Cost-effective supply
For e-commerce platforms to offer low prices, the first thing they have to solve is supply. To have abundant and cost-effective supplies, small HE Tuber and medium-sized merchants are the key - including non-brand merchants and brand distributors.
In the early days, Taobao and Tmall attracted a large number of small and medium-sized businesses by offering free store opening and commission-free services. After Taobao began to brand, Pinduoduo used a similar method to absorb this part of the supply.
Looking at the current situation, Taobao, Tmall, JD.com, and Douyin e-commerce have all become platforms with brand as the core supply. Due to the problems caused by their respective genes, low-price supply is limited.
The problem of Taobao and Tmall is that after branding,
traffic gradually becomes solidified. Top brands have more traffic advantages. New brands and small and medium-sized merchants in the same category have high costs of attracting new customers and limited growth space.
JD.com, which once achieved low prices through self-operation,
now faces problems including: increased self-operated logistics costs, self-operated procurement and sales, in order to increase GMV or profits, frequently selected products with higher unit price or gross profit are put on the shelves. All these have caused JD.com, which focuses on self-operation, to lose its price advantage.
The problem with Douyin e-commerce is that the hot-selling model of live broadcast cannot meet the platform's demand for abundant supply, and the increasingly mature commercial launch is not conducive to small and medium-sized businesses with small profits.
So starting last year, these platforms began to introduce more low-price supplies through various methods.
JD.com’s approach is to streamline its self-operated system, remove some products with low transaction efficiency and high contract performance costs, and at the same time give the remaining products to the POP ecosystem, and by lowering the threshold for merchants to enter and canceling platform usage fees for small store merchants and POP merchants .
Taobao and Tmall have brought price power to the core strategy, grafted Taote's supply to the main website, and established a small and medium-sized enterprise development center headed by Wang Hai, the former head of Taote. The focus is to discover more cost-effective products, Expand more individual businesses. Wang Hai mentioned at this year’s Taobao and Tmall 618 Merchant Conference that for small and medium-sized enterprises, as long as they can price well, they will have traffic.
Douyin e-commerce has also established a merchant development department to support small and medium-sized merchants, operating alongside apparel, food and other industry categories. This year, we have successively introduced policies to open stores with zero yuan and no commission. At the annual e-commerce ecology conference, we proposed a growth path suitable for small and medium-sized merchants, and also encouraged merchants to exchange low-priced products for traffic.
Some insiders pointed out that Douyin has invested a lot of resources in the industry, which may put pressure on Pinduoduo in this dimension in the next 2 to 3 years. This year, Pinduoduo also proposed the “Ten Billion Ecosystem” project and launched tens of billions of assistance funds to support and assist high-quality merchants, brands, and small and medium-sized businesses.
During JD.com’s earnings call in the first quarter of this year, management revealed that the number of third-party merchants joining JD.com reached a record high. However, some brands believe that the number of POP merchants is "far lower than Taobao Tmall, Douyin, and Pinduoduo."
To make low-price supply sustainable, the fee exemption is only temporary. In the long run, it will require the cooperation of business mechanisms to make merchants willing to maintain low prices for a long time and make money at extremely low prices.
For example, Pinduoduo is able to maintain low prices because its operating rules are simple and commissions are very low, which can reduce operating costs and thresholds for merchants.
Zou Yan from Taobao Tmall responded to whether merchants can make money from Taobao's "3 yuan for 3 pieces" and "9.9 yuan for 3 pieces" products. He said that most of the supply behind such channels comes from Taobao factories, and the model adopted by Taobao factories is hosting, which can reduce costs through supply chain optimization.
Jack Ma also suggested at Alibaba’s internal communication meeting in May that small and medium-sized businesses should be served through product innovation. “Alimama’s original intention is to enable small businesses to buy and sell advertising, so we want to help small and medium-sized businesses.”
