Why Walmart Wants to Buy TikTok? Live Streaming E-Commerce Is The Future

Sep 07, 2020 - 3 minutes read time

Walmart - TikTok

A new form of e-commerce has been born in China. Video stars now promote products during the coronavirus lockdowns. The U.S. retail giant can do the same if it acquires TikTok. That’s how Walmart can get ahead of Amazon.

For teenagers, TikTok FOMO—fear of missing out—is real. I had mostly avoided the app; it made me feel old. Then Walmart said it was joining Microsoft in a bid for TikTok. That caught my eye. 

Walmart x TikTok. Really?

True, TikTok could be a huge boost for Walmart’s e-commerce business. There might be some potential to cross-sell ads. But that wouldn’t justify a $30 billion price tag. So there has to be more to it. 

Over the last few years, Walmart has stepped up its online activities. In the US, it offers curbside pick-ups so people can shop at a safe distance. Customers order things online and drive to a store. A worker then loads everything into their trunk. There’s no need to step inside a crowded store. 

In China, Walmart is the only foreign supermarket competing in the country’s massive e-commerce arena. It’s made large investments in JD.com, China’s second-largest e-commerce platform. In 2018, it invested US$500 million in a grocery delivery service, Dada-JD-Daojia.

So Walmart saw first-hand what happened in China during the pandemic. The company understands that the future of e-commerce is in live-streaming. It’s now bringing what it learned from China back to the US. And TikTok is the vehicle.

TV interview on Yahoo Finance: TikTok U.S. sale is not about the algorithm, it’s about the user base. 

How a Live-Streaming Craze Turned Into a Lifeline

Consider a well-known case in China, Peacebird. It’s a billion-dollar fashion retailer with seven brands and 4,600 brick-and-mortar stores. 

Peacebird chairman Zhang Jiangping responded to the coronavirus outbreak by going all-in on live-streaming. He notified sales agents and authorized them to post content on social media channels. Then, on Jan 28, the company hit a milestone. 

Three days into the Chinese New Year, retail director Andre Gao hosted Peacebird’s first live-stream session. Over 100,000 people joined it. Thousands of in-store managers became online sales agents. These agents started to interact with customers on Taobao Live, the live-streaming platform run by Alibaba. They reached as many new clients in three hours as they normally would in six months.

The result? Peacebird made more than 10 million yuan (US$1.41 million) during the first three weeks of the Chinese New Year. This was the same period when the coronavirus ravaged Wuhan and triggered the city’s lockdown. By the second quarter, the company had already seen a 30 percent year-on-year increase in online revenue.

The Next Frontier of Shopping

American brands are adjusting to the new retail formats too. Nike’s online sales in China grew more than 30 percent. It went big on Tmall, another Alibaba platform. It hosted the Air Max March Party in April. The launch was broadcast online, attracting 2.7 million viewers and generating 24 million likes. That alone translated into over 5 million yuan in sales in under four hours.

In January, like everyone else, Nike had to close over 5,000 Chinese stores. But its sales revenue for the Greater China region only dipped by 5 percent in that first quarter. By the third quarter, revenue had grown by 5 percent compared to last year. 

Walmart is watching with interest. 

After all, Douyin, the Chinese version of TikTok, is a major player in China. It has 13 percent of the live-streaming e-commerce market share. That makes it second only to Alibaba’s Taobao Live.

What happened in China may show Walmart how to beat Amazon in the US by attracting more consumers aged 16 to 24. TikTok has about 100 million monthly active users in the US. Half of them use it daily. 

Time Is Ticking On TikTok

Depending on how you look at it, the forced sale of TikTok can be a boon. It’s easy to imagine tens of thousands of TikTokers live-streaming products the same way millennials endorse brands on Instagram. It’s easy to imagine Walmart stepping up its logistic services. Physical stores could serve as fulfillment centers even after the pandemic. Young people could watch TikTok, click, drive to a store, do a curbside pickup, go home. And repeat. 

To Walmart, $30 billion for a joint bid for TikTok might well be a bargain. Amazon, don’t complain you didn’t get the memo. 

Howard Yu signature

 

 

 

P.S. What’s your view on future retail? Who’s your favorite online influencer? Is live-streaming on TikTok the new infomercial? Join the discussion below. Love to hear your view.

(An earlier version of this article was co-authored with my colleagues Mark Greeven and Jialu Shan. It was published by Channel News Asia in Singapore.)


Comments


4 comments

H
Hartmut Sep 25, 2020 at 10:43am

Your response to Sharnelle is spot on and describes our challenge and opportunity for BayerCropScience spot on. We need to develop our technologies and offerings in a way that we are perceived as part of the solution and not part of a problem in society. It is basically our "License-to-operate" but at the same time the risk-benefit evaluation of society moved in highly developed societies towards risk evaluation as benefits of innovation is in many input sectors not directly relevant. The training and discussion is opening minds - thank you!

Howard Yu:
H
Howard Yu Sep 28, 2020 at 5:09pm

Thank you Hartmut! I like your example of BayerCropScience. Spot on! Thanks a lot.

M
Martin Sep 09, 2020 at 5:46pm

Clicks to Bricks - not quiet sure that this will work out at the end of the day - it is not the business logic behind it - it is more the culture of two very different type of companies that makes me wonder ? - I question myself - why does TikTok has to sell and is this intervention of the US president in line with fair trade?

P
Patricia Andrews Sep 08, 2020 at 4:32am

A very smart move. If Walmart's TikTok bid succeeds, not only they will reach millions of Gen z consumers - they could also catch up with Amazon! It will definitely be a game changer. Interesting article Howard as always, thank you for sharing!

Howard Yu:
H
Howard Yu Sep 09, 2020 at 7:34pm

Thank you Patricia for your comment! Indeed, Gen Z is the next battlefield for all retailers. Can't agree with you more.

S
Sharnelle Jackson Sep 07, 2020 at 12:07pm

Great post Howard! I am curious, with all the market turmoil and uncertainty, if you would remain confident in the long-term success/potential of big tech?

Howard Yu:
H
Howard Yu Sep 09, 2020 at 7:36pm

Hi Sharnelle! Great to see you here. I also harbor the same thought too. The biggest risk of tech giants today is their very low "likeability." If they are not seen providing our society with the positive contributions, their freedom to innovate will come under pressure by regulators around the world.

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