Detailed explanation of WeChat business agent model | 3 core agent models revealed

I have to say that’s a great question and one I’m looking forward to answering.

I started to get involved in micro-business in 2016, and officially started my own business in 2018, working on my own social e-commerce project. I have been in charge of it for 3 years, personally managed 5 projects, helped friends plan and advise on more than a dozen projects, and conducted in-depth research on hundreds of well-known social e-commerce projects.

Many newcomers who want to enter the industry or have just entered the industry are confused about the specific agency models of WeChat business and social e-commerce. Social e-commerce has become the mainstream model, and WeChat business thinking has become the industry thinking. This year, more and more brands have joined the social e-commerce camp, including Mengniu, Yili, Wahaha, Alibaba, JD.com, Pinduoduo, Xiaomi, Vipshop, and all the well-known brands you can name have already been working in the field of social retail.

But most people still don’t understand social e-commerce - when they talk about WeChat business, they feel it’s all about stockpiling goods, and when they talk about social e-commerce, it seems like it’s all about commission rebates.

Today I will share with you the three most core agency models (also called agency systems) of WeChat business and social e-commerce. To make it easier for everyone to understand, I will use representative platforms to illustrate cases for each model.

The agency system is the soul of the entire WeChat business and the structure of the community organization.

It’s just like the steel structure of a building - the type of agency system determines what kind of community organization you will grow.

A good agency system follows two principles: first come, first served, and more work for those who are more capable.

Therefore, a good project will allow the next level to surpass the previous level if the conditions are met.

The kind of people who make money without doing anything and the lower level always contributes to the upper level are called "traditional **".

Now let me focus on explaining what the agency system is and how it is formulated.

All agency systems are designed based on the products. Different products have different systems and cannot be copied completely.

We must first determine which agency system to adopt, and then determine the five core elements of the agency system:

• Agent levels and promotion methods;
• Agency pricing system and rights;
• The profit-sharing model of the agent;
• Agent assessment and management mechanism;
• Agent exit mechanism;

From the birth of WeChat business in 2013 to the present, in addition to the maturity of the WeChat business industry, the WeChat business agency model has also been continuously optimized, from WeChat business to social e-commerce, and it has become more and more compliant.

Although there are endless WeChat business brands and projects, there are only three core agency models.

• Hierarchical micro-business wholesale model;
• Platform WeChat business rebate model;
• A hybrid model of hierarchical micro-business + platform micro-business.

01 Hierarchical micro-business system

Traditional channel agency + Internet = hierarchical agency micro-business, 2013 to present.

The hierarchical micro-business agency system is relatively easy to understand. It is a hierarchical wholesale model, which is exactly the same as the traditional channel agency model. A simpler understanding is the traditional channel agency model + the Internet, which becomes a hierarchical agency micro-business.

Representative companies include new retail projects of Sibu, Mo Neng, Mengniu, Yili, Guangming, Wahaha, and Wanglaoji, as well as numerous brand micro-business projects.

You can become an agent only if you meet the one-time purchase requirements. The more you purchase, the higher your level and the lower your purchase price; the less you purchase, the lower your level and the higher your purchase price.

Low-level agents purchase goods from high-level agents and pay the payment to the senior agents.

Senior agents recruit low-level agents, ship goods to low-level agents, and at the same time train low-level agents, establish sales channels, and conduct product retail.

Why do so many companies choose the hierarchical micro-business system?

Although some people say that the hierarchical agency system is a traditional micro-business and an outdated system; however, the hierarchical agency system still plays a very important role in the product sales process - the larger micro-business enterprises in China that we have seen so far, with a scale of hundreds of millions or even billions, all adopt the hierarchical micro-business agency system.

Advantages of hierarchical micro-business:

Low investment and low requirements: Generally, the hierarchical agency model only has one brand and only requires a few products to start smoothly; these are the brands sold by most WeChat businesses in your circle of friends, and you generally don’t recognize these brands.

The funds are recovered quickly, and the operation can be light-asset: the hierarchical agency model requires stockpiling of goods, and stockpiling of goods requires payment, so the payment can be collected first and then the goods are delivered; this model requires the lowest capital from the platform. During the crazy times in the past few years, it even started operation with negative assets, and officially started production only after receiving the agency payment.

The operation mode is mature and simple with a low threshold: traditional channel agent + Internet = hierarchical agent micro-business. Reselling and making a profit from the price difference has been going on for thousands of years and everyone is too familiar with it.

The model is mature and easy to use: because it has been popular for many years, the industry and model are very mature; it is relatively complete in terms of starting strategies, marketing activities, agent training, agent rights, support policies, etc., and it is easy to match with corporate operations.

It will be chosen by many large team leaders when they start their business: because their team originally has a hierarchical system, in order to more effectively and simply transfer and transform the team, they will choose the hierarchical micro-business system.

The hierarchical system makes it easier to achieve short-term rapid growth: senior agents are the main force in shipments, and the hierarchical agent system specifically recruits senior agents and first-level agents in the early stages to deliver goods quickly and split products quickly.

Boss awareness, activate agents: the money in the hierarchical wholesale model is basically collected by the superior agents; as long as someone places an order, you can receive the money, you are just like the boss, collecting money, shipping goods, and making a profit from the difference; it is the same as opening a store offline to do business, and you will feel that everything is under your control, so you will be constantly stimulated.

Disadvantages of this model:

• It requires capital and inventory, and the higher the level, the more inventory there is. It puts a lot of financial pressure on agents, and there is a lot of pressure to liquidate inventory, which often falls on the agents themselves. If it is not well managed, mass incidents are likely to occur.
• Agents not only have to stockpile and store goods, but are also responsible for selling them, and they also have to take care of the subsequent logistics and after-sales service. The core ability of Wechat businesses is to convey and sell product information based on social relationships, and too many heavy and scattered tasks have seriously affected the efficiency and benefits of Wechat businesses.

The traditional hierarchical micro-business model is almost no longer seen in the market, and the current hierarchical micro-business models have basically been optimized.

Let’s take WeimiSlim as an example:

1) Agency price

It’s very simple and you can understand it just by looking at the pictures.

It is divided into general agent, first-level agent, second-level agent, third-level agent and special agent.

• General agent, purchase price is 218, total payment is 130800.
• First-level agent, purchase price is 258, total payment is 67080.
• Second-level agent, purchase price is 308, total payment is 30800.
• Level 3 agent, purchase price is 358, total payment is 10740.
• Special agent, purchase price is 418, total payment is 4180.

2) Proxy mode

The agency model is also very simple, the superior earns the wholesale price difference from the subordinate.

When you reach the highest level of general agent, you will enjoy special rewards from the company.

3) Assessment system

The most powerful feature of the traditional micro-business model is the assessment system - a high-pressure policy.

If the monthly sales volume does not meet the target, you will be downgraded directly; you can apply to be a general agent only if you meet the target for two consecutive months.

Let’s take a look at Mengniu’s slow-burning model:

02 Social Mall System

Direct selling + Internet = social mall system, 2015 to present.

The social mall system includes independent APP-type social malls and membership-based social malls based on mini-programs or WeChat public accounts. The social malls all adopt a team rebate system and are extremely dependent on the number of team members. To put it simply, it is a direct sales model + the Internet, which becomes a social mall model.

What we call social e-commerce now basically refers to the social mall system; those who adopt hierarchical micro-businesses are brand micro-businesses, and those who adopt the social mall system are platform micro-businesses.

Representative companies include Yunji, Global Catcher, Beidian, Darling Home, Huasheng Diary, Taobao Shop, and Tingmi Secret, etc.

The social mall system has several major characteristics:

Low threshold and unified entry: all members are no longer determined by the amount of shopping. Everyone is at the same level, starting from the same starting line, and competing fairly.

No need to stock up, no financial pressure, no inventory pressure: just buy a membership gift package, the general price is 398, and you can start killing monsters and upgrading.

Provide drop shipping service: after-sales, logistics and training are all handed over to the platform to reduce the workload of agents.

The mall has diversified products: a combination of thousands of hot-selling items and a small number of high-profit products, focusing on the mall concept, which greatly reduces user resistance.

All orders are paid to the platform in a unified manner: the platform entrusts a third party to pay the funds to individuals, and the financial and taxation procedures are compliant and legal.

The social mall bonus system is basically divided into three levels. Each level has different achievement conditions, but the purchase price for all levels is the same, and everyone enjoys different rebates and benefits.

First, consumers can become junior agents by purchasing designated gift packages or reaching designated consumption amounts, and enjoy saving money on their own use and making money by sharing; junior agents can also recommend junior agents and receive referral rewards, and they can be upgraded when a certain number of recommended agents are reached.

After upgrading, you will enjoy higher commissions for developing agent recommendations and higher sales commissions; and similarly, after reaching the standards, intermediate agents will be upgraded to senior agents and enjoy a higher proportion of promotion bonus commissions and percentage bonuses for subordinate agent commissions.

Many zero-threshold projects have emerged here, including Pinduoduo’s newly launched social new retail projects Haohuo Neigou and Tingmi Mi, etc.

The advantage of zero threshold is that you can experience it without spending any money and level up while killing monsters. The disadvantage is that there is no timely feedback of income after developing agents, which is not enough incentive for the agents.

Let’s take Yunji as an example for analysis:

On May 3, 2019, Yunji was officially listed on the Nasdaq in the United States, becoming the first listed membership-based social e-commerce company in China; membership-based social e-commerce has been controversial since its inception, and Yunji is the pioneer of this model.

Yunji's listing in the United States means that the Yunji model can withstand the world's most stringent financial regulatory review. It also means that it has obtained permission from relevant government departments, which is a major milestone for China's entire micro-business and social e-commerce industry.

1) Yunji’s past and present lives

Yunji is the pioneer of membership-based social e-commerce, adopting the S2b2c model. By purchasing gift packages, one can become a store owner, save money for personal use and make money by sharing, thus turning consumers into consumer-merchants.

The S2b2c model was first proposed by Zeng Ming, executive vice president and chief of staff of Alibaba Group.

Its core concept is that large suppliers S (Supplier) help small businesses b (business) sell goods to customers c (customer). S and small businesses serve c together, while the supply chain and factories reach consumers directly.

The Yunji APP was officially launched in May 2015, and it was then called Yunji Weidian.

In May 2019, Yunji was listed on the Nasdaq in the United States.

Members are the core of Yunji, contributing 66.4% of its GMV and a repurchase rate of 93.6%. From 2016 to 2019, Yunji's membership grew rapidly, from 900,000, 2.3 million, 7.4 million to 13.8 million; during the same period, Yunji's GMV (total transaction volume) was 1.8 billion yuan, 9.6 billion yuan, 22.7 billion yuan and 35.2 billion yuan respectively.

2) In-depth analysis of Yunji’s agency system

So how exactly does Yunji design its agency system?

Let’s take Yunji’s most core agency system in 2018 as an example. After purchasing a 398 gift package, you can become a Yunji store owner.

The store owner enjoys three major rights:

• Invite a new store owner and get 60 Cloud Coins as reward (Cloud Coins can only be spent, not withdrawn).
• Share products with your friends and earn commissions if retail customers buy them.
• You can enjoy the sales incentives set by Yunji.

When the amount of gift packages you directly sell and team sales reaches the upgrade requirements, you can be upgraded to a sales manager.

Sales managers enjoy three major benefits:

• 25% of the sales profit of the community (the entire team) is 25% of the sales commission of the goods; the sales commission of Yunji’s hot-selling products is very low, and the commission for 100 yuan may be less than 10 yuan; calculated based on 10 yuan, it is only 2.5% of the commission.
• Eaglet Reward: The profit you can get by recruiting new store owners. This is the main source of income for sales managers. Store owners do not enjoy direct cash rewards from the community and recruitment, and only when they reach the level of sales managers can they get them. Therefore, agents who want to make money will actively upgrade to sales managers.
• Sales manager coaching basic salary: I am a sales manager. If I recruit another sales manager, he will be at the same level as me. In principle, I will not have any income. In this case, I will not recruit sales managers. So I will give you a referral reward at the same level.

Service manager is Yunji’s highest external membership level. The rights and interests are similar to those of a sales manager, but it is one level higher than a sales manager. In this way, the sales manager will also become a subordinate member of your team.

Yunji has greatly lowered the threshold for membership, and many retail customers will also join Yunji. If they succeed, they will make good money. If they fail, it will be like spending money on a gift package to enter a discount mall - this is the fundamental reason why social e-commerce consumers can become consumer-merchants.

Yunji’s system design has several characteristics:

• There is a unified threshold for everyone, and there is no question of who has a higher level who spends more. The traditional WeChat business agency model is all about seeing who has more money.
• If you want to level up, you can only do it by killing monsters, there is no backdoor. All those who have reached a high level already have a team and have grown up through it.
• You follow the principle of first come, first served, and you will always follow your master; at the same time, you also follow the principle of those who are more capable should do more work, because there are thresholds for promotion. It is very likely that the apprentice meets the requirements but the master does not, and then the relationship with the master will be severed.

03 Hybrid model of hierarchical agency + social mall

It now seems that this model can go further, from 2016 to present.

The hierarchical agency model has few products, non-standard products, and a lot of inventory, which can easily lead to a situation of "cutting leeks" and makes it difficult to enjoy the benefits of the team. In the future, the only way to achieve this is to continuously raise the threshold for the highest-level agents.

The platform mall model has low profits and is not flexible enough, especially for those who are already team leaders and want to make the transition.

The hybrid model combines the advantages of the hierarchical agency model and the social mall model.

Representative companies include Miffy and ABM.

This model is a recharge agent. There is no need to stock up on goods. The platform will ship them on your behalf. However, you still need to invest a certain amount of money, usually from a few hundred to a few thousand.

I will use Miffy as an example to analyze the business model:

The Miffy model has also become a mainstream model, and traditional hierarchical micro-businesses are basically optimized in this direction.

Compared with traditional micro-businesses, Miffy has the following advantages:

• Agents do not need to stock up on goods or ship goods. The company will ship all products on their behalf. After-sales service, logistics, and training are all handed over to the platform, reducing the workload of agents.
• There is no assessment pressure, and there is no such thing as constantly cutting leeks.

Compared with the Yunji platform WeChat merchants, Miffy has the following advantages:

• The model is mature, has high acceptance, and it is easy for existing team leaders to make the transition.
• Because of the price difference among agent levels, brands can attract investors quickly and collect payments quickly.
• Merchandise retail profits are fast enough to meet the agency's need for continued profits.
• With team benefits, no matter how big the team is, there will be positive motivation.

04 Choose the appropriate mode according to the product

The specific model chosen is based on the product, and is closely related to product price, product profit, product consumption frequency, and product audience.

For WeChat business projects, products are the core foundation, agency model is the soul, traffic resources are the lifeline, and sustainable profitability is the guarantee.

Author: KK. Zhongkai

Source: Kaige's World