In recent years, public opinion has “criticized” more than double 11. Among them, the one that resonates the most is the discussion about the reduction of commodity discounts, and even compared with the price of some live broadcast rooms, there is not much advantage. a lot.
This has also aroused our interest. Why is the platform growing stronger and the bargaining power weakened? In theory, the Double Eleven platform fully grasps the pricing power, why does the reality contradict the theory?
Online and offline competition for pricing power
As we all know, Double 11 began with “detailed goods”. At that time, Alibaba considered that merchants generally had the need to exchange inventory for cash flow at the end of the year, and there was a general lack of foreign outlet-style destocking shopping malls in my country. Double 11 naturally Just get the support of the merchants, and the 5-7% discount is essentially the price of foreign Outlets.
The reason why this model works well in the short term is that it is very important to run fast because the platform has the final say on the price. At that time, the online market was in the ascendant, and merchants and e-commerce companies were either end-product processing platforms, or different from offline styles. Sales, online pricing power is extremely strong, and will not be affected by other factors.
The so-called other factors are mainly offline. We also know that with the enlargement of online transaction scale, online has begun to pursue an upward position, that is, “sale of the same item at the same price online and offline”, which is almost the same as the online retail channel in those years . The important work of the company calls on merchants to regard online as an important launch channel for new products.
On the one hand, it can indeed expand the richness of online commodities, and on the other hand, it can also improve the user experience, and stimulate the secondary growth of online under the stimulation of dual factors.
However, everything has its pros and cons. When the online and offline sales of the same item are realized, it means that the prices of the two must be strongly correlated. Here we may use the supply relationship curve to explain.
In a market economy, commodity prices are jointly determined by the supply and demand curve, and the equilibrium point is the market price P0, which is no objection. Assuming the participation of wireless online channels, offline retail channels generally follow this principle, and now online appears as an “intruder” whose sharp edge is price.
Because online transactions have no geographical and time constraints, and the price advantage can easily be amplified to form a scale effect (price comparison and evaluation websites act as a magnification multiplier). We assume that the offline price is based on the online high discount, and it will drop from P0 to P1 in the short term, which means that there will be a mismatch in the supply curve in the short term, that is to say, when the price drops, the market can only meet the demand of AB segment, BC segment demand will not be met.
To put it simply , when the price deviation suddenly moves down from the supply line, the demand of consumers cannot be fully satisfied (online as a substitute for offline is beneficial), and the supply will also be compressed , and industry participants will face a clearing risk, and in the short term, operational inefficiency.
The trend chart of floor efficiency of national chain department stores produced by Essence Securities can also illustrate this problem, see the figure below
Before 2016, the floor efficiency of department stores had been declining, and the operating quality of offline enterprises was indeed deteriorating.
During a period of change, although we can say in general terms that “no one can stop the trend”, we can see from the details that in the process of change, the consideration of different groups based on their own interests will make the trend change. be blurry.
Since the online discounts are too violent, the offline ones are unexpected, and many problems have arisen in practice (although the low floor efficiency cannot be completely blamed on the online discounts), which will hinder this trend through various means.
After the online break-in, the total demand for offline has decreased. In order to regain the pricing power, the offline supply must be reduced, and the policy of “same item online and offline” should be treated negatively. the scarcity of the commodity and reduce the total supply.
In the past, when we talked about this, we often thought that this was the survival method of offline channels, but now it is closely related to the competition for pricing power in the commodity world.
It’s just that the moat-style approach will hurt the online competitive advantage. Therefore, online re-education should be carried out to offline, which is mainly divided into two steps:
The first step is to start investing and transforming offline online, and use online traffic to feed back offline. Typical examples are Ali investing in Suning, Shangchao, using Taoxianda to divert traffic to Shangchao, and displaying products on hand-tao in nearby stores. Address, which is essentially to appease offline, and online cooperation can expand offline demand and make the other party relax its ability to control prices;
In the second step, the online hope can use the offline as a member of the retail network. In the past few years, the O2O model that the market was optimistic about has placed hope on this. The online sales will continue, and the offline will serve as a nearby service. A game of chess service users.
The above visions are logically impeccable, but the effect is unsatisfactory. The main reason is to ignore that online traffic is not infinitely supplied . As the demographic dividend gradually disappears, the traffic supply also falls into a bottleneck. “If there is not enough flow to provide nourishment, it is like water without a source.
In addition, the online competition landscape has also changed. The sudden emergence of Pinduoduo has made Ali and JD.com have to stop to deal with new problems. Ali has Taote, and JD.com has Jingxi (recently abandoned), using traffic in new lines. On the channel, there is no room to feed back offline.
Around 2017, there was a brief recovery in offline performance, which was not only a shift in business strategy, but also related to online-to-offline assistance at this time. Come to an end, back to the price game state.
So far, we have roughly sorted out the reasons why the price of Double Eleven in recent years is not fragrant:
First, there will be a game of pricing power between the two major channels in the process of online and offline sales of the same item from the sale of finished goods to the sale of new products;
Second, due to the large fixed cost offline, the margin for profit is relatively narrow. Compared with the 50% off the price of the original goods, a new price center will gradually be formed in the new price game, which is a higher price than the original goods. s price;
Third, this also creates a stereotype that online discounts are getting smaller and smaller. The 50% discount on the original stock corresponds to the discount on the new model. This is also the reason why the Double 11 platform has recently begun to downplay the image of the price butcher and turn to high-quality service. Show people, and consumers are most concerned about the price.
Why is Double Eleven the most fragrant in 2022?
In the above logic, it actually tells us two potential directions:
1. If we want to completely change the price center in the long run, we still hope that there will be more demand stimulation online for offline. When the demand is released, the supply will also be released (the online and offline categories can be the same), and the offline is relatively low. The price tolerance will also increase. We have also seen that online companies have started to write articles about local life recently. Ali, JD.com and Pinduoduo have re-emphasized instant retailing. Meituan has even started cooperative delivery with Suning. .
This online re-entry to offline is after the online competition pattern has stabilized, and the infrastructure such as distribution and logistics has been improved. It is different from the last time, which was mainly based on diversion. The difference is that when a consensus is formed in the industry, the cost of user education is reduced, and operational efficiency can be multiplied with half the effort.
2. Since the above work takes a certain amount of time, in the short term, this year’s Double Eleven is very likely to be a big discount in recent years.
There is little controversy about the former, and there may be objections to the second. After all, in the previous article, I emphasized the phenomenon of the price center moving up under the channel game. Why is the Double Eleven discount this year so big?
I have also explained this before. If we focus on the perspective of cash flow recovery of merchants, we need to reduce prices to recover cash flow for the sake of continuous operation.
In order to strengthen the analysis, we start with the analysis of the channel game.
After sorting out the turnover of 100 large-scale retail enterprises across the country, it is very intuitive to see that although there was a “ZTE move” in the industry around 2016, the year-on-year growth of retail sales improved, but after 2018, the industry began to return to negative growth.
During a period of industrial transformation, price games often hurt the enemy and lose one thousand. Excessive management of the demand management curve will cost the long -term offline demand, that is, the industry will continue to clear. The main reason for reversing the offline pricing position.
It can be seen intuitively in the above picture that in recent years, retail enterprises have suffered heavy losses due to the superimposition of unfavorable factors such as the epidemic. At the same time, although online is also experiencing a serious slowdown in growth, it is still positive growth. , the live broadcast with goods has grown at this time.
The game of channels has achieved another transformation. Offline channels have already faced a serious problem of insufficient demand, and it can be clearly seen that the fluctuation of supply is not as good as the degree of demand restraint (the stability of core cpi). Considering macro factors, this year’s offline retail sales The price center is actually facing downward pressure, which is passive price reduction.
On the other hand, whether it is a franchisee, a company-owned store, or a large supermarket, it will also face the cash flow dilemma under the problem of insufficient demand. At this time, the channel will often take the initiative to temporarily give up offline price control. Move the price center down actively.
Under the above two factors, we believe that the online pricing initiative will be obtained this year, so this year’s Double Eleven discount is more worth looking forward to. Of course, the premise is that the offline economic vitality can be effectively restored after next year, and the offline will be retaken. to serve.
To conclude this article:
First, the discussion that the double 11 discount is not strong is often a false proposition. The logic of the last product and the new model is different. It is much more difficult to reduce the price of the new model by 20% than the 50% reduction of the last product;
Second, offline and online games, online will not kill the price;
Third, this year’s Double Eleven will be the year with the best deals, theoretically.