Bezos, the founder of Amazon, once said, “There are two types of companies in this world. One is to persuade customers to pay a high profit as much as possible; the other is to lower the price to the lowest and give up all profits to consumers. I think both companies can be very successful, but we firmly choose to be the latter.”
Companies such as Tmall, JD.com, and Xiaohongshu that place more emphasis on non-price factors such as brand, experience, and content belong to the former, while trading platforms such as Pinduoduo, discount stores, and membership stores that emphasize price advantages belong to the latter.
Although e-commerce platforms all acknowledge that faster, better and cheaper is the basic logic of retail, the differences in models objectively lead to the division between the above two types of companies.
And in the current consumer environment, low price has become a label that every platform is working hard to research and create.
From this perspective, how to fully understand Pinduoduo/Haodiye/Snacks Busy/Sam’s, and even Hema, which claims to transform into a discount business, has always been our focus.
Previously, “Narrow Broadcast” has dismantled Pinduoduo’s low-price ecosystem and believed that its low-price capabilities closely revolve around the “price” concept and built a transaction framework of supply-crowd-algorithm-ecology synergy, thereby using the system The ability to mobilize merchants to engage in internal competition and continuously screen and attract low-price supplies. The resulting low-price mentality and transaction scale have also attracted a large number of low-price brand supplies. Pinduoduo has thus achieved an increase in supply and crowds. It has become a platform covering 900 million users and has strong profitability. “Ten billion subsidies” alone contribute about half of the profit source.
This is a sufficient explanation around supply.
From the perspective of supply and demand in the transaction framework, how low-price e-commerce platforms solve the other problem – traffic is also a topic worth discussing.
In the past, traffic and transactions were distinct and focused on each. Later, traffic was moving towards e-commerce, and e-commerce was also reaching out to traffic. When Taobao started its content transformation, it wanted to solve the traffic problem, but failed for many years.
What helped Pinduoduo build this traffic acquisition capability was WeChat’s social traffic. Now, in addition to the traffic mentality formed by low-price supply and marketing itself, an important product for Pinduoduo to increase traffic is Duoduo Video.
It is like a key, helping to verify a rough but short-term effective strategy for the contentization of e-commerce platforms. It clarifies what path should be taken for the contentization of trading platforms, especially when Taobao’s short video project “Guangguang” has been circulated several times. It may be disbanded, it may also lose its tab position on the homepage of Taobao App, and the contentization of Taobao series adds to the mystery.
The e-commerce platform that is integrated with Pinduoduo is Douyin e-commerce. It starts from traffic and gradually supplements the supply structure and delivery capabilities. The combination of the two forms a new force that can challenge traditional e-commerce.
Taking Duoduo’s video as a starting point, we have recorded several observations and thoughts, and you are welcome to discuss them.
We have previously analyzed Pinduoduo’s low-price ecosystem, starting from the introduction of “price”. In this article, let’s take a look at the topic of “traffic”. Taking Duoduo Video as a starting point, we have recorded several observations and thoughts. Welcome to discuss.
1. Duoduo Video Revelation: Instead of growing grass, it’s better to get traffic
Duoduo Video is a video project whose DAU is widely rumored to have exceeded 150 million, but this figure has been denied by officials several times.
Currently, Duoduo Video occupies the second column at the bottom of Pinduoduo’s main APP. It uses crudely transported entertainment content and online earning incentives to create a large traffic pool, which is equivalent to recreating a single column video traffic pool, and then interspersing advertising spaces in it – such as product delivery videos or merchant live broadcast rooms.
From a formal point of view, the core business indicators of Duoduo Video are DAU and duration. There are few original experts, no account logic, and no business order monetization. Entertainment content + online earning model + low-price recommended e-commerce, this is very consistent with the underlying framework that Huang Zheng originally designed for Pinduoduo based on human nature: Disney + Costco.
It is also the opposite of Xiaohongshu’s approach to content and live broadcasting. Content platforms and community platforms pay more attention to original content, experts, account systems, and through content cultivation to achieve commercial revenue and transaction conversion.
Pinduoduo does not need to plant grass. In fact, it is saying that there is another effective path for the contentization of e-commerce platforms – not the logic of planting grass, but the logic of traffic.
The difference between planting grass and traffic is that the former uses content to provide advertising services for merchants and consumers to improve conversion efficiency, while the core of the latter is to increase DAU and duration, and is not responsible for transactions and conversion rates.
In other words, planting grass is the logic of advertising, and the one who pays is the brand; traffic is the logic of enclosure, and the one who pays is the platform.
Even when it comes to attracting traffic to off-site platforms such as Bilibili, Pinduoduo’s strategy is to attract new traffic. Its wide-spreading post-like advertising on Bilibili is an example.
An MCN entrepreneur who has also worked on Pinduoduo, Diantao, and JD.com once lamented to us that excessive entertainment is actually not beneficial to the ecology, but why are these e-commerce platforms so committed to entertainment? “Because everyone wants to go in the direction of increasing DAU, pan-entertainment, film and television content will definitely be more effective. If you don’t do it without entertainment, how can you get traffic?”
2. Trading platforms are turning to DAU and duration
Before the emergence of crude gameplay like Duoduo Video, the content-based e-commerce platform wanted to adopt the idea of ”planting grass”.
After Taoxi’s traffic grassland and traffic black hole strategies failed, they successively tried grass-growing projects such as overseas Taobao, live streaming, wandering, and Diantao. However, except for live streaming, which relied on its low-price advantage to suddenly emerge, the other grass-growing products had limited effects. It is said that the total commercial revenue of Wanwang Ecosystem in a year is only a few hundred million, with only Tmall brands and leading Taobao merchants being its main customers.
The essence of planting grass is to rely on “content and people” to spread the word and persuade and convert. Planting requires an ecosystem, which is jointly built by content, talent, institutions, and platforms. The talent produces the content, the agency serves the commercialization of the talent, the platform builds better infrastructure, and finally the three parties share money from the platform ecosystem.
Therefore, planting grass has always been the main way for traffic platforms and community platforms to monetize.
However, the content ecology of e-commerce platforms is a matter of fighting between left and right hands and trying to catch fish by chance. The constraint that Taobao has always faced in doing live broadcasts and short videos is that the content department needs traffic, and the e-commerce department needs transaction conversion rate.
Now, Taobao and JD.com have begun to follow Pinduoduo’s lead in content development, shifting towards traffic direction, with DAU + duration as the core assessment indicator. Currently, Taobao’s short videos are the same as Duoduo’s videos in terms of content structure and user experience. Games, comedy, plots, emotions, and other general entertainment and mid- to long-tail content are all key purchasing categories.
3. Low-price e-commerce does not need to plant grass
Why can Pinduoduo grow so fast without planting grass to promote transaction conversion?
One is determined by the supply structure – low-price e-commerce does not need to grow traffic.
A brokerage minutes show that Pinduoduo’s category structure as of the first half of this year, from high to low, is home furnishings accounting for 17%, clothing and luggage accounting for 16%, fresh fruits and vegetables 15%, digital home appliances 12%, beauty and personal products accounting for 17%. Protect about 10%.
The common characteristics of these high-proportion categories are: low customer orders, high repurchase, categories, no brands, or very low brand concentration and a high proportion of factory white brands. These characteristics determine that these products have no cost and do not need to be planted. Product function and price are the core decision-making factors.
This is one of the reasons why Pinduoduo’s live broadcast e-commerce has not prospered. Merchants do not have a lot of willingness or cost to improve the conversion efficiency of e-commerce through content creation; it is also the reason why Duoduo videos tend to be driven by online earning rewards and crude content. Traffic logic – as long as the user sees it.
Pinduoduo also encourages merchants to self-broadcast. Self-broadcasting has no additional costs, does not require exquisite content, and has no intermediate links such as service providers and anchors. Live broadcasting is just a way of presenting products, and price and functionality are the only conversion tools. This is the logic of selling goods, not the logic of planting grass.
Even though Pinduoduo has leveraged a large number of brands through tens of billions of subsidies to supply more than 55% of the site’s GMV, these brands do not mainly rely on planting grass to increase conversions.
Pinduoduo’s brand merchants are composed of three parts: flagship stores, specialty stores and specialty stores. Flagship stores rarely do Pinduoduo’s brand image and new product launches, but mainly clear inventory; specialty stores and specialty stores can be understood as non-direct stores. For dealers who operate, selling goods in quantity and clearing inventory is also the first priority, especially when there are no strict restrictions on the pricing system.
Brands in Pinduoduo mainly rely on low-priced mental resources such as flash sales or tens of billions of subsidies to obtain traffic. The branded goods in the resource section are mainly mature brands and popular single items, and basically do not require user education – when you buy an Apple mobile phone or Nike running shoes on Pinduoduo, you are endorsed by “tens of billions of subsidies” or “authenticity guarantee” If so, price is the most attractive decision-making factor.
It stands to reason that new channels will inevitably give birth to new brands, so since the rise of e-commerce, there have been Taobao brands, Douban brands, and Kuai brands, but there is no brand fight, because Pinduoduo has almost no growth ecosystem that new brands need – such as content, such as private domains. . Without these, new brands cannot be launched or repurchased.
Tmall began to emphasize members and private domains. It was also facing the fierce new e-commerce and was looking for its own differentiated approach.
4. Algorithms reconstruct the consumption ecology
Pinduoduo does not need content behind it. What it means is that in some specific categories, the matching efficiency of algorithms between people and goods exceeds the matching efficiency of brands and advertising spaces between people and goods.
In a low-price e-commerce dominated by recommendation algorithms – matching of people and goods and product recommendations are mainly done by the algorithm, rather than advertising space or content planting.
Huang Zheng had a famous saying in his early years, God doesn’t know what you need to buy, but your friends do. This sentence corresponds to Pinduoduo’s early model of relying on social relationships and group buying models within WeChat to gather consumer demand.
Now, algorithms play a more important role in matching people and goods. Some brands have told us that 80% of their Pinduoduo transactions are due to recommendations.
Social networking, group buying, and algorithms have made Pinduoduo an e-commerce shelf with single-item hot products as the main display logic. As long as enough data is accumulated, the algorithm can complete the matching between users and single products. In this matching link, price/brand is just one of the tags that helps the algorithm match people and goods.
In other words, in Pinduoduo, the recommendation algorithm surpasses the brand and becomes a tool for more efficient matching of people and goods. This is closely related to the fragmentation of the communication environment/decentralization of information. When demand is dispersed, supply cannot be concentrated. The lack of concentration of supply means that relying on brand marketing and grass planting to leverage large-scale business and cost optimization is ineffective, and branding will not be a means to maximize the efficiency of matching people and goods.
Therefore, another core point of Huang Zheng’s point is that the conversion efficiency of this funnel is very low when converted to e-commerce through content or social networking.
What he is talking about is actually the efficiency game between brands and algorithms.
Before the algorithm era, becoming a brand generally required going through three stages of product-channel-brand driving, superimposing advertising and advertising, and gradually forming a set of standard and stable cognitive systems to help consumers improve the efficiency of their consumption decisions and gain more market share. , thereby achieving low-cost production and high efficiency through economies of scale.
With the fragmentation of channels, building a brand itself is a very difficult task. If it cannot become a large-scale brand, then the scale, cost and efficiency required by the brand will no longer exist, and the product’s price/performance ratio will be defeated. Small and medium-sized brands may solve the problem of differentiated supply, or they may solve the problem of cost-effective supply through the ultimate supply chain.
In other words, the algorithm is reconstructing our consumption ecology, replacing some brands, and combining video/influencers/social networking to achieve more efficient supply and demand matching.
5. Pinduoduo is a Spartan ecosystem that removes all intermediate links
In a decentralized e-commerce ecosystem where supply and demand are scattered, the platform can have absolute control over both supply and traffic.
Pinduoduo goes to the extreme and wants to remove all intermediate links and become the only hand that can control it. It does not even want the intermediate strongholds that form premiums such as content, talents, and brands.
Even organizations that provide content or services. It is said that through the off-site traffic diversion project Duocaoduo, Pinduoduo was able to establish relationships with a large number of bloggers and accumulate the conversion data of these bloggers. As a result, Pinduoduo bypassed Duoduo’s service provider organizations and directly cooperated with individual bloggers who had the ability to take orders.
By removing the intermediary link of the organization, Pinduoduo’s off-site delivery efficiency is extremely high, and “the CPE is as high as the sky.” It is said that Douyin has become Pinduoduo’s largest off-site traffic drainage platform this year.
This is Pinduoduo’s trump card to become a low-price e-commerce company.
6. Pinduoduo and Douyin are both new e-commerce companies
At this point we can roughly summarize the Pinduoduo species: its main features are recommendation, decentralization, and single-product hot products, and it sells traffic packages; in comparison, traditional e-commerce focuses on search, centralization, and branding ( or merchants) as the main focus, selling advertising space.
Centering on the matching model of traffic and supply, the distinction between old and new e-commerce has arisen. Traditional e-commerce focuses on matching people and goods with search/brand/store/centralization, while new e-commerce focuses on matching people with goods on recommendation/single product/ Content/decentralization.
Taotian and JD.com are traditional e-commerce companies, while Pinduoduo and Douyin e-commerce companies are considered new e-commerce companies. Both companies use recommendation technology as their bottom layer to efficiently match people and goods, and launch single-product hits.
The difference is that Pinduoduo pays more attention to cost-effectiveness because it started from the sinking market and long-tail and small and medium-sized businesses. It has leveraged brand supply through tens of billions of subsidies, and it provides low-priced, standard products and popular brands. Low price is its core logic, and the platform is also better at using low price logic to involve merchants, screen supply, and organize matching of people and goods from the perspective of supply.
Douyin e-commerce is better at new and unique products, because the media format of short video + live broadcast is more conducive to new and unique products that “eat content”.
However, as the consumer environment changes and Douyin e-commerce needs small and medium-sized merchants to build shelves, low prices have become more and more important in matching people and goods. Slightly extreme industry cases like “a popular product developed by a merchant was followed up and copied by peers, and the package was delivered at half the price and the same traffic, intercepting most of the transactions.” In the past, it only happened in Pinduoduo. Now it will also happen in Douyin e-commerce.
Because they both reach the same destination by different paths.
7. The anti-brand logic of new e-commerce
If Pinduoduo is anti-planting and anti-brand, then is Tongwei’s rival Douyin e-commerce? At present, it seems that the huge engine that makes brand money is of course on the side of the brand, but the increasingly independent Douyin e-commerce company should end up with Pinduoduo in a different way.
The Douyin e-commerce store building is a defection from commercialization. The shelves want to attract small and medium-sized businesses, but the payment ability of this part of the supply is very limited, so the commercialization of Douyin may cause huge friction with e-commerce.
A brand founder from Douyin believes that the entire development direction of Douyin is to promote cost-effective products in the form of horse racing suppliers through the method recommended by this algorithm. According to him, this model will even squeeze the brand’s living space. He also recalled to us the discussions he had with his Byte Strategy classmates about whether brands are needed in the future. By extension, he believes that Zhang Yiming and Huang Zheng should be the two bosses who least believe in brands in China.
After all, the brand is also the middle link.
8. Consumption will not only consist of low prices and white brands, content still has the opportunity to reconstruct consumption.
We say that Pinduoduo does not need to grow grass and anti-brand, but it does not mean that the brand is without value.
In an industry chain, brands are still an important driving force for industrial evolution, especially in demand insights, key technology research and development, etc. It’s just that Pinduoduo’s ecological structure determines that this is an e-commerce ecosystem that is anti-grass and anti-brand. The low-price logic it advocates is just in line with the current consumption environment.
From the perspective of industrial evolution and supply and demand reform, efficiency is the only criterion. Any brand that cannot maximize efficiency may eventually be squeezed out by the shortened industrial chain, such as industrial belt products that have compressed the production-channel-user circulation link.
If we cannot maximize efficiency, we can only bypass efficiency and focus on design, spiritual attributes, community value, and identity labels – this is the dividend of today’s era of rapid growth when Xiaohongshu re-enters: 2013 In 2020, it captured the rapidly rising middle class and the rapidly expanding cross-border demand; since 2020, this group of people has begun to shift from brand consumption to interest consumption, community consumption, and buyer consumption. This is a more general type of consumption during the period of economic transformation. The “lipstick economy” of China.
In other words, content still plays an important role in similar non-standard consumption.
Cheng Yixiao, the founder of Kuaishou, has always emphasized that Kuaishou’s e-commerce should become part of the content layer of the community. Kuaishou’s e-commerce should be a business with a particularly strong “shopping” attribute or content attribute.
He also feels that brand/white label is a two-level classification vocabulary. One level up, it should be standard products/non-standard products, which correspond to the categories that shelf/recommended e-commerce is better at. Video + algorithm + economy, if done well, can completely reconstruct users’ consumption decisions and promote the next round of innovation in trust mechanisms.
In fact, this kind of thinking is not inconsistent with Huang Zheng’s so-called “content leakage and low e-commerce efficiency”. The bottom layer of Pinduoduo is transactions, and transaction conversion is the core. The conversion efficiency through content is naturally not as high as the conversion efficiency through direct matching of people and goods. The bottom layer of Kuaishou is community + media. Huge traffic and sticky content are natural advantages. Whether it is commercial advertising or e-commerce transactions, it is a channel for monetizing community traffic.
Therefore, in addition to being good at closed-loop e-commerce for non-standard products, the community platform has never given up advertising business such as CID external links to earn advertising from standard product customers.