The 3rd 'FMCG + Internet Conference' hosted by New Distribution was grandly held at Chongqing Yuelai International Conference Center on November 8-9, 2017! It attracted thousands of industry distributors, manufacturers, and internet companies from all over the country, with a full house and an unprecedented scene. The following is the speech delivered by Dianchi founder Qiu Hao at the conference, organized by New Distribution for readers.
Good morning, everyone! I am very happy to communicate with you on such a platform. I am an old hand in the retail industry but a newcomer in the entrepreneurship industry, with just over a year of experience. Today, I want to share my views on the retail industry over the past period. My title is 'The Mobile Internet Era.' Today we are all talking about new retail. Why am I not talking about new retail? Later, I will also host a dialogue, and at that time I will specifically talk about new retail.
Why do I want to talk about the mobile internet era? Let me report to you: new retail is a concept, while the mobile internet is an era. Concepts are built on this era. Without the mobile internet as a foundation, new retail cannot emerge. I will share on this point. My speech today has no answers, only questions and thoughts. To accomplish something, we need to do it from three levels: Dao (the way), Shu (the method), and Qi (the tool). Today, combining my understanding over the past decade or so, I want to discuss some questions with you from the level of Dao.
There is a saying: The motivation for choosing any way to do anything comes from an assumption about achieving a certain result. When we mention assumptions, we think of 7-Eleven. Assumptions and validation. Today, let's talk about this assumption. For example, a mom-and-pop store assumes that opening a store here can support the family, so they open here. For B2B technology operations, they assume that as long as they provide more favorable, faster, and more comprehensive services, they will purchase from them. Entrepreneurs also have an assumption: they make a business plan and go to venture capitalists with PPTs every day. All our efforts are built on assumptions. Some assume success, some assume failure. The accuracy rate depends on our prediction of the endgame and our grasp of the rules. Your cognitive ability determines the accuracy of your assumptions. In the process of validating assumptions, you must pay a price, which can be as little as time and money, or as much as life. If you want to learn something, you must pay tuition. To learn the most powerful things, you must find the most powerful teacher. To achieve the assumptions we build, what do we compete on? It is who sees more clearly and who can afford to play.
For mom-and-pop stores, a family opens a store. They need to predict rent and income, and decide whether to do it themselves or join a platform. For service providers to stores—suppliers, distributors, brand owners, service providers, and even the headquarters of many franchise companies, such as our best and largest convenience store franchise, Meiyijia—what assumptions should their headquarters base on, including all of you here, for our daily efforts to be based on what assumptions to remain invincible in the long run?
'Except for brand, everything can be outsourced.' Such a concept may impact and subvert many people's traditional cognition. What is this? Xiaomi. How many of you here use Xiaomi phones? Quite a few. This is fruit oatmeal. Do you know where I bought it? I bought Xiaomi's fruit oatmeal and daily nuts. At this point, everyone gradually understands why in the ultimate state, everything except brand can be outsourced. Many of our friends use Xiaomi phones. Many think Xiaomi is a phone maker. We compare Xiaomi phone sales with Huawei and OPPO, but you may not know that Xiaomi also sells oatmeal and underwear. Today, everyone here is very lucky. The guests this morning shared a lot of dry goods, and their way of thinking and cognition are very consistent. I very much agree with what Mr. Wang just said. In the end, our ultimate competition is: why does a customer buy this product in my store? Why would I buy oatmeal from Xiaomi? This question is worth thinking about for all of us. So I gave this example.
However, brands are built on products. If Xiaomi had not done deep marketing and high cost-performance positioning since 2014, I probably would not buy nuts and oatmeal from Xiaomi, because there is a 'Laiyifen' downstairs. Last week, I also hosted a dialogue event, and the boss of Laiyifen was there. So why would I buy from Xiaomi? This question is too worth facing and pondering. So, without a product, there is no brand. All brands are built on products. Xiaomi's brand is also built on the phones it initially launched, establishing a strong emotional connection with us. That is the core. So for a long time, products remain the core. Except for brand and product development capabilities, everything can be outsourced.
But today we are not talking about brand or products. We are talking about the 'everything can be outsourced' part. What can we do? Let's start with a formula, which I think is the most beautiful formula: Customer Value = Value Creation + Value Delivery. For example, anytime, anywhere, convenience, speed, cheapness, and personalization are all customer feelings. Price is the cognition that a customer is willing to pay. Value consists of two parts: value creation and value delivery. Value creation is product, experience, and relationship. Value delivery is our four flows.
Today, when we create services for B-end and C-end, are we helping them create value or deliver value? If the customer is C, what do they want? If we position C, it is easy to understand and deduce why traditional supermarkets cannot beat e-commerce. Putting it into this formula makes it too easy to answer: they only do the most basic value delivery. If they only do value delivery, they cannot beat online. I am talking about traditional supermarkets, excluding Hema and the like. If the customer is B, what do these mom-and-pop stores want? They have only one need: how to stably earn more money. Across from the hotel where the conference is held, there is a restaurant called 'Li Xiaomian.' The owner runs a noodle shop and also a mom-and-pop store. She orders goods through a local B2B2C ordering platform in Chongqing. I said, 'If one day someone comes to recruit you, would you cooperate?' She thought for a moment and said, 'If it is suitable, I would cooperate.'
From a supply chain perspective, many companies provide such services. Every region has them, including Alibaba and JD.com, which have already entered the game. Great minds think alike because everyone has chosen a correct track. All friends here doing B2B2C, let's give yourselves a round of applause. We are great; we have entered a very good track. But this is just the beginning. The real difficulty comes later. Because in the endgame, we have to compete on four things, still seeing who sees clearly and who can afford to play. The endgame will not go beyond these four: supply chain (finance), brand, traffic, and operations. In the end, we will compete with Alibaba and JD.com on these four dimensions, not just supply chain.
Returning to this formula, supply chain and financial services are at the level of value delivery. They are delivering value. But brand, traffic, and operations help small B create value. So today, close your eyes and think about your business. Are you in the realm of value creation or value delivery? If, like the applause just now, we are still in the realm of value delivery, that is great because you have only done one thing, and there are three more things you can do.
So, most so-called B2B2C companies still have many opportunities for growth, but there are many problems. Today, I am giving you some questions based on methodology. All questions should provoke your thinking.
For example: Supply chain (finance) services. All B2B2C ordering services based on APP are actually a natural result of technological upgrades, just like I said in 2013 that O2O is a pseudo-proposition. You can roughly understand it as the electronization or mobilization of wholesale. If everyone wants to provide better, more comprehensive, and more convenient services, then under a certain gross margin, cost and service become contradictory.
Some say that a company being valuable and a company being profitable are two different things. If we take a longer-term perspective, no company that does not lose money is profitable. That is certain. Previously, when I attended a meeting in Chongqing, the hotel I stayed at had just opened an Xianfeng (a fresh food chain) store next door. Why do they still need to do their own extension? For example, if I open a store, Alibaba comes and asks me to hang a cat (Tmall), JD.com comes and asks me to hang a dog (JD). As a customer, when seeing 'Lihua Grocery' versus seeing a cat and a dog, which feels better? Under the shadow of a brand, this competition is asymmetric; it is not on the same level. So why did I start with the assumption that except for brand, everything can be outsourced? That is my ultimate assumption. So who you cooperate with is whose ship you board and who recruits you.
Looking at traffic, if we let Li Xiaomian compete with those branded and traffic-driven stores, I definitely have no initiative. But if these stores are based on traffic from JD Daojia, where is the entrance? Who is the traffic for? Traffic is a bottomless pit. Only big players have killer moves. Can we afford to play? How do we play? We all need to think.
Operations: Which small store does not want to upgrade and become formal? Everyone wants to. Is this a point to maintain competitiveness and attractiveness? We are based on who understands offline retail better. This is likely our entry point. Having been in this industry for many years, I have many thoughts. I have been thinking about something. Today, there are various concepts, such as B2B, omni-channel, and big data a few years ago. Last year, Mr. Ma (Jack Ma) came up with new retail. I hope that all Chinese retail people can have more independent and critical thinking ability to think about these concepts.
I think if every retail person lacks critical thinking, we will be led by those who easily create concepts. Our energy, physical strength, and ability are very limited. For example, everyone is busy now. You think exercise is important, but you are busy, so you go for night runs. Do you know that night running is the same as suicide? After 9 PM corresponds to 'winter storage' in the four seasons. When you should be storing, you are generating. That is asking for trouble. We are under great pressure, and everyone is in a sub-health state. If you spend physical strength to consume, the more you consume, the weaker you become. What is the result? If we lack critical thinking, we are easily played to death by these big shots. They easily create a concept to make us run after them, and we run at night, becoming weaker and weaker. Then they get up in the morning and run, running in the spring when things grow.
I am also a service provider. After leaving Haiding last year, I provide site selection and operation services for small stores. So I face exactly the same problems as everyone else. We need to think together. In this scenario, I have not mentioned new retail; I still mention the mobile internet era. We must think together to answer those questions. So, our dream is to make those retail people awesome. Thank you!
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