Full custody has swept cross-border e-commerce for less than a year, and the semi-custody model has become a new top stream.
Entering 2024, "semi-custodial" has become a hot word in the field of cross-border e-commerce.
On January 4th, AliExpress took the lead in announcing that it would fully launch the semi-hosting model, before that, the platform has been in trial operation for some merchants for 4 months and a half hosting model, and now it is announced that it is open to all merchants, proving that AliExpress is satisfied with the results of the four-month trial.
In fact, it was not only AliExpress that decided to open semi-custodianship, in mid-January, Ali International Station also launched the first semi-custodian in the B2B field.
According to multiple sources, Temu, a cross-border e-commerce platform under Pinduoduo, will launch a "semi-managed" service on March 15, first on the US site, and then on the European site at the end of the month.
At a time when the battlefield of cross-border e-commerce is becoming more and more intense, why do several players choose to open this mode? What are the differences between the different "semi-custodial"? Let's stand at the current point in time, look back on the past operation model of cross-border e-commerce, and talk about the changes in this sunrise industry in the window period of going overseas.
In the pre-"hosting" era, the cross-border e-commerce model spiraled upward
The development of things is spiraling, and it is particularly appropriate to use this sentence to describe the development history of cross-border e-commerce.
From the end of the 20th century to the beginning of the 21st century, with the development of Internet technology and the advancement of globalization, China's cross-border e-commerce began to take off. Initially, these e-commerce platforms mainly provided information service models for online display and offline transactions. At this stage, the representative platforms include China Chemical Network, Made in China Network, etc. One of the landmark events is that Alibaba, founded in 1999, provides global customers with product information of Chinese enterprises through its Chinese business services, and positions itself in B2B bulk, opening the development of China's cross-border e-commerce.
Source: Paigu.com.
Subsequently, DHgate was established in 2004 as China's first B2B cross-border e-commerce trading platform, focusing on helping small and medium-sized enterprises enter the global market through cross-border e-commerce. The emergence of DHgate marks that China's cross-border e-commerce has entered a new stage of development, which not only provides a broader international market for Chinese businessmen, but also promotes the internationalization of Chinese brands.
The initial operation model of cross-border e-commerce is the information service platform model.
In this mode, the e-commerce platform, as an intermediary for information display and exchange, can provide an interface for displaying goods, and merchants can publish product information on it, including **, specifications, **, etc. Buyers can search for the products they need on the platform, and the platform will match the right merchants according to the needs of buyers. Essentially, the main function of the platform is to provide instant messengers that allow buyers and sellers to communicate and negotiate. The logistics and distribution, after-sales service, etc. are all responsible for the first business. Among the three elements of "people, goods, and yards", almost all of the sense of presence is only in the "field".
Then, in the early years of the 21st century, with the development of Internet technology and the maturity of the e-commerce industry, consumers' requirements for shopping experience have gradually increased, which has promoted the transformation of cross-border e-commerce from only providing information services to providing full-process transaction services**The trading platform model came into being.
After entering the first-class trading platform model, the cross-border e-commerce platform began to provide more comprehensive services, including ordering, payment, logistics, etc., thus realizing the transformation from the role of information intermediary to transaction intermediary. This model not only brings consumers a more convenient and safe shopping experience, but also provides merchants with more market opportunities and operational convenience. It is undeniable that it greatly facilitates cross-border transactions, but it still cannot solve the problem of buyers' quality and seller reputation.
Source: Guolian shares.
Then, on the one hand, with the development of Internet technology, the application of electronic payment, big data and other technologies enables the platform to better manage the first chain, inventory and logistics. On the other hand, as competition in the e-commerce industry intensifies, platforms need to attract and retain users by providing differentiated services. Motivated by such internal and external factors,The self-operated model has gradually taken over as the mainstream, which can help platforms build their brand image and loyalty, giving them an edge over the competition.
In this model, from procurement, sales to logistics, after-sales, the platform is deeply involved, the advantage of this model is that the platform can better control the quality of goods and services, and improve the shopping experience of consumers. At the same time, due to the reduction of intermediate links, the platform can respond to market changes more quickly and adjust commodities and strategies in a timely manner.
However, some challenges have also surfaced: First, procurement requires a large amount of capital investment, which increases the operational risk of the platform. Secondly, due to the involvement of multiple links, the operating cost is high, and the platform needs to have strong chain management capabilities and cost control capabilities. Finally, due to the wide variety of goods, the platform needs to establish a huge warehousing system to manage inventory, which also increases the difficulty and cost of operation.
At the same time, with the acceleration of the development of the e-commerce economy, cross-border e-commerce companies with domestic backgrounds such as Temu, TikTok Shop, and SHEIN have attacked the city one after another, occupying overseas market share, and the variety of goods and merchants has increased significantly.
In the inherent mode, merchants need to be personally involved in product selection, shelves, promotion, order taking, packaging and delivery, logistics and distribution, after-sales and other transaction points, which poses a great challenge to the operational ability of merchants and virtually raises the business threshold of merchants.
For the platform, it is also facing the increasingly fierce involution of peers, and under the stimulation of competition and merchants, it is imperative to lower the operational threshold. It is in this context that the fully managed model was introduced.
The full custodial bonus is short-lived, and the semi-custodial service is about to emerge
2022 can be described as the first year of "hosting" services.
In September of that year, Temu launched in North America and announced the launch of a fully managed service to provide merchants with a full range of e-commerce operation support, kicking off the prelude to "hosting" services.
In fact,The original intention of this model is to provide merchants with one-stop services, including but not limited to product listing, marketing promotion, order processing, logistics and distribution, and after-sales service, so as to allow merchants to focus more on product design and production, and leave the complex e-commerce operation work to a professional platform team.
As soon as the fully managed model was introduced, it quickly set off a wave.
Subsequently, AliExpress, TikTok Shop, Shopee, Lazada, Shein, these major cross-border e-commerce players at home and abroad have also opened fully managed services in 2023. It seems to announce the arrival of the era of full custody.
Source: TikTok Shop fully managed investment requirements.
From the perspective of the merchant, the merchant only needs to supply the goods and deliver the goods to the platform warehouse in advance, while the platform is responsible for transportation, operation and sales, and the two parties will settle in stages according to the agreed node. In terms of competition mode, in the past, merchants mainly competed with each other as individuals, and hedging was inevitable in order to ensure share and profits. After the full custody model is rolled out, it is mainly dominated by the platform, which can make better use of the clustering advantages of individual businesses, so as to reduce logistics and marketing costs and improve efficiency. It also helps merchants expand their pricing space.
As a pioneer of the fully managed model, Temu has actually eaten quite a lot of dividends.
At that time, the biggest obstacle for temu to enter the North American market was the brand barriers created by its peers who had been operating for a long time.
For the platform, full custody is easier to control the quality of the source of goods and ensure its own profits, and this kind of direct link from the seller to the consumer has impressed many upstream ** chain factories that want to transform from to B to C. For merchants who want to do cross-border, full custody can save the cumbersome operation of the platform, and further reduce the cost of trial and error for novice merchants who are doing e-commerce retail business for the first time, which is self-evident in its attractiveness to merchants.
In essence, full custody is actually an article made around the ** chain and the sales chain.
In May 2023, its sales in the United States for the first time successfully surpassed Shein, which takes the small single fast reverse ** chain as the main golden signboard, and it is reported that in the third quarter of 2023, Temu's total merchandise sales (GMV) have exceeded 5 billion US dollars (about 365.).RMB 500 million); Temu expects it to complete $14 billion in GMV for the full year of 2023. What is remarkable is that Pinduoduo has set an ambition of $30 billion with the expectation that TEMU's GMV will double in 2024.
However, after the bonus period, market saturation comes quickly. In the initial stage, it is possible to maintain a certain excess profit while reducing costs, but as major competitors compete to learn from each other and launch a full custody model, it is becoming more and more difficult for merchants who have lost a certain degree of pricing autonomy to maintain profits.
In this case, factories, industry and trade integrated merchants, especially those who lack e-commerce operation experience, but have strong first-chain capabilities, can still be satisfied. However, for enterprises with strong product differentiation and relatively rich accumulation of their own e-commerce operation capabilities, it is obvious that there should have more room for bargaining.
In fact, Temu also understands that this model is not a long-term solution, and this method is a great challenge to the company's cash flow, loss pressure ability, and risk guarantee ability. According to research institute Sanford C Bernstein, in 2022, Temu lost 41300 million yuan-67300 million yuan, and in 2023, this figure will likely expand to 26 billion yuan, which is certainly due to the expansion of marketing spending, but the pressure brought by cost control and external competition is also obvious.
Source: Pinduoduo financial report.
Not only Temu, but the fully managed model is not universal for other platforms.
The full custody model may be more frequent in terms of connection and transaction density, but in the view of Qin Fen, head of the industry and merchant business department of Ali International Station, the current breadth of the business categories of these platforms such as temu and tiotok is still far from that of the international station. There are also a lot of customization and service content in the business of the international station, not only the pure sale of goods in the To C market, so full custody may not be suitable for the business of To B.
After all, the fully managed model emphasizes the ultimate cost performance, which is essentially to reduce marginal costs through scale effects, and provides standardized services, which are themselves opposed to personalized needs, on the other hand, TOB sales usually involve complex decision-making processes and long-term customer relationship management. Enterprise customers may prefer to establish a solid connection with a specific business representative or team rather than communicating through a fully managed platform.
Complete self-management is almost a straggler, complete trusteeship is too uniform, less individual, the solution to this pain point, it is easy to think of a compromise, so the semi-managed model is further developed.
In August 2023, less than half a year after the full custody model was launched, AliExpress began trial operation of the semi-managed model, and after 4 months of running-in and commissioning, this model began to be fully rolled out. Subsequently, temu and Ali international stations also successively exposed the news of semi-custody brewing.
The main difference between a semi-managed model and a fully managed model is the scope and depth of services, as well as the resulting division of responsibilities and cost sharing.
In the semi-managed model, the platform only needs to provide some services, such as logistics assistance, payment processing, etc., but the merchant still needs to be responsible for other operational work such as product listing, marketing and promotion.
Correspondingly, in the fully managed model, since the platform undertakes most of the operational work, the corresponding responsibilities and risks are mainly borne by the platform, including inventory risks, logistics delays, etc. In addition, taking care of part of the operation work by themselves may help the merchant reduce some costs, but it may also require more resources to maintain the operation, which of the two shares is larger remains to be verified.
Semi-custodian is coming, Ali International and Temu are flexible, and merchants need to adapt
It is worth mentioning that several platforms that have confirmed that they will launch a semi-managed model have chosen different paths. The semi-managed models of temu, Ali International Station and AliExpress have their own characteristics, which are mainly reflected in the autonomy of logistics, service content and target merchant groups.
First of all, from the perspective of logistics autonomy, Temu's semi-managed model allows sellers to ship goods and deal with logistics after-sales issues on their own, while the platform is responsible for product pricing and sales.
Source: AliExpress.
This model eliminates the two major processes of domestic first-leg and trunk logistics, compresses the logistics timeliness, and enriches the categories of the platform. In contrast, the semi-managed model of Ali International Station provides a complete service from door-to-door pickup, logistics fulfillment to after-sales guarantee, which is suitable for B2B merchants with spot capabilities. This model simplifies the complex process of foreign trade exports, and merchants only need to prepare the spot and ship it.
Secondly, from the perspective of service content, AliExpress's semi-custody model was fully launched at the beginning of this year, attracting the attention of cross-border sellers through heavy subsidies. AliExpress's semi-managed model not only provides sellers with a certain degree of flexibility and autonomy, but also aims to attract sellers with warehousing and logistics capabilities to settle in to enrich product supply.
Finally, from the perspective of the target merchant group, Temu's model may be more suitable for sellers who want to maintain a certain degree of autonomy in logistics, while Ali International Station is more suitable for B2B merchants who want to get a full range of services. AliExpress may be more attractive to sellers who want to improve their operational capabilities through the platform's subsidies and support.
Source: Interface News.
In fact, for Temu, the semi-managed model may be a more reasonable choice. Before and after the full custody model, merchants have experienced a huge change from competing with merchants to competing with platforms, and this transmutation will force all merchants to enter the full custody mode, and there is almost no alternative.
The semi-custodial model provides sellers with a certain degree of flexibility and autonomy, aiming to attract sellers with warehousing and logistics capabilities to settle in, enrich product supply and improve logistics efficiency, and for sellers, it can also play a role in expanding sales channels, expanding customer coverage, and cleaning up excess inventory at a relatively low price to improve inventory turnover.
What's more, the expectation of semi-custody for TEMU to reduce losses is obvious compared to full custody.
In terms of daily operations, merchants directly participate in the operation of goods, which reduces the platform's investment in commodity management and customer service, thereby reducing the platform's operating costs.
In terms of logistics, merchants can optimize logistics solutions, reduce logistics costs, and improve logistics efficiency according to their own geographical location and logistics resources, which also helps to reduce the return rate caused by logistics problems, thereby reducing losses.
In terms of product management, merchants can respond to market changes faster, adjust product strategies in a timely manner, reduce overstocked inventory, and reduce inventory costs.
It can be said that in the existing cross-border e-commerce trading system, the semi-custody model is a great hope to solve the problem of continuous losses of Temu.
Of course, Temu's decision to start semi-custodial is by no means a passive choice based on performance pressure, as can be seen from the fact that its choice is almost opposite to that of the other two.
Compared with AliExpress and Ali International Station, which are roughly the same "pricing power is given to merchants, and logistics is responsible for the platform" scheme, Temu has almost chosen the exact opposite scheme, which mainly depends on the completely different underlying business logic of Pinduoduo and Alibaba.
The business model of Pinduoduo and Temu has always emphasized cost-effectiveness, reducing costs through digital chain management and large-scale centralized procurement, so as to be able to provide competitive products. This model relies on the platform's control over pricing power to ensure that the low price strategy can be maintained and the most sensitive consumers can be appealed.
Platforms such as **, Tmall, and AliExpress are committed to providing more diverse goods and services, and their merchant groups are more diverse, including brands, small and medium-sized enterprises, and individual sellers. Therefore, merchants are allowed to have greater independent pricing power to reflect the cost structure, brand positioning and marketing strategy of different merchants.
On November 28, 2023, Pinduoduo released its performance report for the third quarter of 2023, with quarterly revenue of 688400 million yuan, up 94% from the same period last year, more than 10 billion yuan higher than market expectations, which led to a sharp rise in Pinduoduo's share price, and once surpassed Ali in market value to become the highest market value e-commerce company in China.
Although the name Temu did not appear in Pinduoduo's third-quarter financial report, it is almost an indisputable fact that it represents a new key growth point for Pinduoduo.
Alicia Yap, co-head and managing director of Citigroup Global Markets' Asia pan-Asia EMT division, who has been tracking Pinduoduo for a long time, analyzed before the earnings report: "In the third quarter, Temu may process transactions of $4.2 billion, accounting for about 13% of Pinduoduo's total revenue. ”
Macquarie even published a research report saying that Temu's GMV is expected to reach $36 billion in 2024, contributing 26% to Pinduoduo's revenue.
Obviously, under the general trend of going overseas as a visible to the naked eye in the next few years, it is now the time when temu will be of least importance in the next few years, and the role of temu will become more and more important in the future. And the importance of its slightly "maverick" semi-custodial model will also be demonstrated. However, at the same time, it should be pointed out that the launch of the semi-managed service does not mean that the full custody model is discontinued, but can be chosen by the merchants, which is another embodiment of Temu's "selectivity and flexibility".
Write at the end
Like fully managed services, semi-managed services are also destined to become a track for many cross-border e-commerce platforms to compete for in the future.
From the emergence of the prototype of the industry, to the formation of a mature operation model, and then to a new era of continuous self-iteration, the operation model of cross-border e-commerce has ushered in earth-shaking changes, and their roles in it are also completely different.
In the past, the factor that contributed to this change was technological upgrading, but today, the main factor that drives this change is competitive pressure. The stimuli are changing, but what remains unchanged is that every time a new paradigm emerges, it directly points to the pain point of the previous generation of paradigms, and it is the existence of the higher plane of the predecessors.
However, the experience of temu and Ali International in cross-border e-commerce has repeatedly proved that if you want to stand out, finding a differentiated path in the "big stream" is the key to victory. Whether it is to create a full custody model, or to add its own core elements according to its own tonality after its peers have opened semi-custody, it is a professional behavior that follows the underlying logic of its own business.
Although it seems that there is a semi-custodial tide now, in all fairness, judging from the past development process of cross-border e-commerce, the trend of semi-custodial is destined to be difficult to last. After all, after a sunrise industry has reached a certain stage of operation and achieved a certain operating paradigm, it will be difficult to maintain this paradigm for a long time under more market increments and technological innovation.
In the final analysis, no matter what new models and new ways of playing will come out in the future, how to not fall behind the trend at the same time, but also have individual characteristics and follow their own business concepts is a topic that each platform can think about and layout in advance.