Analyze the product logic behind NetEase Yanxuan!

NetEase Yanxuan is an e-commerce platform promoted by NetEase. It directly connects suppliers and consumers, controls the entire production process, and provides consumers with high-quality, cost-effective goods and services. In this special year of 2020, NetEase Yanxuan was the only Chinese product that appeared at Apple’s product launch conference in October, which really made NetEase Yanxuan popular. Why did NetEase Yanxuan become the only Chinese product that appeared at Apple’s iPhone 12 launch conference? What kind of charm does NetEase Yanxuan have that can win the favor of Apple?

This article will analyze from the following aspects:

Industry analysis;
Competitive product analysis;
User value analysis;
Business value analysis;
Product iteration analysis;
Product structure analysis;
Operational analysis;
Summarize.

1. Industry Analysis

The quality e-commerce industry is different from traditional e-commerce that sells goods. The traditional e-commerce industry provides suppliers' goods to demanders through online platforms, while quality e-commerce penetrates into upstream suppliers and supply chain management, reduces intermediate links, emphasizes platform independent product selection , relies on big data technology to improve the supply side's response speed to changes in market demand, comprehensively improves product quality, and provides consumers with a high-quality, cost-effective e-commerce model, a new model of e-commerce.

NetEase Yanxuan is a typical and outstanding representative of this new e-commerce model. In what kind of industry environment did NetEase Yanxuan develop?

This section will use the PEST analysis method to analyze the entire industry.

1.1 Politics

The long-term development of an enterprise or product is inseparable from the influence of the environment in which it is located. Political factors are the most basic and important part of an environment. This section will look at the quality e-commerce industry from the perspective of policies, laws and regulations.

1.1.1 National policy level

From the relevant policy content in the table below, it can be seen that the country is supportive of the development of the e-commerce industry. After the Ministry of Industry and Information Technology issued a series of policies such as the "Twelfth Five-Year Plan for E-Commerce" in 2012, China's e-commerce field has entered the fast lane and has achieved great development.

In 2016, Premier Li Keqiang first mentioned the concept of “craftsmanship” in the Government Work Report, and the term “quality revolution” first appeared in the press release of the State Council’s executive meeting in May. This was the first time that the word "quality" came into people's vision. Subsequently, the policy document "The 13th Five-Year Plan for E-Commerce" jointly issued by the Ministry of Commerce, the Central Cyberspace Affairs Commission, the National Development and Reform Commission and other departments clearly proposed to encourage the development of quality e-commerce and brand e-commerce, and further play the positive role of e-commerce in guiding production and consumption.

This is also the first time that quality e-commerce has been proposed in national policy, and quality e-commerce has been officially included in the scope of policy encouragement.

1.1.2 Legal and regulatory aspects

As e-commerce continues to grow and develop, the country's legislation on e-commerce and the Internet is increasing at an increasingly rapid pace, the effectiveness of legislation is gradually increasing, and the areas covered are more comprehensive. On January 1, 2019, the first comprehensive law in the e-commerce field, the E-Commerce Law, was promulgated. During the period of 2019-2020, the speed of legislation in my country in the field of Internet and e-commerce has increased significantly, with new laws introduced basically every once in a while, which is enough to illustrate the country's emphasis on and attitude towards the Internet and e-commerce.

2020 is a special year. It is the last year of the 13th Five-Year Plan. 2020 is also the year when the sudden new coronavirus epidemic raged. In this special year of 2020, e-commerce has played a huge role in ensuring people's lives and preventing and controlling the epidemic, but a series of problems have also emerged.

In some recent State Council press conferences, its spokesperson mentioned the term "consumption upgrade " more than once, which shows the trend of e-commerce in the next few years. Therefore, in the upcoming 14th Five-Year Plan for e-commerce , the requirements for consumption and service upgrades in the e-commerce field will be increased.

Therefore, in the future, the national policy level will continue to vigorously encourage the development of e-commerce, but it will also be further regulated at the legal and regulatory level to meet consumers' quality requirements for e-commerce.

1.2 Economy

1.2.1 The online shopping market maintains rapid growth, and consumers increasingly prefer online shopping

The data in the figure below shows that as of June 2020, the number of online shopping users in my country has reached 749.39 million. Compared with the 939.84 million Internet users nationwide, the number of online shopping users still has room for further growth.

Moreover, it can be seen from the data in Fig. 1 that in March and June 2020, the scale of online shopping showed a strong growth trend, reflecting that online shopping played a huge role in ensuring basic social life, avoiding social panic, and preventing the spread of the epidemic during the epidemic. This has also made online consumption gradually become the core of consumption from a state corresponding to offline consumption.

Brand e-commerce is essentially different from bloated traditional e-commerce. Its high-quality brand value, more precise marketing, better innovation capabilities, and superior design capabilities will attract more consumers.

Data source: "The 46th China Internet Development Report"

1.2.2 With the stable and continuous increase in per capita disposable income, consumers will be more willing and able to pursue a better quality of life and better consumption experience.

The data in the figure below shows that my country's per capita disposable income has been increasing continuously and steadily. From 2010 to 2019, per capita disposable income has doubled. Consumers are more willing and able than ever before to pursue a better life and are more demanding on the quality of products and services.

Data source: CEIC China Economic Database, personal compilation

1.3 Society

1.3.1 Product quality and cost-effectiveness have become important factors for consumers to make consumption decisions

According to the "2020 China Consumer Trend Report" released by Zhimeng Consulting, the factors that consumers pay attention to when making consumption decisions are becoming more diversified. In addition to brand awareness, consumers not only pay attention to the practicality of the product, but are also good at studying the ingredients, origin, etc. of the product. While upgrading quality, consumers are always pursuing a balance between "cost-effectiveness". 88.1% of consumers, even if they are rich, hope to spend their money "wisely".

In other words, after the sudden outbreak of the epidemic in 2020, consumers are paying more attention to the quality and cost-effectiveness of products, and are seeking to buy better products with the same price.

1.3.2 The service quality of e-commerce platforms remains high, the quality of goods needs to be improved, and logistics needs to be improved.

According to the "2019 China E-Commerce User Experience and Complaint Monitoring Report" released by the E-Commerce Research Center of the China Internet Network Information Center, the number of e-commerce complaints in 2019 achieved negative growth for the first time compared with the number of complaints in 2018 (-0.72%), but still accounted for 55.85% of all complaints. Among them, the most complained issues were refunds, delivery issues and product quality issues , accounting for 30.81%, 12.66% and 8.22% respectively. This series of data shows that consumers' demand for quality e-commerce is gradually increasing.

1.4 Technology

The continuous development and progress of technology can be said to have changed people's lives in all aspects, and has also brought many changes to the brand e-commerce industry. From the production to the hands of consumers, a product needs to go through marketing, payment, warehousing, logistics and other links. This section will analyze the impact of new technologies on consumers' online shopping processes.

1) Marketing: Big data marketing recommends products that meet user needs through accurate analysis and prediction of users, stimulates consumers' consumption desire, and encourages consumers to consume. For enterprises, it reduces a lot of marketing costs and effectively increases profits .

Moreover, big data marketing is also a new communication channel between enterprises and consumers. For enterprises, it can quickly understand and respond to user needs; and changes in users' own needs can be immediately reflected to enterprises through big data.

2) Payment: The use of technologies such as QR codes, sound waves, and biometric identification can reduce the complexity of consumer consumption and improve efficiency.

3) Warehousing: Technologies such as warehouse robots, mobile computing, and inventory planning can reduce inventory backlogs, improve flexibility, and reduce corporate warehousing costs .

4) Logistics: Technologies such as loading analysis and freight volume count can effectively improve logistics efficiency, allowing consumer goods to be delivered to customers faster, better and more conveniently, thereby improving user experience .

1.5 Summary

The above factors have promoted the development of brand e-commerce in recent years and made brand e-commerce increasingly popular. The next few years will be the time for brands. Only by creating your own brand and improving product quality and service quality can you survive. So what is the future development potential of brand e-commerce? Will this market expand further?

According to iMedia Consulting's report on the brand e-commerce industry, the scale of China's brand e-commerce service market exceeded 200 billion yuan in 2019, with a growth rate of 37.1%. Brand e-commerce service providers have developed into an important part of the e-commerce industry. Although the sudden outbreak of the new crown epidemic has brought certain impacts to the e-commerce industry, in the long run, it will accelerate offline brands to expand online channels and embrace digital technology to improve operational efficiency. Brand e-commerce service providers still have broad room for development in the future, and are expected to reach a scale of 366.32 billion in 2022.

2. Competitive Product Analysis

As the potential of quality e-commerce gradually emerges, many large Internet companies have joined this field, such as NetEase, Xiaomi, JD.com, Alibaba, etc.

iResearch pointed out in a report in 2018 that as one of the earliest companies to enter this field, NetEase Yanxuan's awareness rate, usage rate and satisfaction are all in a leading position. According to the latest "Top 200 E-commerce Brands (2019)" released by the Guangzhou Daily Data and Digital Research Institute GDI Think Tank, Taobao, JD.com and Pinduoduo undoubtedly occupy the top three places.

In the field of brand e-commerce, NetEase Yanxuan, which has pioneered the quality retail market, successfully entered the TOP10 and became the number one in this field in China. According to the comprehensive strength of major brand e-commerce platforms, we divide the brand e-commerce platforms into three echelons.

First tier: NetEase Yanxuan.
The second tier: Xiaomi Youpin, JD.com, and Taobao Xinxuan.
The third tier: Suning Jiwu and Tutoumama selection.

Before the emergence of NetEase Yanxuan, domestic e-commerce had two main business models, namely the platform model and the self-operated model. NetEase Yanxuan and Xiaomi Youpin are the third model, the brand model. However, there are still certain differences in the specific business models of the two.

The following will analyze both NetEase Yanxuan and Xiaomi Youpin.

2.1 NetEase Yanxuan

In April 2016, NetEase Yanxuan was officially launched.
By the end of May 2016, NetEase Yanxuan had 12 million registered users and a monthly turnover of 30 million.
In September 2016, NetEase Yanxuan had 30 million registered users and monthly turnover of 60 million.
In September 2018, NetEase Yanxuan entered Tmall, JD.com, Pinduoduo, etc.
In December 2018, NetEase Yanxuan’s first offline store officially opened on the shores of West Lake in Hangzhou.
On January 19, 2019, the first e-commerce joint store between Watsons’ sub-brand “Watsons+” and NetEase Yanxuan was unveiled in Guangzhou.

NetEase Yanxuan's business model is shown in Fig. 4. It controls the upstream supply chain by selecting and purchasing first-line brand ODMs (original design manufacturers), eliminating intermediate links, improving quality control, and selling through its own platform and other third-party platforms to maximize profits.

Before we go into detail about why NetEase Yanxuan chose the ODM business model, let us first understand the development experience of NetEase Group before NetEase Yanxuan was launched in 2016, as shown in the figure below.

It can be seen that before the establishment of NetEase Yanxuan, NetEase had three characteristics:

The core business is gaming, etc., which has been deeply engaged in C-end consumers for many years and has huge traffic
Lack of experience in e-commerce
Possess strong brand operation capabilities

According to NetEase Yanxuan’s business model, we will analyze it from the following three aspects:

(1) Why did NetEase Yanxuan choose the ODM business model? (Based on the situation before NetEase Yanxuan was established)

First, reduce the cost of trial and error and seize market opportunities. ODM manufacturers are responsible for the entire process from product design to production, while for the upstream supply chain, NetEase Yanxuan is only responsible for the selection of manufacturers and the control of product quality. In the e-commerce industry where business opportunities are fleeting, choosing the ODM model enables NetEase, a company with no e-commerce experience, to enter the e-commerce field as quickly as possible, seize the initiative, and achieve success.

Second, carefully understand the needs of target consumers (market demand). NetEase is keenly aware of the rapid changes in the needs of its target consumers. Consumer decisions have become more diversified, and in the process of quality upgrading, the weight of its cost-effectiveness decision-making has become increasingly prominent. The ODM model can well satisfy consumers' desire to "buy better quality products with the same money."

Third, minimize brand premium, reduce middlemen and increase profits. There are two reasons why the prices of traditional branded goods remain high after they leave the factory . One is the brand premium, and the other is to make up for the costs incurred in the intermediate circulation links. This means that consumers ultimately have to spend several times the factory price to purchase the same product.

ODM manufacturers are responsible for the entire process from product design to production, and for the upstream supply chain, NetEase Yanxuan is only responsible for selecting manufacturers and controlling product quality, saving time, effort and money.

Fourth, play to your strengths and avoid your weaknesses, highlighting your advantages. NetEase has no experience in the physical industry and no effective cases, but its core business has huge traffic and rich operating experience. The adoption of the ODM model can play to its strengths, highlight its greatest advantages, concentrate on promoting the brand, and achieve twice the result with half the effort.

Fifth, the domestic manufacturing industry and logistics are well developed . In 2016, China's manufacturing industry ranked first in the world, and NetEase Yanxuan is positioned as a brand e-commerce company. The strong manufacturing industry provides strong support for the development of brand e-commerce.

(2) How does NetEase Yanxuan select its partners?

When selecting upstream suppliers, WebShop mostly prefers suppliers of well-known first-line brands , such as CK, Samsonite, MK, etc. World-class brands also represent first-class design, first-class team, first-class products, and improved product quality .

NetEase Yanxuan has formed a complete selection system, selecting ODM partners based on five aspects: access qualifications, business reputation, production capacity, quality assurance, and service capabilities. The corresponding cooperation process is qualification review and on-site inspection, confirmation of cooperation, contract signing, Yanxuan puts forward product requirements, develops products and makes samples, NetEase Yanxuan confirms products, and produces and puts products on the shelves.

Some of NetEase Yanxuan’s domestic ODM suppliers are shown in the following table.

(3) How does NetEase Yanxuan control product quality?

NetEase Yanxuan focuses on quality control. How to control quality has always been the main difficulty in the manufacturing industry. Products manufactured by the same manufacturer do not necessarily have exactly the same product quality. NetEase Yanxuan focuses on controlling products throughout the entire process.

NetEase Yanxuan focuses on "strictness" and "selection" , "strictness" and "selection" in the entire production process. Before the products enter the assembly line for production, NetEase Yanxuan will require partners to produce samples first and send them to the world's most authoritative monitoring agencies - Intertek, Bureau, Vertas, and SGS for monitoring. After obtaining qualified monitoring results, partners will then carry out assembly line production, which will include product monitoring, post-production monitoring, warehouse inspection, patrol inspection, random inspection and other links.

2.2 Xiaomi Youpin

On April 6, 2017, Mijia Youpin was officially launched and was renamed Youpin in August of the same year.
In May 2018, Youpin was officially renamed Xiaomi Youpin.
In June 2018, Xiaomi Youpin's first offline flagship store in the world officially started trial operation in Jianye District, Nanjing, displaying 15 popular product categories with a total of 3,000 items.
On November 6, 2018, JD.com and Xiaomi Youpin, a boutique lifestyle e-commerce platform under Xiaomi, signed a strategic cooperation agreement in Beijing to carry out in-depth cooperation in multiple aspects including the entry of selected products, incubation of third-party brands, reverse customization of goods, and logistics.
In April 2019, it entered the field of social e-commerce and launched "Youpinyouyu".
On December 23, 2019, Xiaomi Youpin reached a strategic cooperation with the overseas crowdfunding platform Indiegogo, completing a step for Xiaomi Youpin to explore overseas markets and help high-quality companies go overseas.

Xiaomi Youpin's business model is shown in Fig. 5. Xiaomi Youpin has only two upstream suppliers, namely ordinary suppliers and deeply bound suppliers. Ordinary suppliers follow the traditional supplier model, and suppliers supply according to the needs of Xiaomi Youpin; and deeply bound suppliers mainly refer to two types, one is the supplier of Xiaomi's own brand, and the other is the supplier of Xiaomi Group's "investment + incubation" .

"Investment + Incubation" means that Xiaomi Group invests in suppliers to form a community of interests, and uses methods such as providing technology and product design to partners to improve the competitiveness of suppliers, thereby obtaining investment returns and sales commissions, etc.

Xiaomi Youpin exports its brand values to companies within the ecosystem by deeply intervening in the upstream supply chain, and participates in controlling product definition, design, quality monitoring and other aspects to ensure product quality within the ecosystem.

Before we analyze Xiaomi Youpin’s business model in depth, let us first understand the development experience of Xiaomi Group before Xiaomi Youpin went online, as shown in the figure below.

It can be seen that before Xiaomi Youpin was founded, Xiaomi had three characteristics:

The core business is mobile phone business and IOT business. We have been deeply involved in this field for many years and have strong technical, design and operation capabilities.
Strong experience in operating e-commerce models (Xiaomi Mall)
It has a relatively complete industrial ecological chain and relatively strong control over the product supply side.

According to Xiaomi Youpin's business model, we will analyze it from the following three aspects:

(1) Why adopt the upstream supply-side model of general suppliers + deep ties with industry and commerce, rather than the ODM model of NetEase Yanxuan? (Based on the actual situation before Xiaomi Youpin was established)

First, based on thinking about your own business, play to your strengths and avoid your weaknesses .

Xiaomi Youpin was founded in 2017. Prior to that, several major e-commerce companies such as Taobao and JD.com occupied the mainstream factory product market. There were also e-commerce companies such as NetEase Yanxuan that seized the market differentiation and continued to develop. Their main markets had already been occupied. Based on its own business and playing to its strengths and avoiding its weaknesses, Xiaomi Youpin’s best choice was to make the most of its strengths in such an environment.

As early as before 2017, Xiaomi Group's core business was the mobile phone business, and other businesses were built around the mobile phone business, such as the IOT business. The traffic, brand and supply-side resources of its core business itself are an advantage, so Xiaomi Group entered the brand e-commerce field based on this advantage.

Second, the advantages of the upstream supply-side model of general suppliers + deep binding with industry and commerce are many

"Fast". This model enables Xiaomi to successfully join excellent product teams at the lowest cost and fastest speed, gain advantages in the shortest time, and obtain huge business traffic.
"Good", the ecological chain business model can add equity investment income to product sales and give full play to the benefits of the ecological chain model.
"Complementing each other's strengths and weaknesses", this ecological chain business model can achieve complementary advantages. The companies within the ecological chain, together with Xiaomi's own brand, traffic and supply chain resources, make Xiaomi Youpin a strong upstream supply side.

(2) If Xiaomi’s deeply tied suppliers grow in size, will it have an impact on the Xiaomi brand?

According to the data from the 2018 "Xiaomi Technology Analysis Report", as of June 2018, Xiaomi has invested in more than 200 companies. Its top five investment industries are: scientific research and technical services (91 companies), information transmission software and information technology services (35 companies), leasing and business services (16 companies), software and information technology services (11 companies) and wholesale and retail (10 companies).

From this, we can see the characteristics of Xiaomi's investment:

Companies that can enhance the strengths of their core businesses and supplement their weaknesses
An enterprise that can improve the enterprise ecological chain system.

From this we can see that deeply bound suppliers will not have an impact on Xiaomi's own brand, but will only continue to supplement the Xiaomi brand's ecological chain.

2.3 Summary

From the above analysis, it can be seen that the models of Xiaomi Youpin and NetEase Yanxuan both start from the supply chain, participate in upstream production and manufacturing, and are committed to optimizing the supply chain, shortening the chain from manufacturing to consumption, and providing consumers with high-quality, cost-effective products.

The main difference in their business models is reflected in the upstream supply chain. NetEase Yanxuan chooses to use the ODM model to carefully select suppliers with good reputation. Based on NetEase Yanxuan's understanding of consumer needs, it allows manufacturers to design corresponding products and sell them using the NetEase Yanxuan platform.

Xiaomi Youpin adopts a combination of ordinary suppliers and deeply bound suppliers to penetrate into upstream supply-side companies, so that they can not only obtain sales sharing, but also obtain equity profit sharing. The advantage is that it can penetrate deeply into the supply chain, has a strong voice in design, research and development, and branding, forms a unified brand image, and the product system has strong brand power and market appeal.

Although both business models have their own advantages and disadvantages, each is the best business model determined by the positioning of its own enterprise.

3. User Value Analysis

In the brand e-commerce industry, there are three main participants: consumers, platforms, and suppliers.

If a platform wants to achieve rapid growth, it must meet the needs or demands of different participants such as consumers and suppliers.

Next, let’s explore the needs of these two parties and how NetEase Yanxuan can better meet their needs.

3.1 Consumers

From the public reports of iResearch Consulting, we can see that structural changes have been found in the age structure and income level of the population. The structural changes in the population have brought opportunities for brand e-commerce. NetEase Yanxuan’s target users are: the middle class, those born in the 1980s and 1990s, and other young groups who have both economic strength and online shopping habits.

For target consumers, they have the following demand pain points:

(1) Convenience needs

The data in Fig 9 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.

(2) Benefit requirements

Efficiency is the ratio of input to output. Its essence is that people satisfy their desire to pursue more than they lose through various means. The two ends of the benefit side are quality and price, which, when mapped to consumers, can be seen as the cost-effectiveness of the consumed goods.

The left picture shows that young people have become more cautious in their consumption after the epidemic, and they are no longer over-consuming as before; the middle picture shows the price comparison of young people. It can be seen that basically 90% of consumers will compare the prices of the same items. It can be seen that consumers are paying more and more attention to buying relatively good quality items at a suitable price, that is, products with a high cost performance;

The right picture shows consumers' participation in special offers. It can be seen that consumers ' attitude towards being able to buy their favorite products with less money is the most mainstream attitude. From this we can conclude that consumers will pay more attention to benefits when purchasing products and need products with higher cost-effectiveness.

(3) 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 Fig. 12, we can see that the average price of designer brands is generally higher than that of trendy brands. This represents consumers’ pursuit of beauty and their desire to obtain beautiful and high-value products.

From the above demand analysis, we can see that the target consumers value shopping experience, pursue product quality and design, and consume rationally , instead of blindly following trends or expensive products as before. After consumers have these demands, how will their needs be met? There are three ways:

(1) Go to the brand’s official website or offline store to make a purchase

In order to meet personalized needs and enjoyment demands, consumers will go to the official website of the brand they want to buy or to offline physical stores to make their purchases, choosing what they like in terms of style and what they trust in terms of quality, to avoid products that do not meet their psychological expectations of the products they are purchasing. But this approach has quite a few disadvantages:

Does not meet consumers' convenience needs. Consumers need to spend a lot of energy and time going to a brand’s official website or offline store, and cannot save time and effort to make purchases.
Miss out on the brand that suits you. The number of brands that consumers browse is quite small, which will cause them to miss out on many other brands that may better suit their needs.
Does not meet efficiency requirements. Going to an offline store or a brand's official website means that consumers need to pay more money. If they see the same product at a lower price after purchasing, they will feel very bad.

(2) Go to major comprehensive e-commerce platforms to compare prices before purchasing

In order to meet the demand for efficiency , consumers will go to major comprehensive e-commerce platforms to search for related products, compare the lowest prices one by one, 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 consumers' enjoyment needs. 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) 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.

The price is too high, product expectations are greater than actual product performance, and the demand for benefits and enjoyment cannot be met. Since the purchased products are purchased through private channels, this may result in consumers purchasing products that are too expensive and the quality cannot be guaranteed. Then the product quality/product price ratio is too small and cannot meet the consumer's benefit needs well.

If we do not consider the price factor and only consider the product quality, then the price of products purchased through private channels cannot be guaranteed, which will result in the products being unable to meet consumers' enjoyment needs.

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.

From this we can see that the above three solutions cannot meet the current needs of consumers well.

3.2 Upstream Suppliers

In today's era of developed Internet and mature manufacturing industry, suppliers (vendors) are no longer at the top of the entire purchasing chain. For upstream suppliers in China, they have the following demand pain points:

(1) Low gross profit

Many suppliers have been doing OEM for many international brands all year round, but they have the smallest profit margins in the entire chain.

(2) High inventory

Product production cycles are long and suppliers may face the inability to meet consumer demand, resulting in unsalable products. In the traditional supply chain, brand owners generally take six months to a year in advance to analyze future trends and arrange the next round of orders and purchases. This takes a long time, about half a year. In addition, during this cooperation process, the backlog of inventory can be returned to the supplier in part or in full according to the contract, which creates a lot of inventory pressure and squeezes profit margins.

(3) The rise of competitors

Due to rising domestic labor costs, some international orders have shifted to Southeast Asian countries in search of cheaper labor production bases, resulting in the loss of orders and customers.

For these demand pain points, these upstream suppliers usually solve them in the following ways:

(1) Create your own brand website

Companies will create their own brand websites to build their brands, expand brand awareness, and increase sales. However, there are corresponding disadvantages. For example, in brand operation, after building the official brand website, it is available for consumers to choose from, but the company needs to devote a lot of energy to carry out brand operation and increase consumers to purchase from the official brand website. In the process of operation, the result may be half the effort with twice the results.

(2) Enter major e-commerce platforms and open brand stores

Suppliers will choose to join major e-commerce platforms and open brand stores to increase revenue. However, there are corresponding disadvantages. Currently, the traffic on mainstream e-commerce platforms is becoming more and more concentrated. Suppliers need relatively high marketing costs to open stores on such platforms. Otherwise, they will not be able to obtain corresponding traffic support, and the inventory risk is still high.

(3) Offline retail stores

Companies may choose to open offline retail stores to increase sales, but this method may have some disadvantages. Offline retail stores require high rental costs and consumers have low brand recognition, which may lead to further losses.

3.3 Platform

From the above analysis, we can find that when it comes to consumer shopping, both consumers and upstream suppliers have their own demands and the current solutions do not meet their needs well. As a platform, how does NetEase Yanxuan use its own ODM model of brand e-commerce to better meet their needs and attract them to the platform?

How did NetEase Yanxuan solve the pain points of consumers and upstream suppliers after discovering them?

3.3.1 For consumers

1) Reduce brand premium and maximize cost performance

NetEase Yanxuan has a very complete supplier quotation management system, where three or more suppliers quote for the same product, and then the supplier with the best price-performance ratio is selected.

A certain degree of premium is applied based on the supplier's quotation, with a gross profit margin of approximately 25% to 30%, in order to ensure the best cost-effectiveness and the best service. Therefore, 4/5 of the products in Yanxuan are priced based on the entire product cost, reducing a large number of product brand premiums and maximizing cost-effectiveness.

2) Supplier management and product management to ensure product quality

Suppliers: NetEase strictly selects suppliers based on five aspects: access qualifications, business reputation, production capacity, quality assurance, and service capabilities. The corresponding cooperation process is qualification review and on-site inspection, confirmation of cooperation, and contract signing. After cooperating with partners, NetEase Yanxuan also conducts corresponding assessments on suppliers to ensure high-quality suppliers from multiple dimensions. The assessment dimensions include production capacity, quality, management, and overall planning, etc.

Products: Strict product management system to ensure product quality. NetEase Yanxuan conducts regular quality inspections, manages a product before, during, and after production, and also makes some improvement requests to suppliers. For example: maternal and infant products must not contain fluorescent agents, but in fact, most fluorescent agents are not artificially added, but come from the air. Many people don’t know that there are a lot of fluorescent agents in the air we come into contact with on a daily basis. If these fluorescent agents fall on clothes, the products will fail to pass the strict testing standards. Therefore, under the requirements of strict selection, the supplier converted its workshop into a fully dust-free operation workshop to manage from the source.

Through the management of suppliers and products, we improve and ensure the quality of NetEase Yanxuan products.

3) Procurement from multiple dimensions to meet consumers’ convenience needs

NetEase Yanxuan purchases products from multiple dimensions to meet consumers' demands for the richness and necessity of items, namely the product life cycle, product sales dimension, and products for special times . This purchasing method is used to ensure that consumers can buy the type of products they want at any time.

4) Combine fashion trends to meet consumers’ fashion needs

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

3.3.2 For the upstream supply side

1) Combine online and offline sales channels to increase sales. Online, it has the NetEase Yanxuan e-commerce platform; offline, it has retail stores that focus on retail experience to make up for the shortcomings of the online experience. NetEase Yanxuan’s combination of online and offline sales channels can provide suppliers with stable and large orders.

2) Friendly cooperation model. In terms of inventory, NetEase Yanxuan chooses to have inventory and NetEase Yanxuan takes responsibility for the inventory. This type of cooperation helps suppliers reduce the risks caused by product unsale. In terms of payment funds, Yanxuan will pay the supplier within seven days or seven days of arrival of goods.

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 . This explains why many users like to buy at NetEase Yanxuan. It also explains why NetEase Yanxuan was the only Chinese brand that appeared at Apple’s iPhone launch conference this year. The core idea of NetEase Yanxuan is to provide consumers with high-quality and cost-effective products, which is in line with the positioning of iPhone’s own brand this year.

4. Commercial Value Analysis

NetEase Yanxuan’s current core business is e-commerce business, and one of the important indicators to measure whether an e-commerce platform can develop healthily is operating income. Here we use the website’s transaction amount (Gross Merchandise Volume, GMV) as our measurement indicator.

GMV is an important indicator to measure the competitiveness and development speed of an e-commerce platform. Generally speaking, for e-commerce platforms, GMV = number of users * conversion rate * average order value. Changes in the number of users, conversion rate, and average order value will have a positive impact on changes in revenue levels. So next we will look at the commercial value of the platform from the perspective of the platform, evaluating new users and completing the purchase process. The commercial value capabilities of NetEase Yanxuan’s core business are analyzed based on the number of new users, purchase conversion rate, and average order value .

4.1 Number of new platform users

The number of users is the foundation of a platform, and the number of users a platform has also determines the development of the platform.

In e-commerce platforms, only new users who have logged in will make purchases, so converting as many users as possible into active logged-in users is our ultimate goal in increasing the number of platform users. Below we will analyze how NetEase Yanxuan does it from two perspectives: increasing the number of potential users, inducing users to register , and increasing the number of logged-in users .

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

Potential users refer to those users who have not used the product yet, have the need to purchase a certain product or service, have the purchasing ability, have the purchasing decision-making power, and have some demand for the functions provided by the product.

(1) Advertising to increase brand exposure

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

1) Offline: Cover the target user group from all angles in offline subways, bus stations, buses, shopping mall advertising spaces, etc., to place advertisements and increase brand exposure.

Example of bus stop advertising: During this year's epidemic, NetEase Yanxuan's bus stop advertisement was not something that passers-by would have stopped to watch. However, the warm reminder on the advertisement warmed people's hearts and they stopped to watch. This shows us the social responsibility that companies should have in the face of public crises.

This also shows the excellent adaptability of the NetEase Yanxuan advertising team. Originally, due to the epidemic, the large amount of physical advertising it had placed would have been wasted. However, the NetEase Yanxuan advertising team cleverly used the psychological method of emotional arousal to turn the bus stop advertisements that might have had no effect into a "hot spot", which left a deep impression on everyone and their favorability ratings soared.

2) Online: Targeted advertising is carried out on online platforms that match the characteristics of the target group, such as WeChat Moments, Weibo, Zhihu, Douban, Toutiao and other online platforms. As shown in the picture, NetEase Yanxuan placed APP splash page ads on Toutiao and Zhihu.

(2) Share to acquire new users

In the NetEase Yanxuan APP, there is an activity called "Share for a Surprise" to receive cash below the introduction of each product details page. You don’t need to make any purchase to participate in this activity. You just need to share the product with your friends and then return to NetEase Yanxuan to receive the cash. This activity took advantage of consumers ' desire to get a bargain , not only increasing the platform's traffic, but also increasing the possibility of users registering and logging in.

(3) Create hot topics to attract public attention, gain attention and spread the message, occupy the minds of users, increase the product's presence, and then guide users to experience the platform.

For example: During the first anniversary of NetEase Yanxuan (2017), Ding Lei hyped up a series of hot topics on platforms such as Weibo, thereby attracting the attention of the whole society and arousing the public's attention and dissemination. Then, the slogan/topic #You can't afford a house, but you can afford a home# was used to trigger a nationwide discussion. Later, through a series of operations, users were guided to the platform to experience it, which greatly increased the potential users of the NetEase Yanxuan platform.

(4) New user coupons attract potential users to register

On the NetEase Yanxuan website, there will be an activity called "Scan the QR code to receive instant discount red envelopes for new APP users". New users who download the NetEase Yanxuan APP will immediately receive discount red envelopes, attracting potential users to download the APP and register.

(5) Multiple convenient registration/login methods

When a potential user downloads the APP, browses it, and is interested in purchasing a certain product, clicks to add it to the shopping cart or clicks to buy it now, the page will immediately jump to the registration/login page, and a one-click login page and six other login methods will appear.

The advantage of this one-click registration is that the platform reduces the cumbersome registration/login process, preventing customers from losing patience due to an overly complicated registration process, leading to a bad shopping experience; on the other hand, it improves the efficiency of using users' fragmented time, reduces factors that interrupt the registration process, and thereby increases users' order rates.

4.1.2 Increase the number of logged-in users

Logged-in users refer to users who have registered on the platform but have not made any purchases . NetEase Yanxuan provides the following ways to allow such users to log in.

(1) Wake up via SMS or email to activate the user

SMS is a powerful tool in the expansion of e-commerce operations. NetEase Yanxuan will choose to send certain content to users based on known user information (for example, user gender, age, region, whether or not they are new users, etc.) to activate users and increase the number of logged-in users. As shown in the picture.

(2) User sign-in

The main function of the sign-in function is to increase the daily activity of the platform, and to encourage users to sign in every day through a certain degree of rewards. The sign-in gift interface of the NetEase Yanxuan platform is shown in the figure.

(3) Reduce the number of steps for users to log in again - fast login

The simple and quick one-click login method can reduce the factors affecting user login and improve the user's consumption experience.
Message push: Through the message push function, NetEase Yanxuan can deliver large and small event information to the client to attract users' attention, thereby prompting Yanxuan users to log in to the Yanxuan platform.

4.2 Purchase Conversion Rate

In Section 4.1, we have analyzed in detail the methods taken by NetEase Yanxuan to increase the number of users. This section will mainly analyze NetEase Yanxuan's efforts to improve purchase conversion rates , accelerate the user decision-making process for payment, and reduce factors that influence and interfere with consumers' consumption.

For e-commerce platforms, there are mainly two types of users: clear users and unclear users. A clear user knows clearly what he needs and wants to buy, while an unclear user is the opposite. For clear users, the design focuses on speeding up the user's decision-making process for payment, while for unclear users, the design relies more on the operation side (activities, discounts, atmosphere, etc.) to guide them.

4.2.1 Unclear User

Although users with unclear goals rely on the operation side, NetEase Yanxuan has also made a lot of efforts on the product side. Using the AIDTAS model , an analysis of unclear users found that new users of this type have not yet developed a great interest in the platform's products and their desire to buy is relatively low . For users with unclear goals, NetEase Yanxuan ignites users' desire to purchase by making unique designs for the first contact page of this type of user, the homepage .

We will analyze how to improve purchase conversion rate from the perspective of the design of this page.

(1) Overall

Use the seven-second color law and field effect to create an overall atmosphere.

Use the passionate and unrestrained characteristics of red as the main color of the entire page, affect users' perception of the platform and build an overall atmosphere.
Use visual temptation elements and visual contrast effects to create a visual center, capture users' attention, and let users see what the PM wants users to see.

(2) Partial

Stimulate consumer interest in multiple dimensions, increase user stay time, and increase user interest. In the Banner section, there are three contents, namely the bottom price of Double Eleven hits; the bottom price for the whole year, now; the CEO sets up a live broadcast; use these three copywriting to enhance users' interest and ignite users' desire to consume. For example, CEO group live broadcast content, using frontal images with NetEase CEO to create visual new things and increase user interest (Pandora's box effect: create a sense of mystery, stimulate users' curiosity and curiosity, and make users curious about CEO live broadcasts. What is it live broadcast? What can NetEase CEO live broadcasts?) induce users to browse.
The content of the floating window is "Newcomer 106 gift package is received for a limited time | 41:47:48". The floating window allows users to notice at a glance that the time on the title is accurate to seconds. Using the principle of scarcity, users can feel the uniqueness and timeliness of this offer, create a sense of urgency, and induce new users to consume.
"Recommendation" in the bottom column: Use visual temptation elements and visual comparison techniques to provide psychological hints to users (that suggests that there are good things here), improve user interest, and stimulate users to browse

4.2.2 Clarify users

Using the AIDTAS model, users with clear goals were analyzed and found that this type of user has already generated clear goals and purchased them. For the platform, it should be a process of accelerating users' consumption, quickly allowing users to trust the platform's products, stimulating users to consume, and completing the final payment process.

The specific process of users' consumption is shown in the figure. The most important electric shock pages are the product list page, product details page, shopping cart list page, delivery address page, and order details page. The following will explain from a few ways how NetEase Yanxuan accelerates the consumption process of new users.

4.2.2.1 Product List Page

(1) Overall

The entire page uses white as the background color, creating a sense of freedom and space, making customers feel that the product types are quite rich and can be selected by users. Then, product pictures are used as visual inducing factors to create a visual center so that users can see the product as well as the word "explosive" on the product page as soon as possible.

(1) Partial

Selection of other types of product at the top of the page: Simplify users' choices to perform other operations, reduce the reverse progress of users' consumption process (for example, if the user wants other products of this type, he needs the user to exit the current contact page and enter the previous page), further induce consumers to proceed forward in the consumption process and accelerate the consumption process.
Comprehensive, price, new products, and filtering: The four options are the most important factors for users when making consumer decisions. Consider them for users, help users make decisions, facilitate consumers to make selections, and accelerate the user decision-making process.
Type, usage scenarios, packaging: Use the scene hint effect to allow users to further refine the product usage scenarios, remind users of the picture of using the product in the scenes set by the user, depict the user's expectations, and imply that if the user purchases the product, they can quickly achieve the scenarios they want, and use such means to further induce users to consume.
Popular products: Use the principle of color comparison and text content to hint to users, implying that the product is the best and most popular (primary effect), and everyone likes it (social conformity effect), further induces users to browse and consume, and induces users to consume. Note: If you have platform data, you will definitely find products with the word "hot product", and the number of clicks, views and purchase rates of the products will be higher.
Contains 40% free-range eggs, 800 grams of cheesecake: Use precise values to anchor the product, allowing users to feel the nutritional value of the product and improve user trust.
Interest-free installment: Use pressure to decompose and split into pressure that users perceive less or cannot perceive (the threshold effect), lowering the threshold for users to consume and inducing users to consume.

4.2.2.2 Product Details

The product details page consists of four main modules, namely product introduction, product evaluation, product details, and recommendation.

"Explosion" has a total of 90,000+ positive reviews: using visual contrast effects to create a visual center, suggesting that consumers are the best selling (hint effect) on our platform, "cumulative sales of 90,000-+" can show super high popularity (herd effect), build trust with consumers, and eliminate purchasing barriers.
Newcomer special offer: Use price anchoring and "snatching" to establish hint scenes, allowing new users to feel the product's shortage and popularity and create a sense of urgency (through scene hints without any oppressive words, users create a sense of urgency).
Product evaluation: Use the simultaneous presentation of comments and product pictures to highlight the comments of other consumers and capture the user's attention. This module can slide horizontally to facilitate consumers to read other comments. Good reviews show the quality of the product, eliminate obstacles for users to make purchases, build trust with users, and thus stimulate users to make consumption.
Yanxuan Commitment: Add "Yanxuan Commitment" to the head of the product details page to increase consumers' trust in the product. Through the platform, endorse the product (authoritative effect), establish trust with users, and further eliminate the worries about consumption and purchase.

4.2.2.3 Shopping cart list page

When the user enters the contact page of the shopping cart list page, it has proved that the user already wants to buy the product. For PM, the main purpose of this stage is to speed up the user's consumption process, try to eliminate all unpositive factors that may affect the user's entry into the next process page, and complete the final purchase.

Newcomer discounts, newcomer special offers: Use newcomer discounts and newcomer special offers to let users feel the uniqueness of this consumption discount and the privileges brought by their identity, creating a sense of urgency, and further stimulating new users' desire to consume.
Red "settlement": Use color vision and fonts to provide psychological hints to consumers, so that users can have logical coherence in their consumption process, eliminate interference from other factors, and accelerate the purchase process.

4.2.2.4 Shipping address page

This page is a contact page that new users will definitely do when they consume. The main function of this page is to fill in the user's receipt information. Therefore, for PM, the main purpose of this page is to let users fill in the information. It should be as simple and intelligent as possible, so that users can fill in foolishly and reduce cumbersome operations to prevent excessive consumption of user patience and thus exit or reverse consumption process.

In order to reduce the cumbersomeness of creating new addresses for new users, NetEase Yanxuan adopts intelligent selection (fool-style) operations, allowing new users to fill in the information of the delivery address faster, improve user experience, reduce interference from other factors, and speed up the consumption process

4.2.2.5 Order Details Page

Multiple payment methods: Multiple payment methods eliminate consumer purchase barriers, improve consumer experience, and eliminate obstacles facing users.
Tomorrow, it is expected to be delivered on November 4th: By describing the delivery time of the product, making scene hints, and suggesting that consumers can own it as quickly as possible to increase consumers' expectations and further strengthen consumers' determination to pay.
¥13.80: The high frequency of price anchoring appears, which can continuously strengthen and imply consumers, allowing users to know the value of this product and the huge discount amount.
Don't worry, you can still change your mind after receiving the goods: assume the user's purchase risk commitment, let the user eliminate the worries about purchasing (loss aversion psychology), and add an insurance policy to the consumer psychology.
Check to activate, this order will be immediately reduced by ¥5: further tempting new users to purchase and become the last insurance.
Red "submit order": uses color vision and font to provide psychological hints to consumers, so that users can have logical coherence in their consumption process and eliminate interference from other factors.

4.3 Average Order Value

The average customer price is the average amount of goods purchased by customers. The most important thing to increase the average customer price is to increase the frequency of consumption and the amount of single purchases. For the PM of NetEase Yanxuan platform, it is necessary to ensure that users consume, but also to increase the frequency of users’ consumption and the amount of single consumption as much as possible. NetEase Yanxuan increases the user's average customer price from the product details page and the shopping cart page respectively.

4.3.1 Product Details Page

NetEase Yanxuan takes advantage of the loss aversion effect and adds modules such as red envelopes for newcomers, free shipping for full amounts, and floating windows for full amounts of money to increase the user's single consumption amount.
Related recommendations: NetEase Yanxuan puts the relevant recommendations at the bottom of the product details page. This way, after users read the product recommendations, they can see the products recommended by the platform for users, further increasing the exposure rate (exposure effect) of other products and increasing the probability of clicking, browsing, and purchasing products.

4.3.2 Shopping cart page

NetEase Yanxuan has placed three to four gifts in the shopping cart of new users, but all of them need to meet a certain amount to obtain the gift.

NetEase Yanxuan uses the birdcage effect method to further increase the consumption frequency of new users. And on the entire page, place discount information on discounts with high frequency and unknown information (the exposure effect and loss aversion effect work together) to continuously imply users and induce users to consume.

From the figure below, you can see how high this frequency is, and this is on a single page, as well as other pages of the process and this information.

4.4 Summary

In terms of improving GMV, NetEase Yanxuan can be said to have cleverly utilized limited pages, highlighted key points in limited space, made reasonable arrangements, and made full use of each space. This may be the reason why NetEase Yanxuan can quickly gain a large number of users in the market occupied by large e-commerce platforms such as Taobao and JD.com.

5. Product Iteration Analysis

The following figure is the total download volume of NetEase Yanxuan App from January 5, 2017 to November 5, 2020. The blue one is the total download volume line chart and the red one is the total download trend line (polynomial). According to the analysis of the download volume curve of NetEase Yanxuan App, from January 2016 to August 2017, the download volume was small and the download volume grew at a low rate, so it was determined that it was in the first stage of the product.

Starting stage : From August 2017 to August 2019, the download volume increased rapidly, the growth rate was getting faster and faster, and there were no signs of slowing down. The product was in the second stage
Development stage : From September 2019 to November 2020, the total download speed of this stage increased faster, but gradually slowed down later, so it was determined that it was in the third stage of the product.
Maturity stage : Continuously optimize basic functions to improve retention and purchase conversion rate;

As can be seen from the figure, the total number of downloads of NetEase Yanxuan App has been showing an upward trend, proving that the product has been developing steadily. Combining the total download line chart of NetEase Yanxuan App with the product life cycle, we can divide the development of NetEase Yanxuan products into three stages, namely the first cold start stage, which is the stage of verifying user needs and improving basic functions ; the second development stage continuously improves functions and improving user shopping experience; and the third mature stage, which continuously optimizes basic functions and improves retention and purchase conversion rate;

5.1 Startup Phase

Verify user needs and polish user experience.

After sorting out, the content of the iteration of the main product version at this stage is shown in the following table.

From January 2016 to August 2016, V1.0 to V1.8 versions are the launch stage of Yanxuan APP. At this stage, NetEase Yanxuan’s goal is to verify user needs, polish user experience, and improve the basic functions of the product. In order to better understand the rhythm of product iteration at this stage, we combine version iteration with downloads, as shown in the figure below.

From this, it is obvious that NetEase Yanxuan’s characteristics in product iteration, and iterates the version in a planned and rhythmic manner in response to problems.

In terms of the total number of users downloads, NetEase Yanxuan is an incubated product for NetEase. Before 2016, NetEase had many types of large-scale products such as email, NetEase News, and games. During the launch stage of NetEase Yanxuan, most of its seed users obtained the first batch of users in the launch stage by sending emails.

The reason why the number of users did not grow on a large scale during this stage was mainly because NetEase Yanxuan did not use large-scale operational means to increase the number of users during this stage, but instead focused on verifying user needs.

To polish the product experience and improve the basic functions of the product, it can also be seen from NetEase Yanxuan's official Weibo that the first Weibo post of NetEase Yanxuan's official Weibo was on March 3, 2016. Most of the Weibo content at this stage is about introducing brands and products.

From the perspective of product functions, the V1.0 version of APP is just a product with the most basic functions, which requires continuous iteration and improvement of basic functions, such as login methods, payment methods, customer service, shopping process, etc., aspects that users will definitely encounter when using APP.

5.2 Growth Stage

While continuously optimizing and enriching product functions, we will build operation tools, continuously attract new products, and increase the number of users.

After sorting out, the content of the iteration of the main product version at this stage is shown in the following table.

From August 2016 to September 2019, V2.0 to V4.7 versions, this stage is the rapid development of NetEase Yanxuan products, with the total number of downloads increasing from 424,563 times to 57702,104 times. This stage has undergone thirty version iterations. At this stage, the purpose of NetEase Yanxuan’s products is to continuously optimize and enrich product functions while building operation tools, continuously attracting new products, and improving user retention rates. In order to better understand the rhythm of product iteration at this stage, we combine version iteration with downloads, as shown in the figure below.

From the product iteration rhythm compiled from the above figure, although there were continuous increase in operational activities and increase the number of users in the first half of this stage, the focus was still on the aspects of continuous optimization and enriching product functions. In the second half of this stage, it was obvious that while continuously optimizing basic functions, it was reasonable to use operation methods to increase the number of users.

In terms of optimizing and enriching product functions, in addition to continuously optimizing basic functions, NetEase Yanxuan has also continuously added modules of membership system, guess you like, hillside special offers, personalized pop-ups, flash sale, and size assistant to further enrich the functions of the product, meet user needs, and improve users' shopping experience.

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

5.3 Mature stage

Continue to optimize basic functions to improve retention rate and purchase conversion rate

After sorting out, the content of the iteration of the main product version at this stage is shown in the following table.

From August 2016 to September 2019, V5.0 to V5.8 versions, this stage is the stage of the maturity of NetEase Yanxuan products. At this stage, NetEase Yanxuan continuously optimized basic functions at the product level, including adding one-click login function, optimizing return and exchange process, optimizing historical browsing record product entrances, etc., further improving user experience and conversion rate;

At the same time, it is constantly trying various ways to further operate on the operation side, such as CEO Ding Lei conducting live broadcasts, live broadcast cooperation with Luo Yonghao, cross-border cooperation and other methods. At this stage, NetEase Yanxuan’s purpose is to continuously improve retention and user activity on the basis of improving the user experience of the product.

5.4 Summary

Overall, NetEase Yanxuan's product rhythm is quite good. In the early stage, it focuses on verifying user needs and polishing the product, and is not in a hurry to promote it, because even if the operation is carried out, a large number of users will come in, and the product's functions are not in place and the user experience is not in place, resulting in a high churn rate.

When the product and user experience stabilized, NetEase Yanxuan began to continuously increase its operational activities and continuously acquire the number of users. When the number of users of the product reaches a certain level and enters the maturity stage, in order to continuously improve and stabilize the number of users, NetEase Yanxuan continuously optimizes the user experience to prevent user loss on the one hand, and increases the level of operations, using a variety of operation methods to improve user activity and retention rates.

6. Product structure analysis

In product iteration 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 V5.6.0:

In order to further analyze, the product structure of NetEase Yanxuan is re-sorted and analyzed according to four perspectives: user, scenario, needs and functions, and the following table is obtained

Overall analysis:

Because the main target users of the mobile terminal are consumers, the focus is on meeting the needs of consumers.

When consumers use NetEase Yanxuan App, there are three main scenarios:

1) Before consumption:

Before consumption, it refers to the application scenarios of consumers before deciding on consumption. In this scenario, consumers will browse the product through the mobile client, understand the product related details, check the promotional activities, compare whether the product meets their goals, form a psychological account in their hearts, and determine whether to buy it.

2) When consumption:

When spending, it refers to the application scenario where users choose good products and prepare to make payments. In this application scenario, consumers have determined the product they want to purchase and put the product in the shopping cart. At this time, consumers will choose to purchase directly, and will also choose to place an order with other products, select discount coupons, participate in discount activities, fill in relevant information, and make payments.

3) After consumption:

After consumption, it refers to the application scenario in which the user has completed payment. In this scenario, consumers may continue to browse other products, or learn about the logistics information of the products through mobile clients, or perform return and exchange services, or conduct product evaluations and other processes.

6.1 Scene 1

In this application scenario, based on the clarity of the goal and the classification of product types , pre-consumption users can be divided into three types:

1) Clearly buy a certain product: The consumer of this type has clear goals and knows clearly what kind of product they want to buy. He will search on the platform, then view the product details, and finally add it to the shopping cart.

Based on the needs of this type of users and the touchpoint pages during the usage process , NetEase Yanxuan provides keyword search modules, category navigation modules and other modules on the homepage; provides detailed scene selection modules, sorting modules, etc. on the product list page; as well as collection modules, recently browsed modules, etc.

2) Clearly purchase users of 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 clearly purchases a certain type of product, they will constantly browse the product and view the product details, and conduct round-trip operations. This type of consumer would like to further refine the scenarios in which they use the products and further refine the products.

Based on the needs of this type of users and the touchpoint pages during the usage process, the website Yanxuan uses classification modules to help consumers choose products and provide personalized recommendations to users. The classification module divides the products into thirteen categories. Under each subcategory there is a special recommendation module and two product categories to meet consumers' needs for product richness and further subdivision of product types.

When users enter the secondary classification of products, NetEase Yanxuan also adds product operation scenario options to meet consumers' further refined needs.

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.

In order to meet the needs of this type of users, NetEase Yanxuan has designed modules such as brand introduction, worth buying, and recommendation. The details are as follows:

Brand introduction and the platform introduction at the top of the homepage help users understand NetEase Yanxuan’s brand concepts, values, positioning, user rights and other information, establish consumers’ awareness of the platform, and build trust with consumers.
Worth buying, Worth buying is the first-level module of this APP. There are a series of recommendations such as value zones, employee selections, and good products awards to meet consumers' diverse consumer factors.
Recommended modules, there are recommendation modules at the end of the home page, product details page, etc., which use the recommendation module to recommend users to meet the needs of purchasing without different factors.

NetEase Yanxuan can use the operational side (such as festivals, discount distribution, etc.) to increase users' consumption interest and stimulate consumption desire.

6.2 Scene 2

In this application scenario, the user has selected the product and is ready to make payment . All the user needs to do is to select the product specifications/quantity, fill in the address/consignee/contact information, select the payment method, and make payment.

At this time, if consumers only need to purchase a single item, they can place an order directly. This requirement corresponds to the purchase now - fill in the order module.

If the consumer needs to purchase multiple items at the same time, he can enter the shopping cart noodles and select the products he needs to purchase as well as the attributes, orders, and coupons. In order to meet the user needs in this scenario, NetEase Yanxuan provides coupon collection module, shopping cart editing/sharing module, order-making module, purchase replacement module, settlement module, etc.

6.3 Scene Three

In this application scenario, users have completed their consumption and are more concerned about value-added services such as logistics and after-sales services . In order to meet the user needs in this scenario, NetEase Yanxuan provides modules such as logistics viewing information, after-sales evaluation, customer service, after-sales return and exchange, sharing and receiving coupons, and posting orders.

6.4 Summary

From the above analysis, we can find that the functions of NetEase Yanxuan products can well meet the needs of users in three application scenarios, including before consumption, during consumption and after consumption. At the same time, recommendation functions are designed on multiple pages to recommend products from the platform to users from multiple angles.

7. Operational Path Analysis

Products and operations are inseparable. Compared with "products are responsible for giving birth and operations are responsible for raising children", the more precise term should be that products are responsible for defining and providing long-term user value, and operations are responsible for manufacturing to create short-term user value and assisting products in better product improvements in long-term value .

From this we can see the significance of operation to a product. The most basic thing for each activity is the purpose of the activity, and the purpose of the activity is the self-driven force of the activity. The following will sort out the operational activities of NetEase Yanxuan since its establishment from the purpose of the event: It is divided into five categories (because it is impossible to obtain detailed internal information and data of the operational activities, so it can only be roughly analyzed for your reference):

Method 1: Star cooperation

April 2020: Join forces with several entertainment stars to promote, such as Jia Nailiang, Kan Qingzi, etc.
March 2020: Launch offline store one-day store manager and promote it with Zhang Yishan
November 2019: NetEase Yanxuan and 6 celebrity youths release six major life attitudes
October 2019: NetEase Yanxuan and NetEase Cloud Music make 16 Yanxuan user stories into an album
May 2019: NetEase Yanxuan and Dou Xiao’s Zhiko Native Art Fund build a “Natural Healing Institute”

Method 2: Cross-border cooperation

October 2020: NetEase Yanxuan moves into WM Motor Points Mall
June 2020: NetEase and Moutai Group reach cooperation
September 2019: NetEase Yanxuan and Yanghua Times Culture invite users to watch dramas together
April 2019: NetEase Yanxuan Fan Festival joins hands with Zhihu, Ctrip Travel Group, iQiyi members, etc. to speak out for their dedicated life
August 2019: NetEase Yanxuan joins hands with the movie Shanghai Fortress to give everyone a gift
In May 2019, NetEase Yanxuan and MarryU jointly launched the 521 Lover's Day.
In January 2019, NetEase Yanxuan and Wenxuan BOOKS launched a series of scene-based reading spaces called "New Middle-class Study Room" in Chengdu.
June 2018: NetEase Yanxuan and Ctrip's B&B chain brand Youjia Chain jointly created the first "Yanxuan HOME Youjia B&B"
February 2018: NetEase Yanxuan joins hands with Ele.me to order food online and perform "Non-closed food party"
September 2017: NetEase Yanxuan and Vanke Boyu launch the "14-day home transformation" plan
August 2017: NetEase Yanxuan joined hands with Yaduo Life's new hotel brand "Yatu Light House" to officially launch the first "Light Life Concept Hotel".

Method 3: Charity Activities

April 2020: NetEase Yanxuan and Dachuang Town jointly launched three items of assistance and support for efficient college students in the new district.
March 2020: NetEase Yanxuan Sakura Series Charity Activities Help the Return of a Better Life, and will donate part of the sales to prevent and control the new coronavirus
In November 2019, 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.
January 2019: NetEase Yanxuan and Palm High-speed Railway donate to the targets of assistance
In December 2018, NetEase Spring Breeze World AIDS Day theme charity event "Cycling with Ai" was held
November 2018: NetEase Yanxuan launches the "Brand Co-creation Poverty Alleviation Plan" in Leishan County, Guizhou

Method 4: Short video promotion

Short videos are the most popular way of communication today. NetEase Yanxuan has produced short videos with various connotations and meanings for publicity and promotion.

NetEase Yanxuan Selector Factory Inspection: In 2018, the process of Yanxuan Selectors inspecting the factory was recorded, such as going to Shanghai to learn about the research and development story of Yanxuan's hot down quilt, and personally participate in the production and production of a down quilt; going to Shaoxing to learn about the ancient inheritance process of Yanxuan's special rice wine, and taste different types of rice wine; going to Ningbo to learn about the entire production process of Yanxuan imitation rattan mats; inviting children to inspect the Yanxuan xylitol hand and mouth wipe factory; going to Luoyong Prefecture, Thailand to witness the entire process of a drop of glue evolving into a latex pillow, etc.
Strictly Selected China: In April 2020, the project of Strictly Selected China’s cultural traceability was launched, and the 1st episode of the “Strictly Selected China” series of micro documentaries “Hangzhou, This Place Is a Little Spirit” was launched.
Yanxuan Laboratory: Introduces various products from NetEase Yanxuan, such as NetEase Yanxuan Bozi soda, fresh jelly, big-headed fans, all-aluminum-magnesium alloy boarding case, red wine glasses that are not suitable for breaking.
Strictly selected recipes: Teach and promote how to use strictly selected products to make delicious foods, such as summer ice cream, tea-flavored chicken, lemon garlic shrimp, wolfberry glass fish for the Spring Festival, glutinous rice eggs, and teach everyone to be cute gingerbread people on Christmas.

Method 5: Live broadcast promotion

November 2020: NetEase Yanxuan CEO Group to broadcast live
May 2020: NetEase Yanxuan invests 100 million in share recruiting anchors and institutions
April 2020: Cooperate with Luo Yonghao to let Luo Yonghao live streaming and sell goods
2020-9-21: E-commerce live broadcast event initiated by NetEase Yanxuan and Tencent Weishi [Tencent Weishi Super Brand Day]

Method 6: Copywriting and packaging

In February 2020, NetEase Yanxuan Bus Station Advertising - "Don't look at this advertisement", echoing the special social environment during the epidemic period and effectively resonates with warmth.
April 2018: NetEase Yanxuan arranged 10 children to create another "Yanxuan Xiang" and gave the fragrance to 20,000 NetEase Yanxuan packages as a surprise to users for the second anniversary of its launch.
April 2017: NetEase Yanxuan conducts creative bus activities: You can buy this Guangzhou by spending 2,365 yuan on NetEase Yanxuan.

8. Conclusion

Through the overall analysis of the e-commerce industry and NetEase Yanxuan, we can draw the following conclusions:

Through the joint effect of political, economic, social, cultural and technological reasons, the e-commerce industry has achieved great development and the e-commerce industry has entered a stage of mature development. However, due to the joint effect and development of various factors, consumers are increasingly looking at the cost-effectiveness, and the traffic growth of e-commerce platforms is weak.
As a brand representative under consumption upgrade, NetEase Yanxuan is mainly Xiaomi Youpin. The business models of the two have similarities and differences. The same is that they both start from the upstream suppliers. NetEase Yanxuan chose to carefully select suppliers with good reputation through the ODM model. According to NetEase Yanxuan's understanding of consumer needs, manufacturers can design corresponding products and use NetEase Yanxuan's platform to sell them to provide consumers with cost-effective products; while Xiaomi Youpin uses the combination of ordinary suppliers + deep binding suppliers to go deep into upstream supply companies, so that they can not only get sales share, but also get equity income share quotas superimposed.
In NetEase Yanxuan’s business model, there are three main participants, namely consumers, suppliers and platforms. If the platform wants to achieve rapid development, it must balance the needs and interests of these three participants. On the one hand, NetEase Yanxuan is based on its own advantages and uses big data technology to output manufacturing standards to the factory. The factory plays the role of processing and manufacturing to carry out customized batch generation; on the other hand, branded products can well meet the needs of modern consumers; through such a model, it can well balance the interests between the three, meet the needs between the three, and realize their respective values.
NetEase Yanxuan’s core business is an e-commerce platform. If you want to maintain the stable growth of GMV, you must design it for different types of users. Taking new users as an example, through the AIDTAS model, we found that different types of new users have different purposes and needs. Based on this discovery, we analyzed the designs made by NetEase Yanxuan in increasing the number of new users, increasing purchase conversion rate and increasing customer unit price.
NetEase Yanxuan has a reasonable pace in product iteration and adopts different development strategies at different development stages. In the first stage, we did not rush to use operational means to acquire customers, but instead focused on verifying user needs and polishing user experience; in the second stage, while continuing to optimize and enrich product functions, we built operation tools to increase the number of users. In the third stage, the focus is on user experience, and continuously optimize product functions while improving user retention and conversion rates. From this we can see that the three stages of NetEase Yanxuan's product iteration have different focus.
NetEase Yanxuan’s target users are midfielders in first- and second-tier cities, and the functions of their products are built around the needs of these consumers. There are three main types of consumer usage scenarios: before consumption, during consumption and after consumption. NetEase Yanxuan's product functions can be said to be well met the needs of consumers in different types of users in different scenarios.

9. Suggestions

Compared with some other e-commerce platforms, NetEase Yanxuan also has corresponding disadvantages and advantages. In order to better see the disadvantages and advantages, we use the SWOT model for analysis here.

9.1 Advantages (S)

At present, other e-commerce platforms only provide traffic and technical support, and do not participate in the production and circulation of goods. NetEase Yanxuan’s ODM model provides NetEase Yanxuan with advantages that other platforms do not have.

1) Strictly select manufacturers and products, use big data to empower manufacturers, so that manufacturers can create high-quality products that meet user needs. Manufacturers can also further improve the manufacturer's own capabilities through such profitable cooperation opportunities.

2) Reduce intermediaries, reduce brand premiums, and improve the most cost-effective products for consumers.

Finally, after several years of development, NetEase Yanxuan has begun to formulate some corporate standards, which will also become a future advantage of NetEase Yanxuan.

9.2 Disadvantages (W)

NetEase Yanxuan’s main flaw is its quality control and innovation.

1) In terms of quality control: NetEase Yanxuan’s core advantage is cost-effectiveness, but with the continuous improvement of SKU, NetEase Yanxuan will also face huge pressure on product categories.

2) In terms of innovation, the biggest disadvantage of NetEase Yanxuan model is whether it has the ability to continuously innovate and create explosive products that satisfy consumers.

9.3 Opportunity (O)

1) The country will continue to vigorously encourage the development of the e-commerce industry, and the overall industry development trend is stable, and the country will also vigorously encourage the integration of the Internet with other industries, such as manufacturing, which means that NetEase Yanxuan's development prospects are still broad.

2) Due to the effect of the jingchi effect, people's consumption will continue to upgrade and continue to improve in the future. Also, with the increase in the per capita disposable level, the younger generation of consumers has gradually become the main force, and they are more sensitive and picky about consumption choices. If they can seize this wave of young consumers who are gradually growing into the main force, then NetEase E-commerce will develop well.

9.4 Threat (T)

1) Patent infringement

NetEase Yanxuan’s model poses a great risk of infringement. NetEase Yanxuan and many brand supply production factories may have bought the copyright of a certain product, and NetEase Yanxuan cooperates with its manufacturers. How to not fully understand the copyright information and then sell it under the label of its own brand may lead to NetEase suspected of infringement, which will lay a time bomb for the future development of NetEase.

2) Facing the siege of other e-commerce companies

With the arrival of the second half of the Internet, NetEase Yanxuan's customer acquisition cost will become higher and higher, and it may face a situation of competing with e-commerce giant platforms such as Taobao and JD.com to compete for users.

Moreover, with the improvement of infrastructure to help strengthen the penetration of e-commerce platforms, the sinking market will become a new development focus of e-commerce platforms. However, e-commerce platforms such as Pinduoduo have already made arrangements in this field in advance, and NetEase Yanxuan may face siege and interception.

Through the above analysis of NetEase Yanxuan using the SWOT model, we can find that NetEase Yanxuan has advantages and disadvantages. The main problem for NetEase Yanxuan is to improve its own innovation ability and quality control ability. These two points are in line with NetEase Yanxuan's core goals.

The above is the analysis I made, I hope it will be helpful to everyone. Due to my limited personal ability, there are definitely some areas where my analysis is not in place. I welcome your criticism. Thank you!

Author: XMU—Lin

Source: XMU—Lin

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