Service providers are operating stealthily on Kwai

The altruism and egoism of service providers.

By Haik Finance, Qi Jielen

The smoke of the mid-year major promotions in the domestic e-commerce market has gradually dispersed, while the changes in the supply and demand structure reflected in this major promotion are still being hotly debated on social media.

As a rapidly emerging force in the recent years of China's broad e-commerce, live streaming e-commerce has now planted more of its own flags in the traditional shelf-based e-commerce territory, achieving a broader coverage and deeper penetration.

Two models have initiated a profound game, with the mid-year major promotions serving as another high-profile training ground and show of strength in the strong breakthrough of live streaming e-commerce. The presence of live streaming e-commerce on short video platforms is further highlighted due to advantages such as user base and user stickiness.

Kuaishou, which emphasizes the private domain value in traffic operation mechanisms, has built an experiential trust e-commerce model based on live rooms as super nodes. While upholding the values of universal benefits to create a down-to-earth atmosphere, it has nurtured and stimulated strong consumer momentum, bringing about the possibility of restructuring many aspects of the industry chain.

We can find evidence of this from the performance during the 616 promotion of Kwai Shou ($KUAISHOU-W (01024.HK)$) In the midst of the 616 promotion, data released by Kwai Shou shows that during the 616 period (May 20th to June 19th), GMV of brand merchants on Kwai Shou platform increased by 515% year-on-year compared to last year's 616, with beauty, fresh food, digital electronics, second-hand, and entertainment industries breaking the 2022 daily sales records.

Kwai Shou's strong push for the trust e-commerce model and the phased achievements it has made are closely related to the intensified focus on service providers. According to Kwai Shou's official data, the number of e-commerce service providers has increased by nearly 40% compared to 2021, contributing to nearly 60% of the GMV during this year's 616 promotion.

The core of Kwai Shou's e-commerce lies in the people in their live streaming rooms, and consumers' favor and trust in the live streaming rooms, as well as the platform's advocacy of "real people, real products, real prices," require live streaming operators to be well-versed in policies and tactics. Professional and efficient services are essential, and in fact, these service providers can create even more value.

From the first mention of the "Three Big Movements" by Kwai Shou's e-commerce service provider conference on July 22, 2021, which includes "focusing on trust e-commerce, brands, and service providers" and the launch of the service provider support program the "Weather Maker Plan," to the Gravity Conference of Kwai Shou e-commerce on May 13, 2022, which upgraded the strategy to the "Four Big Movements," including "trust e-commerce, swift branding, branding, and service providers," service providers have always been in a key position in Kwai Shou's e-commerce business.

Evolution of the service provider ecosystem

In the Q1 2022 financial report of Kwai Shou, it is mentioned that the Kwai Shou service provider system, aimed at providing comprehensive and targeted services for merchants within the Kwai Shou e-commerce ecosystem, is taking shape. While increasing the number of service providers, Kwai Shou is improving the quality of their services, the latter being measured by its ability to help merchants achieve GMV growth; these measures, along with additional exposure policies that enhance sales efficiency, have collectively driven double-digit percentage growth year-on-year for active merchants within the reporting period.

Taking the five forces model launched in July 2021 as an example, according to the data disclosed by Li Congshan, the head of 快手's e-commerce service provider ecosystem and regional operations, as of December 2021, 52% of service providers have significantly improved in traffic marketing capabilities, live broadcast operations capabilities, and anchor incubation capabilities; 27% of service providers have made significant progress in supply chain capabilities and service fulfillment capabilities; 16% of service providers have seen substantial development in all five capabilities.

From the data perspective, the rise of the live-streaming e-commerce industry has driven the emergence and growth of a large number of professional service providers with different expertise in China. 快手's unique advantage in strong private domain and strong repurchase e-commerce ecosystem, as well as the multi-dimensional support from policies to tools provided by the official side to service providers, have attracted more and more service providers to settle in and deepen their presence, ushering in a comprehensive acceleration upgrade of the 快手 e-commerce service provider ecosystem.

More bullish news is coming.

Li Congshan stated at the aforementioned Gravity Conference that 快手 e-commerce will empower service providers through six major dividends, the five forces model, four major systems, three focal points, three upgrades, and one infrastructure, thus enabling service providers to provide professional, systematic, and refined services to merchants, creating a standardized and deterministic path for merchant growth and transformation.

Here, it is necessary to briefly explain some of the terms. The six major dividends include live streaming traffic cold start, short video traffic cold start, investment attraction cold start, 616 big promotion, 快 brand incubation; the five forces model includes traffic marketing capabilities, anchor incubation capabilities, service fulfillment capabilities, supply chain capabilities, and live broadcast operations capabilities; the four major systems include money-making systems, working systems, people management systems, and viewership systems; the three focal points are focusing on merchant transformation, focusing on 快 brands, and focusing on traditional brands; the three upgrades include anchor link upgrades, service organization upgrades, and business model upgrades; the one infrastructure is the operation system + operator.

For service providers, each of the aforementioned terms and their detailed classifications undoubtedly help them hone their internal skills to break through the encirclement. Behind this is 快手 e-commerce's in-depth planning of the service provider ecosystem under strict access control and a strong competition mechanism, which requires meticulous platform support as a foundation.

It is not difficult to predict the overall enhancement of service providers' service capabilities and the re-accumulation momentum of the service provider ecosystem from this point on.

Trader Moving Towards Depth

The value of Kuaishou e-commerce empowering service providers comprehensively manifests itself through the empowerment of merchants by the service providers.

Chongqing Jie Zhi Yu Trading Co., Ltd. (referred to as Jie Zhi Yu) is a typical representative in the process of self-growth continuously promoting the growth of merchants.

In December 2013, Jie Zhi Yu was registered and established in Dadukou District, Chongqing. Since then, it has been engaged in internet operation-related work, having interactions with Baidu, Gaode, Tencent, and others.$Baidu (BIDU.US)$$TENCENT (00700.HK)$Based on the bullish outlook for short video platforms in live e-commerce, after differentiating between Douyin and Kuaishou, Jie Zhi Yu ultimately decided to focus on Kuaishou. Hou Wenbo, the co-founder of Jie Zhi Yu, stated in an interview with Heike Finance that once Kuaishou's private domain traffic accumulates to a certain level, it can obtain long-term revenue with a positive growth trend.

In October 2021, Jie Zhi Yu became a core service provider for Kuaishou e-commerce. Becoming a core provider under Kuaishou e-commerce's strict entry and strong competitive system also signifies undergoing continuous internal cultivation.

Prior to becoming a service provider for Kuaishou e-commerce, Jie Zhi Yu excelled in traffic operation. Now, the company has over a hundred various professional personnel including certified traders, trainers, commercial streaming hands, anchors, assistant streamers, video producers, photographers, channel operators, and even established its own product selection team and operation team. Through the introduction of professional personnel, Jie Zhi Yu has expanded from a single traffic marketing capability to possessing abilities in anchor incubation, service fulfillment, supply chain, live streaming operation, and all-rounded capabilities are rapidly improving.

The improvement of capabilities has also brought about the diversification of profit models. Currently, Jiezhiyu makes money through various modes such as operating incubating anchors, commercialized investment outsourcing, self-built vertical account, content operation, supply chain, offline training, and more.

Hou Wenbo told Hecaijing that during this year's Kuaishou 616 event, Jiezhiyu helped the anchor 'Xuan Nai Daily Food Workshop' complete a large scene, with a daily incremental GMV reaching 5.26 million yuan. Not only during major promotions, for anchors and merchants starting from scratch, Jiezhiyu can also quickly assist the growth of anchors. Clothing anchor 'Mao Boss-M' only had a sales volume of 0.19 million yuan in 8 months. After receiving Jiezhiyu's professional base operation support, merchandise lineup sorting, live broadcast optimization, traffic support, overall adjustment of anchor scripts, video production, and comprehensive operational services, sales gradually broke through to a current monthly average of 3 million yuan.

As of the time of writing, Jiezhiyu has served nearly 3000 Kuaishou influencers including 'Xuan Nai Daily Food Workshop', 'Xingzi', 'Qianqian jia you', boosting the monthly GMV of over 800 merchants by 0.5 million and over 500 merchants by 2 million. Additionally, they have helped multiple Kuaishou influencers achieve daily sales of over 5 million yuan, monthly sales of over 10 million yuan, cumulatively promoting a GMV of over 3 billion yuan.

How much professional capability is needed to run a major promotion successfully? Hou Wenbo listed a series of professional terms such as selection, display, short video preheating, magnetic bull operation and distribution, live broadcast views, and thousands of live room product clicks. It involves optimizing the order and rhythm of product display, script optimization, enhancing and presenting the role design, popularity during large scenes, targeted potential customers, live interaction throughout, post-event data analysis and communication related to operational optimization.

These professional terms are associated with precise control and real-time adjustments in countless details. As live streaming e-commerce ventures into deep waters, becoming an essential part of the ecosystem, service providers have opened a door to a vast world for merchants.

Refreshing the supply structure once again.

Live streaming e-commerce has shown significant support for China's structural supply-side reforms, with service providers playing an extremely important role in this process.

Take the example of Kuaishou e-commerce. Service providers are upstream of Kuaishou e-commerce merchants, continuously seeking to incubate high-quality merchants and accompanying them throughout their lifecycle. Therefore, the expansion and specialization of the service provider team are of significant importance to the platform's policy dissemination and the horizontal and vertical expansion of business. It should be said that the prosperity of merchants originates from the prosperity of service providers. The development of service providers is the backbone of Kuaishou e-commerce development.

From the business expansion trajectory of Jie Zhi Yu in the past two years, it is not difficult to see this point.

Located in the southwest inland area, Jie Zhi Yu not only successfully promoted breakthrough penetration of Kuaishou e-commerce among merchants in its located Chongqing district, incubated and helped a large number of merchants, established a demonstration effect, and laid a solid foundation for further local development of Kuaishou e-commerce; Moreover, while its influence continues to deepen, it also gradually radiates horizontally to surrounding provinces and cities. Merchants and anchors from Chengdu and other places in Sichuan, as mentioned earlier, have also entered the service sequence of Jie Zhi Yu and have achieved rapid growth.

It needs to be clear that live streaming e-commerce has enormous potential both from a policy perspective and a market perspective. Kuaishou e-commerce, based on trust e-commerce, has increasingly demonstrated comparative advantages. Its service provider team has great potential in internal competition and upgrading.

First, from a policy perspective. In recent years, the country has paid close attention to the standardized and orderly development of the live streaming e-commerce industry and successively introduced various policy measures to support it. Various expressions encouraging the development of live streaming e-commerce were involved in notifications such as the "Notice on Coordinating the Normalization of Epidemic Prevention and Control and Accelerating the Recovery of Rural Tourism Market" issued by the Ministry of Culture and Tourism in July 2020, the "Implementation Plan for Accelerating the Cultivation of New Types of Consumption" jointly issued by the National Development and Reform Commission and other 28 departments in March 2021, and the "14th Five-Year Plan" for e-commerce development jointly issued by the Ministry of Commerce and other three departments in October 2021.

Looking at the market perspective. Live streaming e-commerce, especially live streaming e-commerce based on short video platforms, has a wide audience, high stickiness, and quick momentum, but there are still many blank spots, and the refinement is not enough. Starting from the launch of Taobao Live in April 2016 and the beginning of e-commerce live streaming, followed by short video platforms such as Kuaishou and Douyin testing live streaming for sales around 2018, to the current almost nationwide live streaming and the vigorous development of live streaming e-commerce, it has only been a short six years, and it has far from reached the market size limit.

During the 2022 Q1 financial report conference call, Kuaishou CEO Cheng Yixiao stated that the efficient and vivid product display function and the efficient real-time interaction of live streaming e-commerce have significant efficiency optimization effects on product expression and sales, and the trust-based e-commerce model of Kuaishou is suitable for merchants to long-term cultivate. Laugh Gu, the head of Kuaishou e-commerce, stated at the previous Gravity Conference that the essence of trust e-commerce is to improve the consumer's experience-to-price ratio, and the best experience-to-price ratio is to lower the price and improve the experience.

Operators deeply understand the logic of trust and experience enhancement in Kuaishou e-commerce live streaming rooms. Based on the operator model, service providers of Kuaishou e-commerce form a value flywheel that consists of better traffic operations, more professional anchor services, more ultimate product selection, and higher quality fulfillment experience. This enables merchants to take a shorter path, establish their brands with less investment and at a faster pace, and improve customer retention.

Research agency Questmobile data shows that currently, users under the age of 40 are the block orders for short video live streaming, accounting for 63.7%, with active performance from users in third-tier cities and below, accounting for 62.4%. Live streaming is beginning to show effectiveness in sinking.

There is reason to believe that with the rapid enhancement of service providers' operational capabilities and the maturity of the entire industry chain infrastructure, Kuaishou e-commerce will contribute even more to driving brands in the industry, especially fast brands, and meeting the needs of users in third-tier cities and below in China.

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