Click to read the original article for details. When the challenger becomes the leader, how should it face new challengers? This is an eternal question. In the struggle between the two, their upstream and downstream partners will inevitably be swept into this battlefield. This is the story between Alibaba and Pinduoduo. As the 618 mid-year sales event approaches, the 'either-or' (exclusive dealing) incidents are intensifying. Many brands originally wanted to take advantage of Pinduoduo's rise to experience the benefits of 'channel sinking,' but the 'either-or' events have dashed the hopes of many merchants. This impact is particularly severe for top merchants and brands with their own traffic. "Pinduoduo is a new channel for us, especially at this stage. Pinduoduo's user base still has a certain orientation, making it a good opportunity to overtake on the curve," the e-commerce head of a food brand told New Distribution. Many companies share this view. Especially after its listing, Pinduoduo has attracted increasing attention from brand owners. FMCG companies such as Nestlé and Tsingtao Brewery have opened stores on Pinduoduo and established dedicated teams to manage their Pinduoduo business. However, with the development of 'either-or' incidents, more and more top merchants have been forced to remove their products from the Pinduoduo platform. Public data shows that just before 618, the number of merchants 'removed from shelves' on the platform reached tens of thousands, with product counts reaching millions! When facing a new challenger, 'either-or' will inevitably continue to erupt until a winner is decided or a new industrial balance of terror is formed. When 'either-or' becomes the norm in the industry, brand owners undoubtedly become the biggest victims of this dispute. So, where should the top brand owners at the center of the storm go? Why do 'either-or' incidents occur frequently? 'Either-or' is nothing new in the e-commerce industry. As early as 2015, a brand was forced to withdraw its resources from JD.com's event due to 'either-or' pressure. After JD.com disclosed the incident, the competitive method of 'either-or' between e-commerce platforms was officially exposed to the public. Later, when JD.com invested in Vipshop, merchants on Vipshop also began to be affected by 'either-or' incidents. And as Pinduoduo jumped to become China's second-largest e-commerce platform, the flames of 'either-or' spread to Pinduoduo. So why do 'either-or' incidents happen frequently? 1. E-commerce growth is slowing, and under stock competition, top merchants are the most effective bargaining chips for platform competition. The competition among e-commerce platforms is essentially a battle for traffic centered on consumers. To gain more users, platforms need to continuously acquire new users; at the same time, they must deeply mine the user value of existing users, increase average order value, and thereby ensure the continuous growth of platform GMV. In addition to the platform's own ability to attract traffic, another core element of traffic acquisition is the upstream suppliers, i.e., the merchant resources that open stores on the platform. Especially top merchants, with high brand awareness and products that bring their own traffic, are themselves a scarce resource for the platform. On the other hand, the demographic dividend is gradually disappearing, online traffic is becoming scarce, and the cost of acquiring new customers has risen sharply. Taobao and Tmall have both moved from the era of 'traffic increment' to the era of 'traffic stock.' At this time, the value of top brand owners as traffic carriers has become even more prominent. In short, if a platform has the presence of major brands, user stickiness can be strengthened to a certain extent; but if a brand is lost, consumers with high brand loyalty will also leave the platform, and the platform naturally does not want such a thing to happen. 2. User bases highly overlap, and business models are becoming similar, so a battle between Alibaba and Pinduoduo is inevitable. As is well known, Taobao, with its C2C model, forms the foundation of the entire Alibaba system. Whether it is Tmall, which was incubated from it, or Alibaba Cloud, Alipay, and Cainiao, all originate from Taobao. Although Alibaba's business scope has become increasingly diversified in recent years, it is undeniable that the e-commerce business represented by Taobao remains the foundation of the entire Alibaba system. Undoubtedly, the listed Pinduoduo will inevitably challenge Alibaba's traffic. The latest data shows that Pinduoduo's annual active users have reached 418 million, while Taobao's active users are 721 million. In the overall pool of 846.4 million netizens in China, Taobao's room for active user growth is already limited. According to Pinduoduo, in 2019, Pinduoduo's annual active users will achieve a net increase of 150 million to 200 million, and the gap between Pinduoduo and Taobao in active users is continuously narrowing... At the business model level, both Pinduoduo and Taobao started with C2C business and have many similarities in their development paths. Obviously, Pinduoduo is following a path that Taobao once took. Without considering objective factors, to some extent, it can even be said that today's Taobao is the future Pinduoduo. In the context of consumption upgrading, Pinduoduo naturally has the idea of 'recreating' a 'Tmall,' and the leader Alibaba will naturally not sit idly by. On the supply side, using 'either-or' to 'cut off food supplies' to Pinduoduo and leveraging its supply chain advantages to contain Pinduoduo is a simple and effective method, and Alibaba will naturally not abandon it. When gods fight, brand owners are forced to take sides 'Either-or' is essentially a struggle by advantageous platforms to compete for high-quality merchant resources using their near-monopolistic industry position, while also squeezing the living space of competitors through this 'cutting off the firewood from under the cauldron' approach. For today's e-commerce platforms, the entire competition is almost a zero-sum game where one side's gain is the other's loss. From a business competition perspective, Alibaba's initiation of 'either-or' is understandable, but from the perspective of platform merchants and consumers, 'either-or' is not a good thing. An industry insider told New Distribution bluntly: "In the short term, 'either-or' is effective, but it blocks competition, and often there is no motivation to improve services, just like a certain search website now. Moreover, the fees charged by platforms will become higher and higher, and in the end, merchants pass this cost on to product prices, and in the end, consumers suffer." For brand owners, the platform's 'either-or' is equally harmful and of no benefit. "The main reason for cooperating with Pinduoduo was to reduce the company's e-commerce business's dependence on a single platform. Otherwise, we are at someone else's mercy, and the company's operating costs will only get higher, and our voice during big promotions will be even more negligible. But now the 'either-or' leaves us with no choice. Between two evils, we choose the lesser. After all, the largest volume of e-commerce business is still on Alibaba, so we have no choice but to remove our products from Pinduoduo!" The e-commerce head of a leading domestic beverage brand told New Distribution candidly. Where should brand owners go? The rise of Pinduoduo, besides challenging Alibaba's absolute dominance in the e-commerce field to a certain extent, has more important significance in bringing a portion of users from lower-tier markets online, which is precisely an important growth direction for traditional e-commerce giants like Alibaba and JD.com in the next step. The value and significance of cooperation between traditional FMCG companies and Pinduoduo are even more so. Due to personnel costs and profit distribution among different levels of the distribution system, most brand owners have found it difficult to achieve channel sinking. This leads to situations where even global beverage giants like Coca-Cola still have more than half of their sales points uncovered in China. Through Pinduoduo, companies can effectively reach these consumers, which is already a huge breakthrough and progress for brands that cannot achieve channel sinking. "The 'either-or' incident not only indicates Pinduoduo's formal challenge to Alibaba but also represents a substantive challenge from social e-commerce to traditional e-commerce. Of course, Alibaba will also take the initiative to defend its absolute leadership in the e-commerce field. But in the long run, if traditional e-commerce does not make major breakthroughs in model and only uses its existing traffic and output advantages, it will eventually lose the motivation for innovation and progress. From this perspective, Pinduoduo's challenge is a good thing for Alibaba and the industry," the new retail head of an FMCG brand told New Distribution. On the other hand, it must be objectively recognized that channel stratification brought about by personalized consumption is irreversible. The younger generation of consumers will not be limited to shopping on a single platform; users will vote with their preferences, which means that strong platforms using 'either-or' tactics cannot fundamentally solve the problem of user attrition. 'Either-or' may temporarily restrain the development of a certain platform, but when more platforms rise, can the leading platforms maintain their existing competitive advantages? This is a question worth pondering. At this point in time, 'either-or' has become a fact. How should brand owners effectively protect their own interests? New Distribution believes that although brands are forced by platform pressure and cannot operate on multiple e-commerce platforms, this does not mean that the path for brand owners to operate across all channels is blocked. Especially when Pinduoduo continues to maintain high growth, whether from the perspective of market increment or strategy, Pinduoduo is a channel that brand owners cannot ignore. In such a situation, authorizing third-party operation companies or authorized distributors to open stores on Pinduoduo is a good development path for brand owners to 'relieve the siege by attacking Wei' (a strategy of indirect approach). For traditional distributors, the increase in operating costs such as labor and materials has made their living conditions much worse than before. Many distributors have already put transformation on the agenda. The 'either-or' incident undoubtedly provides distributors with a new transformation direction and thinking. From a longer-term perspective, the development of China's e-commerce has entered an uncharted territory. New technological revolutions are constantly emerging, new distribution channels are constantly rising, and centralized e-commerce platforms will find it difficult to meet the increasingly personalized, niche, and stratified consumer demands in the future. 'Either-or' can ensure a company's competitive advantage to a certain extent, but looking at the present from the future, only through business model innovation, technological innovation, organizational change, etc., and cultivating agile and efficient response capabilities, can a company gradually develop its core competitiveness.