The following is the speech delivered by Ms. Xu Yuren, Deputy General Manager of Guangzhou Shangrui Marketing Planning Co., Ltd., at the 5th FMCG + Internet Conference hosted by New Distribution, and has been organized and published for readers.

Shangrui Marketing is a service-oriented distributor focused on the new retail sector, with its core operational battlefield being B2B platforms such as Alibaba Retail Link. Through digital operations, Shangrui helps brand owners achieve deep distribution.

Although Shangrui's business is only two and a half years old, it is estimated to be the youngest distributor in the conference. But the growth rate is quite good. Through two years of development, we currently operate nearly 20 well-known brands, covering daily chemicals, food, and alcoholic beverages, almost full-category operations.

In these two years, we have made many offline distributor friends. After communication, we found that the feelings are similar: anxiety. The business of hypermarkets is not easy to do, and the only existing stock of traditional retail small stores has been moved online by B2B platforms, leaving less and less living space. Offline distributors are anxious; in fact, we are also anxious. Upstream are brands, and downstream are small store resources, which we cannot control. Offline distributors are relatively better off; they can contact outlets and think about how to control them. But for online service-oriented distributors like Shangrui, we cannot see or touch them at all.

Where is Shangrui's competitiveness? The core value of a B2B platform is to empower small stores and brands through data. If a B2B platform operator does not make good use of this data, then Shangrui is no different from ordinary suppliers. Therefore, Shangrui's core competitiveness must be the ability to integrate and apply data.

The data is there; if we don't use it or don't know how to use it, it is worthless. The data generated by the platform is also available to other operators; the key is how to use it. This topic is very broad, but today I will only talk about one point: digital operation, how to use numbers to do distribution business well.

Before that, I want to express a viewpoint: Digital operation is not a technology or skill, but a way of thinking. Many distributors also spend huge sums on software and systems, but if the underlying thinking does not change, it is still the same. Digital operation is a way of thinking that should first happen in the minds of every distributor boss and manager.

Shangrui's main battlefield is on B2B platforms. Although it may be different from the business logic of traditional distributors, the ultimate goal is the same: to help brand owners cover offline retail terminals. The goal is the same, just the methods are different.

Sales Management

Offline outlets and stores are invisible and intangible to Shangrui. How do we operate? We must first set goals. For operators, the ultimate goal is the relationship between single product and single store.

How to understand this? For example, the platform shows that two outlets are very close, maybe only 20 meters apart, but one outlet sells chocolate very well, while the other cannot sell it, but another SKU with a higher price sells very well. It is strange. We even went offline and found that one is a school-side store, and the other is a relatively high-end community store, separated by a road. This case illustrates that different stores have completely different demand for product mix. The ultimate goal is to achieve the relationship between single store and single product.

Many distributors look at result indicators, but for us, sales completion rate and GMV are results. In the market operation process, we need to break them down. For example, GMV is a result, but its source is the number of active stores * average order value. Around these two points, we can continue to break down: old stores or new stores, number of SKUs, number of orders, etc. We can also break down by SKU dimension and by region dimension.

For Shangrui, all business decisions cannot rely on experience. Past practice tells us that experience is often wrong; we only look at data.

Take the simplest example: when doing a full reduction activity, setting the threshold level, how to set it? We can only analyze with data. For example, in a certain area, what percentage of stores have an average order value of 100 yuan? What percentage have 200 yuan? How many core stores do we want to attack this time? Another example: when making a virtual combo pack, which SKUs to use, what is the purpose of the virtual combo activity—is it to "break into stores" (new stores) or to drive repurchase? How many of each SKU? All of this comes from data analysis.

In sales management, we usually focus on three points: First, stage-specific key indicators; second, core data tracking; third, marketing activity ROI.

There is a lot of data; how to look at it? First, set stage-specific key indicators. Different brands have different market goals at different stages. For example, when we first served a sanitary napkin brand, sales were very small at the beginning. At that time, the stage-specific key indicator was to cover outlets, especially to look at the number of new stores. All operational strategies revolved around this one thing.

In the second year, the results were not bad. But compared with its competitors, there was still a gap. We found the source of the gap: our average order value was 140, while the competitor's was 200. So the key indicator at this stage was to increase the average order value, and we designed operational strategies around this goal. Later, we found repurchase issues, and we adjusted again.

Different stages look at different key indicators, but some core data need continuous attention. For example, single-product distribution rate, repurchase rate, and average order value. The single-product distribution rate looks at the penetration rate of different single products. Distribution alone is not enough; we also need to look at sell-through. Repurchase rate and average order value can show whether the brand is operating healthily.

There is another set of data that is very important: the ROI of marketing activities. Basically, for every activity, we analyze its input-output ratio. The relationship between input and increment. Of course, the increment here is not only the increment in sales, but also the increment in new stores.

Are these useful for offline distributors? Of course they are useful. For example, distributors can establish store distribution standards, build a database, set labels for stores, and set key indicators and core data tracking. In the business process, all marketing investments can be planned according to different store labels. First-line brands may have their own distribution standards, but for non-first-line brands, the manufacturer's capability is relatively weak, so they have to rely on themselves. Behind the relationship between single product and single store is data analysis.

Personnel Management

All operational implementation is completed by the business team. Many distributors also use software tools, but what do they use them for? Usually for monitoring, especially common is check-in. But can we use the data collected by tools to empower our salespeople?

Each salesperson is also doing their own business. Can we help salespeople do their business well through the establishment of a database? Everyone does not like to be monitored. If we think from their perspective, through data, we can turn routine matters into detailed tasks, so that salespeople know the management methods and distribution standards corresponding to each store, as well as the corresponding store tasks, making sales work simpler and more efficient.

More than ten years ago, when we talked about refined management, it was more about the eight-step visit, but behind the eight-step visit is a unified store management method and distribution method. But the role of data is to do a thousand stores with a thousand faces on the basis of the eight-step visit.

Inventory Management

Many people think that because we have a powerful system behind us, it is easy to do inventory management, but in fact it is not. For example, in 2017, when doing Spring Festival gift boxes, we got the best traffic position and seemingly good SKUs (Spring Festival gift boxes). The platform asked us to stock 1 million yuan of goods. At that time, lacking experience, we went offline to investigate and felt it was not feasible, so we finally stocked 300,000 yuan. What was the actual result? We only sold 100,000 yuan. You know, this was a Spring Festival gift box, only sold 100,000, and there was still 200,000 in inventory. You can imagine. So doing inventory management is not easy either.

Therefore, in terms of inventory management, we have also achieved refined management, subdivided into refined operations of single product and single warehouse. Currently, we use about 40 warehouses, operate 20 brands, and a brand often has 20-30 SKUs, so our orders must be very precise. We will establish an order management mechanism, especially when operating new products.

With the order management mechanism in place, the key is to implement it to people. By setting KPI management, such as out-of-stock rate, inventory turnover days, and the proportion of clearance inventory, we ensure dynamic management of inventory. Finally, we establish a risk control system. Why do we do this so carefully? Because we operate a single channel. If we don't do it well, we have no place to digest it. Even if we can sell, it will be at a "cutting hands and feet" cost.

Warehousing and Logistics

Shangrui uses third-party logistics, which is a variable cost. For variable costs, we consider more about cost reduction.

In fact, with Shangrui's current scale, we could also build our own warehousing and logistics, but we believe that in this link, our function is to solve the logistics from the brand owner's warehouse to the platform warehouse. In the future, the platform can do this, putting the logistics system forward, directly to the platform warehouse. Their efficiency may be higher than ours, so this is not Shangrui's future core competitiveness.

The only thing we need to do is reduce costs and improve warehouse utilization efficiency. Around cost reduction, we analyze data from two dimensions: goods value and sales amount, to consider how to reduce warehousing and logistics costs.

Financial Analysis

Doing this business ultimately is to make money. When to do financial analysis? When introducing a new brand, we will do financial analysis. Of course, we not only look at gross profit, net profit, capital usage, and break-even point, but we also make a special report, then review it monthly, and use it as our management indicator. Is the actual operation each month the same as originally estimated? Is there a gap? Where is the gap? How to adjust?

Regarding financial analysis, we focus on three parts: First, capital; second, annual settlement; third, profit.

Capital. What is the current cash flow? What money is used to do this business? Especially whether to increase money. We not only look at a single brand, but also the entire company. Originally, we did the sugar and chocolate category, and summer was the off-season, with less capital usage. Now we also do water and beverages, and summer is the peak season. By adjusting, our capital usage efficiency has improved. We record all data such as payment collection speed and verification cycle, and quantify them to form a formula.

Annual settlement. What is the situation at the end of the year? Many distributors cannot calculate clearly. They may only know how much profit they have made when they settle accounts. This is definitely not acceptable. Distributors must be clear about where their profits are, how much money they have made, and how big the risks are. At the end of the year, each brand calculates ending inventory, verification usage ratio, and ending verification balance, etc. Behind this is also risk control.

Profit. First, the marginal profit rate. It reflects a key core profit indicator of the brand. We can see how the profit is without considering fixed costs and interest. Net profit. We use business unit management. In the past, the team did not look at allocated costs and only asked the company for resources. But through fixed cost allocation, the team will think about how to optimize resources and improve efficiency. By issuing monthly reports, they can see the corresponding profits.

Finally, talk about ROI. Whether to invest 1,000 yuan in brand A or B is not based on which brand has higher profit. We often calculate and choose a brand with not high profit. Although the profit is low, the capital turnover is very fast. The most important core of deciding to do a brand is not to look at everything, but first to look at ROI, and second to look at risk. These are the two most important aspects.

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