The dilemma of commercial logic of vertical electric business

Vertical electric business focus on the market segments, the industry and product understanding is more profound, so it is easier to make characteristics, to meet a certain type of user groups personalized needs, has its existing market value. But in the 10 years of rapid growth in e-commerce, the development of vertical electric business has been difficult to be satisfactory, although there are only goods will, Poly-Mei excellent products, such as a few industry stars, but not wishful is the vast majority, we have seen red children at the sale of suning, wheat forest gradually wither, Fank is experiencing the transformation of the sleepy, There are a large number of former star enterprises such as Cotton network, product poly Nets, the first time fade out of the people's vision.

The last two years the development momentum of the comprehensive electric business platform has been more and more fierce, robbed almost all of the limelight, occupy the majority of the market share. In their squeeze, the vertical electric business is a quiet, almost no power to fight back, the deceased has died, the living people are also suffering from the flow and the continued decline in turnover. What is the reason for this? How should the vertical electric dealer continue to essay?

The dilemma of commercial logic of vertical electric business

Vertical electric business Enterprises today's dilemma is caused by multiple factors, including the inherent defects in the business model, but also has its own business problems.

1, vertical electric business model of the war

The vertical electric quotient is compared with the comprehensive electric quotient, compared to the latter's full category coverage, most of the vertical electric operators focused on a particular category, and because of this so that the vertical electric business model has some natural flaws to overcome, so many people are discussing whether the vertical electric quotient is a "pseudo proposition."

First of all, consumers have a natural demand for a one-stop shopping, because only this is the most convenient, coupled with a comprehensive electric platform on various effective member incentives, more incentive to consumers on a platform to complete all merchandise procurement. In the choice of goods, consumers are also more inclined to face a rich variety of goods, rather than a limited number of options, this is the same online, so we see the line of business more and more fixed focus on the market, but this is not the advantage of the vertical electric business. For vertical electric business, also often faced with the confusion of category management, because generally 20% of the best-selling category accounted for 80% of the sales, if the remaining 80% of the category, then the richness of the category greatly reduced, affecting the user experience. If you supplement the remaining 80% of the category, it will lead to a significant increase in inventory costs. In a word, because of these reasons, the comprehensive electric business platform has more and more strong scale effect, and the user's stickiness is more and more big.

Second, for retail to complete the transaction need to have enough traffic, this is both online and offline truth is interlinked, but the line and the flow under the line structure is completely different. Below the line most important is "the lot, the lot and the lot", in essence is the stream of people, chooses the position to be destined to have many natural flow. But the line is completely different, the flow of the line more concentrated, in addition to relying on the brand effect gradually improve the natural flow of the account, but also need to go to search engines, portals or through the Federation of the way to buy a lot of traffic. At present, the overall flow of the Internet prices are very expensive, the cost of access to new users is very high, if the flow of money to buy over the formation of a relatively high conversion, or the user came to transform once lost, then the enterprise will always spend a lot of money to do marketing, Once the reduction in marketing costs is followed by the flow and sales of the sharp decline in revenue, which is a lot of vertical electric operators are facing problems. In this case, for many enterprises once the capital market to stop blood transfusion, the plight is doomed. But for the comprehensive electric business, because the category is richer, the user base is also bigger, relatively is diluted the expensive flow purchase cost. As a result, we can see that the marketing cost of Jingdong is basically maintained at about 2%, while the vast majority of the vertical electric operators in more than 10%, even more crazy time to reach 30%-50%, such business model is difficult to continue.

2, vertical electrical business problems

We talked about the flaws in the business model of the vertical electric quotient, but in fact, the model is largely without the so-called good or bad, it will not be perfect, just for the different business model needs to have a completely different play, the so-called vertical can not use the platform of thinking and logic, unfortunately, many enterprises on the wrong pace, failure is inevitable.

The vertical electric business is fastidious is the more specialized operation, through the differentiated goods or the service and the consumer produces more emotional interaction, thus produces the platform cannot replicate the user loyalty and the stickiness. But what we're seeing is that most of the vertical electric dealers are no different from the General Electric. Even as a result of logistics system defects to provide services rather than the Beijing-east and other electric platform, and the so-called vertical only to do the surface of the vertical goods, operation is not professional, it is difficult to form a moat, but fell into the cycle of price competition, Gross margin continued to lower.

The reason behind this is a few years ago the entire e-commerce industry impetuous atmosphere has a great relationship, everyone's focus is on the size of the enterprise, or in order to desperately open the distance with the competitor, or for the next round of financing, or for a few of the few listed places. This is understandable, because the retail itself is a very emphasis on the scale effect of business, no scale is difficult to form the bargaining power of suppliers, also can not effectively stall thin various operating costs, no certain size of the enterprise is doomed to be very difficult to achieve too much success. But it needs to be clear that E-commerce is not only a scale of the game, but also a cost of competition, the management of the refinement has a very high demand. For the vertical electric business, but also in the goods or services to the difference between the great effort. Many companies do not realize this, lost in the pursuit of scale, and finally become unsustainable.

3. The extrusion effect of the integrated electric business Platform

Due to the inherent defects in the pattern and the misguided management, most of the vertical electric operators did not seize the short time window to show their professional operation ability, make the characteristic and form the brand. When the Beijing-east and other electric business platform covered by the category gradually penetrated into the daily life of all aspects of people, when the traditional brand began to embrace the Beijing-east, the cat and other integrated electric business, the comprehensive electric business platform for the vertical electric operators of the extrusion effect began to appear, and more and more strong, as the goods provided by the two, service is difficult to reflect the difference, On the contrary, the Beijing-east, which features its own logistics, provides better service for consumers.

In the comprehensive electric business platform to carry out a certain category expansion, it is also often selected in the field of operation of the best vertical electric operators as a target, the most direct competition. For them to sacrifice a certain category of gross profit, because through the related category of the company's overall profit level to maintain a certain standard, and for the vertical electric business is a disaster. Jingdong was relying on such a strategy to the book as the core category when the profit directly hit the loss, the stock price repeatedly fell, this is basically when the development of the history of the turning point. Red children is also due to the comprehensive electric business platform for mother and infant category of the involvement and sales fell sharply, had to sell to Su Ning.

Finally, after a series of projects, investors gradually understand the internal business logic and play, the capital market of winter began to cut off the vertical electric operators continue to rely on the possibility of external blood transfusion, and the lack of their own hematopoietic capacity makes many enterprises become unsustainable, encounter "merge" Doom.

The mode breakthrough of the vertical electric dealer

In the past few years, I think it is the first stage of development of the vertical electric quotient, this is a hundred meters sprint, many enterprises from a subdivision of the standard category, the end of only one: that is to grow into a comprehensive electric business platform, the reason is that we mentioned above the standard category of vertical electric operators have insurmountable weaknesses. Therefore, for many enterprises in the beginning is doomed to the final outcome, because in the race to the comprehensive electric platform on the track, the last chance to retain only will be the Crown, Asia, third place, and most of the company when the admission is already late, the time window is running out.

After more than 10 years of development, Alibaba, Beijing-east and other comprehensive electric platform is more and more large, Matthew effect has been very obvious, to build a comprehensive electric platform window of opportunity has been basically closed. However, comprehensive electrical business can only meet people's general shopping needs, with the social progress and people's consumption level, the pursuit of personalized goods and services will become more and more people's consumption concept, this is a vertical electric business opportunities. The development of the foreign electronic commerce basically presents such trend, the comprehensive electric business platform is more and more big, but at the same time some personalized, the characteristic vertical electric dealer unceasingly appears. For the players in the market, the face has gradually matured e-commerce market and strong competitors, with the old thinking and logic has been difficult to stand out in the competition, so we must adopt a differentiated play, to seek the mode of breakthrough. This is the second stage of development of the vertical electricity quotient, and it is the business logic that they should adopt in the beginning.

Vertical has two meanings: the first is the vertical of the commodity category, for example, focusing on the footwear of Zappos, cosmetics, such as poly beauty, such vertical electric operators are very focused on the industrial chain upstream and downstream resources integration, so as to provide consumers with more value-added products and services, the standard products to make the characteristics of non-standard products to make brand The second is the vertical of the target population, such as focusing on the mother and child groups of zulily, military enthusiasts of the iron and June character, such vertical electric operators through the excavation of the core needs of specific groups of people, to expand the category to meet the needs of such people's comprehensive shopping. At home and abroad, we have seen some innovative vertical electric business enterprises, in the vertical category or vertical groups on the basis of a variety of dimensions of innovation, not only in the market foothold, but also made great progress. In combination with their situation, I think that the vertical electric operators can focus on the following four directions:

1. Innovation of Sales Model

E-commerce moves trading behavior from offline to online, the form of trading relationship has changed a lot, but the essence of the process is the same, but the full use of Internet features can be improved or change the shopping process in some aspect of the promotion of shopping efficiency or shopping experience innovation, In order to meet people's personalized shopping needs, to enhance customer loyalty and active degree, this is a comprehensive electric business platform is difficult to do.

At present, the more typical mode of sales innovation is limited time to sell, this type of model of the electric business is usually focused on a category or a specific group of people, in a limited timeframe to provide a high price-performance goods, stimulating the impulse of people to buy. And because the product timing on the new, consumers each landing may have a new discovery, the curiosity of the drive to stimulate them to keep looking back, so this type of electric dealers generally have a high user stickiness and repeat the purchase rate. This model in China's representative enterprise is the only product will be listed after the strong performance caused by the major electric dealers to imitate, but often only its table. In the United States, there are a lot of listed electric companies, in addition to Amazon and ebay and other comprehensive electric platform, the best market capitalisation of the companies are basically limited to special selling mode, and these enterprises often have a higher p/s valuation multiples, but also has a better profitability.

In addition, in recent years, the rise of the cycle of purchase, social power, etc. belong to the category of sales Model innovation, there are many enterprises in this field to get a good investment.

2. The personalized demand of the service vertical crowd

Finding the target consumer group is undoubtedly the most important prerequisite for the success of any business model, and most of the previous wave of vertical electric dealers did not do this, so it is unavoidable to face the fate of bankruptcy or takeover. Most of them focus on a specific category, to achieve the vertical goods, but this is only the surface of the business model set up. The vertical electric quotient is more important is achieves the target consumer group's vertical, that is to say, to find a different consumer group with a comprehensive electric platform, the more obvious the difference is, the more likely it is to meet their needs through distinctive goods and services, and the more effective the business model is, of course, if the market has enough space.

At present, the successful vertical electric dealers in the market have their own distinctive characteristics in the target consumer group positioning, for example, only products will focus on the three or four-line city, Zulily focus on the mother and child groups, blood June character for military enthusiasts, and so on, we will refer to the community of the electricity business is a vertical crowd as the core of the operation of the electric business model. Found a vertical consumer, vertical electric business is not limited to a single category, but around the special needs of such people to carry out the expansion of many categories, often also receive very good results. For example, only the goods will initially be clothing shoes and hats mainly, but is currently increasing the proportion of cosmetics, mother and child category; zulily also provide infant supplies, women's fashion and home furnishings and other categories; the character of the blood and iron June is almost from the beginning covers clothing, shoes, hats, watches, All kinds of military products, such as glasses and purses.

3. Branding of non-standard category

For non-standard categories of goods, consumers often have the choice of obstacles, because sometimes they are faced with tens of millions of goods, the quality of which is uneven, this is a comprehensive electric business platform in the provision of rich goods at the same time the headache caused by the problem. And this gives the vertical electric business opportunity, focus on a certain non-standard category, the product and industrial chain at the same time to do deep, using their own professional service level to help consumers simplify the selection process, resulting in shopping efficiency and experience promotion, and based on this build brand. The vertical electric dealer accumulates the accurate grasping ability to the consumer demand and to the industrial chain deep control is the comprehensive electric business platform is difficult to match.

The success of the only product will be the victory of the special sale during limited hours, on the other hand is also a selection of shopping guide mode of victory, because the only product will be through the professional purchasing team and the mechanism for consumers to filter out the needs of the quality of their products, simplifying the shopping process, and realized with Alibaba, Beijing-east and other electric business platform of the partition Zulily business model also has the same similarity, through the professional buying team from a large number of small and medium-sized suppliers for consumers to filter out the highest price of the goods, thus satisfying their needs, and formed a distinctive brand image.

4, personalized vertical brand electric dealer

For many vertical electric operators, there is only channel value, and this is precisely the most vulnerable to large electric platform squeeze. However, in any case, the brand of goods is very valuable, the platform relies on a large number of brand merchants. The internet is a very good brand-building tool, not limited by the region and the shelf, with a very strong radiation range and the ability to gather passengers. The use of the Internet can build a strong brand effect in a shorter period of time than the traditional brands have accumulated over the decades or even hundreds of of years. We have witnessed a lot of Amoy brand growth miracle, although they are now facing some business problems, but this is basically a brand growth process must experience the pain, is from a Amoy brand to grow into a truly enduring internet brand. Mention vertical brand Electric dealer, here also cannot say a descend a guest, every guest originally very possibly become this field of benchmark, I also once very optimistic about it. However, the difficulties that Fank today have nothing to do with the business model, but mainly in the implementation of the strategy has been lost and deviated.

In short, the vertical electrical business must be very clear to their own business logic and survival, in the differentiation of the article, to establish a comprehensive electrical and other competitors difficult to replicate the core competitiveness.

The problem that the vertical electric trader should pay attention to especially

Now, the vertical electric quotient hundred meters sprint dash to the General Electric Trader's race has basically finished, next they need to be in the big electric business platform formidable aggregation effect and the radiation scope to find own position, at this time in addition to need through the unique localization to realize the business model to break apart, It also requires specialized operational capabilities to establish a strong differentiated competitive advantage. This process is more like the marathon than the hundred meters, need enterprises to sink down, to leave the simple pursuit of the scale of financing of the impetuous mentality, return to the essence of business, pay attention to some of the core problems in operation.

1, give up the pursuit of the size of the blindly

As we mentioned above, retail must be accompanied by scale, too small to support the independent operation of a business, it is difficult to obtain the favor of capital. But the significance of the scale for the vertical electric and comprehensive electric business is completely different, comprehensive electric business is must have scale support, big scale can have enough traffic and consumers, also can serve the platform of business and consumers. So in the road to the integrated electric business must be hundred meters sprint, the competition is who can be the first large-scale, and then have a strong platform effect, then it is difficult to reach such a level of magnitude and dialogue.

For vertical electric operators, whether for vertical groups, or vertical category, in the final analysis is a market segment, to meet the needs of users, so the need to do a subdivision of the field of professional and unique, to give up the pursuit of scale, more attention to the quality of growth and efficiency. The vertical electric trader must first make sure that the industry that it engages has enough market capacity and space, can support the future development of the enterprise, and the speed of development is more emphasis on moderation.

2. Deep-Plough supply chain

The comprehensive electric business can cover people's general demand for the commodity, and the vertical electric trader should make the supply chain chain deeper and more professional. First of all, from the height of the supply chain to design their own products and services, strengthen the impact on the upstream and downstream resources of enterprises and control, from the source of the quality of products and services; Secondly, we should continuously optimize every node in the supply chain, improve the efficiency of operation, and realize the best ratio of cost and benefit. In short, the vertical electrical business to the supply chain through the remodeling and improvement, either to provide unique products and services, or have a higher supply chain efficiency, only in this way to achieve the difference with the comprehensive electric.

3, pay attention to the refinement of operational capabilities of the promotion

The fine operation ability is in the future in front of all electric dealers an eternal proposition, a enterprise's success and failure, largely decided in the operation, management and other aspects of the details. However, unlike the hundred meters impact, this is a slow kungfu, the effect of the show from the accumulation of the accumulated. Internet or Internet thinking can only accelerate the growth of enterprises and the speed of brand building, but can not fundamentally change the process. E-commerce in the final analysis is a strong traditional color of the real economy, the supply chain is very long, involving procurement, sales, warehousing, distribution and customer service, and many other links, each link and link and link between a lot of details of things need to be continuously optimized. The so-called fine management is to continuously strive for excellence, to do everything to the most fine, in the same investment situation to produce the greatest benefits, bring the best user experience.

4, pay close attention to user conversion rate, retention rate and stickiness three indicators

We mentioned above that users have a natural demand for a one-stop shopping, so the flow of more and more integrated electronic business platform centralized. And in the case of the flow price is so expensive, comprehensive electric business platform through the category of related sales to achieve the maximum flow cost efficiency, and the vertical electric business does not have such advantages. Therefore, the vertical electrical business must not fight with the integrated electricity flow and resources, but should be professional and differentiated, and on the basis of the user conversion rate, retention rate and stickiness, this is the core of the vertical electric business.

For the vertical electric business, must be very concerned about the user's conversion rate, retention rate and stickiness, and in these three indicators must reflect the advantages of a comprehensive electric quotient, so as to explain the role of the vertical electric operators targeted strong and professional characteristics, which means that enterprises will have more and more natural flow, Maximize the value of marketing costs, so as to avoid falling into the vicious circle of high marketing costs. In fact, the relatively successful vertical electric operators are also in these indicators have a good performance.

5, cautious view of the expansion of vertical electric business

Vertical is accompanied by specialization, and do not say that this ability to build a long time to accumulate, even if it has made a feature, is often tailored for a certain group of people, once to step out of this circle is bound to produce great difficulties. We've seen a lot of vertical electric dealers succeed in one area, but soon after they start to expand, they have to go back to their original territory.

Of course, it is not said that the vertical electric operators must not consider expansion, but to be very cautious, the more prudent approach is to slowly seek a strong correlation between the category or the expansion of the population opportunities.

6, the whole network distribution

In addition to the independent construction station, the vertical electric distributor can also consider the whole network distribution according to the characteristics of category and target consumer group. On the one hand, the large-scale effect of comprehensive electric business platform is more obvious, not only on its own platform has brought together a large number of consumers, and the rate of return (ROI) is also relatively high, which formed a value of the depression. Compared to independent sites, vertical electric dealers in Alibaba, Beijing-east and other electric business platform on the sales cost is lower; on the other hand, Alibaba, Beijing-east and other electric platform after years of development, has been around E-commerce transactions to establish a relatively perfect ecosystem, can be very good for the merchants to provide inclusive logistics, payment, Data services, as well as financial support and other ancillary services, so that businesses will focus on the main focus on commodity transactions and services, thereby enhancing the overall operational efficiency of the enterprise. Therefore, especially in the special situation of our country, the cooperation between the vertical electric quotient and the comprehensive electric business platform is expected to be more and more. In this respect, the most typical enterprise is Dangdang, the veteran electric dealer itself has its own trading platform, but also settled in the cat.