Bytedance Has Begun to Invest in Consumer Goods Brands
Not long ago we wrote about Bytedance’s push to expand its ecommerce business, with the launch of Douyin Flagship stores and its efforts to court fashion brands. Now we’re adding another piece to that puzzle. ByteDance has started to invest in consumer goods brands. According to CBNData, in the first quarter of 2021, the company invested in 7 brands. In comparison, in 2020 it only invested in 5 projects.
This has been in the works for a while. In 2018, Zhang Yiming (张一鸣), CEO of ByteDance, founded a technological development company called Liangzi Yuedong Technology (量子跃动科技). In 2019, ByteDance became a stakeholder in two investment firms that mainly focus on consumer goods brands, and Liangzi Yuedong Technology also invested two other brands.
What Type of Brands Attract Bytedance To Invest?
Bytedance favours intelligence technology
Let’s dig into the projects ByteDance has invested in. In total, 9 projects are consumer goods brands, 3 are related to supply chain, 2 are media outlets. Among the consumer goods brands, 4 of them are intelligence technology brands. For example, NARWAL (云鲸), whose hero products is a floor mopping robot. We mentioned this product in our previous article talking about 10 hottest products of 2020.
ByteDance also favours founders with Internet background
Among those 14 investment projects we mentioned, 7 of the founders are coming from an Internet background.
ByteDance prefer to be the only investor
Out of the companies it has invested in the past 5 years, ByteDance has become 8 of the projects’ only investor. The remaining companies that have multiple investors are either about advanced technology or have stepped into a mature period of financing.
What Has Caused Bytedance to Invest in Some Projects Twice?
Though it has only been 2 years since ByteDance officially entered the investment industry, it has invested in two companies twice. They are the intelligent technology brand NARWAL and Lazy Bear Hotpot (懒熊火锅), a convenience store for hot pot ingredients that opened in 2020.
These two product categories have space for growth and these brand’s popularity in the market is rising. In terms of cleaning robots, there is no unicorn brand showing up yet. Besides, NARWAL’s main competitors such as Xiaomi and iRobot don’t have the function to clean itself, they require customers to wash the machine manually. What NARWAL does is to improve the automation and humanization of its cleaning robots. In August 2020, the sales volume of its floor mopping robots ranked TOP1 on Tmall. In its C-round financing, the brand applied for over 100 technical patents.
What Can Bytedance do for These Consumer Goods Brands?
Drive awareness by guiding more traffic to those brands’ Douyin official accounts
The most direct way that ByteDance supports those brands is by providing traffic to their official Douyin accounts. For example, in January 2021, ByteDance invested in a meal replacement brand Shark Fit (鲨鱼菲特). In March, the brand’s Douyin account followers grew from 26k to 62k, which was 138% growth.
Help the Brands Develop Douyin Stores
As we mentioned earlier, Douyin announced on April 8 that it is creating an ecommerce system called “Interest Ecommerce” (兴趣电商). It launched Douyin Flagship Stores and has been investing heavily in building out its ecommerce department.
Unlike tradition ecommerce platforms, Douyin’s Interest Ecommerce doesn’t rely heavily on users searching for a specific product or brand. Instead, Douyin want to create an ecommerce platform similar to how Douyin’s algorithm recommends videos to watch based on the other videos a user has interacted with. With Interest Ecommerce, users don’t search for what they want, instead, they have the motivation to buy a product because they see someone recommending it and this arouses their interest.
It is estimated that the GMV of Douyin’s Interest Ecommerce will reach over 9.5 trillion RMB by 2023.
Open access to Bytedance’s other platforms
ByteDance has many other apps besides Douyin. In China, its biggest two are Douyin and Toutiao (头条), which reach many young female users and the middle-age consumers. It also has Dongchedi (懂车帝), a car introduction app and Hupu (虎扑), a sports app that often shares info about NBA. The majority of users on these two apps are males.
What ByteDance can do is to open green channels for brands that it has invested in and match those brands with a specific app based on the brand’s target consumers.
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