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Wen/Hanxing
Source: Xuebao Finance Agency (ID: xuebaocaijingshe)
The vertical e-commerce industry can no longer accommodate small and beautiful dreams, and can only push each other to embark on the expansion of the single log bridge.
Recently, Miya, a mother and baby mall, announced on its official website that with the change of users' shopping habits, the company decided to stop the service of Miya App on September 10, 2022 and shut down the offline.
The fate of mother baby e-commerce represented by Miya to decline is just a microcosm of the whole vertical e-commerce from prosperity to decline. Domestic vertical e-commerce rose around 2010. For more than a decade, investment and financing events have been widely distributed in many vertical fields such as fresh food e-commerce, medicine e-commerce, mother and baby e-commerce, alcohol e-commerce, pet e-commerce and flower e-commerce.
However, after burning out at least 130 billion yuan in 12 years, few players could escape the fate of going into silence.
In the winner take all market pattern, vertical e-commerce companies struggle to survive and make difficult transition. Going to comprehensive e-commerce is the only way for vertical e-commerce, and this road is extremely dangerous: after the three strong patterns of Ali, JD and Pinduoduo have been basically established, no vertical e-commerce has successfully broken through in China.
Small but not beautiful
The stage belongs to the three giants of "cat and dog", and there is not much space left for small and beautiful vertical e-commerce.
In 2021, based on the GMV caliber, the market shares of the three giants, Taoxing, Jingdong and Pinduoduo, will be 53%, 20% and 15% respectively, leaving little space for marginal players.
From the spotlight of capital to a bleak corner of the stage, Myya Baby has walked for 8 years, and has also witnessed the rise and fall of vertical e-commerce.
In 2011, Liu Nan, who left a foreign company for one year, became a full-time mother. At that time, China had just experienced the Sanlu milk powder incident, and consumers' trust in domestic mother and baby products fell to the freezing point. Liu Nan, who had just become a mother, also focused on imported baby products.
In the process of overseas shopping, Liu Nan smelled the opportunity of purchasing mother and baby products on behalf of others, so he founded a Taobao store called Myya Baby in November 2011. In 2013, Myya Baby obtained round A financing from Zhenge Fund and Huaxing Xianfeng, and then obtained more than 80 million dollars in round B and round C.
In 2014, Miya B2C website was officially launched, and entered the Internet retail track as a cross-border mother baby vertical e-commerce, opening a journey for capital darling. From 2014 to 2016, Miya successively obtained five rounds of financing, with a cumulative amount of about 2 billion yuan, of which 150 million dollars was raised in round D, setting the record for the largest single financing of mother baby e-commerce. Baidu led the investment, followed by investors including Sequoia Capital, H capital and other institutions, with a valuation of nearly $1 billion.
However, the carnival of capital came to an abrupt end in 2016. After the E-round financing, Miya has no new expansion action. In 2017, he joined in social e-commerce and even fell into pyramid selling doubts. In 2020, offline self operated stores will be closed one after another. After 4 years, the honey sprouts that quickly disappeared from the public could not wait for the moment of comeback. In July 2022, Miya announced that its app would officially stop service and shut down on September 10.
In fact, in the most beautiful years of Miya, the track of mother baby vertical e-commerce has been crowded with players. They have their own highlights, but they inevitably fall into the dust: in 2012, the old brand mother baby e-commerce red child sold in Suning for $66 million; In 2016, Lotus parents and children, who started with social networking and group buying, announced their closure due to poor management; Beibei, which used to be worth 10 billion yuan with Mia Ya, will have capital problems in 2021 and will be taken off the shelves in major application markets in the same year.
With the implementation of the two child policy and the three child policy, and under the flood tide of maternal and infant consumption of more than 3 trillion yuan in 2021, none of the maternal and infant vertical e-commerce tracks that burned more than 10 billion yuan of capital can stand steadily at the top of the wind.
As early as 2015, Bi Sheng, the founder of Letao, once put forward the view that "vertical e-commerce is a fraud", but now it doesn't seem to be a lie.
According to incomplete statistics of open data, Xuebao Finance and Economics News Agency, in the past 12 years, the total financing amount of 15 well-known vertical e-commerce companies has reached at least 3.5 billion US dollars, about 23 billion yuan.
This is just the tip of the iceberg. Snow Leopard Finance and Economics News Agency counted the financing data of all vertical e-commerce angel rounds to round D. Excluding enterprises that did not disclose detailed data (the financing number showed tens of millions, hundreds of millions), there were 1691 financing data from January 1, 2010 to July 15, 2022, with a total financing amount of about 129.1 billion yuan.
Today, some of these once famous e-commerce companies have stepped into the dust of history, while others are hidden in a bleak corner of the stage.
Winner takes all
Compared with comprehensive e-commerce, the limitations of vertical e-commerce doomed it to be a phased product of e-commerce in a specific historical environment.
Bi Sheng, who has thrown out the "vertical e-commerce fraud theory", once made such a split when analyzing the cost composition of e-commerce: one-way logistics 10%+warehousing 10%+reverse logistics 3%+customer service 1%+technology 4%+management personnel 10%+market promotion 10%+commission 2%+packaging 1%=about 50%. In fact, there are very few categories in the e-commerce industry with more than 50% of gross profit, and there is still 10% of gross profit in the end when the marketing costs such as price wars and subsidies are superimposed.
In actual operation, the erosion of high marketing expenses on gross profit space goes beyond this.
The financial report of Siku, once the "first stock of China's luxury e-commerce", in 2021 shows that the gross profit margin during the reporting period is only 3.77%. Under such a low gross profit margin, the marketing expenses still amounted to 214 million yuan, which was far higher than the gross profit of 118 million yuan, and became one of the reasons for the net loss in consecutive years. Compared with Siku, the gross profit rate of Babytree, a mother baby vertical e-commerce company, in 2021 is as high as 60.58%, but the marketing expenditure in the same period is 285 million yuan, far higher than the gross profit of 171 million yuan.
Comprehensive e-commerce has more advantages in the management and control of marketing expenses. In 2021, the marketing expenses of Alibaba, JD and Pinduoduo will account for 38%, 30% and 72% of the gross profit respectively.
Not only does the high marketing cost make profitability more difficult, but the lack of long tail effect is also a major challenge that vertical e-commerce has to face.
For the vast majority of platforms, hot selling categories gather together to form the "head", while other relatively personalized, niche and scattered demands form the "tail". When the tail is long enough, the amount of transactions it adds up may even exceed the head. Contrary to the "28 Law", the long tail formed by 80% of "non mainstream" goods contributes far more than 20% to comprehensive e-commerce.
Amazon, which started from selling books and has grown into the largest comprehensive e-commerce platform in the United States, is based on the long tail effect.
Amazon first sold the best-selling books at a low or even loss price, competing with traditional offline bookstores for customers. At the same time, we will earn profits from the relatively high prices of the less popular books. In this business model, consumers who buy best sellers get substantial benefits, consumers who demand unpopular books get their favorite products, and Amazon gets traffic and user stickiness.
The long tail effect then expanded from a single category to multiple categories. Due to the existence of the long tail effect, it is difficult for vertical e-commerce to prevail in the frontal conflict with comprehensive e-commerce. What's more, integrated e-commerce is also expanding its category to swallow honey and milk from vertical e-commerce.
In the field of luxury goods, Taobao launched Tmall luxury goods, and JD launched TOPLIFE luxury service platform in 2017; In the field of maternal and infant products, Alibaba has launched Tmall Smart Maternal and Infant Rooms in Beijing, Shanghai and Hangzhou since the end of 2017, and JD has also launched the online offline integration of JD Maternal and Infant Living Hall.
At the same time, the huge flow pool of the integrated e-commerce platform also has great attraction for vertical e-commerce. In 2012, 38 vertical B2C enterprises such as Yihaodian, Yintai, Kuba.com and Letao entered Taobao Mall and opened official flagship stores.
Due to the lack of moat, vertical e-commerce has no advantage in direct competition with integrated e-commerce.
If the market space is large enough, the two cannot coexist, but when integrated e-commerce also starts to worry about traffic, the situation of vertical e-commerce will only be worse.
In the first quarter of 2022, for the first time since Taobao was founded 19 years ago, the quarterly GMV declined; On this year's "618" shopping festival, the year-on-year growth of the turnover of goods on the JD platform hit a record low; The year-on-year growth rate of Pinduoduo's MAU dropped from 50% of Q4 in 2020 to 2% of Q4 in 2021.
When the lions on the grassland began to starve, it seemed extravagant for the jackals to share a mouthful of rotten meat.
Either expand or decline
Looking at the development history of domestic e-commerce platforms for nearly 20 years from 2003 to now, Taobao, which focused on clothing sales in the early years, has more or less the shadow of some vertical e-commerce, and Jingdong in its infancy is a typical 3C vertical e-commerce.
It is a complete lifeline for e-commerce enterprises to cut through the vertical category and develop comprehensively. However, the key to success or failure of the transformation is to find a strong fulcrum.
In 2004, JD started with computer products, and then expanded its product categories such as mobile phones and home appliances, forming the embryonic form of early 3C vertical e-commerce. 2007-2008 is an important node in the development history of JD: JD began to build its own logistics in 2007, and began to sell general merchandise in 2008, transforming from vertical e-commerce to integrated e-commerce platform.
In 2008, the sales volume of JD Mall was only 75% of that of Dangdang. Now it can compete with Taobao and Pinduoduo. Self built logistics is the fulcrum of JD's successful transformation from vertical e-commerce to integrated e-commerce.
Dangdang, once known as the "Oriental Amazon", quickly fell into desolation after a short highlight, while the western Amazon also relied on its own logistics system to grow from a book vertical e-commerce platform to a comprehensive e-commerce platform with the highest market value in the world.
Public data shows that in 2019, Amazon's package volume in the United States was 4.5 billion, and 2.3 billion packages were delivered through its own logistics network, accounting for 22% of the total distribution volume of e-commerce in the United States. After becoming the second company in the world with a market value of more than one trillion dollars, Amazon is often ridiculed by investors as a courier company.
Due to the characteristics of deep cultivation of the segment track, vertical e-commerce often touts more professional and considerate services, but actually ignores the most basic consumer experience. When vertical e-commerce cannot provide users with better service experience than comprehensive e-commerce (including price, category, distribution, after-sales, etc.), its transformation process often evolves into blind expansion without fulcrum.
As a phased product of e-commerce development, vertical e-commerce is the only way out to a larger and more comprehensive comprehensive e-commerce. But this road has long been a single wooden bridge over the turbulence. Who can find the fulcrum first and squeeze through with his ability can gain new life.
However, there are fewer and fewer fulcrums.
(Statement: This article only represents the author's view, not Sina.com's position.)
