Source: Dongge Interpretation of E-commerce Author: Li Chengdong
At the end of October 2003, Beijing, which has not yet started heating, was chilly. At 1 a.m., few cars passed by Chang'an Street, but the intersection of Xidan just ushered in the most lively moment. Zhongyou Department Store is brightly lit, dozens of taxis at the door occupy half the road, and the entrance of the mall is full of customers.
Zhongyou Department Store's "Shopping Festival" is here. Different brands and counters are promoted in time in the "Shopping Festival". Citizens took alarm clocks and floor shops, waiting at the counter for sale. The young girl made a good shopping guide, took a small notebook and bought a small item and it would be like a loss of 100 million yuan.
Later, the media roughly counted that nearly 10,000 consumers arrived to queue up and participate in the rush to buy, and bought 50 million in 30 hours.
The more than 20 new cash registers in the mall did not play much role, and consumers had to queue for more than 4 hours on average. In sleepy, some young people complained to media reporters who have been interviewed, "If you can operate things on your computer, it will not be so troublesome, right?"
Now, Zhongyou Department Store has been renamed Hanguang Department Store. The former department store, which was crowded with people, has collectively posted QR codes, and some cabinet sisters simply started live streaming to sell goods.
But the ideals of young people have not been realized, and queuing up to buy is still a necessary part of shopping. Every year on Double Eleven and 618, there are still many girls who have to calculate the discount and then fall asleep with the alarm clock. Many things haven't changed.
The current trend of "e-commerce live broadcast" was previously called "TV shopping". The "shopper" who is hesitant about the shopping cart may also understand the mood of parents when shopping on TV.
From the perspective of consumption behavior and characteristics, what changes is the channel, and what remains unchanged is the consumption behavior itself. Buying, buying, buying, whether online or offline, is still a game between human nature and desire.
China's retail industry has been developing for 40 years, and has experienced a channel revolution in state-owned stores, department stores, supermarkets, hypermarkets, and e-commerce platforms. The number of products has increased by tens of thousands of times. The shopping scenarios have been fully transferred from offline to online, but the essence of consumer shopping has never changed. We, like our parents and parents, consume different products and experience different eras in different ways, and always point to the same joys and sorrows and desires.
The founder of Miwei Ma Dong also concluded, "Any particularly successful Internet products have offline scenarios."
If we let today's e-commerce platforms go back thirty years ago, what should they be like?
JD State-owned home appliances
All aspects of JD story are already well known. Liu Qiangdong , which started with Zhongguancun store, started with self-operated 3C digital products, and fought against Dangdang, Gome, and Suning for prices. It has built a logistics system amidst doubts, becoming the Internet company with the largest number of employees in China.
Most of JD's loyal users come from first- and second-tier cities. Most of the reasons for choosing JD.com focus on the quality of self-operated services, unified procurement, unified sales, and unified distribution, logistics and goods are guaranteed, and are willing to pay a higher premium for this convenience.
offline era, to find this kind of "sense of security" in shopping, consumers will choose to go to state-owned stores. The state-owned store in my memory is spotless in the cement floor, the TV and radio on the shelves are orderly, and the salesperson is busy in front of the counter.
"Strong funds, smooth channels, concentrated products, and high reputation." In 1990, Hui Jin Heng, deputy general manager of Tianjin Department Store, once summarized the advantages of state-owned stores in this way. These four words are appropriate if used to describe today's JD.com.
For JD.com, a more accurate description is the state-owned home appliance shopping mall.
Jiaojia Appliance Store is a business model that emerged in the late 1980s, specializing in bicycles and other transportation and home appliances. After the reform and opening up, China's manufacturing industry entered the fast lane of development, and a number of specialized stores and comprehensive department stores have emerged in which the circulation channel pattern is competing with each other and competing with each other. Suning, an opponent that has been repeatedly mentioned during JD.com's rise, was originally a small store called "Suning Jiaojiao Home Appliances" on Nanjing Ninghai Road .
Review of the rise of Suning and JD.com, both of which are due to the heavy asset operation model.For example, acquisition of stores, self-built warehouses, self-built logistics, etc. The result is that service quality and sales terminals can be effectively controlled, and reputation will be continuously improved, while forming a strong voice for upstream manufacturers.
As early as 2000, Suning had built an air-conditioning warehouse of 30,000 square meters and an after-sales service center of 10,000 square meters. JD.com has also continued to build positions in recent years, and by the end of 2019, JD.com's logistics infrastructure area will reach 16.9 million square meters. In recent years of competition, the two companies have never stopped competing in warehouse area.
However, the model of unified procurement, unified sales and heavy asset operation also has disadvantages. For example, high inventory pressure, limited coverage, high supply chain requirements, high fulfillment costs, etc. After Suning's increased efforts in heavy asset operations, the company's return on equity has declined and its asset turnover rate has declined. JD.com suffered huge losses for 10 years and did not make a profit for the first time until 2016.
At the same time, this also means that the expansion speed will be limited. When external opponents rise rapidly and they are also facing growth pressure, they are concentrated. During the process, service quality does not keep up with the requirements of the main consumer groups, which will also attract criticism.
In the "darkest moment" before JD.com's transformation, some consumers complained on Zhihu, "In the past two years, 618 and Double 11, the discounts have shrunk sharply compared to previous years. They look like they love to buy but not buy, and they are not short of you." The frequency of Suning's poor after-sales service is reported is also an interesting correlation with Suning's speed of opening new stores.
Due to the high fulfillment cost, JD.com's products are sold at a much higher price than other e-commerce platforms. According to merchant feedback, JD platform's service fees and commissions rank first among the three major e-commerce platforms. JD.com's same product has the highest price, followed by Tmall, and , Pinduoduo, , the lowest, especially fresh food and agricultural products, such as low-customer order products.
management is also a huge challenge. In the 1990s, a wave of discussions analyzing the problems of state-owned business formats emerged. The final consensus was that price and operation were shortcomings, and improving operational inefficiency and "big pot" management was the core of state-owned store transformation.
Coincidentally, efficiency and management are also the core of JD.com's changes in recent years.
Since 2019, JD.com has begun to not talk about brothers and performance, sending internal emails to solve three types of people, people who cannot fight, people who cannot do it, and people with low cost performance. Liu Qiangdong also personally sent an internal letter to cancel the "big pot rice" - cancel the basic salary and significantly increase the commission for picking up parts to stimulate delivery staff to increase the number of picking up parts and increase the company's revenue.
The new CEO of the news report, Xu Lei , is always talking about organizational structure. The keywords with the most frames are "organizational change", "structure adjustment", and "refocus on retail".
In 2020, JD.com, which has once again revitalized, told its supply chain story again, devoted itself to commercial infrastructure, joined hands with Gome and Kuaishou, returned to the Hong Kong stock market and announced its return. Xu Lei’s appearance of ringing the bell reminds people of the turn of the century Near East . To the media, he firmly said,
"What should distribution companies rely on to survive? I think it should be the Internet."
Although JD.com and Suning have moved to the Internet now, from the perspective of business, management and business model, these two stores are indeed not much different from traditional retail stores.
Alibaba : From small commodity market to commercial real estate
In November 1982, the "Choucheng Town Small Commodity Market" in Yiwu County was officially opened. The market allows farmers to do business, engage in long-distance trafficking, allow open urban and rural markets, and allow multi-channel competition. This is the first time since the reform and opening up that the government has officially confirmed the legalization of farmers' vendors and professional markets.
The first business license in the small shopping mall was issued to a rural woman named Feng Aiqian. Feng Aiqian, 50, once worked in a hotel, but her salary was meager and she could not raise an old mother and five children at all. She could only make money by setting up a stall and selling buttons. In the first year of the opening of the small commodity market, more than 1,000 merchants like Feng Aiqian were welcomed. Since then, this mountain town in Zhejiang has become the largest small commodity distribution center in China.
Alibaba, who shouted in 1999, said that "there is no difficulty in doing business in the world", moved Yiwu's business online.The "three-year free" Taobao was the first to attract individual merchants in Zhejiang, Guangdong, Fujian and other places. In the offline era, they carried large and small bags of goods through large and small towns in China, and sold wholesale and imported goods from coastal areas in markets.
Soon, when Chinese small and medium-sized merchants supported Taobao's traffic, Alibaba decided to transform from a small commodity market to an "online shopping center" to adapt to China's urbanization and enter the city vigorously.
The first general manager of Tmall should still remember the afternoon when Tmall was established. As usual, he walked into the office of Sun Tongyu, the then president of Taobao, and discussed the model and framework of Taobao Mall. In the concept, Taobao Mall is a B2C platform with brand owners as the main sellers, corresponding to offline shopping malls.
Huang Ruo is a manager with a deep retail background. He has served as general manager of Yichu Lianhua, Wankelong, Tianjin Jiashishi and other companies, and executive vice president. The joining of executives of offline retail giants such as Huang Ruo is one of the signals of Alibaba's transformation: Alibaba is gradually evolving from the small commodity market in the past to an American-style department store.
When building Taobao Mall (the predecessor of Tmall), Huang Ruo also introduced the profit model of offline shopping malls' "commission income" into Taobao Mall, that is, charging merchants a commission according to the commission percentage of category transactions.
Tmall’s commission fee model and “consumption upgrade” strategy will also become the cash bull for incubation of businesses such as Ant Finance, Alibaba Cloud in the future. For example, the commission rate for clothing category is 5%, and every 100 yuan sales of merchants will pay Alibaba a service fee of 5 yuan.
After Huang Ruo and others built the "Taobao Mall" and left Alibaba, Zhang Yong , then Taobao CFO, took over Taobao Mall. Drawing inspiration from the "Thanksgiving Day Promotion" and "Christmas Discount Season" of American department stores, Zhang Yong organized the first "Double Eleven" of Taobao Mall. With the strength of 50% off, Taobao Mall's transaction volume exceeded 52 million yuan in one fell swoop. With the record of "Double Eleven", Zhang Yong was appointed as the president of Taobao Mall in 2011, which also laid the foundation for Taobao department store.
Nowadays, consumers can always find traces of department stores when opening Tmall. In the magnificent shopping mall, there are various categories of clothing and beauty products, and well-known brands such as Procter & Gamble , Olay, NIKE, Uniqlo, and Adidas are distributed in a scattered manner.
"Being an e-commerce platform, gathering a large number of buyers and sellers, and assisting both parties in making the transaction smoothly and bigger. This is actually the business of commercial real estate." When recalling this past, Huang Ruo believes that Alibaba finally became an "online commercial real estate." One of the focus of Alibaba's vigorous "new retail" strategy in the past few years is the integration and interaction between online department store "Tmall" and offline physical department stores.
commission model and "online real estate" have brought about Alibaba's cash flow boom. But at the same time, the commission model also has huge hidden dangers: the traffic providers that dominate the market have great voice, and the numerous entry fees will pass the cost onto merchants and eventually onto consumers. Finally, "the price of buying a pair of American brand jeans produced in China in domestic department stores is usually higher than the price in American department stores."
This phenomenon further brings about the impact of the survival space of the waist and tail brands is squeezed. Since the commercial real estate model essentially provides a conversion rate per unit area (the online indicator is traffic conversion rate), this means that resources will be tilted towards brands and categories with high transaction amounts.
So in any offline shopping mall, the most expensive areas sell the categories and brands with the highest premium prices. Therefore, ordinary categories and brands are either underground or in unpopular locations such as the 7th and 8th floors. This phenomenon is also obvious online. In the early years, "Tao brands" such as Handu Yishe and Afu Essential Oil have long turned to seek traffic offline. The brands such as Jack Jones , Belle , and Oushili, which participated in the first "Double Eleven", have gradually declined.
As products become more and more expensive, the real "discount" will become smaller and smaller.Therefore, just as the mall's solution is to use "increasingly complex route planning to force consumers to visit more", the design of mobile Taobao APP is becoming more and more complicated.
This complexity also affected Double 11. When the efficiency of the overall commodity circulation channel has not been improved, low prices and preferential activities have become pseudo-concepts.
Therefore, as soon as the discount season comes, online and offline shopping malls are full of "mathematical problems" such as paying deposits, recharge and redeeming coupons, special price zone discounts, discounts, limited time discounts, full discount coupons, and exchange purchases. The way to play these math problems has also been moved to Double 11.
The well-known Papi Jiang once released a video to bombard Double Eleven. "4000 words of reading comprehension, plus 10 math problems, you are not qualified to spend money if you don't finish it", "build a building, delete text messages, and do math problems".
Shopping in the mall may be an upgraded consumption experience, but the prices and routines of merchants are not suitable for everyone. Therefore, in recent years, every time on Double Eleven, there are always consumers who miss the sincere and silly discounted Taobao that year.
Pinduoduo: market, alley, market
At the fork of fate 10 years ago, Taobao founder Sun Tongyu participated in the establishment of Taobao Mall that "killed" Taobao in the future. The C2C business represented by Taobao is gradually becoming marginalized, and Taobao has become the main source of traffic for Tmall.
Many years later, Sun Tongyu once again became one of the angel investors of Pinduoduo. Fate goes by, and the small and medium-sized businesses that Sun Tongyu once embraced have found a new home on Pinduoduo.
Pinduoduo started out as a agricultural product. After developing into a platform model, the first ones to settle in were the industrial belt factories and small and medium-sized businesses that were forgotten by Alibaba.
Let’s talk about Pinduoduo. According to roughly divide, there are three major stages of development in Pinduoduo. The first is to accumulate users through agricultural products and group buying models; the second is to attract industrial belt merchants with the "0 commission" and "low cost" platform model, and expand cost-effective products to all categories; the third is to use "10 billion subsidies" as a springboard to introduce branded products to attract people within the "five ring roads".
The development of three stages has formed mixed and complex characteristics in Pinduoduo.
First of all, it has a consistent market-priced temperament, from fruit fresh food to big-name beauty makeup, shoes and clothing, as well as T-shirts, toilet paper, and laundry detergent worth 9.9 yuan, and I wish the whole world knew that it was cheap. Even big brands such as SKII and Switch are difficult to escape, so they will make up for a few hundred yuan first.
The second is the vitality of group buying and socializing. White-collar workers in urban offices, square dance troupes, and sisters and gay friends from university dormitories are all working together. Finally, from the spring and snow to the inclusiveness of the people in Xialiba, artists in the small circle bought both small snacks, big cherries, and photography collections.
Housewife and chef are looking for seasonal ingredients in the vegetable market, and urban Foxconn workers in air-conditioned rooms experience the four seasons in Pinduoduo. Oranges and pineapples in spring, apricots in May, big cherries in June, mangos in June, watermelons in July...
Previously, some media used "fireworks" to summarize Pinduoduo. The high-frequency words related to "fireworks" are: roadside stalls, night markets, stalls. The common point is that you have to bring money, and you have to buy some of them when you go out for a walk."
In the urban consumption format, this place where thousands of families are integrated is called a market.
In the Chinese people’s memory of the market, the neon lights of the brand light up after nightfall, and there are endless visitors to the community vegetable market, deli restaurant, clothing store, and digital store on both sides of the street. Groups of young students were laughing and chasing, vendors were selling cups and magazines on the roadside, and the fog rising from the fish balls, cold noodles and fried chicken stalls on the roadside gave the street a filter, which also made the air filled with the unique fragrance of fried food.
Some people use whether they can go to the market and eat food stalls together as the standard for testing their partners. "You can take me with Michelin and accompany me on the roadside stalls" has become the standard for choosing a mate for some young girls.
Among all retail formats, markets belong to the weakest but essential category. Among all the retail consumption formats, the characteristics of the market are mainly:
(1) The organizational threshold and business cost are the lowest, and there is stock and there is someone to complete.
(2) The products follow people's needs and pursue structural richness.
The market was born because of the gathering of consumers. Streets with markets must also be the place with the largest traffic in the city. Therefore, the goods in the market will naturally exist in accordance with people's needs. On the one hand, the market has a wide range of products and services, which can almost meet all your needs, from food, clothing, housing and transportation to entertainment and games. On the other hand, most of the single-category products pursue "hot products" rather than long-tail niche products.
(3) The core vitality of the market provides the third space for "socialization" and "entertainment", rather than pure buying and buying.
Walking alone in the market was previously rated as the loneliest experience, which also reflects the real vitality of the market lies in "shopping and playing with friends". Compared with shopping centers, the market meets the needs of social and entertainment, and shopping is only a form of social and entertainment.
(4) The core logic of market business is to make small profits but quick turnover. Therefore, market products generally pursue cost-effectiveness rather than brand premium.
The market is doing a small profit but quick turnover business. Although there will be shops of big-name products in markets in big cities such as Hong Kong and Shanghai, even if it is prominent, such as SKII and Lancome, they will throw away the colorful counters on the Sasha on Temple Street and line up the cosmetics shelves.
From the average perspective, most products in the market still pursue cost-effectiveness. In any place in the world, the most common markets you can find are selling fruits, vegetables, spices and other daily needs. This also means that in the market format, the repurchase rate pursued is high and the stickiness is strong.
After JD.com and Taobao moved pure offline retail scenarios to the Internet, Pinduoduo copied the traditional offline market scenarios online, and successfully replicated an "online market" on the mobile Internet with the help of algorithm recommendations, social group buying, game products and other models.
In the market Pinduoduo, consumers may encounter a farmer who has just learned to sell goods online and brings agricultural products to sell them, and may also encounter big-name cosmetics placed on the shelves. This broad-spectrum distribution of merchants provides consumers with more product choices. You can buy onions that cost 9.9 yuan in the mountains of Yunnan, or you can buy a Japanese version of Switch with fitness rings.
The triple attributes of social + entertainment + cost-effectiveness ensure the traffic and expansion of Pinduoduo as an online market. Group buying has achieved online social interactions between consumers and friends, and the absolute cost-effectiveness lowers the threshold for shopping. Finally, mini games such as Duoduo Orchard provide entertainment outside of shopping.
Through the logic of the market, we can understand why Pinduoduo’s average daily number of packages can reach more than 65 million in five years.
Take the previous Chinese market data as an example. In 1978, after China first opened up individual trade, the number of Chinese markets reached 33,000 in one year, and it moved forward at a rate of 10,000 annually. Just two years later, the number of large-scale markets across China was nearly 60,000, accounting for about 10% of China's total social retail sales.
Among various retail forms, markets are business formats that are closer to ordinary people and life. The combination of low threshold + social + cost-effectiveness makes the market naturally occur in almost every crowded area.
Of course, the market model has also brought many problems in the development of Pinduoduo. First of all, the quality of goods brought about by low-priced products is uneven, and secondly, the lack of credit endorsement like shopping malls, and consumers' selection costs are relatively high.
If the Internet is a city
Until today, home appliance shopping malls, wholesale markets, shopping malls and markets are still widely present in cities and towns. The development of multiple business formats is meeting the needs of consumers in different scenarios. People need not only the quality and service guarantee of state-owned home appliances, but also the prosperity of department stores, as well as the human fireworks and the small happiness of daily use of affordable fruits.
If the Internet is a city, residents need the logistics service guarantee of JD.com, new fashionable products launched by Taobao and Tmall, and also need the cost-effective products provided by Pinduoduo.
You cannot see differentiated services between different business formats. The value of these different scenarios to consumers will fall into the mentality of "anti-eight-to-eight" one.
The main theme of business development has always been efficiency and scale. Aircraft, train, and carriage are all tools from the departure point to the destination, the difference is speed, engine, comfort and passenger capacity. In areas related to consumption, business justice is to provide consumers with lower prices, more choices and better services.
Therefore, when all daily consumption scenarios are completed online, the next step is a new era of e-commerce.
