Who is supporting the lowest price of e-commerce? Internal horse racing, bloodshed to participate in the war, small and medium-sized businesses fell into the whirlpool of price comparison

Source of this article: Times Finance Author: Xu Xiaoqian

Like most e-commerce practitioners, Lin Qi's day is awakened by orders.

He is a post-85 supplier for small and medium-sized businesses, and has been up and down in Yiwu for more than ten years. With the recent start of the "low price war" on major e-commerce platforms, many old customers have passed on their anxiety to him. From time to time, Lin Qi has to face the threat of price reduction: customers ask for concessions with orders four or five times more than before, and under the guidance of thousands of orders, he can only obey the new rules of the game.

Directly behind Lin Qi's desk, there is a horizontal plaque that reads "Exploding Orders to Solve Thousands of Sorrows". "Bursting orders" used to be the common wish of all Yiwu e-commerce practitioners, and now they are more concerned about how to survive the fight.

The slogan hanging in Lin Qi's personal studio Times Finance / photo

In the more brutal and vast e-commerce battlefield, the fierce battles of various leading platforms are in full swing, and they are the source of the price involution of millions of small and medium-sized businesses.

On December 26, Taobao issued a notice to change the Taobao Platform Dispute Handling Rules, adding a refund-only rule. The next day, JD.com also added support for users to refund only. Refund only used to be an exclusive feature of Pinduoduo, and consumers who bought unsatisfactory products could be refunded directly without returning them under certain conditions.

The competition for consumers on the platform has escalated again, and the pressure has accelerated to every end of the huge e-commerce network. Small and medium-sized businesses are coerced and can only withstand pressure from all walks of life.

On December 27, JD.com announced that the annual fixed salary of front-line business personnel such as procurement and sales will increase by nearly 100%, and at the beginning of 2024, all JD retail employees will have an average salary increase of no less than 20%. During this year's Double 11, Jingdong's procurement and sales team directly benchmarked Li Jiaqi's live broadcast room with the signboard of "the lowest price on the whole network", realizing a network-wide out-of-circle.

In the past month or so after the end of Double 11, Taotian and JD.com have started high-level personnel adjustments - Dai Shan stepped down as the head of Taotian Group, and a personnel reshuffle also quickly surfaced, and the newly appointed Wu Yongming entered the stage of re-entrepreneurship with 6 young managers; Xin Lijun, CEO of JD Retail Group, stepped down, and Xu Ran, CEO of JD Group, concurrently served as CEO of Retail Group.

The head e-commerce platform moves frequently and is gearing up, which may indicate that the price war is far from over. If we say that the e-commerce low price war 10 years ago was an easy hunt for the offline retail industry. This time it is an open and secret battle between high-level players, which is important and determines life and death. New regulations with their own strange tricks are emerging one after another, and behind them is related to a new round of market share and status.

It's just that the "lowest price" is anxiously competing for who will pay in the end?

Compete for small and medium-sized businesses: painting a big pie and cold bench become history

In the past few years, the vigorous quality upgrade campaign of the e-commerce platform has been launched, and Zhang Xiao, a Taobao socks merchant, feels that he has been sitting on a cold bench for a long time. The big stage is almost always the home of flagship stores and all kinds of new brands, and small and medium-sized businesses can only turn to Pinduoduo and Douyin to find vitality.

The turning point occurred in March this year, Zhang Xiao learned from the platform Xiaoer that the sales data of the big promotion confirmed the vigorous vitality of the low-price market, and small and medium-sized merchants will be the absolute main force in the new round of e-commerce competition.

It was a conspiracy between the two sides. Small and medium-sized businesses that have long relied on Pinduoduo need to find new "meal tickets" and are seeking stable growth across all channels, and the turmoil caused by "refund-only" rushed to a climax in April this year Xi.

Source: Visual China

In Zhang Xiao's view, Taobao's sense of crisis is the strongest, and the ambition to compete for small and medium-sized businesses has been written into almost every rule.

In the past year, Taobao has begun to try to attract small and medium-sized businesses by changing the soil. Zhang Xiao told Times Finance for example, the platform's commission has been reduced from 5% to 4%, the price of freight insurance has also been reduced to a few cents, and another important change is the adjustment of the assessment mechanism, from focusing on sales to attracting new customers and paying buyer data.

"If our sales this year reach 100 million yuan, the adjustment of the commission policy will directly save us 1 million yuan in channel costs, which was unimaginable a few years ago. Zhang Xiao said to Times Finance.

For small and medium-sized businesses, the most intuitive stimulus often comes from fluctuations in sales. The rise and fall of prices is like a rope of fate, which directly pulls the ranking of merchants in the low-price war. Compared with the top brand merchants, white-label manufacturers can often quickly make corresponding adjustments according to market changes and provide platforms with richer and more diverse products, but due to the lack of brand recognition, their voice in price changes is relatively weaker.

Once, Zhang Xiao readjusted the price of the product according to Xiao Er's wishes, and the number of link visitors quickly increased from 1,000 to 7,000, and he imagined that if he did not adjust according to the requirements of the platform, the number of visitors would plummet from 1,000 to 100. In the face of a rollercoaster of traffic, merchants usually follow the platform's arrangement.

"Can you do it at this price?" Li Yao, a seller in the stationery category, smelled this low-price storm from the change in the attitude of the platform's Xiaoer, and the links thrown by the other party usually came from Douyin and Pinduoduo.

Li Yao found that Xiao Er's opening remarks became very straightforward, often driving straight from a certain popular item, and the target was only price.

"In the past, they would emphasize the service quality of the entire store and strive to become a crown merchant, but now I can feel that their purpose is particularly precise and clear, that is, to let small and medium-sized merchants charge low prices. Li Yao said.

At the beginning of May, Taotian Group held a small meeting, and Ma Yun, who had not long returned to China, proposed three major strategies of returning to Taobao, returning to users, and returning to the Internet, officially launching a low-price campaign. Liu Qiangdong's change came earlier, in order to cope with the low price, Jingdong first launched tens of billions of subsidies, and then opened up POP and self-operation, aiming to achieve "traffic equality".

Today, the low-price strategy has begun to bear fruit on Taobao. According to data released by Quest Mobile, the number of daily active users of Taobao App has increased for five consecutive months since March this year, and it is currently the only e-commerce platform with DAU exceeding 400 million. Other platforms are also trying to open their doors to low-cost white-label manufacturers.

Offering the lowest price, small and medium-sized businesses rush to the forefront

No one can better experience the excitement of shopping for low prices than Wang Yang, who is the head seller of Yiwu daily necessities, with 10,000-20,000 SKUs in the omni-channel layout. He described himself as being at the forefront of the low-price war - daily necessities with an average price of less than 10 yuan are the first choice used by the platform to attract traffic, and it is also a stepping stone to open the low-price market.

In 2016, when Wang Yang joined the Yiwu entrepreneurial army, the popular narrative framework in the market was still "get rich overnight, seize the opportunity, and double the profit". At that time, the e-commerce industry was in a bonus period, Taobao had achieved full wireless for less than two years, and the sales of Double 11 were still reaching a new high.

Wang Yang recalled that an early merchant he knew put a product that cost less than 2 yuan on the store at a price of 6 yuan, and inadvertently became a big hit. ”

In 2022, the growth rate of traditional e-commerce will decline, announcing that e-commerce platforms have moved from an incremental market to a stock market. In the third quarter of this year, Taotian Group's revenue was 97.65 billion yuan, a slight increase of 4% year-on-year. Among them, the revenue from China's retail business was 92.56 billion yuan, a slight increase of 3% year-on-year.

The e-commerce industry is in turmoil, and Yiwu, which has a huge volume of small commodity transactions, will be infinitely amplified. According to the data, Yiwu's express delivery business volume exceeded 10 billion pieces this year, becoming the first county-level city in the country with an annual express delivery business volume of more than 10 billion, and the second largest express delivery hub after Guangzhou.

In Wang Yang's description, any popular daily necessities, as long as they enter the field of vision of Yiwu merchants, will fall rapidly in a month. Thousands of troops follow up on the same product at the same time, as long as a group of new merchants enter the market, the price of the product will continue to fall, until everyone can not afford it.

When more and more merchants join this "low-cost meat grinder", the good days of high returns are over. Li Yao calculated that from 2014 to 2018, his profit margin on the e-commerce platform could reach 15%-18%, but during this year's trough, the profit margin dropped to less than 1%.

"There are always competitors coming in, you don't do it, some people do it. Li Yao also experienced a dilemma, in a big promotion activity, Xiao Er asked him to provide 100,000 products at the cost of 5 yuan per order, otherwise let the store behind him "top".

"In the past two years, the low price advocated by the platform has challenged the floor price of the entire supply chain. We don't just think about the cost of fabrics, we need to get the lower cost raw materials ourselves, and only give the factory a processing fee. Zhang Xiao felt that each link was running like a spinning top that couldn't be stopped, constantly rotating towards low prices, and he even began to calculate the price of cotton.

Lin Qi has witnessed the reinvention of the supply chain by low prices. Ten years ago, he opened a store of several tens of square meters in the trade city to attract offline foreign trade customers, and at the same time, he also operated a factory with a scale of about 50 people.

With the increase of labor costs, machines gradually dominate the entire production line, but the increase of machinery and equipment is facing the expansion of plants, and the cost of rent makes the company close to the profit red line again. In 2020, Lin Qi simply closed all factories and transferred the production link to factories in Jiangxi, Anhui, Hebei and other places.

Today, Lin Qi is more of a supply chain integrator. A small hair rope needs to be disassembled into 7 processes and distributed to different manufacturers, and his daily task is to promote the progress of each link of the work to ensure that the parts scattered all over the place are finally seamlessly transformed into a product.

Products concentrated in the shipping warehouse Times Finance / photo

"In the past, it was the front store and the back factory, but now some stalls only leave a small part of the production capacity in Yiwu, and other production lines are transferred to the central and western cities, and the front store has no factory and has gradually become a trend. Lin Qi said to Times Finance.

Internal horse racing, bloodshed and war, merchants fell into the whirlpool of price comparison

An undercurrent is surging in the price comparison movement. Times Finance has learned that Xiao Er's price comparison is no longer limited to the same platform, but an all-round hunt for competitors.

Price reduction, price comparison, price reduction...... Similar models in the same category go through countless rounds of screening.

"It's like falling into a whirlpool of price comparisons with no end, and one price a day has become a common phenomenon. This leads to a very unstable supply of goods, and it is necessary to consider whether the follow-up stocking can keep up, and every time you choose to reduce the price, you need to evaluate whether you can hold the cost. Wang Yang said to Times Finance.

In the past two years, Wang Yang has seen many peers who have been immersed in the false prosperity of high sales and have finally been crushed by debt. "For example, a product that costs 2.5 yuan, some people dare to sell it for 2.7 yuan, they don't take into account the labor costs, return and refund costs, water, electricity and rent costs, and commissions to the platform, and they can only fall down in batches in the end. ”

When price and traffic are directly tied together, traffic becomes a fluid and ungraspable variable. Small and medium-sized merchants are caught in the wheel war set by the e-commerce platform, and once the same type of merchants continue to reduce prices, the traffic that originally poured into the store will also fade like a tide.

The Taobao platform assigns one to five stars according to the competitiveness of the price of the goods on the whole network, and the lowest price on the whole network can be rated as four or five stars. Public data shows that in September this year, the average traffic of Taobao five-star price power products increased by more than 62.5%.

Li Yao is experiencing unprecedented management pressure, and the low-cost baton makes the team's internal competition full of gunpowder.

According to him, the company's business mode is to distribute multiple links on the platform for the same product, and different sales managers follow up the price adjustment to form an internal horse racing mechanism. "Rather than being competing for market share by other manufacturers, it is better to cast a wide net internally and sell products through full-platform testing. ”

However, in the environment of low-price competition, this internal competition is easy to get out of control. When a popular product appears, almost the entire sales team wants to compete for this "fat meat", and they desperately push down the price to get sales. In order to compete for the same batch of customers, it is not uncommon for multiple sales teams to repeatedly burn promotion fees.

"If you don't roll up low prices, don't do e-commerce, this is the rule of all platforms. A number of merchants told Times Finance. They don't know when the industry-wide war will be paused, and they are not sure what the supply chain will ultimately look like under the long-term low-price competition.

The only thing that is certain is that the era of "the bigger the wind and waves, the more expensive the fish" has come to an end, and it is no longer difficult to solve the "thousand sorrows" of "explosive orders".

(Names have been changed.) ）