Traffic or freedom? Oriental Selection is in a dilemma

Dongfang Zhenxuan was fined by Douyin and then switched to Taobao live broadcast. How can Dongfang Zhenxuan do a good job in brand e-commerce? In this article, the author puts forward his own views and opinions on the dynamic case of Dongfang Zhenxuan entering Taobao live broadcast, and makes a brief analysis of its future plans. Let's take a look.

Before a super IP is formed, it is bound to encounter many twists and turns. This is also true for Oriental Selection, which wants to move towards "branding."

Due to violating the rules, it was suspended for 3 days by Douyin. However, it was not until 6 days later that Oriental Selection resumed broadcasting on Douyin. During the suspension period, the undercurrent of live broadcasting on its own APP was still surging, and industry insiders believed that this was one of the ways for Oriental Selection to "decouple" from Douyin.

In addition to its own APP, Yu Minhong's chess game is becoming clearer and clearer. On August 29, Dongfang Zhenxuan launched its first Taobao live broadcast. Before Dongfang Zhenxuan responded positively to the news of entering Taobao, Taobao Live could not wait and started to build momentum in advance.

On one side there is punishment, on the other side there is welcome, and the undercurrent of various forces has never stopped surging. The current trend of live broadcasting has only strengthened Dongfang Zhenxuan's determination to develop on multiple platforms and channels.

In addition to sharing the huge traffic dividends of various platforms, Dongfang Zhenxuan will not give up its ambition to gradually establish its own territory. For Dongfang Zhenxuan, the difficulty lies in the commercial choice between traffic and freedom .

But in fact, it seems that this is not something that Oriental Selection can decide on its own.

1. Is it blocked or under pressure?

Let’s go back to the incident when Oriental Selection was suspended by Douyin.

After Oriental Selection was put on the "emergency brake", it immediately made an urgent clarification, "It was not Oriental Selection's live broadcast room that was closed, but Oriental Selection's self-operated product store that was closed for a few days, so its small 'self-operated product live broadcast room' was also closed for three days." At the same time, in the live broadcast that night, Oriental Selection CEO Sun Dongxu said, "The closure was very sudden. After the shared bikes were suddenly towed away that afternoon, the self-operated products could not be sold for three consecutive days."

The three days of no sales may have a huge impact on Oriental Selection. In the first half of fiscal year 2023 alone, Oriental Selection's total GMV exceeded 4.8 billion yuan, the total number of product orders reached 70.2 million, and 6 live broadcast accounts were opened. Based on this, it is estimated that Oriental Selection is expected to lose 80 million yuan in revenue in three days.

As for the specific reasons for violating the "rules and requirements", some media publicly reported that when explaining the ingredient list during the live broadcast, because there was a QR code on the product packaging, the camera could not be avoided, and Douyin judged that it violated the rules after diverting traffic, resulting in the closure of the store; some media reported that the reason for the closure was that the Oriental Selection APP and the Douyin platform used the same live broadcast source.

Such a huge loss has forced the market to carefully consider the meaning of the ban on Oriental Selection. On the surface, it is because it has stepped on the "minefield" of the rules. As for the deeper reason, the market is also speculating that it is because Oriental Selection has built its own APP to divert traffic, so it is facing "pressure" from Douyin.

Although when building its own APP, Yu Minhong, the founder of Oriental Selection, once said that his Oriental Selection and Douyin platforms are mutually beneficial and there are no contradictions or conflicts. He also stated about building its own APP, "Creating its own platform is a normal and enterprising behavior of the company. I hope everyone will not over-interpret it."

But in fact, Oriental Selection is indeed paving the way for attracting traffic to its own APP. According to relevant media reports, Oriental Selection has set up an "App Download" column on all six matrix pages of Douyin, including the Oriental Selection main account with tens of millions of fans, where users can download the "Oriental Selection APP" by clicking on it.

This move will undoubtedly be easily regarded as a "provocative" act by Douyin, because relevant people analyzed that the self-built APP of Oriental Selection has in a sense touched the bottom line of what the super platform can tolerate being challenged.

Since Oriental Selection's transformation into live streaming, it has placed its main marketing position on Douyin. To some extent, Douyin's traffic pool has fostered the smooth transformation of Oriental Selection's phenomenal live streaming, and has also "watered" the growth of top anchors such as Dong Yuhui for Oriental Selection.

At this time, Dongfang Zhenxuan chose to build its own APP, which would undoubtedly be more easily regarded as a "breakup". In plain words, "I helped you get through the difficult times and make money, but you kicked me out once you got the money", so it is inevitable that there will be many twists and turns in this situation.

2. The truth behind “independence”

Regardless of whether the conflict of interest has escalated into a commercial struggle, it is impossible to confirm whether Oriental Selection was pressured by Douyin, but perhaps we can guess that Oriental Selection wants to build its own independence, which is "driven by short-term interests" as well as "driven by long-term interests."

Guided by "short-term profit drive", Oriental Selection has actually tasted many benefits after the e-commerce of live streaming, bringing in considerable operating income and profits.

During the period when Douyin was suspended and live streaming began on the self-built APP, sales on the first day reached 17.5 million yuan, and sales on the second day exceeded 30 million yuan. The Oriental Selection APP even reached the first place on the IOS shopping list and the fifth place on the free shopping list. As of 10:30 p.m. on July 27, the total GMV of the Oriental Selection APP exceeded 30 million.

According to New Oriental's semi-annual report for fiscal year 2023, the company's total revenue from continuing and discontinued operations increased by 262.7% to 2.08 billion yuan from 570 million yuan in the same period last year; net profit increased from a net loss of 544 million yuan in the same period last year to a net profit of 585 million yuan, and the gross profit margin of live e-commerce was as high as 42.5%.

The huge and considerable profits are worthy of "envy" in any industry track today, but the fact that live streaming sales are achieved through Douyin means that Oriental Selection has to give Douyin a corresponding "share". According to the public Douyin platform mechanism, generally speaking, for orders completed through natural traffic, the platform will charge a technical service fee based on the corresponding category of the goods when the payment is settled. For example, for clothing, the technical service fee is 5%; for orders completed through the Selected Alliance, in addition to the technical service fee charged by the platform, the commission for the influencer must also be deducted.

Not to mention that if the margin balance is insufficient, the withdrawal function will be frozen. In addition, in case of some serious violations, there is also the risk of the withdrawal function being frozen. In other words, there is always a risk as it is not under your control.

However, although over-reliance on TikTok can allow for sharing in the huge traffic pool, on the other hand, a single channel is quite fragile for the brand's development cycle . Once the channel is restricted, it will bring a devastating blow.

Yu Minhong once pointed out that the business model based on external platforms is relatively fragile, and that Oriental Selection still has a long way to go to achieve long-term development. He also repeatedly emphasized that over-reliance on the public domain traffic of a single platform is not a long-term solution.

To this end, Oriental Selection launched a WeChat mini-program, opened a video account, and deployed on platforms such as JD.com and Tmall. In August 2022, Oriental Selection launched an independent APP on major mobile app stores, and carried out its first live broadcast on the APP in early July 2023. It also recently announced that it will start broadcasting on Taobao on August 29.

Finally, returning to the "independent" core essence of Oriental Selection, perhaps the truth lies in the strategic decision-making direction of Oriental Selection.

Because at the time of transformation, Yu Minhong once said on his personal public account that New Oriental, with New Oriental Online as its main body, a Hong Kong-listed company, established the Oriental Selection live streaming sales system and transformed into an e-commerce platform with agricultural product screening and sales as its core . In addition to Douyin, other places will also be considered; and the product system will be built at a relatively fast speed, similar to NetEase Yanxuan.

Under the influence of many reasons, it may be a general trend for Dongfang Zhenxuan to choose to open up a territory of its own, but this "road to independence" is still difficult at the current stage.

3. “Freedom” comes at a price

Cui Lili, executive director of the E-Commerce Research Institute of Shanghai University of Finance and Economics, once pointed out that the relationship between super-head anchors or institutions and platforms is actually one of mutual dependence and mutual achievement , but both parties must carefully maintain this relationship.

But on the other side of mutual achievement, there is still a hidden game of interests. For the sake of profit, platforms generally tend to bundle anchors and institutions to stabilize profit income. When anchors and institutions broadcast live on the platform, they have to pay various fees and face the risk of restricted operations. Not only will their profits be reduced, but they will also be easily "monopolized" due to platform rules. The pressure from the platform is very obvious.

Just like Li Jiaqi, after accepting the platform's traffic support and resource allocation, he sought an "independent" way out on multiple platforms . For example, he wanted to cultivate the private domain of WeChat mini-programs, and he also carried out live streaming on JD.com and live streaming on Douyin. There was even news that Douyin had invited Li Jiaqi and the company behind him, Mei ONE, to live stream with astonishing conditions, but there was no follow-up in the end.

Luo Yonghao's "Make Friends" live broadcast room was first launched on Douyin, and later gradually moved into Taobao and JD.com to start live broadcast cooperation. But it is obvious that it has disappeared from the top few places on Douyin's sales ranking list recently.

In addition to the pressure from the platform, Oriental Selection is still some distance away from having the "independence" conditions of "the right time, the right place, and the right people".

First, it takes time to cultivate users' mental habits and consumption habits , which is the "right time". It took Douyin several years to transition from short videos to e-commerce in the early days. Judging from the current live broadcast content of Dongfang Zhenxuan, it is better at making content. Operating independent apps or even independent live broadcasts and independent shelves are not the same. Traditional e-commerce companies such as JD.com and Taobao are already fighting fiercely. For example, JD.com's 10 billion subsidy war this year and Taobao's upgrade of the content community both mean that there is anxiety about traffic, and the competition for emerging platforms is full of uncertainty.

Secondly, Dongfang Zhenxuan’s transformation started with Douyin live streaming, and it still “relies” on the traffic effect of the Douyin platform . The head effect of the anchor Dong Yuhui is also very dependent on Douyin, which is the “geographical advantage”. According to industry insiders, in the Dongfang Zhenxuan live broadcast room, when Dong Yuhui is online, the number of people online in the live broadcast room can reach more than 100,000, but when Dong Yuhui is not there, the number of people in the live broadcast room drops sharply, and sometimes drops to less than 10,000.

According to data from Oriental Selection for the six months ending November 30, 2022, the total number of paid orders for third-party products and self-operated products on Douyin was 70.2 million, and the number of Douyin followers reached 35.2 million at the end of the period. It has to be said that Douyin still has a significant influence on Oriental Selection at this stage.

Third, apart from the preliminary completion of the construction of the APP, Oriental Selection does not seem to have a stable long-term partner in logistics. Most of the product selection relies on self-operation, and the categories are mostly limited to culture, agricultural products and other types. As a result, it has no obvious advantage in competition with traditional e-commerce platforms . In general, the e-commerce system has not yet been fully established.

And there is a more important logic. At present, for Oriental Zhenxuan, perhaps what is more important is that no matter whether Oriental Zhenxuan's products are sold on Douyin, Taobao or even its own APP, what is valued in essence is the Oriental Zhenxuan brand. Those attracted will become loyal customers of the brand under good operations, and the e-commerce platform is just a display platform and a media channel. When the moat of Oriental Zhenxuan's e-commerce system is not obvious enough, it is obviously not wise to try to "decouple".

Because Oriental Selection has just smelled the "sweetness" of the transformation period, there is still some distance to go before it can expand further. At this stage, it is more important to win the high ground in the minds of consumers rather than competing for consumers' "belonging."

4. Joining Taobao is a “last resort” choice?

Since freedom comes at a price and cannot be achieved overnight, "multi-sacrifice development" is the best option at present.

But just like the development path of Douyin, the current relationship between Oriental Selection and Douyin seems to reflect the future outcome with Taobao Live.

On August 29, Oriental Selection launched its first show on Taobao. Yu Minhong personally led the team and jointly with Oriental Selection CEO Sun Xudong and many anchors to start a full-day live broadcast on Taobao. On the day of the debut, in addition to an 12% discount on all self-operated products, a huge red envelope subsidy was also launched. The categories included Oriental Selection's self-operated products, food, personal care and household cleaning products, shoes, clothing, jewelry and accessories, beauty and skin care, home appliances, etc.

Just one hour after the show started, by 9 a.m., sales exceeded 10 million yuan and the number of online users exceeded 2.1 million. In terms of specific products, 6,000 orders of Oriental Selection's self-made grilled sausages were sold in one hour, 5,000 orders of Oriental Selection's Ecuadorian white shrimp were sold, and Dyson hair dryers had sales of 1.5 million yuan in one hour.

According to third-party data platforms, the average daily sales on the Dongfang Zhenxuan Douyin account is also around 10 million. As of press time, the number of fans of Dongfang Zhenxuan's Taobao live broadcast room has reached 1.04 million. Currently, the number of fans of Dongfang Zhenxuan's Douyin live broadcast room is over 30.62 million.

It is not difficult to predict that no matter how big a splash it makes, Oriental Selection’s entry into Taobao Live will eventually return to calm.

Just like Luo Yonghao, in addition to maintaining his leading position on Douyin, he was also actively seeking cross-platform cooperation. During his first live broadcast on JD.com, the total sales exceeded 150 million yuan, ranking first on the live broadcast popularity list. On that day, the cumulative number of visitors to JD.com's live broadcast room exceeded 17 million, but it has been "declining" since then.

Such cases are actually not uncommon. Whether leaving Taobao and entering Douyin or leaving Douyin and entering Taobao, the "migration" of anchors between different platforms has become a common occurrence, and fans have gradually become accustomed to it. In the future, it is unlikely that there will be any major storms like when live streaming first became popular, unless a phenomenal figure appears again.

If it continues to open low and close low after entering Taobao, it may also indicate that Oriental Selection cannot "decouple" from the e-commerce platform and move towards independence. The "prerequisite" for Douyin's traffic support is "monopoly development", and it is not very practical for Taobao to fully devote its traffic support at this point in time.

Because Taobao Live is currently in an important period of content ecosystem construction, starting from late May, Taobao Live invited more than 300 celebrities, setting off the largest celebrity broadcasting boom in history. For example, in June, Argentine football star Messi appeared in the Taobao live broadcast room, and the number of viewers in the live broadcast room once exceeded 2.1 million.

In addition to upgrading its live broadcast policy, during the 618 period, Taobao Live launched a new feature called "Supporting Purchase", where users can get gifts to give to the anchor after purchasing directly or placing an order in the live broadcast room; in July, Taobao Live began to vigorously recruit game anchors and came up with a subsidy policy to further expand the category track...

With a large number of MCN agencies, internet celebrities, new amateurs, and major brands entering Taobao Live, Taobao Live will inevitably have to "share the spoils equally" in terms of traffic support. Oriental Selection may not be able to get a huge share of traffic, nor may it be able to recreate Douyin's performance.

At the same time, compared to platforms such as Douyin, which started out as a short video platform and is more inclined towards content communities, Taobao has been anchored on the shelf e-commerce track since its inception. Therefore, the track logic of "people looking for goods" is more suitable for the development of live streaming with goods attributes than the "goods looking for people" that is good at content construction. By then, it is not impossible that the contradiction and conflict between the "atmosphere" of the content created by Oriental Selection in the early stage and the shelf e-commerce will be amplified. Perhaps the content power will be gradually "assimilated", or perhaps the shelf attributes will be "reduced" while maintaining the content power.

After entering Taobao, if it fails to properly balance the need for content or sales, it will essentially be unable to balance the need for traffic or freedom. Oriental Selection is bound to "repeat the same mistakes" and find it difficult to move forward independently.

Author: Lin Xiaobai, Source: WeChat public account "Hydrogen Consumption"