Summary of the Key Points
Zhong Zhaozhao, the founder of Nongfu Mountain Spring, criticized e-commerce platforms for the fourth time on CCTV's "Dialogue" program, this time with even more intense language. He labeled e-commerce platforms as "special intermediaries" that control pricing and traffic through algorithms, thereby harming offline retailers. He blamed the competition based on low prices for destroying productivity and stifling emotional consumption. He also highlighted agricultural issues, stating that these platforms only address the "selling" aspect of the business process but not the actual "planting" (for example, the volatile prices experienced by flower farmers in Guangxi). However, the public mainly focused on his criticism of e-commerce, leading to two opposing viewpoints: some praised him for speaking out honestly, while others accused him of representing old interests (since Nongfu Mountain Spring generates 90% of its revenue from offline distributors).
Analysis of Zhong Zhaozhao's Three Main Points
Zhong Zhaozhao's main grievances are as follows:
- E-commerce as a "new type of intermediary" that is even more detrimental: Traditional distributors have fixed fees (e.g., 10% based on contracts), but e-commerce platforms use algorithms to secretly adjust the commission rates. The distribution of traffic is entirely at the discretion of the platforms, leaving merchants unsure of their actual profits. He argued that these intermediaries have wiped out offline retailers.
- Low-price competition destroys the industry: He used Coca-Cola and Pepsi as examples, pointing out that established companies focus on quality rather than low prices. The current trend of constantly lowering prices discourages investment in research and brand development, leading to a decline in overall industry productivity.
- Online shopping stifles emotional consumption: Offline shopping allows for spontaneous purchases driven by surprise and impulse, whereas online shopping involves searching, comparing prices, and reading reviews, all influenced by algorithms. He fears that this leads to a lack of creativity and discernment among young consumers.
Validity of Zhong Zhaozhao's Criticisms
Some of his criticisms are well-founded:
- The power of e-commerce platforms is too opaque: Traditional intermediaries can be replaced, but e-commerce platforms are almost monopolistic. Merchants have no control over these platforms; for example, they may see their commission rates increase suddenly or face restrictions on traffic distribution. Some small merchants complain that platform fees have risen from 5% to 15%, and they must also pay extra to gain visibility.
- The race to the lowest price is without limits: Products sold at very low prices (e.g., free shipping for items priced at 9.9 yuan) leave merchants with minimal profit margins, preventing them from investing in product improvement.
- Online shopping lacks personal touch: The social interactions and opportunities for discovery that occur in offline stores are absent online. For instance, while you might pick up a book with a attractive cover in a bookstore, online recommendations are often based on sales volume rather than personal interest.
Misconceptions in Zhong Zhaozhao's Criticisms
His views are not entirely accurate:
- Intermediaries are not inherently bad: Nongfu Mountain Spring itself relies on a network of distributors to sell its products. Without intermediaries, transportation and storage costs would likely be higher. The real issue with platforms is their unregulated power.
- **E-commerce and physical stores are not in a competitive "zero-sum game": Both have coexisted and evolved over the past 20 years (many offline stores have opened online channels, and e-commerce platforms have set up physical outlets). Overemphasizing their rivalry overlooks broader issues such as platform monopolies.
- Zhong Zhaozhao's stance may bias his suggestions: Since Nongfu Mountain Spring only generates 5% of its revenue from e-commerce, his criticism might be motivated by a desire to protect its offline business. His proposals for restricting platform power are vague and lack specific solutions.
The Underlying Concern: Agriculture
Zhong Zhaozhao spent much of the program discussing agriculture, but this aspect was largely overlooked:
- Platforms only address the selling side: They help farmers sell their products but do not provide guidance on planting methods or price stability. For example, flower farmers in Guangxi face erratic prices. Platforms can help with sales but do not offer necessary support for long-term agricultural development.
- Agriculture needs stability and predictability: Farmers need long-term contracts, guaranteed purchase prices, and technical support, rather than short-term spikes in demand. Nongfu Mountain Spring's approach to supporting agriculture involves industrialization, such as processing products and signing long-term agreements with farmers.
The Real Value of the Debate
The controversy surrounding Zhong Zhaozhao’s remarks highlights an important issue: how to regulate the power of e-commerce platforms. The real question is not whether they should exist but how they should be governed. Current regulations aim to make their operations more transparent, preventing unfair practices that harm merchants.
In conclusion, whether Zhong Zhaozhao is speaking the truth or merely representing his own interests, the debate about how to regulate e-commerce and support agriculture is a valuable discussion. After all, solving practical problems is more important than arguing about right and wrong.