As expected, Alibaba has indeed invested in RT-Mart, right after the 'great' Double 11, following the slowdown in GMV growth, and after 'Master Ma' casually took down martial arts stars like Jet Li, Wu Jing, and Zou Shiming on and off stage while greeting them with 'Have you eaten?' Earlier this year, when rumors swirled about RT-Mart and Alibaba, Lao Miao had 'predicted' in an article that RT-Mart would sell, and it had to sell. However, the road to new retail is not as simple as scaling up online and offline; in fact, the current direction of new retail is heading into a bigger misconception. Taking advantage of the current fervor, let's revisit previous predictions and analyses, hoping that the market, which is burning with the 'new retail' concept, can engage in more rational thinking and pragmatic actions. RT-Mart is known as the king of offline retail, having left competitors in the dust in the long battle against international giants and local wolves. We won't dwell on how impressive it is; there's plenty of data online for you to check. Let's talk about why RT-Mart wants to sell, and why it must sell. One must admire RT-Mart's veteran leader, Huang Mingduan, as a highly astute strategist. While many international KA systems were focused on penetrating from first- and second-tier cities downward, RT-Mart had already started intercepting in third- and fourth-tier cities; while many large retail enterprises were collecting entry fees, anniversary fees, and various other levies until their hands went numb, RT-Mart's private-label products were already gaining momentum; at the same time, as e-commerce rose, RT-Mart was catching up, with Feiniu.com, personally led by the veteran himself, becoming a sales platform with annual revenue in the billions. However, the impact of e-commerce on offline retail has exceeded many people's expectations. In 2016, e-commerce B2C sales exceeded 15% of total social retail sales, and the previously anticipated ceiling of 20% is within reach. E-commerce penetration in third- and fourth-tier cities is still rapidly increasing; for supermarkets primarily selling fresh produce and daily necessities, the true impact of e-commerce has not yet arrived due to category limitations, but this natural barrier could be broken within a few years, making supermarkets even more miserable. These are the major 'visible' threats to RT-Mart's future development. What might give the veteran leader even more headaches is that Feiniu.com's losses seem to have no end in sight. This project, considered the 'most important engine' for RT-Mart's development, might turn out to be a beautiful mistake. At a time when the 'visible' threats haven't fully materialized and Feiniu.com hasn't fallen into a quagmire, RT-Mart choosing to sell (or partially sell) now is undoubtedly the most opportune moment. Let's also look at the situation of the 'male lead' in the rumor, represented by Alibaba. Since last year's mention of 'new retail' and 'pure e-commerce is dead,' and later the war of words with Zong Qinghou of Wahaha, Ma Yun's moves in retail have always attracted attention. Zong Qinghou said that Ma Yun's 'five new' concepts were 'nonsense' except for new technology, which was substantive. That sounds a bit extreme, and in Lao Miao's view, it's a bit over the top; but the fact is that Ma Yun's 'new retail' has so far not produced anything to prove it's genuinely new, rather than just playing with concepts and creating panic. As the leader in e-commerce, if Alibaba also takes down the leader in offline retail, Chinese consumers would have no way to avoid Ma Yun, and Ma Yun would have contracted the largest piece of China's retail 'fish pond.'
Wang Jianlin asked Wang Sicong: 'Son, what do you think about money?' Wang Sicong said: 'Money is not omnipotent...' Wang Jianlin nodded approvingly, then heard Wang Sicong add: 'It's Wanda's.' However— Ma Yun has already invested in Sanjiang, Suning, and Intime. Even if he buys RT-Mart, and later even Bailian or Gome, it would only be scale expansion, and we still wouldn't see what's new about his new retail. In a December 7 article last year, it was mentioned: The form of the terminal is irrelevant.
Kotler's original words: It matters not how these goods or services are sold, or where they are sold.
What matters most is the function of the terminal. The functions of retail terminals: logistics, transactions, product display, information transmission, and consumer education. Since the development of e-commerce, its progress has been technological, making it possible for customers to order from offline to PC to mobile, but there has been no progress in retail philosophy; in fact, it has regressed. For a long time, Chinese retailers have preferred to abandon self-operated models in favor of joint operations or even just collecting platform fees, minimizing transaction risks: that is, whether you sell or not is none of my business; I just sit back and collect rent; and even charge other fees, euphemistically called service fees. In terms of retail functions, they try to simplify to only handling logistics and transactions, leaving everything else to suppliers. E-commerce has inherited this 'glorious tradition' from traditional retailers and expanded it, not only charging platform fees but also collecting more service fees in the name of helping suppliers. Ma Yun has a famous saying: We are not competitors with JD.com, but we aim to cultivate more companies like JD.com. Currently, under the exploitation of the platform, it's impossible for an e-commerce company like JD.com to grow on Alibaba's platform. From this perspective, at least based on Alibaba's current performance, it's not 'new' but 'old as dirt.' Retail can be divided into two basic forms: self-operated and platform-based. Self-operated refers to retail enterprises that engage in the purchase and sale of goods, including buying and selling on their own account, buying out, consignment, or private-label sales. Profits come from product sales and price differences. The oldest and most classic retail enterprises are self-operated. In this model, all retail functions are present. Platform-based means retail enterprises only provide a platform, collect rent or entry fees, and then charge various promotional fees. The advantages of platform-based retail are obvious: low cost, easy to replicate, easy to manage, and able to quickly achieve economies of scale. Therefore, in recent years, it has become the mainstream for retail enterprises: whether large department stores, supermarkets, chain convenience stores, or large e-commerce platforms, most are platform-based, or platform-dominant with a small amount of self-operation. Self-operated retail is left only to individual merchants and mom-and-pop stores that lack resources to build platforms. But the problems with platform-based retail are equally prominent: incomplete retail functions, or rather, these enterprises don't even consider themselves retail enterprises. Platform-based retail enterprises only assist suppliers with logistics and some transaction functions, but are severely lacking in information transmission and consumer education, and often occupy a large amount of supplier funds. The functions of retail terminals are indispensable in the commercial chain; if retailers don't do them, suppliers must (in China, usually distributors, sometimes manufacturers) do them. Suppliers not only have to undertake functions that should be the retailer's responsibility, but also pay promotional fees to the retail platform for these functions. Since suppliers are far from consumers in the channel, it's inefficient for them to undertake promotional functions. Suppliers bear functions they shouldn't, pay for them, suffer inefficiency, and have funds tied up, so conflicts between platform-based retailers and suppliers are extremely sharp. The conflicts between supply and retail further reduce channel operational efficiency. Kotler pointed out long ago that the operational efficiency of channels in mainland China is shockingly low. In traditional offline channels, it's common for a product with a manufacturing cost of 5 yuan to reach consumers at 20-30 yuan. Even so, there's little profit at each channel stage, and channel inefficiency is the biggest culprit. E-commerce channels are not much better; retail prices may be lower, but Tmall, as the 'hardest business in the world,' few companies can make money on it. For platform-based retail enterprises themselves, there are also several serious problems. First, the best period for platform-based retail development is the 'enclosure' period of retail format changes. Once the competitive landscape stabilizes, the lack of promotional functions naturally makes it difficult to generate purchase and sale profits, and enterprise growth becomes unsustainable. Losing the advantages of centralized bulk purchasing and price negotiation, higher distribution costs, fragmented processes, fewer large orders, lack of private labels, and strained supplier relationships—these are the inevitable situations for retailers that lose their self-operated capabilities. Second, due to the lack of promotional functions, only larger brands (with brand pull and strong promotional power) tend to survive on platform-based retail enterprises. The result is severe homogenization among platforms, forming an 'all shops look the same' awkward situation. And when facing large brands, platforms have relatively less bargaining power, meaning lower profits. Third, for e-commerce platforms that break geographical barriers, it's often winner-takes-all. Nothing grows under a big tree, and small platforms have slim chances of rising again. These problems can be solved precisely through self-operation. Lao Miao once mentioned in an article: Many enterprises have formed an awkward situation of subsidizing 'modern channels'—e-commerce—through traditional distribution channels, while also subsidizing 'pre-modern channels'—supermarkets.
The most traditional distribution channel, from manufacturer to distributor, and then directly or through secondary wholesalers to 6.8 million small shops nationwide, is actually the only channel chain that can achieve a win-win for manufacturers, distributors, shops, and customers, and is the most profitable channel. In other words, it is currently the most efficient channel. Where does the efficiency of distribution channels come from? Lao Miao's answer is the natural clarity of responsibilities, rights, and interests, more bluntly, each channel stage is self-operated, especially the retail side. Retailers are responsible for the products they purchase and earn profits from selling them. This makes the interests of supply and retail almost completely aligned. As the stage closest to consumers, retailers purchase products based on actual conditions, use every means to communicate with customers, have complete retail functions, and thus achieve the highest efficiency. Self-operation stimulates retailers' enthusiasm for communicating with the market, increases retailer profits, and changes the retail homogenization of 'all shops look the same.' Moreover, for new retailers and those that fell behind in the last round of enclosure, platform-based models have no chance left; self-operation is the only way out. From this perspective, Lao Miao thinks 'NetEase Yanxuan' is the true new retail. We call merchants 'buyers and sellers'; 'buying' and 'selling' are the most essential behaviors of commerce. At each major channel transformation, there are significant channel dividends. To maximize these temporary dividends, many astute retail enterprises tend to adopt platform-based expansion to gain greater commercial benefits. This was true for early supermarkets and recent e-commerce. But in reality, these platform-based retailers are not the main players in commerce; they don't participate in buying and selling but serve the transactions. The current distortion in the domestic market is: the main players in commerce are declining, while platforms serving them are thriving, and the shop bullies the customer. This makes commodity circulation sluggish, bad money drives out good, and commercial efficiency is extremely low. Once the dividend period of channel development passes, we must return to the essence of commerce: retailers must take on the functions of buying and selling, rather than leaving buying and selling to suppliers and collecting tolls and advertising fees. In the channel chain, products run a relay race. The current situation is that when it reaches the retailer's leg, the retailer says to the previous leg: 'Let's change the game. I won't take the baton, but I can make you run faster. This is a highway; you keep running, but I'll charge you a toll.' So the previous leg keeps running, constantly paying bridge tolls, car repair fees, and buying water and food, while the money from sold goods is held by the retailer. Over time, they become overwhelmed. Since 2015, a large number of distributors have thrown in the towel and been played to death. In 2017, another large batch will leave. Once they die, China's business environment will be pretty much ruined. Of course, Ma Yun's 'new retail' is not simply 'online plus offline' combination, nor is it as superficial as expanding scale to contract the fish pond. The industry and Alibaba have a bunch of explanations:
The future of business is C2B, not B2C; users change enterprises, not enterprises selling to users;
The model shifts from B2C to a fusion of B2C and C2B, emphasizing on-demand customization, focusing on customization and personalization;
Offline terminals provide superimposed consumption experiences, terminal services penetrate communities, and offline terminals form communities;
Smart terminals replace traditional shelves;
Omnichannel integration, summarized by Alibaba as product connectivity, member connectivity, and service connectivity. It looks beautiful and dazzling. But the problem remains the same—'who sells goods to consumers'; if retailers don't take over the function of selling, don't get in the game themselves, the more beautiful and luxurious the highway, the higher the costs for suppliers and the heavier their burden. Efficiency still cannot be improved. The internet promotes commercial development, not changes the essence of commerce. This round of enclosure is basically over; only a few players are left to continue. Future retailers, whether online, offline, or integrated, whoever is better at 'buying,' 'selling,' communicating with consumers, and operating (buying and selling) efficiently will represent the future of retail. Source: Lao Miao Tears Apart Marketing (ID: yiheyingxiao) -END-