Business Model And Valuation Method Of Social E-commerce

The purpose of this study is to study the business model analysis framework and valuation methodology of social e-commerce,and to conduct case studies to provide reference for business model analysis and valuation of other companies in the social e-commerce industry.In recent years,as a new type of e-commerce,social e-commerce has sprung up.However,due to the fact that relevant social e-commerce companies have not disclosed data publicly since 2018,there is little literature on social ecommerce.Therefore,the author believes that this study has incremental value.The author puts forward the methodology of research on business model and valuation method of social e-commerce.As for the success of business model,we focus on three points: first,whether the social attribute of social e-commerce can bring a large amount of traffic quickly at low cost;second,whether the positioning of social e-commerce is sufficiently differentiated;third,whether the basic ability of social e-commerce as an ecommerce is good enough besides the social attribute.There are two kinds of valuation methods.First,in the initial stage,we should decide whether a social e-commerce company can survive qualitatively.If the industry space is large,the market concentration is expected to increase,and the company has strong competitive advantages and high barriers,then the company has a better probability to survive in the process of elimination of the weak,and greatly improve the market share.Second,to assess the value of more mature companies,we should look at valuation quantitatively.The number of users is determined according to the attributes of social groups;sales per order is determined according to the attributes of social groups,commodity price positioning and customer age distribution;the number of orders per user is determined according to the frequency of commodity use,sales per order and the distribution of customer age;the monetization rate is determined according to the diversity of ecommerce monetization modes and the extent of supplier's allowable profit.Because the income-cost structure of platform-based e-commerce is similar,and the income-cost structure of self-operated e-commerce is also similar,both of them are slightly affected by social attributes.We can use the relative valuation method,and compare the platform-based e-commerce company with BABA,and compare the self-operated e-commerce company with JD.For those companies whose monetization rate is stable or whose GMV growth rate slows down so that investors ask for monetization,we should use P/S valuation method.Assuming that the net profit rate of the social ecommerce company is the same with that of the target company under positive circumstances,we can use PSG relative valuation method to calculate the value of the social e-commerce company in combination with the revenue growth rate of a social e-commerce company.For those companies whose GMV growth rate is high and whose monetization rate is low,we use P/GMV valuation method.The author further chooses Pinduoduo and Yunji to apply the analysis framework and valuation methodology of social e-commerce business model.Firstly,this paper elaborates the company's business model in detail,and then combines the fundamental analysis method to improve the valuation method according to the social characteristics of social ecommerce,in order to give a more accurate valuation of the company.To research Pinduoduo,the key tracking indicator is the progress of infrastructure construction as an e-commerce platform.According to the price-sensitive characteristics of Pinduoduo social group and the commodity price positioning of Pinduoduo's low price,we estimate the annual number of active users,sales per order,number of orders per active user and other parameters.Taking BABA's valuation level into consideration and using the relative valuation method,we assess that Pinduoduo should be worth 188.12 billion RMB on March 1,2019.As a result,we consider that Pinduoduo's market value was relatively higher at that time.The author draws a conclusion that Yunji has little possibility to succeed.The main reasons include: the logic of "selecting SKU to reduce cost" in the back-end supply chain cannot last with the increase of users and SKU;the industry is fiercely competitive and there is no obvious giant,so that the marketing cost of competing participants will be high for a long time;the improvement of future concentration cannot depend on individual distribution channels with very low stickiness,and companies need to cultivate supply chain and supporting infrastructure;Yunji has no obvious advantages in price positioning and incentive mechanism of individual distribution.