Before making a profit, the electric dealer is constantly investing in the process of burning money

The business philosophy of the electric business is to enlarge the market share rapidly through the upfront investment, reduce relative cost and gain profit when the scale of operation reaches quite level. And before making a profit, it's the process of constantly investing in the money.

In August this year, the most popular public concern of the hot events should be the price of electricity dealers war. But the price war has only been sustained for three days, as a result of the Beijing-East Liu of the sound of the end. Originally chattering price war, due to the absence of Liu, the heat plummeted. For Liu suddenly "dumb mouth", the industry insiders said, Liu has "backyard": Jingdong a large PE has withdrawn investment, only the principal to take back.

As the main mode of E-commerce business is the electronic mall, because the use of Internet technology has always been the focus of wind investment objects. If the traditional mall is relying on the crowded business district to open a shop, through the environment, services and merchandise to attract customers, then the electronic mall is like in the Wild Hills Open shop, using advertising and low-cost or subsidized transportation to attract customers.

The electric dealer does not have to pay the huge store to rent, by people mistakenly thinks the cost is low, actually actually. From the listed domestic and foreign electrical Business Report, the actual cost of electric business is by no means lower than the real store operating costs, especially in the electricity business model exists in the distribution costs, compared to the physical store required rent, personnel, water and electricity costs is not low, for low unit price Books, department stores, The cost of daily product distribution is even far beyond the physical store. Physical store rental, personnel, water and electricity costs are in the 5%~6%, and the electrical distribution cost of many enterprises in 10%, or even more than 15%. Advertising fees are an irrevocable expense.

The business model is rife with the difficulty of making a profit, and the famous Amazon is starting to make a profit in seven years. Jingdong Mall through the two rounds of financing to obtain 21 million U.S. dollars and 150 million of dollars of investment, its sales from tens of millions of a few years ago jumped to tens of billions, but almost no profit, in 2011 allegedly a huge loss of 1 billion yuan. The price war is said to be a rapid expansion of sales to match the next round of financing, the target is billions of U.S. dollars, the scale of the world's top. Jing Dong's journey to burn money is long and distant.

Offline retailing, the real store, is definitely not a dead alley. From the number of stores, China has more than 2,500 county units, there are nearly 350 land-level units, more than 30 provincial capitals, according to a provincial capital city opened about 4 stores, the level of units to open 1~2 stores, county-level units to open 1 stores planning, Suning appliances (002024, shares bar) proposed to 2020 , will have 3,500 store targets. At the same time, the entity store function, the future will meet the product consumption and time consumption of two functions. In addition, the line under the fusion also has many opportunities, Suning Electric Appliance Chairman Jindong, Suning to do "Wal-Mart + Amazon" concept. In the future there will be no simple physical shop or shop, mutual infiltration is the trend.

From the marketing point of view, the electric business through advertising can indeed attract a lot of people to browse, but sales conversion rate is not high, generally only a few percent. The reason is that the purchase process itself is the process of experience, and Web pages can not really feel the quality of products. I bought books early on Dangdang, but most of the books I bought later didn't look. The reason is that through the limited information on the Internet, I bought a book that I shouldn't have bought, which reduced my interest in buying books.

Dangdang is also in the same situation, the establishment of the more than 10-year online bookstore has been on the brink of profit and loss. The industry giant, which almost wiped out virtually all the physical bookstores, is not valued even if it is barely listed, earning more than 30 million yuan in 2010 and losing more than $200 million in 2011.

It can be foreseen that the number of successful people in the electric business model is only small, and most enterprises will die on the eve of success.