Source: Tobey.com Yijiupi is a prominent company in the FMCG B2B platform space, and CEO Wang Chaocheng is also known as an industry influencer. As 2018 reaches May Day, how is Yijiupi developing? Recently, a reporter from Tobey.com conducted an exclusive interview with Yijiupi CEO Wang Chaocheng. The following is the transcript of the interview:
Q: Yijiupi is a "low-key star" in the B2B industry, and everyone is very concerned about Yijiupi. Could you briefly introduce the development of Yijiupi over the years? Wang Chaocheng: Yijiupi was founded in September 2014, but it really started developing in 2015. In terms of commodity transactions, we did 700 million in 2015, 4 billion in 2016, 7.4 billion in 2017, and 3.2 billion in the first quarter of 2018, a year-on-year increase of 108%. Q: From the data you just mentioned, it seems Yijiupi slowed down in 2017. What was the consideration behind that? What key adjustments did Yijiupi make during these three years, and what factors were these adjustments based on? Wang Chaocheng: Let me answer the second question first, which is actually the answer to the first question. In the first year (2015), our sales categories focused on alcohol, quickly covering 30 cities; in the second year (2016), we continued to expand into 50 new cities and added beverage categories, sprinting forward with sales growing 5 times year-on-year. After two years of rapid development, in the third year (2017), we focused on operational quality adjustments, basically not expanding regionally, intentionally slowing down, but this was precisely the key adjustment year for Yijiupi's steady development. That year, our gross profit grew 300% year-on-year, we added food sales categories, improved internal control management systems, completed talent pipeline construction, and the company continued to be profitable in Q3 and Q4, while still maintaining an overall 90% year-on-year growth, laying a solid foundation for the next high growth. In other words, we view growth rationally and made a phased balance between development speed and quality. Obviously, starting this year, on the basis of the original high base, we have again entered a fast-growth track, and in terms of revenue, profit, governance, etc., it will be more healthy and sustainable. Q: Every company wants to pursue speed, and investors want you to be faster. How do you view the speed of the B2B industry and the quality you mentioned above? Wang Chaocheng: Speed and slowness differ in each industry; it depends on the balance of three factors: the competitive situation of the track, cash flow, and business quality. Indeed, some industries have very short windfall periods, such as bike-sharing, where competitors expand rapidly, and if you can't keep up, the war is over. In the B2B industry, because the traffic of offline small stores is based on location rather than online, giants cannot monopolize. Even among 2000 SKUs, if a few best-selling categories have an advantage, giants cannot kill you. Of course, speed is also needed, but B2B is not as fast as bike-sharing. For B2B, quality is also important; this is an industry where burning money cannot create user stickiness. Indeed, we are "lucky" because we started with alcohol, which has high per-unit gross profit, so the initial business quality was relatively good. We set up 80-90 points nationwide, and selling only alcohol basically did not lose money. Expanding into non-alcohol categories from this base is relatively easy. But B2B companies that start with beverages are basically in difficulty. In balancing speed and quality, you also need to look at cash flow. Understand how much money you have in the account, and the development speed must match it. I am a conservative person; investors like to talk about 18 months of cash flow, and we have more than enough. I would never bet on so-called performance to get others to give me money to continue burning. "Fast" varies in each industry, related to competition, and also requires balancing business quality and cash flow. If the company goes bankrupt, speed is meaningless. If business and cash are stable, you must run desperately. Q: Yijiupi is a representative company that came from behind in the FMCG B2B field. How did you achieve this? Wang Chaocheng: Enterprise competition is a long-distance race. A long-distance race does not focus on the speed of the start and the early stage, but on internal endurance. I think our so-called coming from behind is not that we are fast, but that many fast peers fell, and some regional peers cannot be fast. Yijiupi happens to be the company that can be fast and did not fall, so we have what everyone calls coming from behind. Q: In your view, why did those companies that were faster than you fail to sustain their position, and instead the pioneers became martyrs? Wang Chaocheng: Fast and slow are relative to different tracks. Relatively speaking, in traffic-driven industries like B2C, quickly becoming big is a very important success path. But B2B is an industry where efficiency wins; you need to be fast and have quality. If you blindly pursue speed without quality and lack the ability to generate value internally, it can be very dangerous. During the group-buying war, Wowo and Lashou were also fast at first, but Meituan was more focused. Later, the former, after burning money crazily and failing to IPO in time, was overtaken by Meituan, which had stronger data operations and execution because it lacked efficiency. This is very similar to today's FMCG B2B. We don't want to be the former; we hope to be the one that is fast and good, not the fastest but the strongest, able to run to the end. Q: Compared with competitors, Yijiupi has higher operational efficiency. Where does this mainly come from? Wang Chaocheng: Actually, at the beginning, several one-stop FMCG peers that started with beverages and food were running fast and raised a lot of money, so by 2016, one of our peers had already reached several billion. But they only focused on speed, not efficiency, resulting in severe cash burning. When financing didn't keep up, we found they had to shrink significantly, becoming very unhealthy. In 2016, we also did several billion in self-operated business, but we mainly focused on alcohol and beverages, with deep category depth. We have always been profitable in the alcohol category. Starting from an advantageous base, in the past two years, our beverage business has also grown relatively large. We have always emphasized the principle of "heavy operations, light assets." This has played a key role in improving our operational efficiency and flexible use of funds. For example, our warehousing is directly managed with high control over goods, but we do not build warehouse properties; we rent, which is more flexible in adjusting area. Our transportation capacity is directly controlled, providing thoughtful service at lower cost, but we do not purchase vehicles; we mainly rent new energy vehicles or drivers bring their own cars. "Fast" is the external manifestation, supported by "internal skills" honed over time. Yijiupi has invested tremendous effort in internal informatization, and these achievements support our higher operational efficiency and competitive barriers in the long term. In addition to self-developed conventional ERP and supply chain systems, almost all our positions have achieved mobile management. Sales promotion, procurement, drivers, warehouse managers, and HR all interact and manage through APPs. The terminals we serve now know what they lack and what to order, what to purchase and at what price, vehicle delivery routes and loading order, which SKU should be placed in which location... In Yijiupi, these are all directly answered by our APP. Our AI pricing is about to go live, and our suppliers, supply chain finance, and warehousing and distribution partners will all achieve online and mobile interaction with the company. I believe the core of industrial internet is to carry out integrated digital transformation of the upstream and downstream of the industry, of course, the company's own operations and management are fully digitalized. Therefore, Yijiupi has already implemented a 360-degree, all-round, deeply digitalized operation system internally, driving efficiency through technology. During large-scale expansion, it will definitely become a very important competitive advantage for us. Q: Everyone is seeking development and expansion. We saw that last year you changed "酒" (alcohol) to "久" (long-lasting). What are Yijiupi's expansion principles? Wang Chaocheng: For category expansion, we follow the principle of "slicing sausage": focus on one category at a stage, deepen the supply chain, form procurement pressure upward, and then form stronger price competitiveness downward. Before 2016, it was alcohol, quickly becoming the national number one; in 2017, our beverage total scale also became the national B2B number one. This year, our self-operated sales of beverages alone will exceed 2 billion. Starting in 2017, we entered food, and our goal is to become the industry number one by the end of 2018. For regional expansion, we are firm believers in "national B2B." We firmly believe: "B2B, like other internet models, only has national B2B, not regional B2B." So our overall strategy is still "quickly encircling land": quickly occupy mainstream regions nationwide and build infrastructure. Phased focus on categories and continuous national layout—these two points are exactly what differentiate us from peers. Many peers try to do everything at once, but no category supply chain is the strongest; it looks beautiful but has severe internal losses. Some investors initially promoted their invested companies to expand crazily, and when encountering difficulties, now talk about so-called "regional density." We think these are short-sighted and speculative arguments! Q: Finally, could you talk about Yijiupi's plans for this year and the next steps? What do you envision Yijiupi becoming? Wang Chaocheng: After last year's adjustment and profitability stress test, we have strengthened our judgment and confidence in the future, especially the confidence to compete with giants like Alibaba and JD.com. We will soon conduct another round of regional expansion, capturing all mainstream prefecture-level and above markets nationwide. Life is short; if you do it, be the first. Yijiupi must become China's leading FMCG industrial internet platform. In the first quarter of this year, we maintained growth of over 100% year-on-year. Given the current momentum, the full year is expected to be even higher. On the one hand, through competitive supply chain and better service experience, our penetration in existing regions is continuously improving. On the other hand, this year we will focus on promoting food category sales, plus new regional breadth growth, and the number of terminals Yijiupi serves will significantly increase. So, after a stage of "slow," comes the next stage of "fast." -END-