In May 2014, JD.com listed on NASDAQ, and four months later, Alibaba rang the bell on the NYSE. Everyone believed that with giants standing tall, the e-commerce industry was set in stone. No one could foresee that the crack torn open by social media would prove so resilient. Lifting a corner of China's social e-commerce history—words like 'grassroots,' 'revenge,' and 'counterattack' converge to stage a drama where one player exits and another enters. I. The Rise of Grassroots 01 The Accidental Success of Wu Bin and His Qiaoshisui In March 2013, Beijing's chill winds still lingered. Wu Bin, 47, opened his first Qiaoshisui counter at the Kade MALL in Taiyanggong. Strictly speaking, Wu Bin was not a typical grassroots entrepreneur; before founding Qiaoshisui, he had already amassed hundreds of millions in wealth. But in the cosmetics industry, Qiaoshisui was an outright underdog. The barriers of brand and channel in this industry were extremely high. Lack of brand recognition, poor distribution channels, and scarce traffic were the enormous challenges facing the new brand Qiaoshisui. "Conquer the world with a facial mask, let the world know the best mask is made in China." This traditional businessman, who started selling computers in Zhongguancun in 1985, was likely plotting how to defeat foreign brands like SK2, Lancôme, and LAMER to become the No.1 in the mask industry, achieving the most brilliant leap of his life. But reality was harsh: the store's first-month sales were a mere tens of thousands of yuan. The mask, developed over 13 years and embodying Wu Bin's efforts, faced the awkward prospect of disappearing from the market at any time. On the brink of failure, Wu Bin made a decisive move—offering free trials to everyone. He started with friends, giving them masks for free. The recipients not only reported the masks were excellent but also, with Wu Bin's permission, began showcasing and selling them via WeChat Moments. Subsequently, Qiaoshisui rapidly spread through word-of-mouth, achieving sales of 400 million yuan within a year. "At first, we sold masks one box at a time; now it's hundreds or thousands," Wu Bin said after Qiaoshisui's unexpected success. He defined this practice of selling products via WeChat Moments as 'WeChat business' (weishang). 02 The WeChat Business Tycoon from the Basement Lin Xinyue, Jolin Tsai, Qin Lan, Guan Xiaotong... It's sometimes hard to associate these names with WeChat business, but Sibu Group was the first to successfully do so; these celebrities are endorsers of its brands. This company, which started in an underground garage in 2013, has already accomplished many miracles. For instance, within just 8 months, it announced sales of 2 billion yuan, and in 2015, as a grassroots brand only two years old, it successfully appeared on CCTV's Spring Festival Gala. "When I proposed the concept of social e-commerce in 2013, no one recognized it. When I started my business in the basement, I lived in constant fear—today the industry and commerce bureau came, tomorrow they came again..." This was a heartfelt confession by Wu Zhaoguo in September 2018 at the Ministry of Commerce's expert review meeting for the "Social E-commerce Operation Standards." This Shandong man, who loves live streaming, thrives on motivation, and speaks with conviction, still felt emotional recalling the hardships of entrepreneurship. In May 2018, Sibu Group successfully completed a 50 million yuan Series B financing, and Wu Zhaoguo and his Sibu Group are now on the fast track. 03 The Astute Boss Xiao In a few years, Xiao Shanglue will likely become the small-town youth who made good, often mentioned in people's conversations. The fourth child in his family, he left his hometown of Tongling, Anhui, after high school to work and support his family. In 2003, the thoughtful and quick-witted Boss Xiao keenly sensed the e-commerce wave emerging in Hangzhou. That same year, he founded Zhejiang Xiaoye Network Technology Co., Ltd., entered the Taobao platform, and established the Xiaoye Cosmetics Taobao Store. In 2006, "Xiaoye Taobao Store" achieved 50% of its revenue online. Xiao Shanglue decisively cut off offline operations that generated millions in revenue to focus on e-commerce. In 2010, "Xiaoye Cosmetics Taobao Store" surpassed 2 million in credit index, earning the prestigious Triple Gold Crown. When everyone expected Xiaoye to develop steadily, Boss Xiao chose the hardest path—'leaving Taobao to seek traffic.' His first stop outside Taobao was QQ. At that time, Xiaoye Taobao Store created hundreds of QQ groups, each with 1,000 to 2,000 users. These groups were used for user communication, enhancing customer loyalty and repeat purchase rates. It turned out Xiao Shanglue's choice was correct. In an era when Taobao's traffic dividend was waning, the QQ group shopping guide model was far more cost-effective than paying high advertising fees. This was also the earliest prototype of community e-commerce. The success of "Xiaoye" also accumulated the first batch of seed users and operational experience for the later rise of Yunji. 2010 was also the year when the prototype of social e-commerce emerged. WeChat was Boss Xiao's second stop outside Taobao. In 2015, the commercial boom of the WeChat ecosystem had been fully validated by Wu Bin in Beijing and Wu Zhaoguo in Guangzhou. The astute Boss Xiao felt the time had come again. As the capital of e-commerce, Hangzhou was the perfect place for this venture. Compared to Beijing and Guangzhou, Hangzhou's city managers were more receptive to new things. On April 29, 2015, a company called Zhejiang Jishang Network Technology Co., Ltd. was quietly established in Hangzhou, and shortly after, in May, Yunji Weidian officially launched. "Yunji meets uncertain demand and satisfies potential demand," Xiao Shanglue explained Yunji's success. Past e-commerce models were about people finding products, but Yunji's model is about products finding people. Through store owners recommending cost-effective selected SKUs, good products find suitable consumers. Under this logic, Yunji grew rapidly after launch, attracting capital attention. In November 2016, Yunji completed a 228 million yuan Series A financing. In 2017, Yunji's transaction volume reached 9.6 billion yuan, and the number of buyers increased to 16.9 million. When everything seemed smooth, in July 2017, Yunji was exposed for suspected pyramid selling and was penalized by market supervision, after which Yunji Weidian was banned by WeChat. Boss Xiao was forced to adjust. After the adjustment, store owners could only earn from selling goods, and a third-party service provider module was added. After the model adjustment, Yunji received verbal recognition from local regulators. On March 23, 2019, Yunji filed for an IPO with the U.S. SEC. The small-town youth Xiao Shanglue was about to become Boss Xiao of a listed company. The opening of China's social e-commerce decade saw three grassroots entrepreneurs lead three grassroots brands to rapid rise. Without prestigious academic credentials or strong capital backing, they embodied the bold spirit: 'If I achieve my lofty ambitions, I dare to laugh at Huang Chao for not being a true man.' II. The Revenge Alliance △Image from the movie "The Avengers" As early as April 2011, Xu Yirong's Meilishuo launched its iPhone client in Beijing, helping Taobao with traffic and shopping guidance. Three months later, it had accumulated 1.7 million users. Meanwhile, in Hangzhou, 1,200 kilometers away, Xu Qi's Mogujie was doing the same business. Both launched as social shopping guides, sharing and recommending products within communities, directing traffic and transactions to Taobao. At their peak, Mogujie and Meilishuo accounted for 10% of Taobao's traffic. Besides leveraging the giant platform Taobao for their own site traffic, Mogujie and Meilishuo also engaged in CPS and CPC advertising, which caught Alibaba's attention. In October 2013, Taobao revoked their Taobao Alliance qualifications, closed API interfaces, and blocked their external links to Taobao. Mogujie and Meilishuo had to build their own e-commerce platforms to form a closed transaction loop. As early as 2012, Meilishuo had received investment from Tencent and chose to side with Tencent. In January 2016, Meilishuo and Mogujie merged to form Meili United Group, with Tencent becoming a major shareholder and providing strategic support. After experiencing failures with Paipai and QQ Mall, Tencent seemed strategically inclined to recruit more capable e-commerce players. Building its own 'Revenge Alliance' against Alibaba, with a focus on 'social e-commerce' that aligns with Tencent's social DNA, was a key priority. Meili United was the 'entrant' valued by Tencent, the 'S.H.I.E.L.D.' The next entrant valued by Tencent happened to be Huang Zheng, a fellow townsman of Alibaba's Jack Ma. Unlike his fellow townsman Ma, a former teacher, charisma was not the forte of this computer science graduate from the University of Wisconsin-Madison. Huang Zheng believed more in pragmatism, rationality, and common sense—the extremely simple objective laws behind facts, i.e., the most basic rational laws. So, at some point, when you walked through subway crowds, you'd see red ads plastered on surrounding walls; when you strolled through streets and alleys, you'd hear the parody ad song "I Miss You So Much" from TVs and instinctively hum the next line. Pinduoduo suddenly became popular under this pragmatic guidance. Targeting the "beyond the Fifth Ring Road" demographic, the company's official account surpassed one million followers within two weeks of its launch in September 2015. By September of the following year, users reached 100 million, and by year-end, monthly GMV exceeded 2 billion yuan. In July 2016, Pinduoduo completed a Series B financing with investors including Gaorong Capital, New Horizon Capital, and Tencent, with Taihe Capital serving as financial advisor. In April 2018, Pinduoduo completed a $3 billion Series C financing led by Tencent. The five major investors behind Pinduoduo constitute a true anti-Alibaba alliance. NetEase's Ding Lei, BBK's Duan Yongping, former Taobao president Sun Tongyu, SF Express's Wang Wei, and Tencent's Ma Huateng—all of whom, openly or covertly, had entanglements with Alibaba—became investors behind Pinduoduo. According to incomplete statistics, Tencent has invested in 12 social e-commerce companies in recent years (chart of Tencent's social e-commerce investments). Company | Time | Round | Total Financing SEE Xiaodianpu | 2018-01-03 | Series C | Over $10 million HLA | 2018-01-31 | Tencent Investment | 2.5 billion yuan Haowu Mencang | 2017-12-12 | Tencent-led | Unknown Hui Xiadan | 2018-08-27 | Tencent Investment | Unknown Duozhuayu | 2018-05-25 | Series B | Unknown Xiaohongshu | 2016-03-31 | Series C | $100 million Xiaohongshu | 2018-06-01 | Series D | $300 million Youzan | 2019-04-03 | Tencent Strategic Industry Win-Win Fund | Unknown Haoyiku | 2018-07-17 | Tencent-led | Hundreds of millions of yuan Pinduoduo | 2016-07-20 | Series B | $110 million Pinduoduo | 2017-02-01 | Series C | $213 million Pinduoduo | 2018-04-11 | Series D | $1.369 billion Chuchujie | 2013-03-17 | Series A | $1 million Chuchujie | 2014-11-14 | Series B | 10 million yuan Weidian | 2014-10-23 | Series C | $350 million Meilishuo | 2012-10-01 | Series D | $10 million In the middle of China's social e-commerce decade, a titan struggle was brewing. III. Giant Counterattack and the Rise of Powers △Image from the movie "The Incredible Hulk" On July 26, 2018, Pinduoduo rang the bell on NASDAQ. On December 6, 2018, Mogujie listed on the NYSE. It seemed Tencent's 'Revenge Alliance' plan was working well. "Any industry always has new entrants. Pinduoduo's current stage at least shows its past entry path was effective, but it is essentially not social e-commerce; social is still a superficial element." This was Alibaba CEO Daniel Zhang's public response to the question: "Will the new generation of social e-commerce, represented by Pinduoduo and rising with WeChat, pose a threat to Taobao?" The response seemed casual, but the giant Alibaba had already been laying out its own plans. In March 2018, the Taobao Bargain App was launched, attempting to upgrade consumption across different consumption tiers; Five months later, Taobao, together with Alipay, launched the "Daily Must-Buy" section at the bottom of Alipay's homepage, offering daily hot-selling items for group buying; By the end of that month, the Taobao mobile version underwent partial page redesign, placing greater emphasis on personalized recommendations, shifting toward "products finding people." Besides the giant's counterattack, various powers were also eyeing the massive social e-commerce market. Similarly, JD.com launched "JD Group Buying" in April 2018, which made JD feel the strong feedback from social traffic. To accelerate its pace, JD announced an organizational restructuring at the end of last year, establishing a Social E-commerce Business Unit and elevating social e-commerce to a new strategic height. Not long ago, JD formed a strategic partnership with strategic partner Fenxiang, officially launching an invitation-based membership social e-commerce platform. Suning is also trying to enter the center stage of social e-commerce. Suning's "Group Plan" originated in June last year, aiming to support 10,000 enterprises in brand cooperation. By Double 11 in 2018, Suning's group buying grew more than 10 times year-on-year, demonstrating Suning's accumulated strength. Additionally, Gome, which had been quiet for a long time, began promoting "Gome Meidian," attempting to enter the social e-commerce market through three gameplay modes: group buying, instant discounts, and super rebates. In the second half of China's social e-commerce decade, the entry of giants may just be the beginning. Whether e-commerce giants with supply chain advantages can disrupt the situation and reshuffle the deck after making more user-centric changes remains to be seen. IV. The Next Decade Grassroots rise, giants declare war, powers emerge—social e-commerce has lively traversed its first decade. But breaking down the term 'social e-commerce,' the essence of social is traffic fission, and the essence of e-commerce is product quality. Ultimately, in this battle, social is a means to attract traffic; every player needs to employ different traffic-generation tactics. However, for sustainable development, products and services are the foundation. Perhaps players in the second half of social e-commerce will gradually shift their focus from customer acquisition costs to customer lifetime value. In the next decade, no one can predict who will ultimately write the chapter of victory. But 'Change leads to progress, stagnation leads to blockage; change leads to prosperity, stagnation leads to decline; change leads to survival, stagnation leads to extinction' will always be the theme of our era. Source: Xingguang Fagu, Author: Xingxing. -END-