How much time does it take to make a decent buck for the Business-to-consumer?

Last week Jingdong Mall President Mr. Liu a new article on the blog, "Jingdong mall old Liu Talk about e-commerce of the five-the real king of the burning money" caused no small controversy. The key point of the controversy is to be a decent business-to-consumer, which takes no more than 10 years to 1 billion. In fact, Mr. Liu also emphasized in the article, he refers to "decent" refers to the annual sales of 20 billion, net profit of 500 million of the business. This "presentable" refers to the whole product upstream and downstream value chain, the whole network purchase market industry chain impact, this and only want to do a profitable small and medium of the starting point; , the problems to be confronted, the resources to be invested, the return on income, the value of the risks, the ability to resist risk is completely different. How much time will be spent to achieve such a "decent" depends on the industrial environment and market maturity.

First, let's look at the process and status quo of the U.S. online shopping market that is at least 5 years ahead of China. We take Amazon, for example, in the 5 years from 1995 to 1999, the market costs are the highest in their operating costs, the proportion of sales in the 10%-40%, because this stage market is immature, to spend a lot of money to educate the market users, This time Amazon is a MKT company (which is also Amazon's sales growth of more than 100% 5 years). This phase of the entire business industry concentration in the initial phase, everyone in the capital market support under the fight to promote the fight to burn money, try to occupy market share. After 2000 years of big shuffling of the Nasdaq dotcom bubble, a large number of businesses went bust. The industry concentration of the company also from the initial stage of the transition to the expansion phase, we also from the fight to promote the ability to fight, competition is the supply chain capacity. Amazon since 2000, logistics and technology costs to replace the market costs to become the largest operating costs, logistics in the proportion of sales in the 9%-15%, technology in sales accounted for 5%-10%, this time Amazon is a logistics/technology company. Today's industry concentration in the US is maturing, with TOP500 's 70% per cent market share, from No.1 's Amazon (20 billion dollars/year) to no.500 Musicnotes (10 million USD/ The Amazon family occupies 11% of the market. (defined outside the US TOP500 as a small business with no impact on the industry, no more statistical significance) at this time, Amazon is an IT service company, its own E-commerce experience/technology/logistics/ Users output to tens of thousands of small and medium-sized retail enterprises. From zero to annual sales of 20 billion U.S. dollars, net profit of nearly 700 million U.S. dollars, Amazon spent 15 years, nearly 2 billion dollars in investment. Amazon is finally a success, and others may not be so lucky, such as the establishment of the 1997 Buy.com, in 2000, the successful listing, due to poor financial performance 2001 and retreat, in the burning of 200 million dollars after the loss of advertising costs; 1999 established Zappos, in the logistics/ Customer service investment is very large, in the case of gross margin 35% losses for nearly 10 years before starting to have a little profit, the last investor lost patience to sell to Amazon.

And China's relative to the United States, time will be longer and more investment, of course, the return will be more, the market share will be greater. This is because China's internet is not mature enough, network coverage/network penetration rate is low, netizens have not formed good online shopping habits, and the entire industrial chain is incomplete, each node has no professional service Provider/subcontractor. such as marketing, the United States of the effect of marketing is very mature, account for more than half of the source of the customer order, and in China search engines and alliances, whether traffic or quality is far less than the United States, is not enough to support the customer, so we will be on the portal/video station/software client to see so many hard to read, such as the IT system, Every link in the United States, ERP;BI;CRM; Site search engine, Web analytics tools, WMS and so on, all have professional providers, and in China have to do their own, foreign professional can not afford to meet domestic demand, domestic simply cannot use; For example, logistics, China's logistics environment is more than road, No hundred years of Fedexs and UPS, there are only the quality of the speed of the attitude can not guarantee but every day to yell at the price of 3PL (of course, their costs are also high, prices can not say that there is no rationality, but the cost of passing on to whom the problem). Last winter I bought a few clothes at a man's official store in Taobao Mall, the entire customer experience is terrible, from the accuracy of information to customer service to order processing to delivery and follow-up of the sale of the mess, this experience I do not want to go through this life again, and this brand of online retailing is outsourced to a well-known Third-party service provider, It can be seen that the current China's e-commerce outside a lot of unreliable. What's more, the demand for Chinese Internet users is the highest: the most complete goods, the lowest price, the fastest speed, the best service. In the worst environment to meet the highest requirements, it is difficult to imagine. Therefore, Jingdong and other large companies to invest tens of millions of billion to develop the system, in all parts of the country to build large warehouses, automated production lines, self-built distribution team, is to ultimately reduce costs, improve efficiency and service levels to meet user needs. When this layout is finally realized, it will be found that the cost of input before the transformation into an advantage, that is, the core competitiveness, that is, the threshold, and even the ability to output. The equivalent of driving along the road, the cost of buying a car is not high, but the road is too expensive, and the return will take a long time to recover, and once the road has been built not only to reduce the long-term cost of driving, can also be charged for profit. For those who do not have the ability or do not want to go into the system and logistics, it is necessary to compromise on the long-term cost and user experience, to face the inefficiency caused by the lack of system capacity, logistics loss, high freight cost, and the loss of risk and user experience, because of their lack of control and good solutions, Third parties do not have the ability or awareness to provide in the current environment. Of course, not to let all the business-to-consumer to put into the system to build logistics, this is not only unrealistic, but also is the accumulation of resources and time waste,Just have to be prepared for a long time to face the loss of high cost and competitiveness, until eventually the large environmental maturity, the industrial chain is perfect, each link to produce a professional and cost-effective third-party solutions or produce similar Amazon E-commerce output enterprises.

I believe that Mr. Liu's article is also based on the development of the high growth rate of the Beijing-East for many years the immediate experience of the problems encountered and resolved, this is experienced a long learning curve, and constantly try to pay tuition fees in exchange for experiences. Lao Liu's definition of "decent" does not necessarily allow everyone to agree, but we can think of their own enterprise positioning, goals, to achieve the goal to pay the investment and time, to face the problem. One thing is always true: it is a long-distance race, and ultimately, endurance rather than explosive power. For the more incisive article, we should discuss and not dispute, if the dispute without discussion, it is a bit the cart before the horse.