December 2003: Xiao Shanglue from Anhui founded the channel brand Xiaoye Perfume, which became one of the first stores on Taobao. It later became the first three-gold-crown store on Taobao, maintaining the top position in its category, and in 2010 launched the Taobao brand Suye.
2009: Li Xiao from Jiangxi and his wife Shen Danping founded the bird's nest Taobao brand Yangege, which held the top position on Tmall and Taobao from 2011 to 2014.
May 2015: Xiao Shanglue's Yunjie Weidian officially launched.
May 2015: Li Xiao's second entrepreneurial project, the Gegejia APP, completed a Pre-A round of financing of RMB 15 million led by China Growth Capital. Subsequently, Gegejia completed two more rounds of financing within 17 months.
April 2016: Li Xiao's third entrepreneurial project, the snack e-commerce platform based on the WeChat ecosystem, incubated by Gegejia, Global Hunter, announced the completion of a financing of tens of millions of RMB led by China Growth Capital, ZhenFund, Shunwei Capital, and Ping An Innovation. Within the following 18 months, Global Hunter announced three more rounds of financing.
December 2016: Yunjie announced the completion of a Series A financing of RMB 228 million led by Cazenove Capital and Zhongding Capital.
July 2017: Yunjie Weidian received a sky-high fine of RMB 9.58 million from the Hangzhou Binjiang Market Supervision Administration for organizing and planning pyramid schemes.
August 2, 2017: Tencent officially announced the permanent ban of Global Hunter.
August 10, 2017: Tencent officially announced the permanent ban of Yunjie Weidian.
February 2018: Global Hunter completed a strategic investment from Zhejiang University Youchuang. At the same time, according to a related supplier of Global Hunter, its GMV in March was close to RMB 100 million.
April 2018: Yunjie announced the completion of a Series B financing of USD 120 million led by CDH Investments and China Renaissance New Economy Fund.
May 5, 2018: Li Xiao announced on his Moments that the Gegejia APP would officially close at 24:00 on May 31, and Global Hunter would subsequently replace Gegejia.
May 11, 2018: At Yunjie's third anniversary celebration, Xiao Shanglue announced that its annual GMV in 2017 exceeded RMB 10 billion, with 4 million merchants and 30 million VIP users.
"Sorry, my name is also Haonan, Situ Haonan." In the 1998 Hong Kong film "Young and Dangerous: The Battle in Causeway Bay," set against the backdrop of two gangs vying for control of Causeway Bay, the protagonist Chan Ho-nam's arch-rival coincidentally shares the same name—a deliberate twist of fate by the director. If we map this coincidence onto the fierce competition between the two major internet giants in mainland China today, the rivalry between the two Mr. Mas doesn't seem so conspicuous.
However, for a while, in the Hangzhou e-commerce circle, the heartland of Alibaba, two WeChat-based micro-commerce platforms that have thrived have also drawn our attention to their two protagonists—Yunjie Weidian founder Xiao Shanglue and Global Hunter founder Li Xiao—due to similar "coincidences."
Both are grassroots e-commerce entrepreneurs who came from other places to Hangzhou to make their fortunes, both are former Taobao/Tmall category TOP champions with Taobao brands—Xiaoye Perfume and Yangege—both "left Taobao" around 2015 to enter the WeChat ecosystem, both received fervent favor from top investment institutions in the capital market, yet both used the explicitly prohibited three-level distribution system, resulting in penalties from regulatory authorities and bans from WeChat, leaving them with the stereotype of "pyramid scheme kings."
In one Hangzhou city, the saying of "two Xiao (Xiao) bosses" has clearly transcended the realm of "coincidence" and become a kind of fate: After all, in the current WeChat e-commerce ecosystem, apart from the top-ranked "Flash" Pinduoduo, among the platforms in the first tier with obvious competitive relationships, Yunjie Weidian and Global Hunter have the most similar models and the closest competitive relationship.
Yan Liang and Wen Chou
If we place Xiao Shanglue and Li Xiao, this pair of destined heroes, into a parallel world of the Three Kingdoms, perhaps the brave generals Yan Liang and Wen Chou under Yuan Shao's command are their previous incarnations.
In historical records, Yan Liang once instantly killed Wei Xu, a general under Lü Bu, defeated Song Xian in three rounds, and after thirty rounds with Xu Huang, Xu Huang retreated. Wen Chou, in the battle against Gongsun Zan, fought one against four and killed one, fought Zhao Yun to a draw in sixty rounds, and in a duel with Zhang Liao and Xu Huang, shot Zhang Liao and repelled Xu Huang. Had Xu Huang not risked his life to cover Zhang Liao, Kong Rong's evaluation of them as "bravest in the army" would not be an exaggeration. Of course, this series of fame only lasted until they both encountered that bearded man riding the Red Hare and wielding the Green Dragon Crescent Blade.
Romain Rolland said that fatalism is only an excuse for those who lack willpower. Xiao Shanglue and Li Xiao, both heroes spanning the e-commerce and micro-commerce fields, will not easily give up because of so-called fate. On the contrary, they tend to choose to dominate their own destiny. To that end, they would even open Pandora's box of three-level distribution, turning themselves into demons without regret.
If history could be reloaded like a game, could Yan Liang and Wen Chou avoid Guan Yu's blade?
If Yunjie and Hunter could use time to gain more policy space, would they be the next Mary Kay and Amway to clean up their acts?
1
Destined Heroes
Lin Yutang said that to understand a person, you only need to see how they use their leisure time. Presumably, this principle applies to the two Xiao (Xiao) bosses as well.
Left: Xiao Shanglue
Xiao Shanglue, born in the 1970s, aside from photos with major brand partners and government officials, his daily Moments content is mostly about running along the Qiantang River in Hangzhou. Li Xiao, a sharp-eyed post-80s, is nicknamed "Gudun Road Qi Tongwei" in the industry because of his resemblance to actor Xu Yajun, who played the second male lead in "In the Name of the People." His Moments are filled with his beloved son and food related to his industry.
Left: Li Xiao, Right: Xu Yajun (actor of "Qi Tongwei")
But the behavior on Moments is also a typical psychological defense mechanism, the so-called "the more one lacks something, the more one shows it," just like the micro-commerce kings who are often ridiculed for showing off wealth, buying cars, and buying houses.
· Xiao Shanglue received a sky-high fine of nearly RMB 10 million from government regulators last year, and today Yunjie's core anxiety lies in attracting merchants to expand its brand pool, so he rarely has time to go out for exercise and running.
· Li Xiao is thin and small in stature, and in reality, he loves sports cars more than food, so he is not a true foodie. What he feels guilty about is perhaps spending less time with his beloved son due to his focus on work.
From Moments, one can infer a person's inner world, but this still cannot fully restore a real person. This is like the fact that these two unicorn companies in the WeChat ecosystem are currently in a relatively closed environment—WeChat is an open and inclusive ecosystem based on strong connections, but the circles of individual players/users within it are necessarily closed.
This is like a residential community with independent apartment buildings and a park and swimming pool open only to residents. A person's Moments can only be viewed by those closely related to them: a closed relationship network indicates a closed traffic entrance and an internally circulating business model—Yunjie Weidian's C-end customers cannot purchase without an invitation code, and Global Hunter loses its core driving force as a social e-commerce platform if users do not share to earn rebates.
In contrast, in the first ten-plus years of Xiao Shanglue and Li Xiao's lives, they both had a close relationship with another "open e-commerce platform"—Taobao and Tmall under Alibaba were called open at that time because they had so-called public domains. It was precisely by fully exploiting the traffic dividend within the Alibaba ecosystem that Xiaoye Perfume and Yangege each accumulated over 100,000 seed customers. This is the capital that Xiao Shanglue and Li Xiao brought to the WeChat ecosystem when they founded Yunjie and Global Hunter, and it is also a point that pure internet entrepreneurs could not match at the beginning.
"The so-called e-commerce dividend period in the early years was actually a process where Taobao's platform traffic dividend helped merchants complete the takeoff from 0 to 1. In the 14 years from 2003 to 2017, Alibaba never mentioned private domains because the vast majority of e-commerce traffic went through Alibaba's platform. For example, a sea-view room or a scrolling banner during a big promotion could bring your store millions in performance. That is public domain traffic. But starting in 2017, the concept of private domains was officially proposed."
A former KA merchant from Tmall told Zhu Si Ma Ji that due to the overall platform traffic decline from March to April 2017, the strange phenomenon of GMV growth but a decrease in package volume made it impossible for Alibaba to trace where these packages went, even through Cainiao logistics package information and other means. The real answer to this mystery was that these packages went through third parties outside traditional e-commerce platforms like Tmall, Taobao, JD, and Vipshop—the WeChat ecosystem.
"The official can say that the decrease in package volume and increase in GMV is due to consumption upgrading. Logically, it's like I bought 100 jin of rice last year, and this year it became 60 jin. You officially say it's because you bought more expensive organic rice, so you don't need to buy as much rice. That explanation definitely doesn't hold water. Therefore, the core of the official proposal of private domains is still the hope that merchants can better channel their traffic from the WeChat ecosystem back to Tmall and Taobao under the background of platform traffic decline."
In other words, in the eyes of the official, the departure of big merchants like Xiao Shanglue and Li Xiao is currently very undesirable, but the shift to the WeChat e-commerce circle is an uncontrollable trend since 2017. Therefore, on January 10, 2018, Alibaba's anti-counterfeiting annual report expressed an official attitude towards WeChat e-commerce.
On January 10, 2018, Alibaba Group's anti-counterfeiting annual report named and criticized micro-commerce platforms and Pinduoduo.
So what exactly led these two CEOs to resolutely choose to leave after becoming top sellers in the Alibaba ecosystem?
· Xiaoye and Yangege hit the regulatory gun due to irresistible policy factors. Xiao Shanglue's Xiaoye Perfume was once investigated by the industry and commerce bureau for selling counterfeit parallel imports, while Yangege was directly banned from the agency of animal products including bird's nest due to the avian influenza incident, and restrictions were placed on imports from Southeast Asia. It was precisely because of these irresistible major problems at the source of goods that Xiaoye initially transformed into a self-operated brand and later moved to WeChat, while Yangege's situation was even worse, forcing Li Xiao to start a new entrepreneurial plan to avoid policy risks. Perhaps this is also the direct reason why Yunjie and Global Hunter, both originating from Taobao merchants, currently adopt a model similar to JD's self-operated procurement: both, from the perspective of former channel merchants, believe that platform operations must ensure extremely high control over product quality and quantity. But compared to the Alibaba ecosystem, they both believe that WeChat has more room for survival.
· Both predicted that the traffic ceiling of the Alibaba ecosystem had been reached. From a historical perspective, Taobao's first peak period was from 2009 to 2013, the so-called internet brand dividend period, from which Xiaoye Perfume and Yangege both benefited. From 2013 to 2015, Tmall was a dividend period for domestic platforms, with reduced support for internet brands and a shift to promoting domestic first- and second-tier brands to go online. By 2015, Tmall transformed to support international big brands, using their performance growth as the main driver of the entire Tmall market. Therefore, after 2014, the performance growth of Xiaoye and Yangege slowed significantly. At that time, besides radical players like Xiao Shanglue and Li Xiao who chose to leave Taobao, there were also representatives like Feng Min who used Alibaba's social platforms like Weibo to rapidly boost the internet celebrity economy. However, with the end of the Weibo dividend period and the completion of WeChat ecosystem infrastructure including mini-programs, payments, official accounts, and Moments ads between 2014 and 2017, the dividend period had emerged, and both chose to dive into WeChat during this period.
· Their different personalities determined their choices. According to a classmate from Xiao Shanglue's Taobao University days, Xiao, a Sagittarius, is cautious and profit-oriented, with a standard competitor mindset. Xiao's core reason for entering the WeChat ecosystem was the discovery of the extremely high loyalty of high-stickiness customers under the strong connection social relationship attribute when he used WeChat groups to serve old customers in the early days. Therefore, entering Yunjie through the high-margin beauty and skincare industry was his quick solution to profit. According to a friend close to Li Xiao, Li, a graduate of Fuzhou University, carries the dual genes of an internet person and an e-commerce person. As a Gemini, he is a typical opportunist, often choosing high-risk early losses to achieve his goals, and later monetizing traffic on a large scale after attracting a large number of users to achieve profitability. This is an extremely rare existence among e-commerce sellers. Yangege, Gegejia, and even today's Global Hunter are all cases where Li Xiao used this strategy. But whether competitors or opportunists, both, as former Taobao store owners, voted with their feet and favored the WeChat ecosystem in their track selection.
"Three years ago, Yangege even adopted a model similar to today's Hema Fresh, opening stores in shopping malls. Their freshly cooked bird's nest was delivered to users within a 5-kilometer radius according to the one-hour delivery standard, or customers could pick it up in-store and eat on the spot. But the idea was too ahead of its time and the customer acquisition cost was too high, so even if the delivery range was expanded to 10 kilometers, it might not achieve the sales per square meter that a store in West Lake Yintai should have. And eight years ago, Xiao Shanglue created the self-operated brand Suye to avoid the risk of parallel imports. Today, this brand is just a drop in the ocean among domestic second- and third-tier brands. When poor, one thinks of change; if it were me, I would also try to change such a situation."
After more than ten years of ups and downs on Taobao, Xiao Shanglue and Li Xiao made their first pot of gold. During the subsequent quiet period in the WeChat ecosystem, they did not try legitimate means to turn the situation around, but their ceiling at that time was precisely the profit-driven, "barefoot not afraid of wearing shoes" top Taobao merchants. Therefore, in the face of rules and risks, they chose to violate rules and take risks to maximize benefits, which seems to align with their values. This is like when Taobao store owners used to engage in fake transactions, send empty packages, and sell counterfeit parallel imports under the guise of agency. Xiao Shanglue and Li Xiao successively introduced the three-level distribution system on Yunjie and Global Hunter and began to expand crazily.
"Three-level distribution" is as dangerous at the commercial level as a country developing nuclear weapons: if the adventure creates a fait accompli, the country can join the ranks of the five permanent members of the UN Security Council, gain great protection for national security, and have unlimited political and diplomatic influence internationally. But if the plot is exposed, the country will face sanctions and condemnation from the whole world, becoming a rat crossing the street.
A person's past ceiling affects the floor of their actions, and today's floor will inevitably determine their future ceiling.
2
Multi-level Distribution: The Pandora's Box That Cannot Be Closed
On August 2, 2017, Tencent officially announced the permanent ban of Global Hunter, and eight days later, it again announced the permanent ban of Yunjie Weidian.
It was an expected but surprising result. From the moment the two Xiao (Xiao) bosses decided to adopt the three-level distribution system, it was equivalent to pressing the countdown timer for the ban by Tencent and regulatory authorities. Pyramid schemes are not a commercial issue but have long risen to the political level of a country.
After the birth of WeChat Pay, due to the backward infrastructure of the WeChat ecosystem, from 2014 to 2017, WeChat e-commerce, commonly known as "micro-commerce," was directly equated with pyramid schemes. After all, without formal platform operations, commerce based solely on trust between people is not enough to be equated with the traditional retail industry.
"You can also see them as the current 'micro-commerce' being platformized. From the development model, it is undoubtedly 'micro-commerce,' but micro-commerce is just their way of acquiring users. At least for now, they are not purely for profit, and they can be considered to have come ashore because they have closed the three-level distribution, indicating that the early accumulation of customers has been completed."
A senior person from the micro-commerce industry told Zhu Si Ma Ji that if we look at the model, the largest micro-commerce platform in China should be Pinduoduo, and below that are Yunjie and Hunter. The difference between Pinduoduo and Yunjie and Hunter is that the former has merchants opening their own stores, while the latter are platform self-operated. Moreover, Pinduoduo's low-ticket products only rely on WeChat sharing to attract people but do not need multi-level distribution. Its target is the bottom-level traffic, which is clearly the part that Yunjie and Hunter look down upon—even if this bottom-level traffic could complete consumption upgrading after following for more than ten years like Taobao, Yunjie and Hunter, eager for quick success and under pressure from investment institutions, naturally cannot wait for the next ten years of consumption upgrading. Xiao Shanglue and Li Xiao are not easy opponents.
In the final analysis, why do Yunjie and Hunter use three-level distribution to expand users?
· Direct competitors are Tmall and JD. The Gegejia APP, which entered the market with cross-border snacks, and Global Hunter, and Yunjie Weidian, which entered with beauty products, all started by using a segmented market to enter the industry. But in a segmented market, the early competitors are too weak, and the later ones are too strong. Taking Li Xiao as an example, around 2015, he used a bug in the Apple App Store to rank high in search and acquire a large number of customers, becoming the industry leader, and then chose to expand categories. At that time, they suddenly found that their competitors had become Tmall Supermarket and JD Supermarket. The former has the support of Taobao traffic, and the latter is China's largest B2C self-operated e-commerce platform. Li Xiao's model of purchasing snacks from suppliers obviously could not beat the two giants. Therefore, with no way forward and no way back, Global Hunter chose the simplest and most crude method of attracting people. The same applies to Yunjie.
· Extremely high input-output ratio. Yunjie and Global Hunter are both self-operated vertical e-commerce platforms. According to a person close to Li Xiao, compared to Gegejia, which does not use the three-level distribution system, with the same operating costs, the order data that Global Hunter can complete through three-level distribution is almost ten times that of Gegejia. Since this method has a higher input-output ratio, why choose to take a step back? "Risk exists in any field. A business without risk is only suitable for one type of person—the two Mas of Tencent and Alibaba today. But now the two Xiao (Xiao) bosses are just ordinary guys. Do you think they will gamble or not?" A merchant from Guangzhou commented.
· The purpose is to acquire more precise users. If we compare the users of the WeChat ecosystem to a pyramid, the bottom-level low-end users have the largest base, and this part has clearly been harvested by Pinduoduo, which focuses on third- and fourth-tier regions. The early seed users of Yunjie and Global Hunter, however, have user profiles of middle-to-high-ticket customers from the Taobao brand Xiaoye Perfume and the housewives and ladies targeted by Yangege. Therefore, from the beginning of entering the WeChat ecosystem, their goal was the high-end crowd. To this end, they used three-level distribution plus high-threshold membership to attract precise customers, and then stimulated consumption through large discount coupons, aiming to increase the platform's user scale by one or even several orders of magnitude. The platform's user scale actually determines its valuation in the capital market.
Violation and illegality differ by one word, but their meanings are vastly different. However, most early successful Taobao merchants more or less played some risky tricks on the edge of the rules—for example, Global Hunter's large discount coupon gameplay actually originated from Taobao's gameplay.
"This routine is almost exactly the same as those merchants on Tmall that rose with coupons. In fact, Tmall also has large discount coupons now, but they are basically only issued in small quantities during Double 11 promotions or when merchants apply in the backend, because such high discounts are not achievable from a business logic perspective in terms of cost and gross margin, and there is a high suspicion of fake transactions. Since Tmall does not count the lowest price, if you issue a 399-300 coupon, the sales volume is still calculated at 399."
A category operations expert from Tmall told Zhu Si Ma Ji that similar large coupons like 399-300 have indeed appeared as a bug in Tmall's history. Merchants would obtain a large number of IDs and then issue large coupons without limit to coupon recipients. Tmall has a coupon expiration reminder function, which forces users to be guided and stimulated to consume at a certain point. But currently, this gameplay has become a demotion gameplay because the price difference is too large, affecting Alibaba's search traffic and security monitoring.
But today, Yunjie and Hunter have left the Alibaba ecosystem's regulatory system, and reusing this old trick on their self-operated platforms does not violate corresponding industry and commerce regulations. In contrast, Taobao and Tmall originally aimed to curb such large discounts to protect their image and maintain the platform-wide price system. As a new platform, Global Hunter adopted this strategy mainly for early customer acquisition and to stimulate short-term transactions.
"I think as long as it is platformized, the entire business environment can become more formal. After all, no matter how the platform operates now, it will inevitably establish rules in the future. Even if there are overbearing clauses like having to use coupons within 48 hours, as long as the scale increases in the future, it will inevitably move towards formalization, because then the impact of national policies will be greater. Just look at Taobao to understand."
Combining the current landscape of China's e-commerce retail industry, we can see the following picture:
· Alibaba's e-commerce and offline retail businesses in the central areas of first- and second-tier cities follow Zeng Guofan's Hunan Army strategy of "building strong fortresses and fighting steady battles": forming a fortress-like defensive position with Tmall and Taobao as the core, combined with Hema Fresh on the ground. With such an impenetrable fortress, the Hunan Army forced the roaming Taiping Army into a war of attrition.
Zeng Guofan's Hunan Army found the weakness of the Taiping Army's insufficient attack capability through fortress defense warfare, thus turning the tide of the war.
· Tencent, through its WeChat traffic, payments, mini-programs, friend ads, official accounts, and other matrices, and its partners, adopted a mobile warfare model similar to the People's Liberation Army's strategy of encircling cities from rural areas during the War of Liberation. In the early stage, they established a foothold in third-, fourth-, and fifth-tier cities through partners and WeChat Pay while annihilating effective forces, dividing and encircling the e-commerce retail traffic of central cities, turning these areas into isolated islands, and then completing the defeat of each through cooperation with JD and other large retail groups. Currently, the three echelons that have emerged in the WeChat ecosystem are:
First guerrilla force. Led by the top-ranked Pinduoduo, it follows the strategic thinking of encircling cities from rural areas, directly cutting off the incremental market of low-ticket items to surround cities. But the current problem is that its merchants' supply chain has extremely limited means in attacking central cities, and the effect is not obvious.
Second guerrilla force. Represented by guide-type platforms like Weixuan, the core is to convert past fans that could not be converted to points into precise individuals through WeChat mini-programs. This part mainly targets top Taobao merchants and domestic second- and third-tier brands.
Third guerrilla force. Platforms like Yunjie and Hunter choose to bloom in the center of Alibaba's sphere of influence, cutting out a customer group of their own through "extraordinary means," and then wait for policy adjustments to capture the head users and the existing market of high-ticket items through internal and external cooperation.
"However, the biggest problem with Pinduoduo, Hunter, and Yunjie is exactly the same as Taobao's situation back then—the platform is not making money or even losing money. Yunjie Weidian's entry into high-margin beauty and skincare products is relatively better, but if it continues to rely on VC money to build scale and then wait for policy shifts, it is actually a gamble. What WeChat e-commerce really needs is a profitable model suitable for most platforms. Otherwise, it cannot always be like Yunjie locking merchant deposits, Pinduoduo relying on fines, and Global Hunter relying on membership fees, right?"
3
Who is Guan Yu?
In the fifth year of Jian'an, the Battle of Guandu broke out. Yan Liang and Wen Chou, who had been the bravest in the army under Yuan Shao, fell in what is now Yanjin County, Xinxiang City, Henan Province, and Hua County, 53 kilometers from Puyang City. Due to Luo Guanzhong's romance, when people talk about Yan Liang and Wen Chou, the first thing that comes to mind is Guan Yu.
On May 8, 2018, Guangzhou police dismantled the "Yunlianhui" mall suspected of pyramid schemes. For Xiao Shanglue and Li Xiao, far away in Hangzhou, Hangzhou is indeed a paradise and blessed land for entrepreneurs, because the city's values have always been to believe first and question later.
Today, Yunjie has long closed its three-level distribution, and Hunter's rebate intensity is no longer as crazy as last summer. The claim that Xiao Shanglue and Li Xiao have cleaned up their acts seems to make people forget the permanent bans imposed by Tencent last summer.
If history could be reloaded, could Yan Liang and Wen Chou have escaped?
"They are actually different from traditional e-commerce platforms. Here, users are forcing the platform to expand categories and brand pools because users want to consume and also have the need to make money. On the other hand, while the platform's performance continues to improve, we suppliers are also increasing our investment in your platform. Even if the platform wants to brake in time, it will face dual pressure from C and B ends, not to mention the pressure from VCs upstream."
A large supplier from Yunjie Weidian gave Zhu Si Ma Ji an example of the "Zhilaohu" weight-loss biscuits he had previously dealt with. In 2017, the brand achieved a staggering RMB 2 billion in annual sales through micro-commerce channels. But the brand knew there was a huge regulatory risk in the industry, yet it still could not brake because the suppliers and countless agents forced them to continue.
So what potential risks will Yunjie and Hunter face in the future?
· The company structure itself. The legal department of a supplier from Yunjie Weidian raised concerns about the current risks in Xiao Shanglue's company. He pointed out that while the company's registered person and main entity are constantly changing, its subsidiaries have very little registered capital. On the other hand, since 2018, Yunjie has extended the settlement period for suppliers from 30 days to 90 days and required suppliers to provide a RMB 100,000 deposit. Given the above, this supplier ultimately terminated cooperation with Yunjie this year. In the future, when facing international brands and listed companies, such a chaotic structure may have a very negative impact on its merchant recruitment.
· Expansion of the brand pool. Yunjie's current merchant recruitment focuses on domestic second-, third-, and fourth-tier brands. In contrast, Global Hunter, which relies on suppliers' self-operated direct procurement of overseas snacks, is slightly better. But both target housewives as their main audience. Therefore, whether they can attract more international brands and domestic first-tier brands to join the platform in the future is key to maintaining their middle- and high-end customers—after all, Tmall and JD currently occupy the first tier mainly because of the domestic and international first-tier brands that drive their platforms. If the platform only relies on the founder's personal influence to bring in a few Taobao brands they have known for years, it will only lower the middle- and high-end customer base they have worked hard to build.
· Shortcomings of the internal circulation model. As mentioned earlier, Yunjie and Hunter are in a closed WeChat relationship network. Therefore, in this ecosystem, consumers are not individuals but families. A closed environment means extremely high customer acquisition costs, which is why they had to resort to the model of attracting people to feed the platform. Yunjie and Hunter currently face a situation very similar to that of today's top Taobao merchants: the 28 effect is obvious, store growth is slow, and 80% of sales rely on the 20% of old customers with high stickiness. Therefore, when users hit the bottom, Yunjie and Hunter either have to take the risk of starting three-level distribution again or expand categories one by one. But it is certain that the GMV growth of Yunjie and Hunter cannot simply rely on more registered users, because the brands currently on their platforms still cannot support a larger scale, let alone the fact that both platforms are still banned by WeChat, so they cannot obtain more traffic through mini-programs or other forms. At the same time, the closed state of Yunjie and Hunter makes them standard data black holes. Their GMV and real merchant sales data are unknown unless we use strong measures such as through industry and commerce and tax departments.
"The reason we are unwilling to cooperate with Yunjie and Hunter is actually the same as not wanting to discount casually during Double 11. As an international brand, we would rather not do business with you than maintain our own price system, even if you are Tmall or JD."
A person in charge of a well-known international brand on Tmall cited the example of Tmall's official subsidies in 2017, which met with strong backlash from his brand and a group of international brand merchants. The reason for these brands' protests was that Tmall's actions at that time interfered with the pricing system of their brands' offline and online sales in mainland China. Compared to Tmall's official subsidies, the multi-level distribution of Yunjie and Hunter is actually more harmful and dangerous to these brands.
Perhaps the real Guan Yu is not Tencent or the regulatory authorities, but their own suppliers/brand partners.
As the saying goes, one mountain cannot accommodate two tigers. Just like the final duel between Chan Ho-nam and Situ Haonan, if a Hangzhou city only allows one Xiao (Xiao) boss in the future, who will laugh last in Yunjie vs. Hunter? I think Global Hunter has a higher chance of winning, for three reasons:
· Yunjie's closed invitation loop model is more like a TOB platform. This model has deviated from the spirit of mainstream e-commerce platforms and even mainstream internet products, where users actively embrace customers. If adhered to for a long time, it will not benefit the platform's future development. Global Hunter, on the other hand, is a typical TOC platform.
· Global Hunter's seed customers come from Yangege's high-quality ladies and mothers. Although Yunjie also emphasizes housewives as its target customers, Hunter has a higher user dimension. Its current consumer group is basically the same as that of Tmall Global and NetEase Kaola. Therefore, in the future, it has the potential and ability to attack lower dimensions from a higher dimension. At the same time, its UI interface with a black color scheme clearly has a high-end attribute—similar to the black Centurion credit card.
· Global Hunter's category operations start with cross-border snacks, a segmented market with medium-to-low gross margin but high frequency. The advantage is to cultivate the user habits of high-end customers, and later use this to leverage domestic and international first-tier beauty, daily chemical, and health products. In contrast, Yunjie enters with high-margin self-operated beauty products, but the problem is that the beauty and personal care brands that match its current user profile (based on beauty Taobao brands) are extremely limited, and in terms of recruiting big brands, it will face great resistance due to the existence of its distribution system.
When we look back at the 1980s and 1990s, American beauty and skincare brand Mary Kay and health products and daily chemical brand Amway entered China strongly. They used the golden distribution system to build a pyramid system and expand rapidly in China. But with the Chinese government's crackdown on pyramid schemes, these two brands became synonymous with "direct selling" in the minds of Chinese people. But by 2018, Mary Kay and Amway's "direct selling" in mainland China is legitimate and legal. In other words, these two American brands that use multi-level distribution methods have obtained "direct selling licenses" from the Ministry of Commerce for their commercial activities in mainland China.
Perhaps this is another coincidence or fate. The businesses that Xiao Shanglue and Li Xiao have been in are exactly beauty and skincare products and health products.
Everything has accidental coincidences, but the results are like inevitable fate.
Grassroots heroes may respond to reality like Qi Tongwei's roar before his suicide at the end of "In the Name of the People": No one in this world can judge me. Go to hell, God!
Because no one is born to be a pyramid scheme king.
Source: Zhu Si Ma Ji (ID: zhusimaji88)
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