Sunday, 2024 May 26

The Allure of Chinese Apps: Factors Behind Their Rise in the US

Amidst the ongoing tensions between China and the US, an intriguing revelation from SensorTower’s Store Intelligence Data Digest Q1 2023 Report unveils an interesting trend. Out of the top five most downloaded apps in the US, a remarkable four spots are occupied by Chinese-based mobile apps.

Social media app TikTok, video editing app CapCut, and two online marketplace apps, Temu and Shein, have triumphed over their rivals like Facebook, YouTube, and Amazon. Why are US consumers opting for these Chinese apps despite the abundance of well-established tech giants in the country? In this article, we’ll be exploring the possible factors that have led to this shift in consumer preferences.

Today’s most dominant Chinese apps

Let’s take a look at some of the successful mobile apps that have gained significant traction in other countries:

TikTok

We’re aware that technically, Douyin is the Chinese app, but since we’re focusing on Chinese apps in the US market, TikTok is what we’re starting this list with. A decade ago, social networks primarily revolved around the concept of the social graph, where content recommendations were based on the preferences of people you knew.

However, TikTok revolutionized this approach by shifting the focus to personalized content that aligns with your own interests. By prioritizing interest algorithms — which involve utilizing advanced machine learning for pattern recognition based on the users’ likes and follows — TikTok has become adept at uncovering content that its users enjoy.

In fact, Twitter is now copying this model by defaulting to the “For You” feed when you enter the homepage, where it recommends tweets from topics that interest you, in contrast to the “Following” feed which shows tweets from accounts that you follow.

The platform’s short-form video format allows for the gathering of multiple data points from users in a shorter span of time, allowing it to become more advanced in predicting the content you enjoy. This has enabled it to recommend accounts and posts that the user may not have heard of before but are likely to engage with.

Additionally, TikTok provided a platform for new creators to get discovered. Unlike previous social networks that mostly benefited individuals with pre-existing popularity, TikTok’s CEO Shou Zi Chew believes that the platform would give anyone a chance to succeed as long as they have talent. The platform’s discovery algorithm plays a pivotal role in connecting creators with communities that appreciate their content, motivating aspiring creators to remain active on the platform in pursuit of greater visibility. Additionally, TikTok’s mobile-first approach and emphasis on portrait mode content significantly reduced barriers to content creation, enabling anyone with a smartphone to become a creator.

TikTok is still continuing its impressive growth, as the only short video-sharing app to experience positive year-over-year growth in Q1 2023. Nevertheless, concerns surrounding addiction and data privacy breaches have raised alarms over the app, particularly in the US.

Image source: CapCut

CapCut

CapCut, owned by ByteDance, the same company behind TikTok, has also been making significant strides in its global expansion.

According to the SensorTower report, the app witnessed a remarkable surge in global downloads, reaching 130 million downloads, and most notably being the second most downloaded app in the US with 12.4 million downloads through Q1 2023.

One of the key factors contributing to CapCut’s popularity is its accessibility. Unlike professional video editing software that demands high computing power from desktops, CapCut is completely free and can be easily used by anyone with a mobile phone. The app is tailored specifically for media to be uploaded to social media platforms like TikTok, Instagram, and YouTube.

Its user-friendly interface ensures that creators can upload, edit, and create engaging videos with just a few taps and swipes. With a range of features including auto-captioning, transitions, background removal, and the innovative Auto Velocity function — which automatically adjusts the video speed to match the beat of the accompanying music — CapCut empowers anyone to create engaging and polished content effortlessly.

Temu and Shein

Both Shein and Temu, two prominent online marketplace apps, have experienced a remarkable surge in popularity, particularly in the US market. While Shein primarily offers a wide range of clothing options, you can find almost anything on Temu, making it a versatile platform where customers can find and purchase nearly anything they desire — from furniture to fitness equipment.

Both apps have been gaining significant traction in the market with their attractive offerings of affordable products. This affordability factor holds great appeal for price-conscious consumers, particularly during this period of rising inflation. Since its launch in August 2022, Temu has experienced rapid growth in downloads quarter-over-quarter. In fact, in Q1 2023, the app secured the top spot on both the App Store and Google Play in the US with 19.5 million unique installs, three times more than its competitor Amazon.

Image source: Temu

How both apps are able to offer products at such low prices lies in their direct connection between consumers and manufacturers. By cutting out the middleman, these apps capitalize on the cost advantages of production in China, where lower material and labor expenses contribute to affordability. Rather than prioritizing profits, both applications keep their margins low, focusing on customer acquisition and attracting a large user base instead of increasing profits.

Driving user engagement has been a crucial aspect of their success. In Q1 2023, both Temu and Shein surpassed Amazon in terms of average user engagement. These discovery-based shopping apps employ algorithms to determine the products users are most likely to buy, based on the data points provided by them. This approach entices users to stay on the app, possibly making it more effective than Amazon’s search-based model.

Moreover, these applications use certain incentives to continuously engage users. Shein employs a points system that offers discounts and incorporates gamification elements that encourage users to engage more with the platform. Meanwhile, Temu integrates a variety of games within the app, providing prizes or discounts as rewards.

However, the rapid rise of these apps has been coupled with some concerns. Shein’s fast fashion business model has raised concerns about additional waste generation. Furthermore, Temu has faced criticism for its inability to deliver items on time, as evidenced by over 500 customer complaints lodged with the Better Business Bureau.

Why are Chinese apps so popular?

After garnering significant success in their home market of China, Chinese tech companies are now setting their sights on expanding their presence in other countries. Among their ambitions, penetrating the US market stands as their ultimate goal. The attractiveness of the US market lies in its consumers’ higher disposable income and a strong culture of consumerism, making it an attractive opportunity for Chinese companies to capitalize on new business prospects.

Chinese mobile apps have gained a reputation for their intuitive and user-friendly interfaces. As early as 2011, Chinese companies recognized the significance of user experience as a crucial element to compete with international apps. This awareness prompted them to prioritize user-centric design and refine their interfaces to meet the evolving expectations of global users. Consequently, Chinese mobile apps have become known for their engaging user experiences.

In recognition of the importance of competition in the tech sector, the Chinese government has taken proactive measures to foster innovation among companies. For instance, they started a regulatory crackdown in 2020 on large tech firms by introducing anti-monopoly regulations and increased scrutiny of mergers and acquisitions by these companies. Unlike the American tech landscape, which has witnessed the dominance of a few major players and subsequent antitrust lawsuits, China’s approach emphasizes constant innovation and competition. As a result, Chinese tech companies are incentivized to push boundaries and strive for excellence.

In addition to these external factors, Chinese companies exhibit a strong inclination to foster internal competition. As highlighted in a Wall Street Journal podcast, reporter Shen Lu shed light on the intense rivalry and extended working hours prevalent in Chinese tech firms, which drive continuous app enhancements and optimization. Within these companies, different teams would compete with each other to produce the best design or feature. Ultimately, only the winning team receives the necessary resources to advance their ideas.

In this competitive environment, Chinese apps yield two significant outcomes: users perceive them as highly user-friendly, efficient, and even mildly addictive. Consequently, tech companies are able to fulfill their KPIs when their users are more inclined to invest additional time and money into these apps. This culture of internal competition in Chinese companies ensures a constant drive for excellence, guaranteeing that only the best is delivered to their customers.

Image source: Shein

Lastly, aggressive marketing campaigns have been a huge factor in Chinese apps gaining awareness in other markets. These companies prioritize customer acquisition over immediate profits, employing strategies that capture the attention of potential users and create a strong brand presence.

One of the drivers of Temu’s success is its Shop Like A Billionaire Super Bowl ad, which cost the company around USD 14 million. From the SensorTower report, this advertisement boosted brand awareness in the US, leading to a surge in app downloads. As a result, Temu gained an additional 10 percentage points in market share, reaching 50% in Q1 2023.

Shein has effectively leveraged influencer marketing as a promotional strategy for their mobile app. By collaborating with influencers and encouraging them to share their clothing hauls using the hashtag ‘#SHEINHAUL’ on popular social media platforms like TikTok and Instagram, Shein has achieved significant results. The hashtag itself has amassed over 10.9 billion views on TikTok, playing a significant role in generating widespread awareness for Shein’s affordable clothing offerings. This influencer-driven approach has proven instrumental in reaching a large audience and establishing Shein as a prominent player in the fashion industry.

As Chinese apps continue to navigate the landscape of US-China competition and tensions, their future in the US remains uncertain. The ban of TikTok in India due to privacy concerns has raised further scrutiny on Chinese apps, drawing attention to potential data privacy issues and their perceived connections with the Chinese government.

However, it’s worth noting that despite these concerns, the average user is primarily concerned with whether the app fulfills their needs, rather than its country of origin. In this regard, Chinese app developers seem to have cracked the code, as their apps continue to flourish in popularity and usage.

Gideon Ng
Gideon Ng
I excel in simplifying difficult concepts into in-depth, long-form articles, particularly for my passions in life (finance, cryptocurrencies, and football). I strongly believe in educating the masses on cryptocurrencies to shorten the learning curve as more people make the shift from Web2 to Web3.
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