Analysis of the e-commerce operation growth formula!

Compared with previous years, this year's Double Eleven seems a bit cold. The popularity of Double Eleven is getting lower and lower every year. To be frank, it is still a growth problem.

When the market enters the stock stage, the cost of acquiring customers for e-commerce increases. Even giants need to pay a lot of costs to acquire new users, and small and medium-sized businesses face even greater costs.

If we look at it from the perspective of people, goods and places, the peak of traffic is actually the stagnation of "people", so we may need to do in-depth research around "goods". Supply chain digitalization has been put on the e-commerce agenda.

1. “New factors, new tracks, and new platforms” to break through the bottleneck of e-commerce growth

In fact, the underlying logic of the e-commerce track is undergoing a change. If the previous growth was based on traffic, it is now gradually transforming into growth based on supply efficiency.

In the past, the carrying capacity of traffic determined the growth value of e-commerce. Many merchants and even platforms were chasing traffic, hoping to take off by riding the momentum of traffic. Nowadays, traffic is becoming like "quicksand", and businesses are trying to find a foothold in the "quicksand".

At this time, the effective support of the supply chain becomes the key factor in determining how much growth space e-commerce has. E-commerce is not just about providing products to consumers through websites. More importantly, it is about grasping the length and depth of the supply chain. The maturity of supply chain capabilities has become a structural competitive advantage that determines the merchants' cost structure and delivery capabilities.

There is a "tidal effect" in the e-commerce supply chain.

On the one hand, with the continuous increase in the number of SKUs, the inventory costs brought about by the bullwhip effect have lowered the efficiency of the supply side, leading to increased supply costs, making it difficult for the e-commerce supply chain to effectively coordinate and optimize.

On the other hand, during e-commerce festivals such as Double Eleven and 618, merchants need to stock up frantically, but after the festivals, the market becomes unusually deserted. This brings difficult supply curve fluctuations and inventory pressure to the e-commerce supply chain, which ultimately makes it difficult for front-end data to quickly respond to the supply chain, leading to problems such as slow supply chain distribution, low efficiency, and high inventory.

To sum up in one sentence, the efficiency of traffic acquisition and conversion is increasing, but the efficiency on the supply side is decreasing. This is the problem that the industry urgently needs to solve.

In the past, in the e-commerce landscape dominated by giants, whether a company could grow to a certain scale depended on: new traffic x new population x new model, which is essentially the underlying logic of traffic e-commerce. For example, Pinduoduo found space for new traffic on WeChat, while targeting new users in the sinking market. Coupled with the new model of social group buying, it was finally able to gain a foothold in the crowded e-commerce field.

Today, the efficiency of the traffic model has hit the industry ceiling, and the industry is gradually returning to a more essential retail logic, with the supply side becoming more important. The key to breaking through the growth bottleneck has become: new elements x new track x new platform.

New elements: algorithms and data on the supply side. In today's digital age, we have accumulated a large amount of data in the past. Empowered by digital tools based on intelligent algorithms and big data, we can effectively solve SKU management problems after cleaning and organizing e-commerce supply chain data. Through supply chain integration, we can analyze the essence of customer needs, market and commodities, improve the efficiency of goods-to-store distribution, and ensure efficient and accurate delivery.

New track: The supply chain digitalization track is hot. Whether it is digital construction or the reshaping of business formats such as e-commerce and new retail, the supply chain has become increasingly important to the operational efficiency of merchants and the key links related to the core competitiveness of enterprises. The digital innovation and transformation of the supply chain has become an internal driving force of the enterprise. At the same time, the supply chain track began to attract the attention of capital. The integration of intelligent algorithms, big data and e-commerce supply chain gave birth to a new supply chain digitalization track.

New platform: A platform model that focuses on e-commerce supply chain efficiency. In the future, a number of platforms that solve supply chain efficiency problems will emerge, empowering small and medium-sized businesses, reducing supply costs, and stimulating new growth.

As this is a new trend, there are not many players who have entered this field and are available for learning. Jiqi is one of them.

In the past, the e-commerce industry focused on growth on the demand side and ignored growth on the supply side.

From online celebrities promoting products to the whole nation promoting products, from trusting the anchor to trusting the product, what’s behind it is actually the supply chain. Live streaming sales that only make a loss but gain publicity will not last long, because the goods you sell are not supported by an excellent supply chain and cannot provide sufficient value to consumers.

Why can live streaming sales make products popular? What is being tested behind the scenes is actually the competitiveness of the e-commerce supply chain. In addition to the top anchors, many mid- and tail-level anchors are directly connected to manufacturers, and frequently encounter difficulties in inventory, logistics, after-sales and other aspects. It is easy for a series of problems to arise, such as insufficient stock of goods, a surge in orders and merchants being unable to ship goods within the specified time limit.

In fact, no matter what kind of goods, we must try to improve the efficiency of the entire supply chain and establish a more flexible and agile supply system. This is also the core purpose of supply chain digitalization.

Merchants are also increasingly looking to digital supply chains to improve "upstream" efficiency, specifically by reducing operating costs, improving sales efficiency, creating new business expansion opportunities, and enhancing strategic advantages. For the e-commerce industry, this may mean digitalization of the entire chain from demand to supply, and further tapping into new growth dividends.

2. Deepen the scale effect and achieve secondary growth under the supply chain model innovation

The development of anything does not happen overnight. From the perspective of the development law of e-commerce supply chain, the growth of digitalization of supply chain can be roughly divided into two stages:

One is “front-end digital growth”. That is, use digital means to manage the operation of private domain traffic, and feed back data to the supply chain, so as to optimize the allocation of e-commerce supply chain resources, such as inventory and SKU quantity.

At this time, the supply chain began to gain value from the ever-growing front-end user data, trying to help merchants build an agile, efficient, and collaborative digital supply chain, and realize intelligent decision-making and data-driven supply chains. But whether it is e-commerce distribution, live streaming, or social sales, channel establishment is time-consuming and labor-intensive, progress is slow and unstable, and it is difficult to form a coordinated operation of a digital supply chain.

The second stage is "back-end digital growth". That is, the supply chain digital platform enables "secondary growth" through model innovation.

How to achieve “secondary growth” in the industry? Answer: Scalable growth empowerment.

An important trend in the development of SaaS companies is to gradually evolve into growth service providers. This means that the digital platform will empower merchants at a more refined level and form a set of replicable digital empowerment growth templates.

Finer granularity means that merchants are empowered at a deeper level, which can maximize the competitive advantages brought by the supply chain.

Replicability means that such empowerment can be scaled. On the one hand, the platform GMV grows faster. On the other hand, scale also makes the supply chain empowerment business profitable. As the scale grows, it can continue to empower the entire industry.

Taking Jiqi as an example, we have extracted the Qiwu success formula of intelligent algorithm X service, empowering small and medium-sized merchants from multiple dimensions of data, operation, and growth, and providing merchants with a series of "Qiwuji" empowerment services from product planning and development, product selection, shelf listing, warehousing and distribution to after-sales. The key is that this formula is scalable, replicable and easy to achieve.

The digitalization of the e-commerce supply chain has the ability to drive business scale growth and is a type of digitalization that can unleash vigorous vitality. Among them, the intelligent algorithm directly targets the pain points of merchants in terms of product recommendations, store-goods matching, hot product analysis, sales forecasting, price optimization, etc. Combined with Jiqi's services, it can help the industry build a large-scale, networked supply chain distribution mechanism with algorithms as the core.

The advantage of this model is that with growth empowerment as the touchpoint, the effect of platform empowerment is more intuitive. Under the mechanism of algorithm matching store goods, the operating pressure on merchants is lower, which helps the platform itself to grow in scale.

In addition, this model can also be quickly replicated across multiple categories, multiple merchants, and multiple platforms, further promoting the growth of the e-commerce industry. It is reported that Jiqi's "Qiwu" service model has completed the first phase of concept verification, can maintain a stable number of orders and operating gross profit margin, and has established a complete operating team structure. We are now conducting the second phase of MVP verification on multiple platforms and for multiple types of users. By March 2021, we will enter the third phase of rapid model replication and business expansion.

To sum up, this model can essentially be summarized as " tool product - service ecosystem - growth empowerment" , which is equivalent to the three-stage rocket of the supply chain digital platform.

Tool products are scalable product bases that can gather a large user pool of small and medium-sized businesses and achieve rapid growth in the early stages. On the basis of making good tool products, they also build the superstructure of the service ecosystem to help further optimize the e-commerce supply chain. Finally, they complete the integration of tool products and the service ecosystem, build a complete e-commerce supply chain closed loop, and optimize the efficiency of the supply chain.

In fact, in the entire e-commerce SaaS field, this model has been verified. All players in the track need to do is to adjust and adapt to deeply integrate this model with the supply chain track. This is also conducive to the development of the entire e-commerce ecosystem. However, at present, in the field of e-commerce supply chain digitalization, it seems that only Jiqi is making such an attempt.

This is understandable. The unknown brings fear and challenges. After all, this is an unknown area. Without understanding, no one can be sure whether they can make it to the end. As for Jiqi, on the one hand, it is a professional match, and the founder has accumulated experience in data intelligence empowerment industry. On the other hand, it can be attributed to the passion for serial entrepreneurship. Jiqi's team is a serial entrepreneurial team. Zhao Hong not only founded Jiqi, but is also the founder of Jiangshang Technology.

Zhang Xiaolong once said, "When a platform only pursues the maximization of its own commercial interests, I think it is short-sighted and unsustainable. When a platform can benefit people, it is viable."

E-commerce is a trillion-dollar track, and some of its sub-sectors may also produce players worth tens of billions of dollars. The supply chain digitalization track is no exception. It is worth looking forward to what kind of industry leading players will emerge in the future.

Author: Liu Zhigang,

Source: Internet Jianghu (ID: VIPIT1)