A man holding a phone walks past a sign of Chinese company ByteDance's app TikTok, known locally as Douyin, at the International Artificial Products Expo in Hangzhou, Zhejiang province, China October 18, 2019. Picture taken October 18, 2019. REUTERS/Stringer

HONG KONG, June 21 (Reuters Breakingviews) - China’s latest e-commerce challenger is teaching the establishment a lesson. While Alibaba (9988.HK), JD.com and Pinduoduo (PDD.O) are suffering from slowing sales growth, TikTok parent ByteDance’s Douyin app is benefitting from consumers spending more on entertainment and education.

Shoppers recovering from the ripple effects of Shanghai’s months-long lockdown were generally unenthusiastic about the discounts on offer during this year’s “618” – China’s second-largest annual shopping extravaganza that runs through the first 18 days of June. JD.com, for example, only recorded a 10% rise in total sales for the period, down from 28% last year and its slowest growth on record. read more

Meanwhile, Douyin, which only ventured into e-commerce in 2019, became the centre of attention thanks to the meteoric rise of “Oriental Selection”, a livestreaming studio built atop the virtual ruins of New Oriental (9901.HK). New Oriental was once China’s largest and best-known English tutoring company, but it was almost destroyed by a crackdown last year on private tutoring for school-aged children. Oriental Selection mostly sells agricultural produce, though is branching out into books. Its hosts are some of the erstwhile teachers and their schtick is to describe everything on offer, from the cuts of beef in a 12-pack of steaks to the different shrimp varieties, in detailed English.

It has become a sensation. Daily active users soared during 618 from 430,000 to 7 million, per Questmobile data, with daily sales averaging 15 million yuan ($2 million). Shares in New Oriental’s online-services unit Koolearn (1797.HK) jumped as much as seven-fold since the start of June, though that has since halved.

This success validates ByteDance’s switch in May to fully embrace “interest-based e-commerce”, encouraging users to shop based on interests and appreciation of knowledge - a departure from the popular bargain-offering or passive search-based model. While sales volume remains small, Douyin’s 600 million daily active users are a formidable force. Its total sales growth outperformed Alibaba’s Tmall in the first quarter, per research firm Third Bridge, with brands reporting higher customer conversion rates and new vendors obtaining better traffic distribution.

Sure, the incumbents’ decline may just be a lockdown-prompted blip. And the mysterious absence of China’s biggest livestreaming star Li Jiaqi, a top anchor on Taobao, another Alibaba shopping platform, may have created a void.

Reviving involuntarily retired English tutors, though, is likely to be just the start of ByteDance’s foray into their online territory.

JD.com’s total sales rose by 10.3% during the so-called "618" shopping festival, China’s second-largest shopping event by sales that runs for the first 18 days of June, the company said on June 19. That compares with the 27.7% growth JD reported last year.

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China’s latest e-commerce challenger is teaching the establishment a lesson. While Alibaba , JD.com and Pinduoduo are suffering from slowing sales growth, TikTok parent ByteDance’s Douyin app is benefitting from consumers spending more on entertainment and education.

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