Click to read the original article for details. Product nearing expiration is a pain point for all food companies and distributors in their daily operations. There are two ways to handle near-expiry products: First, discount sales such as gifts, special prices, and bundles in KA stores or designated communities and markets; second, bypassing regular distribution channels to sell to closed special channels like factories, canteens, and prisons. Both brand owners and distributors try various methods and techniques to deal with near-expiry products, but even with all these methods, it is impossible to dispose of 100% of them. When they cannot be handled effectively in time, they have to be destroyed. According to industry insiders, taking a leading FMCG company as an example, there is usually a loss rate indicator of 1%. Although it seems low, it is still very alarming. Want Want, with 20 billion in sales, has a 1% loss of 200 million; Uni-President, with 40 billion, has a 1% loss of 400 million; Master Kong, with 60 billion, has a 1% loss of 600 million... According to incomplete statistics, even though FMCG brands try various methods each year, including pre-forecasting, in-process management, and post-processing, the loss still exceeds 100 billion yuan. Facing such industry pain points and market space, in early 2016, an app called "Hao Shi Qi" was born. It is specifically designed to help brand owners, distributors, and importers sell near-expiry products to achieve rapid clearance and reduce losses, using a countdown pricing model to make product dates transparent to consumers. Recently, New Distribution interviewed Lei Yong, founder and CEO of Hao Shi Qi. As a former executive of Dah Chong Hong's Shanghai branch, a large food distributor in China, why did he choose the path of "food clearance"? Lei Yong told New Distribution that facing the 100 billion yuan market of near-expiry (not expired) food, Hao Shi Qi aims to use internet methods, technological means, and innovative business models, through team efforts, to reduce the 100 billion yuan loss to 50 billion. To this end, Hao Shi Qi has also proposed an internal slogan: "Reduce losses for Chinese food companies by 100 million yuan every day." What is the confidence behind the goal of "reducing losses by 100 million yuan daily"? What is the business logic behind this? Exclusive 110 Million Yuan C-round Financing from Alibaba In July 2018, Hao Shi Qi's parent company, Shanghai Multi-dimensional Network Technology Co., Ltd., completed an exclusive 110 million yuan C-round strategic financing from Alibaba, which was also Alibaba's third investment in Multi-dimensional. Previously, Lei Yong also obtained A+ and B rounds of financing from Alibaba in 2014 and 2015 for his local life service platform "Ai Qiang Gou" startup project. Hao Shi Qi, born in early 2016, came from Lei Yong's supermarket shopping experience. "Once I bought a bag of imported Italian pasta at Carrefour. When I got home, I casually noticed that this pasta would expire in less than a month. At that time, I felt Carrefour was a bit 'unfair'. Although it was legal, since it was about to expire, they should at least sell it to me at a discount." Due to consumer sensitivity to shopping and his past work experience, Lei Yong shared this experience with friends working in the food industry, and their responses inspired him. Regarding this matter, the most painful are actually the suppliers. Carrefour can legally sell until the last day (within the shelf life), but it requires suppliers to deliver within the "acceptance period". For example, for domestic products with a 12-month shelf life, if only 4 months have passed and 8 months remain, they can no longer enter regular distribution channels like Carrefour. In the end, many products can only be "cleared" through closed channels like canteens, factories, and prisons. This friend continued, if these products cannot be sold, they will be stuck in their hands. This is not zero assets but negative assets, because regulations restrict arbitrary disposal, and they have to pay to handle them. This shopping experience and the exchange with his food friend made Lei Yong see a huge business opportunity, and "Hao Shi Qi" came into being. Lei Yong told New Distribution that Hao Shi Qi has two innovations: First, it is the world's first e-commerce platform that makes shelf life transparent; second, it uses a dynamic pricing method based on countdown to shelf life for pre-packaged food, helping brand owners, distributors, and importers achieve rapid clearance. Once launched, Hao Shi Qi was welcomed by suppliers. Lei Yong recalled that in the first year of founding Hao Shi Qi, the general manager of a multinational group visited the company to express gratitude to Lei Yong. "You helped me a lot. Our company had 68,000 boxes of milk before the Spring Festival, with only 2 months left before expiration. You digested them in just a few days, not only helping us earn several million in net profit (compared to the loss if they couldn't be sold) but also saving my job. The digestion of these 68,000 boxes just kept me from exceeding the 1% loss target." After nearly 3 years of entrepreneurship, Lei Yong introduced that Hao Shi Qi is positioned to do only one thing: "Unlike the regular sales of Tmall and JD.com, Hao Shi Qi aims to help brand owners, distributors, and importers achieve rapid clearance after products exceed the acceptance period of regular market channels." Becoming a "Complementary" Channel to Help Manufacturers Reduce Losses Although the positioning is clear and the goal is specific, as a "matchmaking" B2C platform, it naturally cannot avoid facing the same issues as other e-commerce platforms, such as counterfeit goods and service management. In this regard, Lei Yong told New Distribution that compared to regular full-price e-commerce platforms like Tmall and JD.com, Hao Shi Qi is a clearance e-commerce platform. Regarding the counterfeit issue, the first step is to eliminate the motivation for counterfeits. Besides Hao Shi Qi's rule of rejecting products within the "acceptance period", in fact, the logic of clearance has a natural conflict and contradiction with counterfeits. From the mechanism design, counterfeiters are unwilling to come to the platform. "Suppose a company 'Kang Shuai Fu' instant noodle company (not Master Kong!) aims for huge profits and hopes to sell at full price. If they come to the platform, they cannot sell at full price and cannot obtain huge profits. For legitimate brand owners, your product sells at 3 yuan per bag at full price, but on Hao Shi Qi, even if you sell at 0.3 yuan per bag, you don't lose money because we are helping you clear inventory and reduce losses. This is not from the perspective of product cost; the 0.3 yuan can even be considered net profit. But if counterfeit goods sell at 0.3 yuan, from the perspective of the counterfeit company, it is a loss, so they naturally don't want to come." Lei Yong continued. According to the above business logic, the "cat and mouse" game is greatly reduced. In addition, Hao Shi Qi has established strict reward and punishment mechanisms. For example, in every 1,000 orders, if there is one user complaint about quality issues (not due to logistics or express), the supplier will be severely punished for those 1,000 orders. Because sales are directly to consumers order by order, service quality is ensured from a restrictive perspective. In terms of service management, besides setting up a deposit as a constraint, the platform also outputs management processes and systems to suppliers, especially in batch management and logistics shipping. Currently, Hao Shi Qi's error rate in logistics shipping has reached one in 100,000, with a 24-hour shipping rate of 97% ± 1%, and has established a series of credit scoring systems to ensure first-in-first-out and timely delivery to consumers. According to Lei Yong, the Hao Shi Qi platform has no entry fees, barcode fees, or advertising fees, and no payment terms. It only charges suppliers a 5% transaction commission. Hao Shi Qi hopes to help brand owners become a "complementary" channel to achieve "full lifecycle circulation" of products, without price disruption or conflict with existing channels. No Burning Money, No Hype, Over 10 Million Monthly Active Users Suppliers welcome Hao Shi Qi, but what is the value for C-end users? Lei Yong emphasized that Hao Shi Qi's cheapness is different from other low-quality, low-price e-commerce platforms. For C-end consumers, we promote the slogan "Brand food specials with closer dates and cheaper prices". The platform's users are not only consumers outside the Fifth Ring Road but also office workers in CBDs of Beijing and Shanghai. The user profile is rational, smart, and money-saving consumers. This is also different from buying clearance or leftover fruits and vegetables at wet markets or fresh supermarkets. Because these are pre-packaged standardized products, their quality is exactly the same as full-price products. These consumers are not those who are greedy for absolute cheapness but rational decision-makers. Simply put, consumers can buy Evian or Perrier water with the budget of Nongfu Spring. Because it provides consumers with high cost-performance products, Hao Shi Qi maintains rapid growth even in the context of fragmented traffic. Currently, Hao Shi Qi's traffic sources include its own APP, WeChat, Alipay mini-programs (life accounts), etc. Through multiple traffic ports and word-of-mouth effects, Hao Shi Qi has over 100 million users and over 10 million monthly active users. Lei Yong told New Distribution that Hao Shi Qi does not burn money or hype, but focuses on doing one thing well: providing consumers with authentic, high cost-performance brand products and helping the food industry improve turnover efficiency. To go further, Hao Shi Qi is also continuously increasing its self-operated ratio to solve service quality issues from the source, while pursuing "higher gross margins" for its own operations. Lei Yong believes that by controlling quality, improving consumer experience, and helping companies clear inventory quickly, Hao Shi Qi can continue to maintain high growth and embrace a market growth space of hundreds of billions!