Zhong Shanshan blasts live streaming sales: How many people will this offend?

In the wave of digitalization, live streaming has become an emerging marketing phenomenon with both influence and controversy. The article, through the outspoken words of Zhong Shanshan, chairman of Nongfu Spring, has triggered extensive discussions on the live streaming model. From the economic impact of live streaming, the position of entrepreneurs, to the impact of live streaming on consumers and the market, this article provides a comprehensive perspective.

"I look down on entrepreneurs who sell goods through live streaming. I despise them. You can do something more valuable."

It is hard to imagine that this would come from the mouth of the richest man. I don't know whether Zhong Shanshan is not afraid of offending people, or his emotions outweigh his rationality and he said something he shouldn't have said. In short, Zhong Shanshan's blow has undoubtedly offended many entrepreneurs active on the Internet, including those big anchors and Internet celebrities who rely on the Internet for their survival.

As a company that relies heavily on offline channels, Nongfu Spring has almost no demand for "live streaming". Zhong Shanshan's biggest confidence in saying this comes from this. But even if it is not needed, it is unfair to slam everyone with one stick.

Live streaming with goods is a product of the development of Internet technology and e-commerce. Its existence is reasonable. It has problems of one kind or another, but it has indeed produced many good results. For example, live streaming with goods has made many old domestic brands popular again. The rapid growth of businesses such as "Vitality 28" is the best proof of this.

There is no right or wrong, only stance. Zhong Shanshan's remarks have once again put him at the center of the public opinion storm.

1. Nongfu Spring does not rely on live streaming

For the outside world, the biggest barrier to the packaged drinking water industry is the water extraction license or mining license.

Yes, water is also a mineral, and Nongfu Spring has twelve water sources in China, including groundwater and reservoirs. The rich water sources provide the first moat for Nongfu Spring.

One of the sources of Nongfu Spring water is Qiandao Lake in Zhejiang Province. Source: Nongfu Spring official website

Of course, there are many domestic companies that have water resource mining licenses, including Wahaha, Yilibao, and the short-lived Evergrande Ice Spring. But why is it that only Nongfu Spring can reach the ceiling of this industry with an absolute leading advantage of 26.5% market share?

In addition to the huge competitive advantage in terms of the quantity of water resources, channels are the real "code".

Even though e-commerce and live streaming have developed rapidly, there has been a golden saying in the FMCG industry for more than a decade, that is, "whoever controls the channels controls the world." In other words, even if a brand is not well-known, as long as it can enter supermarkets across the country, it will soon become a household name in FMCG brands.

The purpose of the channel, in the final analysis, is to ensure that dealers have a share of the profits and help them make money. A high profit margin will give them more motivation to sell goods.

Over the past few years, Nongfu Spring has continued to invest heavily in channel construction.

In terms of people and money, everyone in the FMCG industry knows that Nongfu Spring's sales staff have high incomes and are very "hot". For the same position in the sales system, Nongfu Spring's income is more than 50% higher than other companies, and even higher for leadership positions.

In terms of data, by the end of 2022, Nongfu Spring will have about 4,500 distributors and 2.37 million terminal retail outlets nationwide. This is why Nongfu Spring launched green packaged purified water in April this year, and it took only about 10 days to basically spread to offline terminals across the country.

Picture: Nongfu Spring offline freezer

On another level, consumers usually buy beverages such as Nongfu Spring in supermarkets, and at most they will stock up a few boxes at home. After drinking, they rarely go to e-commerce platforms to buy more. At most, they will place orders on platforms such as Hema that can deliver to their homes immediately. After all, how many people would buy a bottle of water while watching a live broadcast? A single bottle is not valuable and not light, and with the postage, it is really not as affordable as a physical store.

Therefore, whether it is the company itself or consumer demand, this product portrait itself determines that Nongfu Spring does not need live streaming to sell goods. This also explains why Zhong Shanshan said, "I require e-commerce platforms not to exceed 5% of sales."

2. Nothing is absolute

Although live streaming e-commerce has been very popular in recent years, its biggest highlight is still the reduction of middlemen.

Let's take a simple example. Originally, the manufacturer's production cost of a product was 50 yuan, and it was sold to the distributor for 70 yuan, and the distributor sold it for 80 yuan. Now with e-commerce and live streaming, manufacturers can sell their products to consumers for 60 yuan.

In this case, consumers can buy goods at the lowest price and manufacturers can make more money than before.

As for what Zhong Shanshan said, "There are so many couriers and takeaway guys struggling in society every day, why should we compete with them?", what this sentence actually wants to express is a vicious economic cycle. That is: low commodity prices, low corporate profits, low corporate income, fewer jobs, and then consumption downgrades, leading to deflation and economic downturn...

It is undeniable that there are many links in the entity, including manufacturers, distributors, supermarkets, salesmen, etc. In the process of commodity circulation, people in each link will earn a little profit. Although the commodity becomes more expensive when it reaches the consumer, each link feeds countless families.

But if we follow this logic, technology should not be developed, and "ancient professions" such as elevator operators and typists should be retained. After all, they affect the employment of countless people.

On the other hand, live streaming can boost consumer demand because of its low prices, which will also boost more production demand and create more jobs. For example, physical sales will become customer service, and truck drivers will become couriers.

It's not just the employment and economic issues that are untenable. Zhong Shanshan's statement, "I look down on entrepreneurs who sell goods through live streaming. You can do something more valuable," also does not stand up to scrutiny.

Live streaming has become a new type of marketing method. Now many entrepreneurs have reached a consensus, that is, to carry out marketing activities by establishing personal business IP.

For celebrities with traffic effect, the effect is also very good. For example, Lei Jun relied on his successful personal business IP to bring the fledgling Xiaomi Motors to a new height, forming a "Lei style" in the car circle.

Picture: Lei Jun's Douyin account homepage

This is an era of competing for traffic. It is understandable that entrepreneurs have to change in line with the trend of the times. Failure to change means that they may fall behind, and falling behind will lead to being beaten or even eliminated by the market.

Moreover, in the current consumer environment, many companies are worried about operations, so it is normal for bosses to explore live streaming to sell goods and seek growth for the company.

3. The “back side” of live streaming sales

The development of new things will inevitably lead to various problems. Live streaming is no exception, and the current problems need to be solved urgently. In recent years, there is a term called "minimum price agreement" in live streaming. Simply put, some top anchors will ask merchants to limit prices on other sales channels. For example, JD.com once mentioned in a response that Haishi and Li Jiaqi signed a minimum price agreement for the entire network.

Figure: Details of the low-price agreement contract revealed by Sina Technology

However, some merchants, especially those with low brand awareness or small start-ups, have to agree to make concessions on sales prices in order to gain sales and increase brand awareness.

From the perspective of merchants, they did give up part of their profits in exchange for a lot of sales, but this is not because consumers really think their brands are good, but because everyone is attracted by the fame of those big anchors.

Gradually, merchants began to rely on the platforms and these big anchors. The platforms and anchors had more and more say in negotiating prices. Maybe one day this bargaining power would become pricing power, and the merchant’s own price system would be disrupted, which would be extremely unfriendly to brand building and production cycle.

As for the consumers, on the one hand, the lowest price mentioned by the anchor is not based on the actual market situation, but is set by themselves. Sometimes this price is even higher than the normal market price. Consumers may seem to have made a profit, but in fact they have suffered a loss.

On the other hand, because of the "minimum price agreement", merchants earn less money. In order to avoid losses, they are likely to continuously cut product costs, sell inferior products as good ones, and exaggerate their publicity. As a result, there will be a large number of situations such as "pork belly is spoiled meat", "cassava flour in sweet potato flour", and "Maotai town liquor in Maotai bottle", and the only ones who will suffer in the end are consumers.

In addition, it is well known that anchors are extremely dependent on traffic, but the platform can give him traffic today, and it can give him traffic to his competitors tomorrow. The traffic is in the hands of the platform, and the anchor has no right to choose independently. In order to get traffic, anchors will do everything they can, so in recent years, we have frequently seen a phenomenon:

The more outrageous and funny it is, the easier it is to attract traffic, and the more traffic you get, the more money you make.

Think about it, a group of Internet celebrities with low education, who look like energetic young men and young girls, have made a fortune just because they are more willing to take risks and act like clowns. Moreover, after "getting rich", they not only do not do charity, but also try every means to evade taxes, and even insult the lower-class people while selling fake and inferior products.

If this continues, people's values ​​will inevitably become distorted.

Author｜Lu Shiming Editor｜Dafeng