfy their needs for user reach and channel consumption. In recent years, it has also launched lifestyle and sentimental streamers like Zhang Xiaohui and Dong Jie.

With changes in e-commerce users' consumption habits and user personas, the three-decade-old e-commerce industry may have reached a new historical juncture.

Business development seems to have its historical laws, destined to have its lifecycle, difficult to reverse or revive. When the entire market begins to migrate, the old king's reign is coming to an end, and the new king's battle for supremacy has reached its climax.