Western marketing is "those who win brands win the world," while Chinese marketing has always been "those who win channels win the world." It can be said that if you don't keep up with the pace of channel changes, you won't be able to stand in the business world.

In the past two years, the development of mobile internet has brought tremendous changes to channels. From online to offline, from new retail to social e-commerce and community group buying, not only have a large number of new channel types emerged, but the logic of channel competition is also different from the past. Facing the complex channel environment, how to survive? How to seize the opportunity and stand out?

-01- Channel Division and Changes

In the past two years, with the development of mobile internet, the concept and definition of channels have changed.

In the past, what we understood as channels mostly referred to the retail outlets and terminals we came into contact with, where the transaction and delivery of goods were integrated.

What does that mean? For example, when you go to a supermarket to buy a bottle of mineral water, you pay and receive the goods at the same time. In this process, delivery and transaction are together. Cognition happens online, such as advertisements on TV and other media.

But now, cognition and transaction are together, while delivery is offline. Mobile information technology allows all information to reach places where real-time transactions can occur. For example, when we see a building advertisement in an elevator, and it's well-made, with a QR code, you can scan it and directly make a purchase.

When you see a poster shared by a friend in your Moments, and the recommended product is good, you can directly buy it. At the same time, when you see a good advertisement on TV, you can also buy it. When you see a message in a public account article, and the product is good, you can directly buy it through a link.

All places where you can be reached by information, whether it's print or electronic media, as long as there is a place where information can interact with you, transactions can occur.

Today, the development of mobile internet has made the boundaries between cognition, transaction, and delivery increasingly blurred. So our understanding of channels can no longer be simply understood as offline trading venues. Instead, we should abstract the content carried by channels and understand it as traffic. Any place where traffic can directly generate transactions can be understood as a channel.

Today, we see that transaction touchpoints have become particularly numerous, and the sales share of traditional offline channels is gradually declining. Other channel types, especially those combined with online, have emerged in large numbers. For example, new retail, social e-commerce, and information e-commerce. New Distribution previously made a preliminary statistic that there are about 1,000 types of channels today.

You will find that ubiquitous information intersection points can generate transactions. Today, the scenarios where users can transact are highly fragmented.

-02- Three Traffic Logics of Channels

The most important logic under channels is called traffic.

There are mainly three forms of traffic: commercial traffic, public traffic, and private traffic. Today, I will give a simple explanation of the characteristics of these three types of traffic as I understand them.

1. Commercial Traffic:

Refers to traffic that can be bought with money. For example, Taobao's Zhitongche and Drill Exhibition, advertising on Douyin, and WeChat's Guangdiantong are all traffic that can be bought with money. The purpose of buying traffic is very clear: for direct transactions. So all purposes of commercial traffic revolve around transactions.

Commercial traffic currently has three major camps: Alibaba's activity placement, Baidu's search bidding ranking, and Tencent's Guangdiantong. The source of commercial traffic recommendations is the platform, and the trust multiplier for users to transact comes from trust in the platform.

2. Public Traffic:

Specifically refers to traffic that does not require money to purchase, but requires creating very good content, which is recommended by the platform's algorithm engine to more users, thereby obtaining traffic.

This type of traffic requires the operator to have strong content production capabilities. The algorithm engine evaluates the quality of the content, and based on content tags, recommends it to a certain number of relevant users. Then, based on the content's like rate, completion rate, forwarding rate, and evaluation data in the basic user pool, it evaluates whether to give you a larger user pool.

For example, when you just post an article or a Douyin video, you might get a user pool of 500. If 20 to 30 people all watch to the end, like, and forward, you'll get a traffic pool of 1,500 or 2,000 people or even more. If the like rate and completion rate of these 1,500 people are better, it will recommend you to 20,000 to 200,000 to 2 million people, continuously giving you a larger traffic pool and more traffic.

Public traffic mainly relies on high-quality content and does not require money to purchase, because the cost value brought by traffic is very high.

But public traffic also has a problem: although you can accumulate fans, if your content does not match your fans' tags, some platforms like Toutiao will not recommend it. Moreover, Toutiao's purpose is to obtain huge traffic through your good content and then resell it to advertisers. So, the dominance of public traffic is still in the hands of the platform, not the brand.

At the same time, public traffic also lacks trust endorsement. Because content recommendations come from the algorithm engine, but the algorithm cannot guarantee the consistency of the goods and services sold by merchants. So in public traffic transactions, consumers are more likely to be deceived.

3. Private Traffic:

Specifically refers to traffic accumulated by users based on good content and services, through word-of-mouth fission on social networks, thereby accumulating strong relationship traffic. It is recognition of your personal IP or content value, leading to proactive establishment of relationship traffic with a certain emotional connection.

The source of private traffic recommendations is usually word-of-mouth trust endorsement from friends or users, based on the value and recognition of the IP. Although this relationship is stable, it accumulates slowly. The advantage is that under strong relationships, continuous monetization and transactions can occur, provided that your services and products can continuously provide value output to users.

These three types of traffic have different presentations in channels. For example, the three models that have been popular in the past two years: B2B, social new retail, and live-streaming e-commerce. From my personal perspective, I actually particularly favor community and social group traffic.

Community groups performed very prominently during the epidemic, mainly due to new social interactions based on LBS, and the transaction potential brought by the emergence of traffic surplus opportunities.

From the perspective of user attention, when they first open WeChat to buy things, they must first trust friends around them. Once this transaction is presented by friends first, they will first purchase in their Moments or from friends.

Moreover, Teacher Liu Chunxiong also said that community and social groups are the most important hub for connecting three-dimensional space. Take offline small store owners as an example. Before the internet, they were just simple store owners. The characteristics were small scale, low costs, high rent costs, and the need for cash support, so the store must sell popular products.

But since the popularization of WeChat, especially the significant development of social e-commerce in the past two years, store owners have gradually built their own WeChat groups within their communities. The value of this group is mainly to facilitate shopping convenience for residents around the store, occasionally doing group buying.

Everyone is in a semi-acquaintance relationship within a community, and there is naturally a transaction logic offline. So this group is naturally a high-quality community. When the store owner and group owner are combined, it gives brand owners an opportunity: to use these small store owners to extend from the offline physical space's 2B business to the social space's 2C business for consumers.

So today, all FMCG manufacturers must not only do well in offline mom-and-pop stores, but also leverage the authorized traffic of small stores to do well in the new identity of social space.

-03- Competitive Logic of Channels

After the form of channel traffic changes, the competitive logic must also change accordingly. Moreover, the competitive logic of each channel is actually quite different. Here, a core concept needs to be explained: limited shelves and unlimited shelves.

The shelves in supermarkets and small stores are typical limited shelves. Due to the limitations of store area and display space, only limited products can be displayed. Costs are high, expenses are high, and popular products must be sold. The products we see in convenience stores must be carefully selected, refined, and have particularly good sell-through rates. But the problem is that once these products reach a competitive stage, they will definitely be dominated by big brands.

This means that in the past, on traditional limited shelves, small brands had no opportunity to display. So the past competitive logic and strategy were HBG and deep distribution, essentially competing for scarce shelf resources.

Mobile internet brings unlimited supply of shelves. The cost of listing on electronic shelves and editing costs are almost zero. Unlimited supply brings unlimited long tail, and unlimited long tail makes consumer demand gradually shift to the long tail. So, at this time, internet-famous brands were born.

Because supermarket shelf space is limited, e-commerce shelf space is unlimited. This gives many entrepreneurs many opportunities for display and presentation on e-commerce, and the opportunity to compete with big brands. Many small brands gain consumer recognition through high-quality products, and do not need to compete with big brands for limited offline resources. This is the fundamental reason why internet-famous brands appear in large numbers on e-commerce platforms.

But the problem arises again: unlimited supply also brings a very serious consequence called: shopper decision paralysis.

People have an instinctive aversion to information retrieval. The information explosion forces people to search for valuable information and products among excessive junk information. This process wastes a lot of users' time and cognitive costs.

The value of Li Jiaqi and Viya's live broadcasts lies in helping users strictly select from massive information, reducing the difficulty of user decision-making. This is the logic behind the rise of live-streaming sales.

Why is Li Jiaqi liked by girls? Because there are too many lipstick shades. Li Jiaqi's appearance successfully saved girls from the problem of insufficient IQ when facing hundreds of lipstick shades. So, a good recommendation is far more useful than a bunch of good sales pitches.

So, the essence of competition is the occupation of limited resources, such as mind, shelves, and media resources. But in different times and spaces, resources have different scarcity methods.

Offline, shelves are scarce resources. In the social field, user trust is a scarce resource. In e-commerce, attention is a scarce resource. And the corresponding competitive strategies are also different.

For example, when shelves are no longer scarce, user attention becomes scarce. At this time, it will be found that the logic of sales pitch and recommendation has essential changes.

Offline, when shelves are scarce resources and SKUs are few, effective recommendation and sales pitch can generate effective transactions. But on e-commerce platforms, because goods are excessively over-supplied, recommendations become valuable at this time.

Sales pitch talks about comparative advantages, about what features and characteristics I have, centered around the product. Recommendation talks about relationships and experience, centered around cognition.

-04- Future Trends and Countermeasures for Channel Changes in the Next Three to Five Years

From a macro development perspective, in the next three to five years, the trend of online-offline integration in channels is very obvious, and big brands are accelerating their layout in sinking markets. O2O home delivery business is booming, and many brand owners have proposed the concept of digital empowerment. Moreover, logistics is becoming more and more developed, and the richness of channels and business capabilities have significantly improved.

Currently, except for the shrinking wholesale channel, other retail channels are showing diversified development. The trend of home delivery, store visits, online, offline, and integration is very obvious, mainly driven by technology.

I can sort out three threads for the changes in the entire channel industry:

First, the drive of information technology. Second, new supply brings new demand, and new demand brings new consumption. Third, the drive of cost, efficiency, and experience.

In the future, there is no doubt that multiple channels will coexist, new traffic and new models will emerge, transaction scenarios will continue to fragment, and the combination of communication, transaction, and delivery will become more complex.

In summary, where there is traffic, there are transactions; where there are transactions, our products must support them. Then you must have the capability of a large middle platform and small front-end.

From the perspective of omni-channel integration, I give you some suggestions for channel strategy adjustment:

Strategic perspective: The ability to follow up on dividends, the ability to change and adapt management, and the ability to innovate products and models are indispensable. Product perspective: Unlimited supply brings unlimited long tail, and unlimited long tail brings unlimited demand. Brand owners must have the ability to continuously meet the diverse needs of consumers. Marketing perspective: From sales pitch to recommendation, from media KOL to social, all models and roles that can influence consumer decisions must be grasped. Organizational perspective: Big brands that want to adapt to future consumer changes and channel changes must have the ability to respond to uncertainty and the emergence of new opportunities. They must give up control, have evolutionary thinking, adjust their organizations based on market changes, and try large middle platforms, small front-ends, and amoeba models.

In general, internet integration, integration of cognition and transaction, 3D warehousing and logistics models, F2B2C, online order transaction models, and the integration of home delivery, store visits, and store visits must be supported by brand owners from strategic, decision-making, and theoretical support levels.

For brands, whoever can seize the dividends of new traffic opportunities and adapt to industry changes will definitely stand out in the future!

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