Text| Juchao Dong 2000
A month ago, Zhang Dayi, a well-known Internet celebrity who had witnessed the golden age of e-commerce with Wei Ya and Li Jiaqi, announced that he would indefinitely delay the launch of new products in his e-commerce platform stores.
In her farewell letter, she described the many problems she faced, but it was also a common dilemma for many e-commerce sellers:
"Revenue doesn't mean profit"
"I don't like to take risks if I want to save face."
"Many Internet celebrities who seem to be thriving are just surviving"
Looking further back, at the end of May, Douyin's women's clothing brand "Lola Code" also announced the suspension of the broadcast and the closure of stores after the last live broadcast.
The founder of Lola Password also admitted in an interview that the expensive traffic cost is the core reason for its store closure, "The traffic cost has increased by 10 times." In the past, there were fewer people doing it, but now there are more people doing it, and they are bidding for traffic, which is all cost. This also has a big impact, this time you swiped our live broadcast, and you may not be able to swipe it next time. ”
Behind these similar remarks, it reflects the common dilemma faced by the entire e-commerce industry - both platforms and merchants are stuck in the quagmire of traffic dependence, and after the traffic cost soars to such a height, the model of stream-driven growth is no longer sustainable.
In addition, on the one hand, the high traffic cost is relatively obvious, and on the other hand, the operating cost has increased dramatically in order to improve the efficiency of traffic conversion, and many of these costs are hidden in the details. As Zhang Dayi said, "The hidden costs of content, live broadcasts on various platforms, anchors, models, backstage, design, warehousing and other costs are getting higher and higher. ”
Traceability of traffic can be found that only when the platform can obtain cheaper traffic can it give e-commerce sellers cheaper traffic. When it is difficult for the platform itself to get traffic, the pressure will naturally be transferred to the platform sellers.
01 Dilemma
In 2012, Zhang Liaoyuan resigned from his job with a salary of 280,000 yuan last year, and set up three squirrels in a private house in Wuhu. ”
It is based on this judgment that Zhang Liaoyuan, who holds IDG's $1.5 million investment, spends all his money on e-commerce traffic promotion, according to his recollection, in the first two months of the three squirrels, he spent about one or two million yuan per month on Tmall Taobao to buy Taobao through trains, search advertising space, participate in activities such as Juhuasuan.
Zhang Liaoyuan did get a rich return. In the 2012 Double 11 event, the three squirrels won a single-day sales of 7.66 million yuan, becoming the first place in the sales of snack specialties in one fell swoop, and then sat firmly on the first throne of Tmall Double 11 "Snack Specialties" for 8 consecutive years.
However, since the second year of listing, the stock price of Three Squirrels has entered a continuous downward channel, and the reason behind it is that high sales expenses have eroded profits, which is also consistent with Zhang's judgment of "five-year opportunity".
Three Squirrels Stock Price Performance (Since Listing)
It has been recognized that the shelves of e-commerce are unlimited, and consumers have unlimited long-tail demand, unlimited supply at one end and unlimited demand at the other, which creates a huge opportunity for matching transactions, which is the core reason for the rise of all online brands.
But consumer attention is always limited, especially in a time of increasing competition. The sales of the products that appear on the first page after the search are obviously different from the sales of the products that appear on the first dozen pages.
E-commerce platforms also need to consider how to allocate limited traffic, and traffic price has become the core benefit diversion valve in the entire ecology of e-commerce platforms. It can be said that many merchants have no bargaining chips in the game with the platform, and there is not much to do except acceptance, which ensures that the platform can continue to realize through traffic. But whether their interests can be fully satisfied is not the core of the entire distribution mechanism.
The dilemma faced by merchants such as Three Squirrels, Zhang Dayi, and Lola Password is the same.
The problems and difficulties faced by small and medium-sized sellers are even greater. Fang Yu, the person in charge of a lighting factory, once told the media that she used to spend 100 yuan a day to promote on the platform, but now she spends four or five hundred yuan a day. In the past 30 days, the promotion cost of her store has reached 11,400 yuan, a figure that has almost swallowed up 70% of her profits.
Nowadays, this kind of traffic investment has fallen into a dilemma: either continue to increase promotion investment to maintain orders, but there is almost no profit; Or you can only watch as sales freeze or even continue to decline.
A clear proof of these predicaments is that compared with the endless Tao brands and Dou brands in the past few years, it seems that we have not seen a new brand that can run online for a long time. Essentially, it's an irreconcilable contradiction between increasingly scarce flows, i.e., latent demand, and growing supply.
It's like a marathon with no end in sight, everyone is rushing towards the goal, but there will be no winners.
02 In the traffic dilemma
In the year Three Squirrels was founded, the massive amount of online traffic was like picking up for nothing.
Ali even blocked shopping guide websites Mushroom Street and Meili because they contributed too much traffic, and Ma Yun said the famous "traffic entrance should be a grassland instead of a forest" internally. The gist is that Ali cannot support some large traffic entrances, but should balance the dependence on different traffic entrances.
At that time, China's Internet industry was full of flowers, and small and medium-sized content platforms such as Rebate.com, Mushroom Street, Meilishuo, Fold800, and Chuchu Street all had good traffic. However, nowadays, all kinds of small and medium-sized Internet factories have either been absorbed or eliminated by large manufacturers, and the degree of traffic centralization is getting higher and higher.
The growth of China's Internet users has also been stuck in a bottleneck period for a long time, and the result is the increasing customer acquisition costs of e-commerce platforms. In 2014, Alibaba's per capita customer acquisition cost was 55 yuan, and now it has soared to 3,569 yuan.
Another obvious manifestation of the traffic dilemma is that the platform Double 11 event has been "rolled out of the sky", and all e-commerce platforms hope to introduce huge traffic for them through the festival, so most e-commerce platforms have even started the Double 11 pre-sale activity a month in advance this year.
For merchants, "scrambling" traffic is the keyword of Double 11, the small ones can't compete for the big ones, the cold ones can't compete for the hot ones, and the ones that spend less money can't compete for the ones that spend more. In the fierce competition during the big promotion, some merchants may even experience a traffic drop that exceeds expectations.
"In 2022, small and medium-sized live broadcast rooms will still be able to get organic traffic evenly shared by the platform without streaming, but in 2023, the trend of requiring merchants to use paid traffic to intervene is becoming more and more obvious." The person in charge of Douyin, a laundry pod brand, said.
Not only small and medium-sized brands have similar feelings, but also the leading anchors of leading brands and even platforms are also facing similar problems.
Simba revealed that he spent 25 million yuan to buy traffic in a live broadcast as early as 2021, but the number of viewers was only 800,000 after 1 hour. Simba asked, "Where did the two or three million dollars I spent go?" Why do you still want me to pay more attention to my apprentices?"
You must know that private domain and trust social networking have always been the background color of Kuaishou's "semi-acquaintance community", and its e-commerce loyalty and conversion rate are higher than those of other platforms. If Kuaishou is still like this, the situation of other platforms can be imagined.
Traffic is already a big enough problem, but how traffic converts is an even bigger problem. Well-known Internet celebrities such as Zhang Dayi are still confused, not to mention other small and medium-sized businesses, especially those factory sellers who have a huge number of products and price advantages, do not care about brand building, and just want to open up sales channels to sell goods.
Netizen "DanielV587" shared that as a factory brand, all he wants is more sales, even if it doesn't make money, as long as there is volume, the profit can be saved from the large-scale production of the upstream. However, the logic of the current e-commerce is still to invest heavily in operation, "It costs money to open a store, it costs money to traffic, and it costs money to recruit operation artists, but investment cannot guarantee that it will have an effect." ”
He summed up his real needs as, "Is there a plan that allows us to sell products without investing too much money and spending too much time on so-called operations?" ”
03 Beyond the distribution of benefits
High traffic costs have been compressing the living space of merchants.
In an interview with the media, a number of merchants said that their traffic promotion fees on e-commerce platforms account for more than 50% of the cost structure, and some can even reach 70%. Therefore, some industry observers even assert that "under the current rule system, many businesses will not survive for more than three years." ”
This will also deteriorate the overall e-commerce supply, which in turn will reduce consumers' desire to buy, and many platforms have experienced the pain.
If the proportion of returns is getting higher and higher, the essence is that the gross profit margin of the product can no longer support these marketing expenses, so it will "forcibly thicken the gross profit margin" of the product at the cost of reducing quality. This will eventually lead to the product not matching the advertisement, resulting in a significant increase in the proportion of returns and exchanges.
The most serious result of this is a slowdown in the growth of the entire e-commerce industry, as products in the e-commerce channel are becoming more and more difficult to trust. Wei Wenwen, president of Douyin e-commerce, has publicly admitted that the year-on-year growth rate of GMV of Douyin e-commerce in the past year is 46%, which is slowed down from 320% and 80% in 2023 and 2022.
Since the second half of this year, Alibaba, JD.com, Pinduoduo and other platforms have proposed a "10 billion reduction" to reduce the burden on merchants, including service fee refund, deposit reduction, exemption of logistics transfer fees, upgrading merchant after-sales service, automatic return of technical service fees and other measures.
However, the essence of these measures is that in the fierce competitive environment, the platform transfers part of the benefits to the seller, which only eases the contradiction in the interview and cannot touch the root of the dilemma.
The underlying logic of the traffic source is the user's perception of the platform and product. In the final analysis, whoever can create greater value for users will have greater traffic, and these traffic can be distributed to large and small platform merchants, which is the real solution to escape the traffic dilemma.
The user's demand for goods is nothing more than "how fast and good the province", of which the largest proportion of weight must be the province - if you superimpose the evaluation system of Chinese consumers on the goods, you will find that high cost performance is always the most lethal, and the stability and durability of quality rank second. Those "exquisite brands" that are full of petty bourgeois aesthetics are usually outside the evaluation system of most ordinary consumers.
Therefore, Pinduoduo, which has successfully built a cost-effective mind in the minds of users, theoretically has a much broader traffic pool, and judging from its past development results, this is indeed the case.
It is through the recognition of high cost performance that Pinduoduo can get more and cheaper traffic, so it can reduce or even no traffic fees in exchange for cheaper prices from merchants. For example, the acquisition requirements of Pinduoduo resource slots (tens of billions of subsidies, flash sales activities, Home products, etc.) are basically products with cost-effective advantages.
Especially for those factory sellers who are unable and unwilling to build a brand, this traffic distribution logic is highly overlapping with its business characteristics: they can not consider the brand premium, but they can also give a variety of attractive prices, but if they want to provide such a price, and ask them to pay high traffic fees, it is obviously difficult.
All kinds of factory sellers who don't need to consider the cost of brand building have in fact become the "disruptors" of the entire e-commerce system. They constitute the lower limit of the price of the entire Internet e-commerce ecosystem, but if the platform does not give them the opportunity to display for free, these low-priced goods will only be drowned in the rolling paid traffic in the end.