At the 2021 (4th) China FMCG Conference hosted by New Distribution on September 24, 2021, Wang Qi, CEO of Weijie City Distribution, delivered a keynote speech titled "Trends of Separation of Commerce Flow and Logistics Flow from the Perspective of Community Group Buying Fulfillment System."
Wang Qi (CEO of Weijie City Distribution): Thank you very much to New Distribution for giving me another opportunity to appear. I have been less active in the past two years, and this is my only appearance this year.
Community group buying itself doesn't need much introduction, because in the past two years it has almost been the topic king of the entire retail industry. Everyone is talking about it, and its impact on the industry is clearly more emotional than substantial.
Some people love it, thinking it's the biggest opportunity. For example, a good friend of mine, who originally worked in the live-streaming channel, came to me after community group buying became popular last year, saying this is a huge opportunity. In the past, Taobao created many Taobao brands. Is there a chance for community group buying to create a wave of brands as well?
Some people hate it. In my circle of friends, there are many traditional physical retailers. When they see articles about the government cracking down on community group buying, they enthusiastically forward and comment, saying it's a monster, a pseudo-demand, and will have many negative impacts on the industry and society in the future.
But compared to the end of last year and the beginning of this year, community group buying has cooled down recently, and more people are bearish. If we think in reverse, when others are fearful, we should be greedy. At this time, it's necessary to talk about community group buying because it has its unique value.
First, it partially transfers the right of product selection to consumers, which is very important. Product selection is a crucial capability for all retail enterprises. Today, community group buying platforms are willing to co-build product selection capabilities with consumers, and the construction of shelves has begun to be interactive.
Second, through the pre-sale system, it quickly improves the turnover of goods and greatly reduces product loss, which is particularly valuable for fresh produce categories. Third, through end-of-line self-pickup or free delivery by group leaders, it significantly reduces fulfillment costs.
Based on the above brief summary, it can be seen that community group buying itself is a valuable new channel. But whether this channel is as big as these giants think is still unknown today. The model and format are still evolving, and it may take some time for us to better understand the endgame or stage value of community group buying.
I am in logistics, so let me share the fulfillment structure. The logistics system of community group buying efficiently achieves product fulfillment and delivery through shared warehouses, central warehouses, grid warehouses, and self-pickup points.
The advancement of this structure benefits from two aspects:
First, the community group buying platform, as the supply chain leader, defines and influences a longer chain and more links. Driven by order transactions, it greatly improves operational planning, making fulfillment more efficient and stable.
Second, because community group buying is a new format of online transactions and offline fulfillment, compared to traditional retail enterprises, community group buying platforms have a high degree of informatization, closer coupling than traditional retail, and more efficient fulfillment.
Even compared to existing remote e-commerce, such as JD.com and Taobao/Tmall, the advantages of community group buying in fulfillment cost and delivery efficiency are very obvious.
Community group buying has also changed in customer value orientation. Early on, New Distribution had an article saying "community group buying starts with traffic and ends with supply chain." In the early stage, everyone was grabbing traffic, and internet giants are best at grabbing traffic, good at using high subsidies to attract new users, drive repeat purchases, and retain customers. The government doesn't like this unfair approach and has introduced many policies to restrict such expansion that deviates from the essence of business.
It is also due to the huge losses caused by subsidies that many people today question whether the community group buying model is viable.
This year, Meituan Youxuan's 20 billion yuan loss cannot be covered, and many platforms have collapsed or shrunk on a large scale. But you cannot deny the track just because the players performed poorly. In the past, on the B2B track, trillions of yuan were invested, resulting in bloodshed and corpses everywhere.
But is B2B itself without value? Actually, it has value: higher transaction efficiency, more complete categories, and more efficient fulfillment. There are also good players surviving, such as Caihua Yueheji in Guangdong, Wanquan in Fujian, and Liancai Wang in Henan, all doing well.
Despite the crushing by giants, many local community group buying platforms have not been killed. Including Xingyou Youxuan's achievements in Hunan last year, it proves that the business model of community group buying is viable.
It's just that after the giants entered, they relied too much on the path of high subsidies to gain volume. Last year, I visited a platform that was aggressive and high-profile. They said they subsidized 100 million yuan a day. Because I haven't seen big money, hearing that a business loses 100 million yuan a day, you really feel - it's good to have money.
We in traditional industries are more frugal. We said, you don't need to lose so much. Reduce your own fake orders, use fresh produce for promotions, don't use standard products to be exploited, and control procurement corruption.
They said, you are traditional and don't understand. Speed and scale are paramount; investment is not a problem. I can only say that people from different worlds cannot communicate; we are not on the same frequency.
Weijie has served all the well-known community group buying platforms, but we won't cooperate blindly. Haven't we been hurt enough by internet playboys in recent years? At the beginning of the year, I told my team that community group buying platforms would soon stratify. Competition in community group buying would shift from traffic to customer experience. Only by enhancing customer value can this business be viable, so fulfillment is very important.
Before the national policy came out, Hema Market's group efficiency, repurchase rate, and order volume were continuously growing. They never declined. Other platforms went up with subsidies and down without them, like a roller coaster. Consumers vote with their feet. If products are good and delivery is on time, they will buy; otherwise, they won't.
To tell a truth that may offend people, among all community group buying platforms today, only Hema Market treats consumers as human beings. You can go to Hema Market's warehouse and see that every day all turnover boxes are disinfected, the environment is disinfected, personnel take temperature measurements, health code management... all very strict and standardized.
Other platforms are unwilling to treat consumers as human beings. The tomatoes we received were rotten, but they still had to be sent out from the grid warehouse. Group leaders and customers would definitely complain, but the platform instructed to send them, saying that if not, the out-of-stock rate assessment would not be met. Unfathomable, unreasonable.
Back to today's theme: why separate commerce flow and logistics flow? The era of commerce flow and logistics flow development has changed. In the past, logistics was delivery, spatial transfer; commerce flow was transaction, ownership transfer.
From the fulfillment perspective, traditional distributors, traditional e-commerce, and community group buying have significant differences in overall fulfillment node design and operation management, as shown in the figure. Community group buying has sufficient advancement in fulfillment.
Last year, I chatted with a regional general manager of a leading beer brand. He said community group buying is more valuable than B2B. First, community group buying can capture C-end orders to do incremental market, which is very important in the current stock market competition.
Second, community group buying's delivery is really fast. Even rural customers order today, and the goods arrive tomorrow. If the community group buying fulfillment system opens to more categories and channels in the future, it has a great chance to become the infrastructure of a new generation of commerce, with very strong logistics competitiveness.
This is why giants invest tens of billions in this. They expect community group buying to achieve two business formats: an e-commerce new platform comparable to JD.com, and a logistics network comparable to the three links and one delivery (Shentong, Yuantong, Zhongtong, Yunda). Of course, whether it can be achieved remains to be tested by time.
Since the era of channel fragmentation is inevitable, the trend of separation of commerce flow and logistics flow is also bound to come. If we take individual consumers as the center, within 50 meters there will be vending machines, within 500 meters convenience stores, within 3 kilometers front warehouses, within 5 kilometers hypermarkets, and beyond 50 kilometers e-commerce.
Today, consumers are surrounded by various channels. In the future, there will not be a mainstream channel or a channel that can monopolize the market. The cost of traffic migration is low, and the migration pattern is unpredictable.
In this sense, the entire retail industry will have more and more new formats and new channels. Partners doing business in this market should have this awareness: break up the whole into parts. If you want to do more business, you have to do business in the sky and on the ground. Traditional remote e-commerce, near-field e-commerce, live-streaming e-commerce, and various offline physical stores cannot be abandoned.
Omnichannel competition is the new normal. Omnichannel fulfillment cannot be achieved by oneself. Socialized professional logistics service providers are the best choice for serving omnichannel delivery.
Let me introduce Weijie City Distribution. It has been established for more than six years, mainly serving brand owners, distributors, and chain terminal customers in the supermarket and catering industries. Previously, shareholders criticized me for being too greedy, saying I should only do one industry market. When the pandemic started last year, catering was a mess, but supermarkets grew rapidly. Shareholders said it was originally risk hedging.
Actually, Weijie doesn't look at segmented markets; it looks at categories, because categories determine average order value, categories determine scenarios, and categories guide us to find target customer groups.
In recent years, we have spent a lot of money. In addition to the current 80 warehouses of various sizes, we have invested a lot in R&D of information systems. Weijie's "Tianqiong System Group" can achieve full transparency and intelligent operations.
Welcome friends to visit Weijie. If interested, you can experience the warehouse. After half an hour of training, you can be on duty. The PDA has voice guidance. The intelligent scheduling engine is also decent; 1,000 orders can be dispatched in no more than 2 minutes. Warehouse operation dashboards and cold chain temperature control for delivery are all real-time feedback. The information system is a good tool for Weijie to improve efficiency and quality management.
Weijie is a logistics enterprise mainly engaged in moving and delivering goods, but we have added a lot of technology attributes. We hope to complete the layout of a domestic warehouse and distribution network, and in the new commercial era of short supply chains, provide customers with omnichannel fulfillment delivery, digital operation processes, and inventory management services.
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