Article source: Laomiao Tears Marketing (ID: yiheyingxiao)

In the past few years, amid the trend of “de-intermediation,” the slogan “no middlemen taking a cut” was the most clamorous and seductive.

But once the trend passed, something magical happened:

“No middlemen taking a cut” was just fooling you; “not letting platform operators take a cut” is the real deal. As I've written before, in business, “platform thinking” was a product of a special market period. Once that period passes, clinging to it as a treasure is a backward speculative mindset. Let me elaborate a bit more.

Commercial platforms are infrastructure, inherently social and public welfare in nature, just like highways, railways, banks, and electricity.

Expecting to make big money from them is basically going against the “socialist market economy,” and the workers and farmers will quickly teach you a lesson.

For example, e-commerce platforms are essentially the same as a vegetable market.

The stall vendors are the e-commerce operators, and the platform is the market management center.

If a vegetable vendor wants good business, they need to ensure fresh produce, unique offerings, fair prices, and honest dealings—not be particularly good at “building relationships” with market management.

Market management should maintain order, preventing bullying and short-changing. But they must never be allowed to eye the “few cabbages” in people's hands and assert their presence in vegetable sales:

If a few vendors pay, they make customers go to those stalls, and put ropes in front of others to block them.

If others pay, they can use loudspeakers to promote, while other vendors are not allowed.

No market manager has ever organized a “Vegetable Festival” where all vendors must discount, or customers are barred from non-participating stalls.

Nor has any market manager dared to tell vendors, “If you want to sell here, close your wife's stall at the neighboring market, or I'll smash yours.”

No vegetable market in the country charges management fees that exceed the total earnings of all vendors combined. But these shady practices—both online and offline platforms can do them, and do them with confidence, calling it “traffic thinking.”

Once a platform becomes massive social infrastructure, advocating “traffic thinking” and profiting by allocating “traffic” is nothing short of hooliganism.

Such money-making is faster than robbery, and thus easily attracts capital. In recent years, platforms have become the business model most prone to monopoly. “Traffic” is sold as a product by platforms.

But traffic is actually a social public resource—it's the manifestation of our shopping behaviors, lifestyle habits, social interactions, entertainment, and everything else. Why should it become a tool for fleecing us and a product for making fortunes? Advocates of the “free market economy” often criticize the government for having “restless hands,” but without those “restless hands,” there would surely be countless “unscrupulous and desperate hands.”

A few years ago, I judged that “platform thinking” and “traffic thinking” were backward and speculative, and many didn't understand. At the time, I predicted a future of “de-platformization” rather than “de-intermediation,” and few believed it. Since 2020, with multiple major antitrust actions and a series of severe penalties, many have applauded. Ma has gone from being “the nation's dad” to deeply realizing we are a socialist country under the “dictatorship of the proletariat,” and that he should respectfully call workers and farmers “uncle.”

In just over a year, he's been demoted several generations.

There's no shame in that; Chairman Mao and Uncle Deng also called themselves “sons of farmers.” Being called “dad” and feeling smug is what's shameful.

Platforms are gradually becoming transparent and fair. WeChat and Alibaba's platforms are starting to interconnect, taking a big step toward becoming more complete social infrastructure. Thumbs up +1.

Pony Ma and Ma have each pledged 100 billion yuan for “third distribution,” and Meituan's Wang said, “Meituan is about ‘grouping for beauty’ and ‘common prosperity.’”

Whether it's survival instinct or a greatly improved awareness, it's all good, and I give another thumbs up. In short, the transition of commercial infrastructure from industrialization to informatization is complete, and the days of platforms “robbing” are over. We are entering an era called the “Value Era” and also a “de-platformization” era.

“De-platformization” doesn't mean we don't need platforms; it means platforms must adhere to socialization and public welfare, not overshadow the main players, and stick to supporting and service roles, not become the protagonists in business. After all, consumers and corporate users need tangible products and services.

I've previously criticized excessive “platformization,” saying that entities learning “traffic thinking” is like a duck learning the thinking of Quanjude, even using the example of the big gangster Yuan Wenhui, and Guo Degang and tractors.

But due to limited resonance, I rarely discussed what the market trends would be after “de-platformization” and how we should do business. But major events are the most striking.

In the past two years, there have been many major events concerning platforms. Now, I believe that except for a few diehards, everyone recognizes that “de-platformization” has truly arrived.

In this environment, it's time to talk about how we should do business and start ventures.

Whether you're a big company boss, an entrepreneur, or an ambitious senior professional manager, please first consider a question—it's very important.

What is the biggest problem in the current domestic business environment?

Many have their own answers:

Some think there are many good products but they can't be sold; bad money drives out good.

Some think the opposite: there are too few truly competitive good products, and the market is full of “good products” imagined by companies.

Some think there are too many counterfeits and shoddy goods.

Some think sales platforms are expensive, media placement is expensive, information is fragmented, and consumers are hard to please.

...

Here's my view:

The biggest problem in domestic business is not on the supply side. China has the most powerful manufacturing system, especially for consumer goods, undoubtedly the world's number one.

Nor is it on the demand side. We are peaceful and prosperous, with the world's largest population, the most industrious national character, and an intense desire for wealth and a better life.

Our biggest problem lies in the supply chain system, specifically manifested as: inefficiency in intermediate links and the absence of retail entities.

What does inefficiency in intermediate links mean?

Look at our manufacturer-dealer relationships, dealer-retailer relationships, supplier-brand relationships, and even service provider-client relationships. Whenever there's a party A and party B, there's endless internal friction, endless games, mutual blame-shifting, and meddling.

The store bullies the customer, and the customer bullies the store; whoever is powerful wants to be the “dad.” Either you kneel to me, or I kneel to you.

If you're powerful and squeeze prices, that's tolerable, but what do you mean by calling the party B to pay for drinks in the middle of the night?

Use your heel to think: isn't this internal friction? Who ends up paying for the wool? Take the most common distribution (the process from manufacturer to retail to customer) as an example. Professor Kotler in “Marketing Management” (Asian edition) used a word to describe the distribution efficiency of Asian enterprises:

“Appalling.”

The most typical cases are mainland China and Indonesia. Without comparison, there's no harm. In marketing, there's a term “channel cost rate,” which is how much of what you spend is taken and consumed by intermediate channels.

Media reports say the channel cost rate for domestic products is generally over 60% to nearly 80%, meaning for every 100 yuan spent, 60 to 80 yuan is taken by intermediate channels. In Europe and the US, the channel cost rate is generally 30% to 50%. My experience is that the real situation is even worse, with many hidden channel costs.

Many companies set ex-factory prices at 40% or even higher of retail prices, but they also pay for maintaining a sales team (actually a channel management team), plus various channel incentives like rebates, loss compensation, free goods, shelf placement rewards, and entry fees.

In the end, channel costs often far exceed 80%.

Take the e-commerce platform that claims “no middlemen taking a cut” as an example. From what I know, e-commerce operators' promotion costs on the platform usually account for about 70% of their revenue. This doesn't include their team's operating expenses.

That's for those doing well; those doing poorly lose money straight to their grandmother's house.

A very successful e-commerce friend said: “Besides excellent product quality, I have only two criteria: first, I have the potential to be number one in my category; second, gross profit must be no less than 90%. Otherwise, I can't play.” Don't think of this as a “black-hearted merchant” or “black-hearted enterprise”; these are truly “China's conscience.”

The truly shameless ones are those who grab and run. Do you know what the markup rate is?

It's hard to express their price increases even with percentages; they don't care about a few meters or feet, they go straight to multiples, starting at 10 times, some up to 15 or even 20 times, and of course, they keep a 30-50% profit for themselves.

That means for every 100 yuan you spend, the ex-factory price is only 7-8 yuan, and the cost is just 3-5 yuan. Seeing this, you might start cursing the evil capitalists, cursing that they “have dirty blood flowing from their pores” since birth. You might hope not only to de-platformize but also to de-intermediate, buying directly from manufacturers, so no “black-hearted merchants” can collect our “IQ tax.”

Hold on, let's look at something even more surreal.

In the entire channel chain, the vast majority of enterprises are struggling.

In the early years of e-commerce, it was said “seven lose, two break even, one profit,” but now even the one profit is gone.

Traditional distributors advance fees for manufacturers, get squeezed by retailers on payments, and call themselves “porters” and “sandwiched.” In recent years, half have been driven crazy by “transformation.”

Service companies always watch the “party A dad's” face, spending a lot of energy and time on communication and client relations, on getting proposals approved, on making PPTs and collecting final payments, so naturally they can't provide professional solutions.

The party A of party As, closest to consumers, claiming to be at the “top of the food chain”—the retailers. Yes, them. Look at the financial reports of those big companies: Walmart and Carrefour have long lost their glory, Zhang Jindong and others are unusually troubled lately, not to mention smaller retail enterprises.

See, these people take and spend most of the money, yet most enterprises end up working miserably.

Surreal, right? “High rents” and “heavy taxes” were the arguments of many experts in the early years, and they had a market.

Of course, speaking for them, they have a market.

But business owners should put their hands on their chests and think: these are certainly part of the objective reasons, but are they the root cause?

Internal friction is the fundamental reason for the poor performance of enterprises in the channel chain.

If distributors don't do their jobs, whether brand owners or retailers do them, efficiency is low. The same applies to brand owners, service providers, retailers, and platform operators.

Everyone wants to do less and earn more, but the problem is that if you don't do your own job well, you lose your core competitiveness.

Conversely, if you reach for the core competitiveness of upstream or downstream, first, you may not grasp it; second, even if you do, you'll do it less efficiently and at higher cost than the other party. A distributor friend recently mentioned that some manufacturers now want to learn the route-intensive approach of Coca-Cola and Master Kong, investing heavily in their own people to take orders from small shops and having distributors deliver.

This distributor summed it up in one sentence: “Turning back the clock.”

McCammon believed that channel members are independent economic units, each acting on their own, bargaining without intimacy, and holding divergent views on sales terms.

This is the structural reason for channel inefficiency.

In plain language: interests are not aligned; they simply can't get along.

The solution is for upstream and downstream, or party A and party B, to bind interests to a greater extent, but responsibilities must be clear: whoever is more efficient should do it, without blame-shifting or meddling.

Channel members, especially upstream and downstream, should seek greater cooperation rather than confrontation. Many companies like to form alliances, and every industry has alliances, claiming to “huddle for warmth.” The basic starting point is for similar enterprises to unite against upstream and downstream, hoping to get better cooperation terms with upstream or downstream customers.

This is completely backwards; the foundation is wrong, so the results can't be good.

I've seen countless alliances over the years, and none have truly succeeded.

This is the first major problem in the supply chain: inefficiency in intermediate links. Why talk about problems before doing anything?

Whether you're operating or starting a business, if your model can solve fundamental business problems, you've already succeeded half the battle from the start.

What does “only era enterprises, no enterprise eras” mean? If your enterprise can solve the problems of this era, you are an era enterprise. The bigger the problem you solve, the greater your opportunity.

Now for the second major problem: the absence of retail entities.

In plain terms, no one is willing to sell goods face-to-face to customers in small quantities.

What is retail? Retail is “buying in bulk and selling piecemeal.”

Is this valuable? Of course, hugely.

The most convincing data to measure our consumption level is “total retail sales of consumer goods.” Retail is most closely related to people's livelihoods; all consumer goods and services are ultimately realized through this key link.

Retail is the most important link in all channels; other links serve it.

Marx's “the dangerous leap from commodity to money” is that critical moment, and other channel links are just inventory transfers, belonging to logistics.

But something even more bizarre happened.

In our huge market with total retail sales of 40 trillion yuan, any enterprise of scale is unwilling to engage in retail.

The “retailers” we know well are actually “pseudo-retailers.”

A big supermarket, you think it makes money by selling goods, but actually it makes money by charging supplier fees.

An e-commerce platform, you think it's doing retail, but actually it's collecting advertising fees. You think “Baba” is making money, but it's actually “Mama” making money.

A large department store, you think it's a merchant, but actually it's collecting rent, and most are sublessors.

“Property retail,” “real estate retail,” and “advertising retail” are the current mainstream of domestic retail.

Those truly doing retail are only the mom-and-pop shops and small retailers that can't make money through “platforms.”

And those poor brand manufacturers, whose main business is “R&D and production,” but they have no choice; they have to sell their own products even if it means crying, so they join the army of “forced business,” and can efficiency be high? About half of e-commerce platform sales currently come from manufacturers' self-operated stores. Offline is no better; many distributors only handle delivery, stores only collect fees, and manufacturers don't need to do retail themselves, but they pay all related retail costs, which rise every year, so efficiency is naturally lower.

Property retail, real estate retail, or advertising retail are all platform thinking; they believe in “wool from pigs, paid by dogs.” No one is responsible for the final retail result, so it would be a miracle if they were efficient.

Productive forces determine production relations. Such backward and distorted production relations are being eliminated by the new business environment. To put it bluntly, they're already “falling when everyone pushes.”

Chen Minying, the boss of Jiumaoyue, said that such retail is “counter-revolutionary.” Overthrowing these “counter-revolutionaries” and establishing commercial production relations that adapt to modern productive forces is the responsibility of contemporary entrepreneurs and founders, and a great merit.

Since we're going to “revolutionize,” we must not only know who our enemies and friends are, but also understand how the “counter-revolutionaries” formed, and what stubborn resistance they still have.

First, why is everyone unwilling to do retail?

Actually, it wasn't always like this. The earliest market economy started with small traders, and department stores then actually sold goods rather than renting counters.

But retail has a problem: it's very prone to “involution.”

Comparing prices is our shopping habit. If things are similar, we go for the cheaper one. You're in retail, not production; others can sell the same things, so you have to “roll.”

Competing to lower prices, trying every way to please customers, endlessly “rolling” until there's no profit or even losses.

If you travel the world, you'll find that being a consumer in China is the happiest, being served comfortably. But this also means retailers bear huge costs while earning meager profits. Retail has become a naturally miserable job.

This is the plight of the first generation of retailers.

The change first came from international supermarkets twenty years ago. These guys, who honestly sold goods abroad, found retail in China too miserable and couldn't stand the “rolling.”

So they transformed, “holding traffic to command manufacturers,” becoming real estate retail and advertising retail:

Pay to enter, pay for displays, pay for promotions, pay for new store openings, pay for DM flyers, return unsold goods, get cleared out if sales are poor, and recruit more paying entrants.

Local governments also strongly supported this, as a new supermarket opening meant a new commercial district, rising land prices, and more land sales.

This was the original “wool from pigs, paid by dogs.”

This is also why domestic consumer goods, especially FMCG that rely heavily on retail, are generally hard to sell, struggling to survive, let alone go global.

Although this approach had a big impact, it didn't become the mainstream of retail.

What truly made distorted retail mainstream was the rise of e-commerce platforms and the integration of online and offline retail platforms.

Under even more frenzied platform thinking, truly retail-focused enterprises collapsed completely. Only individual businesses, relying on advantages like no rent and no labor costs, still have a deep foundation in vast third- and fourth-tier cities and rural markets.

But now, with the basic completion of new commercial infrastructure and the vigorous antitrust campaign, the world is becoming promising again.

Old platform operators are either declining or will be nationalized as social infrastructure.

Those who can become “new-type retailers,” meeting customer needs and creating higher premiums through professional retail, will be the biggest winners in the “de-platformization era.”

In the market, the foresighted are already acting: NetEase Yanxuan's buyer-style supply chain retail, Costco's membership service retail, Dingdong Maicai's professional supply chain retail, Bied's simple retail, and Jiumaoyue's ecological space retail—all are preludes to the return of retail entities.

“De-platformization” is the biggest trend in China's business environment in the coming years, the greatest tide of the times. Previously, few believed it; now more and more do, and more will care about how to act under the “de-platformization” wave.

Before knowing how to act, you need to identify the biggest problems in the current business environment, their root causes, and what you can do about them.

Drucker said that the value of an enterprise is to solve social problems.

Ma and others, based on past social problems, built outstanding Alibaba and various platforms, making outstanding contributions to past development.

Now they can no longer solve new problems, and have even become a source of problems. New great enterprises need to be created by the times.

Not everyone can build a great enterprise, but at least we should go with the flow, and not become stumbling blocks kicked aside on the path of development.

Are you “watching” me?