Is self-operated e-commerce back on the rise?

An integrated retail-supply relationship with smooth information flow and clear division of roles, rather than a hosting business where the platform takes care of everything and builds everything by itself, is the common evolutionary direction of e-commerce and retail.

This week, Kuaishou e-commerce announced the launch of the "Kuaishou Optimal Selection" project to provide merchants with agency operation services. After merchants join Kuaishou Optimal Selection, they only need to be responsible for delivery and after-sales service, while traffic operation and product sales are all handled by the platform.

During the Spring Festival, Kuaishou e-commerce launched a group game of 10,000 people, which also adopted a similar hosting model. The official recruited and screened high-quality and low-priced seasonal products, and distributed the products to anchors, small and medium-sized businesses and influencers, promoting a rapid explosion of sales of goods.

Some people believe that this is equivalent to Kuaishou e-commerce also operating its own business.

Two months ago, Taobao also established a live broadcast e-commerce company to provide full-operation hosting services for new anchors joining Taobao, including account cold start, full-cycle planning, business docking, official inventory, and marketing planning.

Even JD.com's self-operated business gave way to POP and low-price strategies in the first half of 2023, but rebounded in the second half of the year, becoming the core tool for JD.com to continue to consolidate its advantageous categories such as 3C home appliances.

Whether it is self-operated or fully managed, it is just a different way of saying it. In essence, with the increasing intensity of competition in the e-commerce industry, including product homogeneity, low-price competition and fierce competition for traffic, e-commerce platforms are increasing their depth of involvement in people, goods and traffic in all aspects due to the needs of price competition, supply competition and efficiency improvement.

If we roughly divide the transactions on e-commerce platforms into three links: commodity trading, logistics delivery, and after-sales service, as the depth of platform involvement in these three links increases from shallow to deep, the corresponding models are POP platform model, semi-hosting, full hosting, and self-operation.

Among them, Taobao is a typical POP model, and the platform is only responsible for matching users and merchants; JD.com is a loyal supporter of the self-operated model, and it owns and builds everything from goods to warehouses to distribution.

As for full hosting and semi-hosting, they have not actually been clearly defined. They first became popular in the field of cross-border e-commerce.

The reason is that all cross-border e-commerce platforms face the problems of lack of supply and poor fulfillment experience in the early stages of development. In this case, strengthening the platform's ability to control the supply chain is a necessary measure. Although the hosting models of each platform are different, they basically involve the platform being responsible for product selection, fulfillment, operation, and after-sales, while the merchant is responsible for supply.

Later, in order to solve the problem of too many standardized products on the shelves and insufficient and diverse supply, cross-border e-commerce developed from full trusteeship to semi-trusteeship, and then entered the stage of supplementing brand supply (AliExpress proposed a 10 billion yuan subsidy).

This year, hosting has gradually spread from cross-border e-commerce to domestic e-commerce. However, it should be made clear that one obvious difference between cross-border hosting and domestic e-commerce hosting is that cross-border hosting mainly solves logistics, fulfillment and after-sales problems, while domestic e-commerce currently mainly uses hosting to solve traffic barriers and quickly replenish shortages.

As mentioned above, Kuaishou and Taobao Live are using similar ideas to introduce suppliers and influencers. Kuaishou Best Selection is open to merchants of all categories, and currently the merchants settled in are mainly merchants in the agricultural product industry belt.

Whether it is managed or self-operated, the essence is that the platform is getting more and more involved in people, goods, and traffic. Specifically, it includes the following points:

First, during the initial stage of gaining momentum and volume, you can quickly compete for supply - including influencers and goods.

After the rise of low-price competition among e-commerce platforms, the supply of white-label products from industrial belts that eliminate the middleman has become the focus of competition among various platforms. However, the characteristics of these industrial belt merchants are that they do not know how to do complex traffic operations and do not have perfect after-sales service.

For example, the merchants in the agricultural product industry that Kuaishou is targeting do not necessarily have the ability to operate traffic and content on the Kuaishou platform. Because Kuaishou is a platform with community attributes, traffic is more complex than that of pure public domain platforms, and there is a certain threshold for merchants who are not familiar with the platform ecology. Kuaishou provides the traffic capabilities that these merchants need most but do not have for the time being.

The same principle applies to Kuaishou’s group play of tens of thousands of people during the Spring Festival.

Second, in the price competition stage, we can eliminate the middle links and rely on economies of scale to provide products with the best cost-effectiveness.

A typical example of this is the direct sales model of Taobao Factory. As we mentioned before, Taobao Factory Direct Sales is a store hosting project. The factory is only responsible for supplying goods, and the platform provides digital product selection, intelligent pricing, marketing hosting, supply chain optimization, logistics and localization services. It has the ability to reverse selection and accurately meet consumer needs; it has the supply chain capability to truly transform circulation, and can consolidate shipments for the same delivery address, eliminating multiple packaging materials, sorting and distribution costs, thereby reducing product prices.

Third, in the stage of supply homogeneity, the platform can introduce differentiated supply and cultivate differentiated user mindsets. In essence, this is the platform using its ability to understand C-end users and grasp consumption trends to intervene in product customization and development, forming exclusive product supply. Moreover, because it bypasses the middle links such as brand owners, this type of supply also has a more obvious cost-effectiveness advantage. Typical representatives are Sam's Club and JD Jingzao.

However, this type of supply not only has category boundaries, but also involves issues of fair competition and ecological coordination between self-operated and third-party brands, and also tests the depth of the platform's understanding of consumers and the supply chain.

At the same time, it should be emphasized that compared with JD.com's self-operated business, both cross-border hosting and domestic e-commerce hosting are still light operation models without controlling goods. This is very different from JD.com's self-operated business model of controlling goods, building warehouses, and building logistics.

But this does not mean that self-operated e-commerce will return as a new trend. In fact, when e-commerce enters a new and more mature stage, no model can achieve a sweeping victory. Even low prices are only the product of a specific consumption cycle. The emergence of any model is a supplement to the existing model and a means for the platform to enrich its means.

And the hosting model itself has limitations.

It can only work in a certain category within a certain period of time; secondly, because the platform operation is too standardized, it can actually screen out supplies that have more advantages in price and certain types of services, and cannot meet the differentiated consumption needs of consumers.

As the platform scales up, it will definitely need an open ecosystem to attract more diverse merchants to meet the long-tail needs of users. Cross-border e-commerce itself is also moving from full trusteeship to semi-trusteeship and POP.

Therefore, Kuaishou’s preferred selection should only cover individual categories within Kuaishou, and most of the operations will still depend on the merchants.

If we refer to JD.com's self-operated business, the platform's too deep involvement in hosting/self-operated business may also encounter problems such as scale, growth rate, corruption, and too heavy a model.

Therefore, whether the platform needs to do hosting, at which links, and for which categories to do hosting, requires a comprehensive judgment based on the platform's overall planning of e-commerce business, category advantages, merchant service capabilities, etc.

In the long run, an integrated retail-supply relationship with smooth information flow and clear division of roles, rather than a hosting business where the platform takes care of everything and builds everything by itself, is the common evolutionary direction of e-commerce and retail.