After Its Break With Taobao, Mogujie Stands Tall: “I’m an E-Commerce Company Now”

From a shopping community to a Taobao guide, Mogujie has finally become an e-commerce platform. It announced its new identity with a marketing campaign costing tens of millions of yuan.

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“Tmall does in one minute what takes us a whole day, but next year we’ll try to do in a day what Tmall does in 10 minutes.” Mogujie co-founder and chief operating officer Wei Yibo said this to employees still hard at work on the afternoon of November 11.

It was a joke, but the comparison was accurate. Mogujie began this year’s Double 11 promotion in the early hours of November 10, a day ahead of Tmall. It recorded 143 million yuan in transactions that day and 194 million yuan on November 11. Tmall reached 100 million yuan in just 1 minute and 13 seconds, even though its site was congested at the start.

Still, the self-deprecation drew cheers. Mogujie had set itself a goal of exceeding 100 million yuan on just one day of its three-day promotion. More important, this was its first Double 11 as an e-commerce platform. Having shed its identity as a “Taobao shopping guide,” it wanted to put in a strong showing.

Since its founding in 2011, Mogujie has changed direction three times, almost once a year. It began as a community where shoppers could share purchases and outfit ideas; users could browse, but they could not buy. Mogujie then made the images in its waterfall feed clickable, sending users to other e-commerce sites to purchase the products, most often from Taobao sellers. As the site became better known, it also acquired the label “Taobao shopping guide.” According to a widely circulated figure, Mogujie, which then had more than 6 million female buyers, sent Taobao 80,000 transactions a day. Its conversion rate of up to 8 percent was far above the 1 percent achieved by other shopping guides. That made it one of the guides thought best able to turn traffic into revenue, and the strongest rival to Meilishuo, founded in 2009.

According to iResearch, at the height of these sites’ popularity in 2013, there were as many as 65 waterfall-feed shopping guides covering different product categories. Soon afterward, Taobao began blocking sites like Mogujie. Several purported internal speeches by Jack Ma, stressing that Taobao would no longer support shopping guides or rebate sites, even circulated on Weibo. Whether the speeches were genuine or not, a split between Taobao and the guide sites had become inevitable.

Mogujie began turning itself into an independent e-commerce platform focused on women in October 2013. The move was seen as its most consequential change yet. “Inside the company, we actually prefer to call these changes ‘upgrades’ rather than transformations,” Mogujie co-founder and CTO Yue Xuqiang told QDaily. “The people we serve haven’t changed. Each change has simply taken us one step further.”

Mogujie’s core users are women aged 18 to 25, mostly college students. They have limited spending power but a strong appetite for shopping and a keen interest in fashion. That helps explain Mogujie’s average order value of around 130 yuan and its repeat-purchase rate of more than 50 percent.

Yue said they had begun to recognize the risks of the shopping-guide model even before Taobao cut off the connection. They later found that sending users elsewhere made for a poor shopping experience. Mogujie might attach a single link to a product, but users could find 100 links online with identical pictures and descriptions. The goods behind those links might be identical—or they might not.

Mogujie began considering bringing merchants onto its own platform, and pressure from Taobao hastened the decision. Around the same time, Meilishuo and other shopping guides also began moving into specialized e-commerce. “It’s inevitable that shopping guides will become e-commerce platforms,” Zhang Wenhuai, an e-commerce analyst at iResearch, told QDaily. Guide sites have little control over the customer experience: users often follow a link only to find that the goods are poor. Running the transaction themselves reduces that risk. The commissions guides earn are modest, too, generally 1 to 5 percent. For Mogujie and Meilishuo, their established users, high conversion rates, and ties to Taobao sellers provided a good foundation for the change.

In October 2013, Mogujie formally launched Youdian, a platform for merchants. Instead of merely selecting and recommending products, it could now let customers complete purchases on its website and app.

The pages still relied on images, as users were accustomed to, but gave products greater prominence. To make the change clear, Mogujie put a shopping-cart icon in the upper-right corner of the home page on both its desktop site and mobile app. It kept the social “like” and “share” buttons, displaying them alongside prices.

Yue and his team built the new transaction platform. Before co-founding Mogujie, he had spent seven years at Taobao, where he was a key systems architect. Another co-founder, CEO Chen Qi, had helped build Taobao’s front end. As they saw it, the technology was not the hard part.

“Our biggest worry at first was that traffic would fall sharply,” Yue said. There were relatively few merchants, after all, and the product range was narrower. That did not happen. Mogujie readily cites figures showing that transactions reached 120 million yuan in the first month after the change. Mobile traffic rose 60 percent, and users bought four times as often on mobile as on desktop, easing the effect of the narrower selection on desktop traffic.

Yue sees last year’s Double 11 as a turning point. Mogujie had done little to prepare, and only about 500 or 600 merchants took part. Even so, it recorded 35 million yuan in transactions. That was not a large sum in itself, but it was nearly 10 times Mogujie’s usual daily total. “It was far beyond what we expected and gave us a lot of confidence. That was when we knew we could pursue e-commerce in earnest.”

This year, 6,000 merchants took part in Double 11. Mobile accounted for 78.03 percent of the 194 million yuan in transactions. Mogujie now has 85 million registered users in total and more than 35 million monthly active users on mobile.

Mogujie sorts its more than 6,000 merchants into five tiers, from one star to five. It considers each shop’s DSR, or dynamic seller rating, gross merchandise value, return rate, repeat-purchase rate, and other measures. According to Mogujie, one- and two-star merchants together account for 60 to 70 percent. Three-star merchants make up roughly 15 to 20 percent, four-star merchants 10 percent, and five-star merchants 5 percent.

“In the future, we’ll direct more resources and traffic toward stronger merchants,” Yue said. Managing merchants has become an important addition to his work since the shift. Mogujie has assembled an account-management team of several dozen people to help merchants solve problems and improve measures such as sales and repeat purchases. The team also screens merchants: those that continue to perform poorly can be removed.

At first, though, many merchants were skeptical of Mogujie’s invitation to join. “Guazi,” a Taobao shop owner and Mogujie user, mainly posted outfit combinations. She had chosen Mogujie over Meilishuo two years earlier precisely because its outfit posts could show several products at once. That brought her more traffic and, she felt, let her show her taste in fashion.

Around November 2013, she received an email inviting her to open a shop on Mogujie. She ignored it, then received a phone call. The 20,000-yuan security deposit seemed too high: an ordinary Taobao shop paid only 1,000 yuan. Such deposits cover penalties for rule violations or disputes with customers. After Mogujie learned that Guazi was known for her outfit posts, it cut her deposit in half. “But I still thought it was expensive, and I wasn’t comfortable with something so new,” she told QDaily. “It didn’t support Alipay. At the time, you could only link a bank card, and the payment system wasn’t mature. Customers also had to download a new chat tool to make a purchase. I doubted they’d accept the new system.”

Yue said Mogujie did have to spend a lot of time persuading merchants at first. Its deposit was higher than those charged by some Taobao shops, but merchants would not have to pay heavily to attract traffic after joining. “We don’t plan to offer many advertising products in the short term. What Mogujie merchants need to do is introduce new styles quickly. That gives them more chances to enter our selection system and be recommended on the home page,” he said. Some Taobao sellers just starting out saw that as another kind of low barrier to entry.

These new sellers are one of three kinds of merchant on Mogujie. Another group had followed the site since its shopping-guide days and valued its users and high conversion rate; they were among the first to join. The third group was already doing well on other e-commerce platforms and regarded Mogujie, without much at stake, as one more sales channel. Mogujie soon improved its chat tool, too. In its app, tapping “Contact seller” now opens a conversation directly.

How often merchants add new products is a central part of Mogujie’s rules, and a major difference between its approach and those of other e-commerce platforms. Its longstanding strength has been choosing products for users; to keep them coming back, it needs a steady supply of new things to show them. “Even after moving into e-commerce, we’ve stuck to the principle of careful selection,” Yue said. That principle is also behind the brand position Mogujie later adopted: “Buyer’s Street.”

Beginning October 11, ads bearing the slogan “Mogujie, My Buyer’s Street” appeared repeatedly on television, video sites, and in subway stations in Beijing, Shanghai, and Hangzhou.

It was Mogujie’s first large advertising campaign and its first presentation of the brand since becoming an e-commerce platform. Fan Yiming, the brand director in Mogujie’s marketing department, told QDaily that the campaign cost tens of millions of yuan—more than half of the company’s marketing budget of over 100 million yuan for the second half of the year. To reach a broad audience, it spent 80 percent of its media budget on traditional outlets.

Mogujie hoped Double 11 would quickly raise its profile. To avoid the peak of Double 11 advertising, however, it began placing ads a month beforehand rather than two weeks beforehand. “While reaching as many consumers as we can, we also want to target them precisely,” Fan said. On television, Mogujie concentrated on Hunan TV’s flagship variety shows and Golden Eagle drama slot, along with Dragon TV’s The Goddess’s New Clothes. “Dragon TV isn’t as well known nationwide as Jiangsu TV or Zhejiang TV. What drew us was The Goddess’s New Clothes: fashion, e-commerce, shopping, and buyers all come together in that show. It suits us very well.” Online, Mogujie chiefly ran ads before Korean dramas on iQIYI, a close match for its users’ tastes.

The advertising agency Tian Yu Kong won the pitch with its “Buyer’s Street” proposal. “We thought Mogujie’s biggest difference from other e-commerce platforms was its ability to select products for people. That’s essentially what a buyer does,” co-founder Yang Yexin told QDaily. All four of the agency’s founders had worked at major international advertising agencies. Founded the previous November, Tian Yu Kong counted Siemens, Philips, and Tencent among its clients. Yang said they had worried that the idea of a fashion buyer was still unfamiliar in China. But it was a prestigious role in fashion and suited Mogujie’s new direction. The position they ultimately proposed was “the leading street for fashion buyers,” with “My Buyer’s Street” as the slogan.

The two sides had arrived at much the same idea. “We started discussing a buyer strategy long ago, but we didn’t have anything definite then,” Yue said. In the second half of 2013, Mogujie began connecting its strength in product selection with the idea of the buyer. It was also considering how to draw its existing fashion and outfit enthusiasts more deeply into the business. “We also concluded that buyers offered a clear way to add value to our products and give the brand a more upscale image.”

Fan joined Mogujie in May 2014. His first priority was to introduce the buyer strategy to more consumers. Before the ads went out, Mogujie ran a small test of how well people understood the term. Half knew what a buyer was, 20 percent had some idea, and the rest did not know. “How much they understand isn’t important. What matters is whether they see buyers as people with distinctive fashion taste,” Fan said. The results suggested that they did.

At the end of September, a Chinese woman appeared at shows across Paris Fashion Week holding a recruitment sign that read, “Seeking the world’s most discerning buyer.” It listed 100 requirements in Chinese and English, written like advertising copy: “Would you go through fire and water for fashion?” and “Dare you take on 100 impossible demands?” “The point was to start a conversation and get people to notice and share it,” Yang said. “It also showed how exacting Mogujie is in choosing buyers.” The stunt did prompt discussion on Sina Weibo. Fashion figures including @RekkoZuoJiani, @JiliangXiansheng, and @toniCiHeshang posted photos on social media.

Next came five carefully planned viral videos. Each featured a young woman going to an extreme in her own way: rushing into a fire to rescue a pair of shoes, bargaining at the top of her lungs, fishing for lingerie from a rooftop, hiding in a trash bin all night to get a pair of shoes, or taking a snake along with the handbag she wanted. All five shared one identity: “buyer.” Together, the videos have drawn about 120 million views. The ads placed just before Double 11 were the campaign’s third wave.

One of the five viral videos

Having settled on buyers as its brand identity, Mogujie also began recruiting merchants with that identity in mind. “We know exactly what we want in a merchant,” Fan said. “First, a shop owner needs a good eye and a style of their own. We also hope they have followers, or the potential to build a following.” He said this was crucial and would, to some extent, determine Mogujie’s capacity to grow.

Mogujie also hopes to attract more working women aged 25 to 28. “They have more to spend but less time—and, of course, higher standards,” Fan said. “They give us more room to grow in the future.”

To that end, Mogujie is looking for stronger buyer shops and buyers. Last month, INXX and CherryKoko opened shops on the platform. Their average order values of 400 to 500 yuan raised Mogujie’s platform-wide average, previously 130 yuan. Mogujie has also hired Su Hong, a fashion-magazine publisher and buyer who appeared on The Goddess’s New Clothes, as a “buyer mentor.” Since adopting the Buyer’s Street position, it has recruited more buyers and now has a team of over 100.

As Mogujie distanced itself from Taobao, it ended its Alipay connection in late 2013 and turned to WeChat Pay, which came to handle a substantial share of its orders. Reports said Mogujie had invested in a third-party payment company in Hangzhou and would work with Ping An Bank in Shanghai on a payment system. On August 28, Mogujie launched its own quick-payment system. On October 29, it announced that more than 1 million users had linked bank cards to that system in two months. Yet on the weekend before Double 11, Mogujie restored Alipay. Its payment options now include its own quick-payment system, UnionPay, WeChat Pay, and Alipay.

Nor has Mogujie abandoned the community from which it grew. In August, it developed Top, a fashion-focused social app that operates separately from Mogujie. Its design resembles Instagram and Nice, another popular Chinese fashion app. Among its users are internet personalities who became popular on platforms such as Douban, including @XiaoLiuXiaoLiZhaoDaxi and @ShiyuanShiyuan.

“This is how it works: well-known Mogujie buyers and people in fashion create content on Top. Active Top users can then be brought over to open shops on Mogujie,” Fan said. It is an experiment in what comes after Mogujie’s original community model. The company wants Top to help it build an ecosystem around buyers, while Mogujie handles the products they sell.

In June 2014, Mogujie raised another US$200 million in a round jointly led by HOPU Investments, Trustbridge Partners, and others, bringing its valuation to as much as US$1 billion. Chen told the media that it had raised the money because investors favored its move to an independent e-commerce platform. After the round, Mogujie pledged 500 million yuan to support merchants and said it would attract more users through coupons and other offers.

“We can’t know what would have happened if Taobao hadn’t blocked us,” Yue said. “But Mogujie was going to become an e-commerce platform sooner or later.”