Traffic is getting more and more expensive, and business is becoming more and more difficult. "After the end of this year's Double Eleven promotion, many businesses have reported to reporters that the rising cost of traffic is their main challenge.
And this kind of trouble is not only during the big promotion period. With the maturity of the e-commerce industry, the early traffic dividends are gradually disappearing. In the early days, due to a relatively scarce supply of goods, brands only needed to invest funds to earn profits. But over time, as the number of brands increases and user demand weakens, consumers' attention becomes limited, and traffic costs rise accordingly.
In this context, which platform can provide more abundant natural traffic, and which platform has higher user consumption power and repurchase rate? Merchants will vote with their feet.
Since its establishment, Pinduoduo has had a different appearance. The traffic distribution mechanism on the platform breaks the basic common sense of "the one with the highest price wins", focusing on service and price. Products with good prices and services naturally stand out.
The "traffic equality" ecosystem created by Pinduoduo may be a driving force for small and medium-sized businesses and brands to maintain sustained growth. More importantly, in the past 9 years, a group of young people from small towns whose consumption power is continuously upgrading have gathered on the Pinduoduo platform. The survey data on young people in small towns previously released by 21st Century Business Herald showed that nearly 70% of county-level consumers chose to shop on Pinduoduo during the Double Eleven period, with nearly 50% spending an average of over 1000 yuan. Ultimately, the prerequisite for sustainable growth for businesses is a more benign ecosystem. Therefore, Pinduoduo is an online channel with sustained growth momentum for small and medium-sized merchants and brand merchants, which has become a consensus among most merchants.
Traffic is becoming increasingly expensive, and profits are decreasing
The continuous rise of traffic costs has become an insurmountable hurdle for businesses in their business operations. Traffic is at its peak, a buyer's market, and market expectations are not optimistic, so consumption tends to be cautious, resulting in expensive traffic, "Cui Lili, director of the E-commerce Research Institute at Shanghai University of Finance and Economics, told reporters." Expensive traffic is a common problem
In 2018, the average traffic cost in the e-commerce industry was approximately between 10% and 40%. However, in the past two years, there have been some extreme data, such as "the investment cost of white label merchants may be as high as 100%" and "promotion expenses have cumulatively increased by 147.71% within two years". The significant increase in traffic costs in the e-commerce industry has brought greater operational pressure to merchants.
At present, the rise in traffic costs and the decline in efficiency have become practical problems that businesses have to face, especially this year. According to statistics, since 2024, no less than 40 online stores have announced their closure or cessation of new listings. One of the reasons behind this is the high cost of traffic, which has resulted in meager profits or even losses for merchants.
Indeed, compared to previous years, it has been more difficult for various merchants to do so this year. Even if they spend money to buy traffic, it does not have the same effect as in previous years. "A certain e-commerce merchant told reporters that even if they spend 100 yuan now, the number of clicks can only reach a few times.
Merchants generally feel the difficulty of doing business. Even if they are willing to invest more funds to purchase traffic, they may not necessarily receive the expected return. The price increase of traffic has led to an increase in advertising and promotion expenses for businesses, but this increase has not brought corresponding benefits, and the conversion rate of stores has instead decreased.
This change directly affects the turnover and profits of merchants. The merchant mentioned to the reporter that compared to previous years, this year's revenue has significantly decreased. Although the difference in sales is not significant, the actual proportion of transactions has decreased significantly. For example, in the past, selling 10 items may have resulted in 5 to 6 successful transactions, but this year, selling 10 items may have resulted in a maximum of 3 to 4 transactions, leading to a corresponding increase in return rates.
In order to maintain the same level of traffic as in the past, merchants have to invest more funds to purchase traffic, which undoubtedly increases costs. She revealed that the overall profit of the factory has decreased by about 20% compared to last year.
The phenomenon of increased traffic also occurs in live streaming sales. Taking the financial report of MCN agency Yuanwang Technology as an example, in 2023, it will purchase through multiple platforms including Tiktok, and the annual cost of Internet advertising agency business will total 2.223 billion yuan.
This year, this trend seems to have become more apparent. In the past, the platform had a traffic bias towards top anchors, and this year's streaming costs have significantly increased. Although sales have not changed much, the increase in costs is significant. "An MCN industry insider revealed to reporters that the streaming fees of several anchors they serve have increased by 5 to 7 times.
How to invest and obtain maximum returns has become a challenge. Each e-commerce platform has its own unique positioning and market strategy, with complex traffic rules. Due to the constantly changing algorithms and promotion strategies of e-commerce platforms, merchants need to constantly adapt and adjust their marketing strategies, which undoubtedly increases the complexity and difficulty of operations.
Under multiple challenges, traffic and marketing have become invisible mountains pressing on the heads of merchants, especially during major promotions, where high traffic costs and complex marketing rules further squeeze the already limited profit margins of merchants.
Merchant demand: Equal traffic rights
Whether for small and medium-sized businesses or large brands, "high traffic" is a very serious challenge at present.
For small and medium-sized businesses, they usually have limited funds and find it difficult to conduct large-scale advertising campaigns like big brands, which limits their exposure opportunities on the platform. Secondly, small and medium-sized businesses are relatively weak in brand accumulation and user mindset, and are more susceptible to changes in traffic allocation rules. This high dependence on platform traffic has led to small and medium-sized businesses losing their operational autonomy and weakening their innovation drive.
For big brands, although they usually have strong financial strength and brand influence, and can maintain and increase exposure through continuous advertising and marketing activities, the problem of profit compression has become increasingly prominent.
For example, although the daily chemical giant Blue Moon achieved a year-on-year increase in sales in the first half of 2024, it is expected to incur a loss of about 620 million yuan, an increase of nearly 300% year-on-year. High traffic costs are one of the important reasons. Metersbonwe founder Zhou Chengjian also mentioned on this year's Singles' Day that despite investing millions of dollars in sales cooperation, the results have fallen far short of expectations and the revenue is very low.
In the eyes of merchants, not investing in traffic, when more than 95% of merchants invest a large amount of funds to divide market traffic, means losing the ticket to the big promotion; Investing heavily but with meager returns, fierce competition further squeezes the living space.
In this context, merchants are more inclined to choose platforms with higher traffic, especially those with simple and effective traffic mechanisms. Pinduoduo is a representative example.
Pinduoduo's recommendation system makes comprehensive judgments based on product quality, price, merchant services, etc. As long as the product has a "quality price ratio", it can naturally attract a certain amount of user traffic. On this basis, if merchants further increase traffic by placing advertisements, they can effectively create popular products under controllable costs.
The traffic unit price of other platforms is relatively high, and the conversion effect is not as good as Pinduoduo. The cost of influencer promotion is also higher, so we have chosen a more cost-effective promotion method instead, "said Zhai Xiaofeng, the head of Huayang E-commerce, to reporters.
Pinduoduo is particularly shifting its traffic towards new products. A merchant told reporters that on other e-commerce platforms, it may take two to three months for new products to grow from zero sales to thousands of units, and the product itself also needs to have explosive potential. On the Pinduoduo platform, the same sales growth may only take a month or even half a month. This efficient promotion speed not only greatly shortens the market adaptation period of new products, but also saves businesses a lot of time and promotion costs, encouraging them to innovate.
Recently, Pinduoduo also introduced the "Promotion Service Fee Refund Benefit" to merchants. For orders where consumers receive a full refund before shipment, the platform will automatically refund the corresponding amount of promotion software service fee to the merchant as a promotional red envelope, without the need for the merchant to file an appeal.
For us, this change has a significant impact, "Chen Caibin, the e-commerce operations manager of Shantou Chaoting Food Co., Ltd., calculated to reporters. In the past ten days, the promotion fee has been basically refunded by three to four points.
If we follow this policy, we can return about 20000 yuan in promotion fees during the peak season. And because Pinduoduo's promotion fees are charged based on transactions, not clicks, we can refund the promotion fees for undelivered orders. Now he can put the money on the cutting edge and operate the store more efficiently, "said Chen Caibin.
This is also why when the whole industry is talking about reducing the burden on merchants, there are still a large number of brand merchants choosing Pinduoduo.
During this year's Singles' Day holiday, the number of merchants in various categories on Pinduoduo continued to surge. According to data, in the context of what is known as the longest Double Eleven promotion in history, Pinduoduo has achieved continuous explosive sales and revenue for merchants in multiple categories under the "subsidy+traffic" dual subsidy.
The cumulative order volume of the second round of "Super Double Supplement" exceeded 45 million, an increase of 1.7 times compared to the first round of activities, and the cumulative sales increased by 145% compared to the first round of activities. Among them, orders in the fresh and food categories account for as much as 29%, while orders in the beauty and personal care category account for 17%. In terms of sales revenue, the sales of mobile digital products account for as much as 38%, and the sales of beauty and personal care products account for as much as 16%. For businesses, the demand is actually very clear: ultimately, what they need is a more fair and transparent market environment, as well as a more reasonable traffic distribution mechanism. Only in this way can they find new growth engines while ensuring product quality and service.
Some industry insiders also believe that the current traffic has entered the stock competition, and later the advantages of competitors are generally based on model innovation. Especially for platforms like Pinduoduo that focus on technological innovation, in the diverse e-commerce market landscape, it has become an industry trend for traffic to tilt towards a wider range of participants.
Open the county-level market and attract brand merchants to Pinduoduo
It is worth noting that although both small and medium-sized businesses and brand merchants are deeply troubled by "high traffic", the specific difficulties they present are still different: small and medium-sized businesses value profit margins being squeezed, while brand merchants also have pressure to maintain brand image, expand scale, and market share beyond profits.
In the eyes of industry insiders, small and medium-sized businesses need more flexible and innovative strategies to survive, while brand owners need to re-examine their market positioning. For brand merchants, seeking traffic and exposure can break out of the current competitive system and instead develop towards county-level markets with less attention and relatively less competition.
The county-level market provides a new perspective for brand merchants. In this market, competition is relatively less intense and consumer needs have not been fully met.
Recently, a survey conducted by 21st Century Business Herald on Double Eleven consumers showed that over half of them come from cities outside of first and second tier cities. During Double Eleven, nearly 50% of them spent over 1000 yuan on e-commerce platforms. A more eye-catching indicator may be the reason why major, medium, and small businesses as well as brand merchants choose Pinduoduo: nearly 70% of county-level consumers choose to shop on Pinduoduo during the Double Eleven period.
With the increasingly fierce competition and saturated demand in first and second tier cities, maintaining growth opportunities in county-level markets has become a consensus for more and more brands. Related retail experts have previously stated in a media interview, "When the trend of foot traffic continues to penetrate downwards, all brands must actively follow suit, first rush down, seize the track dividends, and then try and make mistakes
More importantly, Pinduoduo has firmly stabilized the basic market of small and medium-sized businesses due to its traffic equality ecosystem, and provided a better soil for brand merchants to open up county-level markets. At present, many brand merchants have discovered the increment of emerging markets.
At the end of March this year, the old domestic brand Skyworth settled in Pinduoduo. As of the end of May, Skyworth, which has been open for over two months, has achieved sales of nearly 100 million yuan on the Pinduoduo platform. Interestingly, Skyworth's first product, which started with a TV set, was not a TV set, but a washing machine with a capacity of 10 kilograms. After receiving a subsidy of billions of dollars, the transaction volume of a single link exceeded 8000 units in a short period of time.
Our next plan is to make improvements in style and volume, and develop products specifically for Pinduoduo users, "said the person in charge of Skyworth.
Skyworth is not an isolated case. Many brands have set their sights on Pinduoduo's niche market in unison. Brands such as Mars Arrow and Logitech have tried and validated more diverse product, operational, and marketing strategies as their cooperation deepens.
Logitech, a globally leading computer accessory brand, launched two high-end mice during this year's 618 promotion. One is a wireless mouse co created with Pinduoduo, and the other is an ergonomic mouse, both priced at 399 yuan. The former has seen a 40 fold increase in daily sales compared to the previous period through activities such as billion yuan subsidies, multi person groups, and million dollar hot selling groups; After being subsidized by the platform, the latter's daily sales also increased fivefold compared to the previous period. The brand leader stated, 'We have found that the brand awareness of Logitech among fourth and fifth tier users is rapidly increasing, and they also have enough enthusiasm for big brand products.'.
The new spokesperson of Green Arrow, Bai Lu, used Weibo to attract fans to the official banner of Pinduoduo Green Arrow, driving a 6-fold increase in daily sales compared to the same period last year. The Green Arrow combination products of other celebrities also sold nearly 10000 units on the day of their Weibo release. Prior to this, Mars Arrow also collaborated with Duoduo Orchard to develop an interactive game called "Rainbow Fortune Duoduo". Users who collect the corresponding rainbow candies have the opportunity to obtain pure gold rainbow candies. This mini game ultimately attracted 650000 participants and boosted sales of Rainbow Candy by over 1.4 million yuan, with more than half of it contributed by new customers.
In the view of Li Fei, the General Manager of E-commerce at Mars Arrow in China, Pinduoduo has the widest user base, covering first and second tier urban populations and penetrating into vast county-level and rural users, with sales opportunities hidden everywhere.
As an untapped blue ocean, the consumer base in the county-level market is huge, and brand awareness and loyalty are gradually increasing. Brand merchants need to effectively attract the attention of this group of consumers through precision marketing and localization strategies, thereby opening up new market space.
In the future, the county-level market will become a new battlefield for brand competition. Whoever can adapt to market changes faster and better meet consumer needs will stand out in the county-level market and achieve sustainable brand development.