Two years after its high-profile abandonment of offline channels, Blue Moon has clearly not achieved its expectations.
Core Guide: 1 Why is Blue Moon returning to Carrefour but not RT-Mart? 2 Blue Moon's decision to withdraw from hypermarkets two years ago was both passive and aggressive. 3 Blue Moon's frequent changes over the past two years have not brought the desired changes, so it has chosen to return to hypermarkets.
At the end of May, a report predicting that Blue Moon would return to RT-Mart attracted widespread attention.
However, according to exclusive information obtained by Retail Boss Insider from RT-Mart, the current RT-Mart household cleaning product procurement team and other internal personnel have not been informed or heard of any news about Blue Moon's intention to return to RT-Mart.
Blue Moon, which had already returned to Carrefour at the end of 2016, has not fully "reconciled" with hypermarkets due to the lack of RT-Mart.
And two years ago, Blue Moon's "breakup" with offline channels represented by RT-Mart was so "intense." Now that Blue Moon is returning to mainstream offline channels, what significance does it have in the context of new retail, and what should the industry ponder?
1 ******"Disagreement" Leads to Withdrawal from Major KA Hypermarkets**
On June 9, 2015, news of Blue Moon's withdrawal from RT-Mart instantly ignited the domestic retail and FMCG industries.
One was a leading brand in Chinese household cleaning and care, whose laundry detergent once accounted for over 40% of domestic sales; the other was China's largest foreign-invested KA hypermarket, which had been the industry champion with "three firsts" for eight consecutive years.
Interestingly, according to RT-Mart's understanding, since Blue Moon laundry detergent was first listed in 2008, Blue Moon's current market leadership position has been inseparable from RT-Mart's continuous support.
Blue Moon's withdrawal from RT-Mart was also seen by RT-Mart as "betrayal." It was no surprise that the news of the withdrawal caused shock across the industry.
External interpretations of Blue Moon's daring to "offend" RT-Mart basically revolved around "intensified competition in the household cleaning FMCG market, rising KA channel costs, and a significant increase in online channel shipments."
However, the reason Blue Moon withdrew from RT-Mart was not as the outside world speculated.
In April 2015, when Blue Moon and RT-Mart began negotiating the new year's procurement contract, Blue Moon proposed entry terms to the procurement team led by Lv Guoming, General Manager of RT-Mart's Grocery Department, which RT-Mart found completely unacceptable.
Blue Moon hoped to change the original purchase and shelf contract, setting up a dedicated counter "Moon House" in RT-Mart stores, presenting all Blue Moon laundry detergent and hand soap products under a unified brand image and unique counter display. Moreover, all products had to be priced independently by Blue Moon, with reduced contract deductions, and profits distributed after sales through negotiation with RT-Mart.
After Blue Moon's new entry requirements were reported to RT-Mart Chairman Huang Mingduan, RT-Mart decisively rejected Blue Moon. Blue Moon, on the other hand, showed no signs of compromise or flexibility.
On June 9, 2015, Blue Moon withdrew from RT-Mart, and RT-Mart removed all Blue Moon products from its more than 320 stores nationwide (as of June 2015).
Around the same time, news of Blue Moon's withdrawal from Carrefour and Renrenle emerged one after another. There was no doubt that Blue Moon was giving up offline KA channels.
During that month's JD 618 mid-year promotion, JD's official data showed that on June 18, Blue Moon sold 1.01 million bottles of laundry detergent on JD in half a day. According to industry estimates, Blue Moon's 1.01 million sales in half a day on JD were equivalent to the annual sales of two to three hypermarkets.
It cannot be ignored that Blue Moon's 1.01 million bottles of laundry detergent sold on JD in half a day were achieved at the cost of negative gross margin, on JD's hottest sales day of the year.
The contrast within less than half a month seemed to make the outside world more inclined to believe that Blue Moon's choice to abandon offline and focus on online was a correct decision made with great courage.
In 2015, the offline retail industry was already facing a comprehensive crisis. Even the industry champion RT-Mart experienced its first annual growth decline from double digits to single digits.
Blue Moon's abandonment of offline channels and focus on online was also interpreted by various parties as reflecting rising offline channel costs and sluggish market growth, which highlighted the long-term development potential of e-commerce channels.
Undoubtedly, Blue Moon's move was more disadvantageous for traditional offline giants like RT-Mart in terms of external macro interpretation.
In 2015, JD's page architecture had already added a large number of brand flagship store channels beyond the original "homepage - navigation (search) - product detail page." By supporting and encouraging brands to open online flagship stores, JD highlighted the transition from category shelves to brand "counters" in product display.
This was similar to Blue Moon's high-profile promotion of "Moon House," which was conducive to centralized brand display.
Choosing JD as a strong online channel did bring significant performance improvements to Blue Moon. According to exclusive information provided by JD to Retail Boss Insider:
From 2015 to 2017, JD's self-operated Blue Moon brand sales saw year-on-year net growth exceeding 100%. At the beginning of the year, JD's "Super Brand Day" promoted Blue Moon's high-end product "Machine Wash Supreme," and the single-day sales reached 33 times the sales of Double 11 in 2016.
Relying on JD's strong logistics support, Blue Moon is now piloting projects such as "palletized transportation" and "EDI system integration" on JD, greatly improving the logistics and warehousing efficiency of brand owners like Blue Moon.
2 ****The Misplaced Causal Relationship of Abandoning Offline and Choosing Online
Almost everyone believes that the conflict between Blue Moon and several leading large KA retailers was a concentrated release of long-standing grievances between daily chemical brands and retailers.
Offline supermarkets and hypermarkets have indeed charged various channel fees to brand owners for many years. There are more than ten types of fees, including entry, display, advertising, and holiday discount promotions. Coupled with rising labor costs for in-store promoters and low-price competition from competitors, the daily chemical industry generally suffers from the problem of offline costs not being proportional to gross profit returns.
However, in the Blue Moon case, what is the necessary causal relationship between strongly promoting Moon House and withdrawing from hypermarkets due to channel costs?
Perhaps in Blue Moon's strategic transformation blueprint, it believed that high-growth e-commerce could replace declining KA, and with the good reputation built since 2004, Blue Moon could directly build its own channels to face C-end consumers.
However, the plot over the past two years has not unfolded in the direction favorable to Blue Moon's expectations. Especially looking back now, it seems full of confusion at every step.
As mentioned above, the KA channel not only saw rising costs but also moved from growth to near decline. E-commerce, on the other hand, had no or few channel fees (homepage advertising traffic resources) and was still in high-speed growth.
What is puzzling is that Blue Moon, which had annual revenue of over 10 billion yuan in 2014, had e-commerce revenue of only over 200 million yuan, a fraction of that. In mid-2015, it suddenly withdrew from KA channels on a large scale. The safety basis for this could only be that online channel sales would need to multiply several times in a short period to replace the offline channels.
Is that possible?
Was Blue Moon's move too aggressive and risky? It's like a person with a full-time job earning 10,000 yuan a month but no raise, while part-time income is growing rapidly each month but the base is only 200 yuan. If the part-time income hasn't reached 10,000 yuan one-to-one, quitting the job rashly would be too risky; no one would dare take such a risk.
Moreover, Blue Moon's sudden removal from shelves provided a godsend opportunity for competitors like "Liby, OMO, Tide, Chonergy, Ariel, Attack, and Walch" to suddenly gain more shelf space.
After withdrawing from hypermarkets, Blue Moon quickly deployed "Moon House" across various channels.
In mid-July 2015, Blue Moon released recruitment information for "cleaning consultants" (partners). The recruitment content showed that Blue Moon had entered "Youzan WeChat Mall," JD WeChat Mall, the Moon House APP, and the official WeChat account. After customers placed orders online, individuals who became Blue Moon "cleaning consultants" would be responsible for stocking, delivering, and providing consumer services in their own areas.
Delivery included products sold by themselves and online orders within the area. To achieve fast delivery, Blue Moon divided delivery areas by street or community, with one person per area. The "cleaning consultant" could earn a commission of 8 points on the first order of products they sold, plus another 8 points for delivery, meaning the maximum commission could reach 16 points.
How to understand Blue Moon's "cleaning consultant" plan? Simply compare it to JD's plan announced this year to open one million convenience stores in five years, seeking cooperative individuals to penetrate channels and distribution networks into the capillaries of residents. The difference is that JD targets full-time individual grocery store merchants, while Blue Moon targets completely undifferentiated individuals.
Now, these online channels, except for the official flagship stores on JD and Tmall, have been shelved or even abandoned. For example, the current Moon House APP has only two H5 pages and a content display page similar to a public account, with no other online purchase entry. For consumers, since laundry detergent can be bought on JD and Tmall, sometimes with discounts, why would they download and register a dedicated laundry detergent APP to buy?
Compared to the shelving of the online Moon House, the offline Moon House community stores have long disappeared from mainstream view.
The Moon House stores, which chose to open in the suburbs of Beijing, Shanghai, and Guangzhou, had strange layouts and offered laundry services, making it difficult for consumers to intuitively distinguish between selling goods and providing services.
Blue Moon's choice to adjust channels in 2015 also seems ill-timed.
After the 618 promotion in 2015, FMCG became the last category for e-commerce to focus on. Especially after the 618 promotion in 2016, JD took the opportunity of acquiring Yihaodian to announce that it would compete with Tmall Supermarket in the online supermarket sector within three years.
However, in less than a quarter, Alibaba announced more high-profile that e-commerce was dead and the arrival of "new retail." Everyone then realized that e-commerce, which had seemed to be growing rapidly for half a year, was approaching its historical growth peak.
The "new retail" era of seeking traffic and entry points offline left the online supermarket business hanging. Now, there is little news of giants making major investments or layouts in this business.
As laundry detergent is a fortress product for online supermarkets, Blue Moon's briefly established online ideal became less important than expected amid the changing banners of online giants.
Blue Moon's strategic transformation and frequent tactical moves did not stop.
According to insider leaks from Blue Moon employees, after publicly breaking with major KAs in June 2015, Blue Moon forcibly implemented an internal sales policy similar to direct selling commissions. It required all employees in all regions and departments to become salespeople, including finance, HR, and IT departments, without providing any institutional control, scheduling, or substantive resource support. The main product price was also set at 139 yuan, which invisibly pushed itself into a price range where sell-through was very difficult.
For Blue Moon employees whose jobs had nothing to do with sales, it was impossible to sell laundry detergent except by recommending it to friends and family. Some employees voluntarily resigned, while others were laid off.
Management changed decisions frequently, project plans were volatile, responsibilities were unclear, and frequent street market research made work continuity and stage-by-stage progress difficult to guarantee. Coupled with a压抑 internal atmosphere, middle and grassroots employees generally fell into a sense of confusion about their daily work.
According to former Blue Moon employees, only the salary level, which was higher than competitors, provided some positive motivation.
The situation for distributors was also bad. Blue Moon's "direct selling" tactics offended many long-term partners, and many distributors chose to terminate cooperation.
Apart from the product quality that still had a good market reputation, Blue Moon at this time did not seem to be going smoothly as expected.
The causal relationship between Blue Moon's withdrawal from hypermarkets and its strong promotion of Moon House looks like a classic concept in economics: "post hoc fallacy." Thinking that offline KA hypermarket channel costs were too high, it did the opposite: abandoned offline and embraced online.
3 ** Returning to Hypermarkets**
According to Beijing Business Today, in December 2016, Blue Moon had been gradually listed in Carrefour stores nationwide.
Now, Blue Moon's external recruitment information has turned to positions such as promoters specifically for hypermarkets.
In fact, Blue Moon's two swings between offline and online channels have nothing to do with the current new retail trend of online-offline integration. Essentially, it is the result of a company's aggressive strategy, decision-making errors, chaotic management, and channel focus loss. The story is not fictional, but the plot is similar, and the outcome is coincidental.
In a sense, the credit for promoting the habit of using laundry detergent among domestic residents should also be given to Blue Moon.
The rise of laundry detergent can be traced back to the 1990s when domestic daily chemical manufacturers promoted washing powder to replace traditional laundry soap. In 2008, when P&G and Unilever were still hesitating about whether to mainly promote laundry detergent products in China, Blue Moon took the lead in launching the household laundry detergent war, opening up a new incremental market for household cleaning.
Blue Moon's contribution to promoting and educating consumers about the more advanced concept of laundry detergent is undeniable. Blue Moon made consumers understand that using laundry detergent provides better cleaning results, lower dosage, is gentle on hands and clothing fibers, and is easier to rinse thoroughly.
Laundry detergent became the only high-growth household cleaning daily chemical product, which attracted fierce competition from rivals.
Kantar Consumer Index showed that in 2014, Blue Moon reached 191 million consumers, with a household penetration rate of 46.5%. By February 2016, Nielsen data showed that the market share of the Chonergy brand under Nice Group in the laundry detergent category had reached 32%.
On one hand, competitors were fiercely catching up; on the other hand, costs were not easy to optimize.
The inability to stop traditional media advertising is a typical feature of FMCG brand communication and marketing. Many distributors judge how much to stock based on whether the brand has a large amount of TV advertising. In the eyes of distributors, the main consumer groups for daily chemical FMCG are housewives and middle-aged and elderly people, who still rely on television for brand and new product information.
Liby, Blue Moon, Nice, P&G... all joined this variety show sponsorship war.
Liby laundry detergent sponsored "I Am a Singer" Season 1 for 100 million yuan, Blue Moon laundry detergent was embedded in the Hollywood animated blockbuster "The Smurfs 2," and Chonergy laundry detergent signed five spokespersons at once, including Sun Li and Jiang Fangzhou. Later, Liby's Qujiba laundry detergent sponsored "Dad, Where Are We Going?" and in 2014, Liby laundry detergent again won the exclusive sponsorship of "I Am a Singer" for 235 million yuan.
Everyone thought the dairy industry liked to spend money on variety show sponsorships, but it was the laundry detergent market that was truly bustling.
And 2015, the year of Blue Moon's channel reform, was also a period when Chinese variety shows were booming and prices were inflated. In those years, driven by shows like "Running Man" and "The Voice," variety show sponsorship prices rose astonishingly. Even a TV station that couldn't rank in the top three would charge 50 million to 100 million yuan for sponsorship of a new show with no guaranteed ratings.
Channel costs have never been the only major cost for daily chemical FMCG manufacturers.
Blue Moon has not provided an external answer to its internal decision-making considerations for choosing to return to mainstream KA hypermarkets like Carrefour.
When Retail Boss Insider contacted Carrefour to learn more about Blue Moon's return, Carrefour officials refused to provide any official information, citing "it involves suppliers, so it's not convenient to discuss this topic."
In fact, whether e-commerce or hypermarkets, for household cleaning products like Blue Moon, in the foreseeable future, the price advantages built by hypermarkets, consumer shopping habits, and the scale effect that is easier to "move volume" compared to e-commerce should not be easily abandoned by manufacturers on the grounds that hypermarkets are in "stagflation."
Source: Retail Boss Insider (ID: lslb168)
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