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Author: Han Wenjing

Kuaishou is still maintaining its rapid momentum.

On August 20, Kuaishou released its second quarter and mid-year results for 2024. Its total revenue increased by 11.6% year-on-year to 31 billion yuan, and its adjusted net profit increased by 73.7% year-on-year to 4.68 billion yuan, exceeding market consensus expectations.

However, the day after the financial report was released, Kuaishou's stock price fell.

At the opening, Kuaishou fell 4.95% to HK$42.2 per share, and finally closed at HK$40 per share, a drop of 9.91%. The total market value was 174.1 billion, which evaporated nearly 20 billion compared with 193.3 billion the previous day.

Temporary stock price fluctuations may not reflect too much market sentiment, but it should be noted that since its listing on the Hong Kong Stock Exchange in 2021, Kuaishou’s market value has fallen from 1.4 trillion yuan to about 180 billion yuan, and its total market value has evaporated by more than one trillion yuan.

Regarding the poor reaction of the capital market, the outside world speculates that the main reason is that the growth rate of Kuaishou's e-commerce GMV is lower than market expectations.

In recent years, the rapidly expanding e-commerce business has become a strong boost to Kuaishou's performance. However, as the number of e-commerce users on Kuaishou's website has reached saturation and the number of anchors in live broadcast rooms has been reduced, the growth rate of Kuaishou's e-commerce GMV has slowed down. How to keep up with industry trends and improve user experience will be a challenge for Kuaishou's future development.

Kuaishou e-commerce, the growth rate has slowed down

Looking at Kuaishou's financial report, from the perspective of main business, online marketing services (advertising), live streaming and other services (including e-commerce) are still the "three horses" driving Kuaishou's revenue, generating revenues of 17.52 billion, 9.3 billion, and 4.16 billion, respectively, contributing 56.5%, 30.0%, and 13.5% of the revenue, respectively.

The commercialization progress of Kuaishou is inseparable from the penetration of e-commerce transactions. The e-commerce business has driven the growth of online marketing services and other services on its own.

Specifically, the online marketing service sector, which is Kuaishou's largest source of revenue, is divided into internal circulation marketing services and external circulation marketing services. The internal circulation refers to the advertising placed by merchants and anchors on the Kuaishou platform in order to gain more exposure, which is closely related to the e-commerce business. The development of the e-commerce business has driven the growth of internal circulation advertising.

Kuaishou CEO Cheng Yixiao once publicly stated that e-commerce business is one of the important engines for Kuaishou's future growth and the center of the entire Kuaishou business ecosystem.

In the past 2023, Kuaishou's monthly active users exceeded 700 million, and its total e-commerce GMV exceeded 1.18 trillion, entering the "trillion club" for the first time and becoming the fifth Chinese company after Alibaba, JD.com, Pinduoduo, and Douyin to have an annual GMV of over one trillion in e-commerce business.

With a huge user base as a foundation, Kuaishou's e-commerce foundation is solid.

From the demand side, the number of monthly active e-commerce buyers in the second quarter of 2024 increased by 14.1% year-on-year to 131 million; from the supply side, the average monthly number of active merchants in the second quarter of 2024 increased by more than 50% year-on-year.

In the second quarter of this year, Kuaishou's e-commerce transaction volume (GMV) continued to grow, although the growth rate has slowed down. Looking at the longer timeline, in the second quarter of 2022, Kuaishou's e-commerce GMV was 191.2 billion yuan, a year-on-year increase of 31.5%; in the second quarter of 2023, Kuaishou's e-commerce GMV was 265.5 billion yuan, a year-on-year increase of 38.9%; in the second quarter of 2024, Kuaishou's e-commerce GMV reached 305.3 billion yuan, a year-on-year increase of 15%, and the growth rate was "halved" compared with the previous two years.

Looking at the long-term trend, from 2022 to the present, Kuaishou's quarterly GMV transaction volume has generally increased steadily, but the growth rate of GMV has shown an overall downward trend.

Source: Lieyun.com

In the second quarter of this year, Kuaishou e-commerce is still running at a rapid pace, with sales of more than 300 billion in three months, but the GMV growth rate has dropped to below 20%, which is undoubtedly a warning signal. Douyin e-commerce and Pinduoduo are in the same situation.

According to LatePost, in March this year, Douyin's e-commerce growth rate fell below 40% year-on-year for the first time. After the second quarter, the growth rate further fell to less than 30%.

Coincidentally, Pinduoduo's GMV growth rate in the second quarter was also lower than that in the first quarter. Prior to this, Pinduoduo had maintained a GMV growth rate of more than 40% for a long time.

The slowdown in GMV growth seems to be a problem that all e-commerce players need to face. The weak consumer market and the intensified industry competition have weakened the low-price advantages of platforms such as Kuaishou by pursuing low prices across the entire network and simplifying the full-reduction process.

In the second half of this year, Taobao, Douyin e-commerce, and Pinduoduo have all put GMV back as their top priority.

Talking about the next e-commerce strategy, Cheng Yixiao said that in the second half of the year, Kuaishou will still vigorously develop content e-commerce and social e-commerce, focus on the core value of live broadcast rooms and short videos, and give full play to the important role of content in attracting new e-commerce users and promoting their activation. At the same time, it will steadily build a pan-shelf scenario in the long term, do more to increase user frequency in the shelf field, and establish user mind.

On the day of the second quarter results release, Kuaishou launched a repurchase plan - the company repurchased 1.1288 million shares on the Hong Kong Stock Exchange on August 20, 2024, at a cost of HK$49.9993 million. Based on the repurchase quantity and cost, the average repurchase price was approximately HK$44.29; according to the disclosure, the highest repurchase price was HK$44.95 and the lowest repurchase price was HK$43.95.

Pan-shelf becomes the new engine

In the e-commerce field, continuously attracting new users and maintaining growth is the main goal of every platform. However, as the market becomes saturated, finding new growth points becomes increasingly challenging. Major e-commerce platforms are still constantly exploring new market spaces and striving to expand their brand influence.

Overall, although Kuaishou's latest performance is solid, its e-commerce business is not surprising enough and is on the defensive overall. It is worth mentioning that the potential energy of the general shelf is being released at an accelerated pace by Kuaishou.

The pan-shelf is an important supplement to the live e-commerce content field, including recommendations, shopping malls, searches, and stores. The core is to meet the certainty needs of consumers through frequently hung products. At the Kuaishou Gravity Conference in 2023, Cheng Yixiao first proposed the concept of Kuaishou's pan-shelf. This was the first time Cheng Yixiao spoke to the public after taking over the e-commerce business himself.

At the first quarter 2024 earnings conference, CEO Cheng Yixiao said: "Kuaishou's e-commerce business is still in a stage of rapid development. Among them, the pan-shelf field, as one of the engines of e-commerce growth, achieved a year-on-year growth of more than 50% in the first quarter of 2024."

In the second quarter, Kuaishou's pan-shelf area continued to grow, exceeding the overall GMV growth. The GMV of the pan-shelf area currently accounts for more than 25% of Kuaishou's total e-commerce GMV.

Earlier, the 618 battle report released by Kuaishou e-commerce showed that the pan-shelf market has become a new growth point for Kuaishou e-commerce's overall operations, with pan-shelf GMV increasing by 75% year-on-year and search GMV increasing by 110% year-on-year. At the same time, the content market maintained a stable growth rate, with short video trailer GMV increasing by 69% year-on-year.

Since its trial of e-commerce business in 2018, Kuaishou e-commerce has gone through many iterations. From the early "trust e-commerce" - focusing on trust e-commerce, brands, and service providers, to last year's "low-price good products" as the annual strategy, to "users first", Kuaishou has always followed the changes in consumer trends.

In May this year, at the 2024 Kuaishou E-commerce Gravity Conference, Kuaishou clearly proposed the "user first" strategy for the first time, stating that the platform will work with merchants to further optimize the consumer shopping experience; at the same time, it will also achieve coordinated growth in global traffic, enrich the supply of low-priced goods, and launch sales hosting functions to help merchants follow changes in consumption trends, seize new consumption opportunities, and better improve business certainty and efficiency.

Kuaishou emphasized in its financial report that although the domestic e-commerce business faces challenges in consumer demand, the rapid changes in consumption trends and e-commerce infrastructure still drive the growth of e-commerce. Kuaishou, which closely follows user needs, can further amplify the ecological value of trusted e-commerce.

More possibilities for Kuaishou

Faced with the problem of traffic peaking, how can we release the value of existing traffic to a greater extent? In addition to the e-commerce business that has always been regarded as the second curve, Kuaishou's innovative businesses such as short dramas and local life are also showing a new commercialization positive cycle trend.

In terms of short dramas, as the earliest platform in the industry to develop short drama content, Kuaishou's daily active short drama users have already exceeded 300 million. After the rise of the paid short drama industry, Kuaishou has specially created a native link based on service accounts for paid short dramas, so that users can watch dramas and pay for them on the Kuaishou website, and the streaming parties do not need to develop technology, but only need to complete simple tasks such as uploading dramas and layout configuration. This can not only reduce the disturbance of traditional advertising to users, but also improve the efficiency of business operations and conversions.

As reflected in the financial report, in the second quarter of 2024, the number of customers investing in Kuaishou's paid short dramas increased by 329% month-on-month, and the number of episodes invested increased by 34% month-on-month.

In terms of local life, with the consumption upgrade and consumption structure transformation of the 700 million Kuaishou users, Kuaishou's local life services have instantly stimulated the users' demand for "nearby", bringing new growth to merchants. At the same time, Kuaishou and Meituan also upgraded their strategic cooperation in July, covering "100 cities and 10,000 stores" across the country.

On August 20, Kuaishou held a 2024 interim performance conference. The management said that in terms of local life, "Against the backdrop of the transformation of sales and consumption structure, we have observed huge demand for local life services from 700 million Kuaishou users, which has also brought new growth to local production and operation businesses."

In terms of commercialization, from January to June 2024, the total consumption of local merchants increased by 172% month-on-month, among which the comprehensive and catering industries achieved high growth of 598% and 156% respectively.

Looking to the future, the continued development potential of Kuaishou e-commerce is worth looking forward to. With user-first as its core strategy, its content ecology and business ecology will continue to expand into new space.