E-commerce is a concrete witness to the rapid development of China's Internet economy.

Over the past decade, as China's overall strength has increased, the scale of e-commerce has also expanded rapidly. Today, Taobao and JD.com, which started earlier, have established an unshakable position in the e-commerce industry, and the up-and-coming Pinduoduo has also dominated the market with its impressive growth rate, and a situation of three major players competing for supremacy has officially taken shape.

In 2020, the sudden outbreak of the epidemic pushed the scale of e-commerce to a new level. Taobao, JD.com, and Pinduoduo also adjusted their business strategies during this period.

This e-commerce "Romance of the Three Kingdoms" has a new story.

The old-fashioned Taobao

The rapid rise of new platforms such as Pinduoduo has had a significant impact on Taobao and JD.com.

In February this year, Pinduoduo’s daily active users surpassed Taobao Mobile’s. Although Pinduoduo’s lead lasted only two days, this change in the pattern still sent an unprecedented signal to the domestic e-commerce industry: Taobao is not invincible.

Of course, it is too early to say that Pinduoduo can dethrone Taobao. Judging from the total merchandise volume (GMV) of e-commerce platforms in 2020, Taobao and JD.com still rank first and second. Especially Taobao, its GMV has reached 8.119 trillion yuan, which is almost equivalent to Australia's total GDP last year (1.3 trillion US dollars, about 8.52 trillion yuan), and it is nearly three times ahead of JD.com behind it.

As one of the oldest e-commerce platforms in China, Taobao has already reached a considerable scale in terms of both user scale and transaction volume, but this also means the arrival of bottlenecks. According to statistics, as of the third quarter of last year, the cost of acquiring active buyers on Taobao has risen to 1,158 yuan, which is 5.5 times that of Pinduoduo. This means that Taobao must do everything possible to explore new vitality from the existing market.

In the past two years, whether it is social media, video platforms or information flow platforms, there are common keywords: "algorithm" and "recommendation". Traditional e-commerce runs completely counter to this idea: users open the app, search for items, and place an order after finding what they like. The duration of this process varies from person to person, which is nothing more than the difference between walking 10 meters or 100 meters on a straight road.

Taobao’s idea is to expand a straight road into a large square.

Previously, Taobao's main strength was search capabilities. Since September last year, Taobao has shifted its focus to information flow. So today we can see that "subscription", "live broadcast", "hot search" and other sections with strong social media imprints have appeared on Taobao, and scrolling cards and videos are constantly teasing our shopping desires.

Taobao has applied big data recommendations to e-commerce, and in addition to the traditional "people looking for things", it has also opened up a route of "things looking for people". If the role of Taobao in the past was "buying", now it has become "browsing".

A few years ago, users often relied on recommendations from relatives and friends or the Internet to "seek" a product. Now Taobao has begun to use algorithms to recommend products that users may be interested in, and has upgraded "buyers' show" to "browse", encouraging users to share the products they buy. The two-pronged "seek" guidance makes browsing Taobao as easy as browsing Weibo and Moments.

"Shopping" may not be able to be converted into cash immediately like "buying", but it can enhance user stickiness and desire for interaction. For e-commerce platforms, the long-term value of this may be more valuable.

The success of live streaming e-commerce and information streaming-style redesign has helped Taobao continue to maintain its position as the leader in domestic e-commerce. However, as Alibaba Vice President Tang Xing said, “The existing recommendation model can no longer meet the needs of consumers. The combination of content and merchandise is bound to be an explosion point. Live streaming is just the first one to explode, and there will be more content-based changes in the future.” If it’s not Taobao that catches the next round of changes, then they probably won’t be able to sit back and relax.

JD.com, the online giant’s path to becoming a physical entity

JD.com is the second largest e-commerce platform in China. Compared with Taobao, its biggest advantage, in addition to its relatively higher authenticity rate, is its logistics speed.

JD.com is able to achieve next-day or even same-day delivery thanks to its strong warehousing capacity. JD.com has established thousands of warehouses across the country, with a total storage area of ​​more than 23 million square kilometers and more than 9 million SKUs of self-operated products. With its strong online and offline synchronization capabilities, JD.com has become the most efficient among major e-commerce platforms.

What this reflects is the essential difference between self-operated e-commerce platforms like JD.com and Taobao: the former is more like a physical enterprise with Internet genes, while the latter is a pure Internet company.

What supports Taobao is the huge user base of Alipay and the powerful computing power of Alibaba Cloud; and what makes JD.com successful is largely its physical assets such as goods and logistics parks.

Although JD.com is famous for its Internet business, it is still essentially a company rooted in the physical world. At the same time, they use Internet technology to feed back the physical business, thereby further improving efficiency.

JD.com has established the first 5G smart logistics park in China and completed the 5G and cloud-based collaborative system verification experiments for the entire warehouse robot process. It is expected that the large-scale production of 5G smart warehouse robots will be put into operation by the end of this year. Through the continuous updating of technology, JD.com's operational efficiency has also been improved. At present, its inventory turnover days have dropped to 31 days.

JD.com's physical business is also reflected in the manufacturing industry.

Currently, JD.com has four private brands, namely, JD.com Jingzao, Jiabai, LATIT and Huixun, which focus on mass products, home life, sports brands and sinking markets. Private brands allow JD.com to have products that are not available on other platforms, and also allow JD.com to cover more price ranges for the same type of products. According to statistics, in 2020, private brands have brought JD.com 3 billion yuan in revenue.

Since the outbreak of the epidemic, the importance of the real economy has been demonstrated time and time again. JD.com has chosen a "new entity" route that combines the Internet and the real economy. Liu Qiangdong also said that JD.com is a company "rooted in the real economy, growing in the real economy, and serving the real economy."

JD's strategy of focusing on the physical world means high investment and slow results, but in the context of the country encouraging the development of the physical world and manufacturing industry, in the long run, this will pave more ways for JD's development.

Pinduoduo: Growth is not everything

As the fastest growing e-commerce platform in recent years, Pinduoduo's image in the public eye has always been somewhat complicated.

The first time Pinduoduo came into the public eye was probably through its advertising for the 2018 World Cup. The cluster of "brainwashing" advertisements made it and other products like Boss Direct Hire leave a very deep impression on users - although not a very good one.

Subsequently, counterfeit and inferior products such as "Xiaomi new products" made Pinduoduo wear the hat of "a distribution center for counterfeit goods". In order to reverse its image, Pinduoduo used a killer move: 10 billion yuan in subsidies.

In 2019, Pinduoduo took the lead in launching a 10 billion subsidy campaign. In short, it is to pay money for reputation, and to attract customers by offering low prices while ensuring authenticity. After the launch of this campaign, Pinduoduo's growth rate has skyrocketed, with the growth rate of active users in 2019 and 2020 maintaining above 35%. In 2020, Pinduoduo's GMV reached 1.67 trillion, a year-on-year increase of 65.7%, which is still an amazing growth rate.

But at the same time, Pinduoduo's image in the minds of users is still not very positive.

Even though the 10 billion yuan subsidy guarantees the authenticity of the product, the doubts about "authenticity but not newness" have never disappeared, and order cancellations have occurred from time to time. For users who are not price-sensitive, they are still more willing to buy from official channels or JD.com or Taobao, which are more worry-free.

From the perspective of the entire company, the news of multiple employee suicides and the exposure of "depriving employees of the right to use the toilet" have also made the company bear the stigma of a "sweatshop", and some users have even begun to boycott spontaneously.

In terms of marketing methods, Pinduoduo is completely out of touch with elegance. This year, many video creators have exposed that Pinduoduo's so-called "red envelopes for new members" is just a "Temple Run" that will never reach the end; during the Olympics, "the Pinduoduo team was coming" reminded countless sports fans of the nightmare of the summer of 2018; during the just-passed Double Eleven, I believe that the dynamic pages of Bilibili users were also flooded with Pinduoduo's screen; even more outrageous is that Pinduoduo's splash screen ads will also disguise themselves as other forms to guide users into the App.

For users, as long as they can get benefits, these are not a problem. However, the benefits brought by Pinduoduo rely on investment regardless of cost, and its sustainability still needs to be marked with a big question mark.

Since the beginning of this year, Pinduoduo's revenue and user growth rates have slowed down.

The second quarter financial report showed that Pinduoduo's revenue reached 23.05 billion yuan, lower than market expectations; the number of monthly active users reached 738.5 million, and the growth rate slowed to 24%, which was half of the 50% in Q1 2019.

The slowdown in growth is mainly due to the surge in customer acquisition costs. In the first quarter of this year, the customer acquisition cost of Pinduoduo's active buyers has risen to 367 yuan, more than double the same period last year.

The behavior of stimulating growth by burning money is doomed to fail to last long, especially when the number of Pinduoduo users is approaching the total number of Internet users. This path is doomed to become narrower and narrower. Recently, some media even pointed out that a large number of sellers are fleeing Pinduoduo due to issues such as yield.

Fortunately, Pinduoduo has also realized this. From the financial report data, it can be seen that in the second quarter of this year, the proportion of Pinduoduo's marketing expenses in revenue dropped to 45.1%, creating a historical low. It should be noted that this figure has long exceeded 90% in the past three years, and sometimes even exceeded 100%, which seems to indicate a change in Pinduoduo's strategy.

Affected by this, Pinduoduo achieved the largest profit in the company's history in the second quarter of this year, with a net profit of 2.4146 billion yuan.

But this does not mean that Pinduoduo will take the route of "growth and profitability". Pinduoduo's CFO said that the reason for reducing the quarterly marketing investment is that the second quarter is Pinduoduo's traditional off-season, and profits also come from this, so the reference value of this profit is not great.

At present, Pinduoduo's growth rate has encountered a visible bottleneck, and it does not have a long-term stable pattern. Its future layout and ambitions are really hard to understand.

E-commerce chaos, good news for consumers

After more than a decade of competition, Taobao, JD.com, and Pinduoduo have emerged as the best, and the market has also formed a very obvious "28 effect". In terms of revenue scale, Alibaba is almost equal to the sum of the national e-commerce rankings from 2nd to 99th. Moreover, in terms of GMV, only Alibaba, JD.com, and Pinduoduo have reached the trillion level.

The up-and-coming companies have not stopped chasing the forerunners because of their huge size. New strategies such as live streaming and community group buying are emerging one after another, constantly injecting vitality into the industry.

Live streaming e-commerce platforms such as Kuaishou and Douyin are growing at a rate of several times faster than before; fast-moving consumer goods brand SHEIN has successfully expanded globally by leveraging big data to analyze user preferences, fast design and extremely low prices; and the "grass-planting tool" Xiaohongshu is also working hard to improve its monetization capabilities through the "number and electricity integration" strategy.

Regardless of their size, these e-commerce platforms are deeply involved in the domestic economic transformation, driving the reorganization and upgrading of the upstream and downstream of the industrial chain as well as various links such as production, circulation, services, and consumption.

Today's e-commerce industry is just like the Three Kingdoms in the late Han Dynasty. In addition to Wei, Shu, and Wu, there are many local tyrants. Competition leads to progress. In order to compete for users, various platforms are also making a fuss about price, quality, service, and special products, and ultimately every user becomes the beneficiary of this competition.

This makes us start to look forward to what the future of e-commerce will look like. Different models such as social networking, video, and industry can be combined with e-commerce, which means that e-commerce may have almost unlimited possibilities. Therefore, it is difficult for us to outline the specific form of e-commerce in the future. The only thing that can be determined is that in the future of the Internet, selling goods will be everywhere.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.