Pinduoduo smashed the cost of the merchant side into the "basement"

Photon Planet

2024-07-26 21:49Posted on the official account of Beijing Photon Planet

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01 Pinduoduo platform lowers the operating threshold of small and medium-sized businesses through a simple and clear merchant background, so that they have more room for development.

02Compared with other platforms, Pinduoduo provides a fool-like pricing reference in the price dimension to ensure that merchants get free traffic or paid operations under the price benchmark.

03In addition, the comprehensive return rate of the Pinduoduo platform is relatively low, which helps to release more gross profits and provide merchants with flexible business space.

04The quality of Pinduoduo's supply side has been re-screened after 2021, making small and medium-sized businesses present the characteristics of "outstanding longboard and category expansion" on the platform.

05Through the continuous output of high-quality products, small and medium-sized businesses have gradually made breakthroughs in their operations on the Pinduoduo platform, breaking the narrative of "it is difficult to produce a noble son from a poor family".

The above content is generated by Tencent's hybrid model and is for reference only

Last year, Sun Han from Hebei Province quit his job at a project in Xingtai. Despite graduating in civil engineering, the cold winter in the industry, the intense work, and the fact that he could go home up to three times a year finally decided to adjust his career plans.

After returning to his hometown, he scraped together more than 200,000 yuan, and Sun Han planned to open an online store, but in the process of communicating with him, he hardly heard any e-commerce "black talk".

In stark contrast, a certain brand has set up a business team of hundreds of people in just two or three years, docking hundreds of thousands of talents, relying on continuous resource investment, in the past three years, revenue has achieved sustained high growth, and sales have continued to lead. "Carpet coverage", "user education" and "marketing sense", the marketing person in charge not only jumps out a lot of professional words, but also can create new words.

Put this new brand and Sun Han in the same pool, like a giant whale and a small shrimp.

Small and medium-sized businesses represented by Sun Han have limited budgets and manpower, and lack online business methodology. Those mature brands, with strong capital, clear operation strategies, and clear division of labor between production and marketing, will have more advantages than small and medium-sized businesses.

In the past year, the competition in the online economy has been extremely fierce, and the platforms have made frequent adjustments around the price and service dimensions, and the price game, service upgrades, and quarterly changes of the platform rules have objectively increased the uncertainty of the operation of small and medium-sized businesses.

In the midst of the chaos, we can still see that many small and medium-sized businesses continue to break the narrative of "no noble son from a poor family", some of them have caught the sky-high traffic, some have made breakthroughs by differentiation, and some have quietly completed the triple jump from small stores, to multiple stores, and then to brands.

Small and medium-sized businesses break through

"Lend you 10,000 yuan, and don't open your mouth to me again."

In 2020, when the desperate Zhao Min asked a relative to borrow money, she was very frustrated by the other party's response. With more than 800,000 debts due to business failure, she and her husband are in despair. During the most difficult time, my husband would take a wine bottle to the river whenever he was free to hang around and borrow wine to kill his sorrows. The family didn't dare to go home for the New Year, so they could only swipe the circle of friends to see who could borrow some money. When he was desperate, Zhao Min's husband made his first hit in Pinduoduo's store.

Pinduoduo is not only Zhao Min who sees Pinduoduo as a turning point, but also Sun Han, who is 5 years younger than her.

Three years ago, Sun Han, as a consumer, has completed the transformation from other e-commerce platforms to Pinduoduo, "cost-effective, and pay ten for one fake". Three years later, his e-commerce journey also started with Pinduoduo, and the reason was just as simple: the merchant background was clear and easy to understand.

Yu You, the person in charge of Huanding Plumbing and Electric Blanket, is an e-commerce veteran with more than 10 years of trading experience, and he also believes that Pinduoduo's business tools are extremely simple. "When I first started Pinduoduo in 2019, I was the only one who had to do both operations and customer service." Today, Pinduoduo's channel revenue accounts for nearly 1/3, and the size of the operation team is smaller than that of other platforms.

Lowering the threshold for merchant operation has always been the top priority of various e-commerce platforms, forming two completely different schools of technology and establishment. Since last year, cats and dogs have successively deployed AI e-commerce. Up to now, AI e-commerce is mainly in the transformation of streaming tools, business analysis, generation of business details and live scripts, etc., which can significantly reduce the threshold and cost of merchant operation.

Pinduoduo doesn't have any bells and whistles AI features, but relies on mechanisms to reduce costs.

An industry insider summed up Taobao with a "heavy service system", which is characterized by telling you "how to operate" and providing merchants with a variety of business tools, which also makes business requirements more.

"You may find it strange that Pinduoduo is the first platform in the industry to have a minimum price limit." The above-mentioned people believe that Pinduoduo is a "re-canonical system", and the underlying logic is to focus on "what not to do", and businesses cannot cross the basic rules and boundaries. Once the boundary is crossed, such as the return rate is too high, the product link is basically invalid.

Li Junlun, a coconut chicken businessman, achieved a monthly sales of 1 million yuan+ in 2022, and when it climbed to 5 million yuan+ this year, he has realized that if he wants to make his business "long", he will eventually have to extend to the supply chain.

"We have our own coconut water factory, as well as designated farms. In addition, after the chickens are cut and killed from the farm to the factory, they are cleaned again, the internal organs are cleaned, and the acid is removed. These will make our coconut chicken taste better. ”

In addition to the "re-canonization system", Pinduoduo also provides merchants with a fool-like pricing reference in terms of price. Even if some merchants complain, the price pop-up window in the background is easy to be mistaken, resulting in the loss of a lot of profit margins, but an industry insider said that this mechanism is to pull through the same SKU price in the platform.

Pulling through the same SKU price is equivalent to providing a deterministic price criterion, and merchants can either obtain free traffic under the price benchmark or start paid operations on the benchmark.

Theoretically speaking, in the increasingly fierce environment of the best price on the platform, it is difficult for merchants to make profits if they still want to obtain free traffic under the price benchmark of Pinduoduo. This logic clearly underestimates the agency.

The person in charge of the online department of a large brand mentioned that the brand and the platform will combine cost, materials, product design, market trends, channel price orders and other considerations to carry out reverse customization. "Taking the current best-selling sunscreen clothing as an example, the basic model is the same price across the network, but for Pinduoduo, a more concise design scheme is adopted on the basis of the same fabric, so the price of the customized model is much lower than that of the basic model."

This doesn't mean that all merchants can only make an idea about "price".

Li Junlun once thought that if the product was put on Pinduoduo, the price would "go down", but he never thought that the coconut chicken semi-finished set would do well on the platform.

The Yashou flagship store provides a set of business ideas that are higher than the benchmark price. Li Bo, the head of the flagship store, said that every year when a new model is launched, he will "spend money to pay for it and pull up sales" in the early stage, and then snowball through various activities.

Smash the cost of doing business to the floor

There are two main parts of expenses for merchants' online operations, basic operating costs and paid streaming in the nature of advertising.

One is the basic operating costs, including platform commissions and other service fees. The commission of Pinduoduo main site is not less than 0.6%, and the commission of Baibu is slightly higher, between 1%-3%, and even so, it is slightly lower than the 3%-5% of other platforms.

The other is paid streaming, because the on-site traffic is higher than that of other platforms, the conversion is also considerable. This makes some online brands that mainly pay for their business carry out cost accounting.

For example, Tao Junlei of Caiyang Electric Appliances and Hu Zhuojie of Ningbo Xinke Industry and Trade both mentioned that the paid streaming effect of the integrated e-commerce platform is higher than that of short video platforms such as Doukuai, and in the cat and dog spelling three families, Pinduoduo has more traffic growth and lower push cost because of the increase in the sinking market, which is more friendly to small and medium-sized businesses.

During the peak season, a foot warmer merchant provided us with a set of case data from Pinduoduo channels. Pay without participating in the event, convert 1 order for every 15-20 traffic, and the average traffic cost is about 2 yuan. In the case of participating in the event, you can convert at least 1 order for every 10 traffic (the customer unit price is about 75 yuan), and the average traffic cost is only 0.18 yuan.

For example, Ningbo Xinke, which has a large number of its own intellectual property products, can convert 1 order for every 4 traffic.

Pinduoduo's paid streaming has a completely different positioning from Douyin, the latter is essentially a marketing advertisement, focusing on exposure, while Pinduoduo focuses on conversion, so similar to Taobao, there is a certain ceiling.

Taotian's previous method of breaking through the upper limit was to set content assessment requirements for merchants and build a content pool. A brand merchant said that to obtain on-site recommendation traffic, it is necessary to publish at least three video content within a certain period, and the system will weight it accordingly according to the data.

The path of Pinduoduo is linked to the activities on the site and the resource bits. Zhu Linqiang, director of brand operations of Kocotree, mentioned that he will frequently communicate with the platform junior two about the output of resource slots, and after a period of testing, he will decide whether to participate in the activity based on the feedback.

We have found that most of the breakthroughs in explosive models have been completed and the regular business operation has been completed, and the resource level plays a vital role in stabilizing sales. Taking Baibu as an example, many merchants mentioned that the pull on sales is not uncontrollable. "In the early stage, the focus is on drainage and slowly accumulating momentum, with the steady growth of sales, it will snowball in the middle of the season, and it will sell better and better, and in the later stage, it can help to destock."

Some merchants, such as foot warmers, have been able to predict the scale of the explosion and prepare inventory in advance.

Making explosive products has become the most important thing for merchants in Pinduoduo. Li Bo, a cotton pajama merchant, said that the explosive cycle of new models is about three years, and the competition for some basic models will be more intense. However, brands with original designs and inventions, such as Ningbo Xinke, or self-built factories like Kocotree, with independent design capabilities, can rely on efficiency to compete with imitators.

In addition to the visible costs, merchants on various platforms have suffered from retreats this year, among which the women's clothing field is the most prominent. In contrast, the return rate of interest generated by content e-commerce is higher than that of shelf e-commerce platforms.

Zhu Linqiang said that the return rate is related to the category, such as the return rate of the sunscreen clothing category is slightly higher among its own brands, while the return rate of hats and sunglasses is lower, and the comprehensive return rate of Pinduoduo channel is close to 20%. Many merchants realize that quality and brand can help reduce the return rate, such as NetEase Yanxuan's return rate in Pinduoduo channels, and the situation of big promotions and non-big promotions tends to be stable.

Some aquatic product category merchants said that for every 100 yuan of goods sold in Pinduoduo, the after-sales cost is about 3.5 yuan-4 yuan, and the traffic cost is about 1 yuan-1.5 yuan, and then in addition to the platform commission of 0.6 yuan, the cumulative cost of the three costs is 5-7 yuan. Compared with other channels, these three costs range from 12 yuan to 27 yuan in 100 yuan of income.

Pinduoduo's lower comprehensive operating costs can obviously release more gross profit and provide merchants with flexible business space. The most typical is that in the Bozhou herbal tea industry belt, a large number of business merchants have turned to the integration of industry and trade, as mentioned above, Li Junlun, who makes coconut chicken, not only has his own raw material base, but also invited a five-star hotel chef to help with the deployment.

"This soy sauce recipe is unique to our company." When Li Junlun said this, a moat of intellectual property rights had been quietly penetrated.

We mentioned in "Three Kinds of Cards for Cats and Dogs: Eggs, Texas, and Landlords" that the underlying logic of merchants' operations in Pinduoduo is extremely simple: the only optimal under the same conditions. The best can be not only the price, but also the service and sales volume. Simplicity and certainty are also obviously more friendly to small and medium-sized businesses that generally have poor operational capabilities.

Although a large number of merchants have completed the triple jump of single stores, multiple stores, and brands, almost no one denies that they need to continue to output better products in order to gain a foothold in Pinduoduo.

From Sufficient Supply to "Advanced Supply"

With the 2018 IPO in the United States, Pinduoduo has completed the shift from the demand side to the supply side.

Before going public, Pinduoduo relied on red envelopes to attract users, and then used gameplay to carry out social fission and rapidly expand the user pool. The "pooling" model also serves another purpose: it consolidates individual retail purchases into near-wholesale orders. For merchants, the integrated "purchasing power" can create a hit in a very short time.

Before 2021, the quality of Pinduoduo's supply side was uneven, and the merchants were mixed, with factories and stores with production capacity, business-oriented channel providers, individual sellers who did not know how to operate, and even attracted many merchants who walked in the gray area.

At this time, Pinduoduo, although there are many goods and low prices, it is not "good" at all.

After 2021, the platform will re-screen the supply side around the "re-coding system" of products and services, which mainly includes service and traffic weighting. An industry insider told Photon Planet that although there were complaints from time to time, after several rounds of games, the screening of the existing supply side was finally completed.

"For in-station activities such as 100 subsidies and 10,000 people's groups, it also includes the origin or factory stores that can ensure the supply at the back end, as well as the brand black label stores after comprehensive evaluation of cost performance, customer complaint rate, praise rate, etc."

Under the above mechanism, these small and medium-sized businesses with limited resources in Pinduoduo have the characteristics of "prominent longboard and category expansion".

Some small and medium-sized businesses are trying to hedge the impact of the cycle with differentiated new products. Ningbo Xinke, which has its own heating technology, has expanded the mosquito repellent suitable for summer; NetEase has formed a category coverage of winter and summer; Kocotree does sunscreen in the summer, focuses on the school scene in the fall, and expands the category around the ski scene in the winter.

And when these small and medium-sized businesses continue to create annual sales of millions, tens of millions, or even hundreds of millions, who will talk about "it is difficult to produce a noble son from a poor family"?

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