Re-dismantle the global equation of e-commerce: What is more important in the logic behind the e-commerce process?

Editor’s guide: Today, our lives are inseparable from e-commerce , and many companies are evolving in the direction of e-commerce monetization However, it is not easy to do well in e-commerce operations. The author of this article breaks down the global formula for e-commerce to find out what is most important in the basic logic of an e-commerce process.

Airbus-cockpit-disassembly_Airbus-photo_P.-Pigeyre_600-x-400-150x150 Re-dismantle the global equation of e-commerce: What is more important in the logic behind the e-commerce process?

E-commerce process is the most private operation in the entire field of operation.

After all, in all Internet companies , the percentage of e-commerce companies is undoubtedly the largest. Also, the e-commerce model is constantly evolving, from traditional e-commerce to e-commerce for new media, to mass e-commerce for group buying, and nowadays the most colorful live e-commerce

opinions-logo-1-150x150 Re-dismantle the global equation of e-commerce: What is more important in the logic behind the e-commerce process?


Regardless of the type of e-commerce, its core is selling merchandise. The length and size of the store largely depend on its operational capabilities, as well as the capabilities of the product. Therefore, as an e-commerce operator, the power requirement for it is higher than that of other operating functions.

I don’t know since when practitioners in the e-commerce industry have begun to blindly pursue ingenuity and creativity, articles such as “How to Create an Exciting Style Quickly,” “Home in 7 Days,” and “Newbie Traffic Breaks Millions” or courses are popular.

In fact, these are just holes in the drilling rig, and you cannot say they are definitely pointless, but they are definitely not a long-term solution, and they carry a high risk.

As e-commerce operators, how should we learn or improve our professional capabilities? In fact, this should go back to the lower logic, only when you master the most important things, and then add the motifs above, will everything become meaningful.

There is a so-called global formula in the e-commerce industry:

Why can this formula be called a universal formula? Because regardless of any point of view, this formula has a certain indicative significance.

First of all, it has to be sales, so everyone involved in e-commerce can be very clear where their sales or earnings are coming from! What are the factors that are affected by it!

At the same time, for operators, data analysis can be used to understand where the store is not doing well in the whole process! And many more. It can be said that many e-commerce operators are now using this formula to guide their work. So this formula can also be considered as the basic logic of e-commerce operations.

But there is a problem here , I wonder if you discovered it? It may also be precisely because of this problem that more and more people involved in e-commerce are following traffic excessively. This question is the ranking! In other words, for a store, what should be the most important thing to pay attention to!

Sales = Traffic x Conversion Rate x Customer Unit Price x Repurchase Rate, this is a truncated analysis from the user’s perspective, it represents the user’s behavior path, which is what we often call the user path. After all, with reference to the analysis of the funnel model, the larger the top hatch, the bigger the final sales push should be the largest, but it shouldn’t be the case for the company or you who is opening a store.

1. Check

We need to know, regardless of the type of e-commerce model , whether it is a business or an individual business.

The most important thing is your product, and among the most popular live e-commerce companies, the primary and most important ability is the ability to choose products. Because this largely determines whether your store can ultimately succeed, and the factor that represents the product selection ability in this formula is actually the customer’s unit price.

Alongside the increasing focus on duplicate operations, operations have begun to shift from flow operations to inventory operations.

The cost of getting traffic from abroad is getting more and more expensive, and more and more companies and companies are starting to take an interest in creating private area systems. If all of these are to work for a long time and develop properly, firstly all of your products are required to be excellent. Even if you can’t make the best product, it shouldn’t at least be a problem product or a distinctly poor price / performance ratio.

You might make a mockery when you see it here, thinking that the unit price is a price. What can I talk about? Can I get a low price promotion every day? Even if the cost is sufficient, the profit will not increase!

Yes, if you analyze it from a purely equation perspective, the customer unit price is only a number. But for e-commerce operations, the customer unit price is much more than just a number. Whether it’s promoting keyword research in traffic or positioning an event in event processes, it’s actually inseparable from product skills.

After all, no matter how cool the writing or activity format is, you still have to rely on the product’s ability to attract, retain, and convert users. Why more and more people are starting to pay attention to the so-called content process because it can help us improve the product’s selling points to meet the user’s needs.

So, since this absolute formula is the logic behind e-commerce operations, why not take a step forward and see what is behind each component? !

How do you choose the products?

This is mainly for Xiaobai or full-time / part-time newcomers planning to enter the e-commerce industry. If you are already an experienced or a business owner, you can ignore it! See directly the “Conversion Rate” section below.

In terms of selection, or what should the store sell better? First of all, I hope everyone can understand the truth, big fish eat small fish, small fish eat dried shrimp. Regardless of the e-commerce platform, what is good to sell and whether you can sell are two different things.

Although there are many categories available, it is not very friendly to small sellers, such as clothes, shoes, bags, food, furniture, home appliances, etc. On the one hand, there is a problem with class qualifications, and on the other hand, there is the problem of operating costs.

Don’t be fooled by some of the leading figures who emphasize the industry chain. As a newcomer, if you have a part time job and need to build an operating team yourself, then you need to contact the industrial chain yourself, it is just a fiction.

Of course, for companies or people with sufficient funds and resources, this is another matter, after all, the industrial chain is still very important. Right before that, you need to know your position and the actual situation at this point. How should new arrivals choose products? We can use reverse thinking to ponder this problem i.e. what should not be sold.

Like clothes, shoes and bags, why? Because of this, the market competition is poor, the selection requirements are very high, and the specifications are ample. If it’s drop shipping, it’s OK. If not, the funding requirements are too high. For example, a skirt has many colors and sizes. How much do you think you should store?

So personally I recommend choosing some unpopular products. How do you find these uncommon and niche products? Or what are the dimensions of the ruling?

There are many ways to choose unpopular products, and I’ll briefly introduce one of them. For example, on Taobao platform, you can use your business team to select products.

For example, if the popularity of a particular category is several thousand, the conversion rate can be higher than 10%, and the number of products online is not particularly large, it is quite possible to do so. After all, niche products mean less competitive pressure. Although the market is not large, if it can be done well the profits remain quite objective.

Then when you find a niche product, you still need to check the qualifications required to operate this category (in many cases, the product is illegal in this category, but it is quite OK in another category, so online there is a small number of goods that do that It doesn’t necessarily mean that there are only a few people selling it. This requires specific analysis of specific circumstances.) Additionally, you also need to compare market prices on the platform through sourcing channels to see if there is a profit margin.

This is a simple selection process, and I won’t talk about it much at the moment. Interested friends can leave a message and write an article on selected products if you have the time.

2. The conversion rate

The second most important thing in the global formula, I personally think is the “conversion rate”.

There are actually quite a large number of articles in the market on how to efficiently get traffic, so I won’t say more; Second, in order to avoid wasted traffic and promotion costs, I personally believe that only after making sure that you have sufficient conversion capacity will it be more reasonable to follow the traffic.

The increase in conversion rate is actually to solve a problem: why customers want to pay. This is based on three aspects: user needs, user confidence, and the opportunity cost of obtaining the product.

1. User needs

User needs are actually the selling points of the product, which is why it is essential to get product selection first. Whether it’s the traditional ecommerce model or the hotter live stream model of e-commerce, the essence of it is to keep telling users that your product is there to solve their problem.

Whether designing the main image, designing the detail page, writing the child’s title or dividing the categories, or entering the product by the anchor, without exception, it is always repeated with an emphasis on product characteristics to touch the needs of users.

2. User confidence

The essence of why live broadcasts are so popular is that this model solves the user trust problem by relying on the correlation between the anchor and the fans.

When you go to see these broadcasters, you always turn your fans into family members or give your fan group a cute name like a celebrity, only to draw the distance between the broadcaster and the fans in this way, so that people can feel their sense of confidence.

Another example is the operation of the private domain system that has begun to spread in the last year. The reason behind the popularity of the private sector is that from a merchant’s perspective, having inventory can effectively reduce the advertising cost and increase the rate of product repurchase. But the most important thing is to solve user confusion and eliminate all kinds of distrust problems.

The last point is the service. Ecommerce places great emphasis on service, whether it’s pre-sale or after-sales. High-quality pre-sales services can effectively establish initial trust with users; After-sales services can reduce user satisfaction, thus relying on user evaluation to create the basis for word of mouth marketing

3. The opportunity cost of acquiring the products

When your product can meet users’ needs, users also trust you, but this does not mean that users pay the bill .. Why? There is a word in economics called price and quantity scale! This means that price and sales are a measure.

The more expensive the price, the lower the sales volume, and when the price is lower, the sales volume will naturally increase, so it is necessary to set a price that matches the user’s psyche.

Yep, that’s the thing about picking I mentioned earlier. Do you understand? The opportunity cost of actually acquiring a product is derived from product selection, so product selection is the first priority, then thinking of ways to solve user needs, gain user confidence, and finally increase the conversion rate.

Three, flush

The most talked about in the global formula is the traffic factor! For many e-commerce merchants, traffic is love and hate! The love is because when you have traffic it seems like you can solve all the problems, whether it’s a low conversion rate or a product that isn’t good enough, in the face of the turbulent traffic, it seems like it’s not worth a mention.

With enough traffic, you don’t have to worry about sales, and e-commerce operator KPIs can also be completed correctly. And hate because getting traffic is getting harder and harder, and the cost is getting more and more expensive. There is a saying that when opening a store on Taobao, you should pay for the order and not wait for death! The gist also is that for a new store, if there is no base sales volume, no more traffic will come, and it will mean the store.

So the market is full of articles, courses, etc. on how to get traffic at a low cost. In fact, as far as traffic is concerned, traffic is actually the hardest thing (please put the bricks away first ~~~)

Because the source of the traffic is not more than two cases, one of them is paid traffic, and the other is free traffic. Regardless of the platform you use, traffic consists of these two cases. As for paid traffic, honestly, that means buying traffic with money.

As long as you have enough funds, you don’t have to worry about traffic trouble. The only problem is knowing who can make the lot of money. Different operators can control different costs of the same exposure. So in terms of paid traffic, no traffic is a problem. It’s just a matter of technical skills.

As for free traffic, it is actually very important, especially for people who want to work part-time in e-commerce or small and medium-sized businesses that do not have enough money.

Let’s talk next about free traffic. The different platforms will have free traffic sources. Not all of that can be paid traffic. After all, although the platform can earn more marketing fees from the big merchants, it should also allow small and medium businesses and individuals to survive, otherwise it would be very lethal for the platform.

And the free traffic of any platform includes search traffic (search traffic is also divided into paid and free, here is the free part). We need to know that the importance of search engines lies in providing content to users in the first place. The main factors that affect search traffic are: impressions and click-through rates.

The relationship between them is:

1. Display size

Your product display size is determined by the keyword’s search volume and product ranking under that keyword. Any platform is similar to each other. It is mainly based on the model of search engines like Baidu and Google, which is usually called weight.

For new entrants without enough cash or part-time ecommerce, the best way to get more traffic through research is to use long tail keywords, why?

Currently, any e-commerce platform has the same competing products in almost every sector, and if you are a new store or a new product, it can be said that its weight is almost zero. In this case, you have no way to go. Those who compete with their peers for high-traffic keywords.

Long tail words are different, long tail words are more focused. When users use long words to search for products, their needs are more clear and the match accuracy is higher. So, although the overall flow of long-tailed words is not very large, it suffices for newcomers.

2. Click-through rate

When you have a certain amount of impressions, you need to take into account your clickthrough rate.

After all, there is only the display size, which is pretty meaningless for the conversion. Among them, the main image, price and sales are the main factors that influence clickthrough rate. Here, price is related to your choice, sales volume is related to price, product, etc. It is not easy to operate.

So the best way is to use the main image to increase your click-through rate. This is the most important part of traditional e-commerce. For some new ecommerce models, such as live e-commerce, the factors that can affect click-through rate (CTR) are not only the main image of your product, but people, goods and markets will all have an impact.

This is why models like live e-commerce place so much emphasis on the 3D theory of “people, goods, and industries”. Because it is indispensable! I will not talk more about this issue of length.

In this ecommerce formula, traffic is actually the simplest thing. Because as long as you have enough money, you can naturally burn traffic. Therefore, traffic is the most expensive, as it accounts for the largest proportion of total output, so many companies are eager to find a way to solve the increasingly costly traffic problem.

But in fact, the best solution is not external problems, but internal problems. This is the goal transfer, to solve the selection and the conversion rate. These two difficulties are actually the most difficult, because it is difficult to solve them with money (problems that can be solved with money in this world are not actually rare problems).

Therefore, the most important thing in this formula for e-commerce operations should be the customer unit price, and the meaning behind this is product selection, followed by the conversion rate. Finally, when your choice is fine and your conversion rate is fine, go after that. More movement would make sense

Finally, I am talking about the issue of repurchase rate. In terms of increasing your repurchase rate, there are really two parts. First, you did a good job choosing your product and conversion rate, and then you will keep improving your repurchase.

The best solution at the moment is: the private domain system, it doesn’t mean that your buyback rate goes up and that you are starting to build your own domain system, but you must first create your own domain system, and find a way to buyback through processes. The rate goes up. This is a matter of order, but it is a logical issue.

There is not much talk about how to build the private area system and how to increase the repurchase rate through private area operations. Just provide an idea and perspective. After all, this is an article about deconstructing the global formula for e-commerce to reorganize the fundamental factors of e-commerce operations, not a process.

If you want to know how to build and operate a community, you can take a look at the “Building a Community and Practical Guide to Operations” article I published earlier. Of course, there is still a certain difference between private domains and communities, and in terms of the private domain system, I would like to thank you if I have time in the future.

So in a nutshell: The global formula for e-commerce operators should look something like this:

The first priority of the ecommerce process is choosing your product, then increasing your conversion rate. Next, you start creating your own domain system, connecting the three, and letting marketing enter a virtuous circle. The last thing is to keep expanding the traffic, attracting more users to your pool, so as to make the store bigger and stronger.

After talking about this, there may be questions, and after talking a lot, it just seems useless?

Traffic is said to be not the most important thing, but it doesn’t specifically talk about how to solve the problem of product selection and conversion rate. Yes, this is not a practical strategy article, and the reason I am writing this is because more and more people are paying more attention to traffic and ignoring internal problems.

For new e-commerce operators or junior partners who want to work in e-commerce part-time, I think it would be helpful to understand this clearly. Although there is no more practical content, it at least won’t make people mistake it once they show up. And for the many small and medium-sized businesses that do not have enough money, instead of pursuing more and more expensive traffic, it makes sense to spend more time improving themselves.

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