A comprehensive analysis of Tik Tok’s private domain!

Let’s start with the time and a speech. Four months ago, Douyin held a press conference in Guangzhou to reposition itself, upgrading from the original Douyin e-commerce to "interest e-commerce" ; and proposed three major support plans.

They are: 1) Helping 1,000 merchants achieve annual sales of over 100 million yuan, 2) 10,000 high-quality talents achieve annual sales of over 10 million yuan; 3) 100 high-quality products achieve annual sales of over 100 million yuan. In fact, Zhiyuan does not pay attention to these figures.

As everyone who works in the Internet knows, the essence of communication is first to maximize value based on facts , and secondly to transform uniqueness into shared value.

In other words: Douyin has a huge user pool, preparing to attract more merchants into the supply chain channels. In other words; "Tik Tok is consolidating the supply chain structure" , which is only the first benefit for merchants.

But the most important component lies in the concept of "interest e-commerce", and many businesses ignore its essence; so what is interest?

To sum up, there are two types: material and spiritual. The former is usually manifested in the pursuit of food, clothing, housing and transportation, while the latter is specifically the pursuit of learning, research, academic knowledge and so on.

From a psychological perspective, interest is an individual's attitude and tendency to approach, explore, or engage in certain activities, which is referred to as "hobby."

To go further: When a person is interested in something, he or she will pay special attention to it, which will cause dopamine activity, allowing the brain neurons to form fixed pathways, thus continuing the addiction.

An important keyword in its output is "freshness" ; the human brain is like a person who is lacking oxygen and needs to take in more freshness for stimulation. If you can mobilize more senses such as smell, hearing, touch, etc., it will make the user feel more strongly.

Today we take a look at the development of the e-commerce market and talk about the evolution behind interest-based e-commerce from an industry perspective, as well as what form it will take in the future. Is it worthy of AII-in for merchants and opinion leaders?

01 The intersection of time and space

In 1930, American Michael Cullen opened the first King Cullen Union Store in New York State. Based on his decades of food experience, he cleverly designed a low-price strategy and pioneered the method of pricing by product category.

He was able to achieve an average gross profit of 9%, a figure that was quite astonishing compared to the 25-40% for general local stores at the time. Doesn’t anyone think that a high gross profit doesn’t mean more profit? certainly.

However, in order to ensure small profits but quick turnover, he adopted another business model. He adopted the method of purchasing in large quantities to lower prices in the supply chain, opened branches in the form of chain operations, established a sales system that guaranteed large purchases, and pioneered self-service sales.

Let’s think about it, what is the essence of offline transactions?

The circulation of goods creates a better experience for users and thus meets their needs, but it is not difficult to find that the core reason why traditional stores have too high gross profit margins is the "high time cost of transaction fulfillment" ; it has a huge relationship with the entire transaction chain.

The traditional supply chain to consumers needs to go through five layers of relationships, namely:

1) Suppliers, 2) Manufacturers, 3) Brands, 4) Channel Dealers, 5) Retailers, and finally to consumers; and in the middle there are also a lot of costs such as “transportation, labor, consumption” , etc.

Michael Cullen reduced these costs by eliminating sales clerks from stores and reducing other staff to manage the sales system, which meant lower prices, improved convenience, and increased fulfillment efficiency, which was certainly welcomed by consumers and developed rapidly in the 1950s.

Subsequently, supermarket culture "invaded" China in the early 1990s and expanded rapidly in a short period of time. So what types of self-service supermarkets are usually there?

• The summary is three points:

1) Warehouse type, 2) Large KA stores; 3) Retail supermarkets; the former serves as a transit warehouse to solve consumers' leisure and self-service shopping problems, while the latter meets the daily needs of the community.

In reality, no matter how the price difference of all commodity transactions develops , "it is reduced from labor and supply chain" , and if there is any extra part, it is the brand premium.

After the Internet era, the business pattern has changed. Online is a virtual space , and its development goes hand in hand with the real world. From a comprehensive perspective, all transactions are inseparable from "people, goods and places"; the biggest difference between offline and online is that it breaks the boundaries of "time and space".

How to understand it? The essence of conducting commercial activities by selling goods online is to move real-life commercial activities to the virtual world.

This way of transaction is very convenient and is a huge change to traditional business forms. I call the earliest e-commerce platform "primitive e-commerce."

Abroad, Amazon is the undisputed leader, covering 14 countries including the United States, Australia, Japan, the United Kingdom, etc. In addition, there are Ebay, Etsy, Newegg, etc. In China, famous platforms include Taobao, Tmall, JD.com, etc.

In the original stage, brand owners only need to put offline products online for sale, and relatively speaking, turn physical stores into Internet stores. The online platform actually provides a "venue" for transactions for "small and medium-sized merchants" . The essence of the transaction has not changed. The only difference between the two is that the "transaction efficiency" and "cost structure" have undergone tremendous changes.

Let’s talk about the efficiency issue first. Online is a public platform that all consumers can participate in. It breaks down information barriers and solves asymmetry problems.

For example: If you want to buy a pair of shoes, if you go to a physical store to bargain with the owner, you can only "bargain" within the price range given by the owner.

E-commerce platforms are different. They bring all merchants together, so you have the option of "comparing prices" and you can grasp a lot of merchant brand information and then make decisions.

The traditional offline store connection is a single-point linear state, that is, from channel to retailer; the store to consumer relationship cannot be changed, but the Internet has changed the structure, from linear to cross-network, and the increase in density means "increased efficiency."

As for the changes in cost structure, let’s look at traditional offline transactions from both the perspectives of consumers and operators:

From the consumer's perspective, when you go to a store to buy a pair of shoes, the decision-making cost lies in first knowing the "brand store", and secondly the "communication cost" generated between the product premium space and psychological expectations.

From the perspective of the middle dealers, it involves the "advertising costs to attract more consumers, the labor costs of store operations, the circulation costs of goods purchases , and even the communication costs lost before the final transaction.

Internet e-commerce is different. For merchants, what they pay is "virtual store opening cost, human operation and after-sales cost" ; for consumers, what they pay is "search comparison cost, payment cost".

So what is their biggest difference? Actually it is traffic. The survival of offline stores depends on users within a fixed three-kilometer radius. The consideration cost for users beyond the range will increase. Online stores are like a huge vegetable market, and the cost of shopping is very low.

02 From e-commerce to shopping guide e-commerce

With the development of the times and the rise of e-commerce platforms, the "five rings and eight gates" of related marketing strategies began to appear, such as flash sales, full-reduction, buy-one-get-one-free, discounts, etc., which became the main ways to activate old users; in other words, if many e-commerce platforms want to obtain traffic from other channels, they also need to purchase advertisements and promote their brands.

But the cost is huge, which has given rise to the "shopping guide platform" business, which mainly solves the "big platform traffic problem" through rebates; according to inventory, the development of China's shopping guide system can be divided into four major stages .

• They are:

1) Start-up phase, 2) Early development phase, 3) Mobile social e-commerce phase

Let’s talk about the start-up period first . The CPS commission model was first introduced by Amazon online bookstore in the United States in 1998. In order to promote and advertise for Amazon, other companies would give these companies a certain sales commission as compensation based on the order ratio.

These companies use various "technology plus content" methods to attract users to receive coupons and directly jump to the platform for consumption.

The development in China is not so fast. Shopping guides only officially started in 2006. Since the core logic of e-commerce transactions lies in the three core elements of "search, price comparison, and screening", the shopping guide platform grasps this user pain point; it mainly directs traffic to e-commerce malls such as Dangdang, Amazon, Joyo, JD.com, and Taobao.

Due to the limitations of technology at the time, shopping guide companies could only use crawler technology to crawl small websites and personal blogs for discount information.

Only later did more mature discount websites emerge, such as Fanli.com, What’s Worth Buying, Taofen.com, etc. As of 2012, most of them used “cheap and discounted” as their selling point.

As for the development period, after 6 years of iteration, by 2013, the tacit understanding between shopping guide platforms and e-commerce platforms gradually matured, and e-commerce platforms also began to develop in a diversified manner, actively supporting their own shopping guide platforms to bring in more traffic.

However, a power law situation has emerged, where cheap discounts have driven huge traffic on shopping guide platforms , which means that it will pose a huge threat to Taobao.

The reason is that they can build their own supply chain system and allow more brands to enter the website, thus forming the development of self-operated + supply + OEM brands.

In 2013, Alibaba began to adjust its support for the shopping guide system, directly restricting the API interface and forcing the third-party platform traffic entrance to be cut off, including Mogujie, Tuan800, etc.; this crackdown caused many websites to be cleared out, and some of them transformed to self-operation to get rid of their dependence on downstream e-commerce platforms.

Speaking of the mobile construction period , data from iResearch's 2015 report showed that mobile e-commerce transaction volume accounted for 55.5% of online shopping that year, and mobile transaction volume exceeded that of PC, which meant the beginning of the mobile e-commerce era.

During this stage, the e-commerce platform industry gradually matured, which represented the consolidation of comprehensive e-commerce such as Taobao, Tmall, and JD.com; and the formation of cross-border e-commerce and vertical e-commerce represented by NetEase Kaola and Yangmatou.

This node is also a new era for many PC players to transform to mobile and de-domain "network", and they are all focusing on the development of APP.

Therefore, judging from the three time flows, shopping guide e-commerce is a forked extension of PC e-commerce traffic; the reason behind this is actually that "4G dividends have brought about changes in content and technology."

Among the three types from 2016 to 2018, shopping guide platforms have gradually been subdivided. Zhiyuan divides them into two forms according to different operating models and services: 1) content type, 2) price type.

Content-based apps are represented by What’s Worth Buying. Through the UGC and PGC models, users can write their shopping experiences on the platform, which are then reviewed and processed by the platform for the second time. Products are classified according to their popularity and shared on the platform.

Improve user engagement and stickiness through likes and comments, and assist and optimize consumer decision-making in the content, thereby solving the pain point of information asymmetry.

The business methodology mainly recommends high-quality consumer content in the form of text, pictures, and short videos, and shows consumers specific preferential information about goods or services and usage strategies . The platform helps consumers filter lengthy information, form a specific understanding of the goods, and complete the purchase.

The representative of the price-based type is "Fanli.com", which pays more attention to enriching the coverage scenarios. In terms of business dimensions, SKUs extend to multiple categories such as finance, tourism, games, and book transactions.

The business methodology mainly utilizes tools such as rebates and coupons, and uses preferential information of various commodities or services to attract consumers to make decisions with intuitive price discounts.

In the past three years, due to the fierce development of traditional e-commerce, the market has once again segmented shopping guide platforms based on "content and price" factors;

Price-driven shopping guide platforms are subdivided into three types: price comparison, discount, and rebate ; content-driven platforms are subdivided into three types: content + discount , content + other social fission functions , and content + discount + fission marketing .

Let’s talk about the former first. The discount category basically provides coupon search. For example, if you see a certain product on Taobao, you can copy it to the relevant APP to search for related coupons, and then receive it and jump to purchase to enjoy the discount.

For example, Youzi Street in the past connected to major e-commerce channels to display commodity price trends and the "rebate network" for rebates. If you buy through this kind of website, you can get a commission after receiving the goods.

As for the latter , content + discount is the most basic form. The platform concentrates on KOL's selected soft articles and various low-price discount coupons. A large number of content-based platforms adopt this method and innovate new models on this basis.

For example, "Duitang" in those days focused on being a community for sharing beautiful pictures and articles, and at the same time developed a "money-saving zone" on the APP; on the one hand, it established inherent traffic , and on the other hand, based on social functions , it marketed to KOLs and helped them (create popular products, activate fans, and manage the community), etc.

Zhiyuan summarized it as focusing on social sharing marketing and developing content. Behind this is actually the integration of "the development of the social attributes of the WeChat ecosystem" and the emergence of community software such as "Weibo, Xiaohongshu, and GIF."

But in general, the revenue of shopping guide e-commerce is always inseparable from the "commission + advertising" model. Although they want to escape the control of traditional e-commerce, they finally find that they can never escape the difficulties of the supply chain.

03 From shopping guide to social e-commerce

After the melee, the shopping guide e-commerce has undergone a huge transformation into a few dominant players. During the battle, many merchants also benefited from the development of WeChat, which spawned a lot of "micro-business" businesses.

According to records, it first emerged in July 2012 and belongs to the C2C model; it appeared in Guangzhou and Shanghai, and then expanded to Beijing and Jiangsu, with the supply chain concentrated in the south.

Initially, transactions were conducted on QQ. After 2014, many businesses began to invest their survival opportunities in WeChat; for example, posting beautiful photos and luxury goods in the circle; with the widespread use of WeChat, friends in the circle of friends share the good products they use and promote them, allowing some people to capture business opportunities.

The current business model of Daigou is relatively simple, which can be summarized into three points: "Post to Moments, promote products, and acquire customers on Tieba" to achieve profitability

In order to promote product sales, some merchants engaged in Wechat business began to formulate top-level designs, for example, three-level agency model, positioning strategies, etc. However, not long after development, Wechat business began to have problems with random and counterfeit goods, and CCTV explicitly named the industry for rectification.

Doing business on WeChat is a "closed loop" and each person has a limited circle of acquaintances. This results in many people being unable to sell their goods and having problems with repeat purchases and traffic anxiety.

2015 is an era of chaos among micro-business, mobile e-commerce, and social e-commerce. It is as fierce as the Romance of the Three Kingdoms. Each has its own organization, but no one knows what the future will be like.

The change in model and the wild growth of WeChat users have spawned two giants, one of which is "Pinduoduo" and the other is the social e-commerce "Yunji", both of which are listed on the Nasdaq US stock market.

After several years of development, Taobao began to discourage non-compliant merchants from moving out. Huang Zheng, who was engaged in game development, failed in his business venture and applied gaming thinking to e-commerce business.

With the help of the early dividends of H5 websites and public accounts, we developed the product "Pinhaohuo" so that users can buy cost-effective products by group buying with only a few dollars.

Xiao Shanglue, the brand founder of Xiaoye Perfume and Suye Skincare, who has several years of experience in Taobao e-commerce, heard from Zeng Ming, chairman of the Alibaba Committee, that the S2B2C model is the future development trend. Based on his own judgment, he founded the social e-commerce platform "Yunji".

Traditional WeChat business, traditional e-commerce, and shopping guide e-commerce have been redefined, and e-commerce with a membership distribution system of 399 yuan has entered the consumer's field of vision.

Social e-commerce was like the "Hundred Regiments Offensive" back then, and the emergence of Yunji attracted many second-tier players.

For example: Global Catcher (later upgraded to Zebra Member), which focuses on food, Beidian, Huasheng Diary; Darling Home, DaV Store, Youhaoshouwu (the predecessor of Shihuituan), Little Black Fish; Miya, AiKucun, etc.; Zhiyuan is one of those who has experienced the battle, and the memories of it are still vivid.

According to public information, the distribution membership model is also known as the S2B2C model . S is the platform, and users become platform members after paying a certain fee. The platform (S) and members (B) share the profits.

Members use their own social networks (friend circles, other self-media channels) to promote and expand customer base and promote consumer (C) shopping behavior.

There are several types of back-end supply chain models, including "self-operated + POP (merchant settled) + EMO + external third party". The platform positioning is different and the selection is also different.

For example, Yunji initially adopted self-operation + several fast-moving consumer goods categories. On the one hand, it could increase the platform's GMV (revenue), and on the other hand, it adopted the method of member subsidies to facilitate growth and customer acquisition, which is called "hitting the mark" in the industry.

From 2015 to 2018, the market size grew rapidly. According to iResearch data, it increased from 930 million to 84.21 billion, including WeChat business and shopping guide e-commerce. The fierce competition at that time was between "supply chain and membership" .

After three years of fierce competition, many social e-commerce companies went public. However, they faded out of the market due to insufficient subsidies, weak operational retention, and problems such as brand building and supply chain management.

At this time, Taobao, Tmall and JD.com’s new e-commerce strategy and Double 11 and 618 integrated social celebrities to promote the market vigorously, thus establishing their leading position.

When the fulfillment costs drop lower and the number of merchants increases, internal competition begins to appear; many merchants who cannot afford the through train begin to seek "new opportunities."