The e-commerce industry is very popular, and many traditional companies outside the circle now want to participate. However, there are often two misconceptions. The first one is that e-commerce equals Taobao or Hisoip, assuming that opening a Taobao store means doing e-commerce. The second misconception is that e-commerce requires doing independent B2C, necessitating spending large sums of money to hire people to build websites, maintain teams, and invest in advertisements. These all reflect a lack of comprehensive observation of e-commerce channels. In fact, e-commerce has evolved to today where channels have diversified, and companies need to choose targeted options based on their own characteristics.
### Classification of E-commerce Channels
The author summarizes e-commerce channels into three categories: direct e-commerce sales, e-commerce distribution, and e-commerce group buying.
#### Direct E-commerce Sales Channel
Representatives of direct e-commerce sales channels include Taobao Mall, QQ Mall, and Rakuten, characterized by merchants independently organizing marketing, operations, and after-sales services. Among these, Taobao dominates a large portion of the direct e-commerce sales channel market, so the focus in this area is on Taobao Mall.
Another typical direct e-commerce sales channel is an independent B2C website. However, due to the high complexity and operational difficulty of independent B2C websites, they are usually difficult to manage without a strong operational team, robust supply chain, and substantial financial support.
#### E-commerce Distribution Channel
E-commerce distribution broadly includes B2C distribution and Taobao distribution. B2C distribution can be simply understood as directly supplying goods to B2C platforms. With the rapid development of e-commerce, competition among B2C websites essentially revolves around product offerings. According to our observations in B2C distribution, the sales scale is quite significant.
Taobao's distribution platform deserves special mention because Taobao holds a large share of the e-commerce market. Relying on a massive group of Taobao sellers, it possesses considerable power, though operating within the Taobao network can be somewhat complex.
#### E-commerce Group Buying Channel
Group buying, as one of the hottest new e-commerce trends in recent years, will undoubtedly occupy a certain proportion in terms of sales scale and future markets. Online group buying primarily refers to sites like Meituan and Lashou. The single-item sales volume on group-buying sites is still quite substantial, and with proper management, there is a reasonable profit margin.
These are the main current e-commerce channels. Additionally, there are emerging e-commerce channels such as bank points malls and mobile e-commerce. Since these channels currently account for a small percentage of total sales, they will not be elaborated upon here.
### Three Questions About E-commerce Channels
Before choosing your e-commerce channel, managers should first ask themselves three questions:
1. What is our purpose in choosing a channel?
When selecting an e-commerce channel, we must first understand what we aim to achieve through this channel. Is it brand promotion, sales scale, or simply making immediate profits? Only by clarifying our purpose can we select a channel more suitable for us. If you want everything, then I would say, you'll end up getting nothing.
2. What channels can we handle with our existing resources?
Different e-commerce channels have varying requirements for resources and teams.
Direct e-commerce sales channels require good products, a strong team, and sufficient capital. They offer both high risk and high return. If you believe your product has a high cost-performance ratio, your team is capable, and you're financially stable, then you can certainly give it a try.
E-commerce distribution channels are somewhat similar to traditional offline distribution systems. E-commerce distribution requires some brand support, inventory capacity, and cash flow. Almost all B2C channels have credit periods, typically 15-45 days. Given the significant sales scale of B2C channels, the demands on cash flow and inventory are relatively high. Additionally, the pressure of delivering bulk orders through third-party logistics still presents some uncertainties. Having your own delivery team would be better.
The core of e-commerce group buying channels is price competitiveness. Cooperation with group-buying sites generally involves very low or zero profit margins. E-commerce group buying plays a significant role in clearing inventory, promoting brands, and training teams. Because group buying can significantly increase sales volume in a short period, it greatly helps in team training and enhancing brand awareness.
3. What are the differences between different e-commerce channels?
The distinctions between e-commerce channels mainly manifest in three dimensions: user demographics, scale, and direction of development.
- **User Demographics Differences**
Different e-commerce channels attract different user demographics. For example, Dangdang's majority of users come from its early sales of books and audiovisual products, thus covering a large number of educational institutions and enterprises. Their purchasing power is slightly higher than other channels. In contrast, Taobao users are particularly sensitive to prices.
- **Scale Differences**
Due to differences in channel scales, the effects brought about are entirely different. For some very large-scale channels, we should strive to enter them as early as possible, such as JD.com and Taobao Mall. These channels hold important positions, and doing well in these channels is crucial for channel expansion and future development.
- **Direction of Development Differences**
The development direction of each channel directly affects our planning and return on investment in channel construction. For instance, Dangdang's self-operated business occupies a significant weight. In many categories, once the joint operation merchants' sales rise, Dangdang may reclaim the self-operated business, which indeed influences our choice and judgment of channels.
### How to Choose E-commerce Channels
Different types of merchants have different demands for e-commerce channels. For manufacturers, the significance of online channels lies in sales volume. For distributors, the significance of online channels lies in both sales volume and profit. For brand owners, the significance of online channels lies in brand promotion and the distribution system.
#### Manufacturers
Manufacturers (here referring to those with their own brands) have core competencies in product production and design capabilities. When choosing channels, they should try to reduce the management and operational difficulties of the channels. If cash flow is sufficient, adopting a channel combination mainly based on B2C distribution and supplemented by Taobao distribution is advisable.
B2C distribution channels do not have high requirements for warehouses and teams. For manufacturers familiar with traditional offline channels, operating B2C distribution channels is straightforward and easy to master quickly. Moreover, the method of bulk goods entering and exiting, along with periodic settlements, suits companies with strong production capabilities. In B2C distribution channels, two types of channels are preferred: one is the largest B2C channels, such as JD.com, Dangdang, and Joyo; the other is the best-performing vertical categories, such as clothing selected on V+, and women's apparel and department stores selected on Maiwang.
After the B2C distribution operation runs smoothly, Taobao's distribution platform can gradually be added. Relying on Taobao's vast seller base, a Taobao distribution strategy can be unfolded. However, since Taobao distribution requires enterprises to handle product photography, image processing, description writing, and shipping, some structures of the e-commerce direct sales team are required. If Taobao distribution is done well, one can gradually venture into e-commerce direct sales channels.
#### Distributors
Distributors' core advantage lies in having authorization for some brands, most of which perform well offline and have good brand endorsements and consumer bases. However, the biggest problem distributors face is the control over authorization and pricing by brand owners. Therefore, distributors' distribution strategies depend on the brand owners' distribution strategies. A channel combination consisting mainly of B2C distribution channels, Taobao flagship stores, and supplementary Taobao distribution platforms is recommended.
For well-known brand distributors, obtaining authorization from brand owners for B2C channels makes B2C distribution almost a surefire business, as the current sales volume of B2C is quite significant. The challenge here is obtaining authorization, especially exclusive authorization. Multiple suppliers sourcing from one distributor diminishes the value.
Next, strive to obtain authorization for Taobao Mall flagship stores. As Taobao Mall continues to rise, it will create numerous successful brand owners. Flagship stores are key objects of Taobao's focused support. Obtaining Taobao flagship store authorization, preferably for three years, ensures revenue comparable to top provincial or municipal dealers if operated well.
After securing a Taobao Mall flagship store, auxiliary Taobao distribution platforms can be opened. However, the sellers on Taobao distribution platforms should prioritize quality over quantity, establishing benchmarks first before expanding numbers. Otherwise, chaotic pricing will upset brand owners and plunge distributors into cutthroat price wars.
#### Brand Owners
Brand owners have the most initiative in building e-commerce distribution channels but also face the greatest risks. Since traditional brand owners cannot easily resolve conflicts between online and offline channels, operating sub-brands or new online brands is a viable compromise. This article uses sub-brand operations as an example for explanation.
Brand owners should first seize the high ground. It is suggested to adopt a combination of large B2C distribution, Taobao flagship stores, group-buying websites, and independent official websites. Other channels can be left to their original distributors. Brand owners need to control the high ground of each distribution channel, setting examples, benchmarks, and showcasing images.
For large B2C distribution, JD.com is the top recommendation. JD.com emphasizes direct cooperation with brand owners, making it easier for brand owners to establish direct cooperation with JD.com. JD.com’s leading position in B2C ensures that occupying it opens doors to other B2C distributions, akin to capturing the king first when dealing with bandits.
Taobao flagship stores serve as benchmarks for brands in the Taobao domain. If brand owners can effectively utilize this valuable resource, it is easy to form a formidable force in the Taobao ecosystem. Over the past two years, numerous brands have achieved annual sales of hundreds of millions on Taobao, and some have even started as Taobao-exclusive brands with annual sales reaching hundreds of millions.
For brand owners, group-buying websites mean more in terms of promotion than sales volume and profit. Group-buying websites are among the few channels in current e-commerce distribution that can gather significant attention and exposure. Brand owners can, by appropriately selecting products and utilizing group-buying distribution channels, quickly gain substantial exposure and recognition online within a short time.
For brand owners, their own B2C serves as a base for brand promotion and customer service, holding great significance. Only after completing this step can a brand owner's B2C brand be considered initially established.
That concludes the simple discussion on e-commerce channels. The rule of e-commerce is no rules, so we should dynamically view these issues.