Click 'Read Original' for details. **** " **** In recent years, WeChat Moments has frequently seen seemingly casual leaks of micro-commerce performance rankings, with listed companies often boasting sales of over 1 billion yuan; those below this figure are too embarrassed to 'show their faces.' The miracle-makers are mostly 'underdog' companies you've never heard of, just emerging recently (using 'underdog' here without any offense), while well-known traditional companies rarely make the list. Of course, there are also many excellent companies and brands that operate well offline and have made efforts in micro-commerce, such as Liby, Hanshu, and Hanhoo. These companies' entry into the micro-commerce field is significant as a bellwether. OSM and Sancao Liangmu, among others, have quietly achieved great success. However, those reaching this level are few and far between; the vast majority of brands enter with great fanfare but quickly fade or remain lukewarm. Overall, compared to the frequently heard rags-to-riches miracles of underdogs, the performance of traditional brands in micro-commerce lacks the necessary storytelling appeal for those hoping for quick success. " 1 Why Traditional Brands Lose to Underdog Companies ▼ Logically, these companies should have advantages over new micro-commerce brands in R&D, products, planning, and sales promotion. In terms of capability, strength, and resources, there is no reason they should perform worse than micro-commerce brands without market foundation. The key to this contrast lies in the distinct 'wild growth' late-mover advantages of underdog challengers:

  1. No need to consider existing interest patterns or balance channel relationships Traditional brands entering micro-commerce must first consider existing interest patterns and balance channel relationships, especially fearing resistance from original distributors. They often act timidly and find it hard to go all out. Although initial expectations and enthusiasm are high, in practice, the micro-commerce business remains marginalized within the entire company system, which determines its outcome. New micro-commerce brands, having nothing to lose, can roll up their sleeves and create miracles in this new ecosystem. This is similar to the early days of e-commerce, where Taobao brands thrived while offline brands were constantly criticized.
  2. Difficulty in regulation, marketing without limits Selling goods on WeChat Moments is currently very difficult to regulate, essentially a lawless area. Many micro-commerce brands dare to sell 'three-no' products (no production license, no quality inspection, no safety certification), while traditional brands have passed the primitive accumulation stage and begin to cherish their reputation, not wanting to ruin the brand they've worked hard to build. Traditional cosmetics brands dare not casually fool consumers without a 'Special Cosmetics Production License'; companies themselves must pass psychological and legal hurdles. Those micro-commerce brands' unscrupulous hype sometimes stems from 'ignorance is bold'—because they may not know that without special certification, they cannot promote special effects, and some may not even know that cosmetics must be filed before sale. In such circumstances, law-abiding brands are at a disadvantage on WeChat Moments.
  3. Relying on channel fission, fully leveraging incentive mechanisms So far, micro-commerce mainly relies on channel fission. To fission quickly, one must fully leverage the incentive mechanism at the distributor level, focusing on recruiting distributors and wholesale, essentially profiting from small and medium distributors. This is why we occasionally see people on WeChat Moments showing off piles of money—it's bait for recruiting distributors. Traditional brands have basically formed a 'distributor—retail store—consumer' channel model, following the path of channel flattening, and are embarrassed to reverse history by adding too many intermediate levels. Micro-commerce brands have no such ideological baggage; they immediately adopt multi-level distribution, with three or four levels visible and three or four hidden. To put it bluntly, it's not much different from a pyramid scheme. Without enough small and medium distributors, terminal sales cannot rise, eventually leading to a vicious cycle. In contrast, those micro-commerce brands didn't think much from the start; they just wanted to collect more distributor fees. Therefore, booming micro-commerce mostly plays the game of harvesting small and medium distributors. 2 Revolutionary Factors Behind Micro-Commerce's Prosperity ▼ Of course, attributing the micro-commerce miracle entirely to 'late-mover advantages' would be unfair. Micro-commerce's significant impact on traditional business is inseparable from its inherent revolutionary factors:
  4. New forces, creative gameplay Micro-commerce as a whole is the main battlefield of the new generation; the new generation are natives of the mobile internet world, adept at new ways of playing. The WeChat-based marketing system can be said to be entirely constructed by them. Bold thinking and action are advantages, with many creative gameplay methods; otherwise, how could they overtake on curves? In contrast, founders of traditional brands lack both the ability and motivation to play business on social media like newcomers. With accumulated wealth, they generally don't want to stir things up again, let alone play with fire. Some think it's simple and hand it over to young employees, hoping they'll take the lead. Little do they know that for a strategically significant new venture, if the top leader doesn't 'get their feet wet,' the probability of success is near zero. Micro-commerce is essentially a model that promotes market metabolism, restructuring the market landscape and allowing new forces to rise.
  5. Low channel barriers, low startup costs Traditional channels have evolved over a long period, with both rules and personnel composition solidified, severely fragmented and highly guarded. Everything must follow old rules, and channel transaction costs rise year by year. For newcomers, the trust cost is high, making channel expansion and fission difficult. In contrast, micro-commerce channels only require WeChat to play. Channel barriers and startup costs are low, attracting many young people with more open mindsets. People from all over, who have never met, can cooperate just by adding each other on WeChat, and they dare to pay hundreds of thousands in distributor fees without ever meeting. This system expands very quickly.
  6. Broad mass base, high efficiency Engaging in micro-commerce is the fastest way to become a boss. In the past, one had to rent a storefront; now, a mobile phone suffices. This provides a vast mass base for micro-commerce fission—after all, China has no shortage of people. Since each micro-commerce practitioner works for themselves, they strive to learn and find ways to develop customers, resulting in high efficiency. Many stay-at-home moms and novices dreaming of financial freedom through micro-commerce may not be valued by traditional companies, so they turn to new forces, and thus 'ant soldiers' achieve micro-commerce brand success.
  7. Micro-commerce is essentially a sharing economy Traditional companies have a fixed mindset for branding: preferably with celebrities and advertisements, making it high-end and grand. Without this, they feel users won't pay and channels won't respond. But everyone overlooks a key point: micro-commerce is essentially a product of the sharing economy. Many people think micro-commerce kills acquaintances and overuses WeChat Moments, but they don't realize that the products they sell are basically used by themselves. Micro-commerce practitioners show off products they use daily. Although many offline brands have celebrity endorsements, everyone knows celebrities don't actually use the products. In this regard, micro-commerce's screen-filling posts are more persuasive than celebrity endorsements. Having discussed these advantages and disadvantages, in short, the key to micro-commerce lies in rapid fission, which is based on WeChat's unparalleled diffusion as a social tool and the trust endorsement of WeChat Moments—don't think pure hype can succeed. The cost and price of lying in WeChat friend groups are much higher than in e-commerce—everyone's WeChat contacts are mostly friends and family. Traditional brands are deeply influenced by existing models, with severe path dependence, and switching both mindset and tools is not easy. 3 Traditional Brands Can Still Achieve in Micro-Commerce Channels ▼ Of course, micro-commerce itself is constantly upgrading, not only fully utilizing the convenience of social media dissemination in business models but also becoming increasingly internet-based in business logic, with its operating mechanisms evolving toward user-centricity. Given time, traditional brands that have successfully captured consumer minds, possess product competitiveness, and focus more on retail sales promotion will, after gradually familiarizing themselves with social platform rules, leverage late-mover advantages at a higher dimension and thus occupy a dominant position in the micro-commerce market. Perhaps the scene of offline brands overtaking Taobao brands in e-commerce channels will repeat itself in micro-commerce channels. Source: 'Sales and Market' Magazine Management Edition, Issue 09, 2017, Author Zhang Bingwu, marketing veteran and senior brand marketer. Copyright belongs to the original author. -END-