---
title: "In Lower-Tier Markets, 'Middlemen' Are Even More Needed!"
description: "The article argues that in lower-tier markets, social, regional, and interest-based relationships are key, and that 'middlemen' (such as community group buying leaders) are essential due to the importance of personal trust and service. It warns that platforms that try to eliminate middlemen will fail in these markets."
author: "冯华魁"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2021-03-30"
language: "en"
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# In Lower-Tier Markets, 'Middlemen' Are Even More Needed!

> The article argues that in lower-tier markets, social, regional, and interest-based relationships are key, and that 'middlemen' (such as community group buying leaders) are essential due to the importance of personal trust and service. It warns that platforms that try to eliminate middlemen will fail in these markets.

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**-01-**
A couple of days ago, I wrote an article for members analyzing lower-tier markets, titled "In Lower-Tier Markets, Why Are Big Giants Defeated by Small Giants?" The article proposed a new viewpoint: there are three key drivers in lower-tier markets: one is social relationships centered on acquaintances, another is regional relationships centered on group leaders, and the third is interest-based relationships represented by livestreamers. These three relationships are the three key drivers of lower-tier markets; without them, one cannot establish a firm foothold.

Coincidentally, today there are media reports that last year, Pinduoduo decided to launch community group buying because they discovered in mid-year that Hunan and Hubei, which were their main markets, saw a severe decline in orders due to the expansion of several community group buying companies like Meituan in those regions.

It seems that among the aforementioned social, regional, and interest relationships, there is also a question of importance. Pinduoduo, which relied on social fission relationships to penetrate lower-tier markets, was also defeated by community group buying. Therefore, Pinduoduo made up its mind to do community group buying with Duoduo Maicai.

**-02-**
The biggest characteristic of lower-tier markets is acquaintance-based consumption. Interpersonal relationships are very important. People buy things from acquaintances or through their recommendations, finding it hard to refuse, and they trust acquaintances more than brands.

Behind this characteristic is a lack of product expertise. Users in lower-tier markets are too lazy to understand things like ingredient lists, nutritional parameters, or technical specs, and they really cannot understand them. Therefore, the previous consumption upgrade playbook does not work in lower-tier markets. If an acquaintance recommends a certain milk powder as good, users will not choose the brand advertised.

Acquaintances not only hold the trust chain of consumption but also control local key resources. They know exactly how to make logistics and delivery more efficient, how to save costs, and who can bring more customers.

The importance of acquaintances in lower-tier markets determines that many strategies must be different.

For example, in first- and second-tier markets, you can do direct operations, but in lower-tier markets, it is better not to do direct operations. You must have "middlemen." These "middlemen" are not necessarily channel distributors; they can be service providers specializing in one function, such as logistics, warehousing, traffic, or promotion. Community group buying leaders are such "middlemen."

Some might say, "Isn't this all common sense?"

Yes, it is common sense, but many companies entering lower-tier markets do not follow common sense, and the bigger the company, the more they ignore it.

For example, in the past two years, many giants entered lower-tier markets with low-price subsidies and various special edition products, but they did not find "middlemen." Now that community group buying has arrived, also using subsidies, it is easy for them to defeat these giants. Another example: many companies want to use livestreamers to reach lower-tier markets, but they think livestreamers are not valuable and are unwilling to give high commission rates. Another example: during the recent heated discussions about community group buying, a very important topic was that platforms would remove "group leaders." If everyone had some common-sense understanding of lower-tier markets, they would not come to such conclusions.

Each market has its own operating ecosystem. The ecosystem of lower-tier markets cannot do without "middlemen." For "middlemen," the platform is just one supply chain. If you have discounts, they come; if you don't, naturally other supply chains have discounts. They survive by "understanding" this market.

**-03-**
Many people wonder: lower-tier markets need low prices. If prices are already low and cost-effectiveness is high, consumers will naturally come to buy. Why do we still need "middlemen"?

Yes, this is the crux of the matter!

It is precisely because prices are low that "middlemen" are needed!

Because prices are low, product quality is basically homogeneous, with no major differentiation, making it even harder for users to perceive differences in consumption experience.

For example, many snacks, clothing, and fresh produce—can they perceive the difference between a good and bad cookie, underwear, or cabbage and apple in that price range? Hardly!

Since product differences are not obvious, what can you rely on to stand out in competition? On the services of "middlemen." It could be a product explanation, home delivery, particularly good attitude, frequent communication, mutual help, or even the fact that this "middleman" once helped them solve a phone software problem. Of course, the most important thing is that this person has always been reliable when buying from this "middleman," and even if there is a problem with the product, he can help solve it. This mutual trust relationship, accumulated over time, subtly influences consumers' choices.

This is the power of service. In lower-tier markets, service is not just based on the product; it is an added value based on personal relationships. This added value of personal relationship service is far higher than product-based service—in fact, most products in lower-tier markets, in terms of the product itself, have no service. In the end, isn't it the middlemen who creatively provide service? This service, translated into e-commerce language, can also be called customer service.

**-04-**
This understanding is completely different from internet thinking. In internet thinking, low price is king, but in lower-tier markets, "middlemen" are definitely king. In the past few years, before connecting to the internet, "middlemen" were in a confused period. After connecting to the internet, they mastered social media and short videos, and on their own turf, they are thriving again.

This existence has its roots and soil. They have created value. If an internet platform wants to do business on their turf, it is not decent to want to take everything without leaving anything behind.

Creating a system and ecosystem of common prosperity is healthier and more sustainable. The value of internet platforms is to organize more high-quality supply chains and provide services at lower costs. That is the way to long-term stability. Any enterprise that wants to cut off "middlemen" will be quickly driven out of lower-tier markets, no matter how big the enterprise or how famous the boss.

Source: Naughty E-commerce (ID: tiaopiEC) Author: Feng Huakui


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