On July 14, a blockbuster news spread like wildfire: Alibaba and Tencent are considering opening up their ecosystems to each other, and both parties are making separate plans to relax restrictions.
The market has shown great enthusiasm for this “century reconciliation” drama. On the same day, the share prices of Alibaba and Tencent rose accordingly.
Left: Tencent; Right: Alibaba
The reason why the response is so big is that the openness of the e-commerce ecosystem may reduce the degree of “involution” in the e-commerce industry.
In such a trend, platforms such as Douyin, Kuaishou, and WeChat have tended to build their own closed-loop e-commerce ecosystems in the past year, trying to build a complete e-commerce transaction chain, and are no longer limited to diversion work.
- Since October 2020, Douyin will no longer support products from third-party sources to enter the shopping cart of the Douyin Live Room;
Deft in March 2019 on the line deft goods, open loop electricity supplier of the road, and entered into a collaboration with Jingdong, the focus will be the development of the electricity supplier of goods and supply chain to the upstream tilt, and deft shops free promotion (a direct result of the move The Hong Kong stock e-commerce SaaS track is praised by China, and the stock price has fallen by about 75%) ;
- WeChat continues to iterate optimization tools, and will officially launch WeChat small stores on August 20, 2020, and provide free merchant services;
Let the meat rot in the pot, and platforms have chosen to close the loop. This article will analyze this phenomenon.
Traffic leakage means that the “cake” is divided
When Douyin and Kuaishou ended up doing closed-loop e-commerce, or when the news of restricting Taobao links was spread, some merchants expressed concern: “I don’t want to see the situation of channel fragmentation. Concentrate on Taobao, so as to get a higher traffic distribution weight in Taobao.”
In fact, although the external links in advertising are not restricted, the leakage of “traffic” is precisely one of the reasons why Douyin and Kuaishou have closed the loop.
According to data, in 2020, Douyin e-commerce companies will create more than 500 billion GMV (total merchandise turnover) , but more than 300 billion of them will be jumped to the tripartite platform (JD.com, Taobao) and earned from it.
In this way, the content platform has a huge amount of traffic, but it is almost “reduced” to a diversion tool for third-party platforms. Not only is the value of the flow being diluted, but the realized income is also “divided.”
For example, assuming that 300 billion GMV are all transferred to Taobao, according to Ali’s 2017 monetization rate of 3%, Taobao’s revenue from 300 billion GMV is 9 billion.
Having been “cut” such a big piece of cake, which platform can bear it? What’s more, in addition to the “money” being earned, the user portraits of the platform also risk being captured by third-party platforms.
Generally speaking, users’ transaction data can show their shopping preferences, payment ability, etc. These data can be used to supplement accurate user portraits, thereby activating potential users and improving the commercialization efficiency of the platform.
This is an uncrowned “wealth code” for any platform. “Handing over” to a third party is obviously a big loss for the content platform.
From these dimensions, behind the closed-loop content platform e-commerce, there is actually a defensive purpose. In addition, the closed loop also has commercial development.
At present, for content platforms, traffic monetization mainly includes advertising, live broadcast rewards, and games.
In terms of advertising revenue (advertising revenue=DAU*per capita feed*Adload*eCPM) , eCPM (revenue from thousands of impressions) fluctuates slightly, while Adload (ad load rate) has an upper limit. Excessive increase will hurt the user experience.
This means that as platform DAU and user duration stabilize in the future, the upper limit of advertising revenue can be foreseen.
At the same time, in the article “Quick Hand Arithmetic: Sacrificing the Show, “Money” Changing the Way” , we analyzed that the “topping” of the show live broadcast is an established fact in the industry.
In this article, our calculation results of platform and creator income under the two modes of show live broadcast and e-commerce live broadcast show that the income of platforms and anchors in the e-commerce mode is much higher than that in the show mode, which is a great content platform. Potential performance drives business.
With such a business focus shift, the closed-loop e-commerce platform can further increase the value of the platform’s traffic under the original limited revenue growth.
In addition, by constructing a closed-loop ecology, bringing goods in the platform stores, the “high” commissions drawn by third-party platforms are released to the platform and anchors.
At present, in order to attract merchants, the platform does not charge commission fees for merchandise in small shops, but only technical service fees: for example, Kuaishou charges 2~5% of GMV. But the anchor end has indeed gained “benefit”.
Take the promotion of Kuaishou as an example, if the products promoted through the Kuaishou Goods Alliance (self-built product supply chain) , compared with the third-party platform model, the anchors get the most commissions.
In addition, the platform’s closed-loop e-commerce business also lowers the barriers to entry into live broadcasts and expands the realization space for the large number of small and medium-sized anchors on the platform.
Taking Douyin as an example, according to its “2021 Douyin E-commerce Ecological Development Report”, in 2020 (the first year of launch ) Douyin e-commerce has become an important growth point for the income of talents.
As shown in the figure below, the scale of Douyin e-commerce creators and per capita income continues to grow at a high speed. As of January 2021, the anchors who have received e-commerce income have exceeded one million; and in the second half of 2020 compared with the first half of the year, the monthly GMV per capita of the anchors increased by 588 year-on-year. %.
It can be seen from the above that the closed-loop e-commerce of the content platform not only avoids the risk of traffic (low-efficiency monetization) and data “lost”, but also improves the ecological integrity of the platform, creating imagination for the monetization of the platform and creators.
Based on this, the content platform is a last resort for e-commerce closed-loop, but to a certain extent, it can achieve “three birds with one stone”. However, although closed-loop has many advantages, are the conditions for the platform to be a closed-loop e-commerce mature?
Is there such a “diamond diamond” for the “porcelain job”?
The forerunner of the content platform to try the closed loop of e-commerce is Xiaohongshu. When Xiaohongshu was launched on the Welfare Agency in 2014, its founder Qu Fang once said: “E-commerce is responsible for making money and supporting the family, and the content is responsible for the beauty and beauty of the platform. ‘Weeding’ the closed loop of consumption.”
However, the actual situation, in the words of the netizen “Miss Pi”, is: The various items of Amway in Xiaohongshu are very useful, such as: eye shadow tray, nail polish, watches, etc., but when I see my favorite item, I will find it in Xiaohongshu. Do it on the guide, and then change the place to buy.
The reason is straightforward-there is no guarantee for buying products on Xiaohongshu.
It can be seen that “mixed sale of true and false”, “cannot return the goods when opened”, “cannot comment or give bad reviews”, “official personnel pretend to be dead, do not admit that they have fakes” and other “posts” of Xiaohongshu. , It’s not uncommon on social platforms.
There may be personal emotions in these complaints, but it is undeniable that the exposure of various “problems” finally closed the loop of Xiaohongshu’s e-commerce.
According to data, Xiaohongshu’s e-commerce GMV in 2017 was only 6.5 billion, and in 2018 it did not complete its goal of 12 billion GMV for the whole year.
Based on the lessons learned from the past, will Douyin and Kuaishou’s closed-loop e-commerce business “repeat the same mistakes”? Let’s compare and analyze.
From a timeline point of view, Xiaohongshu, established in 2013, rushed into the “self-operated e-commerce” track after a year of community development. The content community construction and volume are hard to say, but the user’s buying habits on the platform , Almost need to be cultivated from scratch.
At that time, it coincided with the rapid rise of Ali and JD. Coupled with the emergence of Pinduoduo and the giants, the slow development of Xiaohongshu seemed to be expected. After all, the vertical track e-commerce companies in the same period did not develop very well, such as Jumei Youpin.
In contrast, the basic conditions for Douyin and Kuaishou can be described as “leapfrogging” upgrades-large traffic volume: As of May 2021, Kuaishou MAU reached 430 million, Douyin 630 million; has an open e-commerce foundation: 2020 , Kuaishou e-commerce GMV exceeded 400 billion, and Douyin exceeded 500 billion.
The current core contradiction between the two platforms is how to transfer users’ buying habits from the previous third-party e-commerce to their own e-commerce services.
Although this is different from Xiaohongshu’s direct content to the closed loop of e-commerce, it still faces the same problem: the platform is both a referee (planting grass) and a player (selling goods) , how to maintain truthfulness, objectivity, and independence ?
For example, a related person disclosed that Xiaohongshu “Planting Grass” has already clearly marked the price, and the evaluation and sharing of “true feelings” you see is probably an advertisement for the product to spend money. The objectivity may be greatly compromised when the sharers are “soft hands”.
At present, Douyin and Kuaishou, which are mainly based on live streaming mode, are also deliberately building a consumer view of “I feel that I don’t lack anything before watching the live broadcast, and I feel that I lack everything and want to buy everything after watching the live broadcast.” Increase conversion rate.
Take Kuaishou as an example. According to its 2020 user and marketing report, among the top 30 Kuaishou products, 95% of live broadcasts include bridge design, which is mainly manifested in daily chats and performances, increasing interaction, and establishing a foundation of trust between anchors and users. .
According to CBNData data, 76% of the people planted grass/buy goods in Kuaishou, 40% of them are because they trust the anchor, and 33% are because of their love for the anchor.
And this trust-based “people looking for goods” matching “goods looking for people” buying relationship is both strong and fragile, and it is better if there is no problem. Once a problem occurs, a crisis of trust will easily erupt and word of mouth will “collapse.” For example, the above-mentioned netizens complained about Xiaohongshu.
In summary, when the basic conditions are mature, the natural contradiction of “being both a referee and a player” that exists in the closed-loop e-commerce content platform is still a major constraint.
In addition, the platform will face the pressure of the e-commerce industry itself.
Can the pressure on “people, goods and market” be able to handle it?
When the closed-loop is not done, the content platform is an e-commerce, and it only needs to do a good job of drainage. But after the closed loop of e-commerce is realized, the platform must assume the responsibility of the entire chain of “people, goods, and markets” in the retail scene.
And this means that the troubles and problems in the e-commerce business itself are also passed on to the platform.
At present, the pressure on Douyin and Kuaishou mainly comes from “people” and “goods”.
The pressure of “people” is mainly reflected in the development of shopping habits. It can be seen that in addition to the original e-commerce live broadcast audience, many users of short video platforms are attracted by “red envelopes” or content paragraphs.
To convert these users into “paying” users requires a lot of guidance and investment, and the conversion effect may not be known. After all, the “dimension wall” between online shopping users and content users is not easy to break.
There are two problems with “goods”: 1. After-sales service; 2. Category supply.
In the field of live e-commerce, urgency like “All girls, 3! 2! 1! Go to the link!” This kind of urgency anchor talk, when the upper limit is increased, and the limit is stimulated, although the user’s purchase conversion rate is increased, it is also easy to cause Impulsively buying.
“If you don’t place an order directly, you won’t be able to get it.” Under the psychological effect, I bought it “on the fly”, but regretted it (not necessary or disliked) to return it after being cold-headed .
According to 36Kr “China Live E-commerce Industry Research Report 2020”: The average return rate of live e-commerce is 30%~50%, which is higher than the return rate of traditional e-commerce 10%~15%. It is the official e-commerce sales channel of the brand. 2~3 times the rate.
Such a high return rate poses a challenge to the platform’s after-sales service capabilities.
It can be seen that in most cases of traditional e-commerce, Ali, JD.com, and Pinduoduo can return (support) seven days without reason, and for many products, return shipping insurance is also provided, providing consumers with return. convenient.
Douyin and Kuaishou are “learning things” in this area: on the user side, they have been online for 7 days with no reason to refund, freight insurance and other guarantee strategies.
But the actual effect does not seem to be “ideal”.
For example, on the black cat complaint platform, there have been many complaints from consumers about Douyin/Kaishou’s “poor product quality”, “no refund in the shop”, and “no response from customer service”.
In addition to the “under-satisfactory” after-sales service, product supply has encountered greater challenges.
It is understood that the current categories of Douyin and Kuaishou on sale in small stores are mainly standardized products such as beauty makeup, personal care, clothing and luggage, and the unit price is generally low.
For example, Feigua data shows that Kuaishou GMV is mainly composed of white cards with lower unit price per customer, and categories with an average unit price of less than 50 yuan account for 82.5% of the total GMV.
This is mainly because the live broadcast e-commerce audiences of short video platforms are mostly price-sensitive users. Such user characteristics greatly limit the expansion of platform categories, especially the abundance of high-customer unit price products SKUs. If things go on like this, it may affect the growth space of the platform GMV.
In addition to category supply, the two companies also have certain shortcomings in product selection and control.
At this stage, on Douyin and Kuaishou platforms, mid-tail anchors account for nearly 80%. Compared with the head anchors who have a complete supply chain, they mostly work as “polished commanders” or small groups, and their ability to select products is quite limited.
This is a serious potential risk for the platform. However, the two companies have also taken active countermeasures.
Take Douyin as an example. On the creator side, 78,176 people who carried goods illegally were fined, of which 2223 people had more than one million fans. On the merchant side, 9384 merchants who returned and sold fakes were cleared in 2020, and they were successful before they were put on the shelves. Over 300,000 illegal products were intercepted, and over one million illegal products were removed from the shelves;
However, it may be due to lack of experience. In the actual implementation of rectification actions, there has been an “overcorrection” situation.
As shown in the figure below, many merchants complained that their stores were found to be in violation of the rules by the platform without any prompts, and the deposit was deducted and the deposit was not refunded, which is almost “Overlord Clause”.
In general, the closed-loop road will leave traffic, GMV and other benefits on the platform, while also taking over the pressure of being an e-commerce company. In the face of many uncertainties, whether the content platform can achieve the optimization of “people, goods, and markets” , It takes time to test.
At a time when the competition in the e-commerce industry is so fierce that the market is generally worried, we insist on closed loop e-commerce. It seems to be going against the “trend”, but it is actually a move that the commercialization of the content platform is now restricted and has to be launched.
However, although it has the benefit of boosting platform revenue, it is difficult for the platform to maintain the objective and true natural contradiction under the “planting grass + placing an order” model, and the closed-loop road is not easy to follow.
After undertaking the pressure of e-commerce “people, goods, and markets”, Douyin and Kuaishou want to find a foothold in this red sea. There are still many places to make up lessons.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/against-the-trend-of-closed-loop-e-commerce-who-gave-the-courage-to-shake-fast/
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