There are no permanent platforms, only permanent traffic. As traditional e-commerce traffic peaks, social e-commerce, which relies on social fission to harvest new traffic, has become a fast-running dark horse. Although the huge traffic appeal of social e-commerce was once hailed as a trend of the era, the suspicion of pyramid schemes, which borders on legal red lines, has also made many consumers avoid it. But now, with the entry of giants like Alibaba and JD.com, the reputation of social e-commerce, once overshadowed by pyramid scheme suspicions, seems to be turning around. For example, Huasheng Daily, which was fined a total of 74.5658 million yuan last year, known as the largest fine in domestic social e-commerce, was recently reported by iHeima that relevant regulatory authorities revoked the penalty decision and removed it from the list of seriously dishonest enterprises (blacklist). Moreover, platforms like Pinduoduo and Yunji, which were labeled with negative tags such as rampant counterfeits and suspected pyramid schemes during their wild growth period, are now gradually being "self-slap-faced" by consumers who verify the "true fragrance law." Beyond these early players, giants like JD.com and Alibaba have launched their own platforms such as Fenxiang and Taoxiaopu, as well as Fenxiang Life and Miyuan, which have become "money-making" tips for many users. Under these circumstances, will social e-commerce, which has risen again with the backing of giants, move toward "a bright future" or continue to struggle on the "road to nowhere"? -01- The Real World Under the "Cave Theory" Experienced internet surfers should be familiar with the silly online literature ads represented by the "Twisted Mouth War God." These ads attract many users with absurd claims, suggestive text that skirts the edge, and dramatic plot twists, quickly going viral and driving traffic to various free reading apps. Mr. Sun, who works in the online literature industry, said: "These ads are scorned by many, but they are effective enough for harvesting lower-tier users. To this day, many people still underestimate the power of the lower-tier market. In fact, as long as you understand the lower-tier market a bit, you basically don't have to worry about not making money. For example, we are currently just harvesting a bit of users who are excluded from the traditional market, and we have become a traffic source that monetizes millions in ad revenue." This logic is almost the same template as Pinduoduo's rise. The users attracted by these silly online literature ads are even more down-market than the small-town youth Pinduoduo targets. Now, social e-commerce platforms like Fenxiang and Taoxiaopu are doing exactly that: starting from small-town youth and building e-commerce services that reach deeper into the grassroots capillary network for even more down-market users. The fundamental reason is nothing more than the fact that traffic costs have become an unbearable pain for traditional e-commerce. And the lower-tier market, which has been floating on the trend for several years, is still a traffic source waiting to be deeply cultivated. Aunt Zheng, who lives in a rural area in western Hunan, learned to "save money" shopping on JD.com through Fenxiang during the pandemic with the help of her son. Fenxiang's system requires invitations from acquaintances; Aunt Zheng's invitation code was provided by her son's girlfriend. Now, with experience, Aunt Zheng shares good finds "in family and friend groups to buy together." Taobao and JD.com have been developing for years, but users like Aunt Zheng have never enjoyed the convenience of online shopping. Even when Pinduoduo's "cut a knife" was in full swing, Aunt Zheng's son refused her request to learn online shopping, saying, "There are too many fakes, you can't tell the difference, don't get scammed. Just tell me what you want to buy." Now, with giants like JD.com and Alibaba behind Fenxiang and Taoxiaopu truly entering the lower-tier market, groups like Aunt Zheng are finally being seen. Li Qiang, who sells products through information flow platforms like Douyin, also told "Tanglang Finance" that he sells different products according to the season, such as T-shirts and sandals in summer, and stockings, leggings, and cotton shoes in autumn and winter, but the shipping addresses of buyers are mostly in towns and rural areas. The philosopher Plato once had a famous "Allegory of the Cave," where prisoners are kept in a cave with a fire behind them, and people carry various objects that cast shadows on the wall in front of the prisoners. The prisoners naturally believe the shadows are the only real things. Only when they leave the cave and see the real world under the sun do they realize that their previous world was just a cave, and what they thought was real was only images. How big is the real world outside the "cave"? Perhaps Mr. Sun's words, "To this day, many people still underestimate the power of the lower-tier market," Aunt Zheng's online shopping life, and Li Qiang's customer addresses all reveal one side of it. According to QuestMobile's "China Mobile Internet 2020 Semi-annual Report," new internet traffic basically comes from users outside the traditional market. By city tier, third- and fourth-tier users constitute the main source of new users across the network; by age, users under 18 and over 46 constitute the main source of new users. And WeChat is the link that finally makes these consumers outside the internet "cave" visible and becomes the new traffic battlefield that social e-commerce competes for. "42 Chapters" once reported a viewpoint: The spread based on WeChat's relationship chain brought opportunities like Pinduoduo and Yunji, which actually represent two types of traffic opportunities: first, cheaper traffic acquisition methods, such as group buying, distribution, and bargaining; second, more down-market channels that cover incremental populations. WeChat covers 1.2 billion monthly active users and has become an App Store covering users at different levels. Through WeChat's spread, applications can more easily reach down-market groups, and through the operation of WeChat groups, they can cultivate usage habits. With the help of WeChat, which is sufficiently down-market and perfectly fits product sharing, spreading, and fission, companies like Pinduoduo, Mogujie, and Yunji have successfully IPO'd, and giants like Alibaba and JD.com have also entered, leading social e-commerce to differentiate into models such as social group buying, membership, influencer e-commerce, and S2b2C. But regardless of the model, the essence is to reduce traffic costs and transform the path from "people looking for goods" to "goods looking for people," thereby improving efficiency. -02- Can Giants Dissolve Users' "Arrogance and Prejudice"? Low cost and high efficiency, but social e-commerce faces the "arrogance and prejudice" of consumers who refuse to leave their "conceptual cave." Fenxiang founder Deng Zhengping shared such data: As of now, Fenxiang has 2 million good product promoters, covering 2 million WeChat groups, with 50 million mini-program users, and a brand event can achieve sales of 100,000 orders in a day. At the strategic launch conference of Taoxiaopu in early September, data showed that since its launch, Taoxiaopu has had 3.5 million "shopkeepers" in over 60 countries, generating 100 million product shares. In the next three years, Taoxiaopu aims to achieve a transaction scale of 100 billion yuan and provide 10 million flexible employment opportunities. Although Fenxiang and Taoxiaopu have gained recognition from some users based on the endorsement of giants, there are still other users whose received information deviates from the positive message that social e-commerce efficiently promotes product circulation and provides flexible employment. Xiao Fang, a housewife and mother of two in a fourth-tier city, bought a membership and became a shopkeeper when Yunji first became popular. To achieve "promotion," Xiao Fang kept inviting others to become new shopkeepers, but contrary to her wishes, "I invited all my relatives and friends, but couldn't meet the number required for promotion. Later, they all said I was running a pyramid scheme. Because inviting someone to become a shopkeeper requires paying over 300 yuan, although there is an equivalent gift package, it's not worth that much, and I didn't save much money buying things on it either." Therefore, when "Tanglang Finance" asked Xiao Fang, who hasn't found a job yet, whether she would consider Fenxiang or Taoxiaopu, she replied without hesitation, "Forget it, I'd rather do group buying." Under the damage of the wild development period of social e-commerce, there are many people like Xiao Fang who have "arrogance and prejudice" against social e-commerce. Yoyo, who works in Shanghai, even directly told "Tanglang Finance": "Social e-commerce? Isn't that just a pyramid scheme?" In a random inquiry in a social group by "Tanglang Finance," there were not a few people with the same idea as Yoyo. Indeed, now if you enter keywords like Yunji, Fenxiang, or Taoxiaopu in a search engine, the related searches will show an associative entry like "Is XX a pyramid scheme?" There is a common view in the internet economy that all policies lag behind new models. For social e-commerce, the doubts in consumers' minds may be partly due to policy lag, but more importantly, platforms need time to clear the clouds and prove themselves "reasonable and legal." Moreover, many social e-commerce platforms retain models such as headhunting distribution and consumption rebates, which make it difficult to avoid shopkeepers shifting from pure product operation to interpersonal relationship management to achieve more performance. For example, Chen Xin, who previously used Miyuan, told "Tanglang Finance" that in the early days of using Miyuan, there was a team specifically teaching how to save money when buying, but later because she didn't have much shopping demand and didn't use it for a long time, she was kicked out of the group chat by the group owner. This makes it easy to understand why consumers, especially those in higher-tier cities, find it hard to dissolve their "arrogant" attitude and negative "prejudice" when social e-commerce is mentioned. Even Pinduoduo, with its strong growth, reached 683.2 million annual active buyers in Q2 2020, the largest single-quarter growth since its IPO, only 40 million behind Alibaba's 726 million, but mainly from the lower-tier market, with penetration into first- and second-tier cities just beginning. Japanese writer Miura Atsushi wrote in "The Fourth Consumption Era": "The ultimate meaning of consumption lies in how to live a more fulfilling life. Compared to an overly individualistic, isolated society, we need to build a society where people can naturally connect with each other." It is certain that social e-commerce is a new consumption method that steps out of various "caves." But the current problem is that the connection between platforms, shopkeepers, and users in social e-commerce is not a natural state, but more of a consumption of social relationships. However, after several years of development, consumers who once "didn't want to bow to life" are increasingly finding Pinduoduo "truly fragrant." Now, giants like Alibaba and JD.com have also entered social e-commerce. With the credit endorsement and social responsibility of giants, social e-commerce may see "a bright future" and emerge from development's "another village." Source: Tanglang Finance (ID: TanglangFin) Tips will be paid 400-2000 yuan once adopted.