Yunlian Channel Thoughts No. 1: Conceptual Understanding A channel, as the name implies, is a pipeline or connection. What does it connect? One end is the manufacturer or brand owner (sometimes they are different entities, such as in OEM and ODM arrangements), and the other end is the consumer. In the connecting pipeline between these two points, there are countless stories, forms, models, and personalities, which we will gradually consider. The first issue encountered is what is being connected. Generally speaking, the entire process and all links of physical products flowing from the manufacturer to the final consumer are called channels, hence the emergence of various classifications and terms such as agents, wholesalers, secondary wholesalers, deep distribution distributors, terminal retailers, KA retailers, traditional grocery stores, special channels, closed channels, youth channels, entertainment channels, township channels, and so on, which we will analyze slowly in the future. Another understanding is the transmission of intangible brand value from the brand owner to consumers, including various media, pull activities, meetings, gifts, promotional materials, etc. All occasions and channels for such brand publicity and promotion are also called channels, or to distinguish from sales channels, they are called brand publicity channels. With the rise and popularization of e-commerce, sales channels and brand publicity channels have taken on different meanings, such as order production channels, information acquisition channels, express delivery channels, consumer feedback and evaluation channels, interactive discussion channels, points and discount channels, fan gathering channels, etc. In short, e-commerce is a complete society. In this virtual kingdom, it fulfills all the functions of the offline world, and the order system and information system are parallel, data-recordable, instantaneous, borderless, massive, and almost cost-free. These characteristics make e-commerce worthy of in-depth research and consideration, which I will think about carefully later. The channel topic is very interesting, and I will take it seriously. I also welcome everyone to provide valuable opinions. Thank you!
Yunlian Channel Thoughts No. 2: KA Channels KA channels are particularly important for every company because of the Pareto principle (80/20 rule). KA is actually the important 20%. Different companies have different definitions of KA channels, but they can generally be divided into three categories. The first is the Pareto principle classification, which defines the most important and high-volume customers as KA customers, or key accounts. The second is the classification based on traditional vs. modern customers. For traditional customers, the new business formats that have emerged in the past decade or so are called modern customers, such as hypermarkets, chain supermarkets, convenience stores, etc. The third is classification by customer management structure: customers managed by headquarters and systematically managed are called organizational customers, such as chain customers or single-unit hypermarkets. They clearly have well-defined purchasing departments, operations departments, marketing departments, price research departments, etc. The service model for these customers is completely different from that for independent small stores, so a KA key account department must be established to provide professional services. The first hallmark of such professional service is the annual cooperation agreement. In this agreement, both parties stipulate cooperation terms, including items, display, promotions, activities, new store support, deductions, fee support, etc. Obviously, this is the most important negotiation. Many companies have only one KA department at headquarters, responsible for negotiating annual agreements with international customers, national KA, and regional KA, and after signing, they hand over to local operating companies for specific coordination and execution. The second task is new product listing. Because KA management structures are relatively complex, new product listing also requires a relatively complex process, and of course, it costs a considerable amount of money to open a barcode. Many small companies cannot afford this expensive new product fee, so they cannot get listed. Of course, for high-end positioned brands, rapid listing in such systematic customers is also an efficient promotion method. After all, although it costs more, being able to list in dozens or even hundreds of important stores at once is quite satisfying. The third characteristic is themed promotional and marketing activities with complete planning. Because KA customers have many more SKUs than traditional customers, most have tens of thousands or more, so merely getting listed is not enough; frequent promotions and marketing are necessary. The marketing departments of KA customers will also urge you to work with them to boost foot traffic, and of course, they take the opportunity to charge many fees. Promotions require themes, mechanisms, materials, special prices, personnel, and decorations, so advance planning proposals, on-site renderings, locations, and areas are needed. These are the daily tasks of the KA key account department and are also the most expensive projects. The fourth characteristic is that these customers generally have payment terms and accounts receivable, and the payment terms are often quite long. Obviously, for the supplier, capital turnover and bad debt risks are significant pressures. KA is generally a love-hate relationship. Many companies simply do not do it, or do not operate it directly, letting local distributors handle it themselves; otherwise, it is truly a bottomless pit of expenses. Therefore, the strategy for KA customers needs to be extremely cautious!
Yunlian Channel Thoughts No. 3: Wholesale Markets When discussing channels, the first thing that comes to mind is "what exists is reasonable." I have seen the birth and death of many channels, and it is a very natural process without much theory or logic. Behind existence lies a lot of logic, but to understand and study this existence, you need to understand the logic behind it. Wholesale markets are one of the most traditional channels, so I will try to understand the logic behind them. First, of course, is demand. The emergence and production of channels are first driven by demand. What is the demand for wholesale markets? It is large quantity and low price. As everyone knows, business is divided into retail and wholesale. Retail emphasizes service and convenience, while wholesale emphasizes large quantity and low price. When I go to a wholesale market to get goods, I do not care about service or convenience. People have plenty of time and are willing to find the place themselves, and they can tolerate a poorer environment, but the price must be lower because they are buying in larger quantities, such as dozens or hundreds of boxes, so buyers feel it is worth it. Second is the suppliers, the merchants who reside in the wholesale market. They are generally from the same hometown, such as Anhui, Jiangxi, or Fujian. In the wholesale markets in Jiangsu, Zhejiang, and Shanghai, most merchants are from these places. They do business together, and because they are fellow townsmen, they look out for each other. But the market is full of deception and fierce competition, so they generally split into two or more factions. I remember more than ten years ago, in Shanghai's Hongmei Road market, Anhui people and Jiangxi people fought, which became industry news. Of course, due to urban renewal, the Hongmei Road market has long since moved to the suburbs. In short, these merchants operate at low cost, almost all using family members as workers. After a few years of apprenticeship, these family members become bosses themselves. That is the rule of this trade. The third element is the venue provider and regulatory authorities. Generally, such wholesale markets are either built by the government or privately owned, but even private ones must have government support, the so-called "black and white paths." Because wholesale markets generally occupy large areas, have many merchants, huge throughput, and chaotic order, especially fire safety hazards, the venue provider must handle these relationships. Of course, related taxes are relatively low; many are flat-rate or tax-evading, do not issue invoices, and trade at spot prices. That is the rule of this trade. Wholesale markets used to be very popular, and there are still many in less developed inland areas, but in coastal areas they are gradually disappearing because people's time and feelings are becoming more valuable. That is the key! Wholesale markets: a symbol of an era, a symbol of low-price channels!
Yunlian Channel Thoughts No. 4: Grocery Stores Grocery stores are the most traditional retail channel, also known as mom-and-pop stores, tobacco and alcohol stores, or CD shops. As the name implies, these stores are mainly operated by couples themselves, rarely hiring employees, with small areas, mainly selling daily necessities such as tobacco and alcohol. They belong to C and D categories in channel classification. In short, they are large in number but have relatively low output per store. That is the characteristic of this channel. Yesterday I talked about how the emergence and development of each channel mainly comes from three factors: customer demand, the operator's willingness and motivation, and the support of the venue provider and regulatory authorities. But for grocery stores, it is not that complicated. Of course, they also consider the needs of the target population, but the more critical factor is actually just one, which is the past and present of a grocery store: it just happens to have such a convenient location. Therefore, most grocery stores are accidental, not deliberate. The family happens to have such a small storefront, or a neighbor happens to have such a place, and the couple happens to be retired with nothing to do, or they came to work and happened to need a place to settle. In short, this non-deliberateness and coincidence determine that grocery store owners have a relatively calm mentality, do not have high expectations, pay more attention to emotions and customer relationships, and focus on service and avoiding losses from expired products. In other words, small store owners mainly calculate small accounts and focus on current short-term interests. If you talk to them about category management, brand positioning, or industry trends, you are talking to the wrong person. Grocery stores mainly serve two types of people: local elderly and migrant workers from other places. In fact, they all need a sense of belonging, warmth, and security. This is completely different from the mentality of store managers in chain stores like supermarkets and convenience stores. Grocery stores may be the most profitable channel because they do not require additional fees, credit sales, or much promotion, but they have strong customer relationship dependence and brand loyalty. In fact, they are a treasure channel. The key is route visit management and service in place, which is about team management and motivation. Grocery stores: a channel that most tests distribution rate and market foundation!
Yunlian Channel Thoughts No. 5: Traditional Wholesalers Today is the morning of New Year's Day 2016. First, I wish all friends a happy New Year. But my habits and promises cannot change. I continue to think about channels. Today's topic is traditional wholesalers. The concept of traditional wholesalers is actually very broad because there are many detailed types. Among them, two types must be discussed separately in the future: deep distribution wholesalers and township wholesalers. These two types are not included in today's discussion. Traditional wholesalers, classified by scale and the degree of cooperation with brands, can generally be divided into first-tier and second-tier wholesalers. Obviously, first-tier refers to those with relatively larger scale who directly take brands from manufacturers. Second-tier generally have smaller scale and get goods from first-tier wholesalers. Of course, some brands have deeper distribution, having completely eliminated first-tier, and fully cover second-tier, making them effectively first-tier. For example, Coca-Cola and Pepsi and many FMCG brands stipulate that from manufacturer to wholesaler to terminal, there must be no more than three links, so only direct operation and second-tier distribution models exist offline. The biggest characteristic of traditional wholesalers is winning with low prices, so their weakness is lack of service and visits. This is the core difference from other types of wholesalers. Therefore, traditional wholesalers generally operate many brands, but only select the most popular and mature products from each brand, and distribute them at relatively low prices. They do not accept new products, do not fully visit terminals, do not conduct route planning or product mix analysis. In a word, these people have relatively low quality and rough methods. They survive because they are products of history, with low-cost operations and some fellow-townsman and customer relationships. They will not die out for a while, especially in inland areas, where they are still the main source of sales. In most regions of the country, traditional wholesalers have begun to offer delivery services, which is also a result of competition. Originally, the most traditional wholesalers did not deliver, very similar to wholesale market wholesalers, except they were not in wholesale markets but on the roadside, closer to customers. Traditional wholesalers generally have a narrow vision and think very realistically, but they are very sensitive to market prices, low prices, and cross-regional selling. They are also very sensitive to inventory pressure policies and sell-through speed. Doing business with them is a pragmatic principle: how much money can be made, what policies can be given, and nothing else. It is useless!
Yunlian Channel Thoughts No. 6: Deep Distribution In the distribution system, there were two typical models in the past. The first is the direct sales model, called DSD in the Pepsi system, where the manufacturer directly controls the sales team and logistics system to directly serve terminals, without intermediate channel links. They directly take orders from terminals and directly deliver goods to terminals. That is, people flow, logistics, commercial flow, financial flow, and information flow are all executed by the manufacturer. Obviously, this model requires a huge system and complex management. Theoretically, execution is best, but there are many problems and hidden dangers, such as management issues, accounts receivable issues, efficiency issues, etc. If the business format is mainly KA, this model is still OK, such as in the United States, where DSD is the main model. But if the format is mainly traditional channels and township markets, the cost of this model is too high. The other model is the traditional wholesale model, which wholesales goods to local distributors and gives them all policies, without any further management. Because the manufacturer's resources and bottom cards are all given out, there are no means to control distributors. This model is called the "naked price operation" model. This model is effective in the early stages of market development, and for the manufacturer, it is the lowest cost and highest efficiency, but the final drawbacks are also significant: the market is completely controlled by local distributors, and the manufacturer's control over the market is very low. In 1999, I led the strategic consulting project for Yili Group and proposed channel sinking, splitting large distributors into regional distributors, and proposed a series of sales team building and management plans. It should be said that from that time, my team and I discovered that the traditional general distribution model needed to change. In 2000, I joined PepsiCo. Around 2002, the Pepsi system began to build the deep distribution model, which was called the WAT model at the time. Of course, we were also inspired by Suntory Beer. We wrote a complete set of operation manuals and work processes for the various problems encountered in the practical operation of the deep distribution model, making it the most important part of the Pepsi sales system. The deep distribution model is actually a graft of the DSD direct sales model and the traditional distribution model. It divides and coordinates different personnel for functions such as customer visits, order taking, terminal merchandising, collection, delivery, after-sales service, customer information, and inventory management, with clear allocation of responsibilities, rights, and benefits, and strict regulations on operating processes and tools. It should be said that the deep distribution model is a good operating model. Now there are some claims that with the advent of the e-commerce era, the deep distribution model is outdated and useless. There are also claims that by building a B2B system for terminal merchants through the Internet, an efficient and low-cost operation model can be achieved. Personally, I think these two views are theoretical deductions by scholars without practical experience. Just as we once prohibited telephone visits and insisted on route visits, sales still require face-to-face communication. These communications may seem more costly than online, but people are emotional animals, and store owners also need various needs beyond e-commerce information. Therefore, deep distribution will not become outdated; on the contrary, it needs to be further strengthened. Of course, it will also combine with mobile Internet technology, with both emotional visits and data and information accumulation and convenient retrieval. That is the direction of future sales system construction.
Yunlian Channel Thoughts No. 7: Township Wholesalers In fact, many distribution problems are physical distance problems. In cities, sales points are relatively close, so both visits and delivery are efficient. But in townships, villages, and hamlets, distances are far, and the time and cost of visits and distribution are high. This creates sales model issues. In fact, channel customers are also products of history; what exists is reasonable, and there are reasons for their existence. Townships, villages, and hamlets are composed of town centers and various villages. In a typical town center, there may be a dozen or even dozens of FMCG sales points, while in villages there may be only a few, but the distances between villages are several kilometers. Even with vehicle sales, there is an efficiency issue. So there is a model of serving the town, with township wholesalers distributing to villages and hamlets. Of course, some big brands directly visit and distribute to village sales points, but the cost is indeed too high, so township wholesalers are still very important. Township wholesalers generally combine wholesale and retail, usually having a store but also several small vehicles for distribution to villages. For them, the most important thing is sell-through speed, that is, brand power and premium capability. Products that sell well and have good gross margins will naturally be good. Township wholesalers need communication, frequent visits, and good cooperation. This requires having common topics with them, such as truly understanding these townships, villages, and hamlets, and understanding the business logic. In the end, it is empathy, and it is about being down-to-earth!
Yunlian Channel Thoughts No. 8: Department Store Models Originally, I planned to think about e-commerce channels today, but I found that to clearly explain Ma Yun, Liu Qiangdong, vertical e-commerce, official websites, WeChat business, and other e-commerce models, I first need to understand the various traditional department store models. In fact, many e-commerce models are electrified versions of offline models. The most common model in department stores is the joint operation system, where brand owners set up counters and areas, arrange their own promoters, merchandising, and promotions, while the department store uniformly handles cashiering, environment, security, unified promotions, and customer service systems. Then the department store takes a fixed percentage as a service fee. Since the amount is not low, the markup rate in department stores is relatively high, so the overall grade must be pushed up! Of course, joint operation deductions can also be based on actual sales, guaranteed minimum sales, or comprehensive fee rates. This model corresponds to Tmall. The second model of department stores is the leasing system, where counters are rented to merchants, and the department store basically does not manage anything; each merchant operates and coordinates on their own. Since counter rents are fixed, each merchant tries to increase business, mainly through low prices and attracting people. This is the low-end market model. You may feel that such old department stores are smoky and chaotic, but of course, prices are low and styles are old, mainly attracting elderly and price-sensitive customers. The grade cannot go up at all. The corresponding e-commerce is Taobao. The third model is self-operation, where the entire department store is buyer-driven, with all goods bought outright by the department store. Obviously, this model mainly pursues gross profit from wholesale-retail price differences and focuses on product uniqueness and differentiation. This type of company has high requirements for buyers and operations, and the risk is relatively high. The corresponding e-commerce is typically JD.com. There is also a consignment model in department stores, where the mall operates itself, but for these goods, because there is no certainty, the department store does not buy them outright, and the risk of slow sales is borne by the brand owner. This is mainly for some small brands and imported goods as a market testing approach. In fact, regardless of the model, it is essentially a mechanism for allocating responsibilities, rights, and benefits. Risk and return correspond. It depends on how you choose.
Yunlian Channel Thoughts No. 9: Taobao Today I start thinking about e-commerce, because the e-commerce world is completely different from the offline world. Sorting out the context of this world is also very instructive for offline. When talking about e-commerce, I will talk in chronological order, so I must start with Taobao, because it is the earliest and the largest. Currently, its transaction volume is estimated to be around 800 billion yuan. I have not checked any data, so I am only speaking qualitatively about my feelings. Please do not argue with me about numbers. I mainly share my personal views based on my observations and feelings over the years. Taobao was founded in May 2003. I remember I was at PepsiCo at the time. My initial feeling about Taobao was that it was for exchanging second-hand goods. For example, you could auction off items you no longer wanted. So it was purely for fun. Many people paid attention and tried it, but actual transactions were not many. At that time, the main e-commerce platform was EachNet. After eBay and EachNet merged, it was huge, but Taobao overtook it in just two years. How? Looking back, Ma Yun mainly did two great things: free and Alipay. Free was the most attractive for small sellers. Since it was free and fun, why not play? So a large number of merchants moved from EachNet to Taobao. This was Ma Yun's foresight and boldness: provide service and attract popularity, and make money in the future. Later, Zhou Hongyi of 360 also took this path. Free is actually the biggest marketing killer, but its premise is that costs are mainly fixed costs, and it is truly a platform. This way, user multiplication brings a sharp reduction in amortized costs, and the related benefits become very attractive. This is how Taobao gradually developed various money-making treasures, such as advertising platforms and big data platforms. Alipay, launched by Taobao in October 2013, should be considered Ma Yun's biggest core competitiveness. Even now, Alipay should be considered the most valuable product because it establishes trust between buyers and sellers who do not know each other, allowing them to boldly start transactions. In fact, the biggest obstacle to building trust is taking the first step. Once you have from 0 to 1, it is easy. Alipay solved this first-step ice-breaking action. Taobao's third key action was the real-name system. I remember Taobao was the first to start real-name authentication. At first, people felt unaccustomed, but later it was very helpful for cracking down on counterfeit goods and enhancing brand and trust. In fact, in the future, all industries will introduce real-name systems. I feel that Taobao played a role in promoting the real-name system. Taobao's fourth key action was anti-corruption. In 2012, Ma Yun began anti-corruption efforts, cleaning up various "xiaoer" (Taobao staff) who accepted bribes from sellers and challenged Taobao rules. Indeed, Taobao had become a huge and invisible economic kingdom, with many dark secrets at the time. Ma Yun said that if heavy measures were not taken, this kingdom might collapse at any time. In this action, Wei Zhe was ousted, the representative of the golden collar class at the time, disappearing into the wind and rain. Taobao's fifth key action was the Double 11 Singles' Day. Naturally, this year's 91.2 billion has become a social topic, and we are all familiar with it. There are too many topics about Taobao. When I talk about Tmall tomorrow, I can continue. Let's stop here for today.
Yunlian Channel Thoughts No. 10: Tmall Yesterday we talked about how Ma Yun founded Taobao in May 2003, starting the C2C business model, mainly relying on free to defeat eBay and EachNet, and relying on Alipay to break the bottleneck of mutual distrust, enabling rapid development. However, a market is a market, and a vegetable market is a vegetable market. Some companies and VIPs also want to open stores, but they do not want to mix with small vendors. What to do? In 2008, Taobao Mall came into being, starting the B2C business model. In fact, the transaction volume of the mall is much smaller than Taobao, but the brand image, influence, and credibility are incomparable to before. So Taobao Mall became the business model that Alibaba paid more attention to. Of course, this is also closer to Ma Yun's Alibaba B2B model and his vision of "making it easy to do business anywhere," so this is the predecessor of Tmall and a major transformation for Alibaba! In January 2012, the name and logo of Tmall were officially announced. I remember I was particularly interested that year and published many Weibo articles commenting. In fact, at that time, Pepsi and Alibaba had relatively close cooperation. I also personally participated in meetings with Xiaoyaozi Zhang Yong, learning that Ma Yun and the Alibaba team love Jin Yong (Louis Cha) and that everyone must have a code name, basically from Jin Yong's martial arts novels. Some say Tmall looks a bit like Ma Yun, some say cats are picky and emotional by nature, some say cats have taste and love beauty. In short, I think the name and logo of Tmall are very distinctive and differentiated, fitting the characteristics of Taobao Mall. Tmall's key battle was the counterfeit war, because JD.com focused on speed and genuine products, mainly attacking Tmall's counterfeits. The escalation of this event was in December 2014, when a director general of the State Administration for Industry and Commerce publicly attacked Tmall, pointing directly at Tmall's counterfeits, making people in China and even globally suspect that Ma Yun was in big trouble. At this time, Ma Yun's approach was truly surprising: he publicly counterattacked the director general of SAIC. Perhaps this was the first time a private enterprise had taken such an attitude, and it was an important step in China's democratic process. Later, SAIC formally summoned Ma Yun, and this storm ended with Tmall's victory. I feel it was a victory for the Internet and democracy, and I saw the power of the masses. Tmall's biggest highlight is naturally Double 11, which is "Go to Tmall, just shop." This year, the Double 11 gala directed by Feng Xiaogang and co-produced with Hunan Satellite TV integrated advertising and entertainment, creating a new river. This year's 91.2 billion far exceeded people's expectations. Of course, there will be fake orders and returns, but these are not the mainstream. Another major trend of Tmall is international e-commerce, with a large number of imported goods directly entering Tmall. Even the state has specially established a cross-border e-commerce free trade zone in Hangzhou. This should have great imagination space in the future, because China will transform from the world's factory to the world's buyer, and the opening-up trend will accelerate in the future!
Yunlian Channel Thoughts No. 11: Alibaba Advertising After discussing Taobao and Tmall, everyone will have a feeling that Taobao and Tmall are basically free. Although Tmall has some deposits and deductions, they are not particularly high, and compared to offline costs, they seem much lower. This is why many people understand that online impacts offline, thinking that online costs are very low or even zero. Is that really the case? No, in fact, the biggest cost comes from traffic acquisition. When opening an offline store, there is natural traffic. The store is there, and people passing by will naturally go in. Those in need will naturally go in. Those seeking convenience will naturally go in. Once inside, they have an experience, and with experience comes purchase, brand impression, and word-of-mouth. So the logic of offline stores is the convenience of physical location and the experiential nature of the purchase process. But online stores, due to free and low barriers, have a particularly large number of stores, and there is not even an accurate count, because Taobao stores open and close every day. It is estimated that there are millions. What does millions mean? When we shop offline in malls or small stores, such as outlet malls, a hundred stores already confuse people. With hundreds of stores, if there is no traffic, it is like zombies, like waiting behind the screen to die. So you must pay Ma Yun money to buy traffic and do advertising. This is actually Alibaba's purpose, the so-called "wool comes from the dog." Alibaba's advertising platform is Alimama, which actually integrates the original Taobao Alliance resources, building a C2C platform for advertising. If you have a blog or website, you are an advertising slot. If you want to promote your online store and buy traffic, you are an advertiser. Alimama integrates you. There are four main methods: first, pay-per-click advertising, typically Zhitongche; second, pay-per-action, the so-called CPA, such as commission based on order volume or sales; third, pay-per-time, like traditional billboards, the most typical being Zuanshang; fourth, Taobao Ke (Taobao affiliates), who specialize in various promotions for online stores and receive commissions based on sales. Of course, Taobao Ke once had fierce struggles with Alimama, but this group of people specializing in Taobao does exist. I have participated in several meetings of these webmasters and felt their passionate enthusiasm. Of course, behind advertising is big data, such as Damopan, Yushanfang, keyword optimization, search ranking, product display, and detail copywriting. We will discuss these later!
Yunlian Channel Thoughts No. 12: Big Data In the thinking about e-commerce channels, a very important concept is data, because in offline operations, there is almost no data, or very little. But online operations are digital operations; all your behaviors are recorded and become data. These numbers can be used for analysis and application, making marketing more scientific. So now Ma Yun's biggest viewpoint is the transition from the IT era to the DT era. IT is a hardware technology advancement, but DT is a comprehensive and systematic thinking model combining software and hardware. What types of e-commerce information are there? There are about six categories: 1. Basic information, such as gender, age, family, education, income, etc., that you registered. Due to the current real-name system, information is interconnected, and much of your information is cross-verified, so your personal information is actually transparent in the network backend, just whether anyone is really interested in checking you, because many bank information is also exchanged there; 2. Browsing information, such as your online browsing habits, including records of browsing products on e-commerce platforms, your Baidu records, and your casual browsing of news and WeChat/Weibo. Ads can be pushed to you based on your browsing records; 3. E-commerce consumption records, no need to elaborate; 4. Geographic location data, because now it is all mobile, and your phone records your itinerary. Many pushes are related to your location; 5. O2O data, which is information brought by online-offline integrated platforms; 6. Store information, obviously there is quite a lot of information here, no need to elaborate. In fact, there is also a lot of information exchanged, such as weather forecast information, urban planning information, GPS and Amap information, Dianping information, group buying information, travel information, etc. The year before last, I served as the chief judge of Alimama's big data competition. I saw the powerful functions of Alibaba's Damopan DMP and Yushanfang, visited Ma Yun's Taiji Zen Court, and had in-depth communication with several Alibaba VPs. I truly realized that Alibaba's big data platform may become more valuable than the current trading platform in the future, with great imagination space. In e-commerce, there are also two most realistic data points. The first is store ratings, that is, positive and negative reviews. Now there are even many deliberate positive reviews and malicious negative reviews. These ratings include hearts, stars, crowns, and DSR calculations, which is the number of positive reviews divided by total reviews. Obviously, store ratings are the most critical data. The second is the number of transactions, so artificial order brushing has appeared. This has become a common practice, and internal order brushing seems to be happening everywhere. There is really no way around it. E-commerce is digital marketing. Big data is no longer a theory; it is right beside us!
Yunlian Channel Thoughts No. 13: JD.com The previous few issues were all about Alibaba, which is actually the representative of platform e-commerce. Today I talk about JD.com, which is the representative of self-operated e-commerce. These two completely opposite e-commerce models are completely related to the personalities of their founders. Ma Yun was an English teacher. He created China Yellow Pages to use the new tool of the Internet to connect the world, starting with B2B and realizing the vision of making it easy to do business anywhere, so he wanted to build a big platform. But Liu Qiangdong, after graduating from Renmin University, went to Zhongguancun to deal in computers, and later founded JD.com, mainly focusing on 3C products. He has always been self-operated, just shifting from physical stores to online stores. His philosophy is to make life simple and happy. So Ma Yun and Liu Qiangdong, one is idealistic and the other pragmatic, one platform and one self-operated, one innovative and one traditional, although both are e-commerce giants. Liu Qiangdong started small, steady and sure. Each venture capital investment was much more than he expected, meaning that capital urged him to go further and further, gradually making JD.com the representative of self-operated e-commerce, especially in mobile phones, computers, and other electronic products, where he is much stronger than Alibaba. He once mainly fought with Suning, but now Suning has merged with Alibaba, which has some impact on JD.com. JD.com has four key actions. The first is to spare no effort in building its own logistics system, from regional warehouses to its own express delivery system. Speed has become its core competitiveness. Next-day delivery or even same-day delivery, extreme speed and limited-time delivery, reflect basic skills. This requires particularly large investment, but JD.com promised and really did it, which is indeed impressive. This is also the reason why JD.com has not been profitable for so many years. The second action was around 2010, when JD.com announced selling books, which triggered a huge price war and war of words with Dangdang. Li Guoqing was very angry, but this war transformed JD.com from a 3C-only company into a comprehensive e-commerce platform, and its scale naturally achieved a major breakthrough. The third action was the US listing in 2014 and the strategic cooperation with Tencent in 2015, making JD.com a truly international company and occupying the WeChat entrance, forming a confrontation with Alibaba's strategic alliance with Sina. As WeChat fully outperformed Weibo, JD.com's move should be correct. JD.com's fourth action is laying out O2O and rural e-commerce, doing channel sinking. This is also a confrontation with Taobao Village's grand strategy, because the future development space for rural e-commerce will be huge. Other actions, such as JD.com launching the "Tian Gou" logo corresponding to Tmall, and launching the 618 promotion corresponding to Double 11, but overall, Liu Qiangdong still follows Ma Yun more, although JD.com's execution is superior. JD.com also considered launching a C2C model, Paipai, but later closed it. It also wanted to develop brand-owned flagship stores, but that is not the focus now. JD.com still believes in self-operation, which is also the core support for its attack on Alibaba and its claim of genuine products. "More, faster, better, cheaper" - JD.com's appeal is actually a bit too much. Strategy and brand still need to be more focused. Today I talk about JD.com, which is about self-operated e-commerce, such as Yihaodian, etc., and I will not elaborate further.
Yunlian Channel Thoughts No. 14: Official Website E-commerce In the past few days, I have discussed Alibaba's platform e-commerce and also discussed buyer e-commerce such as JD.com, Yihaodian, and Amazon. But there are two other important e-commerce models: one is the brand owner's official website e-commerce, and the other is vertical e-commerce focusing on one industry. These two types are also very important. Today I will talk about official website e-commerce. Obviously, official website e-commerce means building your own e-commerce platform, not hosted on Alibaba or JD platforms. The advantages of an official website are: 1. Information is very pure, without obvious price comparison and hesitation, because basically you see only one brand's information, which brainwashes you; 2. These fans are your fans, and everyone has common preferences and demands, so it is easier to interact, even organizing offline interactive activities; 3. Because everyone has some cognitive foundation, it is easier to promote deeper and more professional topics. Why did Lei Jun's Xiaomi launch "Born for Fever"? It was because these fans' discussions in QQ spaces and forums had already deepened from basic cognition to very professional discussions, so they defined Mi fans as enthusiasts. But Lei Jun later launched Redmi, which I feel was a failed move; 4. Because there are no fees related to Alibaba and JD, the operating costs of the official website are relatively low, so it can afford more powerful promotions and marketing activities. But the official website obviously has great weaknesses: 1. Traffic is hard to obtain, because it lacks the huge traffic of Alibaba and JD. It is like your small store is not in Wanda Plaza or Nanjing Road Pedestrian Street, but in a remote area. How to attract traffic is the biggest challenge; 2. It is not easy for people to compare and choose, because when people buy things on e-commerce, their biggest demands are cheapness and choice. So official websites often only let people understand and care about you, but it is not easy to place orders directly; 3. Another difficulty for official websites is how to handle the relationship with offline stores, because both offline stores and official websites have promotions, so there will always be price differences. At this time, consumers will complain. How to explain and handle this requires a plan. Obviously, the best official websites include Apple, Xiaomi, Three Squirrels, etc. In short, you must work hard to build and strengthen your own brand, because this is the real fan, the real brand stickiness, and the real loyalty. The loyalty on Alibaba and JD is only loyalty to cost performance. So how to divert traffic is a very key topic!
Yunlian Channel Thoughts No. 15: B2B Today's topic is one that has been hot recently, because the concept has changed significantly. Before discussing, we first agree on basic concepts. Here, B refers to business organizations, C refers to final consumers, and F refers to factories. So the general offline channel structure is: the manufacturer distributes to agents or distributors, then to terminal retailers, and finally to consumers. So the model is F2B2B2C. If a company does direct operation, which I mentioned ten days ago as DSD, then the model becomes F2B2C. Of course, this model has high costs. When Ma Yun started Alibaba, he did not consider 2C at all; he was entirely thinking about B2B. At that time, B also had another meaning, referring to industrial goods. So there is also a conceptual distinction: B2C refers to consumer goods, and B2B refers to industrial goods. But later, during the development of Alibaba, Ma Yun discovered the C2C business opportunity of Taobao, because the volume was huge, and later developed Tmall, a B2C opportunity, because the quality was better. So everyone felt that the role of e-commerce was mainly to open the 2C channel. But today, this concept is problematic, because directly 2C makes enemies of the various existing channel merchants, and without leveraging their strength, especially terminal retailers, it is difficult to grow big. So the recent consensus is that the future of e-commerce is still B2B or F2B. Obviously, B here refers to merchants, not industrial goods! Why does B2C have bottlenecks? Because the cost of traffic acquisition is too high, and because consumers face massive information and find it too difficult to choose. The ultimate goal of marketing is simplification and habituation. Since terminals are there, e-commerce must find ways to leverage them. So B2B is to organically combine all terminal retailers through an e-commerce platform. Who is the integrator? This forms several models: first, the manufacturer directly integrates, which is the F2B model, but it is not easy; second, regional terminal alliances divided by locality, integrating orders and distribution. I heard that Yantai's Wanshanggou is doing well in this regard; third, vertical integration by store type, such as 1919 for liquor. In short, it is about uniting terminal retailers, such as the operator network. For example, China Mobile's terminal company uses a B2B platform for ordering, collection, distribution, inventory management, policy issuance, and information transmission, greatly improving efficiency. In fact, Ma Yun is currently doing such a large platform model, integrating terminal retailers nationwide, and has also invested heavily in acquiring several corresponding software developers. There are also several large domestic venture capital firms laying out such platforms. The core is to use APP software for retailers to use for free, forming habits and dependence. Yesterday I chatted with a taxi driver while taking a taxi. They complained that Didi Chuxing uses taxis, initially making them install the software and use it for free, while cultivating dedicated drivers, only charging dedicated drivers a 20% service fee. Once consumers form usage habits, the Didi software deliberately sends more information to dedicated cars and less to taxis. They said this is called "burning the bridge after crossing the river." In fact, marketing is about cultivating a habit and trust. How to establish B2B? It is through visits, introductions, trials, benefits, and communication. This is a foundation-building process. But personally, I am not optimistic about this model. I still think manufacturers need to find their own exclusive and focused agents or distributors to form their own vertical distribution system. I will name these two models: "horizontal big platform, vertical one line"! Due to the entry of e-commerce, O2O, the integration of online and offline, has formed, evolving into many models. We will discuss them slowly later!
Yunlian Channel Thoughts No. 16: WeChat Stores and WeChat Business Earlier I talked about Ma Yun, Liu Qiangdong, and Lei Jun, but there is another big shot that must be mentioned: Ma Huateng. Little Ma Ge is not as high-profile as Ma Yun, but his things are always so ahead, so down-to-earth, so imitative but able to surpass. He started with QQ instant messaging, and then WeChat, which actually surpassed the limelight of Weibo. Weibo is more like media, with weak ties; WeChat is more like a relationship network, with strong ties. So in today's e-commerce boom, Little Ma Ge naturally cannot be satisfied with just a chat tool; he also wants to turn it into a business platform. At this time, WeChat stores and WeChat business appeared. WeChat store, as the name implies, is opening a store on the WeChat platform. In fact, this is an APP platform built by WeChat. Opening a store on this APP platform is similar to opening a store on the Taobao platform. The difference is that Taobao is completely open, but the cost of traffic diversion is too high. WeChat stores face the circle of friends, with a limited audience, but the relationships are relatively strong. If your products are reliable, it is more precise marketing than on Taobao or Weibo. Some say offline communities are geography-driven and identity-driven, while online communities are interest-driven. So WeChat stores should make good use of these interest-driven "birds of a feather flock together" to promote things that everyone likes but cannot get goods or information about. And if you become an expert and influencer, you will become a master. I will not talk about WeChat stores first; I just think of Logical Thinking (Luojisiwei). Luo Pang (Luo Zhenyu) gives voice messages every morning and often makes comments, just to increase his influence. Finally, selling books becomes a natural thing. In fact, this is WeChat business. WeChat business is people who use WeChat to do business. Of course, some people extend this concept to Weibo and even all social media. That does not matter; I am not interested in definitions and theories. Is WeChat business necessarily based on WeChat stores? Must it promote WeChat stores? Not necessarily. Many WeChat businesses do not necessarily open WeChat stores; they just sell things directly, like Logical Thinking. Now, the WeChat business that everyone discusses more is actually doing distribution, finding agents, and having multi-level commissions and rebates. For example, some are three-level distribution commission models, some are six-level distribution commission models. In fact, they are similar to pyramid schemes, except the promotion method is chosen in the circle of friends, WeChat groups, and WeChat chat windows. In the end, they make you buy things, help promote WeChat stores or products, follow WeChat accounts or QR codes, and help post ads in your circle of friends. Some people change pyramid schemes to direct sales or other names, but in fact, they are the same. In fact, pyramid schemes are not shameful. Channels themselves serve the purpose of orders and communication. As long as you can place orders and spread product information, you are a channel. Channels should naturally have reasonable gross margins. If you further open and expand downstream channels, you can naturally get more rebates and rewards. These are normal interest-driven models, so they are normal in themselves. But everyone has their own likes and dislikes. I personally particularly hate pyramid schemes and particularly hate purposeful repetitive promotion. If you always spam your circle of friends with things to sell, doing WeChat stores and WeChat business, sorry, I will block your circle of friends. WeChat stores and WeChat business are just emerging, and I will continue to pay attention and research!
Yunlian Channel Thoughts No. 17: O2O This topic was hyped up two years ago. At that time, almost everyone mentioned O2O, just like today everyone mentions Internet+ and Internet thinking. But personally, I think O2O is indeed very important. The so-called O2O is the integration and interaction of online and offline, including online brands opening experience stores offline, and offline brands going online to place orders and promote. In fact, many customers have already done this, and there is nothing complicated; it should be done this way. Online brands going offline, such as Xiaomi and Meizu. These two are e-commerce mobile phone brands. In fact, it is estimated that about 70% of Xiaomi's sales are sold through offline mobile phone store channels for secondary distribution. Why can this be achieved? It is because of hunger marketing and premium capability. Offline stores can have several hundred yuan of gross profit and relatively fast turnover. But recently, it is not selling well because Xiaomi's premium capability has declined. So Lei Jun is anxious, because 70% of sales are offline, and he did not lay out specially before. So Xiaomi's next strategy is to lay out and build offline channels. But I estimate that Lei Jun cannot do this, because this basic skill is particularly time-consuming and expensive, not Lei Jun's style. Another example is Meizu. In this regard, Huang Zhang still has his own persistence, which is to open a large number of offline experience stores. These experience stores are actually bases for brand publicity and advertising. Offline stores going online, there are too many examples. Almost all catering stores in big cities are developing their own public WeChat accounts, WeChat groups, etc., and cooperating with Ele.me software, of course, also with the old Dianping. It can be said that today's catering stores or service industries can hardly survive without the Internet, because most orders come from online ordering, and most information release and interaction are through the Internet, because it is more precise and efficient. An example of equal emphasis on online and offline should be Suning. I have had multiple communications with their executives. Their shopping guides, besides promoting in-store products, have an even more important job: promoting their APP terminal, because online products have more variety and higher stickiness. O2O is to leverage offline trust and experience, and also leverage online convenience and ease of comparison. Of course, there are often online discounts. Such coordination is indeed a path that all customers must consider and follow.
Yunlian Channel Thoughts No. 18: Channel Segmentation and Integration The so-called channel is a group of customers with the same consumer demographics and shopping environment. We define this group of customers as a channel to make it easier for salespeople to clearly understand their target consumers' needs and the store owners' needs, making it easier to form targeted strategies and improve visit performance. So channels should be segmented. For example, when I was at PepsiCo, sales channels were segmented into dozens of types, each with clear channel names, codes, definitions, characteristics, policies, attack points, visit frequencies, and visit techniques. Through analysis of each segmented channel, we could see where we were strong, such as high distribution rate, strong single-point selling power, and large market share. Conversely, we could also see where we were weak and needed to attack! There is also another trend: further integrating the segmented channels, grouping channels with similar characteristics into a major channel category. This makes it easier for the channel marketing department to formulate corresponding channel policies. For example, various wholesalers, such as specialized wholesalers, township wholesalers, deep distribution wholesalers, wholesale-retail combined operators, second-tier wholesalers, and beverage wholesalers, can all be classified as wholesalers. At this time, promotions may be uniformly targeted at wholesalers, forming a channel group. Combining these segmented channels is the big wholesale channel. What I want to say here is another channel integration method, which is quite interesting. The big wholesale channel mentioned earlier is still classified by customer characteristics. Another integration method is by consumer characteristics. I remember around 2008, PepsiCo proposed the concept of the youth channel, including middle schools, universities, internet cafes, cinemas, etc., because the consumers in these places are younger and more fashionable. We made many deployments in terms of listing, promotion, marketing, activities, and cooperation. This method allowed us to take the lead in occupying the shelves and minds of the younger generation. Channel segmentation and integration is the innovation of marketing, the vitality of marketing, and the direction that the marketing department points out for the sales department. This requires close communication and cooperation between the marketing and sales departments. Of course, sometimes they quarrel, but the ultimate goal is the same!
Yunlian Channel Thoughts No. 19: Major Channel Categories Yesterday I talked about channel segmentation and integration, citing my experience at PepsiCo, where channels could be segmented into dozens, each with clear definitions and codes. This makes it easy to do the market finely, but the downside is that it is too cumbersome and not easy to formulate marketing policies. So some segmented channels are integrated, such as the youth channel. These concepts are all good, but today I want to talk about integration at a larger granularity, because larger granularity has its benefits: stronger regularity and easier to grasp the essence. For example, in the beverage industry, channels can be divided into open channels and closed channels. Obviously, open channels are characterized by multiple choices and main business, such as hypermarkets, supermarkets, convenience stores, and grocery stores. They are all open channels, mainly engaged in commodity trading, giving consumers many brand and product choices, and generally being price-sensitive. The other type is closed channels, such as restaurants, hotels, internet cafes, and also schools, parks, amusement places, and sports venues. These channels are exclusive and service-oriented. Beverages are not the main business but auxiliary services, so generally one category only needs to provide one brand. Such exclusivity naturally requires the manufacturer to provide exclusive fees. In addition, prices are not very sensitive, and there can generally be a premium. Another classification method is by consumer usage habits, which can be divided into three types: drink immediately, drink on the way, and buy to drink at home. Generally, closed channels are immediate consumption, small stores and convenience stores are on-the-way consumption, and hypermarkets and supermarkets are mainly buy-to-drink-at-home. Of course, their corresponding packaging and prices are different. Segmenting channels and then continuously integrating and classifying them is the process of continuously improving our marketing capabilities.
Yunlian Channel Thoughts No. 20: Category Stores and Vertical E-commerce Time flies fast. The channel chapter has reached its last issue. Tomorrow we will start the promotion chapter. It seems that many channels have not been discussed in detail. For example, if there is time, the target groups and purchase scenarios of many sub-channels are worth careful discussion. For instance, when I worked at PepsiCo, I specifically studied the target group, purchase habits, product mix, pricing strategy, and promotion techniques of convenience stores, and found that they are actually very different from chain supermarkets. Also, I actually did retail management for more than seven years at Shell and Concord Petroleum, and I was the general manager. I have practical experience in many retail details, such as team management, detail standardization, inventory management, hit product creation, phased promotions, and advertising. But it seems there is no time to discuss them, so I will leave them for later. After the 20 issues on promotions, I will continue to launch topics such as management thinking, human nature thinking, brand thinking, and positioning thinking. In short, I force myself to write something every day, and I hope everyone will supervise me. For the last issue of channel thinking today, I want to talk about a vertical channel issue. First, let's talk about offline vertical channels, also called category stores or category killers. Why? Because the previous terminal stores had about two forms: one is the comprehensive store, which focuses on completeness and convenience, such as hypermarkets' everyday low prices, and convenience stores and grocery stores' delivery services. But they have many product categories and are not very professional. The other extreme model is the specialty store, such as those used for clothing, selling products of one brand or one company. These stores are of course very professional, but there is no comparison or choice. So category stores came into being. The most typical is Sephora, a high-end cosmetics store. Another is the washing and care stores in fourth- and fifth-tier markets, mainly selling daily chemical products. I have seen many such formats in townships. If cosmetics companies only know how to sell in specialty stores and hypermarkets, and do not understand the cosmetics stores in townships, then channel sinking is empty talk. Then there is vertical e-commerce online, which targets one industry or category, classifying and comparing related products to facilitate people's choices, making people feel that it is professional here and can get the latest information and professional evaluations in the industry. So vertical e-commerce still has a bright future. Depth and verticality are the trends for future channel development, because now people do not lack products; on the contrary, there are too many. They do not lack channels and terminals; on the contrary, they are too泛滥. What is lacking now is how to choose, how to compare professionally and guide. Category stores and category killers are such industry experts and category experts! Han Xiuchao, studied management undergraduate in 1979, master's in management in 1983, taught marketing management at university in 1986, joined foreign enterprises in 1992, served as senior manager at Shell China, general manager of Wuhan Shell, served at PepsiCo for 13 years as marketing director and deputy general manager of bottling plants, founded Shanghai Yunlian Brand Management Co., Ltd. in 2012, serving as general manager, mainly providing consulting and marketing consulting for private enterprises.
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