Between the platform and the anchor, whose low-price ability is more vulnerable?

The platforms are waking up, and they want to take back their bargaining power. This is not a plan or an attitude, but a battle of life and death.

The main theme of this year's Double 11 is low prices, and the most dramatic opening is the melee between JD.com, Li Jiaqi and Hai's.

A similar scene happened during the 2021 Double 11 shopping festival. Because he was dissatisfied with L'Oreal's pricing policy, Li Jiaqi personally attacked L'Oreal, cheering in the crowd and not giving in at all. In contrast, Li Jiaqi was much more low-key in this conflict with JD.com. The company behind him, Mei ONE, appeared in his place.

Times have changed. After all, Li Jiaqi was in crisis not long ago because of the Huaxizi incident.

In this verbal dispute with JD.com, each party has its own opinion, but the truth behind the Rashomon seems not so important. The struggle for pricing power and bargaining power is the common goal of everyone.

In the past, the top anchors seemed to have a lower price advantage because they had a large number of orders, and the platform seemed to have tacitly accepted the existence of this phenomenon. Now the situation has completely reversed.

JD.com's high-profile live broadcast of procurement and sales, and Taobao's emphasis on price power, all indicate that the platforms are waking up and want to take back the bargaining power. This is not a plan or an attitude, but a battle of life and death.

1. The anchor got the chips at a low price

Because of the competition with Li Jiaqi's live broadcast room, JD.com's procurement and sales stole the limelight during this Double 11 period.

On October 24, a JD.com salesperson in charge of Hai's ovens directly fired back in his WeChat Moments because he received a letter from Hai's lawyers demanding liquidated damages because the price of an oven sold on JD.com was lower than the price sold during Li Jiaqi's livestreaming, violating the "bottom price agreement" signed between Hai and Li Jiaqi. That afternoon, "JD.com salesperson calls out to Li Jiaqi" became a hot search on Weibo.

On the second day after the public opinion exploded, JD.com's procurement and sales live broadcast room debuted on the JD.com APP. The theme of the live broadcast room's first show was "Prices are 10% lower than Li Jiaqi's spot goods", and just one live broadcast attracted tens of millions of viewers.

This completely set off a public outcry. For a time, Li Jiaqi's under-the-table operation of "choose one of two" and "bottom price agreement" for brands was exposed. Mei ONE denied this.

Hai's was stuck in the middle, like a powerless punching bag. The tension was concentrated between JD.com and Li Jiaqi. This dispute also revealed that their means of achieving low prices were completely different.

Top anchors represented by Li Jiaqi often achieve their low prices through coercive means.

In the "JD.com Procurement and Sales Calling out Li Jiaqi" incident, it was mentioned that the brand had signed a "bottom price agreement" with Li Jiaqi, and that if the agreement was violated, a huge penalty would be paid. Although both Mei ONE and Hai's denied the existence of the "bottom price agreement", an agreement between Mei ONE and the brand soon circulated on the Internet.

The agreement states that Mei ONE requires brands to offer the greatest promotion within a specified range, and the most favorable prices are on Taobao platforms (including but not limited to Taobao/Tmall stores, live broadcasts and other Taobao content channels), other e-commerce platforms and offline channels. If breached, the brand needs to refund the consumer five times the price difference and pay liquidated damages to Mei ONE.

Just as this dispute was happening, another super top anchor, Brother Yang, was also involved.

Shenzhen News Network reported that on October 24, in the "Crazy Little Brother Yang" live broadcast room, the host Big Brother Yang said that Li Jiaqi controlled prices and inventory. There were 100 units in stock, and Li Jiaqi sold 70 or 80 units. The merchants must cooperate with him. If he sold more, he would have power and hold the merchants hostage.

Afterwards, the topic #大杨哥怒评李佳琪持商客彈# quickly became a hot search on Weibo. Li Jiaqi did not respond to this.

As a top anchor, Li Jiaqi was once the spokesperson for "all girls". With huge traffic, he has the ability to negotiate prices with brands. In "An Offer to All Girls", Li Jiaqi once mentioned that L'Oreal Essence alone had 200,000 units in stock during the big promotion. This is where the price advantage of the products in the live broadcast room comes from.

In this program, the process of Li Jiaqi bargaining with brands was shown, and many brands were "bargained" to tears on the spot.

During the Double 11 pre-sale period in 2021, a product sold by the brand L'Oréal in its official live broadcast room broke the "lowest price on the entire network" given by two top anchors, which attracted a joint siege from Viya and Li Jiaqi. In the end, the brand calmed the war of public opinion by providing subsidies to the users of the two anchors.

However, this episode with JD.com revealed the fragility of the low-price advantage of the top anchors. Their low-price bargaining chip is the appeal to the platform's traffic fans, which can achieve massive orders and have an instantaneous pulse effect.

When platforms compete with super anchors, what they are trying to change is the rules of the game.

2. The platform’s low-price moat

The source of this dispute is that Hai's prices on JD.com are lower. So how does the platform achieve such low prices?

The buyer and salesperson of JD.com ended up tearing each other apart, indicating that it was JD.com's own business that was involved in the incident. The buyer and salesperson responded in WeChat Moments that the low price of a certain Haier oven was because JD.com subsidized it out of its own pocket.

They then explained the logic behind JD.com's low prices: First, JD.com does not charge slot fees or influencer commissions, so it has more say and will naturally give priority to products with greater discounts during the product selection phase. Second, JD.com has coordinated all business units from top to bottom to provide subsidies and concessions.

JD.com’s subsidies for live broadcasts of procurement and sales were launched the day after the public opinion exploded. The theme of the first live broadcast was "Prices are 10% lower than Li Jiaqi's spot goods", and just one live broadcast attracted tens of millions of viewers.

They even put up a slogan in the live broadcast room: "We don't charge slot fees or influencer commissions, so it's cheaper than Li Jiaqi's live broadcast room." As of 8 p.m. on October 31, the total number of viewers of JD.com's procurement and sales live broadcast room in the first week exceeded 140 million.

At 11 p.m. on October 25, JD Home Appliances and Home Furnishings temporarily launched the first show of JD Procurement and Sales Live Broadcast Room. The theme was "Prices are 10% lower than Li Jiaqi's spot goods." Just one live broadcast attracted tens of millions of viewers.

JD.com uses Li Jiaqi as a low-price reference, and has made no secret of its intention to attract traffic, in order to create a low-price mindset among users.

But for the platform, the large number of daily orders itself is a strong bargaining power.

For example, Pinduoduo, in its early days, used gameplay to gather massive amounts of traffic. Because the total traffic cost was low, the platform's traffic distribution cost was also low, but the volume of orders brought to merchants was huge, so the platform was able to gain bargaining power.

The early distribution rules were that merchants would get more traffic exposure if they proactively reduced the price of their products, rather than spending money on advertising. Therefore, the default rule for the platform was: lower prices would get more traffic.

Essentially, Pinduoduo is forcing the reform of the back-end supply chain through the demand for mass customization at the front end. It is promoting the realization of a "semi-market economy" on the supply side with a "semi-planned economy". In other words, Pinduoduo is helping merchants to do wholesale business.

Subsidies are also a common tactic used by the platform and have been proven to be effective.

The oven, the center of the storm of the "Haishi incident", is a low-priced product formed by subsidies. Recently, e-commerce platforms have been following the 10 billion yuan subsidy, and the earliest player was Pinduoduo. At present, Pinduoduo's 10 billion yuan subsidy has become normalized. Although the brands covered are limited and more single product logic, it has been deeply rooted in people's hearts.

Another well-known platform subsidy once occurred in the travel sector. Didi, Hua Xiaozhu and Kuaidi subsidized taxi coupons with the aim of acquiring customers and educating the market.

However, the low prices created by subsidies are only temporary and it is difficult to form long-term advantages.

3. Channels regain pricing power

This year's Double 11 is a critical year for platforms to regain their voice.

According to common sense, channels have more say in commodity prices. Especially in the field of fast-moving consumer goods brands, in the past 30 years, many new brands have relied on channels to start their business. The strategy is to first sell a star product in offline supermarkets or convenience stores, and then develop new product lines after making the first pot of gold, and then occupy the market.

This is an "infinite war" of multimodal and complex games. Brands need to constantly balance the interests between brand growth and channels to maintain the stability of their own channels.

Nongfu Spring is a typical example. For a long time, Nongfu Spring only earned a profit of about 70 cents from the price of 2 yuan per bottle of water, and the remaining 1.3 yuan was distributed to the channel. Later, Baishuishan, which positioned itself as "3 yuan water", was mostly promoted in a contracted channel model. This model means that the brand manufacturer has little control over the channel, and the profit distribution structure between the two is about 4:6.

The reason why traditional channels have such a strong say in pricing is that they have decades of scale accumulation behind them. Originally, Chinese manufacturers relied on a distribution system, from national general agents to provincial general agents to cities, counties, and towns, to build their retail network covering the Chinese market.

China's leading home appliance manufacturers and IT manufacturers have mastered the distribution system. Later, JD.com emerged and launched a fierce war with traditional offline channels. JD.com launched a price war against Suning and Gome. Since JD.com controlled more traffic, suppliers later switched sides to JD.com, and JD.com won the channel victory.

In 2016, live streaming e-commerce emerged, and the top live streaming rooms also seemed to become a channel in a sense. They formed super group purchases with limited SKUs and achieved low prices for goods. The top anchors relied on the platform traffic and maintained their popularity with their ultra-low price advantage. To some extent, the advantages of the channel were once taken away by the top anchors.

Li Jiaqi has always called himself a shopping guide and is very concerned about the prices of products in his livestreaming studio. In a recent conversation with China Business Network, he said that livestreaming studios have the responsibility and obligation to provide users with products with price advantages. Price is one of the important factors that everyone is concerned about during the promotion, but it is not the only factor.

Until this year, "low price" has become the main theme of all e-commerce platforms. Even Double 11 has become a low-price event. The war in JD.com's live broadcast room for purchasing and sales, Taobao and Pinduoduo's emphasis on low prices, means that platforms are once again paying attention to low prices, and the battle for low prices is intensifying.

Author: Li Huan

Source: New-Daybreak (ID: new-daybreak)