In the new era of e-commerce, how can businesses make money?

With the diversified development of e-commerce platforms and the increasing diversification of consumer demand, merchants are facing new challenges and opportunities. In the tide of low-price competition, how to break through the siege and find new growth points? This article will show you how merchants can explore new paths to profitability through innovation and differentiation strategies in the new era of e-commerce.

The second-hand camera for 750 yuan was the first transaction in the history of China's e-commerce, completed by individual seller Cui Weiping through Taobao.

Over the past 20 years, e-commerce platforms have been innovated generation after generation, and merchants' business strategies have also been iterated again and again.

A merchant who has been in e-commerce for 20 years told Zi Quadrant: "When I opened a store, I thought about how to make it exquisite and beautiful. Later, I started to select products to promote. Product selection took up almost 90% of my time. Later, content e-commerce became popular. We tried posting pictures and texts and short video live broadcasts. Today, the business model is completely different from before."

In the past, e-commerce has been running fast along the road of diversification, but last year, the entire e-commerce environment began to return to the same path - emphasizing price. The sudden change of platforms has caused a large number of merchants to have "inadaptability" problems, and lost growth opportunities in the process of blindly and incorrectly reducing prices.

Now, this low-price war has been going on for more than a year, but the situation is getting more and more stalemate. Under the background of "low prices for all", low prices are increasingly showing that they are not a panacea. The real "match point" is far beyond low prices.

"Self-quadrant" talked with many merchants with successful experience about the business secrets of new merchants in this new era.

1. Brand, if not low price, what else can you compete with?

Brands are using cost-effective strategies to avoid price wars.

Summer is here, and 29-year-old Dan Wen has just applied for a swimming card. When he was browsing the social media platform for swimming training plan guides, he found a post recommending a pair of swimming headphones. As a "lone swimmer", Dan Wen's eyes lit up immediately, "Listening to music while swimming in the water gives me motivation."

So Danwen started to select suitable products. He chose several brands for comparison. "The brands with the best reputation are those represented by Shaoyin, with a unit price of around 1,000 yuan. They are too expensive, and the reviews of those affordable hundred-yuan headphones are mixed, so people dare not take the risk." He said.

After repeated selection, Danwen finally found a special case - the official store of Yuanshi Pinduoduo, where a pair of swimming headphones not only cost only 200 yuan, but also offer "30-day water test and 1-year free replacement".

▲ Image source: Pinduoduo

Danwen searched other platforms and found that although the prices were almost the same, other online platforms did not have such services. This puzzled him, "Pinduoduo has always been famous for its prices, why did Yuanshi only offer services on Pinduoduo?"

"This is because Pinduoduo has the best sales volume. From an efficiency perspective, we are more capable of doing a good job of warranty for a small number of single-room headphones if the shipment volume is large. In addition, we also hope to provide the best service in the channels with the highest sales volume to make the sales snowball bigger." Yuanshi customer service explained to Danwen.

In other words, the price advantage mentality brings high sales, which in turn brings higher profits to the brand, which in turn drives the brand to proactively provide better services, thus forming a virtuous circle.

In this process, Yuanshi’s excellence lies in finding a differentiated positioning within the platform and magnifying this advantage.

For example, on JD.com, which is famous for its quality, middle and high-end consumers tend to choose high-end brands such as Shaoyin with the best sound quality. Price is not the first consideration for consumers, and Yuanshi’s cost-effectiveness advantage is difficult to show. On Pinduoduo, mass consumers often choose affordable brands or even white-label products. In this echelon, Yuanshi has stood out from the massive amount of products through differentiated services.

The same is true for Kocotree. Among Pinduoduo's white-label products, Kocotree has achieved the highest cost-effectiveness through the supply chain advantages of the industrial belt and differentiated brand design, avoiding price involution.

The Kocotree brand was registered in 2009, started online operations in 2012, and started operating on the Pinduoduo platform in 2018. The brand's main products include children's clothing, summer sun protection products (hats, sunglasses, sun protection clothing, etc.), school bags for the back-to-school season, winter warm products, etc. During the entire 618 period, Kocotree's growth on Pinduoduo was about 140%, far exceeding other platforms.

From the price point of view, Kocotree is not cheap. The average customer price of hats is between 30 and 50 yuan, which is higher than the 10 to 30 yuan of ordinary white-label products. But compared with the standardized white-label products created by the Yiwu industrial belt, Kocotree has many design teams at its headquarters in Tongxiang, Hangzhou, and its products are more unique in style and more durable in appearance.

"On Pinduoduo's channels, merchants are competing on prices; in other channels, merchants are more competing on brands. Kocotree chose to compete on brand products in a Pinduoduo market where prices are competitive, which created differentiation," concluded Zhu Linqiang, brand operations director of Kocotree.

However, Kocotree is also considering longer-term growth in the future. After all, with slightly higher prices, the advantages of unique style and good looks will gradually diminish. "Good looks and designs can be replicated. If they sell very well this year, the industry chain will copy them exactly."

▲ Image source: Kocotree

Today, Kocotree is continuing to differentiate itself in terms of functionality.

"Before, we were more focused on yarns, but this year we started making a whole set of raw yarn styles, which will have better performance in terms of breathability and sun protection." Since last year, Kocotree has begun to go deep into the source of the supply chain, personally participate in research and development, and co-create with factories to improve yarns in order to enhance product functionality and reduce costs.

In this process, Kocotree not only strengthened the functional design, but also maintained the cost at the same level as in the past or even lower. Then, Kocotree simply passed the saved profits to consumers, continuing to expand the snowball of low price - sales - profit - low price.

2. One store or 20 stores?

Traffic investment is a difficult problem that e-commerce companies in any era cannot avoid.

"In the past, it was difficult to invest in e-commerce traffic because the rules for investing were complicated and we simply couldn't invest. Now we need to consider the investment-output ratio. The most important thing is how many conversions we can get with 100 yuan," said Zhu Linqiang.

Last year, Sifan, a product manager born in 1998, was laid off by a large company. She received a compensation from the company. After much deliberation, she decided to open a Pinduoduo store between finding another job and starting her own business.

"When I first opened my store, there was a newbie benefit period. The platform gave me 100 yuan for promotion. I invested a little bit and got 4 orders. Naturally, the traffic was also very high. The effect was pretty good, so I started to continue to invest. As a result, the effect of the investment became unstable, and I had to keep changing products to invest."

Sifan said that before she started Pinduoduo, she asked many seniors for tips on how to invest, but they all told her that novices still had to rely on luck. After testing for half a year, Sifan found that the monthly turnover was very unstable. Sometimes the effect was very good, and sometimes there was almost no one.

Sifan, who had been a product manager for many years, was not convinced. He made tables, conducted tests in stages and time periods, and used statistical tools to perform data analysis as he did before.

Then he discovered that in Pinduoduo's ecosystem, the platform's traffic distribution is relatively even. "Pinduoduo's traffic will not always be given to one person, one store, or one product."

Wouldn’t it be better to open a few more stores?

In order to verify his idea, he registered 4 different types of stores with one entity and monitored the data every day. Slowly, the stores developed some "rhythms". After the novice period, product selection and promotion became particularly important. Sifan tried 4 different styles of covers in 4 stores, targeting different groups and age groups, and highlighting different selling points.

▲ Image source: Xiaohongshu

For example, for young girls’ accessories, he would emphasize selling points such as niche, try-on, and no-reason returns; while the elderly would pay more attention to keywords such as free shipping, pure natural, and healthy. After batch testing, the four stores ran relatively stable sales at different paces, with a net income of about 20,000 yuan per month.

Having tasted the sweetness, Sifan began to gradually expand the scale. By July this year, he had opened 20 stores on Pinduoduo, and his team had expanded from 1 person to 10 people.

"We will now make very detailed operation plans. For example, from March to June, we will start to launch some sunscreen-related products, and in winter, we will launch some skiing and skating-related equipment. In addition to seasonal adjustments, each store has a special rhythm. We will strengthen operations every 45 days. After the strengthening, there will be a wave of natural traffic coming in, and routine operations will be sufficient. Although these stores are not large at present, the overall GMV is still considerable."

"In the past, merchants wanted to open a gold medal old store and use all their resources to cultivate a store. However, in the current traffic environment, they are obviously not adaptable, and it is time to change their thinking on traffic investment," Sifan concluded.

Sifan joked that his dream is to open 100 stores and he would also try other platforms.

Kocotree and Sifan have the same idea. In Pinduoduo, Kocotree has many brand-operated stores, but brands are different from individual merchants. They cannot differentiate their stores by different categories. Therefore, Kocotree began to communicate with the platform from the source about the strategy of differentiated traffic investment.

"Originally, our business on Pinduoduo was average," said Zhu Linqiang. "Later, we discussed with the platform's storekeepers what the problem was. They also gave us some data references on which brands performed well in the 10 billion yuan subsidy program and cooperated with us to do tests. The results we got were indeed much better than those we invested on our own."

Since Kocotree covers all categories of maternal and child products, the richness of its products has laid the foundation for its continued participation in the 10 billion subsidy. "We continue to participate in activities but change categories, from maternal and child consumables to children's outdoor products. With differentiated marketing strategies and resource positions, we have achieved a 100% sales growth this year."

According to Zhu Linqiang, the 10 billion subsidy campaign contributed 80% of sales in the past three months. Currently, the 10 billion subsidy campaign has been used as a continuous campaign to provide exposure and traffic for brands, which helps to improve product weight and sales conversion, forming a snowball effect. At the same time, during the 10 billion subsidy campaign, brands may adjust the prices of certain products, especially non-omni-channel core styles.

3. How to run a store in a creative way?

Can’t a store be more creative?

Li Ji doesn't think so.

“It’s true that the operation of a single store nowadays is not just about how long you’ve been in business or how old the store is. You also have to think of new ways to play,” Li Ji said.

Li Ji, born in the 2000s, is a fishing enthusiast. While his friends are drinking and relaxing in the bustling city, he prefers to go fishing at night alone with his fishing rod. He finds that more and more young people are joining the fishing team, and nearly half of his "fishing friends" are born in the 1990s.

Gradually, in order to upgrade his equipment, he joined many communities and discussed with fellow anglers how to choose fishing tackle, bait, canopies, and so on.

"I found that the fishing circle is very similar to the maternal and child and pet circles. The crowd is concentrated, sticky, active, and has a lot of consumables." Li Ji found a friend who was engaged in e-commerce. The two hit it off and opened their first store in Pinduoduo.

My friend is responsible for basic operations and traffic, while Li Ji is responsible for product selection and store message replies. As he has just passed the novice period and entered the professional field, Li Ji is particularly familiar with user needs. He marked the product titles with labels such as "Newbies Try New", "Advanced Edition", "Master Edition", etc., and Li Ji often controls the average customer price of newbie products within 100 yuan. Buy them for fun, and if you are really interested and can persist, it is not too late to start investing.

"When you start choosing a fishing rod, there are a lot of professional terms, but novices don't understand what these terms mean. It's better to directly classify them. This is not just about selling products, but also about providing experience services." Li Ji said.

Li Ji often provides some service experience to buyers through the customer service account, and over time he becomes friends with many old customers.

"Once, an old customer asked me what sunscreen to use because he got too tanned while fishing. I recommended two to him and told him to buy them from other stores. Suddenly, an idea struck me: why not sell them?"

After that experience, Li Ji began to study how to expand the product categories in a store. "Pinduoduo's control over product categories is not so strict, which is a good thing. It's not that you can only sell fishing rods and fishing gear."

Gradually, Li Ji began to study the series of products that would appear in the new fishing scene in the store. Sun protection clothing, sun hats, sunglasses, canopies, and small carts are all rigid needs after the upgrade, and are also counted as tools. Although the categories of the store seem to be varied, they are actually very unified.

Doing so also brings an additional benefit. Categories such as sun hats and sun protection clothing are mass categories. Through more common products, some new customers can be captured, driving the sales and growth of fishing rods.

Overall, whether it is a brand merchant, a corporate merchant or an individual merchant, the traditional operating methods are no longer applicable. Simply relying on low prices to squeeze quality and gain market share is no longer effective. Relying solely on low-price strategies is no longer able to meet the market and consumers' dual pursuit of quality and value.

The key to the success of these merchants lies in providing high-quality products and services, while incorporating innovative marketing methods to ensure a personalized customer experience. More importantly, merchants need to adopt more comprehensive and innovative operational strategies to adapt to the ever-changing e-commerce environment and consumer needs.

This is a new challenge for both the platform and merchants.