A long-standing question: Why is there no fertile ground for independent e-commerce websites in China?
During the ongoing 618 shopping festival, it's rare to find consumers who have never bought anything online. If you randomly ask a friend, "Where did you do your shopping this 618?" They'll probably name one or more centralized e - commerce platforms: Taobao/Tmall, JD.com, Pinduoduo... Maybe they'll also add Douyin and Kuaishou. Initially, Kuaishou had a certain "decentralized" flavor, but now it's firmly on the path of a centralized closed - loop model.
Most mainstream consumers don't develop the habit of shopping on brand official websites or official apps, and they're completely unaware of the concept of "independent stations". When independent stations like Shein from China expand in the European and American markets, there's no fertile ground for the rise of independent stations in the domestic market. In the investment circle, when people mention "independent stations", it usually means going global (there's a similar concept in China called "second - tier e - commerce", which we'll discuss later).
The situation in the United States is completely different: There's only one leading e - commerce platform, Amazon, whose scale far exceeds that of any competitor. Although Amazon used to focus on self - operated e - commerce, it has long adopted a model that combines self - operation and third - party sales. As early as 2021, the proportion of third - party products among all the products delivered by Amazon exceeded 50%. Amazon is like the "Alibaba + JD.com" in the United States, lacking direct competitors.
The platforms ranked from second to tenth are basically self - operated platforms (with only eBay being an exception), and most of them are online branches of traditional offline retailers. It's quite astonishing that the official Apple online store can rank among the top five in the US retail e - commerce market, indicating how fragmented this market is.
Therefore, when we talk about the "US retail e - commerce market", we're essentially discussing three types of companies: Amazon (the only first - tier platform); second - tier platforms mainly composed of traditional retailers; and a large number of independent stations. Among the independent stations, cross - border e - commerce sellers from China occupy a large market share. Shein, with a rumored valuation of $50 billion, is a representative of them. Most small and medium - sized sellers have long been used to the dual - engine model of Amazon + independent stations. Such a situation is unimaginable in China.
Strictly speaking, there are sellers similar to "independent stations" in the Chinese retail e - commerce market, which are "second - tier e - commerce". You often see product advertisements on WeChat, Douyin, or Weibo. When you click on them, you'll enter an H5 page where users can complete the ordering and payment process. Second - tier e - commerce is an important Internet advertiser, often accounting for 10 - 15% of the entire mobile advertising investment, especially in categories such as clothing, food, and daily necessities. There's no authoritative statistics on the GMV of second - tier e - commerce, but judging from the advertising investment ratio, their proportion in the overall e - commerce GMV won't be too low. Can we consider second - tier e - commerce as China's independent stations?
Obviously not. Compared with independent stations in Europe and America, domestic second - tier e - commerce sellers have two fatal flaws, making it almost impossible for them to become a sustainable business model:
The repurchase rate is extremely low, and brand awareness is almost non - existent. Second - tier e - commerce heavily relies on advertising to attract new customers, has little ability to retain old customers, and has no word - of - mouth to speak of. Compared with brand e - commerce platforms like Tmall and JD.com, the average order value of second - tier e - commerce is significantly lower. So far, basically no "new domestic brands" have emerged from second - tier e - commerce, while many have emerged from Tmall. Therefore, the profit margin of second - tier e - commerce is extremely low.
Many "second - tier e - commerce" are actually disguised centralized e - commerce, such as the "Douyin Store" based on the Douyin platform. On the surface, it's an H5 e - commerce advertising on Douyin, but in fact, its operation, fulfillment, etc. are all controlled by Douyin. I estimate that about half of the domestic second - tier e - commerce transactions are completed through the "Douyin Store", which is actually Douyin e - commerce.
If you've noticed the performance advertisements of mainstream brands, you'll find that most of them lead to the Taobao/Tmall flagship stores, some lead to JD.com, and a few lead to the Douyin Store. In short, they all redirect to a centralized platform. Why don't they try to direct users to their own fully - controllable official websites or official apps? They've tried. Over the past decade or so, from international big brands to Taobao brands, they've made numerous efforts in "decentralization" and "private traffic monetization", but most of them have ended in failure. Although users' usage habits are changing, it's just a matter of one centralized platform replacing another.
In the past year or so, I've discussed with many senior e - commerce industry practitioners: Why is there no fertile ground for independent stations (decentralized e - commerce) in China? Why do all brands in China need to rely on centralized platforms? We all agree that it's due to users' habits - Users simply don't trust or are not used to visiting brand official websites or independent apps. Ultimately, no one's will can go against objective laws:
Firstly, China has a very high penetration rate of mobile Internet. Users of all levels and age groups are used to using their mobile phones as the Internet entrance and mobile apps as the main shopping scenario. In contrast, there are still many PC users in developed countries, and the habit of using browsers on mobile devices to visit websites is deeply ingrained. You know, the customer acquisition cost of apps is much higher than that of websites, and it's also much more difficult to build user stickiness. About half of the traffic of leading independent stations in Europe and America still comes from the PC end; we can infer that most of their mobile traffic also comes from browsers (websites) rather than apps.
Secondly, search engines (i.e., Google) are still very developed in Europe and America, unlike in China (i.e., Baidu), which has long declined or been replaced by the search function within apps. In this way, as long as users remember the name or brand keyword of an independent station, they can achieve active repurchase through search. As shown in the table above, leading independent stations often get 20 - 50% of their traffic from natural search. In addition, Google's product search function (mainly Google Shopping) is also very powerful, which can compare prices between independent stations and even complete transactions without redirecting to the independent station.
Thirdly, in most countries other than China, email is still a common form of interaction, and users also use email (instead of mobile phone numbers) to register on various websites. Since users often read emails, it's logical for independent stations to conduct promotions and retain customers through emails. This is a bit like Chinese e - commerce sellers using text messages to retain customers. However, after August 2021, e - commerce sellers generally can't directly access users' mobile phone numbers, thus losing the most important means of retaining customers.
Finally, users' trust in merchants is also very important, which is also the main reason for the rise of Taobao in the past and JD.com later. However, the lack of trust mainly affects white - label and small brands. We can't say that users don't trust the official websites of big brands enough. Therefore, users' trust in the authenticity, quality, and fulfillment ability of products is part of the reason why centralized platforms dominate the domestic market, but not the whole reason.
Anyway, we need to face a fact: Due to the differences in the overall Internet ecosystem, it's difficult to establish a decentralized e - commerce system based on independent stations in China. However, this doesn't mean that "decentralization" has no future. Any merchant, especially brand merchants, always has the motivation to operate private traffic and directly control users. They've never given up exploring the "decentralized" model, first with Kuaishou and then with Douyin. Unfortunately, both of them have successively taken the path of a centralized closed - loop model...
To this day, the only scenario that can carry the concept of "decentralized e - commerce" may be WeChat. In fact, since its birth, WeChat has been the main battlefield for merchants to operate private traffic. Most people have a few WeChat merchants in their friend circles, have joined a few merchant operation groups, and have received forwarded WeChat group - buying links. Within the WeChat ecosystem, merchants can choose mini - programs, official account H5 pages, or WeChat stores (linked to video accounts) as the transaction landing scenarios. Compared with other platforms, WeChat has several unique advantages:
WeChat's efforts to create an "e - commerce transaction closed - loop" have failed, and Tencent doesn't have the genes for e - commerce operation. In fact, Tencent is not good at any heavy - operation business that requires a lot of hard work. For the e - commerce business, WeChat has made multiple attempts to create a closed - loop, but so far, the results have not been significant, and the probability of great success in the future is also very small.
WeChat has both strong private and public traffic. Since WeChat is the only truly strong social platform in China, so - called "private traffic operation" is actually WeChat community operation. In terms of public - domain advertising, merchants have many choices. For example, location - based advertising in the friend circle is very useful for life - service merchants.
The video account has made up for the biggest shortcoming of the WeChat ecosystem: With the video account, WeChat ads can increasingly take the form of vivid videos, and the ad landing pages can also be selected on the video account. The video account can be linked to official accounts, mini - programs, and WeChat stores, connecting the entire WeChat ecosystem.
WeChat Pay has a particularly high penetration rate in the sinking market. Many elderly people may not have bound their bank cards, but they have some funds deposited through WeChat red envelopes, which is also an important reason for the rise of Pinduoduo in the past.
After live - streaming e - commerce platforms have successively taken the centralized path, merchants must have realized that only the WeChat ecosystem still holds the last hope for "decentralized e - commerce". With the promotion of platform interconnection, more merchants are starting to imagine whether they can connect the traffic systems of Tencent, Alibaba, and even ByteDance, and on this basis, strengthen their direct control over users and get rid of the control of centralized platforms. Unfortunately, the above vision is too optimistic.
Although WeChat has fewer restrictions and less control over merchants compared to Taobao and JD.com, it's still a typical leading Chinese app. The users who stay within WeChat, whether in mini - programs, official accounts, or video accounts, ultimately belong to WeChat, not to the merchants themselves. Some people naively think that after platform interconnection, merchants can easily export WeChat traffic to their own official websites or independent apps and become like independent stations in Europe and America. This is also unrealistic:
Although WeChat doesn't crave traffic as much as Taobao and Douyin (because it has surplus traffic), it won't allow its traffic to be easily exported. Since September 2021, when clicking on any third - party link (including Tencent's own links) within WeChat, users will receive a warning that "this website may be unsafe". It's imaginable that most merchants can only operate traffic within WeChat and can't export it.
Even if WeChat allows merchants to export traffic at will, users' usage habits are still difficult to change. Chinese Internet users are used to spending most of their time on a few leading apps, which is beyond the will of a few individuals. Unless there are fundamental changes in the Internet usage scenarios or social lifestyles, domestic users will still stay in leading apps like WeChat instead of settling in merchants' "independent stations".
Wise merchants must accept a dynamic balance: Rely on the centralized traffic of Taobao, JD.com, Douyin, and Kuaishou on one hand, and try to operate relatively decentralized traffic on WeChat on the other hand. Even if the latter gradually becomes the mainstream, it's still very different from the independent - station culture in Europe and America, and even can't compare with the decentralized social e - commerce based on Facebook and Instagram in Europe and America. As the old saying goes: Objective laws are independent of human will.
This can explain why, before every Double 11 and 618, we habitually open various e - commerce platform apps (now also short - video apps) to grab red envelopes, get coupons, combine orders, and pay the balance on these leading apps, instead of opening our email boxes to receive discount information from hundreds of independent stations or directly comparing the prices of products from independent stations around the world through search engines. Moreover, it's estimated that the situation of 618 next year, the year after, and even N years later will still be the same - if there's still a 618 at that time.
This article is from the WeChat official account "Internet Phantom Thief Group" (ID: TMTphantom), written by Pei Pei, the leader of the Phantom Thief Group, and published by 36Kr with authorization.