Image source @ Visual China
Text | Market Capitalization Watch, author | Wen Yu, editor | Little City Sister
Chinese Internet companies are the luckiest.
It has not only caught up with the outlet of technological transformation, but also hitched a ride on the rapid development of China's economy, and has become a capillary that penetrates deep into all corners of society.
Standing at the top of the traffic monetization contempt chain, e-commerce platforms are undoubtedly the most "proud" group in the Internet world.
By 2021, Online retail sales of physical goods in China have exceeded 10 trillion yuan to 10.8 trillion yuan, nearly twice the size of the US e-commerce market.
The huge population base and unmet material consumption needs resonate with the online movement, and it is not surprising that China's e-commerce can have such a scale. Curiously, in the past few years, the competitive landscape of the e-commerce industry has not only not been further concentrated, but has continued to diverge, and the front wave has continuously lost its territory under the wild attack of the back wave, which is completely contrary to the inherent cognition of Hengqiang, a strong Internet company.
How did all this happen?
The siphon effect fails
Before 2017, China's e-commerce was basically the "two-person transfer" of Ali and JD.com, which took the lead in completing the mobile migration and controlled more than 85% of the market together.
The wealth was scattered and the people gathered, and the purpose of Pinduoduo was achieved.
As of Q4 2020, its annual active buyers have soared to 824 million, surpassing Ali and becoming the new "scoop handle" of e-commerce. At this point, China's e-commerce has officially entered the era of "Three Kingdoms Killing", but for those who defend the city, the bearishness is far more than this.
As early as September 2020, Douyin decided to disconnect the external link of live e-commerce and no longer divert traffic to traditional e-commerce platforms, and Kuaishou followed up in December. Two companies that master huge traffic pools announced that they would stand on their own, and the territory of China's e-commerce was once again split, entering the stage of "five hegemons competing for dominance".
As of 2021, according to GMV, the market shares of Ali, JD.com, Pinduoduo, Douyin, and Kuaishou are 52%, 20%, 15%, 5%, and 4% respectively, compared with two years ago, the market pattern has diverged significantly.
▲Data source: public information collation
In contrast, the U.S. electricity business has stopped a lot.
▲The image is taken from eMarketer
For the Chinese Internet, which is good at "copying homework", the development trajectory of many subdivisions can be found in the United States. Only e-commerce has gone out of Chinese characteristics. The Pioneers don't seem to have built a moat that is effective against competition by virtue of their first-mover advantage, making them feel helpless when new players enter the game.
An industry, an enterprise, its origin, development and destination have been laid in the original genes of the business model. To gain insight into the root causes of change, we must cut into the depths of the underlying logic, peel back the cocoon, and find the key thread in the chaotic world.
Economies of scale are anti-competitive
To understand e-commerce, we must first understand retail.
Retail, in simple terms, is to connect supply and demand, to achieve the transmission of information flow, commodity flow and capital flow.
Let production and consumption meet online, and reduce the transaction cost of commodity circulation through the efficient operation of "three streams", which is the value and foundation of e-commerce, of which transaction cost is the core competitiveness of the platform.
The so-called transaction costs can be roughly divided into two parts: information costs and performance costs, the former refers to the cost of the matching process, including the search, matching, negotiation between buyers and sellers; the latter refers to the cost of executing orders, most of which is mainly logistics.
The completely different fate of Sino-US e-commerce has sown seeds in the implementation of the contract, but this is not determined by the subjective preferences of the industry, but by the objective economic and geographical conditions between the two countries.
U.S. manufacturing has moved out in large quantities since the last century, and consumer goods are now predominantly imported, especially in Asia, where production costs are extremely low, generally unloaded on the West Coast and then shipped to the densely populated East Coast. In terms of logistics, it is reflected in the concentration of the receiving end, the long transportation distance, the trade-off cost and experience, and the warehouse allocation mode that pays attention to timeliness is better.
China is completely different, as the world's largest industrial power, production and manufacturing is mainly concentrated in the southeast coast of a large population, demand and supply in the space overlap is high. The receiving end is scattered, and the transportation distance is shorter, so that the cost advantage of the express delivery model is magnified, and the living space is larger.
The bigger difference is that the domestic express delivery network is a social resource shared by major e-commerce platforms, rather than exclusive like Amazon, which means that the platform has not been able to establish competitive barriers in the performance process.
In fact, the harsh environment of long-term low-price competition in the domestic express delivery industry will not make e-commerce platforms have the desire to build their own express delivery systems.
In 2019, Zhongtong smashed the ticket unit price of Yiwu in the main grain producing area directly from 4.2 yuan to 1.2 yuan, and last year, Jitu pressed the ticket unit price of Yiwu to less than 1 yuan (the cost was 1.3 yuan), and finally the official mediated, and the war was extinguished.
In this case, the e-commerce platform personally organizing the network is tantamount to lifting a stone and dropping it on its own feet.
In 2017, Suning wholly acquired Daily Express and tried to carry out an exclusive transformation, but it ended in a three-year loss of 5.3 billion.
Jingdong Logistics, which has built its own warehouses, is breaking through, but the current cost is also very high. In 2020, the cost of a single ticket of JD Logistics is about 16.7 yuan, while the same period of YTO is only 2.1 yuan, a difference of several times. In terms of the number of e-commerce parts, the "Tongda system" is more than 19 times that of JD.com.
If the extremely low performance costs and barriers have buried a thunder for the division of the e-commerce map, then what detonated this thunder is the scale effect in the information matching link.
In the information matching and matching process, with the continuous increase of information, the curve of transaction costs is not monotonous, but shows a trend of first falling and then rising, that is, "U" characteristics.
This is not difficult to understand, the early commodity information is small, the platform can complete efficient matching through the "people looking for goods" model, and the transaction cost has the attribute of economies of scale. But as the flow of information between buyers and sellers grows exponentially, a large amount of redundant information will reduce the efficiency of matching and drive up the cost, at which point the economy of scale in turn becomes a drag on the platform.
With limited resources, merchants can only pay a higher price in order to compete for consumers. Before 2015, the marketing cost of merchants per 10,000 yuan of GMV on the Ali platform continued to decline, reaching a lowest point of 153 yuan in 2015, and then rebounded unilaterally, and has grown to 256 yuan in 2020.
Head brands and merchants are still affordable, and small and medium-sized businesses with high cost sensitivity are gradually reduced to vulnerable groups, and the living space is small.
Content e-commerce platforms improve the efficiency of matchmaking by stimulating and creating shopping desires.
To provide consumers with a new ideal state of life, let them have the meaning of longing and yearning, and naturally evoke new consumer demand. The live broadcast room creates a tense and urgent shopping atmosphere, allowing consumers to pay for the impulse.
According to iResearch's survey data, the conversion rate of live e-commerce orders was as high as 4.3%, which increased several times compared with 0.5% of the picture and text.
However, the mode of information connection has been changed, that is, the e-commerce platform has realized the evolution from "people looking for goods" to "goods looking for people", which is equivalent to the previous stalls and other people to buy, and now it is active door-to-door sales.
From a larger perspective, far more than the information connection model has changed, but the paradigm of the entire industry.
Comparative advantage wins
As an angel investor of Pinduoduo, Duan Yongping has repeatedly said on social platforms that he does not understand its business model. In fact, it is not only Duan Yongping who can't understand, as the water of e-commerce becomes more and more muddy, the top institutions in the world have also had obvious differences.
If we have to predict the future, we are more inclined to think that e-commerce will enter a new era of division and pluralistic coexistence, rather than the arena of "having him without me, having me without me" as the outside world has rendered.
Compared with consumer stratification, this is an era of consumption stratification.
Algorithms can solve the problem of "thousands of faces", but they are helpless in the face of the problem of "one person and many faces", which is closer to the essence of consumer behavior. The consumer demand of different dimensions such as "many, fast, good, and provincial" can be harmoniously condensed in one person, and then met on different platforms.
Therefore, it is futile for the platform to carry out consumer portraits based on the user's behavioral preferences on a single platform, and to try to recommend and match information based on this.
Ali P8, which earns millions of dollars a year, can spend tens of thousands of yuan on JD.com to buy a high-end computer, but this does not delay its order in Pinduoduo for 9.9 yuan free shipping toilet paper.
From the perspective of the provider of services, there is currently no platform or model that can meet all the above advantages, but rather the best of its own.
For example, Taobao's advantage lies in "many" to meet the needs of consumers to buy all products in one stop; Jingdong's self-operated, Meituan and other platforms meet consumers' demand for "fast"; Tmall, JD.com and Douyin strengthen the cognition of "good"; Pinduoduo focuses on a "provincial" word.
More importantly, each platform has built a moat in the segmentation advantage, and it is difficult for anyone to completely eat the other.
Taobao is characterized by "more", seemingly easy to imitate, careful study will find that the collection of many long-tail characteristics of the merchants need a long period of accumulation, precipitation, more than ten years of jiangshan can not be taken overnight; and then for example, Jingdong, "fast" behind the continuous loss of 12 years, it is difficult to have an opponent can pose a threat to it in terms of timeliness.
Based on these, the paradigm shift in the e-commerce industry is inevitable. The platform is no longer the bigger the better, but to take the initiative to do subtraction, give up some weak markets, and form its own clear boundaries and positioning. In the past, it was won by the scale effect, and now it is necessary to rely on comparative advantage to win the living space.
In the case of the Internet traffic dividend peaking, defense is far more important than the attack, if someone has to go deep into the hinterland of others to grab food, the cost must be huge, and in the end, it can only be a result of "killing a thousand enemies and losing eight hundred".