Xu Xin says the post-90s generation seeks individuality, they want to be different, and they like to self-promote. After the post-90s grow up, nightclub hostesses are a particularly ancient profession, and they are almost unemployed because the post-90s demand free services.
The mobile internet typhoon is here, even pigs are flying
Xu Xin: Good afternoon, everyone. The topic given today is mobile internet, but I've changed it a bit. I don't know if you've felt the shock of mobile internet. I just heard a lot of depressing macro news, but I don't feel it anymore. For example, with mobile internet, we feel the typhoon is coming, and even pigs are flying. Today I want to share with you how to seize the opportunities when the typhoon comes.
Have you noticed that the post-85s and post-90s have become the main consumer group? Every year we spend a lot of time doing user interviews, and we've even gone to third-tier cities to chat with middle-class families, asking how much they earn, where they spend their money, what they're willing to pay a premium for, and what they don't care about. This is very similar to Baidu's post-90s survey. These characteristics are particularly prominent in the post-85s generation; 85 seems to be a watershed. Their parents are from the 60s generation and are already wealthy.
Grasp the post-90s: they love staying home and are all foodies
First, these people are willing to stay at home. Why do they prefer staying home? Because they are the only child in the family, growing up without siblings, and their parents are out earning money, so they stay home alone. Second, they spend a lot of time on QQ, having grown up with it. They have an average of 7.5 years of internet experience and spend 5 hours a day online. They are used to being on the computer, and 50% of their purchases are online. That's why JD.com can make so much money.
Third, they seek individuality; they want to be different and like to self-promote. After the post-90s grow up, nightclub hostesses are a particularly ancient profession, and they are almost unemployed because the post-90s demand free services. The post-90s are truly a different generation; they are very willing to express themselves. We post-60s just let it go if we're dissatisfied, but post-90s will write many comments and share their feelings. If you don't pay attention to them, you lose them. The power of fans is very strong. So you see the success of Xiaomi, including Three Squirrels. In 2013, Three Squirrels' first year, they achieved 330 million yuan in revenue, 1 billion in 2016, and 2.5 billion this year. They manage their fans, and the power of fans is very strong.
Founder of Three Squirrels, Zhang Liaoyuan
Fourth, these people are foodies. But they don't want to cook and don't know how. Their biggest characteristic is not wanting to dirty their kitchen. Vanke has analyzed that future houses will be very small, with extra space turned into a large dining room. So they bring a trend of fast food because these people don't want to cook. The Tsui Wah and Day and Night we invested in are like this. Recently, they've become too lazy to go out, and food delivery is developing very well.
Fifth, these people's consumption upgrade. Don't look at their monthly income of only 5,000 yuan; they live a comfortable life because their parents have already bought the house: usually the man provides the house, and the woman provides furniture and a car. In third-tier cities, after buying these, their pressure is not great. Where does the 5,000 yuan go? Generally, they spend a lot on their children. And 1,000 yuan on daily life: often lunch at work and dinner at home, so 1,000 yuan is enough. Another 2,000 yuan is saved for travel, and the remaining 2,000 yuan is for shopping.
Now they don't eat peanuts and melon seeds; they want nuts and imported ones
They shop online on weekdays and take their kids to hypermarkets on weekends. Their shopping desire is very strong, and they like snacks. Chacha was very impressive before, but now it's different. Consumption has upgraded; they don't eat melon seeds and peanuts anymore. They want nuts, pecans, and imported ones at 70 yuan per jin.
Previously, we said who is the best between Master Kong and Nongfu Spring? At that time, we thought Master Kong was very impressive. Their management ability is very strong, managing 50,000 people, going to third- and fourth-tier cities every day to check terminals. The first thing they do is tear down competitors' ads and put up their own, and their products are very cheap. But now it doesn't work. To sell bottled water cheaply, they made the bottles very thin. But consumers are different. You see, consumers' income grows by over 10% each year; after five consecutive years, they become middle class, and they want good things. Nongfu Spring's management is average; their boss is a journalist by training, relying on creativity. He used to say 'Nongfu Spring is a bit sweet,' and now says 'We are nature's porters.' They sell at a high price, but they do well because they position themselves in the mid-to-high end.
Chairman of Nongfu Spring, Zhong Shanshan
Also, for food, you need to target the mid-to-high end. Consumers' desire to upgrade is very strong. If you don't keep up with the times, it will be terrible. We interviewed in third- and fourth-tier cities: what shoe brands do they buy? If they can't afford Adidas or Nike, they buy Anta or Li-Ning. Anta and Li-Ning are struggling because their shoes are in cabinets, brand new, and not selling well. So if you position slightly mid-to-high end, they will follow you.
Mobile phones are too small for price comparison; seizing the first-mover advantage is key
Second, user habits have changed. Everyone has ordered things online: on PC internet, you searched by keywords, but on mobile internet, you're constantly scrolling. Previously, you went to JD.com to buy things; now it's become casual browsing. Rational consumption has become impulsive consumption, and the frequency is very high. Time on mobile internet is fragmented, so you can transact anytime, anywhere. That means O2O door-to-door services have become possible. Previously, we said how could manicures be done at home? But now it's possible and very simple. The internet has made many things possible.
In the PC era, users were massive, and you had to buy ads on Sina, NetEase, and Sohu to capture massive users. Online operations were basically free, relying on ads for revenue. But mobile internet is different; people are used to paying. Tencent has cultivated a good habit of paying for games. And you don't need massive numbers; 1 million users can be enough because these are your most precise users.
Third, mobile internet is not convenient for price comparison. PC screens are large and easy to compare, but on mobile, you need to download apps; and the screen is so small that it's hard to see clearly, so people are less willing to compare prices. So the closed loop of mobile internet is very lethal. A user only downloads one or two apps. If you haven't occupied their client, and your competitor has, changing customers is very difficult. So the first-mover advantage is huge because once consumers use your app, they become your closed-loop users. In such a situation, you must run very fast.
Fourth, the product has changed. Previously, when making a product, it went through provincial distributors, city distributors, third-level distributors, then KA, and finally ground promotion before it could sell. The distance was long. Now it's zero distance. Customers order online, and you interact with them via WeChat and Weibo. The sense of participation is very strong. You must have a good product to talk to them. If it's bad, they'll write a negative review, and you won't be able to sell.
We interviewed over 80 customers of Three Squirrels, each call lasting an hour. They first look at user reviews, second at sales rankings, and third at the website. First, the name Three Squirrels is easy to remember; second, its customer reviews are very good. Once there's a negative review, they quickly fix it. So you need to react very fast; bad things spread easily. Also, small companies can grow easily; with a good idea, they can become popular overnight.
Fresh food is grabbed by the elderly; young people no longer go to hypermarkets
This is a great era. In this era, you must be focused. On mobile internet, products must be excellent and make people scream. When Three Squirrels customers receive their orders, they're very happy. There are many small perks: the packaging is double-layered, and they give you small clips and a small tissue. Now the post-85s and post-90s love to share, so once they share, it spreads. Word-of-mouth from users is a great way to acquire customers.
Also, in this era, product iteration must be very fast. The best way to iterate is to have two teams. Previously, development was closed, with layers of reporting. Slogans no longer work—you need to divide into business units, fully authorize, and encourage innovation. The best example is Ctrip. When we invested, it sold flights and hotels; later, train tickets, yachts, and everything else came out. It uses a business unit system, letting employees fully develop. I think in the product era, you need to grasp seven characters: 'focus, excellence, word-of-mouth, speed.' If you grasp these, you can do better than others.
Also, channels have changed. We invest in segmented channels, segmented markets, and segmented companies. We see that old department stores are declining year-on-year; they're having a hard time. For example, Belle is very good at branding, but it follows department stores, so when department stores decline, it declines too. And hypermarkets like Walmart and Carrefour had 20 years of glory, but today that glory is gone because their model doesn't work.
In hypermarkets, fresh food attracts eyeballs, and dry goods generate gross profit. One hand grabs traffic, the other grabs gross profit, and the extra space is rented to KFC and McDonald's. After the internet came, it took away a lot of their gross profit, grabbed by JD.com, Suning, and Yihaodian. High-margin items are gone, leaving only fresh food, and there are many elderly people who grab the good fresh food early in the morning, so when young people go in the evening, they see nothing and never return. KFC and McDonald's are unhappy and demand lower rent, so hypermarkets dare not open new stores. If our brands follow them, growth will be very slow in recent years.
There are also street-side store models, like Cosmo Lady, Bestore, and Yifeng Pharmacy, which are doing well. Because they're in third- and fourth-tier cities, basically on an old street where all the shops are. If your brand opens a flagship store there and then four or five more stores, you'll become the number one local brand, quickly defeating nearby competitors. And your rent is cheap, so you can make a lot of money.
Also, shopping malls are booming recently. You need to follow places with high foot traffic and the standard 'four dishes and one soup' setup, like Tsui Wah and Kungfu, which are doing well. Additionally, the internet grows about 50% annually, accounting for 7-8% of GDP. There's plenty of room for the typhoon and pigs. Companies like JD.com are still growing well, so choice is very important.
Employees need to bloom; customer service should be cute
Another change is the team. Now the post-80s have become the main employees. They're 30 years old, masters of money, not slaves. They were born with houses; they might have three houses by accident. Their sense of security is very strong. At this point, money can't motivate them. What motivates them? What do they want? I learned a word from Bestore: 'bloom.' Their boss is very good at motivating employees.
I want to say passion is not sustainable, but sustained passion can turn into strength. For example, Bestore has a store manager responsibility system, with incentives that have no upper limit. I said the core of retail is good location, good products, and store managers with initiative, but how much effect does it have? We selected 100 store managers for a pilot. After a year, we looked at the results. We found that old stores without the manager responsibility system grew 5% year-on-year, while those with it grew 26%, meaning a 21% increase.
Some people say, 'I also gave money, why doesn't it work?' Giving money isn't enough; you also need to let them bloom. You need to give them red flowers, let store managers who previously earned 3,000 yuan now earn 10,000, let them speak on stage, and make them feel honored. Treat employees as users, and make them very happy. Bestore is very good at this, keeping the post-85s and post-90s excited every day, telling them they can innovate.
Bestore offline store
Three Squirrels is even more interesting. Except for the boss, who is post-70s, everyone else is post-85s, all homegrown, never outsiders. And they do well in Wuhu. Why? Because post-85s are very creative. They say customer service is about being cute; they call customers 'master.' We can't say those words, so you must boldly use post-85s.
When the first and second are fighting, the third dies first
He divides employees into two dimensions: performance and values. The best are those with high performance and high values—they are stars. If both are low, they are 'dogs' and should be fired. There's also the 'wild dog' type: high performance but low values; you must manage them well. And there's the 'little white rabbit' type: diligent, working for years, but not performing well. These are very troublesome. If you don't fire them, they'll become 'big white rabbits.'
And most employees are 'cattle.' They watch. If they see stars growing, they'll move toward that direction. But if they see big white rabbits, they'll become little white rabbits. If a company wants to avoid growth bottlenecks, it must remove the little white rabbits and let others come up. As long as the boss can do this, the company has no bottleneck. If the boss doesn't have this ability, he will definitely hit a bottleneck. So we have a slogan: 'Take down the little white rabbits.' Don't worry about employee turnover or cohesion. As long as you keep winning battles, you'll have cohesion.
Regarding financing, financing should be fast and the amount large. You need more money to make your competitors far behind. Don't care too much about equity dilution; just control the board. Ma Yun's stake isn't very large, but the key is he succeeded. Sufficient capital is also a threshold for rapid growth; find long-term investors who share your philosophy.
Liu Qiangdong wanted $2 million, but Xu Xin gave him $10 million. 'Internet companies must grow quickly; either be very big or die. In a money-burning industry, $2 million is definitely not enough; they'll come back for more in a couple of days.' They agreed to focus only on growth for the first four years and talk about profits in the last year.
Today we look at JD.com. The internet is good in every way, but it's too cruel. The internet has no concept of gods; it's national from the start. You need to invest to grow; if you don't grow, you'll be eliminated. Competition and price wars are inevitable, and spy wars are hard to defend against. The competition is fierce. These kids go to campuses in the morning for ground promotion, put up posters, and competitors come at 10 a.m. to cover them. They put up banners, and competitors tear them down. In the evening, they hand out flyers, and competitors say, 'You made a mistake, let me collect them for you.' This kind of behavior basically doesn't lead to fights, but it's hard to quench the hatred. Competition is really fierce.
Later I thought, how can we win? For example, JD.com vs. Alibaba, Ganji vs. 58. Ganji was about to overtake, but ran out of money, and 58 went up again. Dianping and Meituan are the same, a tug of war. I think doing a brand is good; brands can flourish in segmented markets. You say, who does Tsui Wah fight with? I represent Hong Kong-style dim sum, Kungfu represents nutritious fast food. I'm relatively independent and segmented. But platforms are different; in the end, only one or two remain.
We've seen U.S. data. When does competition stop? As long as there's a third, they'll fight. When the first and second fight, usually the third dies first. The fourth and fifth are nowhere to be found. In the end, to succeed, entrepreneurs must have a strong heart and good health. Everyone is strong. We think it's 'in close combat, the brave win; for longevity, health is key.'
Build the number one brand in the industry. We think a great company starts with a good name. Branding requires spending money and continuous investment. The three 'ones' of a brand: one sentence, one picture, and one 15-second ad. Now it's a video world; you need to invest in video ads and do it quickly.
The Third (CFIC) China FMCG + Internet Conference will be held in Chongqing in November 2017. The conference will closely focus on the theme 'New Forces, New Ecology' and invite 1,000+ distributors, 500+ brand owners, 200+ B2B platform founders, and 100+ investment and financing institutions to explore a new chapter of cross-border integration!
Core topics of this conference:
How can the FMCG industry leverage B2B to achieve new growth opportunities
How to build the new supply chain behind new retail
How can intra-city logistics help B2B achieve leapfrog development
Highlights of this conference:
The industry's first '2017 China FMCG B2B Industry Competitiveness White Paper'
Case sharing of excellent transforming and upgrading distributors
Exhibition upgraded: Hall 6 Internet Technology Exhibition strengthens connections
Alibaba Retail Link, GL Capital, Eternal Asia Supply Chain, Bestore Plus, 91Pi, and Hisense: leaders from various fields will give speeches and share pioneering views.
November 8-9, 2017
Chongqing Yuelai International Conference Center, Xinyue Hall
Registration is now open. Long press the QR code below or click 'Read Original' to register.
Add friend with note 'Conference Registration'
Click the link below to review the highlights of the first and second FMCG + Internet conferences:
2016 'FMCG + Internet' Summit Forum
-END-