According to incomplete statistics, due to the pandemic, foot traffic in stores ranging from 100 to 3,000 square meters has dropped by 10%-15%, making the survival environment for retail stores precarious. Of course, this is not only due to the pandemic; in fact, offline stores have been struggling for years. From the chart above, we can see that the growth rate of offline retail sales is far lower than that of e-commerce. The difficulties faced by offline stores are essentially triggered by three factors. First, the disappearance of the demographic dividend and the arrival of the stock era form the broader context. As is well known, starting from 2012-2013, the FMCG industry entered a state of stagnation and decline. Consumer demand for products has evolved from "whether they exist" to "whether there are many," and now to "whether they are good." In recent years, many companies have reversed the decline through product premiumization, achieving performance growth again. However, the logic of growth is not quantitative but qualitative. This also reflects that the natural increment of the past has ended, replaced by stock competition. Similarly, for offline stores selling conventional mass consumer goods, this has eliminated the basis for incremental demand. Second, online e-commerce has carved out a share, becoming one of the mainstream retail channels. In 2015, during the Double 11 shopping festival, the total transaction volume across e-commerce platforms exceeded 100 billion yuan for the first time. This was a historic moment for the retail industry. Behind this data, almost all industries began to realize that e-commerce is a channel that cannot be ignored. After 2015, e-commerce has left others in the dust. From the data, we can also see that the growth rate of e-commerce channels is far higher than the growth rate of total retail sales of consumer goods. Third, the rise of local new retail. In 2018, community group buying, backed by capital, expanded its territory. In 2020, affected by the pandemic, home-delivery e-commerce became a hot topic. According to relevant data, at Hunan Bubugao chain stores, home-delivery business accounted for more than 20% of sales. With the rise of community group buying and O2O home-delivery e-commerce, such as Dingdong Maicai, Miss Fresh, and PUPU Supermarket, offline stores are no longer a necessary channel for young consumers. The "stay-at-home economy" of young consumers has further affected foot traffic to offline stores. -01- Under attack from both sides, how can offline stores save themselves? Facing the pincer attack from online and offline, offline stores are powerless. Offline stores rely on geographic location, and the foot traffic obtained from location is being intercepted by various new e-commerce and new retail formats. At the same time, constrained by business area and limited SKUs, they cannot effectively meet the diverse needs of consumers. Facing this dilemma, are offline stores completely helpless? At the Youzan Chain Summit yesterday, according to Cui Yusong, co-founder of Youzan, in the second half of 2015, he observed that more and more store merchants began to register with Youzan, with offline stores accounting for up to 70% of registered merchants at its peak. In the first half of 2020, the number of merchants, covered stores, and transaction volume of Youzan Chain all achieved explosive growth, with transaction volume in the supermarket convenience and department store industries growing by over 100%. Taking Youzan Chain's fresh fruit and vegetable merchants as an example, members contributed 45% of the transaction volume, and the customer repurchase rate reached 48%. For the supermarket/convenience store/department store category, members contributed 54% of the transaction volume, and the repurchase rate reached 41%. It seems that all types of offline stores have suddenly flooded online. This is the "new store commerce" that has been hotly discussed recently. Through tools, traditional retail stores can be upgraded, turning natural foot traffic into online members, and through community and Moments operations, into high-frequency users. In the past, a consumer might buy 30 yuan worth of goods and then disappear. But now, through tools, users can be deposited into the store's online membership system, allowing you to reach them anytime, through information push and themed promotions. A consumer might buy 500 yuan or 1,000 yuan worth of goods a year, or even become your recommender. In the past, our communication with consumers was limited to offline, brief conversations. But now, with the help of tools, one-to-many service can be achieved. Through communities, we can communicate with consumers, thereby facilitating sales conversion. The past business model for offline stores: Sales = Foot traffic * Frequency * Average order value; The current business model for offline stores: Sales = Foot traffic * Conversion rate * Average order value * Repurchase rate * Sharing rate; Comparing the two, foot traffic is no longer passive, one-time natural traffic limited by location. Instead, once a customer visits the store, they can become a permanent member. Cui Yusong stated at the summit that when a consumer is thirsty and buys a drink, they usually buy one bottle and leave. But online, a consumer rarely buys just one bottle; they might browse and buy something else. This is the value brought by "new store commerce." I think this is the new way for offline stores to save themselves: establish trust and awareness with consumers through the store; use internet tools to achieve information reach and high-frequency communication, thereby achieving sales conversion. -02- During the pandemic, the counterattack of Baichuan Mingpin, a chain liquor store In the FMCG field, if there is one industry most affected by the pandemic, it must be the liquor industry. With social gatherings reduced, liquor sales were hit hard, and both liquor companies and stores faced closures. But one chain liquor store, Baichuan Mingpin, actually saw sales increase by 30% during the pandemic. Those familiar with the liquor industry should know Baichuan Mingpin. Last year, Baichuan Mingpin began increasing investment in online business and partnered with Youzan Chain. Each store can have its own independent online store, independent membership system, and develop its own salespeople, allowing stores to operate their own "small private domain," while the headquarters is responsible for coordination and empowerment. By launching an online mall, adjusting products, and optimizing gameplay, online orders from customers around Baichuan Mingpin stores increased significantly. At the same time, sharing and forwarding brought new increments. To precisely acquire new customers and maintain old ones, Baichuan Mingpin integrated its distribution business with WeChat Work through Youzan's sales assistant. In just over a month, they established ten WeChat groups with over 10,000 users, and the conversion rate reached 30%. It is understood that through just two months of online operations, Baichuan Mingpin's total sales exceeded several million yuan. At the same time, online themed promotional activities also drove an increase in offline store foot traffic. Let's look at the specific online tactics: SKU optimization, flash sale events, exclusive benefits, and continuous repurchase from customer groups. Introduce low-price, high-repurchase daily necessities, such as beer and agricultural products, to the online mall to increase customer visit frequency. With visit frequency, consumption habits are easily formed, whether for holiday gifts or daily consumption, increasing familiarity with the brand. During high-consumption periods, such as weekends and holidays, launch flash sale events to promote sales conversion. Through tiered membership management, launch exclusive benefits to convert and retain members. I think the case of Baichuan Mingpin can open a new window for the industry. It's not that offline stores have no future, but that in the new era, we need to run stores in new ways. Whether you call it "adding wings of the internet" or "digital operation of traditional stores," since the dilemma is here, don't be afraid. -03- The two core things stores need to do: traffic acquisition and conversion Cui Yusong said at the summit that store business has only two core things: traffic acquisition and conversion. Frankly speaking, in the past, traffic acquisition could only rely on natural foot traffic. Even if there were referrals, it was only through a product that exceeded consumption expectations. But now, through Youzan Chain, various forms such as promotional group buying and referral commissions can effectively turn buyers into traffic generators. Regarding conversion, Cui Yusong used fresh fruit and vegetable merchants as an example. In the first half of this year, the ARPU (average revenue per user) of merchants' members reached 274 yuan per month, with a conversion repurchase rate of 48%. The membership penetration rate in the fresh food industry is very high. Customers are usually regulars; 85% are old members, and member transactions account for over 45%. Why is the contribution per user so high? Because online sales make it easier to do combination promotions, easier to achieve conversion, and increase average order value. According to Youzan Chain data, offline GMV used to account for the absolute majority, but in February this year, that proportion began to shrink, and online GMV began to grow rapidly. Even in the later period when the pandemic was controlled, the proportion of online GMV continued to grow. This means that the pandemic has cultivated the habit of online consumption for some consumers. Across the entire Youzan platform, the average proportion of online GMV for store merchants has reached 25%. How can offline stores save themselves? I think the case of Baichuan Mingpin and the data from Youzan Chain have provided us with an effective path. 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