Youzan, an 8-year-old SaaS service provider, will officially enter the '100 billion club' this year. At its 8th anniversary ecosystem conference on November 27, Youzan CEO Bai Ya revealed that in the first three quarters of 2020, the transaction volume of merchants served by Youzan reached 72.3 billion yuan, and the full-year transaction volume in 2020 will exceed 100 billion yuan.
Youzan CEO Bai Ya
Bai Ya stated that "the meaning of Youzan's existence is to help merchants succeed, so transaction volume has always been the core indicator for Youzan to evaluate its performance." An annual transaction volume of 100 billion yuan is a scale that only a few e-commerce companies in China have achieved. In the field of private domain operations, this data is even more historically significant. From this perspective, Youzan has achieved great success.
Undoubtedly, behind this 100 billion scale private domain economy are the increasing number of merchants joining Youzan. It is understood that in 2018, Youzan had 58,981 paying merchants, in 2019 this number was 82,343, and as of September 30, 2020, the number of paying merchants was 97,875.
FMCG brands including Liby, Luzhou Laojiao, Shanxi Fenjiu, Wuliangye, and Shanghai Jahwa have all been using Youzan to deploy private domain operations and digital transformation. There are countless successful cases of cooperation with Youzan.
For example, before the Mid-Autumn Festival, Youzan & Aiguan mini-program attempted a 'mini-program + store' live stream, visiting the Häagen-Dazs West Lake Cultural Plaza store, with Lamilan, One Cow Raised by One Person, Yan Zhi Wu, and Bestore participating as partner brands. The event attracted 60,000 netizens to watch, bringing a surge in online transaction volume for all participating brands, with the highest increase reaching 723%. Häagen-Dazs's 'Moon Fantasy' ice cream gift box was snapped up by viewers. The highest transaction conversion rate of the entire live stream reached 14%, with an average order value close to 500 yuan.
Recently, on the occasion of McDonald's China's 30th anniversary, the 'McDonald's Infinite Store' mini-program was launched, with technical support provided by Youzan. In fact, besides McDonald's, Youzan can also be seen behind the social e-commerce mini-programs of international restaurant chains such as KFC, Pizza Hut, and Burger King.
There are many similar cases. The reason Youzan has been able to develop so quickly is, on the one hand, that after the sudden outbreak of the pandemic, most offline stores were closed, and more consumption shifted online, especially among young people. The online economy experienced explosive growth, which in turn forced merchants to accelerate their digital transformation.
After the third quarter returned to normal growth, offline business began to recover. However, at this time, more medium and large merchants quickly began to embrace private domain traffic, embrace the online economy, and start comprehensive digital transformation. The addition of more medium and large customers and the increase in transaction volume of all customers once again promoted Youzan's performance growth, fully demonstrating the importance of social e-commerce and the private domain economy.
It can be said that Youzan's success is actually the inevitable result of helping these merchants succeed. So, one cannot help but wonder: how charming is the 'private domain economy' that enables Youzan to help so many merchants do good business through this tool?
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The Charm of 'Private Domain'
In past business models, we all clearly knew the importance of channels, because in the past, channels were the carriers for merchants to reach consumers, so the focus of competition in the past was on controlling channels. In the future, the core competitiveness of merchants will be more reflected in the deep operation of consumers.
Because the private domain economy establishes a better relationship between merchants and consumers. The starting point of the relationship is that you can create value for users. From a marketing perspective, the so-called value is to meet user needs.
The internet has eliminated material scarcity and information asymmetry, and can provide you with good things from all over the world that you know and don't know. But there is still a problem: how do you make others believe that what you provide is good?
In the internet era, online has become an indispensable part of business. In the past, consumers bought things in your Taobao store not because they trusted you, but because they trusted Taobao, so you had to pay extra traffic costs for this transaction. This is the price of trying to make a transaction without establishing a relationship with the user. Such transactions are becoming increasingly difficult today, which is why public domain traffic is getting more expensive. Establishing a direct relationship with consumers and gaining their trust is the charm of the private domain. The private domain economy relies on bringing benefits to users, providing value, thereby generating trust and establishing relationships. Once a relationship is established, making a transaction is no longer difficult. Moreover, the marketing of the private domain economy is more efficient and lower cost. Platform traffic is too expensive; the establishment of private domain relationships can allow users to bring new users, that is, fission, which is the most cost-effective marketing method.
Compared with past e-commerce platforms, private domain traffic also has a benefit: 'property rights' ownership. The traffic you buy on the platform can be turned into sales, but this traffic does not belong to you. If you don't continue to pay, this traffic can run away at any time. Private domain traffic is obtained based on the relationship with customers in social networks, and it is traffic that grows from the merchant's own soil. Therefore, the private domain economy has become a more efficient economic model in the future without suspense. And it is precisely by relying on this concept that Youzan has been able to enter the 100 billion club.
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Defining the Private Domain Economy: Youzan's 'Private Domain Triangle'
We all know that the reason Youzan can help merchants do better business is by helping them operate the private domain economy. As for the 'private domain economy', Youzan defines it as follows: The so-called private domain means that the ability to operate customers has become one of the core capabilities of enterprises and brands. In the era of the digital economy, the core goal of an enterprise is to truly value and own the 'customer' as the most valuable asset from the height of property rights, and continuously improve its ability to create richer value for each customer.
Moreover, in order to better operate the private domain economy, Youzan has summarized and proposed the concept of the 'Private Domain Triangle', analyzing and evaluating a company's private domain operation capability from three key points.
1. Private Domain Property Rights: The number of customers connected and the ability to reach customers; First is the number of customers connected; Establishing connections is the prerequisite for the private domain economy. Only after establishing connections can further relationship building be achieved.
The second point is the ability to reach customers; Having connections alone is not enough. Just as many companies think, users who follow official accounts on WeChat, Weibo, etc., are their private domain traffic. But so far, I have not seen a single FMCG brand that can operate its WeChat public account followers well. Why? Because the relationship between users and you on the public account is called 'subscription', which cannot be strictly considered fans.
2. Single Customer Value: The total value of a single customer over the entire lifecycle, and customer repurchase rate; You acquire a customer through advertising. How much value will this customer contribute over the entire lifecycle? Connection quantity × reach ability is your private domain property rights; the total value of a single customer over the entire lifecycle × repurchase rate is the complete single customer value.
3. Customer Referral Rate: The ability to bring new customers through old customer referrals, and the influence on customer choices in related fields. Customer referral rate refers to your ability to bring new customers through old customer referrals, also known as fission capability. This is the biggest difference between the private domain economy and the platform economy. In the platform economy, a sock seller can only sell socks because customers find you through search. But today, in the private domain economy, customers trust you, and they will bring new customers, creating extended value.
Moreover, once a private domain customer relationship is established, you also have influence on customer choices in related fields. You can also turn yourself into a channel for other brands, so this is also a very important value.
The total of these six values in this triangle determines how strong your private domain operation capability is. And this is also used by Youzan to re-evaluate the value of a brand or retailer, rather than just looking at how much money the brand or merchant has sold.
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Important Capability for Private Domain Operations - Omnichannel Marketing
Based on the definition of the private domain economy, how will Youzan help merchants improve their operations? In this regard, Youzan has proposed a clear direction: Join forces with multiple platforms to launch merchant support plans. While the private domain economy is running at high speed, Youzan also sees an important capability for merchants' private domain operations - omnichannel marketing.
Now there are various content platforms with different audiences. Brand owners need to find content platforms that suit their brand tone, establish their own omnichannel marketing positions, acquire customers from public domains, then settle them into private domains, and through refined operational services, deeply explore single customer value and increase repurchase rates. This is the necessary path for brands.
To achieve omnichannel marketing faster and better, Youzan has accelerated its multi-platform layout. According to Bai Ya, as of now, Youzan has connected with numerous traffic platforms such as WeChat, Weibo, QQ, Baidu, Alipay, Xiaohongshu, Aiguan, Inke, Douyu, and Huya, helping merchants "do business in every corner of the internet."
The value of the multi-platform layout has begun to show. The most representative is Youzan's CPS commission promotion platform 'Youzanke', which helps brands connect with influencer anchors on platforms like Kuaishou and Aiguan. In the past year, Youzanke has experienced explosive growth, with an estimated annual GMV of 7 billion yuan.
At the conference, Youzan launched merchant support plans with Tencent Ads, QQ Mini Program, and Alipay. Among them, the 'Tengzan Plan' jointly released by Youzan and Tencent Ads will provide Youzan merchants with full-link optimization and efficiency improvement for social advertising within the Tencent ecosystem (including WeChat, QQ, etc.).
Youzan also jointly launched the 'Hundreds Support Plan' with QQ Mini Program, providing support for high-quality mini-programs in cold start, event promotion, ecosystem resources, and other aspects.
In addition, Bai Ya also revealed that in the coming year, Youzan will focus on upgrading services in several areas.
1. Youzan Guarantee: Solve the problem of consumer trust for merchants. In fact, in the past three quarters, Youzan has helped merchants who have activated the Youzan Guarantee service complete nearly 100 million more orders.
2. Youzan Academy: Solve the problem of talent cultivation for customers. Teams and talents are long-term issues for most merchants. The most important course is to help more people become operators of private domain operations.
3. Youzan Strategic Investment: Share everything we have, including the money we earn and raise, accumulated customer resources, product and technical capabilities, market sales experience, organizational management and cadre training experience, through investment, to help more peers in enterprise services succeed.
4. Youzan International Version: To meet the needs of some overseas customers or customers with foreign business, Youzan has launched an international version. The goal remains to help merchants succeed and focus on how to help merchants grow their business.
It can be seen that everything Youzan has done and its future plans are still centered around the private domain economy to create a complete ecosystem layout. In addition to allying with multiple platforms, Youzan is also continuously expanding its 'circle of friends' of developers and service providers, providing merchants with a more complete product system and growth ecosystem.
According to Youzan CTO and Co-President Cui Yusong, in 2020, Youzan completed a total of 900 important product updates, especially with rapid development in marketing intelligence and brand digitalization products.
Youzan's ambition is to make merchants not just buy operating tools, but to provide a comprehensive environment for merchant growth. This includes on-demand technical development capabilities, operational service partners accompanying the entire lifecycle, and an ecosystem for mutual learning and common growth. These will also build a stronger moat for Youzan on the future battlefield.
Summary: Why can Youzan continue to grow? For merchants, it is not just a tool, but a comprehensive ecosystem that provides value through products, technology, services, traffic, and other aspects, supporting merchants throughout the entire lifecycle from private domain operations to growth, improving their business operations.
As a merchant, you must not ignore the generational gap brought by technology. From hand-to-hand combat in the cold weapon era, to the volley fire of smoothbore muskets before World War I, the large-scale use of Mauser rifles in World War I, and then the massive slaughter of automatic rifles and machine guns in World War II, all show that improvements in tools have created generational gaps in warfare, leading to one-sided outcomes. If decision-makers still use old tactical knowledge systems to fight with tools, the result will be a disastrous defeat and elimination. The same applies to enterprises in the future. Today, all companies that do marketing well essentially use new technology to the extreme. For tools like Youzan that help merchants enhance their private domain operation capabilities, whether you use it or not, you should have a deep understanding to avoid losing in future battles due to outdated knowledge concepts and the defense of vested interests.
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