Busy doesn't mean profitable
Originally written in Chinese. Translated with AI, reviewed by Gary. Read the Chinese original →
Recently, friends who see me sometimes sharing about startups and sometimes turning up at events have teased me:
"Have you stopped minding your real business?"
I actually found it pretty funny.
Because from the outside, it looks like I'm at an event one moment, writing an article the next, talking about AI, then talking about brands. But after going round in a circle, what I really face every day is still the same thing:
Is e-commerce still a good business?
We started as our own apparel DTC brand, and we also run e-commerce operations for other brands. After seeing a lot, I've noticed an interesting pattern.
Many e-commerce sellers who rely on low prices, traffic and big volumes to push sales are finding life harder and harder.
Some sell thousands, tens of thousands, even hundreds of thousands of units a month. On the surface it looks impressive, and the dashboard numbers look beautiful.
But sit down and talk with them, and many say the same thing:
It's really hard.
Platform commissions keep rising, ads keep getting more expensive, costs keep going up, and customers are harder to sell to.
Selling more doesn't mean earning more
E-commerce used to feel like success as long as prices were low enough, traffic was big enough and things sold.
But not anymore.
Selling more doesn't mean earning more. Sometimes the more you sell, the faster you lose.
Worse, a lot of public data is now far too easy to see.
Which products sell, which price bands move, how many orders a month, how many parcels a day: everyone can see it.
The result is that as soon as a style takes off, a crowd immediately copies it.
You sell at RM39, he sells at RM35. You sell at RM29, he sells at RM25.
In the end everyone drops prices together, until there's no margin left.
When an industry has no margin, a lot of bad things start to happen.
Some start saving on quality. Some start saving on packaging. Some start saving on customer service. Some start saving on supply chain management.
Places that shouldn't be cut get cut anyway.
Then the vicious cycle begins.
Products get worse, customers get less satisfied, returns go up, reviews go down. But because everyone is still chasing volume, competition gets even fiercer.
It looks lively, but many people are struggling to get by.
At the same time, though, I've recently been talking with some very low-key operators and seeing a completely different world.
Some brands are actually doing very well.
They don't ship thousands of orders a day or sell hundreds of thousands of units a month. They might ship only a few dozen parcels a day, but their order values are high, their margins are high, and customers are willing to buy.
Some products can reach a gross profit margin of 60%, 70% or even more. Sell a few dozen orders a day, and sales can still reach ten or twenty thousand.
They don't need to cut prices every day. They don't need to chase hits every day. They don't need big discounts in every campaign to buy volume.
And they live more comfortably.
The two kinds who really do well
That made me realise that in e-commerce today, the people who truly do well are roughly of two kinds.
The first is people who are very good at choosing products.
What they sell isn't necessarily the hottest product in the market. Often, outsiders wouldn't even think it sells well.
But they understand demand, customers and supply chains.
These products won't explode to thousands of orders a day. Maybe a few dozen. But the margin is good, competition is thin and demand is steady. As long as operations are stable and customers are well served, you can make money quite comfortably.
Recently I heard a very accomplished e-commerce veteran say he has a bestseller he's been selling for twenty years, and it's still selling.
That really struck me.
Many people in e-commerce today love chasing today's hit, tomorrow's hit, the next day's hit.
But for one style to sell for twenty years isn't luck.
It's product selection, supply chain capability, and a long-term understanding of customers.
The second kind is brands.
Not brands that just stick a logo on something, but brands with real design, tone, content, service and customer relationships.
Recently a Chinese bag brand has been doing very well: SONGMONT, called 山下有松 in Chinese.
It isn't cheap. A bag can sell for several thousand yuan. But customers still buy.
Because what a customer buys isn't just an ordinary bag.
She's buying the design, the brand's tone, the content, the service, and a sense of identification.
What's more interesting is that when LVMH's Bernard Arnault visited China, he also went to a SONGMONT store and later bought two bags. It sparked a wave of discussion in China, and people started noticing that a group of home-grown accessible luxury brands was slowly emerging.
These brands don't have to build value like traditional luxury, through centuries of history and European pedigree. They're building brands in a new way:
The design has to be good. The content has to be right. The price doesn't need to be too low. But it can't be too far from customers either.
What they sell isn't cheapness, but the feeling of "I can afford this, and it shows I have taste".
That's the most powerful thing about a brand.
It doesn't need every style to be a hit.
It doesn't rely on one product suddenly blowing up and the whole company living off that hit. Every style has its own customers; every style can stand on its own.
E-commerce is going to split very clearly from here.
One group will keep competing on price, traffic, ad spend, livestream hours and order volume.
The other will return to product, brand, service and customer relationships.
The first looks big. The second looks slow.
But big isn't necessarily profitable, and slow isn't necessarily bad.
Very often, the truly comfortable business is one that doesn't look that lively from the outside, but has a very healthy structure inside.
Public data is for reference, not for decisions
If you only look at the market from an e-commerce seller's point of view, it's easy to be swayed by public data.
You see a style selling well, so you want to follow. You see a price band moving well, so you want in. You see others shipping thousands of orders a day, so you feel you should chase that too.
The problem is that public data is only for reference. It can't be used to make decisions.
Because what you see is the result, not the cause.
Someone sells well perhaps because they have a supply chain advantage. Perhaps because they buy stock cheaper than you. Perhaps because they have a history of reviews. Perhaps because they have an ads model. Or perhaps because they have resources behind them that you can't see.
You only see that they sell well, follow them, and very easily end up cutting prices along with a crowd.
The real skill in e-commerce is still testing products.
Not selling whatever you see others selling well.
But using your own way, your own customers and your own channels to find out which products suit you.
Testing sounds simple, but it's the most core skill in e-commerce.
Some people spend a lot of money testing. Some can find answers with very little money. Some can roughly see where the opportunity is at a glance. Some test many times and still don't find it.
That's the difference in capability.
Whether you make money isn't only about whether you work hard, but whether you can find a product that genuinely suits you to run.
Once you find it, just do it quietly.
Sell it well. Serve customers well. Get the supply chain right. Get the reviews right. Get repeat purchases right.
If you don't want to be just an e-commerce seller, you have to think from a brand's point of view.
A brand isn't built in a day.
A brand accumulates slowly from every product choice, every customer service reply, every packaging experience, every piece of content, and every feeling a customer has after receiving the goods.
A brand also doesn't mean selling expensive from the start.
It means knowing clearly why customers should buy from you.
If customers buy from you only because you're cheap, one day someone will be cheaper than you.
But if customers buy from you because they like you, trust you and identify with you, you have a chance to slowly walk out of the price war.
E-commerce has really got harder in these few years.
But I don't think the opportunities are gone.
It's just that the old crude ways of growing are getting harder.
Being cheap, chasing volume, riding platform windfalls, exploiting traffic loopholes: all of these will get thinner and thinner.
From here, the people with real opportunity may be of two kinds.
One is the small, focused e-commerce operator who deeply understands product, testing and supply chain.
The other is the brand willing to build customers, products, content and service over the long term.
One goes deep on product. One goes long on brand.
Neither direction is easy.
But at least neither relies purely on cut-throat competition.
So in the end the question comes back to the most basic place:
What exactly are you selling? Why are you worth buying? Can you keep finding good products? Can you make customers want to come back after buying once?
E-commerce has never been just a traffic business.
In the end, e-commerce is still a product business, a brand business, and a customer relationship business.
Busy doesn't mean profitable.
Selling a lot doesn't mean it's comfortable.
Sometimes the truly good business isn't the one shouting loudest outside every day. It's the one that quietly serves customers well, makes good products, protects its margin, and survives year after year.