“The lowest price on the entire network”, who has the final say?

Let's talk about the "lowest price on the Internet" that all e-commerce companies competed for during this year's Double Eleven. A series of events occurred in the e-commerce circle around Li Jiaqi's "lowest price on the Internet", setting off a price war. Whether or not a brand can have a say in the "lowest price on the Internet" affects its marketing effect. This article will make an analysis.

This year's Double 11 shopping spree was crazy.

If consumers thought that the slogans of "the lowest price on the entire network" by various e-commerce giants before the big sale were just promotional slogans, then the price fights between Taobao anchor Li Jiaqi, JD.com platform and brands since October 23 have really made many consumers feel the lethality of this Double 11 price war.

A month and a half after the 79-yuan eyebrow pencil incident, Li Jiaqi once again stood at the center of the storm. The conflict was the price of an oven, and because of the sensitive node of Double 11 and the involvement of various forces, the e-commerce circle staged a long-lost business war.

In this business war, the protagonists who actively or passively participated include Taobao anchor Li Jiaqi, JD.com, and the brand Haishi. The "supporting roles" include Douyin anchor "Crazy Little Brother Yang" and professional counterfeiter Wang Hai.

The fuse was ignited by the small appliance brand Haishi, which accused JD.com of changing prices without permission, making the price of ovens lower than that in Li Jiaqi's live broadcast room, causing the company to face huge compensation.

A JD.com salesperson directed the conflict to Li Jiaqi, saying that the brand had signed a "bottom price agreement" with Li Jiaqi and questioned Li Jiaqi's "choose one of the two". The incident reached a climax.

Mei ONE, the company Li Jiaqi works for, immediately denied the "choose one of two" and "bottom price agreement". Hai also denied the "bottom price agreement" and stressed that "JD.com did not subsidize the price adjustment, and the losses were borne by the brand."

At the same time, Wang Hai exposed that Li Jiaqi was selling fake Hetian jade in his live broadcast room; Brother Yang "named" Li Jiaqi for controlling prices, controlling inventory, and "holding merchants hostage."

"Lowest price agreement", "holding merchants hostage", "fake goods", these words continue to irritate the public's nerves, and Li Jiaqi and Mei ONE are like being roasted on fire.

On the evening of October 26, Li Jiaqi introduced the Haier oven in his live broadcast room, and the price shown during the live broadcast was 648 yuan; however, the same model, which was previously shown to be priced at 349.5 yuan on JD.com’s own store, could no longer be found.

Li Jiaqi seems to have "won" the oven price war, but some consumers are beginning to question how the top anchor got the so-called "lowest price on the entire network"? Why did JD.com and Li Jiaqi, who seem to have no "intersection", start a "fight"? Are merchants losing their pricing power? The fire of this "price war" has finally died down, and it is time to review it rationally.

1. How does the “lowest price on the entire network” come about?

Since October 24, the discussion about the "lowest price on the Internet" of the top anchors has continued to heat up. A key question that ignited this storm is: Is there a "bottom price agreement" between Li Jiaqi and the merchants? How did Li Jiaqi's "lowest price on the Internet" come from?

Before the discussion, it is necessary to clarify the ins and outs of the incident as much as possible based on public information.

The first party to speak out was the home appliance brand Haishi. At noon on October 23, a report accusing JD.com of price-cutting circulated on WeChat communities, and the whistleblower claimed to be "Haishi brand owner."

It stated that "it originated from Li Jiaqi's live broadcast. JD.com forced to change the price, making the price of the oven lower than that in Li Jiaqi's live broadcast room, causing the company to face huge compensation", and "many communications were fruitless" and "it still did not change after sending a lawyer's letter."

The next day, a response from the accused JD.com sales staff brought the incident to a climax. A person claiming to be from the "JD.com self-operated baking team" responded through WeChat Moments that the product was self-operated by JD.com and the price change was paid by JD.com itself, but it was still blocked by the brand and asked JD.com to raise the price. He therefore questioned Li Jiaqi's suspected "choose one of two" behavior and whether he was forcing a "fake lowest price on the entire network."

Although Li Jiaqi himself and his company Mei ONE have denied the claims of "choose one of two" and "bottom price agreement" through live broadcast rooms and the media respectively; the Hai brand also stated in a statement that there is no "bottom price agreement" with Li Jiaqi.

However, a contract that was leaked soon after still caused doubts about whether "Li Jiaqi's 'lowest price on the entire network' is a real low price or is there some water in it."

According to a contract clause of a "Mei ONE Live Broadcast Promotion Service Contract" exposed by Sina Technology: "Within a fixed period, the brand must ensure that the promotion under all promotion services agreed by both parties is the strongest. If other channels are higher than Li Jiaqi's live broadcast room, the brand must refund consumers five times the price difference and pay Mei ONE a liquidated damages of 2 million yuan, and bear all expenses and losses incurred due to the refund of the price difference." Currently, the Weibo account that posted the contract shows "No viewing permission yet."

Liang Chen, a relevant person in charge of an e-commerce platform, told "Dingjiao" that super-head anchors (hereinafter referred to as super-heads) will sign a "price guarantee contract" with brands. The contract may not be called "bottom price agreement", but the purpose is to ensure the "lowest price on the entire network" within a period of time.

"Generally speaking, 'price guarantee' means that within 120 days of the top anchor's live broadcast of the product, no other channel can sell it cheaper, otherwise a penalty of one million yuan will be imposed," said Fu Wen, head of the MCN agency, as an example.

He said that after the tightening of "anti-monopoly" supervision since 2021, brands and sales agencies no longer sign explicit minimum price agreements, but because there is no universal and effective alternative in the industry, they will still sign similar price guarantee contracts.

"If the price offered by the brand is no cheaper than other channels and the superhead refuses to cooperate, this will force those merchants who are in urgent need of sales and the endorsement of the superhead to make concessions." Liang Chen added that the reason why the brand is willing to sign the contract is that the sales of the superhead are guaranteed, as well as the advertising effect of bringing goods.

Therefore, Chaotou can get the "lowest price" and is bound by contract. In essence, it is Chaotou's advantageous position in terms of user volume and traffic that gives it strong bargaining power over brands.

A question that follows is whether the price constraints imposed by top anchors on brands, including the “lowest price on the entire network”, are reasonable?

Zhang Ranran, a lawyer at Beijing Zhongyin (Nanjing) Law Firm, told Dingjiao that Article 16 of the Anti-monopoly Law of the People's Republic of China stipulates that "the so-called monopoly agreement in this law refers to an agreement, decision or other coordinated behavior that excludes or restricts competition." Price monopoly should be based on the premise of having the effect of excluding or restricting competition. In the price guarantee mechanism, the anchor did not prevent the merchant from giving other third parties a more favorable price, but required himself to enjoy the same low price as other third parties, which did not exclude or restrict others' competition, so she believed that there was no suspicion of price monopoly.

2. There is only one lowest price, who has the final say?

In the eyes of many consumers, the most dramatic aspect of this incident is that it was a little-known brand that ignited the "conflict" between JD.com, the second largest e-commerce platform, and Taobao's super-head Li Jiaqi.

Although Hai's brand awareness is limited, its special feature is that it has been included in JD.com's self-operated business. The same product under its brand was sold in JD.com's self-operated business and Li Jiaqi's live broadcast room during the Double 11 period.

Generally speaking, brands will form a relatively stable pricing system for different channels and platforms. If the price of a certain channel is too low, it will impact sales in other channels.

The ovens in this case were sold by JD.com. JD.com's self-operated model is that JD.com purchases goods from brands and then sells them. JD.com has the right to set prices independently and can also subsidize price cuts out of its own pocket. Zhuang Shuai, founder of Bailian Consulting, added that JD.com has the right to set prices, but it also needs to maintain good communication with merchants.

What Hai can control is the POP (Platform Open Plan, that is, other merchants open stores on JD.com as third parties) store, as well as the price of cooperation with Li Jiaqi's live broadcast room.

This year on Double 11, various forces are competing to see "who has the lowest price".

Under the general environment of slowing economic growth and declining consumer spending, major e-commerce platforms are facing unprecedented growth pressure. Platforms need to use more attractive discounts to promote more transactions and stimulate more price-sensitive users. This is why on Double 11 this year, "cats and dogs competed for the "lowest price" and JD.com directly emphasized "really cheap".

"This is the first time that JD.com has faced Double 11 after its internal organizational changes and its founder Liu Qiangdong stepped into the spotlight. This battle is very crucial, and the final effect will definitely attract market attention," said Liang Chen.

E-commerce practitioner Li Le analyzed for "Ding Focus" that JD.com's Double 11 offensive against low prices was very strong this year, which was consistent with the strategy of launching 10 billion yuan in subsidies in March this year. Both were aimed at acquiring more incremental users and reversing the consumer impression of "expensive".

On the evening of October 25, JD.com put "low price Li Jiaqi" on the background board in the live broadcast room. In response, Fu Wen explained that the price competition between JD.com and the anchors is inevitable, because JD.com wants to compete for the low price mentality, and the anchors who bring goods are "invisible" opponents . Of course, it does not refer to Li Jiaqi alone.

Image source: JD.com

According to his observation, anchors who promise the lowest price on the entire network will guide consumers to compare prices. Prices on the JD platform are often compared as "platform prices". Anchors use this to "prove" that the prices in their live broadcast rooms are lower, and use such rhetoric to stimulate purchases.

The lowest price is also the most important factor for top anchors.

In the first few years of the wild growth of live e-commerce, the top live broadcast rooms quickly gathered traffic by posting the "lowest price on the entire network" and gained bargaining power over merchants. Gradually, in the impression of many consumers, this is a discount sales channel. Those who can enter this live broadcast room have the lowest price, and consumers pay for it at the "lowest price on the entire network."

However, the "L'Oreal ampoule mask refunding price difference" incident during Double 11 in 2021, the "Shiseido selling cheaper than the products in Li Jiaqi's live broadcast room" incident during Double 11 in 2022, and the "Li Jiaqi defending the 79 yuan Hua Xizi eyebrow pencil" incident in July this year have all put Li Jiaqi's "low price" mentality to the test.

"It is generally believed in the circle that whoever can negotiate a lower price has a higher status," said Fu Wen, because even if the anchor is the top, his fans will not pay if he cannot deliver on the promised lowest price.

This year's Double 11, Mei ONE announced at a media communication meeting on the eve of Double 11 that its theme for this year's Double 11 is "Low low low low low, watch Li Jiaqi first for Double 11", and stated that the live broadcast room will distribute more red envelopes on the basis of platform discounts in an effort to achieve the "lowest price".

But the key point is that for the same product, there can only be one "lowest price on the entire network". If one party has the "lowest price", the other party will be "slapped in the face".

On such a highly anticipated event as Double 11, it is no wonder that the "fatal" question of "who has the lowest price" makes all parties concerned so nervous.

3. The two-sided anchor: small brands rely on him, while big brands flee from him?

The Double 11 shopping war caused by ovens seems to have come to a temporary halt.

On the evening of October 26, Li Jiaqi introduced this Haier oven in the live broadcast room, and the price shown during the live broadcast was 648 yuan; the same model, which was previously shown to be priced at 349.5 yuan in JD.com's own store, could no longer be found; the same product in JD.com Haier's official flagship store showed an estimated price of 669 yuan.

Li Jiaqi introduces Haier oven. Image source: Taobao

Li Jiaqi seems to be the winner in this price war. In addition, the brand Hai's "stood with" Li Jiaqi and accused JD.com, and Brother Yang accused Li Jiaqi of "holding merchants hostage". Interpretations such as "Li Jiaqi strongly dominates brands" and "the influence of top anchors is comparable to that of the platform" began to appear in the market.

The right to speak is always relative.

In this incident, "Haye's performance, to some extent, reflects the weakness of its brand power itself," said Qi Cheng, head of fast-moving consumer goods brands, because some small brands still rely on top anchors to promote their brands or boost sales, and match the lowest prices . "The sales volume in Li Jiaqi's live broadcast room is a sure win for small brands' daily e-commerce sales, and they are more motivated to give it a try."

Big brands have already increased their voice by diversifying their channels and embracing live streaming. "It's basically because big brands don't have to worry about sales, and the sales explosion brought about by super-heads may be the result of siphoning the daily sales of brands," Qi Cheng analyzed.

He said that in the early days when live streaming e-commerce was expanding rapidly and traffic from super-headers was accumulating like a snowball, big brands did enter super-headers' live streaming rooms, which resulted in a surge in sales. "But when big brands did the math, they found that if they matched the super-headers' 'lowest price', the ROI (return on investment) would not be worthwhile, and consumers would also be stuck in the super-headers' fan base."

When big brands realize that the super-headline live streaming rooms seem to increase revenue but not profits, they will have to take back some of the interests they previously gave up, including pricing power and private domain traffic.

This is not a signal that only appeared during this year's Double 11. During the Double 11 in 2021, L'Oreal and Li Jiaqi had a conflict over the "lowest price on the entire network". The reason was that L'Oreal's lowest discount was not given to the super head, but was placed in the brand's own live broadcast room. Although it ended with L'Oreal's apology, it has shown that the relationship between super heads and brands is changing, and game and cooperation coexist.

"Li Jiaqi's influence is still very large, but it has passed its strongest stage." In Liang Chen's view, Li Jiaqi's strongest voice was in the first half of 2022. After the tax investigation storm in the live broadcast industry at the end of 2021, many top live broadcasters were hit hard one after another, and Li Jiaqi took over the vast majority of traffic. Since then, the product richness of Li Jiaqi's live broadcast room has been significantly improved.

However, after Li Jiaqi stopped broadcasting in June 2022 and returned in September 2022, his dominance over brands has decreased, and the proportion of non-first-tier brand products sold in the live broadcast room has increased.

As we enter 2023, the dividends of the live streaming industry have already peaked, the growth on the consumer side has slowed down, and the "eyebrow pencil incident" three months ago has made brands look at the potential risks of binding with top anchors more rationally.

In today's environment, more mature brands are more concerned about ROI, hold on to pricing autonomy , and focus on spreading sales pressure throughout the year through multiple channels.

Take beauty products as an example. This is considered to be one of the categories that relies on top anchors. A relevant person in charge of a beauty brand told "Dingjiao" that during this year's promotion, the dependence of major beauty brands on top anchors has been significantly reduced. They have instead focused on regularizing the launch of store live broadcast rooms and offering attractive discounts during the promotion period.

Small brands are still struggling to survive in the "lowest price" competition between platforms and supermarkets. "When the gods fight, the little devils suffer," Fu Wen described the situation of the brand Haishi in the incident of JD.com "calling out" Li Jiaqi.

E-commerce platforms and live broadcast rooms are essentially channels. E-commerce platforms adopt a promotional mechanism with a low-price strategy, and it is understandable that anchors require brands to offer prices no lower than those in other channels. However, the new round of price wars is a comprehensive competition based on supply chain optimization and conversion rate improvement.

If the top anchors regard "the lowest price" as the only thing in their mind in the live broadcast room, then in the future, as major e-commerce companies and brands compete for low prices, it will become increasingly difficult to get the lowest price.

"The lowest price on the entire network" is a double-edged sword for the platform. The healthy development of a platform should not focus on price competition, nor should it rely on simply squeezing the profits of merchants in exchange for the lowest price. Otherwise, it may intensify the conflict with merchants, further affecting consumers' shopping experience and backfire on itself.

As the industry is caught up in low-price competition, live streaming becomes the norm, and Double 11 becomes more and more competitive, platforms, anchors, and merchants should think more about what other cornerstones there are for building a high moat besides low prices.

*At the request of the interviewees, Liang Chen, Fu Wen, Li Le and Qi Cheng are pseudonyms in this article.

Author: Jin Yufan, Editor: Fang Zhanbo

WeChat public account: Dingjiao (ID: dingjiaoone)