W09 - Further Understanding Merchant Business

This week I carefully reread Lao Wang’s presentation from last year, “STP and the 4P Theory.” The 4P framework has long been a cornerstone of traditional business thinking, especially in retail and fast-moving consumer goods. With the internet upending industries and radically changing structures like pricing and costs, many have concluded that the 4P framework is obsolete. Lao Wang’s talk serves as a corrective: as long as the essence of business remains unchanged, the 4P framework’s validity endures—its level of abstraction is sufficiently high.

This gave me a new perspective for rethinking the merchant business ecosystem. This year we made significant strategic shifts, placing the platform’s service role front and center. Viewing things from the platform’s perspective clarifies the relationships among the business teams, the merchant service platform, and partners (financial and non-financial). The merchant service platform provides products and services to the business teams, while the business teams supply traffic to the merchant platform. The merchant platform provides channels to partners, and partners deliver solutions to the merchant platform—for example, how business loans are implemented in scenarios like monthly business payments or D0 withdrawals. You can see the merchant platform has both a product role as a service provider and a channel role as a gateway. When building products we must consider our own 4Ps; when building channels we must consider others’ 4Ps. For instance, as a channel for a business loan provider, the merchant platform must assess how much our traffic overlaps with the lender’s target customer base, since that base is determined by the lender’s funding costs and risk control capabilities.

Next week I plan to follow this line of thought and draft an architectural diagram of the business.