Gome President Wang Junzhou price war: Low cost of electricity quotient is misreading

Recently thinking about a question about how gome will do it in the future.

In April or May this year, the United States in the planning of the promotion line of the same price strategy, we think of the core is around the needs of consumers, the first consumer demand is the price. If the online price is lower than the line, then what is the consumer to the Gome line down shop? The low price promotion is long-term, let the line on-line same price become the different channel consumer chooses gome one reason.

In fact, before the Beijing-east Weibo price reduction, we have developed a line of the same price scheme, why the day 10 o'clock to say this word? We did not want to play this price war, is planned to launch the same price online. and Jingdong first sound, and name the Gome, said the price will be lower than the United States 10%, three years Jingdong not profitable, this has to peer provocative speech, let us have to respond, otherwise consumers will be misled. So we decided to respond at this point in the light of our plan, but made only a few tweaks to the original plan.

When the price war hit, Gome let everyone feel seems silly, only our lowest price, the most abundant supply. In fact, we are fully prepared in two months, according to the original established strategy and policy. Just the day before the big Battle of the electric business, we had just discussed the push plan under the line in the Conference room.

Consumers can see that the day of the price war, we launched a line on the same price ads, if the temporary preparation is not too late, even printing will take 3 days, and we have to do newspaper advertising, outdoor advertising, store publicity and layout, if not in advance of preparation, it is too late.

In fact, from the sales results, this time the electric business war effect is good, you see the physical store in August 17-19th, the three days of the volume of people turned 4 times times than usual.

Online Price

Why should gome implement multi-channel strategy?

Whether Japan or the United States, the relatively mature market, offline retail entity stores still accounted for about 80% of the total, while online sales channels as a supplement to differentiated demand, accounting for about 20% of the market share. The largest home appliance chain in the United States, Best buy its physical store sales of the size of the overall sales of 95% of the total, its online electricity quotient accounted for 5%. More consumers are willing to enjoy the physical shop in the process of experience, sometimes go shopping is no purpose, online can not meet this pleasure.

Ground shop as a consumer to buy electrical appliances mainstream channel is long-term, the future must be we can see. Only online under the line are strong retail enterprises are the most valuable enterprises, multi-channel to meet the needs of different consumers, this is our long-term adherence to the strategy.

The key is how do companies support this long-term strategy?

We have been doing online for nearly a year to share the platform: procurement platform, information platform, after-sales service, ERP and human resources sharing. These platforms also support the operations of more than 1700 stores and 2 e-commerce sites.

After the price war, a Amoy announcement of Gome's website traffic growth is the most, one is prepared well, the second is the sharing platform has played a role.

Gome's web site more directly to the client, to provide customers with better low-cost, high-quality goods, many of the background work of the electrical business is shared with the group to complete. Our ERP cost a few billion, this is not only the cable on the electricity business enterprises can bear the input and cost. There is also a key factor is the logistics system construction, today no matter how much capital, logistics platform construction needs a long time accumulation.

Gome more than 20 years to establish more than 300 logistics Base, constitute a national logistics network, professional logistics companies to support the logistics network, the scale here.

In addition, in the procurement costs, in any event to break through the 100 billion-yuan sales scale, so that you are generally recognized that your procurement costs than the scale of only tens of billions of 3%~5% average cost of electricity business enterprises, which is the size of the procurement cost advantages.

Electricity is only the beginning of the current stage, but also a big battle of the era, who can finally stay is not necessarily, but the consumer will certainly stay. Today we are still paying the bills for home appliances manufacturers that went bankrupt years ago. In the future whether it is still uncertain of the site to order, if the enterprise is not, consumer rights to find who to maintain it?

Changes in the market are the hardest to predict. Benign competition is beneficial to the fittest, to improve the service and management level, so channels and manufacturers will appear to be eliminated situation. Back in the late 90 's, home appliances manufacturing enterprises hit the price war, we have experienced the impact of the brand integration of China's home appliances manufacturers, integration after the lack of core competitiveness of the brand has not, we still in the performance of some of the home appliances brand 8-year warranty commitment, but also to provide after-sale platform protection.

The cost of electricity business is not low

From the current point of view, the electric business model there is a high cost, low profit, loss of defects, in fact, offline entity shop cost structure than E-commerce is lower. Because the electronic commerce purchase cost is higher than the line, the After-sale platform sharing, also provides the safeguard for the future.

How is it possible to achieve the same price online? Whether it's online or offline, everyone in the 11%~13% about the operating costs, from the cost structure analysis, General E-commerce site, logistics costs accounted for 5%~6%, floor logistics cost accounted for less than 1%, gome long-term accumulation of store sales capacity, logistics cost support 100 billion sales scale, cost less than 1%.

It is generally believed that "online must be cheap" mainly based on some visible and wanted cost factors, such as offline stores need façade rent, store management maintenance, and a large number of sales staff expenses, and these online channels are basically not.

And you put the costs out, you will find that the logistics and procurement costs, the line is much larger than the line.

Procurement, in the retail industry, the size of the decision on the level of procurement prices. To Gome, Su Ning as the representative of the offline entity shop every year more than hundred million yuan home appliances procurement, and Jingdong only about 20 billion of the scale, the procurement scale determines the offline entity shop under the average purchase cost less than the electricity quotient 4%. And with the procurement of the scale, the number will rise.

After the electric business advertising cost estimates, the current electric dealer's advertising and traffic costs about 4%, while the offline entity store advertising marketing costs about 1.5%, offline entity store advertising marketing costs lower than the electricity quotient 2.5%.

The online labor cost is 4.5%, the labor cost under the line is about 3.5%, the offline real shop is lower than 1%.

To the Beijing-East as the representative of the Pure electric dealer, more is the use of Third-party logistics distribution resources, logistics costs about 6%, and the United States as the representative of the offline entity stores in the country has its own logistics distribution base, the average logistics distribution cost of about 0.6%, offline physical store logistics costs lower than the electricity quotient 5.4%.

In addition, the enterprise operation must have the fixed cost investment, from the economic principle, the scale of business in a certain scope the marginal cost is lower. Due to the relatively small number of electrical dealers, so the cost of a single piece of merchandise is higher than offline channels.

Online technology and management cost rate of about 2.5%, and offline channel due to the deeper cooperation with suppliers, offline channel marketable products generally more than online, these can rapidly expand sales scale of goods can effectively improve the turnover of retail enterprises, reduce warehousing, logistics and other costs.

From the above comparison can be seen, online low-cost is a misunderstanding. In fact, according to Gome, suning years of public listing performance reports show that, its average comprehensive gross profit is about 18%, operating expense rate (cost) is about 13%, net profit margin is about 4%; At present, the average comprehensive profit of the electric quotient is about 7%, the operating cost rate (cost) is about 17%, the net profit margin is about 8%, Therefore, the operating cost of the electrical business is higher than the operating costs under the line, resulting in long-term losses.

Below the line price line below the direction

The future consumption pattern should avoid weaknesses, "online parity, offline under a single" will be a long-term trend.

Since the line is hard to replace, and online and offline has its own unique advantages, when the line and line combined to achieve information, procurement, logistics, distribution, warehousing, experience and supply chain cooperation and other resources sharing, will become the most valuable and most competitive retail enterprise development model.

Consumption patterns will eventually affect the development of the industry. With the growth of personalized consumption demand, online purchase mode has become an irreversible consumption trend. At the same time, offline platform also has no online consumer zero distance experience advantages, shopping Guide information support advantages, user worry and the advantages of after-sales service.

In the retail industry, whether online or offline, the future sustainable development of the retail enterprises must adhere to the integrity, advocating integrity, through rational, fair competition to enhance their own management and management capabilities, and truly promote the healthy development of the industry enterprises. This is also the United States recently issued a "maintenance of market order, promote the healthy development of the industry" proposal of the original intention, the public appeal to resist mutual slander, mutual undermine the irrational competition behavior.

Gome's vision is to become a respected home appliance retail business, "double-line Price" is currently being promoted by the strategy. The future Bowser network will develop comprehensive category, and Gome Mall is closer to and offline entity store synchronization, focusing on home appliances business. At present, Gome stores more than 70% of the product price below Jingdong Mall, while other products are also implemented at any time to adjust the flexible policy. Gome promised, Gome store prices will continue below Jingdong Mall.

(newspaper reporter Wei Wei interview finishing)