NetEase Yanxuan product analysis

This year's Double 11 is in full swing. Liang Jun, CEO of NetEase Yanxuan , issued an internal letter, responding for the first time to the reasons why NetEase Yanxuan withdrew from Double 11 last year. In the article titled "Let's not talk about sales, let's talk about direction", Liang Jun once again emphasized NetEase Yanxuan's slogan of "no routine shopping", and said that this year it will focus more on products, channels and business structure. At a time when e-commerce companies were caught up in a price war during Double Eleven, NetEase Yanxuan chose to find a new way to withdraw from Double Eleven, making this boutique e-commerce company the focus of public opinion again.

According to public reports, NetEase Yanxuan was launched in April 2016 and has won the favor of the new middle class since its launch. Its categories include eight major categories: home life, clothing, shoes and bags, food and beverages, personal care and cleaning, mother and baby, sports and outdoor, digital appliances, and Yanxuan Global. Over the past five years, NetEase Yanxuan has gradually developed from a shopping platform favored by the new middle class to a lifestyle brand for the new middle class, providing consumers with one-stop, full-category, and comprehensive solutions for a better life.

In the 2019 TOP100 list of smart retail potential, NetEase Yanxuan ranked 22nd. After just a few years of development, NetEase Yanxuan has become the "number one" in boutique e-commerce. Why has this company been able to develop so rapidly in such a short period of time? What is the company's development and business model?

This article starts with NetEase Yanxuan and takes you into an in-depth understanding of the reasons for the rapid development of this company and the operating logic of the quality e-commerce industry.

This article will analyze from the following aspects:

1. Industry analysis

2. Competitive product analysis

3. User value analysis

4. Commercial value analysis

5. Product iteration analysis

6. Product structure analysis

7. Operational Analysis

8. Summary

1. Industry Analysis

Boutique e-commerce is a branch that has evolved from traditional e-commerce. The main difference between it and traditional e-commerce is that it strengthens supply chain management, reduces middlemen, and has a more direct connection with consumers. Boutique e-commerce eliminates the need for distributors, agents, e-commerce platforms and other links, and sells goods directly to consumers.

By eliminating the price difference caused by middlemen, boutique e-commerce companies are able to provide consumers with more favorable prices for the same product quality. In addition, boutique e-commerce companies can create a unique product experience for consumers through customized production, underwriting and buying out certain products from manufacturers, or even leading product design. Ultimately, boutique e-commerce aims to provide consumers with high-quality, cost-effective products.

The main target audience is young people from working college students to those gradually entering family life, between the ages of 25 and 34, who are more concerned about cost-effectiveness. Relatively speaking, they are a middle class with a certain income and high demands for quality of life, but at the same time they are not high-income people. They can be described as not as good as the rich but better than the poor. In comparison, this group has its own special shopping preferences and habits.

So why has boutique e-commerce won the favor of consumers at such a rapid pace since 2016? Since there are many external factors that influence it, we will use the pest model to analyze the reasons in detail below.

1.1 Policy (politics) level

China's e-commerce has gone from nothing to something. During the 13 years of development of e-commerce, national policy supervision has played a vital role. Under the correct guidance of policies, e-commerce has been able to continue to grow and develop. In 2019, the transaction volume of China's e-commerce market reached 3.54 trillion yuan. The scale of domestic small and medium-sized enterprise users using third-party e-commerce platforms has exceeded 12.5 million, and the scale of China's online shopping users has exceeded 130 million.

Since 2004, the construction of my country's e-commerce policies and laws has entered a new stage. In this new stage, from the national level, from the level of various ministries, and from the level of various provinces and cities, our entire e-commerce development has made very great breakthroughs.

The following is an inventory of some important e-commerce laws and regulations issued by the China E-Commerce Research Center:

On August 28, 2004, the 11th Session of the Standing Committee of the Tenth National People's Congress voted to pass the "Electronic Signature Law of the People's Republic of China", which came into effect on April 1, 2019. The Electronic Signature Law, for the first time, gives reliable electronic signatures the same legal effect as handwritten signatures or seals, and clarifies the market access system for electronic certification services.

At the end of 2004, at the fourth meeting of the State Council General Office Information Leading Group, Premier Li Keqiang presided over the approval of "Several Opinions on Accelerating the Development of Electronic Commerce". The opinions clarify the important role of developing e-commerce in my country's national economic and social development, put forward the guiding ideology and basic principles for accelerating the development of e-commerce, and also put forward a series of specific measures to promote the development of e-commerce.

On March 31, 2019, the National Cryptography Administration promulgated the "Measures for the Management of Passwords for Electronic Certification Services".

On April 18, 2019, the Policy and Legal Committee of the China Electronic Commerce Association organized relevant companies to draft the "Self-Discipline Code for Online Trading Platform Services" and officially released it to the public.

In June 2019, the central bank issued the "Administrative Measures for Payment and Clearing Organizations" (draft for comments).

On October 26, 2019, the People's Bank of China issued the "Electronic Payment Guidelines (No. 1)", which aims to standardize electronic payment business, regulate payment risks, ensure fund security, safeguard the legitimate rights and interests of banks and their customers in electronic payment activities, and promote the healthy development of electronic payment business.

The "Eleventh Five-Year Plan of the People's Republic of China" promulgated in 2019 puts forward "actively developing e-commerce" as an important task. It emphasizes "establishing and improving e-commerce infrastructure, legal environment, credit and security certification system, and building a safe and convenient online payment service platform."

In May 2019, the General Office of the Communist Party of China Central Committee and the General Office of the State Council issued the "National Informatization Development Strategy 2019-2020".

In June 2019, the Ministry of Commerce promulgated the "Guiding Opinions of the Ministry of Commerce of the People's Republic of China on Online Transactions" (draft for comments), which effectively avoided the transaction security issues faced by online transactions.

On March 6, 2019, the Ministry of Commerce issued the "Guiding Opinions on Online Transactions (Interim)". Its purpose is to implement the spirit of the document "Several Opinions on Accelerating the Development of E-Commerce" issued by the General Office of the State Council, promote the healthy development of online transactions, gradually standardize online transaction behaviors, help and encourage all parties involved in online transactions to conduct online transactions, and be vigilant and prevent transaction risks.

In June 2019, the National Development and Reform Commission and the State Council Information Office jointly issued my country's first "Eleventh Five-Year Plan for E-Commerce Development".

On December 17, 2019, the Ministry of Commerce, the national department in charge of commercial informatization, issued the "Opinions of the Ministry of Commerce on Promoting the Standardized Development of E-Commerce". The purpose of issuing this opinion is to promote the standardized development of e-commerce, guide transaction participants to regulate various market behaviors, prevent market risks, resolve transaction conflicts, and promote the healthy development of e-commerce.

In April 2019, the General Office of the Communist Party of China Central Committee and the General Office of the State Council recently issued the "Eleventh Five-Year Plan for Informatization of National Economic and Social Development", which proposed to relax market access, strengthen policy guidance, and encourage social capital to participate in informatization construction. Create a good fiscal and taxation policy environment and encourage social funds to invest in the public welfare development of information resources and the construction of public information service platforms. Further improve various support policies for the information service sector.

On April 24, 2019, in order to standardize online transaction behaviors and promote the sustained and healthy development of e-commerce, the Ministry of Commerce drafted the "E-commerce Model Specifications" and "Online Shopping Service Specifications".

In 2019, in order to strengthen the supervision of e-commerce, the Beijing Industry and Commerce Bureau issued the "Opinions on Implementing the Beijing Information Promotion Regulations and Strengthening E-Commerce Supervision and Management", which is expected to be gradually implemented nationwide by the industrial and commercial departments in the future.

In April 2019, the People's Bank of China, the China Banking Regulatory Commission, the Ministry of Public Security and the State Administration for Industry and Commerce jointly issued the "Notice on Strengthening Bank Card Security Management, Preventing and Combating Bank Card Crimes". The "Notice" is seen as a warm-up for the issuance of licenses. This seems to indicate that national regulatory authorities have begun to truly strengthen supervision of third-party payment companies.

In November 2019, the Ministry of Commerce issued the "Opinions on Accelerating the Development of E-commerce in the Circulation Sector", which clarified the government's guidance and support policies for e-commerce. It is proposed to support traditional distribution companies in using e-commerce to expand online markets, cultivate a group of professional online shopping companies with standardized management and operations and broad market prospects, and support a group of online wholesale trading companies with strong influence and cohesion.

On June 1, 2019, the State Administration for Industry and Commerce issued the "Interim Measures for the Management of Online Commodity Transactions and Related Service Behaviors", which clearly stipulates that natural persons who engage in commodity transactions and related service activities through the Internet should submit their real identity information such as name and address. The introduction of this "Measures" will promote the development of online commodity transactions and related service activities, and promote the healthy development of online commodity transactions and related service activities. It will come into effect on July 1, 2019.

On June 21, 2019, the People's Bank of China issued the "Administrative Measures for Payment Services of Non-financial Institutions", requiring third-party payment companies to apply for a "Payment Business License" before September 1, 2019, and the minimum registered capital of national companies must be 100 million yuan. The introduction of this "Measures" is intended to regulate the currently rapidly developing third-party payment industry and will play a guiding role in the standardized development of the industry.

Undoubtedly, the above-mentioned national ministries and commissions have issued a series of policies and regulations, which have provided strong institutional guarantees and standard specifications for the long-term, healthy and orderly development of my country's e-commerce over the past thirteen years.

The "Three-Year Action Plan for Promoting the Development of E-Commerce" was promulgated in 2016. In accordance with the principles of "combining soft and hard forces, internal and external efforts, vertical and horizontal coordination, and government-enterprise cooperation", it aims to build a legal and policy environment conducive to the development of e-commerce, improve the basic information infrastructure of e-commerce, deepen the construction of national e-commerce demonstration cities, and promote the development of e-commerce in key areas. Strengthen e-commerce cooperation with countries along the Belt and Road, give full play to the role of e-commerce in promoting economic growth, industrial upgrading and poverty alleviation, drive mass entrepreneurship and innovation, and accelerate the cultivation of new momentum. This move laid the foundation for the booming development of the entire e-commerce industry.

1.2 Economy

Penguin Think Tank (August 2019) released the "China White-collar Internet User Life & Consumption Survey Report", which conducted a sample survey of core white-collar Internet users aged 25-45 with a monthly income of more than 8,000 yuan across the country, gaining insights into the behavior and psychology of the white-collar Internet user group. According to rough estimates, there are currently about 199 million white-collar Internet users in my country. They have better consumption capabilities, stronger consumption demands and relatively higher-dimensional consumption choices, and are veritable "head consumers." The existence of the white-collar group provides a huge population base for the development of e-commerce. According to data from Wu Xiaobo's "2019 New Middle Class White Paper", by 2029, the size and consumption scale of China's new middle-class user group are expected to reach 450 million, which means that NetEase Yanxuan will be able to continue to snowball.

At the same time, although my country's consumer price index has fluctuated, it has remained flat overall, stabilizing between 2% and 3%, demonstrating good and stable purchasing power of residents, injecting considerable economic level into the continued development of NetEase Yanxuan's e-commerce. This makes young people who pursue higher quality willing to pay for NetEase Yanxuan products. (As shown in Figure 1.2 below)

1.3 Society and Culture

From the overall social level, my country's consumption concepts have changed a lot since the reform and opening up. Although diligence and thrift are excellent virtues that our country has always advocated, while the people still have financial resources, encouraging rational consumption, stimulating domestic demand growth, and promoting a good economic cycle are advocated and accepted by the state and society. For urban middle-class white-collar workers, due to their high level of education, they not only pay attention to the practicality of the goods they buy, but also care about the brand and the cultural connotations, which is consistent with the "strict selection" and high quality that NetEase Yanxuan focuses on. (As shown in Figure 1.3 below)

1.4 Technology

The popularity and continuous advancement of technology have brought many improvements and changes to the development of online business. With the upgrading of e-commerce platform technology and increasingly accurate intelligent marketing strategies, the cost of acquiring customers for online e-merchants has been effectively reduced. (As shown in Figure 1.4 below)

At the same time, the application of big data and artificial intelligence technologies in the e-commerce industry has led to the emergence of a series of services that can enhance consumer experience, such as personalized recommendations, recording of previous searches, and subscriptions, allowing consumers to spend less time thinking and be more immersed in online shopping apps.

All of the above factors have contributed to the boom in the e-commerce market in recent years. So what will be the development trend of this industry in the next few years? Is there enough market space? (As shown in Figure 1.5 below)

Due to the impact of the epidemic in recent years, the total transaction volume of e-commerce platforms has achieved explosive growth. E-commerce will continue to develop at present and for a long time in the future. Therefore, we can see that there is still a lot of room for this market, and it will continue to grow rapidly in the next few years.

2. Competitive Product Analysis

Faced with this rapidly growing market and trend, a large number of participants have emerged, including vertical e-commerce and comprehensive e-commerce. For example, vertical boutique e-commerce companies include: NetEase Yanxuan, JD Jingzao, Taobao Xinxuan, Suning Jiwu, Necessities Mall, etc., and comprehensive e-commerce companies include: Alibaba, JD.com, Pinduoduo and other companies.

According to the data released by iMedia, a report previously released by iMedia pointed out that in the era of new consumption, boutique e-commerce has generally gained a certain degree of market recognition. NetEase Yanxuan, in particular, ranks first among boutique e-commerce with a user awareness rate of 52.1%. (As shown in Figure 2.1 below)

According to the comparison of iResearch data, the recognition and usage rates of NetEase Yanxuan, Xiaomi Youpin, JD Jingzao and Taobao Xinxuan are not much different. However, the sources of products of NetEase Yanxuan and JD Jingzao are respectively first-tier brand manufacturers and high-quality manufacturers in various industries, and they focus on "selection", while the sources of products of Xiaomi Youpin and Taobao Xinxuan are respectively from Xiaomi's ecological chain and Alibaba's self-operated products, and they focus on "manufacturing".

Based on brand awareness, the quality e-commerce platforms on the current market are mainly divided into three echelons: (1) NetEase Yanxuan is the leader in quality e-commerce. On the one hand, Yanxuan has opened up the market during the user education stage and seized the initiative; on the other hand, with the support of NetEase, it has obtained support in terms of capital and traffic, becoming the most well-known quality e-commerce in China. (2) Xiaomi Youpin, Taobao Xinxuan, and JD Jingzao started relatively late. Although their development scale is not as large as Yanxuan, they have certain development potential in the future because they are backed by brands and belong to the second echelon. (3) Necessities Mall and Tutoumama Selection have disadvantages in terms of scale and brand power and belong to the third echelon.

Next, we will take NetEase Yanxuan and Xiaomi Youpin as examples to gain a deeper understanding of the operating logic.

2.1 NetEase Yanxuan

NetEase’s growth path (as shown in Figure 2.1.1 below)

NetEase Yanxuan is an original lifestyle e-commerce brand under NetEase. It was launched in April 2016 and is China's first ODM e-commerce company. Yanxuan connects directly with big-name manufacturers through the ODM model, eliminating brand premiums and middlemen to select high-quality, cost-effective products for consumers.

Product classification: NetEase Yanxuan products cover 9 major categories, including home furnishing, kitchenware, clothing, cleaning, and baby products, and 88 subcategories. SKUs are strictly controlled to avoid the drawbacks of too many types of products leading to too much redundant information and difficulty in control.

Product quality control: Compared with traditional e-commerce companies that have millions of SKUs, NetEase Yanxuan maintains less than 10,000 SKUs. On the one hand, strictly controlled SKUs can provide consumers with more sophisticated choices, reduce shopping time and improve the shopping experience; on the other hand, it helps to implement a stricter screening mechanism for products. NetEase Yanxuan regularly evaluates products and eliminates products with low conversion, low gross profit and high return rates, retaining only high-quality products.

NetEase has a very strict product testing mechanism. There will be corresponding tests in every link of product production and circulation. For example, pre-production samples are sent to the world's most authoritative third-party testing agencies for testing, as well as in-production/post-production/warehousing testing, as well as patrol inspections and random inspections. Before the product is launched in large quantities, a small-batch trial will be conducted first - that is, the products will be provided to core users through the private domain traffic of the App to try them out, user feedback will be collected, and then iterative upgrades will be carried out.

Storage: self-operated warehouses, external warehouses, and warehouses in cooperation with JD Logistics. In order to improve logistics efficiency, NetEase Yanxuan has successively established 9 self-owned warehouses in 6 cities including Hangzhou, Dongguan, Tianjin, Wuhan, Wuxi and Chengdu. At the same time, there are more than 50 external warehouses for direct shipment, and the national logistics and warehousing system is becoming more perfect. At the same time, NetEase Yanxuan also jointly built a collaborative warehouse with JD Logistics in Hangzhou. This is the first time that JD Logistics has jointly innovated the warehousing and logistics model with an e-commerce platform. The collaborative warehouse reduces the number of times goods are moved and shortens the distance between goods and consumers, thereby improving the spot rate and inventory turnover during NetEase Yanxuan's promotion period, laying the foundation for intelligent replenishment and allocation. Based on past experience, collaborative warehouses can help merchants increase their spot rate to over 95%.

Delivery: NetEase Yanxuan will select logistics distributors based on the location of the goods, the location of the customers, and the size and weight of the goods to ensure a high-quality user experience. Currently, we do not support self-selected express delivery. Specific logistics information can be viewed in "My Orders > Tracking Logistics" after successfully placing an order.

Users: The company targets young people with high income and high education who live in first- and second-tier cities as its consumer groups. This group of people are less sensitive to prices and brands, but have high requirements for shopping efficiency and product quality.

After-sales service: NetEase Yanxuan, an original lifestyle e-commerce brand under NetEase, promises to provide users with a 30-day worry-free return service that far exceeds the industry standard. At the same time, it will provide users with a quick refund within 48 hours, allowing users to have the ultimate shopping experience.

Business model: NetEase Yanxuan targets new market opportunities and adopts the ODM (original design manufacturer) model, that is, the purchaser entrusts the manufacturer, the manufacturer is responsible for all aspects from design to production, and the final product is labeled with the purchaser's trademark and the purchaser is responsible for sales, producing de-branded, well-customized selected products. NetEase Yanxuan products are strictly selected from first-tier brand manufacturers, and NetEase is responsible for procurement, quality control, logistics, sales and after-sales. By strictly controlling the production process of goods, directly connecting consumers and factories, and eliminating brand premiums. (As shown in Figure 2.1.2 below)

Business expansion: NetEase Yanxuan positions itself as a lifestyle e-commerce company that provides the public with high-quality, cost-effective products. It has launched the "Quadratic Plan", which includes three parts: supply chain integration, systematized product upgrades, and extension of lifestyle aesthetics. The content covers the comprehensive upgrade and iteration of products, the launch of 100 Yanxuan HOMEs, and the launch of new offline spaces.

NetEase Yanxuan has stepped up its efforts in upstream and downstream layout, striving to improve the efficiency of the upstream supply chain, speed up product updates, and incubate original design products; downstream channels have been accelerated to expand, and it has cooperated with e-commerce platforms such as JD.com, Tmall, Suning, and Vipshop.

In addition, NetEase Yanxuan will continue to accelerate its offline layout. In addition to cooperating with Atour Hotel, Vanke, and Tujia, it also plans to deploy 100 offline Yanxuan HOMEs, involving residential, long-term rental apartments, homestays and other real estate forms, covering scene space display, offline product sales, customized soft furnishing solutions, community culture creation and other content. In addition to Yanxuan HOME, NetEase Yanxuan also plans to launch a new offline space related to bookstores and coffee culture to explore the scene-based e-commerce route.

2.2 Xiaomi Youpin

Xiaomi Youpin development line (as shown in Figure 2.2.1 below)

Product classification: Smart digital products account for 36.8% of the core category, covering a wide range of categories, from mobile phones to TVs, tablets, drones, rice cookers, water purifiers, walking machines, etc. Xiaomi Youpin’s products are mainly divided into four categories: (1) products manufactured by Xiaomi, such as mobile phones, televisions, routers and other traditional Xiaomi products; (2) products of Xiaomi ecological chain manufacturers that carry the Mijia brand, such as Mijia rice cookers and Xiaomi air purifiers. These products have been reviewed by Mijia; (3) self-operated brand products of Xiaomi ecological chain manufacturers. These products do not carry the Mijia brand, but the production, manufacturing and after-sales service are all the responsibility of Xiaomi ecological chain manufacturers; (4) products of third-party manufacturers. These products are not manufactured by Xiaomi ecological chain manufacturers, but Mijia Youpin is responsible for follow-up and supervision from the early production to the later after-sales service. Each category adopts a small number of SKU selection model, with a total of 6,000 SKUs. It mainly focuses on Xiaomi's own products and Mi ecosystem products, mainly home appliances.

Product quality control: Xiaomi has three high standards: high quality, high appearance, and high cost performance. Only products that meet these standards are high-quality products. Xiaomi is involved in controlling every aspect of Xiaomi Youpin's products, from product definition, design, production, quality inspection, etc., to ensure that the style of "Xiaomi Department Store" is unified and the quality is controllable. The biggest feature of Youpin is the control of the entire chain. Xiaomi Youpin has a professional product selection and quality control team to conduct various aspects of evaluation. The number of products under each category is limited and they are differentiated as much as possible.

Storage: self-operated + third-party warehousing

Delivery: Youpin delivery - JD.com, SF Express, Xinpeimeng; third party - brand-partnered express delivery company

Users: In the new consumption era, young users born in the 1980s and 1990s have become the main consumers of quality e-commerce shopping and are also the target users of Xiaomi Youpin.

After-sales service: Xiaomi/Mijia - return within 7 days, exchange within 15 days, support after-sales repair; third party - contact customer service

Business model: Costco, the core of this model is the low-price strategy. Xiaomi Youpin’s low-price strategy relies on two factors: (1) selected SKUs and (2) its own brand.

The number of SPUs of Xiaomi Youpin is between 3,000 and 4,000. The ultra-low SKU can increase consumer surplus, reduce transaction costs, select the most popular SKUs, concentrate consumer purchasing choices, expand the sales volume of single products, and reduce costs through large-scale procurement.

Xiaomi sells cost-effective products made in China to consumers and customizes the products. The platform has a large number of its own-brand products, of which Xiaomi's own and ecological chain products account for more than 70%.

Business expansion: Accelerate the development of Xiaomi Youpin's offline physical stores and overseas crowdfunding platforms. Xiaomi Youpin is actively developing offline channels. There are two stages in opening offline stores: (1) opening a Youpin zone in Xiaomi Home; (2) formulating the operation mode of Youpin offline stores based on the sales feedback of the Youpin zone.

Unlike traditional e-commerce companies that are at the downstream of the value chain and focus on channels, selected e-commerce companies are at the upstream of the value chain and focus on production. Therefore, the development strategy of selected e-commerce companies such as Xiaomi Youpin is to deploy upstream manufacturers and restructure manufacturing resources. Mijia Youpin already has the Xiaomi ecological chain as its support. In the future, it will further attract innovative high-tech companies, develop excellent manufacturers, and control the quality of upstream products through innovative equity investment and technical support.

2.3 Summary

NetEase Yanxuan and Xiaomi Youpin were established at a similar time and have similar concepts. Relying on their own Internet brands NetEase and Xiaomi, and leveraging their native brand influence and traffic advantages, the companies have achieved a relatively high transaction scale and are leading companies in boutique e-commerce. NetEase Yanxuan relies on NetEase's large-traffic platform and massive users. The vast product matrix drives traffic to NetEase Yanxuan, making it the first to gain a leading position in the field of boutique e-commerce.

From the comparison analysis of business models:

(1) Different sources of goods

The main source of Xiaomi Youpin products is the Mijia cooperative enterprise chain. It is easier to gain user trust for such products, and the products are relatively more technological. However, third-party brands are also allowed to supply goods. In this regard, it is necessary to strengthen the control of third parties to avoid quality risks. NetEase Yanxuan has improved design and purchases directly from cooperating factories. The quality control is relatively stricter and the products have a stronger sense of quality.

(2) Different product categories

Xiaomi Youpin focuses on Xiaomi ecological chain products, with relatively fewer SKUs, and the products tend to be more high-tech, which is more in line with the definition of "boutique"; NetEase Yanxuan has created a distinctive Chinese style series, and the product categories cover various daily scenes, which is more down-to-earth. From the perspective of "boutique", the SKUs are relatively too many.

(3) Different warehousing

Xiaomi Youpin allows third-party brands to settle in, so the pressure on warehouse operations is relatively small. NetEase Yanxuan’s warehousing costs are relatively higher.

(4) Different logistics

Xiaomi Youpin has third-party logistics, generally using SF Express and JD.com; most of NetEase Yanxuan's products are basically shipped through JD.com and SF Express on the platform. A few products are shipped from other warehouses by other couriers. Large furniture products are shipped using professional home improvement logistics, and the logistics are relatively more secure.

(5) Different after-sales service

NetEase Yanxuan supports a longer return period, but Xiaomi Youpin provides after-sales repair services for products, and the user service experience is relatively better.

(6) Different business expansion

Xiaomi Youpin has joined hands with Indiegogo to expand its overseas market, targeting users in 235 countries and regions around the world, while Yamibuy, where NetEase Yanxuan has settled, focuses on the North American market. Relatively speaking, Xiaomi Youpin has a wider range of overseas users, and Xiaomi Youpin gathers the momentum of Chinese manufacturing to go overseas together, creating a win-win situation for the platform and merchants, which is more conducive to the long-term development of the platform.

(7) Different businesses

NetEase Yanxuan's business model is ODM, which eliminates middlemen and premiums, transfers part of the profits to consumers and manufacturers, allows manufacturers to obtain higher gross profits, and allows consumers to experience a quality life with great value for money, achieving a win-win situation for all three parties; Xiaomi Youpin adopts the Costco model, the core of which is the low-price strategy. Xiaomi sells cost-effective products made in China to consumers and customizes these products. The platform has a large number of its own-brand products and is a strong upstart.

(8) Current and future development

NetEase Yanxuan fell into a slump after the crisis, which provided latecomer Xiaomi Youpin with an opportunity to overtake. At present, the strategies of the two companies have begun to differentiate. Xiaomi still insists on building an ecological chain; while NetEase Yanxuan is no longer sticking to its original business model and has begun to transform into a brand. In the long run, I believe that the ODM business model adopted by NetEase Yanxuan has certain risks: upstream companies in the supply chain will not be satisfied with the cooperation model of providing products to boutique e-commerce and letting boutique e-commerce companies label their products.

3. User Value Analysis

In the boutique e-commerce market, the main players are: NetEase: platform, suppliers, and consumers.

The business logic diagram of NetEase Yanxuan is as follows:

If the platform wants to achieve healthy development, it must meet the needs of users and also form a good supply chain with manufacturers. Let’s explore the needs of both parties and how NetEase Yanxuan can better meet their needs.

3.1 Users

As the actual consumers of boutique e-commerce, white-collar consumers aged 25-34 are mostly concentrated in the two groups of those born after 1985 and 1990. The typical characteristics of these two groups are that they are usually busy with work and do not have much time and energy, but at the same time they have a certain consumption capacity and level. Judging from the results of the survey, consumers are struggling to choose cost-effective lifestyle products from a vast array of products, and they value high-quality life but have limited incomes. Therefore, consumers’ demands are to strictly control product quality, to ensure that the products they purchase are worth the money, without the need for middlemen to add other value-added fees, and to strive for cost-effectiveness.

(1) Start paying attention to product quality

From the public report of iResearch Consulting, we can see that the quality of service/product has an impact of up to 42.9% on consumers' decision-making. In other words, with the upgrading of national consumption, residents' consumption has also shifted from survival-oriented consumption to enjoyment-oriented consumption.

People are gradually no longer satisfied with basic living needs, and they are holding themselves to high standards in terms of food, clothing and daily necessities. They have upgraded from focusing solely on cheap prices to pursuing higher and more diverse product quality, and the importance they attach to lifestyle has increased significantly.

(2) Still pursuing high cost-effectiveness of products

With the increase in national income and consumer expenditure, and the upgrading of my country's commodity manufacturing capabilities, more and more consumers believe that "consumption for enjoyment" can also be cost-effective and can pursue rational and simple consumption concepts. Consumers hope to buy the most cost-effective products with the least money and pursue cost-effectiveness.

(3) Convenience needs

The data in the figure below shows that 66.4% of users believe that shopping on boutique e-commerce platforms takes significantly less time than shopping on comprehensive e-commerce platforms, 23.1% of users believe that shopping on boutique e-commerce platforms takes slightly less time than shopping on comprehensive e-commerce platforms, and only 10.5% of users believe that shopping on boutique e-commerce platforms takes about the same amount of time as shopping on comprehensive e-commerce platforms, with no difference.

From the attitudes of most users, we can see that in today’s information-overloaded society, consumers need boutique/brand e-commerce to help them save time so that they can quickly buy the products they want.

(4) Pursuing physical and psychological enjoyment needs

With the development of economy, people's disposable income is increasing. They are no longer satisfied with just meeting their survival needs, but are pursuing both physical and spiritual enjoyment. For example, sofas are no longer just used for sitting, but are also used to meet consumers' physical and psychological enjoyment needs. A sofa must be comfortable to sit on and lie on to meet the physiological needs of enjoyment; it must also be beautiful and have a sense of design to meet the psychological needs of enjoyment.

The demand for enjoyment gives rise to the demand for aesthetics, and the demand for aesthetics regulates the consumers' demand for enjoyment. From the figure below, we can see that the average price of designer brands is basically higher than that of trendy brands. This represents consumers’ pursuit of beauty and their desire to obtain beautiful and high-value products.

(5) Summary

From the above demand analysis, it can be seen that the target consumers value product quality, cost-effectiveness, convenience and aesthetic characteristics, and no longer blindly follow trends or pursue expensive products as before. After consumers have these demands, how will their needs be met? Before 2016, when the concept of boutique e-commerce did not exist, consumers had three ways of shopping:

3.1.1 Choose a platform with guaranteed brand quality for online shopping

The survey shows that first-tier e-commerce platforms such as Tmall, JD.com, and Vipshop are more likely to win consumers' trust with their quality thanks to the credibility of large platforms. However, according to the report released by the China Internet Network Information Center, we can see that these platforms have more or less shortcomings:

Taobao is well-known among consumers for its affordable prices and rich product categories, and 28.2% of online shoppers frequently visit Taobao. However, its product brand and quality are not recognized by the majority of consumers.

JD.com’s logistics and service advantages are highlighted: it wins by providing services, providing consumers with fast and high-quality services. Moreover, JD.com’s professional logistics and delivery services have been recognized by online shoppers, with 19.7% of online shoppers being satisfied with its logistics services. However, the platform is relatively expensive and has low acceptance among consumers.

Tmall is popular among online shoppers for its rich brands and categories, and 23.1% of online shoppers visit Tmall frequently. However, its service quality scored the lowest among the four major platforms, and its brand advantage is not as prominent as that of JD.com and Vipshop.

Vipshop leads in brand and quality. Data shows that Vipshop has obvious advantages in terms of product brand and quality, with 40.8% of online shopping consumers recognizing it, ahead of other shopping websites in the first camp. It can be seen that the characteristics of Vipshop's special sale model of "selected brands and authentic guarantees" have been deeply rooted in the hearts of the people. At the same time, its problem is that its product categories are relatively single.

Although the retail e-commerce industry was still booming at the time, there were many problems in the overall retail market environment. According to a report released by the China E-Commerce Research Center, the development of mobile e-commerce encountered five major bottlenecks and difficulties in 2016:

• Bottleneck 1: Low-price culture.
• Bottleneck 2: Vicious competition.
• Bottleneck three: Fake goods are prevalent.
• Bottleneck 4: Crisis of credibility.
• Bottleneck five: Logistics shortcomings.

In general, these e-commerce platforms can meet the basic shopping needs of consumers, but their unbalanced and insufficient development in terms of product quality, service quality, logistics, etc. cannot keep up with the people's growing needs for a better life.

3.1.2 Compare prices on major e-commerce platforms before purchasing

In order to meet the demand for cost-effectiveness, consumers will go to major comprehensive e-commerce platforms to search for related products, compare them one by one to find the lowest price, and finally buy them. However, this method also has corresponding disadvantages:

Does not meet consumers' convenience needs. Comprehensive e-commerce platforms have many SKUs, and the number is large. This method requires a lot of time and energy to purchase.

In order to meet the needs of convenience, consumers only need to go to the e-commerce platform to browse quickly and make purchases. But this approach also has corresponding disadvantages:

The uneven quality leads to the inability to meet the quality demands of consumers. Failure to properly measure product quality and blindly pursuing speed will result in product expectations being far lower than the actual product, leading to a series of problems such as returns and refunds, which in turn will not meet the demand for convenience and will result in a poor consumer experience.

Product prices vary, and quality varies, which does not meet efficiency requirements. Consumers rush to purchase products too quickly in order to satisfy their need for convenience, without weighing the relevant products carefully. This may result in the purchased products being overpriced and of poor quality. This means that other needs of consumers are not well met.

3.1.3 Purchase from private channel dealers

In this era when micro-business and purchasing agents are rampant, selling on behalf of others is also very normal. But this possibility may also cause some problems.

Product expectations are greater than actual product performance and cannot meet efficiency and enjoyment needs. Since the purchased products are purchased through private channels, this may result in consumers purchasing products that are too expensive and whose quality cannot be guaranteed. Unable to meet convenience needs. If consumers are not satisfied with a product and want to return it after purchasing it, the return and refund methods through private channels cannot be guaranteed, which will cost consumers a lot of time and lead to disputes with purchasing agents, which is a huge waste of time.

3.1.4 Purchase goods at offline shopping mall counters

Generally speaking, the quality of the goods sold in the mall is more reassuring, and you don’t need to wait for delivery, and you can personally experience the feeling of using the goods during shopping. However, this method inevitably has many problems: it does not meet the convenient needs of consumers. It takes a lot of energy and time to go to a certain brand’s official website or offline physical store, and it is impossible to save time and effort to purchase.

Miss the brand that suits you. The number of brands consumers browse is quite small, which will make consumers miss many other brands that are more in line with their needs.

Not meeting the benefits needs. Going to offline physical stores or brand official websites means that consumers need to pay more money. If you see the same product after purchasing but have a lower price, it will cause consumers to feel very bad.

It can be seen that none of these four methods can meet consumers' needs for product quality, cost-effectiveness and enjoyment.

3.2 Supply manufacturer

With the stable development of China's manufacturing, consumption expenditure has a significant driving effect on GDP. Sino-US trade has affected the export environment to a certain extent. China's manufacturing industry has entered a development stage with domestic demand consumption as the main driving force.

Since 2018, China's economic growth has entered a new normal, and trade frictions and other reasons have impacted China's exports, and domestic demand will gradually become the main force driving China's manufacturing growth.

In today's era of developed Internet and fairly mature manufacturing, many suppliers will be generated. For upstream suppliers in China, they have the following demand pain points:

(1) Low gross profit

Many suppliers have been conducting OEM for many international brands all year round, but they have the smallest profit margin in the entire chain. The Sino-US trade war spread to the consumer goods field, which has a great impact on export-oriented enterprises in the consumer goods manufacturing industry. Many manufacturers in my country have been blocked from exports and their profits have been greatly affected, so they turned their attention back to the domestic market, hoping to seek new development in the country.

(2) High inventory

Product production cycle is long and suppliers may face unsalable products, resulting in unsalable sales. In traditional supply chains, brands generally analyze future trends from half a year to one year in advance to arrange the figure and purchase of the next order. It takes a long time, about half a year, and in this cooperation process, the backlog of inventory can also be returned to the supplier in part or all according to the contract, which creates a large amount of inventory pressure and squeezes profit margins.

(3) The rise of competitors

Due to rising domestic labor costs, some international orders have been transferred to Southeast Asian countries to seek cheaper labor production bases, resulting in loss of orders and customers. For traditional manufacturers, their core is to create goods that meet consumer needs and find sellers to sell. Many manufacturers who enter major e-commerce platforms have far less store traffic than other professional sales teams due to lack of advertising and weak marketing capabilities. Therefore, many high-quality and low-priced manufacturing stores have low sales.

Similarly, many manufacturers do not have enough funds and energy to sell physical stores.

(4) Small cooperation platform

With the rise of China's manufacturing industry, China's international position is no longer just a position to produce cheap and secondary products. Many things made in China can also have high levels. China's manufacturing pays more attention to quality, originality and technological research and development.

At the same time, the domestic market is large and consumer goods manufacturing occupies an important position in China's manufacturing industry. From 2013 to 2018, China's consumer goods manufacturing industry accounted for between 20% and 25% of the total manufacturing revenue, and the profit margin of consumer goods manufacturing industry stabilized at around 7.0%.

Domestic consumers have such demands, and the current platform for manufacturers to cooperate with is too small, resulting in too dispersed orders and not large order volume, which cannot meet the manufacturers' needs for mass production.

3.3 Platform

From the above analysis, we can find that in the field of e-commerce, consumers have a growing pursuit of quality; and with the development of the manufacturing industry and the maturity of the system, the increase in external environmental pressure, fierce competition among internal existing platforms, and e-commerce platforms are facing transformation and upgrading, high-quality product manufacturers urgently need to find a way to open the door to the domestic market.

As the platform, NetEase Yanxuan discovered the needs of both parties and implemented this innovative model.

3.3.1 For consumers

(1) Reduce brand premium and improve cost-effectiveness as much as possible

NetEase Yanxuan has a very complete supplier quotation management system, where three or more suppliers quote the same product, and then select the supplier with the best cost-effectiveness.

Based on supplier quotations, a certain degree of premium is provided to provide the best service. Therefore, the products strictly selected 4/5 will be priced based on the entire product cost, reducing the premium of a large number of product brands and improving the cost-effectiveness as much as possible.

(2) Supplier management and product management to ensure product quality

Supplier: NetEase Yan selects suppliers from five aspects: access qualification, commercial reputation, production capacity, quality assurance, and service capacity. The corresponding cooperation process is qualification review and on-site inspection, confirmation of cooperation, and signing of contracts. After cooperating with partners, NetEase Yanxuan also has corresponding assessments for suppliers, ensuring high-quality suppliers from multiple dimensions, including production capacity, quality, management, and overall planning.

Product: Strict product management system to ensure product quality. NetEase Yanxuan has a regular inspection of the site, which manages the pre-, during and after delivery of a product, and will also put forward some improvement requirements for suppliers. For example: Maternal and infant products must not contain fluorescent agents, but in fact, most fluorescent agents do not come from artificial additions, but from air. Many people don’t know that there are also a lot of fluorescent agents in the air we usually come into contact with. If these fluorescent agents fall on clothes, the products will not be able to pass the strictly selected testing standards. Therefore, under the requirements of strict selection, the supplier changed their workshop to a completely dust-free operation workshop to manage it from the source.

Through the management of suppliers and product management, the quality of NetEase Yanxuan products can be improved and ensured.

(3) Meet the convenient needs of consumers from multiple dimensions

NetEase Yanxuan purchases from multiple dimensions of products to meet consumers' needs for the richness and need of items. Through various procurement methods, consumers can buy the type of products they want as much as possible at any time, and meet consumers' time-saving and convenient needs through JD Logistics and SF Express.

(4) Combining with fashion trends, meet consumers' fashion needs

NetEase Yanxuan has a special business team, whose team focuses on hot trends and big-name shows to select products that are suitable for the market and meet the fashion needs of consumers, and conduct research and development six months or one year in advance.

3.3.2 Supply manufacturer

(1) Combine online and offline sales channels to increase sales volume. It has NetEase Yanxuan e-commerce platform online; it has retail stores with retail experiences to make up for the shortcomings of online experiences. NetEase Yanxuan's online and offline sales channels can increase stable and large number of orders for suppliers.

Friendly cooperation model. In terms of inventory, NetEase Yanxuan chose to have inventory and NetEase Yanxuan assumed inventory. Such a cooperation method can help suppliers reduce risks caused by product unsalable sales. In terms of payment funds, Yanxuan will pay to the supplier within seven days or within seven days of arrival.

3.4 Summary

From the above analysis, we can find that the core of NetEase Yanxuan is to provide consumers with high-quality and cost-effective products, which explains why many users like to come to NetEase Yanxuan to buy. Changes in mass consumption habits have made online quality e-commerce occupy the market for platform-based e-commerce. As residents' consumption returns to rationality, today's consumers pay more attention to product quality and downplay brand premium.

Although traditional platform-based e-commerce has a wide range of categories, its quality levels are uneven. In contrast, quality e-commerce will strictly control the quality, have the dual endorsement of high-quality manufacturers and platforms, win the favor of consumers and gradually invade the traditional e-commerce market.

On the other hand, Yanxuan cooperates with high-quality manufacturers to strictly control the quality of all aspects of goods from production to sales to logistics, and meet the needs of consumers as much as possible.

From this point of view, NetEase Yanxuan can well meet the shopping needs of the new generation of consumers and the demands of my country's consumer product manufacturers, which explains why NetEase Yanxuan can shine in just five years and become the leader in the domestic quality e-commerce market.

4. Commercial Value Analysis

NetEase Yanxuan’s current core business is to provide high-quality products. An important indicator to determine whether a business can develop healthily is revenue. Here we draw on the GMV, the most commonly used data indicator for e-commerce, to analyze whether NetEase Yanxuan’s core business is healthy.

GMV=number of users*conversion rate*average order value. The increase in any indicator of the number of users, conversion rate, and average customer price will have a positive impact on the growth of overall revenue, so next we will focus on analyzing the means by which NetEase Yanxuan improves these three key indicators. The revenue model of Yanxuan’s core business is as follows:

4.1 Increase the number of platform users

In order to achieve continuous growth in revenue, the most basic guarantee is to continuously register new users. So how did NetEase Yanxuan attract new users?

4.1.1 Increase the number of potential users and induce users to register

Potential users refer to those who have not yet used it, have the need to purchase a certain product or service, have the ability to purchase, have the right to make purchase decisions, and have some demands for the functions provided by the product.

(1) Advertising, increase brand exposure

In the process of increasing potential users, the most important way is to place advertising and increase brand exposure. NetEase Yanxuan serves advertising from multiple angles, namely online and offline.

Offline: Offline subways, bus stops, buses, mall advertising spaces, etc. cover the target user group at all angles without blind spots, conduct advertising, and increase brand exposure.

Online: Precise advertising on online platforms that match the characteristics of the target group, such as online platforms such as Moments, Weibo, Zhihu, Douban, Toutiao, etc. As shown in the figure, NetEase Yanxuan’s APP open-screen ads on Toutiao and Zhihu.

(2) Share to get new users

In NetEase Yanxuan APP, there is an activity to receive cash by "sharing surprises" at the bottom of each product details page. This event does not require purchase, just share the product with friends, and return to NetEase Yanxuan to receive cash. Each product can be shared for the first time every day and can be participated in the lottery, with a maximum cash coupon of 100 yuan. It not only makes users happy to operate, but also increases the possibility of users registering and logging in.

(3) Declare the existence alone to attract consumers' attention

For example, after several years of withdrawal from the "Double 11" war. NetEase Yanxuan said that "Double Eleven" will not do complex discounts, will not send war reports, and will no longer hold celebration meetings for sales; however, it also promotes that "it has obtained the largest subsidy for you throughout the year." Just when people think that this Double Eleven is still boring, NetEase once again declares its existence to us with its maverickness. NetEase has withdrawn from Double Eleven, encouraging consumers to treat such a so-called shopping carnival that is constantly being promoted and overdrafted in a more rational way. Let consumers realize that NetEase Yanxuan was born not to overdraw users’ consumption needs, it is to meet people’s yearning for a better life, it is to bring people a different shopping experience, and it is to provide people with different products. This innovative approach has allowed NetEase Yanxuan to attract enough traffic and make people more interested in knowing and understanding this APP.

(4) Newcomer welfare coupon

On the NetEase Yanxuan webpage, there will be an activity of "scan the QR code to receive new APPs to reduce red envelopes immediately". New users will immediately receive discounted red envelopes when downloading NetEase Yanxuan APP, attracting potential users to download the APP and register.

(5) The reputation created under the name of "Strict Selection"

Compared with comprehensive e-commerce, NetEase Yanxuan has fewer and more refined products and more guaranteed quality, which will attract the attention of consumers who pursue quality and stimulate the possibility of downloading. At the same time, in order to create an excellent reputation, NetEase Yanxuan has spent all his efforts to improve the user experience, so that users can truly feel Yanxuan's intention.

(6) Various convenient registration/login methods

When potential users download the APP and browse, and have the intention to purchase a certain product, click to add to the shopping cart or click to buy now, the page will immediately jump to the registration/login page, and the one-click login page appears, and six other login methods.

The advantage of this one-click registration is that the platform reduces the cumbersome process of registration/login, avoiding customers losing patience due to overly complex registration process, resulting in a poor shopping experience; on the other hand, it improves the efficiency of user fragmented time utilization, reduces the factors that interrupt the registration process, and thus improves the user's order rate.

4.1.2 Increase the number of logged-in users

New users refer to users who have registered on the platform but have not yet made purchases. In order to allow this type of user to log in, NetEase Yanxuan has the following ways.

(1) Wake up SMS or emails to activate the user

SMS is a powerful tool in the vast process of e-commerce operation. NetEase Yanxuan will choose to send certain content to users based on known user information, activate users, and increase the number of logged-in users. As shown in the picture.

(2) User sign-in

The main function of the check-in function is to increase the daily active users of the platform. Through a certain degree of reward, users can insist on signing in every day. User sign-in is suitable for new and old users. The sign-in gift interface of NetEase Yanxuan platform is shown in the figure:

(3) Set up quick login

One-click login can reduce the influencing factors of users login, improve users' consumption experience, and make users feel that NetEase Yanxuan's login is fast, efficient and simple.

4.2 Improve conversion rate

4.2.1 Platform homepage

The homepage of Yanxuan APP has "Selected for You", which is a personalized recommendation based on users' usual browsing habits. When users browse products repeatedly, they can appear on the homepage in a timely manner, making necessary and sufficient preparations to increase the user's chances of placing an order.

If a new user clicks to receive the "First Order is 0 yuan to buy" on the homepage, he will immediately jump to the shopping cart. If the number of products of value is purchased, the user will be reminded to place an order and the balance of shopping can be offset. This will guide users to place orders and improve conversion rates.

4.2.2 Product List Page

The first thing that highlights is the product picture, in order to allow users to intuitively feel what the product they want is like. It should be pointed out that the background of the carefully selected product pictures uses similar and harmonious solid colors, which is pleasing to the eye when browsing.

The second outstanding price makes it easier for users to judge whether the price matches their psychological expectations.

The third highlight is promotional and event information, such as product discounts, discount information, special offer information, whether it is a new product, etc. The product features that attract users are expressed concisely and clearly through labeling.

4.2.3 Product Details Page

Users click on the product they like from the traffic of many products. This is the product details page. The product details page can give users specific information about this product and enter to guide users to purchase and consume, so this page is very important. Let’s analyze the characteristics in the product details page.

1. Show cost-effectiveness: price reduction promotion, full discount, full discount, etc.
2. Create popularity and reputation atmosphere: Use the red label of "explosive/reputation-friendly products" in the picture and the extremely high product praise rate to retain users to view product details. It also builds user trust through user comments and creates a popularity atmosphere.
3. Reason statement for recommendation: Use concise and brief sentences to state the advantages of the product, help users understand the product design characteristics, functions, etc. at the first time, help users to develop a favorable impression of the product, and help users make quick decisions and place orders.
4. Create scarcity of products: Tell users that the product is scarce and must make quick decisions within a limited time.
5. Establish consumer security: Create a user's sense of security through NetEase Yanxuan platform recommendation and after-sales guarantee, so that they have no worries.
6. Shaping the sense of consumption scene: Through product details and pictures, users can imagine the scene of using products in real life environment. High-quality pictures make users subconsciously feel that this is the product I want, and thus place an order.

4.2.4 Shopping cart page

After adding to the shopping cart, we continue to analyze how NetEase Yanxuan can successfully purchase this last step.

1. Given the price discount information, users can see the original price and also see the hand-in price, creating an atmosphere where buying is profitable.
2. Limited time trailer lets users know that after this time, they will not be able to buy their favorite products at the current low price.

4.3 Increase Average Order Value

4.3.1 Event Promotion

In the product details page and shopping cart page, NetEase Yanxuan attracts users to buy more products through tips for promotional activities such as full discounts and value-for-money purchases.

4.3.2 Free shipping for full amount

In the product details page and shopping cart page, NetEase Yanxuan will prompt customers to have free shipping for more than 99; and in the shopping cart, it will prompt users to have free shipping for free, prompting consumers to purchase more products for free shipping for free shipping.

4.3.3 Related recommendations

On the product details page and shopping cart page, products that users may be interested in are recommended through big data, and two related recommendations (complementary products) were made at the top and end of the product details page. Through repeated recommendations, consumers can buy more products.

4.3.4 Multiple coupon information

Display coupon information and increase the order amount after receiving it to meet the discount conditions.

From the above analysis, we can find that in order to optimize its revenue model, NetEase Yanxuan has done a lot of work to continuously attract new users and improve conversions.

5. Product Iteration Analysis

Note: The product version data comes from the Qimai Data website; the product download data comes from the Kuchuan website.

In order to deeply analyze the version iteration rhythm of NetEase Yanxuan and explore the product iteration logic, the author iterated the iteration of all core versions of NetEase Yanxuan from V1.0.1 to V6.9.7 as follows:

According to the curve distribution of the cumulative download volume of NetEase Yanxuan on Kuchuan, it can be seen that there are three parts with obvious changes in the download volume. At the same time, considering the direction of product function iteration, the author divides NetEase Yanxuan into three stages for analysis:

Phase 1: Start-up

Purpose: Verify user needs, improve basic functions, and polish user experience

This stage is the cold start stage when NetEase Yanxuan has just launched. It can be seen that Yanxuan is in an exploration period, mainly focusing on basic functions, such as coupon use, new WeChat payment, online customer service, return, support for WeChat and Weibo one-click login, etc. With the increase of users, in order to enable users to log in faster, new fast login methods have been added, such as supporting login for commonly used social software such as WeChat and Weibo.

At the same time, we focus on social sharing, focusing on attracting new products, polishing user experience, and allowing products to obtain user support in a short period of time, such as inviting friends to receive coupons, exclusive access to newcomers, etc.

As a brand under NetEase, NetEase Yanxuan has a large fan base. He has gained the first batch of seed users by sending emails to users, and optimized the product experience through trials from small batch users. The reason why the number of users in this stage did not increase on a large scale is mainly because NetEase Yanxuan did not use operational means on a large scale to increase the number of users, but instead focused on verifying user needs.

The second stage: the rapid growth stage

Purpose: Carry out operational activities, continue to attract new products, and improve user retention and conversion rate

From September 2016 to December 2018, the V2.0-V4.2 version is the rapid growth stage of NetEase Yanxuan app. The main goal of this stage is to attract new and transform through various operational activities. The main operation is to update various discount activities during major e-commerce festivals. For example: anniversary celebration, 618 promotion, Double Eleven/Double Twelve promotion and other activities.

At the same time, we can also see that the exclusive gift for newcomers has become more luxurious, and the first order is reduced by 8 yuan to a gift package that can be received by 1,000 yuan. In addition, the platform's membership system has been gradually improved, and the updated activities also include activities to attract consumers to purchase membership cards. These activities have indeed brought a large number of new users to the platform, and have also improved user conversion rates and achieved good results.

In terms of optimizing and enriching product functions, in addition to continuously optimizing basic functions, NetEase Yanxuan has set up a membership system to give member users more discounts in order to retain more loyal users and more refined operations. In order to increase the order rate, conversion rate or repurchase rate, the guess you like module is set up. Once you guess like it, the user may continue to browse. The longer the browsing time, the order may be completed in this process. In order to avoid pop-ups being too monotonous and for a good user experience, personalized pop-ups have been added. If some promotional products and merchants want to clear inventory, they will set up some flash sale activities to reduce prices and give users preferential treatment to achieve mutual wins. In order to avoid or reduce the user's inability to buy fit clothes on the platform, a new module of Size Assistant has been added to further enrich the functions of the product, meet user needs, and improve users' shopping experience

It should also be noted that NetEase Yanxuan not only continues to improve basic functions and improve user experience, allowing everyone to enjoy better and more accurate services, but also enhance Yanxuan's reputation.

Compared with the startup stage, this stage began to continuously utilize operational tools, and achieved great results in promoting brands, order conversion, user activity, and obtaining traffic, such as creating hot products, cross-border cooperation with different brands, charity activities, etc.

The third stage: the development stage of relatively stable increase in the number of users

Continuously optimize basic functions to improve retention and purchase conversion rate

From January 2019 to the present, the V4.3-V6.9 version is the stage of continuous and stable development of NetEase Yanxuan app. The main goal of this stage is to continue to attract new products through various operational activities, while allowing old users to enjoy better services and give better reputation for the products.

The main operation is to add new festival activities and optimize product functions. For example: Compared with previous years, in 2019, there were new festival activities such as the exclusive Chinese Valentine's Day and New Year's Festival. Each time a new active version appears, the download volume will experience a steeper climb.

In addition to the activities, NetEase Yanxuan is also continuing to optimize product functions. For example, in the V6.3 version update, the alley selection function has been added, allowing users to have a community to share and experience a colorful life.

Home page design allows users to be more immersive and stay longer, increasing the possibility of increasing conversion rates. A new featured module is added, the Cat Cat module launched at the end of 2021, allowing users to do tasks to complete charity, and the design of activities to raise winter rations for stray cats is both heartwarming and can increase user experience interest.

Summarize:

Through the iterative analysis of the above version, we can see that NetEase Yanxuan verifies user needs in the first stage, improves basic functions, and polishes user experience; in the second stage, it builds operation activities, continues to attract new products, and optimizes product functions at the same time; in the third stage, it increases the intensity of operation activities, continues to optimize functions, and improves user experience.

Overall, NetEase Yanxuan's launch stage is relatively short, which is related to the fact that the NetEase platform can provide a considerable amount of traffic entrances. When the product positioning is verified and approved by consumers, it can immediately enter a new stage of recruitment. NetEase Yanxuan has been rising since 2017. Although the speed has declined, it can be considered that it is still in its mature stage and has great development potential.

6. Product structure analysis

In the iterative analysis, we analyzed the iteration steps of NetEase Yanxuan's product functions. Next, let's take a look at what users' needs meet and how they are distributed throughout the app. This is mainly analyzed through product structure. The following figure is the product structure brain diagram of NetEase Yanxuan V6.9.7:

For the sake of analysis, the author will get the following table by re-examining the product structure of NetEase Yanxuan according to users, scenarios, needs and functions:

When using Jingyi users, there are three scenarios, namely, before purchase, during purchase and after purchase, the goods themselves that consumers are mainly concerned about before purchase, such as the appearance, performance, size, price, etc. of the goods; when purchasing, they mainly care about payment methods and addresses; after purchase, they mainly care about logistics and after-sales service.

In this application scenario, based on the clarity of the target and the classification of product types, users before consumption can be divided into three types

(1) Clearly identify the consumers who purchase a certain product: The consumers of this type have clear goals and know what kind of products they want to buy. They will search on the platform, then view the product details, and finally add them to the shopping cart.

According to the needs of this type of user and the contact page during the use path, NetEase Yanxuan provides keyword search modules, category navigation and other modules on the homepage; provides detailed scene selection modules, sorting modules, etc. on the product list page; as well as collection modules, recent browsing modules, etc.

(2) Clearly identify users who purchase a certain type of product: Although the user goals of this type are clear, the degree of clarity is not as clear as that of the first type of consumer who purchase a certain type of product will continue to browse the product and view the product details, and conduct round-trip operations. This type of consumers will hope to further refine the scenarios of using the products and refine the products one step closer.

According to the needs of this type of user and the contact pages in the use path, web page selection is used to help consumers choose products and personalize recommendations to users through the classification module. The classification module divides products into thirteen types, and each subcategory has a special recommendation module and two types of product to meet consumers' needs for product enrichment and further segmentation of product types.

When users enter the use of secondary categories of products, NetEase Yanxuan also adds product operation scenario options to meet the needs of consumers who want to further refine them.

(3) Users with unclear goals: Users with unclear goals refer to consumers who do not have fixed goals, but the characteristic of this type of consumers is that they do not have enough understanding of the brand and may have different purchasing factors, such as price-driven, product quality-driven, cost-effective-driven, product appearance-driven, etc.

For users with unclear goals, when they browse the NetEase Yanxuan platform, they may think about this question: how good the items on this platform are, whether they are trustworthy, in order to meet the needs of this type of users, NetEase Yanxuan has designed modules such as brand introduction, lane selection, and recommendation. The details are as follows:

1. Brand introduction, the platform introduction at the top of the homepage facilitates users to understand NetEase Yanxuan’s brand concepts, values, positioning, user rights and other information to establish consumers’ awareness of the platform and establish trust with consumers.
2. Choose the alley, worth buying is the first-level module of this APP. You may like to use cats and dogs, three meals and four seasons, an ideal home, and explore daily life to meet consumers' diverse consumer scenario elements.
3. You may like modules. There are recommendation modules at the end of the home page, product details page, etc., and use the recommendation module to recommend users to meet the needs of purchasing without different factors.

Scene 2: Online shopping

In this scenario, what consumers need to do is to select the product specifications/quantity, fill in/select address, collect/select coupons, choose payment methods, whether to issue invoices, etc.

If consumers only need to purchase a certain item, they can place an order directly. This requirement corresponds to the Buy Now - Fill in the Order Module.

If consumers need to purchase multiple products at the same time, users need to first enter the shopping cart page, select the products to be purchased and their attributes, whether to assemble the order, receive the coupon, and then check the relevant products. In order to meet these needs, this product provides coupon module, shopping cart editing/sharing module, order-making module, purchase replacement module, settlement module, and buying module after reading it, and guess you like the module.

In addition to receiving coupons, the coupon module also has a recommended function. This function facilitates users to choose appropriate coupons, helps users make decisions, and improves ordering efficiency. The functions of the settlement module include selecting payment methods, filling in/selecting addresses, collecting/selecting coupons, and issuing invoices.

In addition, the platform also provides the function of sharing shopping carts, and those who receive the link can add products to the shopping cart and place an order with one click.

Scene 3: After online shopping

After the user places an order, he enters the scene after online shopping. At this time, the main needs of users include payment, canceling orders, viewing product logistics information, confirming receipts, evaluating products, contacting customer service, returning and exchanges and other after-sales services.

In response to the user needs of this scenario, NetEase Yanxuan has designed a payment mode, a delivery mode, a return/after-sales module, a review module, and a post-order module. You may like the module.

When the user places an order and pays, he/she shares the items he/she purchases with his/her friends and gets a coupon of 100 yuan. On the one hand, this function can attract new users to the platform and increase the number of tourists. On the other hand, it can increase the conversion rate and platform usage rate of old users through coupon incentives.

Summarize:

In summary, the functional design of NetEase Yanxuan platform is very concise and clear, without too many platform-type functional areas, mainly channel recommendation functions, and is used to recommend products from the platform from multiple angles.

In addition to the basic functions that e-commerce products have, NetEase Yanxuan pays great attention to personalized recommendations for users: from the personalized recommendation area of ​​the homepage, product recommendations on the category page, to the entire worth buying page, product recommendations before and after shopping, etc., all of which can meet the needs of users in the three major scenarios before, mid and after online shopping.

7. Operational Path Analysis

The saying "Products are responsible for giving birth, and operations are responsible for raising them" also indirectly reflects the close relationship between products and operations. So how did NetEase Yanxuan operate this product so that it can grow rapidly in a short period of time? The author has sorted out the main operational activities since its establishment since NetEase Yanxuan, according to the AARRR model.

7.1 Attracting new customers (A)

In order to attract new products, NetEase Yanxuan mainly uses the following methods.

Method 1: Celebrity Promotion

Yanxuan joined forces with the promotional activities of star young people Hu Xia, Xu Weizhou, Bao Wenjing, Zheng Kai, Lan Yingying, Jia Nailiang, etc., such as NetEase Yanxuan 11.11 Careful Life Festival.

Method 2: Cross-border cooperation

2016.06 NetEase Yanxuan worked with Jiangsu Satellite TV's "Star Chef Arrives" to provide NetEase Yanxuan's kitchen utensils: Japanese relief bone porcelain flat plates, Japanese glass storage tanks.

2016.08 Yanxuan and Lecheng jointly held a special event for mother and child parent-child activities, Xinjiang colored cotton series, grass and wood dye series and other home products.

2017.02 Joint Onmyoji NetEase Yanxuan Camouflage Flip-up Casual Shoes.

2017.05.25 NetEase Yanxuan and Jiangsu Satellite TV's "Let's Love" jointly created a love-themed series "Black Pineapple", which was exposed through Jiangsu Satellite TV's emotional variety show "Let's Love" to build a warm and sweet love scene for the target group, and firmly absorbed core consumer groups such as young white-collar workers and urban women.

2017.06 NetEase Yanxuan cooperated with Uber Beijing, ofo Xiaohuangche, Meipai, Sangcha, Owhat and others to create mysterious exclusive lucky bags. Each lucky bag will have 4 different products related to each brand.

2019.5.21 NetEase Yanxuan X MarryU jointly launched 521 Lovers’ Day.

2020.03 NetEase Yanxuan and Shanghai Art Film Studio jointly launched the Hulu Brothers series of makeup, launching exclusive products based on the characteristics of each Hulu baby.

Method 3: Helping public welfare

2018.12.27 The Hangzhou Women's Federation and NetEase Yanxuan launched the "Exchange Beautiful" charity donation activity to bring the warmth of winter to Qiandongnan Prefecture.

2019.10 On the occasion of the 2019 National Poverty Alleviation Day, NetEase Company and China Youth Daily and China Youth Online jointly produced by NetEase Yanxuan, the youth public welfare poverty alleviation documentary program "The Walker in the Countryside" supported by NetEase Yanxuan, was launched.

2020.02.28 NetEase Yanxuan launched the "Spring" original support plan, reached a cooperation with One-way Street Bookstore, and One-way Street joined the Yanxuan "Spring" original support plan.

2020.03 NetEase Yanxuan Sakura Series Charity Activities will help the return of a better life and will donate part of the sales to prevent and control the new coronavirus pneumonia.

2020.03 In order to help tea farmers overcome the difficulties of the epidemic, Yanxuan paid 5 million in advance to ensure that tea pickers returned to Hangzhou in time! At the same time, Yanxuan also launched the "Spring Plan" to carry out crowdfunding for West Lake Longjing and carried out online live broadcasts, hoping to solve Longjing's offline sales problems.

Method 4: Short video promotion

NetEase Yanxuan has produced many series of short videos, including:

#Yanxuan Laboratory#: Introduces various products from NetEase Yanxuan, such as three-in-one multi-function gravity sensing pen, fresh camellia jelly shoes, tents, NetEase Yanxuan Bozi soda, fresh jelly, big-headed fans, all-aluminum-magnesium alloy boarding case, and red wine glasses that should not be broken.

#正克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克克�

#NetEase Yanxuan Selector Factory Inspection#: Record the process of Yanxuan Selectors inspecting the factory, such as going to Shaoxing to learn about the ancient inheritance of Yanxuan special rice wine, and taste different types of rice wine; go to Pinghu, Jiaxing to learn about the entire production process of Yanxuan lightweight down jackets, and fill them with them by hand to make exclusive down vests; record the entire production process of Yanxuan hot-selling electric toothbrushes; invite children to inspect Yanxuan xylitol hand and mouth wipes factory, etc.

#正国国#: 2020.04 The project of Yanxuan China's cultural traceability has been launched, and the 1st episode of the "正国国国" series of micro documentaries "Hangzhou, this place is a little spiritual" is launched.

Method 5: Heart-wrenching copywriting and packaging

2018.01 Yanxuan and 10 children jointly developed a "Yanxuan Xiang" composed of scents such as rainbows, sand, etc., and stuffed this fragrance into 20,000 Yanxuan Express boxes as a surprise to users on the 2nd anniversary of its launch.

2020.4.10 為了讓武漢感受到來自各地的祝福，網易郵箱聯合網易嚴選上線“櫻花美好郵局”，由網易郵箱收集廣大網民的祝福寄語，通過網易嚴選的快遞盒寄送到武漢居民手上，為各地人民開通投遞愛和希望的專屬通道。

2020.5.11 芝麻GO 聯合網易嚴選的線下活動母親節寄明信片。

方式六：直播帶貨

網易嚴選的直播活動算是做得比較早，從產品上線之后就開始進行直播活動，到2020 年開始大規模直播活動。 like:

2016.09 直播全球領先的檢驗、鑒定、測試和認證機構SGS 對嚴選蠶絲被的檢測過程；

2017.03 直播丁磊對話吳曉波，告訴大家一塊干凈、美味、低成本的豬肉是如何生產出來的；

2020.03 嚴選上線“春天計劃”，杭州梅家塢村茶農舉行線上直播，讓更多人能關注茶農，關注西湖龍井，幫助茶農渡過疫情難關，希望能解決龍井線下銷售難題，拓寬線上銷路。 ;

2020.04 嚴選與羅永浩合作，通過羅永浩直播帶貨，嚴選人體工學椅賣出近500w 銷售額；

2020.05.26，網易嚴選發布“星馳計劃”，計劃面向抖音、快手、微博、淘寶等全網招募1000 名優質紅人主播、100 家MCN 機構，共創10 個千萬級爆品。

方式七：舉辦粉絲會

網易嚴選邀請平臺的粉絲舉辦線下粉絲會，以此增加用戶粘性和歸屬感。如：2016.10 合肥粉絲會；2017.05 南京；

7.2 激發活躍(A)

當用戶下載并注冊了app之后，需要激活用戶來打開app，從而提升app的日活和月活，網易嚴選為了提升用戶活躍的方法主要是通過push消息的形式：

新人專享50元紅包；

新人首單零元購，首單全額返，最高可100%返還；

新人專享特價；

嚴選貓咖；

7.3 提高留存(R)

促進用戶活躍之后，還需要提升用戶的留存率，才能持續不斷的為平臺創在價值，為了提升用戶的留存率，網易嚴選主要做了以下幾件事：

簽到免費領取好禮，積分兌好物，積分兌權益，積分兌紅包，積分抽獎；

口紅機；

嚴選貓咖；

7.4 分享傳播(R)

為了引導用戶自發傳播，網易嚴選主要做了如下幾件事：

助力公益，打造良好的企業形象：如2018.12.27 杭州市婦聯聯合網易嚴選啟動“用美好交換美好”公益捐贈活動，為黔東南州送去冬日的溫暖；

邀請有禮：每邀一位新用戶下單可得50元禮品卡作抵現使用，好友可獲得首單全額返資格（新用戶首單100%返現）；

7.5 提升收入（R）

主要從提高提升平臺用戶數，提升轉化率和提升客單價三方面著手，在商業價值分析我們已經有詳細描述，這里不再重復。

以上，筆者從行業、競品、用戶價值、商業價值、產品迭代、產品結構、運營等7個部分系統的分析了網易嚴選崛起背后的原因，可以看出沒有一款產品能夠隨隨便便成功，一定是“天時地利人和”等內外部原因的綜合作用。

8. Future Prospects/Optimization Suggestions

通過對品質電商行業以及網易嚴選的整體分析，我們可以得出以下幾個結論：

8.1 PEST分析

國家政策、國民經濟、社會文化、技術等因素的共同因素，造就了品質電商行業的發展，并且在未來幾年將持續保持一定的增長率。

8.2 競品分析

在這個行業中，網易嚴選和小米有品2019年GMV均破百億，用戶規模較大，屬于第一梯隊；淘寶心選、京東京造，雖然起步較晚，但其背后有品牌背景，未來有一定的發展潛力，屬于第二梯隊；其他公司如兔頭媽媽甄選、蘇寧極物、必要商城等市場占有率較低，屬于第三梯隊。

8.3 用戶價值分析

在品質電商行業中，主要有三個參與方：制造商、消費者、平臺，平臺想要實現提升市場占有率，仍然需要嚴格挑選制造商，生產出高性價比、高顏值、品質有保障的產品，這樣才能持續產生用戶價值。

8.4 商業價值分析

網易嚴選當前的核心業務是品牌自營。要想維持營收的正向增長，首先，網易嚴選必須嚴格挑選制造商，保證優質、性價比高的產品；同時，要通過優質的平臺服務體驗以及運營推廣活動，吸引更多的用戶到平臺上來，并且愿意長期在平臺購買產品。

其次，網易嚴選要根據消費者的需求不斷優化改進，讓他們享受到優質的購物體驗，從而更愿意留在平臺進行復購，一方面可以提高轉化率，另一方面也提升了客單價。

8.5 產品迭代分析

整體來看，網易嚴選從成立至今的發展共分為三個階段，并且節奏感把握的特別好。先重點打磨產品，提升用戶體驗，不著急做大力度的運營活動；當用戶體驗趨于穩定之后進入成長期，才開始大力度的運營活動，不斷的獲取新用戶，同時不斷優化基礎功能以及搭建運營工具提升用戶體驗；當用戶數達到一定規模之后進入穩定增長期，為了持續提升用戶數，一方面不斷優化用戶體驗防止用戶流失，另一方面保持運營步伐、拓展新的業務。

8.6 產品結構分析

網易嚴選移動端的目標用戶是消費者，所以所有功能設計都是圍繞滿足消費者購物前、購物中、購物后三個場景不同的需求進行。通過對網易嚴選功能的梳理，其實可以發現消費者絕大多數的需求，都能很好的滿足，好的用戶體驗才是一個產品的生命力。

8.7 SWOT分析

下面使用SWOT模型對網易嚴選的未來發展進行簡單分析：

1、持續完善以品質為口碑的“嚴選”，當前網易嚴選是因其品質口碑炸裂所為人稱道，所以對網易嚴選來說，需要繼續發揮其品質的優勢，只要品牌不翻車，用戶就會在心中樹立網易嚴選是真正為用戶甄選天下精品的心態，當用戶想要購買高品質產品時，自然而然能夠第一時間想起網易嚴選。

2、持續完善售后體系，為用戶打造良好的購物體驗。目前有用戶反饋網易嚴選的售后體系有缺陷，進而會質疑網易嚴選這個品牌。售后也是購買鏈上重要一環，完整到位的售后能夠為網易嚴選加分不少。目前反饋的主要售后的問題用戶換貨退貨的方面，為此筆者建議網易嚴選建立專門的售后客服體系，設置關于退換貨的相關規章制度，針對用戶提出的退換貨問題予以專人的對接和反饋，讓用戶能夠感受到網易嚴選的高效、順利和真心實意的誠意去解決問題，而不是去推卸責任。

3、網易嚴選在面對消費下沉這個機遇與挑戰的時候，如果想要進軍下沉市場，從中分一杯羹，最好的選擇時開辟一條嶄新的業務線，但是當前其他電商平臺具有搶占了先鋒的優勢，網易嚴選想要脫穎而出，就得與之不同：在面對受眾群體變得廣大時，也能保住品質這一關卡，才能讓網易嚴選重新殺出一條血路。

作者：耕者子棋

來源：耕者子棋