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Text｜"Chinese Entrepreneurs" reporter Yan Junwen

Editor: Yao Yun

Source of header image｜Visual China

Dewu, which is outside the core battlefield of e-commerce, can no longer hold on.

On August 7, the trendy e-commerce platform Dewu released an internal letter announcing the launch of organizational efficiency improvement and the reduction of about 5% of the staff. According to Dewu's current staff size of about 10,000, the scale of this layoff is about 500 people. As for the reason for this layoff, the internal letter mentioned:The company must more resolutely focus resources on core businesses and projects with higher input-output ratios, stop or significantly reduce investment in projects with low input-output ratios, and adjust the organization to a more efficient and lean state to achieve long-term development.

Prior to the layoffs, Dewu held the "Zhejiang Investment Promotion Conference" in April this year. At the conference, Dewu announced a full-category investment promotion plan, from trendy shoes to beauty, outdoor and even wine and beverage categories.At the meeting, Dewu announced that in 2023, many of Dewu's data achieved triple-digit year-on-year growth, and the growth rate continued to lead the industry.According to "China Entrepreneur", Dewu is currently profitable.

So why layoffs at this time? An investor in Shanghai told China Entrepreneur that in the current cycle, whether it is through layoffs, shrinking business lines, or moving closer to large companies, their ultimate goal is to survive and survive with quality.

Vertical e-commerce is entering a period of transformation. From MissFresh to Miaya, from Secoo to Yangmatou, some of them have closed down or gone bankrupt, and some are still struggling to survive. Liu Nan, founder and CEO of Miaya, said that the golden age of vertical e-commerce has passed, and Miaya APP has completed its historical mission. As the founder, she needs to lead the company's transformation.

"What defeats vertical e-commerce is not comprehensive e-commerce, but the algorithmic capabilities that comprehensive e-commerce possesses," Liu Nan said in an open letter.

In 2015, Hupu co-founder Yang Bing founded Dewu. This post-85s entrepreneur initially named it "Du APP" and changed its name to "Douwu" in 2020. According to statistics, more than 90% of users on the Dewu platform are born after 1990, and the penetration rate among users born after 1995 is as high as 70%. Dewu's business model is "identification before delivery". Although the company has spent a lot of manpower on identification and warehousing, it still cannot completely eliminate counterfeits.

Public data shows that Dewu received three rounds of financing from 2018 to 2019. In the angel round, the investors were Hupu Sports and Dynamic Capital; in February 2019, it received a $50 million Pre-A round of financing from Proust Capital, Gaorong Ventures, and Sequoia China; in April 2019, its A round of financing was invested by DST.

In recent years, Dewu has not disclosed any financing information, or it does not need additional financing. Dewu has become a low-key money-making machine. A merchant in a certain category told China Entrepreneur that it costs 38 yuan to sell a product on Dewu, and an additional 15% transaction fee, but thanks to Dewu's user tone, merchants can still get a considerable gross profit return.

After a round of competition on each of the key points of "more, faster, better, and cheaper", the major e-commerce platforms are once again adjusting and re-examining the "ultimate value for money".Behind the constant adjustments is the dilemma of growth. When these big guys also begin to turn their attention here, facing the existing or upcoming squeeze, Dewu really needs to run faster.

It's time to hurry up

Dewu’s headquarters is located in Yangpu District, Shanghai, where leading Internet companies such as Bilibili, Douyin and Meituan are gathered. Compared with these big companies, Dewu seems to lack the “wolfishness”.

This company, which occupies the minds of young people, does not pay much attention to "anniversary celebrations". In 2023, the company celebrated its 8th anniversary, but no large-scale celebration ceremony was held. Instead, slogans such as "Smart people work together", "Save when necessary, spend when necessary", and "Open your mind and accept positive and negative feedback" were hung inside the company.

Dewu also emphasizes "self-drive" or "innovation" internally. For example, the OKR of a certain department will be written on the signboards on each floor, such as "Don't take shortcuts, concentrate on practicing swords" and "Break boundaries, Seek Truth, be on Call" and so on.

The platform users are young, mainly college students, and the employees of Dewu are also young. Walking in the office area of ​​Dewu, you can find that some young employees have big tattoos on their arms and dyed their hair in colorful colors.

In the past two years, the e-commerce industry has made frequent moves.Pinduoduo, Alibaba, ByteDance, Kuaishou and other companies have launched several offensive and defensive battles around "low prices" and "refund only". Even Xiaohongshu has tried hard to enter the live e-commerce market, and has produced super buyers such as Dong Jie and Zhang Xiaohui. On the other hand, after experiencing several "fake goods" and "shoe speculation" storms, Dewu has tried to keep a low profile and stay out of the mainstream.

Behind the low-key appearance, Dewu is quietly making money.

A Dewu merchant once estimated to China Entrepreneur that in the past few years, the total number of merchants on Dewu was around 6,000, while Douyin had more than 8,000 merchants in the third-level category. Dewu's GMV was around 200 billion yuan, and its overall return rate was 5%, which was lower than that of Douyin, Pinduoduo and other platforms. Even on the "black market", the qualifications of some popular Dewu stores can be sold at a sky-high price of 500,000 yuan.

Regarding this data, Dewu officials denied it.But this has not prevented Dewu from thriving in the past few years. Based on its own trendy positioning and tone, it does not have to be as cautious in commercialization as Xiaohongshu or Douyin.Dewu is naturally a trading community.

The trendy and good business continues to attract players to enter, and they all want to dig into the corners of Dewu. An industry insider told China Entrepreneur,Some companies offer three times the salary to poach people who have found something.

It is relatively easy for merchants to do business on Dewu. There is no complicated advertising mechanism. They mail a sample to the experts in the community for free, and then the experts write reviews or experience content to promote it in the community. A Dewu merchant told China Entrepreneur,In its category,ROIThe worst input-output ratio is 1:6.

"What we sell is not the commodity, but the emotional value, the emotional value of giving to friends or partners," said the merchant.

But the moat of a single product category is too thin.Therefore, Dewu had to open up multi-category investment and move from vertical categories to comprehensive platforms, such as beauty or 3C digital products. At this stage, it has achieved certain results. In 2023,Dewu gave the company's highest honor, the "CEO Special Award", to the digital supply competitiveness enhancement project, which achieved a 4.6-fold increase in the number of merchants.

In 2024, Dewu will shift its focus to attracting merchants for all categories. In April, it launched the "2024 Dewu City Tour" investment promotion activity in Zhejiang. At the meeting, Dewu officially announced that it will attract merchants through policies such as tens of billions of traffic support, zero threshold entry, 1v1 new merchant assistance and business tools, and differentiated marketing.

But the response from merchants was not strong.The reason is that giants such as Douyin, Kuaishou, Taobao, and Pinduoduo have already washed the merchants several times. The best merchant resources and products are bound to the giant platforms, and the giant platforms further suppress the space of vertical e-commerce.

Yang Bing, the founder of Dewu, does not have an e-commerce background. He was previously the co-founder and president of Hupu Sports. With this background, it is understandable why he has been focusing on the user side, user experience, and user reviews in the past few years. This is also the characteristic of Shanghai Internet companies, focusing more on users than production, and more on marketing than hard work, such as Pinduoduo and Bilibili, but this methodology does not work now.

Shanghai Internet giants collectively "survive the disaster"

Recently, Dewu has been emphasizing "self-driving, smart people work hard together", and hard work means to polish the supply chain, merchants, and services bit by bit, from taking shortcuts. To this end, they also released a special report on "Dewu Talent Characteristics".

Hard work also means breaking out of your comfort zone and moving into the risk-taking zone.

Shanghai Internet companies have done a thorough job in focusing on a certain circle of business. For example, the content of Bilibili has evolved from the two-dimensional content at the beginning to various knowledge-based long videos that attract the "Z generation"; Xiaohongshu has also changed from targeting mothers to gradually attracting related groups, becoming a "grass-planting" destination; Pinduoduo has also brought the "outside the fifth ring road" business overseas, bringing a new round of cost-effectiveness.

Dewu is no exception. Its penetration strategy from college student circles to workplace experts has achieved certain results.They understand their core circle, and in the past few years, they have launched actions to break out of the circle and expand the outer circle to attract users from more circles.

It is worth noting that Shanghai is home to a large number of vertical e-commerce companies like Dewu, such as the luxury e-commerce platform Secoo, the fresh food e-commerce platform Dingdong Maicai, and the cross-border e-commerce platform Ymatou. Secoo was delisted due to poor performance, and Ymatou is in a slump with an uncertain future.

In May this year, Pinduoduo's market value once surpassed Alibaba. As of press time, the market value of the two companies is basically the same. Temu, a subsidiary of Pinduoduo, is making inroads overseas. According to reports, the GMV for the whole year of 2023 will be US$18 billion, and the goal for the whole year of 2024 is US$30 billion.

In March this year, foreign media reported that Xiaohongshu's revenue in 2023 would reach US$3.7 billion, a year-on-year increase of 85%; its net profit was US$500 million, achieving profitability for the first time, and there were constant reports about its listing.

The trendy e-commerce platform Dewu has also launched investment promotion for all product categories, offering real money to attract merchants and helping merchants with more diverse categories and types to operate easily and make money quickly on Dewu.

It seems that the widely circulated joke in the past few years, "Shanghai has no Internet genes", has been completely sunk into the Pacific Ocean. But in the second half of 2024, Shanghai Internet companies "pull back" and entered a business adjustment period.

At the same time as Dewu laid off employees, many Shanghai Internet companies encountered troubles to varying degrees. For example, Temu, a subsidiary of Pinduoduo, triggered a backlash from some merchants against the "fine"; in July, Xiaohongshu announced that it would lay off 10% of its employees, but it is still vigorously promoting e-commerce and commercialization.

Unlike Internet companies in Hangzhou, Beijing and other places that are focusing on "AI stories", large Internet companies in Shanghai are still looking for the story logic of consumer Internet.

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