I believe many people have not deeply considered how much impact and disruption e-commerce and mobile internet will have on today's consumer goods market. This impact is not just about having a new sales channel or a new medium; in a sense, it is a paradigm revolution that reconstructs the models and competitive barriers we have built over the past few decades.
-01- How should we understand this reconstruction? Let's start with a concept: "infinite shelves."
The concept of infinite shelves was first proposed by Chris Anderson, editor-in-chief of Wired magazine, in his book The Long Tail. Many are familiar with the long tail theory, but few have paid attention to the core concept of "infinite shelves" mentioned in the book.
Infinite shelves refer to shelves that are different from traditional supermarket shelves. Due to physical space constraints, stores cannot stock all products without limit, so shelf resources are finite, and only popular products at the head of the demand curve can be stocked.
However, on e-commerce platforms, shelf display is not limited by physical space, and the marginal cost of listing products is almost zero, so products can be listed infinitely. This allows many niche products that previously had no chance to be shown to consumers to be displayed on infinite shelves.
For example, I am in Beijing now and want to eat an authentic bowl of Luosifen (river snail rice noodles) from Liuzhou, Guangxi. Although Luosifen is a very common snack in Liuzhou, it is hard to find in Beijing, and even if available, it is not particularly authentic. This demand could not be met in the past.
From the supply side, consumers like me who have been to Liuzhou and like Luosifen are still a tiny minority. For Master Kong, it would be uneconomical to produce Luosifen for the occasional needs of a very small niche of consumers, which does not align with the production logic of large enterprises like Master Kong.
From the transaction perspective, convenience stores have limited shelf space and can only display a limited number of products, while also paying high rent and labor costs. So their business logic must be to stock popular items to increase inventory turnover. Luosifen is not suitable for convenience stores either.
But today, consumers only need to open Taobao and search, and they can see thousands of Taobao shops offering various authentic Luosifen.
My number of meals per day is fixed. Although I occasionally eat Luosifen, from another angle, a big brand like Master Kong loses the chance of me consuming its instant noodles for that meal. If such personalized demands reach a certain volume, it is bad news for big brands like Master Kong.
From the supply side, although these niche demands are not large, they are enough to support small enterprises specializing in Luosifen. In the past, these enterprises could not compete with big brands and could only produce low-priced, low-quality goods in areas not covered by big brands. But today, these small enterprises only need to find a sufficiently segmented market and make good products, and they can thrive.
From the channel perspective, online malls like Taobao have almost zero marginal cost for expanding their electronic shelves, so they can expand to countless products without limit. Consumer search is also very convenient; with just two or three steps, they can find the product they want among hundreds of millions of SKUs.
This long tail of demand is a result of the emergence of electronic shelves. The essence of shelves is a physical product catalog, whose core function is to allow consumers to conveniently search and choose products.
Based on this logic, you will find that shelves exist not only in supermarkets. Any place where information is exchanged with users can serve as a platform for product search. These virtual shelves bring a huge advantage: they allow countless small and medium-sized enterprises to flexibly produce various personalized products in small batches and display them to consumers at very low cost.
The significance of electronic shelves for the consumer goods industry is: bringing all long-tail products and long-tail demands together on one platform, greatly reducing transaction costs for both supply and demand sides. This leads to a consequence: as long-tail supply increases and transaction costs decrease, users will shift part of their spending power to the long tail.
Undoubtedly, we are gradually entering a market environment where demand is becoming increasingly long-tail. This is an environment that gives big brands headaches and does not necessarily bring spring to small brands.
Infinite shelves provide consumers with a one-stop supply of infinite products, greatly enriching consumer demand while also making competition unprecedentedly fierce.
-02- Almost all brand owners are racking their brains to innovate, develop new products, explore needs, and create needs. But in fact, more supply is not always better. When consumers face hundreds of identical products, they may experience choice paralysis.
At this point, the consumer's cost of choice is the prerequisite for whether they will purchase personalized long-tail products. We must not only provide them with a rich variety of products but also help them reduce the cost of choice.
-03- The problem for brand owners today is not to continuously discover segmented needs, but to face the infinite long-tail demand; there are always opportunities in the market. You can never exhaust them. What brand owners need to do is to aggregate as many long-tail demands of a certain category as possible to form a business.
This is also what makes brands like Xiaomi and Three Squirrels particularly impressive.
The commonality between Xiaomi and Three Squirrels is that they have built a channel brand, not a product brand. After achieving brand breakthroughs in a single category, they gathered a group of followers who strongly endorse their brand.
They have countless small factories produce for them, and then horizontally meet the diverse needs of these followers.
For Xiaomi and Three Squirrels, the market for non-hot categories is enormous. As long as they do not produce themselves but aggregate supply and demand, they can achieve sales comparable to big brands.
-04- At the same time, we see that making niche long-tail categories is not just about creating a good product and being done. The tragedy of niche categories is that while doing long-tail markets can avoid competition with big brands and meet consumer needs, they can never escape three curses: First, low turnover rate, so costs cannot be reduced; second, too little demand, so the company cannot grow big; third, traffic is expensive, so it is hard to make money.
This is also why I said that the emergence of electronic shelves makes demand gradually long-tail, causing headaches for big brands and not necessarily bringing spring to small brands.
Therefore, for mass demand, you need to build a product brand, making as many consumers as possible remember it, making the product ubiquitous, and making it easily accessible;
For niche long-tail demand, you need to build a channel brand, being as infinite and rich as possible, centrally stored, and reaching as many as possible.
So when we look back at niche products like Zihaiguo (self-heating hot pot), what they need to do is to become a category aggregator. Its ultimate direction must be to appeal to satisfying consumers' lifestyles, which is why it focuses on the lazy economy.
Of course, Zihaiguo's growth path is worth learning from. Previously, in New Distribution's live room, Mr. Shi shared valuable insights. Interested friends can scan the code to listen.
In the past, we always thought the success of internet celebrities was accidental, but in fact, behind most internet-famous brands, there is a group of marketing experts who are very good at operating. We have summarized the seven secrets that internet-famous hits never tell:
First: Continuously segment the market. Find needs that are not fully met by big brands, such as the lazy economy. The essence of laziness is people's pursuit of efficiency. Whoever can insight into this need and meet it will gain consumer recognition.
Second: Create a hit product and use all means to make it explode. Quickly become the number one in that category, making the brand equal to the category!
Third: Technology + IP, dual-wheel drive. Give internet celebrities 100 reasons to recommend you, and give users 101 reasons to buy your product.
Fourth: The 101 strategy. The product is the 1; use internet celebrities and a matrix of ordinary users to promote, and use countless store groups to sell. Achieve full coverage in one channel without dead ends.
Fifth: Build a reputation online, and set stakes offline. While actively educating consumers online, actively expand new retail channels to increase offline sales.
Sixth: Don't create momentum; borrow it. Use Tmall, Alibaba, and all external PR events to gain attention and further amplify the spread.
Seventh: Don't put all eggs in one basket. Based on this lifestyle, continuously develop various products to meet consumers' diverse needs.
-05- To summarize the content of this article:
- E-commerce brings unlimited supply of display opportunities, giving countless small and medium brands an equal chance to reach consumers.
- The unlimited supply of goods makes consumer demand irreversibly shift to the long tail.
- A single long-tail demand cannot build a large enterprise, so new enterprises must have the ability to aggregate multiple long-tail needs around a group of consumers.
- Users have limited time; among these innovative brands, whoever can help consumers filter out the products they want from the vast information will win consumer favor.
- Facing consumer choice paralysis, the ability of a product to be recommended is the core competitiveness in the future.
In the past few decades, all innovations in the consumer goods field were incremental innovations oriented by scale and efficiency, based on a super-large market, single media, and single channel. Because of the significant increase in consumer income, many enterprises had good growth for a long time.
But the essence of the world is non-continuous. History always undergoes structural changes at certain stages. For enterprises accustomed to staying in warm water, sudden changes make it hard for many to adapt. This process also gives some small, prepared, and change-willing enterprises new opportunities.
For large enterprises, the only thing to do in the face of external changes is to start the second curve innovation model. Based on today's market environment, deeply understand, make accurate judgments, and then find a niche market that belongs to you again.
| Founder of New Distribution FMCG industry channel expert, author of over 400,000 words of FMCG industry research articles For communication, you can add WeChat by long-pressing. When adding, please indicate your company, position, and name.