Looking at the many subdivisions of China's Internet, after ten years of development, big players have begun to appear to dominate the market, leaving other potential competitors in awe, but perhaps there is only one exception - e-commerce.
For example, in many fields such as portals, instant messaging, and search engines, there are already four major portals, Tencent, and Baidu that dominate the market. Other investors and entrepreneurs cannot compete head-on and can only find "small paths." But ten years later, e-commerce is still booming, and in the eyes of entrepreneurs and investors, the market threshold is like a "fake".
Therefore, in addition to Dangdang, Joyo, JD.com and Taobao, many e-commerce entrepreneurs are making efforts now, especially in the B2C field of various new models.
1 New entrants:
Bet on "community + e-commerce"
"As long as China's online retail sales account for only single digits, there will be no shortage of money and new companies in this market." Li Guoqing, co-president of Dangdang, told China Business News that this round of investors hope that the website will use money to expand rapidly. , China’s online retail accounts for only 1% of total social retail sales, while this figure is 4% in the United States and 7% in most Asia.
The temptation from 1% to 7% has attracted countless investors and entrepreneurs to pour in. The most popular concepts in this wave are the combination of “community + e-commerce” and the development of department store platforms.
Youzhong.com and Woyou.com are two examples of new entrants building communities to incorporate e-commerce. Sun Tongyu, the founder of Taobao, and Chen Xiao, the former vice president of MSN China, began to jointly establish Youzhong.com, trying to combine e-commerce with SNS.
Chen Xiao once posted photos of his trip to a mountain villa in Yunnan on a website, asking friends around him to share and have the urge to go there. This made Chen Xiao realize that the community is a good promotion. Another example is what kind of kindergarten to send your children to or what kind of car to buy. As long as friends around you agree, the possibility of users accepting it is extremely high.
The overall framework of Youzhong.com is the model of "Kaixin.com + Taobao.com". This SNS website will be promoted in seven cities including Beijing and Shanghai, and it is hoped that it will begin to take shape by the end of the year. Chen Xiao said that Youzhong.com does not provide services to all people, but only positions itself at the high end.
Chen Xiao positioned the website among the 8 million households in China with certain spending power, including 16 million to 24 million higher-income consumers. “The value of finding one user who can spend 100 yuan is actually the same as finding 100 users who can spend 1 yuan. Same." Chen Xiao said.
On the basis of building a community, Youzhong.com will also use complex algorithms to identify users based on user behavior analysis, and use this method to establish a more credible approach in marketing. For example, among the links between interpersonal relationships, people who are truly friends are strong links. Chen Xiao and Sun Tongyu built a profit model of "advertising" + "e-commerce" for Youzhong.com. We hope to unite these high-end “opinion leaders” and use friends’ recommendations to sell, especially luxury goods.
Based on a similar concept, Woyou.com wants to create a model that integrates large communities and e-commerce. "Wyou.com will invest in 32 vertical information platforms and large-scale interactive communities, including travel, clothing, mother and baby, automobiles, etc. Netizens can interact with experts, experts and "opinion leaders" in various fields on the platform." I Liu Xu, president of Youwang, said that the e-commerce platform that will be put into operation will cooperate with the online community to integrate brand products with the platform.
Offline, Woyou.com will also establish an e-commerce platform that operates in conjunction with the community and is organically integrated with the traditional commercial field, and plans to establish more than 3,000 brand stores.
2 Transformation of old website:
From community to B2C
In addition to new communities such as Youzhong.com and Woyou.com that they want to create, existing communities are also undergoing transformation to add e-commerce content. For example, the forum Fencenet, which gathers users with home furnishing and other content, began to get involved in building materials sales and transformed into B2C. Xu Xiangtao, vice president of Liba.com, said that more than 20 million yuan has been invested in this effort.
Fence.com was established in Shanghai in 2002. It was initially a forum for discussing decoration issues, and later began to commercialize group buying. As an "intermediary", Fences.com signs contracts with building materials suppliers and provides products to website users at certain discounts. In this way, it has accumulated millions of users and obtained nearly 20 million US dollars in financing.
At present, the fence network has begun to get deeply involved in B2C e-commerce, including a series of processes such as taking users to see samples, on-site measurement, design, distribution, and installation.
Another major community, Famous Products Network, is heading towards another differentiated e-commerce path. This website originally had Famous Products Shopping Guide Network, a traditional forum-type community. Recently, Famous Brand Network has decided to independently build a famous discount network from within and build a dedicated department store e-commerce B2C platform.
China's B2C market is mainly dominated by vertical online malls in various industries, with a high degree of product standardization. Originally, Dangdang and Excellence for books and audiovisual products, and JD.com and Newegg for IT home appliances, basically made breakthroughs and formed leading advantages in a single industry.
In the view of Zhao Wei, co-founder and managing director of Discount.com, in an industry with a high degree of standardization and a focus on channels, although it has the advantages of supply, price and suitability for online shopping, which can support the rapid expansion of the website's scale, it has high price transparency and lack of online shopping. Competition in downstream channels is fierce and profit margins are low.
The unit price (single purchase amount) of IT appliances is high (more than 800 yuan), but the gross profit margin is low (about 4%), and transportation and distribution costs are high; the gross profit margin of books and audiovisual products is slightly higher (about 20%), and the distribution cost is low. However, the unit price per customer is not high (within 60 yuan), resulting in the gross profit per order being too low and unable to balance the overall cost.
The industry where unit price per customer and gross profit margin can be well balanced is the traditional department store industry. This gives B2C department stores plenty of room for gross profit. The average retail gross profit margin is about 30%. The unit price of online department stores is comparable to that of traditional shopping malls: an average of 200 to 400 yuan per order throughout the year.
This has allowed Joyo, Dangdang and JD.com to get involved in department stores. Mei Guoqing, senior vice president of Mingpin.com, said that in 2004, the entrepreneurial team of Mingpin.com had experience in using the Internet to guide brand consumption. The team has accumulated experience in department store retail and resources for brands and consumers. Therefore, focusing on department store B2C will be a natural choice. .
Zhao Wei revealed that Famous Brand Discount Network will launch its first round of financing in the near future, giving priority to RMB venture capital funds.
3 large-scale players:
Looking for M&A targets
In fact, the biggest threat faced by these new entrants is still how to bypass the head-to-head competition between large platforms and find differentiated high-margin space.
"There are still three years to finalize the pattern." Li Guoqing said that although the e-commerce space is huge and new companies are emerging one after another, after rapid growth continues in the next three years, there will be a major online retailer in different fields, and there will also be large cross-field players. Retail platform, by then, latecomers will not be able to compete with Dangdang, Joyo, etc., because the scale effect will create a high threshold.
A large platform company like Dangdang relies on "scale + low price". Li Guoqing said that Dangdang does not need to sell special products. It mainly focuses on basic products so that other small companies cannot make enough gross profits to survive.
Dangdang COO Huang Ruo revealed that Dangdang's goal in 2010 is to strive to achieve the leading online retail market share in the three target categories of cosmetics, household products, and maternal and infant products. The weapon is "price war".
"Price war is the norm in the online retail industry and is also the most effective weapon to expand market size and attract new customers. In the future, we will continue to use low-price weapons to expand the department store retail market and strive to become an online shopping platform with the lowest overall price." Huang Ruo express.
"It will be difficult for new entrants to compete with a network that has hundreds of thousands of packages running across the country every day." Li Guoqing said that large e-commerce platforms will also make acquisitions. After Dangdang raises funds at the end of the year, it also wants to find suitable acquisition targets.
In Li Guoqing's view, there is currently a lack of distinctive segmented e-commerce platforms. It is just that many venture capital companies are trying their best to "feed" some e-commerce companies without studying how to differentiate and make their own businesses unique. This situation may become dangerous in three years.
Editor in charge: Chen