Original link: https://www.latepost.com/news/dj_detail?id=1205
China’s technology companies are always obsessed with looking forward, they will worry about the second growth curve when the first curve is not yet mature; the historical “window period” to capture the future is fleeting; the old business is rusted, rather than wasting Time to polish, it’s better to open a new one.
Mature business supports new business, and when mature business enters recession, new business drives growth—a trajectory that almost any company can only dream of. In an age of unlimited resources, this may be possible.
But the reality today is, how can there be so many imaginative new businesses?
When the speed slows down, some companies start to look back and look down. It is not necessarily the new business that maintains the vitality of the body, it may also be the old business 20 years ago radiating new vitality.
In the case of Alibaba, what it faced: revenue grew in the single digits in the first quarter, the slowest growth rate in the past five years.
Ali is the largest market player in China’s retail business, and its performance is to some extent the overall performance of the entire Chinese business.
In the past quarter, Pinduoduo had 880 million annual active buyers, an increase of only 1.5% month-on-month; JD.com’s revenue increased by 18% year-on-year, but the growth rate has created the lowest value since its listing 8 years ago.
The growth of consumer Internet is facing a bottleneck.
In Ali’s financial report, “China Wholesale Business” has a 30% revenue growth rate – this is the highest growth rate of all Ali’s businesses. “China Wholesale Business” refers to the 1688 business, which began in 1999 and is one of Ali’s earliest businesses. It is rare for a business that is more than 20 years old to maintain the growth rate of a startup.
“1688” went from a ticker symbol to an era symbol, and it’s been preserved. But over the years, its image has become blurred.
In terms of growth rate and GMV (gross merchandise volume), it cannot keep up with Taobao and Tmall; in terms of business innovation, it is not as concerned as Hema. It is even less able to tell an imaginative story like Cainiao and Alipay.
But it is such a business. Quietly, GMV has nearly quadrupled since 2017, and Taote, a fast-growing business, has been incubated from it.
Ali once proposed “crawler-type development”, and most people only see new business taking on old business. But the nature of the crawler is cyclical, and different businesses have different missions and life cycles. The purpose is to support the heavy body to adapt to different environments. One business is supported, and the other business begins to recuperate. After several years of adjustment, it may become a “crawler” again.
In the past, whoever mastered the traffic mastered the market. When market demand is more dispersed and diversified, from “flow” to “reservation”, whoever can control the supply, especially the high-quality supply, will have the dominant power in all fields such as people, goods, markets, and business. In the past, commercial companies only needed to be a thin layer in the industry to achieve great success, but this also means that it is not irreplaceable.
As Alibaba’s chassis, 1688 was “stuck” in a key position when the consumer Internet and industrial Internet converged. The change in 1688 is an observation window for Alibaba’s accelerated migration to the era of industrial digitalization.
Only the deeper the root is, the more stable it will be, the less anxiety will be, and the movement will not be deformed.
Make the “mother” stronger
Relying on inertia, 1688 passed its first 14 years.
In 1999, Alibaba was established relying on B2B business, first serving Chinese suppliers for export, and opening a domestic station in the second year. This is the predecessor of 1688-then called Alibaba China Trading Market. In 2007, the B2B company was listed in Hong Kong under the code name “1688”. Later, this number became the name of Ali’s domestic wholesale business.
In 2012, “1688” was delisted. This year, Taobao’s annual GMV was close to one trillion, and Tmall’s Double 11 entered its fourth year, with sales more than 300 times that of the first year. What 1688 is doing is information matching and collecting membership fees from suppliers.
A factory owner who bought a membership in the early years said that they did not even publish their factory information on the platform, but only used it as a search tool. When there was no order, they called new salesmen to practice their skills.
In 2013, 1688 ushered in an important change. Just the year before, Ali established seven business groups, called “Seven Swords”, which have since been split into 25 business divisions, which are trying to accelerate their entry into the mobile Internet.
Yu Hong, the head of 1688 operations, recalled that the most important direction of change at that time was to upgrade 1688 from an information matching platform to a trading platform. In terms of business, the membership IDs of 1688 buyers and Taobao sellers have been connected, and the latter can wholesale goods to Taobao for sale with one click.
1688 solved the supply problem for Taobao. At that time, 2 of the 3 women’s clothes came from 1688; 1688 itself also achieved a surge in users and transaction volume. Opening up with Taobao also made 1688 and its supply move from a weak connection to a strong connection. In other words, for the first time, its sellers have a huge, deterministic business.
“One-piece drop shipping” was a very important business model innovation at the time. Taobao shop owners no longer wholesale stock in advance, but place an order with 1688 merchants after they have an order, and let the other party deliver the goods. People who open Taobao stores can focus on traffic and marketing.
Yu Hong is in charge of this business. He said that there were a lot of internal doubts at the beginning. Some people thought that “one-piece drop shipping” was B doing C (Taobao) business. It’s not easy to convince the merchants. Wholesale is sold in a whole group, such as clothing, usually from S to XL in one set; but one piece is sold separately, some sizes are easy to sell, and some cannot be sold, and the seller has to bear the waste the cost of.
However, the business was launched in October 2016, and the transaction volume increased from zero to more than 100 billion in more than a year, proving the feasibility.
“Drop shipping” has lowered the threshold for Taobao sellers, making 1688 the largest source of goods for small and medium-sized sellers when many new e-commerce channels are emerging.
After 2013, 1688 began to penetrate deep into the supply side: bringing the industry online. The management at that time judged that the industrial belt system would be the future of 1688. Through the multi-party cooperation with the government and service providers, more than 100 industrial belts have entered 1688.
After that, 1688 began a series of attempts. First of all, they wanted to organize the products of the industrial belt in a self-operated way to supply Tmall supermarkets and Taobao platforms. The project was called “Source Cow”, but ended up with “no credit”.
At that time, internal reflection was that this was a supply chain for the sake of a supply chain, and they didn’t think too much about the certainty of the demand side. Yu Hong said that at that time, they vaguely thought that a warehouse was a supply chain. But does the warehouse solve the problem of supply side or consumption side? Not sure. Only later did I understand that the warehouse is to solve the consumer experience. If the warehouse is only to lock the inventory, the value is very thin, and the so-called heavyweight does not mean that a lot of warehouses need to be built at once. “We are not doing logistics fulfillment, logistics network, that’s what Cainiao does.”
Yuanniu was later merged into Retail Link. Retail Link is positioned to transform the scattered offline “mother-and-wife stores”. In 2021, the 1 million small stores (outlets) of Lexingtong will be transformed into the group point of Taocaicai, the Ali community e-commerce platform. Together with Ali Digital Agriculture, it will help Taocaicai to enhance the competition of outlets and supply in the community e-commerce competition. force.
1688 has explored many types of self-operated products. At that time, Ali regarded the large market of 1688 as the matrix of supply, and always wanted to test new businesses on it and grow a second growth curve. Some businesses are doing well, so they are separated out and developed independently. There are continuous business incubations and divestitures, but the whole process, 1688 has not changed – on it, time seems to stand still.
The conclusion of the internal review is that the goal is right, but the direction is wrong. The direction should be to transform the matrix first to make the matrix stronger.
1688 Turning point, GMV quadruples in five years
2012 was a key node in the development of 1688 – from information matching to trading platform, and 2017 was another key node. Prior to this, 1688 had not grown significantly for two years.
In this year, the sales and service department of 1688 and the website operation department of 1688 were merged into the CBU Division (China Domestic Trade Division). At the same time, it cut off the import business and cloud market that were not highly relevant, and concentrated on the main domestic market for factory goods. The management at the time judged, “Fight in fertile soil, not in poor soil.”
This strategy to make the big market prosper again is called the “KA Plan”, which selects more than 10,000 leading merchants from the entire 1688 merchants to help them make better money in 1688; 1688 also combines operations and products to form A large operation team, and at the same time change the way of thinking, from operating merchants to operating commodities.
Operating goods is Taobao’s idea, but 1688, as a source of goods, can’t just do B2B, but from the perspective of demand, otherwise who will this thing be distributed to?
The promotion of the Tao Department was also introduced in 1688. Merchant’s Day was established in March, September and December, of which March was the spring and summer new season, September was the autumn and winter models, and December was the clearance season. 1688 also set up a marketing team for the first time – a B-side Alimama.
Before that, 1688’s services, or the way to make money, were almost only “members”. A salesperson recalled that in the past, merchants wanted to spend more money to invest, but there was nowhere to spend it. So 1688 reorganized the digital marketing team and launched a number of performance advertising products and brand advertising products. At present, 1688’s value-added services have accounted for more than half of the entire 1688 revenue.
In the first year after the above adjustments, GMV nearly doubled. By 2021, the average growth rate of 1688 in the past five years will be more than 30%.
In 2018, Tencent opened WeChat’s wallet entry to Pinduoduo, and Pinduoduo was listed on Nasdaq in the same year. Soon, Taobao and 1688 negotiated a “big store” plan.
Taobao wants to cover users in the sinking market, but in the original Taobao system, there are too few products that meet the needs of the above users. And 1688 naturally has these goods. The two parties decided to jointly build a large directly-operated store – “Tiantian Special Factory Store”, to move the goods on 1688 to Taobao more efficiently. At the end of 2019, Tiantiandi and 1688’s supply center were merged into the C2M division, which was later renamed the Taote division.
1688 further communicated with Tao Te. The supply that has been accumulated for many years on 1688, especially in the non-standard clothing and apparel category, is a huge supplement to Taote, and the clothing category is exactly the weak point of Taote.
In April 2020, the 1688 Ground Force dispatched a team of more than a dozen people to serve the factories on Taote. At the same time, 1688’s merchants were encouraged to try the “integrated wholesale and retail” business and become Taote’s seed sellers.
That summer, the Taote team moved out of the Xixi Park and into the Xixitang Entrepreneurship Base. The Taote business department was also independent from the Taobao business group and was completely included in the “B” department of Alibaba.
It is the advantage of 1688 to do a good job in the cost-effective supply of goods. The strategy behind the above series of actions is: the source of the factory and the goods are connected to the world. Make the source factory goods truly operational and identifiable, and then open up with Alibaba’s related retail platforms, so as to serve more consumers and stimulate the business of the source merchants.
New Year’s direction and road
At present, the expectation of the whole society on the Internet has changed from only promoting consumption to promoting industry. As traffic becomes more expensive and scattered, Ali has also strengthened its efforts on the supply side to better meet consumer demand.
1688, which has been deeply cultivating on the supply side, has been given new expectations. It is already a large and prosperous market: transactions continue to grow, supply is relatively abundant, infrastructure and industry operations are solid.
Since January this year, with the new president taking office, the first major change perceived by the business unit is that KPIs are replaced by the OKR system. The president’s “O” also discussed round seven or eight. First retreat, back to the fundamental question, “I just thought that I was a bull, but this bull is essentially a bull of the times and a bull of China. Looking back, what did we bring to our customers?”
On the last day of last year, Ali’s domestic e-commerce GMV-driven model was officially suspended. The whole Taobao began to shift from transaction to consumption. 1688, as the “strong lower body” of Taobao and the most mainstream core supply support of Ali’s domestic e-commerce sector, the rules must also be changed. In the past, the platform rules more encouraged merchants to rush to GMV and do promotions. Now they emphasize that merchants should focus on products and services, so that The customer business is simpler, and one sentence runs through the inside and outside. It is no longer a set of culture for internal business, and a set of culture for customers.
1688 has a clearer direction – back to user experience and quality supply. The former is the original intention of customer first, and the latter is the core competitiveness of 1688. These two keywords point to more certain customer value, including improving the buyer’s purchasing experience, the conversion rate of new merchants, and the repurchase rate of old customers.
1688 The first is to increase the number of technicians, especially algorithm engineers. What the synchronization does is to simplify the operation and background of the merchants, and the marketing activities are also reduced. All the businesses of the merchants must return to the product and service capabilities, and the rest do not need to be dealt with. Wang Qiang, head of the 1688 Business Development Center, said that his focus this year is to recruit and cultivate more “high-quality supplies” to help businesses grow rapidly.
The scope of the “O” shifted from digital goals to “customer value.” But for 1688, who is the first customer? Who is more important, seller or buyer? Some answers say sellers, because 1688’s advantage is supply; others say buyers, because 1688’s identification, insight, and operation of buyers are still weak.
In the end they came to an agreement – back to the buyer. If a merchant is very capable and the platform maximizes its needs, there will be no grass under the tree. Live e-commerce is a profound lesson.
Tang Lihua, head of the 1688 User Operation and Development Center, said that they put buyers from entering 1688 to the final transaction. The process is divided into five stages: “find, pick, inquire, pay, and fulfill”. The core focus of “find and pick” is efficiency. “Inquiry, payment, fulfillment” needs to provide service experience and guarantee for the whole link of procurement – the next focus is to continuously improve the user experience on this core link. At the same time, it will also subdivide the main needs of buyers in business operations: new product measurement, small purchases, large wholesale, and customization, so as to undertake corresponding undertakings and operations.
After “O” is determined, the organization adjusts accordingly. The original organizational structure was designed to address past challenges, not present new challenges.
Some people are specifically responsible for users, some people stop supplying, and commercialization is also unified by one person. The logic of the previous division of functions such as technology and products has been adjusted to form a team according to common goals. It turned out to be infantry, artillery, cavalry, and spearmen. It was arranged according to functions, and now it is reorganized into offensive troops, defensive troops and forage troops according to value and combat tasks.
At the end of 2021, Ali will establish a domestic digital business sector. 1688 is organized on the same level as Da Taobao, Taote, and Taocaicai, and it will undertake Ali’s largest and best supply in the domestic e-commerce sector.
A pallet of goods from 1688 can be supplied to Taobao Tmall, Taote, Taocaicai, etc., to help three Tao sellers to deliver goods. Each channel has different needs for pallets and prices. 1688 will give each big one. Businesses match corresponding operations and ground forces.
In addition to supplying Santao, 1688 is also supplying e-commerce sellers on platforms such as Pinduoduo, Douyin, Kuaishou, Xiaohongshu, and Station B, especially factory goods. In the industry, 1688 is known as “the source pallet of Chinese e-commerce”, forming the mentality of “go to 1688 when you find a factory”.
1688 currently covers 172 primary industrial belts, accounting for about 70% of the country’s primary industrial belts. More than 50 million small and medium-sized enterprises rely on 1688’s supply of goods to carry out their daily operations. A report by the Ministry of Commerce believes that 1688 is already the main channel for digital transformation and upgrading of factories.
The total turnover of Taobao, Pinduoduo, and Douyin has added up to more than 11 trillion; and according to the data of the State Administration for Market Regulation, there are currently 107 million individual industrial and commercial households in the country, and there are 5,000 wholesale markets nationwide with an annual transaction volume of more than 100 million yuan. .
This means a huge market space. Guangzhou Thirteen Lines, the first city of women’s clothing wholesale in China, is an example. Today, on 1688, more than 1,000 thirteen-line stalls are active, covering 50% of offline head stalls, and the high-quality supply represented by these head stalls is being sent to Taobao Tmall in a more direct form in front of the seller.
In May of this year, a small number of Taobao merchants were able to see an offline stall area still in the “grey test” on the workbench “Qianniu”.
The biggest opportunity for 1688 in the future is the digitization of every link of the supply chain such as logistics, finance, payment, warehousing, and distribution—to become a bridge between the industrial Internet and the consumer Internet.
1688 used to be more support and assistance to the Da Tao Department, but now its mission is to really strengthen the parent body and realize the long-term value as a big platform.
It can’t be done quickly, it can only be defeated by the sun
The sales force trained in 1688 is called the “Integrity Tongtie Army”. They are strong in execution and fulfill their mission. In the past, the company set a goal of 100% for them, and they were very concerned about whether they could achieve 99% or 101% in the end. But now, the management of 1688 believes that if one can only complete 99%, it is also required to complete 101%. The two points added in the middle may damage the customer experience.
The management reflects that not all businesses are suitable for the iron army culture.
One of the core competencies of the 1688 today comes from “ground forces”. At that time, the Industrial Development Center was established in 1688, and more than 1,000 people were distributed in more than 30 cities, including Ningbo, Wenzhou, Jinhua and other industrial belts with dense factories. Today’s ground forces are both sales and service.
The biggest difference from the original “Tiejun” is that the salesmen of the “Tiejun” only sign orders and only catch businesses, but the “ground troops” need to go deep into the factory so that they can have a stronger control over the supply. They need to compete with Pinduoduo and JD.com for supplies.
The signing rate is no longer the only assessment criterion, and the in-depth operation of high-quality factories on 1688 is more important. Chen Sheng, head of the 1688 Origin Development Center, said that many large enterprises have entered the digitalization of manufacturing. But small enterprises are different. For them, the digitization of the production chain is neither urgent nor expensive. They are more concerned with how to sell more goods and survive.
In 1688, the growth of the factory was divided into four stages. Like children going to school, there were elementary school, junior high school, high school, and university. A 1688 employee will enter the factory to investigate and build a team including art, operations and sales. Their services range from small to large, from shooting short videos for factories to help them improve their service capabilities, such as responding to customer inquiries in a timely manner, 72-hour delivery, etc., to helping factories build their own brands. Accompanying the factory from profit to development.
“We must let it live first, so that it can face the possibility of the digital transformation of tomorrow’s industries. Not the other way around.” said Chen Sheng, head of the development center.
Tian Ziliang is a factory manager who produces mobile phone accessories. He said that traditional factories are too eager to do business online, but they don’t know how to do it. Recruiting an operation feels like the world, but the result is often a pitfall. They hope to have their own operations team that can understand online traffic and have information to support offline product development iterations.
Since its establishment in 1999, the value of 1688 to buyers has undergone the evolution of looking for companies, sources of goods, online wholesale and factories. Today, with the fragmentation of domestic sales channels and the rise of new brands, 1688 has ushered in the opportunity to find supply chain services, and thus activated a series of changes and innovations in recent years, especially in the past six months.
Supply chain services focus on optimization, platform endorsement, commodity power, service capability, contract performance capability, production capacity guarantee, and cargo arrangement guarantee, etc. This means that 1688, a platform that has grown up in China’s manufacturing, must also be established in industrial belts and factories. deeper and deeper. In the past, Ali did not even look down on JD.com, but the logic is here. To be on the supply side is to be heavy and stupid.
The logic of doing B-side business and C-side business is different, and it cannot be reached quickly. A death of the sun arch is the norm. As Wang Qiang, head of the 1688 Business Development Center, said, there will be no earth-shaking changes in this business. What they have to do is to do better every day than yesterday at the current level.
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