W09 - Further Understanding Merchant Operations

This week I closely reread Old Wang’s presentation from last year on STP and the 4P theory. The 4Ps have long been a classic framework in traditional business, especially in retail and fast-moving consumer goods. With the internet disrupting industries and radically changing structures like pricing and costs, many have argued that the 4P framework is obsolete. Old Wang’s talk serves as a corrective: as long as the essence of commerce remains, the 4Ps retain their validity because their level of abstraction is sufficiently high.

This gave me a fresh perspective for reassessing merchants’ business landscapes. This year we significantly adjusted our business direction, prioritizing the platform’s service role. From the platform perspective, consider the relationship between the business unit, the merchant service platform, and partners (financial and non-financial). The merchant service platform supplies products and services to the business unit; the business unit supplies traffic to the merchant service platform. The merchant service platform provides channels to partners; partners provide solutions to the merchant service platform—for example, how business loans are implemented in scenarios like monthly business payments or same-day withdrawals. Thus the merchant service 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 product, the merchant service platform must assess how much our traffic overlaps with the borrower segment the lender actually targets, since that segment is determined by the lender’s funding costs and risk controls.

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