The following is the speech content delivered by Mr. Wang Qi, CEO of Weijie City Distribution, at the 5th FMCG + Internet Conference hosted by New Distribution, organized and released for readers.
On March 22, 2017, I also reported on Weijie's exploration in the city distribution market at the New Distribution conference in Chengdu. Today marks a two-year review. Has Weijie achieved my original vision and plans with its performance? Looking back, it's passable:
First, the competitive landscape of the city distribution industry has changed significantly; some well-known peers are facing difficulties, but we haven't gone bankrupt and are developing well.
Second, the transformation of FMCG and retail formats has been significant; benefiting from correct strategic foresight, we have achieved more than double revenue growth each year.
What has brought Weijie to where it is today? This is what I want to report to you—"Win first, then fight" is an important methodology for enterprise development. This phrase comes from Chapter 4, Section 5 of Sun Tzu's Art of War, meaning "The victorious army first obtains conditions for victory and a superior position, then engages in battle. The defeated army rushes into battle first, attempting to seize opportunities and win by luck."
Some might say this is the strategy of the strong; how can the weak have overwhelming advantage? How can entrepreneurs be in an invincible position? Such an understanding is biased. Even the weak can have local advantages without overall advantage; even if there is no advantage initially, it can be gradually built through accumulation. Recently I read a good book, Liu Tong's "China's 1948: The Decisive Battle of Two Fates." New China was founded in 1949, but the reversal of strength between the Communist Party and the Kuomintang occurred in 1948. Chairman Mao concentrated superior forces to gain local advantages and achieved the turning point of victory that year. This is seeking battle in victory, strategic thinking, open strategy, and a rational decision-making process.
As an innovative city distribution enterprise, how should strategic choices be made and business models designed? Generally, we think from 8 dimensions, both external and internal:
Understanding and insight into the market and industry: characteristics, changes, and opportunities left by competitors?
What is the enterprise's strategic intent? If financing, what do you want the capital market and investors to see?
Where are the innovation points? Why choose one or several innovation focuses? What resources, genes, and capabilities are they based on?
Which link in the industry chain to enter? What position to occupy? How to define your business role and identity (current and future)?
Who are the customers? Why choose them?
What unique value do you provide to customers? What needs (pain points) do you satisfy?
Analyze the scope of activities in terms of market size, service product offerings and pricing, network coverage, sales channels, etc.
How to achieve profitability? Estimate scale boundaries and profit inflection points.
Combining these strategic thoughts, let me share several key decisions in Weijie's past development path.
From 2015 to 2016, when Weijie was just starting, we chose to do warehouse-distribution integration rather than a platform model. Business model is also a value; doing warehouse distribution means doing physical operations, which is hard and tiring, but not easy to overturn; if we had done a city distribution platform, we might have perished like hundreds of other peers.
From 2016 to 2017, the city distribution market was very hot, and there was a lot of "stupid money" in the financing market. Many peers were rushing to scale growth, subsidizing to exchange for traffic, etc. Weijie was very restrained, choosing "customer retention rate" as the core indicator and building basic capabilities. To be honest, such a strategy doesn't grow too fast, and investors don't like it either. Every time we saw peers raising so much money, we could only swallow our saliva and feel envious. But the benefit was that the team was steady, pragmatic, and not impetuous. The operation system was built step by step. So when we rapidly expanded to 19 cities in 2018, the operation system basically didn't deform, and service quality remained stable.
By 2018, I began to repeatedly reinforce an idea with the team: even if the model is right and operations are good, what's the use if we don't make money? Enterprises still need to make money, and make big money. We began to emphasize lean management, focusing on costs and revenues. Currently, one-third of our city companies are profitable, another one-third will achieve profitability by mid-year, and we aim to achieve overall company profitability by the end of 2019, so that we can develop rapidly and healthily in 2020.
In the past three stages, at the strategic level, Weijie chose what to do, how to do it, and the correct development process. We attach great importance to a development strategy that emphasizes both high efficiency and high quality. In capability building, we adhere to the principle of "pragmatism as the foundation, and hard work as the criterion," continuously promoting the iteration of warehouse distribution operation capabilities (efficient and precise), operational digitalization (achieving wider management boundaries), standardized systems (supporting significant business scale increase), and business digitalization (improving efficiency and reducing reliance on team capabilities). Competition is fierce, and product advantages need hardcore operational capabilities as support.
What is the hardcore operational capability of city distribution? Weijie divides this system into three layers: resource integration and management, process design and optimization, and system implementation and iteration. Each layer is very complex; due to time constraints, I'll only use the information system as an example.
Friends who know Weijie are familiar with the Tianqiong City Distribution System Group. Besides the feature-rich and stable Warehouse Management System (WMS) and Transportation Management System (TMS), the intelligent scheduling engine achieves industry-leading status with thousand-order-per-second processing. There are also management modules supporting multi-scenario and personalized business needs. For example, our strong support for fresh food processing needs not only realizes real-time interaction of orders, processing, and sorting but also adds image recognition and human-machine voice interaction functions, which customers praise highly. In 2018, we also launched two management systems: one is automatic billing and online financial settlement, which, no matter how complex the business, achieves T+1 billing and monthly statement summaries without pressure; the other is a Business Intelligence (BI) system that supports our business digitalization. Besides helping colleagues with business development and project operations, it can also analyze input-output ratios and risk identification, greatly reducing the difficulty of management positions.
In addition to strategic choices and operational capability building, Weijie also pays great attention to team building and organizational management, which is the foundation of business operations. It is often said that talent is the primary wealth, but is talent the core competitiveness of an enterprise? I used to think so, until one day I studied Huawei's management system and found that this definition is not precise enough. The correct statement is that effective management of talent is the core competitiveness of an enterprise. This is an important assertion made by Mr. Ren Zhengfei when the Huawei Basic Law was finalized in 1998. Thinking about it, it is absolutely correct. Without effective management, no amount of talent will pile up into a successful enterprise.
How to achieve effective management of talent? Weijie has learned from Huawei's practices: high person-post matching rate, fast training and growth, and effective incentives. Due to time constraints, I'll briefly elaborate on incentives. If we can achieve a people-oriented approach that focuses on strivers, fully creating value, correctly evaluating value, and reasonably distributing value, then the team's combat effectiveness will be formidable. The able should do more and get more; these eight words should be said together. If you say only four of them, it's a rogue behavior.
To summarize Weijie's past development, correct strategic choices, solid capability building, and effective talent management are the long-term drivers that can promote enterprise development. Additionally, I'd like to share a insight: entrepreneurs and bosses should look more inward and be less disturbed by external noise. I'll give you a saying I learned from Teacher Yang Jinfang: "True transmission is one sentence; false transmission is volumes of books." If you can correctly understand yourself and grasp the essence of management, that's enough. On social media, I find many people care more about other companies than their own. For example, Ma Yun stepped down, JD's stock fell, SF made a big move, Pinduoduo sold fakes, Amazon cheated Chinese sellers... and so on. They know everything under the sun but don't know how to manage their own enterprises well. To be honest, those giants have never cared about our small enterprises; no matter how many problems they have, they are better off than us. Worrying about others is like always wanting to discipline other people's children, but when your own child asks about homework, you scold them for being stupid. Some friends might say we are learning to improve ourselves. That's a delusion. A cruel fact is that success has countless accidental factors and cannot be learned or replicated; the reasons for failure are few and can be summarized.
Many of our bosses and executives are accustomed to blaming the team for being incompetent, subordinates for lacking responsibility, or being too stupid. Better to look for reasons within ourselves. In Weijie's culture building, I only think about one thing: how to make colleagues find a reason to strive at Weijie. Currently, we have probably found it.
Saying so much that is intangible doesn't match Weijie's style. Let me share a case. Xi'an Weijie is our newest company, prepared at the end of July 2018 and started operations in August. Initially, it only undertook a few projects from headquarters, with revenue of 300,000 to 400,000 yuan. After half a year, it achieved monthly revenue of nearly one million yuan and profit of nearly 100,000 yuan, which validates that Weijie's model and development strategy are correct. In 2019, Xi'an Company is expected to achieve revenue of over 20 million yuan and profit of 2 million yuan. You might think this number is ordinary, but those who truly understand city distribution should know that for a newly established city distribution company, this performance is quite excellent. There are three reasons for this achievement: focusing on a reasonable customer structure in business development, emphasizing efficient use of resources, and solid operational management capabilities. For example, the industry's average effective warehouse volume utilization rate is 0.6-0.8, meaning that in a 1,000-square-meter warehouse, after deducting functional areas and aisles, it can generally accommodate 600 to 800 pallet positions. Xi'an Weijie, by choosing high-standard warehouses and making efforts in equipment planning, uses double-deep and double-reach storage positions to achieve a volume utilization rate of over 1.2, making the warehousing cost advantage obvious.
Weijie City Distribution is launching a partner recruitment plan in second- and third-tier cities for those with "shared vision, similar values, and complementary advantages." We hope like-minded friends will consult and communicate. Thank you!
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