Douyin reduces merchant deposit fees to tackle rivals

Douyin, the short video app owned by ByteDance, has announced a reduction in the guarantee deposit required of merchants on its ecommerce platform.

This new policy, which applies to all product categories, aims to lower financial barriers for existing and new sellers and attract new ones in the face of intensifying market competition.

Under the revised rules, the deposit is capped at 5,000 yuan (US$695), decreasing from the previous maximum of 500,000 yuan (US$68,900).

Existing merchants will see an average reduction of 75% in their deposit requirements, based on their gross merchandise volume (GMV) from the previous month.

For stores with monthly sales under 50,000 yuan (US$6,962.64), the deposit will be set at the minimum of 500 yuan (US$69.62).

New merchants can now join the platform without an upfront deposit. However, they will be required to pay the deposit once their paid orders exceed 200 transactions or their total sales reach 10,000 yuan (US$1,392).

This policy builds on a pilot program launched in February that initially targeted specific types of goods. The latest update extends the zero-deposit initiative to all product categories.

🔗 Source: South China Morning Post

🧠 Food for thought

1️⃣ Competitive landscape driving deposit reduction in Chinese e-commerce

Douyin’s deposit reduction strategy emerges during intense competition in China’s massive e-commerce sector, where market leaders maintain significant advantages.

China’s ecommerce market reached $2.29 trillion in 2020 and is projected to grow to US$3.56 trillion by 2024, making it nearly twice the size of the US market 1.

Established giants like Alibaba’s Taobao and Tmall control 50.8% of market share, while JD.com holds 15.9% and Pinduoduo 13.2% 1.

This deposit reduction creates a clear financial incentive for merchants considering multiple platforms, as competitor platforms typically require substantial deposits to ensure merchant accountability.

The decision to reduce the maximum deposit by 99% (from 500,000 yuan to 5,000 yuan) represents a significant competitive maneuver to attract sellers who might otherwise gravitate toward established players.