The 3rd "FMCG + Internet Conference" hosted by New Distribution was grandly held at the Yuelai International Convention Center in Chongqing from November 8 to 9, 2017! It attracted thousands of industry distributors, manufacturers, and internet companies from all over the country, with the venue packed to capacity. The following is the speech delivered by Zhang Li, founder of Jianfu Convenience Stores, at the conference, organized by New Distribution for the benefit of our readers. Zhang Li: I am very glad to have this opportunity. I have ten years of experience in manufacturing, from producing beer bottles to producing beer, then ten years in the wholesale business, once being the largest beverage wholesaler in Xiamen, and then 11 years in retail. I would like to share my views from a different perspective, some thoughts on B2B. Since I have been in the wholesale business for a long time, some of my views may not be entirely correct. From smart retail to retail wisdom, how do we view the changes under the current major trends? First, the new era – the arrival of a new era, the arrival of a new technological era. Second, the supply side, which has brought about tremendous changes in the thinking of B2B and manufacturers. Third, the formation of oligopolies. My original industry was glass factories, now there are no more than five nationwide; beer factories, three. The formation of oligopolies in the future retail industry is an unavoidable natural phenomenon. Second, new forces – the integration of online and offline. In the future, there will be no separate online or offline enterprises; they will inevitably be integrated. Second, cross-industry and cross-domain integration. It is already difficult to tell whether a company is a real estate developer, a retailer, or a financial enterprise. It is hard to distinguish, and it is hard to define with our current views, because if we use current views to define them, there will be no future. Third, the integration of tight and loose structures. It may not just be the so-called fully-owned stores or franchise stores of the past, but possibly cooperation in various models, such as cooperative joint ventures, holding or equity participation, and various forms of integration, no longer being singular. These three new forces have created a new landscape for us. Third, new relationships. We all know the relationship among manufacturers, wholesalers, and retailers. From yesterday to today, many B2B companies have felt a sense of crisis, but the biggest crisis is: how is your service to your terminals? We rarely hear about that. You haven't considered how retailers and customers are doing; you consider that less. Second, private brands. I can tell you that in Taiwan and Japan, 7-Eleven has about 80% private brands. It's inevitable: the rise of retail must be the rise of private brands, but not necessarily exclusive to them; it may be shared, co-owned with suppliers and manufacturers. This is an inevitable trend. Third, the ecosystem. Don't listen to some people who say, "I'll just touch it, I won't go in; I'll just feel it, I won't enter." Competition is cruel; it's either rebuilding or patching. The lessons of the past are worth learning. Originally, they said online wouldn't take your money, but in the end, they will take it away. Now they tell you they will share with you. What will it become in the future? It's worth considering. The new ecosystem is no longer what we could predict; it must be something we cannot predict. Fourth, new responses. In the book "The Innovator's Dilemma," there is a very interesting passage: "Even if we do everything right, we may still lose the city." You may have done nothing wrong, but it might be because you are old. Ten years ago, when I was a wholesaler, I had many friends around me. Ten years later, I met them, and they were still doing the same things, still the same. I have a saying internally: "Those who use past successful experiences and old methods to achieve results in the new situation are called lunatics." I often tell my friends who used to be wholesalers and agents: you can't use the old methods anymore. If you even keep your inventory records by hand, how can you cross over? You can't. The mindset of breaking the old and establishing the new: throw away past thinking, travel light, otherwise you won't make it. When the automobile came, we studied how to make a hundred horses run faster, tying them together, but that still couldn't outrun it. With a positive embracing attitude, I am very surprised to see so many companies participating in this conference, more than many retail conferences. I am very happy, indicating that everyone wants to change. If we only think and don't act, it's still zero; it's called delusion. Take down-to-earth actions, step by step. Don't dream that others will help you; if you don't help yourself, no one can help you. How do we go from retail wisdom to smart retail? In the early days, the aunt at the vegetable market would always grab a handful of scallions for you when you left. She wasn't necessarily selling you cheap goods; she was giving you the feeling of getting a bargain. Retail is absolutely not about selling cheap goods, but about selling the feeling of getting a bargain. Every time we went to the aunt, she would say, "You're a regular customer; I've saved some old stuff for you below." I observed that she said this to every customer. Also, the old man at the small shop. Our family was from a petroleum unit. When my mother took me shopping and occasionally forgot to bring money, the old man would say, "It's okay, you can pay next time." I have an assistant whose father likes to drink. He would tell the shopkeeper, "It's okay, take the wine first; my son will pay when he comes back." He would transfer the payment. Chinese people make tofu: if it's soft, it's tofu pudding; if it's thin, it's soy paste; if it's smelly, it's stinky tofu. Northerners don't eat much pork offal, but when people from southern Fujian went there, they found it delicious and believed in "eating what you lack." Northerners don't like pork neck meat, but someone invented a dish called "roasted pork neck meat," which sells very well and at a high price. This shows different thinking. We say that executives are responsible for creating dreams, middle management for interpreting dreams, and frontline staff for realizing dreams. People don't live in reality; they live in the future. I posted a meme in the morning: I used to hate the 9-to-5 life, but after starting my own business, I finally changed it to 5-to-9. Isn't that right, everyone? These are the core ideas of this book. Based on these ideas, I look at my company with over a thousand store managers; some do well, some don't. A store manager can affect 20-30% of sales. I now have over a thousand stores, with an average of 300,000 people entering per day, and over 100 million people entering per year. I asked internet companies: how much is this traffic worth? They thought for a while and said it should be worth about $300 million. I said, right. I said, how do you capital-side people calculate accounts with us? They said, you don't know how to tell stories or hype. I believe that most of you here are also weak in this ability – the ability to tell stories. There's a book called "Entrepreneurs Must Know How to Tell Stories." We live in stories. This year, we did something very important: facial recognition. Microsoft, Jianfu, Hd, Nanyang, and Zhiyu jointly developed a CRM facial recognition system. Many people think: why would a small convenience store do facial recognition? I said my main pain point is that I don't know who I'm doing business with. My store has 300,000 people per day. How many are male, how many are female? Let me tell you, the Japanese have done it. They are very honest; before paying, they press buttons to indicate gender, age, new or regular customer. But our employees, the post-90s and post-00s, would they do that? Impossible. It's good enough if they don't play with their phones. To solve our pain point, known as the "millennium pain of retail" – "knowing the customer" – we built a system. I know which customer went to which store, bought what, at what time, and their shopping habits. Isn't that what they call profiling? My profiling is more accurate. I know which ones are thieves. Once identified in one store, it's sent to the system to alert all staff that this person is a thief or a counterfeit exchanger. How do they exchange counterfeit goods? First, someone places an expired product on the shelf. Five minutes later, another person buys the expired product, opens it, and claims it's expired, demanding 50,000 yuan in compensation. We solved these problems with these methods. Let me share another interesting big data analysis. Recently, we discovered something: everyone thinks fewer people are smoking, but we found that the total number of smokers has increased. It's just that people like us don't smoke anymore. It's becoming younger and more female. The growth rate of female smokers is faster than male, beyond our imagination. We also had an understanding of condoms. Of course, an important point in psychology is human nature; remove the "human" and it's "nature." Do you know that most men buy small boxes of condoms, while most women buy large boxes? Men who buy condoms tend to be older, while women who buy them tend to be younger. We also found that men need a single condom, not three. I asked the manufacturer why they make three-packs. We are communicating with them to develop single packs, but the unit price might be slightly higher. Through big data analysis, we achieved humanization. Many men here: what's it like when men buy sanitary pads? How many buy them for their wives or girlfriends? It's interesting: men with higher education and good upbringing tend to buy sanitary pads more, while those near factories buy less. This breaks our past thinking. If we blindly see a man buying sanitary pads and immediately recommend sanitary pads to him, or if I watch adult ads and then get bombarded with them every day, how annoying would that be? We need to close the loop from consumers to internal company to manufacturers and supply chain. Don't worry about being replaced; as long as you have value, you won't be replaced. The key is: when you lose value, what use are you? When you have value, why would they replace you? In this process, how do we achieve a consumer-centric approach? The first step is how retail can provide more scenario-based services to customers, and how to share issues with upstream suppliers from manufacturers to wholesalers. About 80% of our supply contracts are signed directly with manufacturers, but 80% of delivery and logistics are done by various agents. Why? This shows that agents are very important in the industry chain and supply chain. First, the payment terms are always advanced by suppliers; warehouses are always crammed by manufacturers; when disputes arise, we are the ones to clean up. How much capital did I advance for bottle caps? I once advanced a lot of money, and the risk was too high. We need to find our own value. Don't imagine that outsiders see the large and small intestines as the same. I tell you, even the appendix has its function; otherwise, it wouldn't conform to Darwin's principle of survival of the fittest. It's just that we may not know it yet. In this process, our retail enterprise has transformed from a simple retail company to a composite one. We can't clearly define it. We say it's a comprehensive business with four major segments: IoT as the core, internet as the soul, telephony as support, standardization as a prerequisite, and supply-side reform as innovation. We break down the company to see what it looks like from different angles and dimensions. We break it down to the finest level, which we call single-item, single-store management. If we can't achieve that, our retail business has no value. Our four major business segments: First, basic operations as the core – food, non-food, fresh food, and value-added services; these are the basics. Second, e-commerce and fresh produce as growth – we failed three times in e-commerce; now we do less than 10,000 yuan a day. We take it slow; we've died several times. It's okay; dying is normal, nothing strange. Third, logistics and distribution – we built our own logistics center of 110,000 square meters. Fourth, smart retail as a driver – we see our small retail business as four major segments, breaking it down into multiple functions, and we clearly know the value of each segment. Finally, let me make a small summary. The essence of retail business is human hearts; everything is people-oriented, managing hearts. So, a special suggestion for B2B companies: think more about small stores. Smart retail is not about unattended stores. We have massage chairs, but I rarely use them; I still prefer a masseur to massage me; it feels different. Creating value for customers is the core. We tell our franchisees: if you use our methods and don't increase sales by 20%, we'll cover all costs. If you achieve 20%, we charge a fee. That's your value. As a small store, if you don't help increase sales, the essence is to help customers sell well; otherwise, they will always talk about price and buy from whoever is cheaper. If you take my goods and they sell well, won't people come? Knowing the customer is the core point. Perceiving the customer: who is the customer, why do they come, why do they buy, how to make them come again – this is an eternal study. Understand the customer's real needs better than they do. What are the real needs? That's why we studied why men buy sanitary pads. What should we focus on? When a man buys sanitary pads, selling him some ginger jujube tea would be a good idea. Serving customers: without service, nothing matters. Enter the store and become a member; leave the store and lose contact. I differ from many internet companies. Why don't I offer delivery? I say all relationships are gender relationships; don't fool people; they are all male-female relationships. When you become a consumer, you adopt feminine thinking, choosing everywhere. When you become a merchant, you want to have everything. So, the best relationship is like a lover: come when called, go when dismissed. Just like Faye Wong's song: "When I miss you, you are by my side; when I don't, you are far away." Thank you! Click Read Original to see more about the 3rd FMCG + Internet Conference... -END-