Click the original text to view details On the morning of July 12, Three Squirrels went public, marking another key milestone in its seven-year entrepreneurial journey. At the end of 2011, in an ordinary coffee shop in Ningguo, Anhui, a conclusion more stimulating than caffeine was drawn — "E-commerce can give birth to new brands." Uncle Feng and the Squirrel Dad had remarkably consistent views on this trend, and thus began their cooperation and friendship. As the most "focused and loyal" investor and the friend who loves "intellectual challenges" the most, Uncle Feng witnessed many lows and highs of the "Squirrel Dad" in this entrepreneurial journey, as well as the choices, thoughts, and growth behind them. Shortly before the IPO, Uncle Feng and the Squirrel Dad's routine "face-to-face" meeting, as usual, expanded into a nearly four-hour long conversation, with resonance and sparks. At such a juncture, some questions found answers, while some thoughts were just beginning. We recorded and edited this long conversation and share it with you here, hoping it can inspire you. Small enterprises cannot do what big enterprises do, unless it is an opportunity for exponential growth Li Feng: Some believe that starting a business now is not as easy as it was a few years ago. When you first started, how did you find the entry point and development opportunities? Zhang Liaoyuan: From a strategic perspective, big enterprises cannot do what small enterprises do, and small enterprises cannot do what big enterprises do. Although nothing is absolute, you should not do what others have done, unless it can achieve exponential growth or bring disruptive change. In 2012, why did we think we had to do e-commerce even if it meant selling everything we had? Because we knew this was something worth doing. The basis for judging it was the sentence we found at our first meeting — "E-commerce can give birth to new brands." This was also the most important sentence in our early days. Li Feng: Since new brands all had opportunities, it must have been a race of a thousand horses. Why did it end up being Three Squirrels? Zhang Liaoyuan: When we started in 2012, there were indeed many fellow travelers, some in clothing, some in daily chemicals. Looking back now, many of those fellow travelers are no longer around. Some categories are hard to scale up. Clothing is relatively non-standard, and internet clothing brands tend to be niche. Daily chemicals need no mention; offline competition is too brutal. Once big players like P&G enter, small enterprises find it hard to survive. The nut industry was different. In 2012, there were no super-large players offline. We seized this opportunity. When our online scale grew larger than our competitors' offline scale, we could compete with them. If in 2013, Laiyifen had discovered our rapid growth and knocked us down, there would have been no us later. Fortunately, they were conservative at that time and missed this critical point. Li Feng: So when making judgments, category and competitive environment are important bases. Zhang Liaoyuan: Yes. For small enterprises, the most important thing is to find a zone ignored by big enterprises, seize the time window, and grow quickly. Many enterprises eventually lose to big enterprises because your growth speed and time difference are not enough; you are not yet strong enough to confront big enterprises head-on. For example, the clothing industry once had internet celebrity brands that were popular for several years, but they still couldn't beat Uniqlo. When Uniqlo started to focus on online, new brands were immediately crushed. The essence of business is competition. I think a very misleading saying is "I never look at competitors," although many entrepreneurial leaders say this. Of course, keeping an eye on competitors does not mean you cannot have higher-dimensional thinking. Many people cite the example of asking what a faster carriage is, and the answer is a car. What I mean by "benchmarking" is not the carriage itself, but the service the carriage provides. That is, we must study competitors, but not their strategies, but their products and services. Li Feng: How did these ideas of yours form? Zhang Liaoyuan: One was forced, and the other grew out of difficulties. Most entrepreneurs should find it hard to think everything through from the start. Conversely, such entrepreneurs may not necessarily succeed. At least in the early stage, people rely more on intuition, and then keep trying and making mistakes. In this process, you will make many mistakes. But it doesn't matter; entrepreneurship is like fighting a war, practice leads to truth. However, when you grow to a scale of ten billion, you cannot rely solely on intuition; you need a systematic approach. At the beginning, for Three Squirrels, the most important thing was the sentence I mentioned at the start: "E-commerce can give birth to new brands." Around this core sentence, we mainly did three things: First, choose a good name; Second, do a good job in user experience; Third, concentrate forces on the 'Double 11' campaign. Li Feng: In the first few years, you were generally smooth sailing. Zhang Liaoyuan: Yes. The story behind this is that with the name "Three Squirrels" and the victory in "Double 11," no matter how many opponents, the subsequent battles were not so difficult. Because you won strategically, the name "Three Squirrels" and being the "number one" left a deep impression on everyone. Good supply chains will want to cooperate with the number one, ensuring we always have the best product quality. Although looking back now, we didn't think everything through at that time, including how to transform the food manufacturing industry and how to use data, it didn't matter at all. Why is it harder for bigger enterprises? Because big enterprises need to do everything, but small enterprises only need to find the key one or two moves, dig into one point thoroughly, and you can win a valuable forward momentum in your early stage. When the sky falls, no one can foresee it, but when it really falls, the first thing is to save your life Li Feng: Forward momentum will disappear. Zhang Liaoyuan: When we ran to 2017, the momentum indeed disappeared. This was actually a critical period for us, because after the momentum disappears, there are usually two outcomes: either the enterprise takes this as an opportunity to continue evolving, or it cannot pass this hurdle and that's it. There is a saying that when the sky falls, the tall ones get hit first, and the short ones later. It means no one can foresee the sky falling, but at the moment of being hit, the difference appears. Whether you can recognize mistakes and make quick decisions is the real test of an entrepreneur's ability. When the sky falls, save your life first. At this time, don't think about finding a perfect plan. First save your life, and after saving your life, find out the cause and where the problem lies. This process is often a continuous exploration and evolution until you finally find the next growth factor. Li Feng: Among the problems you encountered in these seven years, I remember about three. Around 2013 and 2014, it was mainly logistics; by 2015 and 2016, it was profitability. First you did nuts, but nuts couldn't make money, so you did snacks, which also didn't make money at first, so you began to doubt whether you could make money; later you made money, finally proving your profitability, and making money seemed easier. But by 2017, you suddenly found growth stagnating. Zhang Liaoyuan: In the first half of 2017, we were happily making money. At that time, we calculated that by 2018 we could reach 7-8 billion, and we were overjoyed. But when we counted the money at the end of the year, we found it was wrong; growth had stagnated. Li Feng: So at that time, you blindly fought a price war. Saying "blindly," were you thinking that since you hadn't figured out what to do, you would first prevent others from emerging, attack others, attack wherever they are strong. Zhang Liaoyuan: Yes, enterprises fear growth stagnation the most. Once growth stops, all problems come. So after 2017, by 2018, in my view, the company had problems everywhere. What to do? Attack others. See what hot products they have, and we quickly launch them too. We implemented a "T9 Strategy," which was to launch 9 hot products at the fastest speed. As we fought, we found the feeling. Frankly, last year we were blindly fighting for a while, until the beginning of this year when we finally figured things out. This is what I said at the beginning: save your life first, find methods while fighting others, keep exploring, and finally find the truth. Li Feng: So, this is your competitive strategy, and it also relates to employee morale. Through fighting, at least you can unite everyone. Zhang Liaoyuan: Yes. When a company has problems, you must quickly increase revenue, never cut costs. If you cut costs, morale changes. Another thing, since good things must contain bad things, bad things must contain good things. We fought chaotically and unexpectedly created a new category—cake. When we started making cakes in 2018, we lacked confidence because we didn't understand the industry and consulted cake companies everywhere. But after we became the "number one" brand in cakes, now we understand the baking industry well. Growth is above all, and everything can grow Li Feng: Over the years, have there been times when you felt you couldn't go on? Zhang Liaoyuan: From the first day, I felt I couldn't go on. But as time went on, I felt more and more that I could. Because when you just start, your responsibility is not that big, and you just think it's hard, but you still continue. As you move forward, problems increase. Li Feng: Responsibility grows, and it forces you out. Zhang Liaoyuan: When forced to the limit, there is only one way: keep going. However, at this time, your cognitive boundaries also change. Now I feel that the growth of a company is similar to the growth of a person. It will inevitably experience good and bad things, and this process is a process of continuously validating values. Our company has an important value: Growth is above all. How did this come about? When a company gets a bit bigger, it's easy to have a wrong perception—my scale is big, so my growth will naturally slow down. We thought this way in 2017. By 2018, when the company started having problems, I began to reflect that this thinking was not right. By 2019, our attitude towards growth became more resolute. How can we slow down? China's market is so big; we haven't finished it. Taobao hasn't stopped. So now I am very sure that "growth is above all, and everything can grow." Last year, our Tmall flagship store fought a large-scale price war. This year, there were internal voices that there wouldn't be much growth. My attitude was clear: if you can't do it, I can replace people. If after two or three rounds of replacements, everyone can't do it, then we'll judge. At this time, you can't open a gap; if you open a gap, it's trouble. Li Feng: Agreed. Zhang Liaoyuan: In Three Squirrels, we have always emphasized competitive awareness. Competition must find a benchmark, and it must be the strongest benchmark. This has little to do with scale. Even if it is small, if it can achieve over 50% growth, you must set your goal to grow over 50%. Specifically for growth, you also need to clarify what growth you value most. We advocate that sales growth is more important than profit growth, because if sales revenue doesn't grow, profit growth is harmful. These things must be clearly understood. When running a company, you must prioritize; the first element is far more important than the third. Don't try to do everything at the beginning. This is the hardest thing in business, because prioritization means choice and trade-offs. The endgame of business is the choice of values Li Feng: Everyone agrees on the importance of values, but specifically in corporate management, how do you establish your values and truly implement them? Zhang Liaoyuan: Let me first share my view on values. Although companies may have the possibility of opportunism at different stages, I always believe that the endgame of business is the choice of values. Three Squirrels' internal reference states our mission (1. Make the masters of the world happy; 2. Promote the progress of the food industry with digitalization, and promote brand diversification with IP) and vision (1. Live for 100 years; 2. Enter the global Fortune 500; 3. Serve the vast majority of families worldwide) and values (Exceed master expectations; Be real; Strive as the foundation; Innovate; Only be first). Clarifying mission, vision, and values is related to the growth of the enterprise. You must figure it out sooner or later; if you don't, you definitely won't grow big. Values are not something you only consider when the company is big. On the first day of our entrepreneurship, when there were only five people, we were discussing what values were. Values are the working methods to achieve strategy, the ideology of an organization, and the code of conduct for all employees. Our entire company's decisions follow values. For example, we put "Exceed master expectations" as the first value, which is actually considered from a strategic level. Everyone can understand that when our products and services fail to exceed master expectations, we will definitely head to a dead end. In fact, there was a period when we didn't develop well, and upon reflection, we found it was because we lost this value. Li Feng: After establishing values, how do you implement them in the organization? I know you have had many thoughts on corporate organization in the past year or so. Zhang Liaoyuan: Values are ideology, concepts. Concepts are useless if just spoken; they must be practiced. Our current internal assessment uses a dual-track system—50% performance, 50% values. To assess values, the premise is to refine them. Under each value, we have 4-5 golden sentences and detailed rules. Taking "Exceed master expectations" as an example, it is further broken down into several slogans. The first is "Always maintain products and services that exceed competitors." Under this slogan, we continue to break it down into several detailed rules. This process of breakdown and refinement answers what "exceeding expectations" means. These detailed rules constitute our evaluation criteria. When scoring, each rule has a score range from 1 to 5. When scoring, you must provide cases as the basis, and we will sample and verify the cases. The reason for doing this in such detail is that enterprises need to establish a set of standards so that employees know how to strive. If employees don't know how to strive, the company will definitely have problems. Many people only focus on the 'sales' in 'marketing', not the 'management' Li Feng: What do you think is the core competitiveness of Three Squirrels? Many people think your brand is well done because of your strong marketing ability. Zhang Liaoyuan: When starting a business in the FMCG industry, marketing ability is definitely the first priority. For FMCG startups, the opportunity lies in finding a very niche field that big companies are unwilling to do or look down upon, and then putting effort into marketing. Don't talk about technology first. The core capability of a brand in its early stage is marketing. Li Feng: No, the benefits brought by technology or craftsmanship are useful; they can solve users' pain points. For example, you also developed tools to help users open shells in the early days. Zhang Liaoyuan: The essence is still our ability to insight into user needs, and then reverse customization: matching different products for different channels and groups. Marketing is just the skin of user experience. Li Feng: The reality is that many people's marketing is not the same thing. Zhang Liaoyuan: People may have derogated marketing. Many people only focus on the "sales" in "marketing," not the "management." The essence of "management" is that when customers buy goods, you match them with goods. It is about the ability to insight into consumers. The reason why the same word is split internally is that in the past industrial era, sales personnel, market personnel, and R&D personnel were separated. Salespeople get a product and only keep saying how good it is. Their mission is to sell it by any means; they don't care whether consumers need it. Now we adjust our thinking, driven by digitalization, emphasizing insight into users and products, and reconnecting management and sales. Internally, we achieve the integration of product people and operation people. For example, a regional manager manages 10 stores. His first mission is to do user insight and set products for the store. I don't need you to do promotion or ground promotion. Li Feng: This requirement is very high. Zhang Liaoyuan: So we rely on "digital supply chain" to solve this, re-establishing the connection between people and products. In the past, our people and products were separated. From raw materials to snacks bought by consumers, the chain in between is too long, with countless distributors. As they work, the people doing this in the middle forget the most fundamental thing—users don't want brands; they want products they like. Brands are meaningless to them. Now why do we propose "retail should go de-retailing" and "brands should go de-branding"? Because the fundamental purpose of retail and brands in the past was to passively sell products to users. But if users enjoy products they truly want, retail and brands become less important. Brand gives way to optimal cost and efficiency Li Feng: This is the conceptual level. On the practical side, what specific problems made you feel you couldn't rely solely on brand? Zhang Liaoyuan: Simply put, in the early stage, brand was very important because often what leaves an impression is just a name. Like a person going on a blind date, they might be attracted by appearance or some feature and find each other instantly. Of course, after finding, you need to return to the essence: your connotation, your product. Now, when we set a goal to achieve tens of billions in growth every year, we find that the effectiveness of brand is gradually decreasing. More specifically, behind this shift involves a concept: snacks individually are homogeneous; the essence of snacks is homogeneity. Do you agree? Li Feng: You need to finish the second half. With just the first half, I can't judge. Zhang Liaoyuan: You must agree with the homogeneity of snacks, meaning whether it's Coca-Cola or Oreo cookies, I have the ability to produce the same product. No problem. Where is the differentiation? We discussed that in the past, the differentiation of snacks was at the brand end. The monopoly of big enterprises was manifested in advertising monopoly and shelf monopoly. Li Feng: Agreed, mainly shelf monopoly. Zhang Liaoyuan: Advertising monopoly is also serious. But now, we can see that the power of brands in forming product differentiation is not as strong as before, including daily chemical brands. The reason is that the "two monopolies" are being broken up, especially the channel is being divided. So, in this context, what should our strategy be based on? What we should grasp is leadership in cost and efficiency, that is, providing products with higher cost performance, but ultimately making more money. This is the most powerful ability. So, although our brand still has differentiation attributes and we will continue to uphold the brand, we must also have another more important line: the cost efficiency and supply chain line. The supply chain determines the product, and marketing determines the brand. If before, brand accounted for 7 and product 3, now it may be reversed. Li Feng: I think this is related to the change in your industry position. You see different things. You were an excellent startup, and now you are a 10 billion market value enterprise. Zhang Liaoyuan: It's possible. It can only be said that starting to focus on brand allowed us to get to where we are. But at our current scale, if we don't want some brands to rise, we have the ability to block them. For example, a cookie brand emerged recently, and we quickly followed. I can make cookies exactly like yours, but you sell at 180 yuan, and I can fight a price war, selling at 80 yuan, leaving you no gap. Li Feng: That's because you are big now and can show off. You also came from being small and beautiful. A year ago, when you hadn't determined the direction, seeing new entrants, you must have felt a bit uncomfortable. Zhang Liaoyuan: Now I have seen clearly. My concept is that you must be number one. No matter who it is, even if I can't kill them, I can make sure they don't grow big. The confidence behind this comes from our ability to build a sufficiently powerful leisure snack infrastructure. This infrastructure is my moat. With this moat, I can do many things. So now, we are no longer a single-product enterprise. Our innovation must be platform-based. What we want to do is provide every family with richer snack solutions under optimal cost and efficiency. Snacks individually have little innovation, but the act of eating snacks requires a lot of innovation. If we define it as a product solution, then this solution doesn't just look at one category, but emphasizes richness. Different snack categories are adjustable components. I want to make you remember that your family's snacking is contracted to me. How to target the mass market instead of falling into a niche market? Li Feng: Although China's consumer market is large and there are many leisure snack brands, so far, no leisure snack brand has reached a market value of 10 billion. Zhang Liaoyuan: Yes, this is what I said about eating snacks requiring a lot of innovation, because everyone hasn't done well enough. The markets for beverages, instant noodles, and fast food are large. Besides being related to the theory you mentioned about dietary needs, it's also because eating and drinking are related to the mass's ability to pay. Li Feng: Yes, the composition of diet is related to the composition of the human body. Zhang Liaoyuan: In the past, you boiled water at home, then drank mineral water, then flavored water. But when flavored water exceeds 7-8 yuan, the market share of this beverage is limited. This is a truth we learned after operating for a long time: if a cake exceeds 35 yuan per kilogram, it cannot become a big single product, even if you think it's delicious. Our best-selling is 19.9 yuan (800g), more than 20 slices, meaning you can spend 3 yuan every morning to eat two or three slices. This is why I repeatedly emphasize supply chain optimization, which can allow more mass consumers to form stable snack purchasing power. For example, you can buy a week's snacks for 19.9 yuan here, and this fourth meal might be done well, even replacing the third meal, increasing consumption frequency. At the same time, it is rich enough, and the cost is acceptable to you. Then the demand for such things will be high, which is conducive to the growth of the enterprise. Li Feng: That's right. Provide richer choices as a substitute for instant noodles and other fast food. Zhang Liaoyuan: At our scale, we can no longer do what small enterprises do. For example, we also discussed high-end beverages. This is meaningless to us; it can't leverage the mass market. The next 10 years: digital-driven, achieving supply chain front-end and organizational efficiency Li Feng: From a strategic level, what is the significance of you going offline? Zhang Liaoyuan: First of all, China is a big country of foodies. E-commerce has developed for so many years, but there are still hundreds of thousands of snack stores offline. I think the demand for offline purchases doesn't need verification. But currently, offline is generally not done well. The simplest example: some offline snack stores offer rich categories, and each bag looks cheap, but when you buy a bunch and weigh it, it's expensive. Users can't predict at all. In addition, we also found many problems when doing online. First, online can indeed present very rich products, but when users choose products, the depth of preview is limited. Although you can display 1000 products, they can't browse all before judging. They might see everyone buying this, so I'll buy this too, tending to buy hot products. But the problem is that hot products generally have low profits, making it difficult to make profits online. Second, online price comparison is easy. Big enterprises have scale advantages and can make money through asset restructuring and supply chain spillover, but small enterprises find it hard to make money. Third, online has bottlenecks. For example, there is a limiting factor—delivery fees. Every consumer indirectly bears the delivery fee, so the unit price of products must be correspondingly higher, at least 60-70 or 80-90 yuan, which limits certain high-frequency demands. Now look at offline. Why might offline be more profitable even with almost the same pricing? Because the path and logic of offline shopping are different from online. First, information is insufficient. The offline sales structure is very fragmented, and the difference between hot and non-hot products is not prominent. Second, price comparison is also insufficient. "Insufficient price comparison" here means you feel good while shopping in the store, and you won't think about comparing with others. Of course, our online and offline pricing is the same. Third, our offline packaging can be smaller, and there is no shipping threshold, which can increase frequency. So overall, even if we sell cheaper than others, many of our offline stores can achieve about 40% gross margin. Li Feng: Indeed, in your industry, offline and online are completely different. Previously, an entrepreneur told me that internet snack brands don't sell well in offline channels. First, there are display issues: whether placed horizontally or vertically, they can't stand or hang. Zhang Liaoyuan: Yes, although this is a small problem, it must be solved. I have thought carefully: there is no integration between online and offline. We rose online, relying on reverse customization. Offline also needs reverse customization, although it's completely different. We can look at the composition of our industry from a more macro perspective. It mainly includes the following ends: raw material end, manufacturing end, circulation end, connection end, and demand end. Currently, the internet only solves part of the problem, that is, the circulation end between manufacturing and connection. You order online, and the logistics warehouse sends it to you, but it doesn't solve it thoroughly. Li Feng: Mainly, it doesn't cut into the production end. Zhang Liaoyuan: At the same time, there is also the ability of reverse customization. So in our industry, there are several directions we can take: One is the advantage of scale, which can reduce costs at the raw material and manufacturing ends; the second is the advantage of high turnover, which can reduce costs at the connection end between manufacturing and circulation, and high turnover can also bring fresh perception to users; third, the advantage of flexibility. Not all products can achieve scale advantages. Some can't be big, and what they can provide is not cost advantage but flexibility. For example, cakes and nuts become more competitive as they grow. Why couldn't we do this before? Actually, it's because the business model lacked a digital tool. The connections between these ends are complex, with many processes. So, if seven years ago we played the game that new channels would create new brands, then in the next decade, what we want to do is digital-driven, achieving supply chain front-end and organizational efficiency. Retail is 100% efficiency competition Li Feng: Regarding offline stores, the question I've asked you most recently is: why do users go offline, and what categories can bring customers to the store? Zhang Liaoyuan: 85% of users now buy offline. Even if you buy online, you still buy offline. I know a big concept: Chinese people love eating, and there always needs to be a company to solve their eating problem. What I'm thinking about now is how offline stores can evolve. Li Feng: I haven't thought it through clearly, but I think there are at least a few directions. First, from the result, it must provide a more complete solution. Second, besides having clear offline advantages, it can also attach other online advantages, such as making the ways to reach users more diverse. Zhang Liaoyuan: I haven't paid much attention to store visit frequency. I talk more about consumption frequency. Actually, my target is the most competitive product under the vertical positioning in this business district. For example, in a business district of one or two kilometers, there must be a big supermarket and mom-and-pop stores. The usual store visits are for daily necessities like soy sauce, rice, oil, and salt. So I want to cut off the leisure snack part. Li Feng: Okay, no problem. Why do I keep asking about store visit frequency? Because I've been thinking about the future format of retail stores. China's urbanization, population density, and transportation costs are very different from abroad. Small families, high urbanization, and very high transportation costs. This leads to a typical life scenario: after work, you return to a small family, too lazy to cook. If there is a store at your doorstep, you either order freshly made noodles, wontons, or other fast food and have it delivered, or you go there to eat and bring back some fruit and snacks on the way home. In this case, the more reliable retail store format I see now is to connect these three things: first, freshly made hot food that suits Chinese diets, different from 7-11; second, fresh vegetables and fruits; and third, some pre-packaged food. Actually, I want to ask: under China's unique urban environment and population structure, how to solve the problem of what brings people to the store and makes them remember it? Small stores can only succeed if they do relatively high-frequency, irreplaceable things. Retail is 100% efficiency competition; there is nothing else. If your efficiency can't reach the highest, according to China's real estate development, rising property prices will inevitably squeeze the living space of street-side stores, and your offline stores will eventually be squeezed out of the streets. Zhang Liaoyuan: This will bring great opportunities to e-commerce again. Li Feng: Currently, those doing new retail entrepreneurship are actually competing on who can achieve the highest system efficiency. In the end, except for one or two, the vast majority should not survive. Look at Carrefour, sold for 6 billion. Zhang Liaoyuan: Carrefour was sold cheap. Li Feng: In comparison, many new retail projects today are overvalued. Although everyone's models are different today, China's offline retail stores may only have three ways out: First, one-stop comprehensive shopping solutions, similar to a new type of Costco or Walmart; Second, community small stores like 7-11, but they must be localized; Third, some categories can be made into specialty stores. Zhang Liaoyuan: Then we are the third. Li Feng: Okay. I've also figured it out. In the end, retail may have two formats: one is for rigid demand and scale, eventually becoming like Amazon and Xiaomi, being both brand and channel; the other is C2C like Taobao and Kuaishou. Users don't know what to buy, have no clear consumption purpose, and just browse. Besides these two, the survival space of other formats in between will be gradually squeezed. In the United States, the manufacturing and circulation of goods have gone through full competition one by one, improving efficiency; China puts manufacturing and circulation of goods, and information manufacturing and circulation, in one channel, with slight sequence but almost simultaneous. This means entrepreneurs need to adapt to both things simultaneously, that is, solve the efficient circulation of goods and the efficient circulation of information at the same time. Zhang Liaoyuan: Adapting to both things simultaneously, there are opportunities in vertical fields. From a purely e-commerce perspective, my current view is simple: following the most direct approach, selling goods on Taobao, it's almost impossible to make big money. Because homogeneous products can only earn 4-5 points on e-commerce. So how to play? It relies on supply chain efficiency. I sell the same things as you, but I can sell cheaper. If you do this price, you can't make money, but I can, relying on the supply chain. The supply chain must be front-ended to the retail end. In plain terms, in the past, the information flow of the supply chain did not flow to the manufacturing end, so the efficiency of the supply chain was not improved. Li Feng: So what do you plan to do? Zhang Liaoyuan: Our advantage is the halo of being the "number one brand." Good supply chains are willing to follow us. What I need to do is reconnect them. Of course, following this approach, we won't be a high-profit enterprise in the short term. There's no way, but I believe that if we persist, once it works, it will get better and better. Li Feng: Monopoly will become stronger and stronger. Zhang Liaoyuan: Cost and efficiency are the biggest moats, but to complete this moat, you must reach that scale. Li Feng: So now, are you clear about the road ahead? Zhang Liaoyuan: Yes. Doing offline, we face two challenges: one is how to apply the ability of reverse customization—our core success gene in e-commerce—to offline, not only providing experiences that online can't, but also achieving the same cost efficiency as online. The second is how to manage offline well, especially personnel management. It can be said that to achieve exponential growth, these are the two hardest things. To solve them, we still have to rely on digitalization. Thanks to the Internet era Li Feng: Looking back, if an entrepreneur now wants to do a consumer project, what suggestions would you give? Zhang Liaoyuan: Find a very niche field—one that big companies are unwilling to do or look down upon—and then put effort into marketing. Before 2017, what we grasped was traffic. At that stage, traffic was more important than products; products matched traffic. After 2018, products are more important than traffic; products bring traffic. I say this not because I didn't value the supply chain at the beginning, but a very realistic reason is that I was small then, and my scale couldn't change the supply chain. If you sell only 300 million a year, how can you change the supply chain? Now we have several billion a year, and only then do I have room to talk with the supply chain. So, at different stages, you must make choices and changes based on different strategic fulcrums. This is very important for startups. Li Feng: Off-topic, have you ever thought about what you would do if you hadn't done Three Squirrels? Zhang Liaoyuan: I haven't thought about it. At a certain node in a person's growth path, something will definitely precipitate. When I joined Zhan's, I thought clearly that I would sell walnuts and nuts in the future. Why? Before joining Zhan's, I wandered in society for six or seven years, trying various things, all with only hardship and no results. When I joined Zhan's, I summarized that I had never been focused on any one thing and hadn't found a master to learn from. After joining, I told myself that selling walnuts wasn't a high threshold. I would stay focused, learn well inside, and if I could sell well in this company, I would; if not, I would still sell walnuts when I left. This was my biggest self-awareness at that time. Under this awareness, I did it for nine years. If Li Feng hadn't appeared, I think I would still be selling walnuts. Li Feng: As a typical representative of internet + manufacturing born in the internet industry, I think Three Squirrels' corporate culture also has internet characteristics: transparency, sincerity, and customer-centricity. Do you find it difficult to achieve transparency and truthfulness? Zhang Liaoyuan: Truthfulness is essentially self-discipline. It's not easy, but truth is worth defending. The information revolution brought by the internet will only make the world more transparent and truthful. Many people think we are proud and don't understand social conventions. That's not true; it's because we are truthful. My father always taught me to be a good person. In the internet era, the premise of being a good person is truthfulness. Not to brag, but I am very grateful for the internet era, especially for the internet business model that eliminated so many middlemen. You just need to face consumers truthfully, because the feedback from consumers is also truthful. You don't need to deal with so many people to do business. This suits me well. Also, the internet opened a window for people from small counties like us, allowing us to stand on the same starting line as people in big cities and compete on a national platform. If it weren't for the internet, I might not have succeeded in entrepreneurship. Source: Fengrui Capital (ID: freesvc)