It is difficult to escape
Editor’s note: This article comes from the WeChat public account “Industry Fengyunhui” (ID: yejiefengyun), the author is in full swing.
On July 30, the luxury goods e-commerce Shangpin.com announced that it had closed down. The announcement said that it will bid farewell to users for some time from now on, and the official website and APP will be closed. According to the announcement, Shangpin.com’s suspension of business was due to the unsatisfactory financing restructuring and business obstruction, and it was unable to continue to provide services for the majority of users.
On August 16, Caixin.com reported that Alibaba will spend $2 billion to acquire cross-border e-commerce koala koala. On August 20th, it was reported that Ali and Netease had already collapsed on the acquisition of Netease Koala.
Within a month, the two vertical e-commerce companies of Le Bee Network and Shangpin.com successively declared bankruptcy; Netease Koala was sold to Ali, but the transaction failed because the price was not discussed. Domestic vertical e-commerce has encountered difficulties in succession. Is it difficult for industry players to survive? What problem has this track encountered?
The industry is welcoming the tide of closure?
Netease koala and Ali’s transaction, although not successful, but also revealed that Netease koala is in a difficult situation.
The development of Netease Koala in recent years, behind the seemingly beautiful results, is the high operating costs and potential risks. Netease koala is a cross-border vertical e-commerce, its self-operated model has very high requirements for supply chain and warehousing, and offline expansion requires a lot of money. At the same time, the koala in Netease, does not rely on Ali’s e-commerce ecology like Tmall International, and get a lot of internal traffic. As the cost of acquiring customers continues to rise, Netease’s koala growth has encountered bottlenecks.
Perhaps in Ding Lei’s view, compared to the bitter support, selling koala to Ali may be a relatively good choice. Selling koalas can bring a lot of cash income to NetEase, and stop losses in time.
On August 8, Ai Media Consulting released the “China Cross-border E-Commerce Market Research Report for the First Half of 2019”. The report shows that Netease Koala ranked first with 27.7% market share. Tmall International and Haishu Global respectively. It ranked second and third respectively with market shares of 25.1% and 13.3%. For Ali, after the acquisition of koala, the market share of the twoAdding more than 50%, Ali will sit on the top spot in the cross-border e-commerce field.
However, Ali did not talk to Netease Koala and the transaction failed. In this regard, some insiders said: “The koala is not selling, the transaction abortion proves that the status of vertical e-commerce is very embarrassing. Netease koala investment is more than 2 billion US dollars, and now Ali only bids 2 billion US dollars, the loss of trading, Ding Lei Of course not.”
As one of the head vertical e-commerce companies, the koala suffered from a bottleneck in the parent company and was forced to sell. Not to mention some non-headed, under-funded industry players.
In the past 12 years, vertical e-commerce players have either closed down or declined, almost becoming a common phenomenon in the industry. Just, this year seems to be more frequent. Shangpin.com and Le Bee Network successively announced the closure of the company. NetEase Koala is deeply troubled by the difficulty of profit.
In 2007, the founder of Joyo.com founded Chenke.com, which is positioned in the fast-moving field of the Internet. After completing 7 rounds of financing, the valuation is over US$3 billion, which is close to the market. As the customer forgets the original intention, the company expands and sells products in addition to services, as well as home appliances, digital, and daily necessities. When the SKU was expanded wildly, it affected the quality control because of mass production, and finally led to failure.
Le Bee Network was founded in 2008 by the famous TV personality Li Jing. It is the first beauty vertical e-commerce company in China with expert stars. It has been positioned as “beauty products”. Because it relied too much on the star effect and the Sequoia Capital behind it, Le Bee Network deviated from the core of the beauty vertical e-commerce, and evolved from an e-commerce company into a brand operation company. In 2014, Vipshop will invest in Le Bee Network and become its largest shareholder. In August of this year, Le Bee Network issued a notice to stop operations.
In August 2017, Jumei Premium acquired Shenzhen Street Power Technology, and some insiders said: “Chen Ou is not doing business, or will lead to the decline of Jumeiyou.” The result is a word, Jumeiyou from now on The stock price plunged, and the market value was nearly $6 billion at a higher point, which has fallen more than 95%.
In early July this year, Jingdong official news, Toplife, the flag luxury service platform, has been incorporated into Farfetch and closed on July 21. It is reported that Toplife was launched in October 2017 and is a high-end, all-category luxury e-commerce platform independent of Jingdong. In less than two years, Toplife declared a bankruptcy, leaving the outside world unexpected.
No matter whether it is Shangpin.com, Lebe.com, Fanke.com, Toplife, etc., it will be closed down, or Jumeiyoupin, Mushroom Street, etc. will be turned from bad to bad, or Netease will be hard to make profits, seeking to sell, both Pointing to the point – vertical e-commerce into the industry recession, the players on the track is difficult to survive.
Why is it difficult to survive?
Liu Qiangdong once predicted: “In the future, e-commerce companies can only survive in two modes, one is platform-based, and the other is personalized and branded vertical websites.”
It seems that Liu Qiangdong’s words are only half right. The platforms like Taobao and Jingdong are very good, and the vertical e-commerce like Le Beenet and Jumeiyou is difficult to survive.
In the domestic market, there are many reasons why vertical e-commerce is difficult to survive. First, the industry has ceilings. Vertical e-commerce has a limited total number of users due to the relatively single product category and targeting specific user groups. Taking Le Bee Network as an example, it is mainly targeted at young women aged 15-30 years old, and mainly based on cosmetics, which leads to a limited total number of users in this group, with a strong ceiling.
When it becomes difficult to acquire new users, Le Bee Network will face a growth bottleneck, and regardless of its “sales and sales storm”, many users will be lost.
Second, continuous marketing costs are high. Compared with integrated e-commerce such as Taobao and Jingdong, vertical e-commerce requires more accurate traffic, which increases the difficulty of obtaining traffic and requires higher customer acquisition costs. And vertical e-commerce needs long-term spending money marketing, otherwise it is difficult to occupy the user’s mind.
If marketing is stopped, there will be a loss of old customers, and new users will be more difficult to increase.
Again, user needs are not met. As people’s income levels increase, consumers’ demand for goods becomes diversified, personalized, and refined. The vertical e-commerce platform is difficult to meet the needs of users because of the small number of products, and consumers are more willing to go shopping on large integrated e-commerce platforms.
In addition, the profit margin of the product is small. In essence, the vertical e-commerce is mainly to the manufacturer to buy or sell after the purchase, to earn a difference. Considering the inventory problem, the quantity of purchases is limited, and the price of a single product is relatively high, and the profit margin is limited.
In addition to the rising cost of manpower and rent, vertical e-commerce has become elusive due to high operating costs.
Moreover, these factors are almost universal industry problems faced by vertical e-commerce, and it is difficult to solve.
There is a giant pressure on it, and there is a “micro-business” attack
In addition to many industry problems, vertical e-commerce is also facing the competition of many competitors.
On the one hand, the giant is powerful and suppresses vertical e-commerce.
Taobao, Jingdong and other comprehensive e-commerce giants, compared with vertical e-commerce, the platform has more businesses, more categories, more users and other advantages, the strength is too strong. This makes the sales of the giants very high, and it is difficult to compete with such vertical e-commerce.
In the flow and supply chain, the giant has a lot of traffic, the number of consumers and the repurchase rate continue to grow, coupled with better supply chain management, can produce huge scale effect, higher profit margin. However, because the vertical e-commerce is single, if the giant initiates a price war, the vertical e-commerce will be very passive.
Moreover, the giant has a cost advantage and a more commodity bargaining power. For example, Jingdong self-operated can make the price of the supplier’s commodity lower, and the settlement period is longer. This invisibly raises Jingdong’s pricing power for goods and brings more abundant liquidity to itself.
On the other hand, net red e-commerce, micro-business, star-selling, personal purchasing and other impact vertical e-commerce, causing further diversion of customers.
With the development of live and short videos, many net reds began selling on short video platforms. One of the most popular net reds in 2019, Li Jiaqi, a “lipe brother”, has nearly 31 million fans on the vibrato, and the lipstick has a superior ability to bring goods. Hao is not inferior to the main women such as Jumeiyou and Le Bee. Vertical e-commerce platform for cosmetics shopping.
In recent years, many stars have settled on platforms such as Vibrato, Weibo, and Xiaohongshu. Many stars have opened the mode of goods, while helping businesses to advertise, while selling goods. For example, Xiaohongshu has attracted many stars such as Zhang Yuqi, Han Xue, Guan Xiaoyu, etc., because the stars have their own aura, there are many fans, and the ability to bring goods can not be underestimated.
In addition, with the development of WeChat, since 2014, there have been more and more micro-businesses, and almost every WeChat user address book has some friends who are engaged in micro-business. There are even many people who work as full-time micro-businesses and sell goods through acquaintance networks. Compared with vertical e-commerce, micro-business is usually cheaper, allowing consumers on a part of the vertical e-commerce platform to transfer to the micro-commercial channel to purchase goods.
At the same time, in recent years, the rise of personal purchasing has largely affected the business of overseas shopping vertical e-commerce platforms such as NetEase Koala and Tmall International.
Overall, the vertical e-commerce platform is not only facing the pressure of many giants, the impact of individual merchants, but also because of the increasingly difficult traffic acquisition, there is fierce competition between the industries. In the context of a crisis, for vertical e-commerce, it is not facing bankruptcy, or being acquired, it is difficult to survive.
After these mainstream vertical e-commerce companies are dying, is there no room for development in the industry? Where will the next station in the e-commerce market go? It still takes time to give an answer.