Competition for small and medium-sized businesses

Small and medium-sized merchants have He Tuber become the focus of competition for e-commerce supply. As consumption enters a new round of low-price cycles, compared with premium brands, supporting small and medium-sized merchants in the industry can replenish low-priced goods for the platform on a large scale.

However, small and medium-sized merchants are not a homogeneous concept. Most small and medium-sized merchants are limited by their scale and do not have the ability to achieve absolutely low prices. Therefore, what needs to be clarified is that the significance of small and medium-sized businesses to the platform lies in the "ecological prosperity" mentioned by Dai Shan.

The latter means that competition vitality, content output, and user relationships are all more abundant and abundant. Although its own contribution in advertising and commission income may not be sexy enough, an active ecosystem will often attract more users and paid users. Capabilities of large merchants are therefore closely related to commercialization potential.

This is most evident in Little Red Book. As a content community, the ecological prosperity of the community is almost directly proportional to its commercialization capabilities. Small and medium-sized businesses can not only provide a rich and diverse supply, but also continuously produce consumer content. In its newly launched "buyer-made e-commerce" concept, "buyers" as small and medium-sized merchants have become the core of it.

Established e-commerce platforms also focus on small and medium-sized merchants. According to "Narrowcast"'s interviews with digital industry belt merchants, we learned that one of the key points in the current competition for e-commerce platforms in the battle for industrial belt supply is to find those factory-type companies that are stronger but have not yet connected to the Internet. Merchants, these merchants often have large and efficient supply chains and can provide low-price products.

One of Pinduoduo's new CEO Zhao Jiazhen's major moves after taking office was to set up a "10 billion ecological" project to lead the platform's small and medium-sized enterprises and high-quality merchants to improve quality and efficiency. Douyin's shelf e-commerce and Kuaishou's zero-yuan store opening project have objectively provided more stages for small and medium-sized businesses.

Douyin and Pinduoduo win in traffic scale and decentralized ecology, so they continue to attract new entrants. From the perspective of merchants, Douyin’s e-commerce advantage lies in its short-term explosive power. The recommendation algorithm adopted by it and Pinduoduo is also more suitable for the explosive product mechanism, so it is suitable for factory-type merchants with a single SKU in the industry. Supply chain traders with the ability to grade goods will also mostly try Pinduoduo as a shipping channel for low-quality goods.

What the Douyin and Pinduoduo ecosystems have in common is that they need to screen and wash out a batch of efficient supplies from the vast market of small and medium-sized businesses, and find the winners that can survive the extremely involved low-price/content competition.

For businesses, this means extremely cruel and fast-changing competition. This gives other platforms opportunities. Alibaba's industrial belt project "Taobao Live Store" launched this year, the investment criteria for merchants are low operating threshold, stable traffic and dynamic sales of the whole store.

This is the first time Alibaba has intervened in the supply of industrial belts from the live e-commerce side rather than the shelf e-commerce side. Taobao Live insiders revealed to "Narrow Broadcast" that one of the purposes of this project is to guide merchants in some industrial belts to return to Taobao from Douyin.

A multi-platform merchant operating in the tea category said that under the favorable policies of Taobao Live, he has observed many merchants returning to Taobao. Alibaba’s financial report mentioned that the number of new merchants entering Tmall in Q2 increased by 75% year-on-year. In the past year, Taobao added 5.12 million new merchants, the vast majority of which were small and medium-sized merchants.

However, compared to Douyin and Pinduoduo, it is still unknown how long the bonus period of Taobao Live, which is hungry for traffic, can last.

After the launch of JD.com's low-price strategy, the industrial belt has also become the focus. The Q2 financial report shows that the number of new merchants increased by 417% year-on-year, showing an accelerated growth compared with the first quarter. "The senior management personally moved to Yiwu and cleaned up the powerful local industries to bring big merchants. As long as the merchants can provide low-priced goods, they can open an interface to sell goods on JD.com," said an industry insider.

It seems that the competition for small and medium-sized merchants has brought e-commerce platforms back to the early stages of their rise. However, as far as the platform is concerned, the transaction commissions and advertising revenue brought by brands far exceed that of small and medium-sized merchants. Focusing on small and medium-sized merchants is often just a phased strategy. The platform's support and competition for small and medium-sized businesses may not mean that the spring of small and medium-sized businesses will come back again.

In the past, when there was excess supply, e-commerce platforms could occupy one market as long as they had advantageous categories. Alibaba has clothing, JD.com has 3C home appliances, and Pinduoduo has broken through agricultural products, thus attracting a group of small businesses in the industry and cost-effective businesses.

But with the rise of new e-commerce forces, no one can say that the advantageous categories they have established are completely unbreakable.

Take Taotian as an example. Its platform has the largest number of apparel merchants. However, the apparel category is non-standardized and naturally has space for personalized display. It is especially suitable for video and live broadcast content display, and is dominated by small and medium-sized merchants. Therefore, Taobao Today’s clothing market will be regularly divided among content e-commerce platforms, hobby e-commerce platforms, and community e-commerce platforms.

In other words, when any e-commerce platform is newly launched, clothing will be a category that will grow faster and account for a larger proportion. Alibaba has first-mover advantage and scale advantage, but this cannot prevent latecomers from attacking.

Early attackers include Douyin Kuaishou, and now video accounts are also developing the clothing industry. Many clothing merchants on Xiaohongshu e-commerce overlap with Taobao IFASHION merchants. Liu Qiangdong also made an internal speech a while ago, requesting procurement and sales to win more headwear companies to join JD.com.

JD.com’s traditional advantage is 3C home appliances, but other platforms have successively made achievements in this field through sinking or industrial belt methods. The core method for JD.com to consolidate its advantages in 3C home appliances is the "low price" emphasized by Liu Qiangdong.

Liu Qiangdong said internally that as long as it is "a category that affects JD.com's brand mentality", it must "resolutely engage in price wars with competitors." These categories include 3C, home appliances, etc. Among JD’s tens of billions of subsidies, there are indeed many SKUs in categories such as 3C digital and home appliances that are cheaper than Pinduoduo’s tens of billions of subsidies.

This is undoubtedly a clear offensive behavior for Pinduoduo, which takes advantage of its tens of billions of subsidies and agricultural product categories. Correspondingly, Pinduoduo went in the opposite direction and proposed "618 every day", emphasizing the daily low prices, and launched the "Digital Home Appliances Consumption Season" for defense.

In the agricultural field, Pinduoduo is trying to further strengthen its focus on R&D and industrial upgrading. In addition to basic operations such as the 10 billion agricultural research project and the Duoduo Agricultural Research Competition, Pinduoduo also hired Yvonne Ritkins, a well-known agricultural expert from Wageningen University in the Netherlands, to join the board of directors this year to gain endorsement from the academic community.

However, from the perspective of mainstream pallets, Pinduoduo’s barrier in agriculture is actually still its ability to select high-quality and low-cost products and suppliers from the abundant affordable supply funnel through the traffic mechanism. "Narrowcast" learned that large-scale supply chain traders with the ability to integrate supply and product classification in the production areas often choose Pinduoduo as an important channel for selling low-price agricultural products.

In addition to the core battlefield of "Province", there is also a secondary battlefield about "Quick".

Previously, in order to prevent retail, especially real-time retail platforms, from invading the e-commerce category, and to strengthen their competitiveness in terms of "fastness", e-commerce platforms once wanted to reverse the trend and operate their own real-time retail business. As a result, the interweaving of e-commerce and retail was realized in the "fast" market.

The current variable is that, with the exception of Meituan, which has always been interested in entering the retail market and has instant delivery capabilities, all major e-commerce platforms are strategically lowering the priority of self-operated instant retail businesses, through lower costs but equally mature capabilities. Social logistics continues to provide retail services and still pursues faster speed.

For example, Tmall has expanded its “half-day delivery” service to 14 cities; Meituan’s tomorrow delivery supermarket brand “Meituan Select” has upgraded its delivery speed from the next day’s “afternoon delivery” to “noon delivery”.

Another outstanding feature of this sub-battlefield is that the speed must be based on provinces. Consumers are no longer willing to pay high premiums for fast services, and platforms are beginning to pursue lower-cost fast services, and are even willing to lose some of the best fast services to save money.

Under the leadership of Liu Qiangdong’s general low-price strategy, JD.com implements equal rights in the allocation of resources such as traffic for self-operated products and POP products, and allows POP merchants to use non-JD.com’s external logistics. Social logistics capabilities are not bad, but compared to self-operated logistics, the speed and experience provided by external logistics during the service process may be lower.

If Kuai's capabilities are dismantled, it points to logistics at the front end; supply chain efficiency and warehousing turnover efficiency at the back end.

The improvement of social logistics capabilities is related to cost and scale, and is difficult to achieve in the short term. Supply chain efficiency and warehousing turnover rate can be optimized by each platform.

Taochang Factory is currently using methods such as conducting data insights on the front end in advance to predict consumers' multiple consumption needs and combine multiple orders for delivery. That is, by merging orders to increase the unit price per customer, the delivery cost is diluted.

Douyin Supermarket, a subsidiary of Douyin E-commerce, is also improving contract fulfillment efficiency by optimizing warehousing. Douyin Supermarket is affiliated to Douyin e-commerce. It currently offers two delivery services: hourly delivery and next-day delivery. The overall categories are not rich enough and the product differentiation is relatively lacking, but it can supplement Douyin e-commerce with certain logistics capabilities.

In fact, Douyin Supermarket is engaged in instant retail business, but in the context of consumption that pays more attention to cost-effectiveness, Douyin's local group buying coupons and local live broadcasts of some small and medium-sized merchants have shown strong explosive power. Now, Douyin has begun to connect to the offline supermarket supply chain.

In the context of Internet traffic peaking and traffic structure being reshuffled, e-commerce platforms may have to accept a reality: In the past, whoever had richer supply had traffic. But when supply becomes homogeneous and excessive, this rule It may be about to expire.

Therefore, on the one hand, the platform must reaffirm its supply advantages - whether it is from traditional advantages or external supplements - on the other hand, it must put the issue of traffic sources before its eyes and study it carefully.

If we imagine a coordinate system, with content on the far left and e-commerce on the far right, an obvious trend since this year is that the positions of almost all e-commerce platforms are migrating to the content on the left.

E-commerce platforms are creating content one after another, in fact, in order to obtain traffic through content. Reflected in the financial reports, all platforms are emphasizing DAU (daily active users). The meaning behind it is: user scale is the absolute number one at the moment, and sales growth and periodic user stickiness are ranked second.

The one who made the most obvious move was Ali. The platform has conveyed on many occasions that DAU and dwell time have replaced GMV as the most watched indicators in Taobao. The Q2 financial report emphasized that the average daily DAU of Taobao App in June reached 402 million, ranking first among e-commerce apps. Taobao Live also distributes huge cash rewards and continues to introduce content experts and MCN organizations to Taobao.

In early August this year, the Yuandiantao team was integrated into Taobao Live, specifically responsible for the incubation of the content-based live broadcast ecosystem. Recently, some users have discovered that some film and television drama live broadcast rooms have been recommended to their Taobao homepage; on the other hand, Make Friends, Oriental E-commerce live broadcasting organizations that are good at content, such as Zhenxuan, have also come to Taobao Live.

In fact, Pinduoduo has already taken similar actions. The core of Duoduo Video is to only consider the traffic-draining properties of the content, without considering conversions, and at the same time superimpose the stimulation of cash subsidies. From this perspective, Pinduoduo is the first e-commerce platform to practice letting content belong to content. Recently, there was news that Douyin’s first anchor with over 100 million followers, “Crazy Little Yang,” is suspected to have settled in Duoduo Video.

In comparison, JD.com’s attitude towards content is much more ambiguous. According to "latepost", Liu Qiangdong said at an internal meeting at the end of June that "live broadcasts, short videos, etc. are all trends. You cannot ignore the trends, and you cannot always chase them. Otherwise, it will be difficult to do business for a long time."

This somewhat reflects JD.com’s ambivalence: Live broadcasting can indeed solve the traffic problem and help to close transactions in some categories; but JD.com is too unfamiliar with the live broadcasting ecology and gameplay, so even though it has plans to introduce MCN – for example, during the 618 Festival this year Make a Friend Luo Yonghao premieres - but actual progress is still slow.

"If there is no supply, we can slowly replenish it, but if there is no traffic, it will be very difficult." One merchant commented on the current e-commerce competition.