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At the end of July, the rumored "Daily Fresh Bankruptcy" and "Daily Fresh Layoff" turmoil attracted widespread attention. Looking back, this company, once known as the "first stock of fresh e-commerce", once had a market value of $32 billion, and it was in the limelight. However, now it seems that the former "XX e-commerce" are all heading towards the same fate - collective collapse. Not long ago, the leading mother and baby e-commerce company honeybud announced that it would close its business and will officially close its services and remove goods on September 10. In addition, fashion e-commerce Mushroom Street laid off large-scale employees, luxury e-commerce Secoo withdrew from the market, and Jumei lost money for three consecutive years. Vertical e-commerce emerged around 2010, and in the past twelve years, the e-commerce field has been subdivided into more and more elaborate, fresh e-commerce, mother and baby e-commerce, fashion e-commerce, luxury e-commerce, special sale e-commerce, etc. have emerged, almost filling users' mobile phones. However, the current situation seems to warn us that vertical e-commerce may not be destined to have a future.
The rise of this vertical e-commerce wave is inseparable from Huang Ruo, a veteran in the e-commerce field. In 2007, Huang Ruo joined Alibaba and was in charge of the Taobao mall business, which has now evolved into a well-known Tmall. However, Huang Ruo did not rise to prominence due to Tmall's success. In October 2008, Huang Ruo was named by Jack Ma for "dropping out of class" because the Taobao mall he managed had only 3 million daily transactions, far less than JD.com. Huang Ruo then joined Dangdang.com and began the journey of vertical e-commerce. He said in 2010: "E-commerce in the past decade has been mainly the success of the platform, but the next decade belongs to the market segment. And in an interview in 2012, he once again emphasized the importance of focus, and even proposed the concept of "pillow core e-commerce". Huang Ruo's prophecy and firm belief in vertical e-commerce have stimulated the enthusiasm of capital and led the vertical e-commerce entrepreneurship boom for more than ten years.
In July 2015, Liu Nan officially changed the name of "Honey Bud Baby" to "Honey Bud", at this time, the demand for maternal and baby products was high, and capital was optimistic about this field. Honeybud quickly obtained five rounds of financing, totaling 20 billion yuan, of which the D round of financing set a record for the largest single financing of mother and baby e-commerce. Also in the field of mother and baby, Beibei has also received a large amount of capital injection, with monthly sales exceeding 200 million. However, many entrepreneurs plunged into it, lighting the torch of hundreds of billions of yuan, but did not realize the bright prospects of Huang Ruo's vision. At the same time, integrated platforms such as Taobao and JD.com continue to prosper, while some vertical e-commerce that were once pinned on high hopes have ended sadly, while others have experienced valuation collapse.
In fact, the fate of vertical e-commerce has been sounded by some people in 2011. At the time, Bitao.com's CEO Bi Sheng called e-commerce a scam in a speech, causing an uproar. Bi Sheng believes that there is huge competition in the e-commerce field, and the profitability of vertical e-commerce is extremely difficult. He pointed out that it is difficult for e-commerce companies to compete with comprehensive platforms such as Taobao and JD.com, because users only remember a few domain names, and it is difficult to remember other niche e-commerce websites. The limitations of vertical e-commerce are limited categories, low repurchase rates, and limited user loyalty. Although Bi Sheng's views are controversial, actual developments have proved his views.
The fatal problem of vertical e-commerce is that the category is limited and cannot meet the diversified needs of consumers. Comprehensive e-commerce platforms have a wider range of categories and attract more users. User purchase frequency, customer unit price and retention rate are all affected by category richness, and comprehensive platforms have more advantages in these aspects. Vertical e-commerce is difficult to survive in the competition, and it is easy to attract traffic by super platforms such as Taobao and JD.com. This situation has put vertical e-commerce companies in a difficult situation.
However, some emerging e-commerce platforms have successfully emerged, such as fresh e-commerce, Pinduoduo and Douyin e-commerce, which have found a unique competitive advantage and rapidly expanded their platforms to become comprehensive e-commerce platforms. The success of fresh food e-commerce relies on timely delivery, while Pinduoduo gains a competitive advantage through low-priced white-label supply chains, and Douyin e-commerce uses short videos and live broadcasts to display goods to achieve multiple categories
After reviewing the ambition at the beginning of the rise of vertical e-commerce and the frenetic investment of capital, we can't help but ask: what is wrong with vertical e-commerce, so that the future that seems destined to be full of ups and downs today?
Vertical e-commerce originated from Huang Ruo's bold words, preaching focus, deep cultivation, and market segmentation, but in fact, they quickly fell into a fatal dilemma: the Matthew effect. The Matthew effect refers to the phenomenon that in a field, the rich get richer and the poor get poorer. In the e-commerce industry, this means that large, integrated platforms have a wider range of product categories, more users, and higher user retention rates, thereby attracting more advertisers and sellers. Vertical e-commerce faces the problem of limited categories and difficult user retention, and it is difficult to compete with comprehensive platforms.
Let's take the example of Huang Ruo to explain this phenomenon. When Huang Ruo worked in Taobao Mall, in the face of competition from JD.com, due to the limited category, the transaction volume of Taobao Mall was only 3 million, far inferior to JD.com. This example reveals the dilemma of vertical e-commerce: few categories, low purchase frequency, and low unit price make it difficult for GMV to compete with integrated platforms.
Taking the price war between Dangdang.com and JD.com as an example, although Dangdang.com is desperately fighting, due to the relatively high proportion of books, it cannot attract new users to buy goods with higher gross profits like JD.com, which eventually leads to Dangdang.com's loss and inability to recover. This once again shows the disadvantages of vertical e-commerce in the face of comprehensive platforms.
However, vertical e-commerce is not useless. Fresh e-commerce is a special field, due to the short shelf life of goods and the key delivery time, the scale effect of fresh e-commerce is limited to specific regions. This provides a living space for some fresh food e-commerce companies such as Dingtone to buy vegetables and daily fresh food. However, in the fields of normal temperature agricultural products and fruits, there is still a Matthew effect, and the comprehensive platform has a competitive advantage.
The rise of JD.com, Pinduoduo and Douyin e-commerce is based on a similar model: finding competitive advantages in supply chain or fulfillment, then rapidly expanding the platform and gradually developing into a comprehensive e-commerce platform. These platforms avoid the focus drawbacks of vertical e-commerce and successfully stand out.
In summary, vertical e-commerce ignores the Matthew effect and the competitive advantage of comprehensive platforms in the process of pursuing focus and market segmentation. Although vertical e-commerce once ignited passion, they eventually found that to gain a foothold in the e-commerce industry, they needed a wider range of products, more users, and higher user retention. These factors make it difficult for vertical e-commerce to compete with comprehensive platforms such as Taobao and JD.com, dooming them to failure.
In the future e-commerce competition, comprehensive platforms will continue to dominate, and vertical e-commerce needs to constantly innovate and find its own competitive advantage in order to gain a foothold in the fierce market. The landscape of the e-commerce industry may already be set, but the competition will continue to evolve, and the winners of the future will be those companies that can flexibly adapt to market changes.
Summary: Vertical e-commerce once emerged in the e-commerce industry, but ended up in trouble because it ignored the Matthew effect and the competitive advantage of integrated platforms. Integrated platforms continue to dominate the e-commerce market, and vertical e-commerce needs to innovate to gain a foothold. E-commerce competition is still evolving, and companies that flexibly adapt to market changes will be the winners of the future.
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