At the end of May, Alibaba launched its first social e-commerce APP, "Tao Xiaoshu",; in the Taobao APP, the product "Taobao Master", which focuses on sharing cashback, is also quietly testing it.

Source: Economic Observer

Can the cloud gathering model of member rebates "break the wall" and become the new mainstream of e-commerce?

2 years ago, Wu Xiaobo asked Yunji CEO O Xiao Shangluo , "Is it possible for Taobao and JD to make something similar to Yunji in the form of plug-ins?" Xiao Shangluo replied, a slight difference and a thousand miles of loss. Two years later, the interface of Taoxiaopu APP is very similar to that of Yunji APP store owner. After the price of each product is marked, it is followed by a eye-catching "earning ***".

Is the spring of "social e-commerce" with member rebate model coming? On May 4, when Yunji went public on the Nasdaq in the United States, "socialization" and "sinking" have become the main themes of e-commerce's continued growth. In late spring, the plum rainy season has not yet arrived. It is sunny and rainy day, just like the stock price rises and falls after listing. From rising to breaking the issue price and then pulling back, the market has always doubted this business model.

on the one hand is rooted in the retail channel that has rapidly expanded social networking; on the other hand, there is a suspected pyramid scheme of "membership fees", "hit recruitment", and "team remuneration". When giants bet on social e-commerce, Yunji has become a member-based e-commerce sample based on the fission of acquaintances social networks. Through it, we may have a deeper understanding of the new ways to play the current e-commerce member rebate model.

pulling people and fission

Lin Qin became the owner of Yunji store for less than two years. During this period, there were more than 2,000 paid members, including her husband, sister, son and daughter. Although her son is under 18 years old and her daughter is just 9 years old, it does not affect her using their mobile phone number/account to make profits. In mid-May, the reporter joined a WeChat community operated by Lin Qin. After his telephone "training", he had a clear understanding of Yunji's fission system.

Yunji APP has two versions: customer version and store owner version. The page of the customer version is similar to other e-commerce companies; and the uniqueness of the store owner version is that each product is followed by the "earning**" in red background and white characters. This is the rebate you can get after sharing and sales, and it is also a "bait" that encourages store owners to forward.

Yunji Store Owner APP (left), Taoxiaopu (right) interface example

If you want to become a Yunji store owner, you need to pay 398 yuan in cash. After becoming a store owner, you can enjoy the "rebate" of buying and selling goods by yourself or guiding other customers to consume. Develop new paid members and you can also get a certain amount of cloud coins (vouchers on the Yunji platform).

Above the store owner, there are also account managers and service managers, collectively known as Yunji's "service providers". They sign labor contracts with Yunji's third-party service companies and receive monthly remuneration.

The conditions for becoming an account manager are: directly invite 21 people to become paid members and 80 paid members indirect fission to compete for the account manager. The service manager needs to directly invite 31 people to become paid members and 905 paid members for indirect fission of the community before they can compete.

The income of the account manager and service manager consists of two parts, sales profit sharing and newcomers' participation rewards. All profits of community members' transactions on the Yunji platform can be divided into 20% per month, and the service manager is 8%; for each new paid membership developed, the account manager can receive a cash reward of 150 yuan, and the service manager can receive 80 yuan in cash.

When talking about the income from working in Yunji, Lin Qin said that the platform does not allow the income to be displayed now, and anyone who shows it will close the store. However, in order to attract new members to join, some managers will find ways to "show off their wealth" and show off their personal income tax, bank statements, etc.

Lin Qin will post recommended products, promotional activities and "chicken raising games" on WeChat groups every day. Dozens or hundreds of items are common, and at the same time, it must be synchronized to your friends and send private messages to some WeChat friends. Her online time is usually from five or six in the morning to midnight to quickly respond to WeChat friends’ wishes to shop and join the club.

Lin Qin said that although she has fissioned more than 2,000 members and has become a service manager, she is still a certain distance from the "Genting Club" big shot. Only Yunji's best service managers can enter the Genting Club and participate in high-standard training with CEO Xiao Shangluo.At the bell ringing ceremony of the two places that were listed this time, members of the Genting Association went to New York to ring the bell.

uses social platforms to attract new customers, Yunji's early customer acquisition costs have certain advantages. Through sales expenses/number of new active buyers, Yunji's customer acquisition cost in 2017 was 49.1 yuan and 151.6 yuan in 2018; during the same period, Pinduoduo's customer acquisition costs were 17.38 yuan and 142.86 yuan; Alibaba and JD's customer acquisition costs were as high as more than 200 yuan.

In 2018, the number of active buyers Yunji was 23.3 million, with a year-on-year growth rate of 37.28%. Among these active buyers with a total of more than 20 million, the backbone is the paid membership, and 95% are women, contributing 2/3 of the GMV (total platform transaction volume) to Yunji.

pyramid scheme questioning

Dieyi (WeChat name) is one of the representatives of Yunji service providers who went to the United States to ring the bell. At around 4 a.m. in New York time that day, she posted a circle of friends, "...Some people say I do WeChat business, some people say I do pyramid scheme, and some people ask me to cherish my feathers... Fortunately, I believe in my vision and cognition." In her opinion, Yunji's listing is a powerful response to the pyramid scheme questioning.

In the second half of 2015, Yunji Weidian was fined 9.85 million yuan by the industrial and commercial department for pyramid schemes and ordered to rectify. In order to avoid legal risks, Yunji has added a third-party service provider module, where the third-party company signs labor contracts with the service manager and account manager and pays compensation. Through this design, legally, service providers are not employees who gather, and they can only earn rebates for selling goods from the platform and avoid charging entry fees.

Legal people also have different opinions on the issue of "whether Yunji is suspected of pyramid schemes".

Anli Law Firm partner Wang Xinrui believes that according to the "Regulations on Prohibition of Pyramid Selling", the three requirements of "entry fees", "hunters", and "team remuneration" are important basis for judging whether they are pyramid schemes; the State Administration for Market Regulation stated that if the above three points are met at the same time, it can be concluded that they are suspected of pyramid schemes. However, using the word "suspected" means that the business model needs to be studied. For specific judgment, the essence of online pyramid schemes is Ponzi schemes, and they must meet the "three requirements + one essence" to be qualitative.

"I tend to think that companies like Yunji have a less likely chance of establishing online pyramid schemes after they go public." Wang Xinrui added, "Yunji was definitely suspected of online pyramid schemes in the early days (2015), but after they go public, they must disclose real financial reports regularly. If there is a pyramid scheme, it is equivalent to self-proven crime."

Beijing Jiashan Law Firm Executive Director Chang Liang also believes that: the necessary requirement for pyramid schemes is "making illegal benefits." When making a judgment, it is necessary to distinguish whether it is a behavior of attracting people by making illegal profits or a new model of increasing fans for normal business activities. Judging from Yunji's financial report, its sales revenue accounted for more than 87%. There is an essential difference between this membership e-commerce and "hitting people".

But Kyoto Law Firm's lawyer Zhang Qiming held the opposite view. In an interview with "Chinese Entrepreneur", he said: Yunji compressed the previously controversial three levels into two levels in terms of charging membership fees, avoiding the pyramid scheme problem, but at the sales level, the three-level member structure still exists, "Business logic is not equivalent to legal logic", and Yunji essentially violates the regulations.

As a latecomer of social e-commerce, "Taoxiaopu" abandoned the requirement of joining the party threshold when operating, and currently can become a store owner through the invitation code. At the same time, only a first-level distribution is set up, that is, the store owner’s offline purchase of goods, and the store owner can receive a rebate; the sales created by the offline offline are not related to the store owner. This is significantly different from Yunji.

sell members or sell goods?

From 2016 to 2018, Yunji's membership plan revenue accounted for no more than 13%, and its main source of income was commodity sales revenue. From the logic of e-commerce, as Liu Qiangdong said in , "The retail industry is constantly changing: cost, efficiency, and experience." How far Yunji can go also needs to be considered from these aspects. In 2018, Yunji transaction buyers had 22.3 million, with an average annual consumption of about 978 yuan, and a repurchase rate of 93.6%.

"Yunji's shopping guide logic is understandable, but the ceiling will not be too high, because the volume of social communication is the current dividend and will be flattened soon." An investor in the consumer track told reporters.In his opinion, the key to retail competition is still the ability on the supply side. Only when channel merchants go upstream of the industrial chain and build high-gross-profit and differentiated private brands can they expand their channel advantages and continue to expand.

2016-2018 Yunji's revenue situation

2018 Yunji has a total of 6613 SPUs (standard product units), which are divided into three categories: mainstream brands, emerging brands, and private brands. When explaining that revenue increased by 53.2% year-on-year in Q1 2019, Yunji focused on "the product portfolio focuses more on private brands and emerging brands."

mainstream brands refer to brands with high market share and a certain monopoly share in the country or region; emerging brands are brands in the period of market expansion; private brands are products customized by Yunji through ODM (original design manufacturer). Taking skin care products as an example, Estee Lauder and Xuehuaxiu are mainstream brands, Mayou and Yunifang can represent emerging brands, while Su Ye is a self-owned skin care brand that has gathered.

Currently, the private brands that are gathered in Yunye, native yellow, and Unimi, are skin care products, sanitary napkins, and healthy foods. Why choose these as entry categories? Yunji responded: "Because these categories are very consistent with Yunji's customer group, they can better meet their consumption needs." Yunji's target users are women aged 25-39, among which the "mother group" accounts for the majority.

In addition to user needs, the gross profit margin of its own brand is also an important consideration, which can be seen from its rebate ratio. In order to encourage members to actively promote their own brand products, Yunji's own brand rebate ratio is relatively high. In comparison, the rebate for fresh fruits and vegetables

is generally 5%, and most personal care products are between 3% and 15%.

Yunji platform's own brand data statistics

Yunji frankly admit that a large part of its GMV comes from its own brand "Suye". When promoting Suye, the store owners will emphasize that "Suye is produced in the same factory as Estee Lauder and Dior ". As a typical representative of Yunji's own brand, is Suno indeed produced in the same factory as first-tier brands?

Yunji Public Relations Department told reporters: "Suye maintains cooperation with top domestic and foreign cosmetic manufacturers and laboratories, including: Italy INTERCOS, Switzerland CRB Research Center, Royal DSM Life Science Research Center, and Korean cosmetics manufacturer COSMAX. At the same time, at the end of Suye's product introduction page, most of them have actual manufacturers of this product.

By querying the official websites of relevant companies, the reporter learned that INTERCOS (Yingteley) cooperative companies include L'Oreal, Estee Lauder, etc.; Korean COSMAX (Cosmetics) OEM processing brands include Lancome , Dior, etc.; Northbell cooperative companies include Watsons, Shanghai Jahwa, etc.

"ODM commissioned processing is a common OEM model in the skin care industry. Brands may not have their own factory production lines, and they can contact manufacturers to commission processing." Zhang Yu, head of R&D of a domestic skin care brand and PhD in biology at Tsinghua University, told reporters that large manufacturers such as INTERCOS and COSMAX have relatively strong R&D capabilities and can accept "all-inclusive" contracts. Tell him the main concept and cost requirements, and he can make products and OEMs as required, and the production process and quality control system are relatively guaranteed.

In addition, Zhang Yu said that the ratio of the cost price of raw materials in the skin care industry to the final sale price is about 1:10 or 1:8. For vertical e-commerce companies without intermediate links, it is feasible to lower the selling price and attract customers. The reporter checked the skin care industry research report and the data was basically consistent with what he said.

Then, the reporter checked the official websites of Kosemite, Dutch Royal DSM Group , Northbell, etc., and found that they did not include "Suye" as a customer or cooperative enterprise. But Zhang Yu told reporters: "This is generally not fake, because the manufacturer must be marked on the outer packaging of the product, and each product must be registered by the CFDA (State Food and Drug Administration), which is easy to find."

On the official website of CFDA, the reporter did check the product registration information of Suye Cosmetics, and also found that some products have inspection and rectification records.

promotes its own brand through channels. For Chinese manufacturers with overcapacity and insufficient premium, it is an export to release productivity and a market space for Yunji model to survive. However, this model puts higher requirements on product selection, quality control, and product marketing capabilities, and this is also a longer-term test for it.

Like Yunji, social platforms such as WeChat are used as the main battlefield for promotion. In terms of user experience, what cannot be avoided is the advertising of member friends circles. When the circle of friends as social resources is full of product advertising information, potential users may directly choose to block them to avoid being disturbed. Many people will choose to stay away from the stereotype of "website business", which is also a challenge for whether Yunji's membership model can continue. In Q1 2019, Yunji membership revenue decreased instead of increasing, down 21.7% year-on-year.

When giants such as Alibaba are focusing on social e-commerce, on the one hand, it may share the cake with the crowd, and on the other hand, it is also a kind of market education, which determines whether the rebate "social e-commerce" model can "break the wall" and become the new mainstream of e-commerce in the future.

(At the request of the interviewee, Lin Qin and Zhang Yu are pseudonyms in the article)

Editor in charge: Wan Lu

(Editor in charge: Sun Penghao)