---
title: "The Much-Maligned WeChat Business Can Actually Be a Legitimate Profession"
description: "Despite its bad reputation, WeChat business (micro-commerce) can be a legitimate profession if it focuses on selling quality products and building trust, rather than recruiting downlines. The article explains the business logic behind WeChat business, emphasizing the role of transaction costs and the importance of trust in social retail."
author: "刘润"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-08-05"
language: "en"
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---

# The Much-Maligned WeChat Business Can Actually Be a Legitimate Profession

> Despite its bad reputation, WeChat business (micro-commerce) can be a legitimate profession if it focuses on selling quality products and building trust, rather than recruiting downlines. The article explains the business logic behind WeChat business, emphasizing the role of transaction costs and the importance of trust in social retail.

Click to read the original article for details.
Have you ever seen copy like this in your Moments: "Ms. Mako joined WeChat business three months ago and happily got her Harmony train, career on the left, family on the right..."? Does it feel strangely familiar? Although "happily got her Harmony train" is a bit exaggerated, I see WeChat business copy like "Earn over 10,000 a month with a few clicks," "Joined WeChat business and got a Porsche in six months," and "Annual income of a million is not a dream" almost every day.
I don't know since when, WeChat business started growing like weeds in Moments...
One day, out of the blue, a friend might announce, "I've started doing WeChat business!"...
When it comes to WeChat business, many people's first reaction is: Isn't this just pyramid selling?
Everyone thinks WeChat business is low-class, just killing acquaintances and recruiting heads.
But regardless of whether it's low-class or not, why has it been able to grow so vigorously?
Even a WeChat business company called "Yunji" has gone public today.
Why?
WeChat business is much criticized; it must have many problems, but it has developed to this day, so there must be logic to it.
In this article, I want to discuss the business logic behind WeChat business.
Before we start, I want to make an important statement: **The purpose of this article is absolutely not to encourage you to do WeChat business, nor to advise you not to do it.**
I just want to stand from a neutral business consultant's perspective and tell you what WeChat business really is.
To understand what WeChat business is, we need to deeply understand a concept: **transaction costs.**
What are transaction costs?
The business process is complex, but in summary, there are only two links: **creating value and delivering value.**
Haier making refrigerators is creating value; Suning selling refrigerators is delivering value.
The delivery of value, specifically, is about using efficient means to reduce the fixed multiple.
What is the **fixed multiple**?
**Fixed multiple = retail price ÷ cost price**
If a phone costs 1,000 yuan to produce and we sell it for 3,000 yuan, the fixed multiple is 3 times.
The fixed multiple for the footwear and apparel industry is generally 5-10 times, and for cosmetics, it's generally 20-50 times.
What does a fixed multiple of 50 times mean?
It means if you spend 1,000 yuan on a cosmetic, its production cost is actually only 20 yuan.
So where does the remaining 980 yuan go?
Cosmetics advertise on TV, hire celebrities as spokespeople, and go from the factory to first-level distributors, second-level distributors... all the way to the mall counter near your home, to the salesperson who sells you the cosmetic...
Each link that delivers value takes a portion of that 980 yuan.
In other words, for what you buy for 1,000 yuan, 980 yuan is spent to get it to you.
This cost is called **transaction costs**.
**In traditional retail, transaction costs are very high.**
For a brand to become familiar to consumers, it needs to hire celebrities and advertise on TV, all to build consumer trust.
But if a friend tells you, "I use this product and it's great, you should try it too!"
Even if the merchant's ads never reached you, you might still want to buy it and try.
At that point, your friend uses their trust to build value for the merchant. The merchant didn't spend any advertising money on you, so for the merchant, it reduces a significant transaction cost.
So, **if you can deliver products through the natural trust between friends, you can greatly reduce the cost of delivering value.**
When the cost of delivering value is reduced, the merchant saves money, so they can lower the product price and also give a portion as a reward to the friend who shared the product.
In the end, you pay a lower price, your friend earns a bit, and the merchant makes more money. From this perspective, it is indeed a very efficient business model.
So how can we use the trust between friends to deliver product value?
In today's internet world, there are already several ready-made social venues, such as Weibo, WeChat, and Moments.
So naturally, different social retail models have grown in these venues.
For example, WeChat business.
Most early WeChat businesses sold cosmetics. Why?
Because **cosmetics have a very high fixed multiple, saving a lot of transaction costs.**
In traditional retail, for a 1,000 yuan cosmetic, the delivery of value might cost 980 yuan.
But if you use social methods to deliver products in Moments, the merchant might make more money than before, and the product might only cost 500 yuan to the consumer.
Spending 500 yuan to buy something that originally cost 1,000 yuan, you'd think, "Wow, that's so cheap!"
At the same time, the friend who shared the product can earn a "promotion fee" from the merchant.
Why not?
At this point, the story sounds very natural.
Using trust to greatly reduce transaction costs is certainly a more efficient business model. **WeChat business is just a more efficient retail form that grows in Moments.**
In essence, it seems no different from offline mall retail and online e-commerce retail. But **why is it criticized and despised by many?**
**Because WeChat business has its natural human challenges.**
If a WeChat business person follows the logic of WeChat business, sharing products they genuinely use and like in Moments, and at a lower price than the mall, they might really do well.
But unfortunately, many WeChat business people don't do this.
Their basic logic is to build a sales network, commonly known as finding downlines, making each downline post ads and sell goods in their Moments.
**In this way, the WeChat business person is no longer a normal sharing consumer, but purely a salesperson aiming to sell goods or recruit heads, so building trust becomes very difficult.**
**When you know a friend has started doing WeChat business, you know they have a strong intention to sell products or recruit you, not that they really like the product. At that point, your trust in them greatly diminishes.**
The original intention of the WeChat business model is to borrow the trust relationship between you and your friends, but once you do this, the trust relationship between you and your friends has already been damaged, and many people even block WeChat business people.
**Using trust but consuming trust is the natural human challenge of WeChat business.**
Many WeChat business people find they can't make money from acquaintances, so they add a bunch of strangers.
But building trust with strangers is even harder, let alone "monetizing" it.
And once WeChat business starts aiming not at selling good products but at recruiting heads, it changes its nature.
It slides toward the edge of pyramid selling.
**What is the essence of pyramid selling?**
It is a model that uses the lure of huge returns to deceive others' trust, pay money to get membership, then continuously recruit heads, develop downlines, and take commissions from newcomers to profit.
It's essentially a "Ponzi scheme" like passing the parcel, usually with high entry fees.
For example, investing 69,800 yuan might get 10.4 million yuan. Such activities clearly fit the characteristics of recruiting heads, paying membership fees, and developing downlines to illegally profit.
Remember, **pyramid selling has three obvious characteristics: multi-level distribution, poor product quality, and high entry fees.**
The money earned in this transaction structure is not compensation from end consumers, but using later people's money to pay earlier people's returns.
So, **in the pyramid selling transaction structure, products cannot be sold outside their pyramid system; the people buying products are so-called WeChat business "partners," not actual consumers of the product.**
**WeChat business is built on trust.**
A truly reliable WeChat business aims to actually sell goods, not to develop downlines.
A truly reliable WeChat business targets end consumers and profits on the basis of consumer benefits.
If you can steadily sell good products and accumulate trust, rather than recruiting heads to cheat people one by one, such WeChat business is indeed a relatively efficient business model compared to traditional malls and e-commerce.
**Final Words**
WeChat business is a natural form of social e-commerce today, with no right or wrong.
It's just that the different purposes of people doing WeChat business have led to prejudice against the WeChat business community.
**Truly reliable WeChat business people, deep down, really want to sell conscience goods and help those around them.**
Unreliable WeChat business people aim not to sell goods but to recruit heads.
**Know how to distinguish, understand the essence of WeChat business, steadily sell good products, and not recruit heads. WeChat business can still be a legitimate profession.**
Finally, let's do a little survey.
Which reliable WeChat business people in your Moments do you not want to block?
What type of products do they sell (to avoid advertising, please don't mention brand names)?
Why don't you block them?
Source: Liu Run (ID: runliu-pub)


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