No. 1th Store CEO Gege: The pros and cons of price war

Wool

The biggest price war in the history of China's young Jankin, August 15, finally came to an end. While this battlefield is not dispersed and a new wave of war drum is about to be sounded in the gap, we should calm down to reflect on this war who is the winner? Is it conducive to the development of China's electric business? Have the vast majority of customers benefited at last?

A brief review. On the morning of August 15, BoE chairman Liu through Micro-blog announced that Jing Dong everyone electricity three years 0 gross margin! If within three years, any of the sales personnel in the electricity plus even a dollar margin, will be immediately dismissed! After the release of micro-blog said that Beijing east in the country to recruit 5,000 U.S. and Soviet price intelligence, 2 per shop stationed. Any customer to Gome, suning buy everyone electricity time, take out a mobile phone with Jingdong client parity, if less than 10%, price intelligence agent on-site verification is true, Jingdong immediately cut prices or on-site coupons, to ensure a cheap 10%!

Li Bin, the executive vice president of Suning in the afternoon, responded, said that Suning easy to buy, including home appliances in all products, prices must be lower than the east, any netizen found that the price of suning is higher than the east, Suning easy to buy will immediately adjust prices, and give the purchase of feedback twice times the difference pay. In the evening, Gome Vice President Yang announced Gome also joined the price war "gome online shopping mall line of goods prices will be lower than Jingdong mall 5%."

A moment of flames of flames, "This price A, the outcome has been divided" red logo appears in Jingdong, Suning easy to buy and other products on the page. As to whether this price war is true, clean the battlefield with a discerning mind. A special inventory of the situation, according to its published data, in this price war, actual participation in the price of goods accounted for the proportion of the total number of products, Beijing East only 4.6%, Suning easy to buy 7.5%, and these participate in the reduction of the average price of goods not more than 10%, and did not appear in the round of the people are looking forward to endless price reduction model. and product asymmetry, out of stock, prices before the surprise price and other phenomena have been criticized by customers and the media.

Is there a winner in this price war?

The victim of the price war

I think "price war" is more harmful than profit. Although the price war attracts the attention of the public, get free flow, promote the sale, also advertise, let the customer know the online also can buy big home appliances, but I think through price war to achieve these goals, is the golden goose, lead poison thirst, in order to sacrifice long-term benefits for short-term benefits of behavior.

From the brand, marketing, and market perspective, its drawbacks are:

1 The more high-profile price wars bring customers higher expectations, if the commitment to customers is difficult to cash, so that customers have a feeling of deception. such as the price war, the Beijing-east commitment than suning easy to buy gome cheap 10%, and suning easy to purchase commitment if found to pay double the cost of the east, Gome also promised a cheaper than Beijing East 5%, in fact, these commitments are difficult to achieve. Although the short-term increase in sales, but let customers to the war business and even the entire electric business industry, the loss of trust in the long-term brand and reputation can not be underestimated.

2 The party that provokes the price war often sings red to rival, reduces own market share, be picked up by the public and the media. This can be explained from the perspective of popular psychology that provoking a war is often regarded as aggressive and devoid of justice, and the challenge is often pitied. The result is also the case, we look at the two Baidu index, before the August 13, the Beijing-East in Baidu's user concern for Suning easy to buy 4.8 times times, fierce war, August 15, the gap has dropped to 1.51 times times, after the war subsided to 2.3 times times, did not return to the original pattern. From the media attention to see, the Beijing-East war before the overwhelming advantage, and in the war, Suning Tesco even once overtook Jingdong.

From the point of view of supply chain operation, price war is more not to be taken:

1 Supply chain management is the most taboo is the pulse of sales, will cause huge peaks trough. In order to fulfill the sudden rush of orders, warehouses, distribution, customer service need to be working overtime, operating costs increased dramatically. And delivery delays, customer service phone explosion, problem-handling slow and so will be at the expense of customer experience, resulting in long-term damage.

2 price before the war is not clear how competitors deal with, customer response, these uncertainties will pose a huge challenge to inventory management, it is difficult to determine the reasonable amount of inventory. Out of stock will make customers feel fooled, too much stocking will cause inventory backlog.

3 price war so that customers have expectations, customers will wait for the price of wartime purchase, purchase time transfer, the value of lower.

All this leads to an increase in operating costs, and the wool is on the sheep, and these additional costs will be passed on to the customer sooner or later, and finally the consumer buys the order!

Scientific Management Price

The first thing to admit is that prices are really important to retail. Varieties (selection), Prices (price), availability (availability), convenience (convenience) is the cornerstone of customer experience in E-commerce. Price is one of the most important factors for customers to choose, and customers always want to receive concessions and benefits. And its importance does not diminish with time, the past is important, today is important, the future remains important.

But price competitiveness should be based on efficient and optimized supply chain, only the procurement, warehousing, distribution, after-sales service and other aspects of the cost down, in order to save the cost of the customers. At the same time, prices can be scientifically managed, relying on systems, mechanisms, optimization models and methods to achieve price competitiveness. For example, use the price intelligence system to cover the prices of mainstream e-commerce sites, and capture, store, and analyze commodity prices and inventory information in real time FDI. Based on this information, the price management team can do data mining, analyze price elasticity, develop price strategies based on purchasing cost, customer demand, competitor price and profit target, and build price model. Finally, the PiS system uses these price models to automatically adjust the price in real time to ensure the competitive price.

Price index is an important index to measure the price competitiveness of electric companies and their direct rivals. First of all, the commodity needs to be classified according to price elasticity, high price elasticity for sensitive goods, and much lower is long tail goods. Samples of different quantities (more sensitive commodity samples) are taken in each category to calculate the weighted average price difference percentage with the competitor and are reviewed at the Business Review meeting to adjust the strategy if a high price index is found.

In a word, I hope that in the new business model of E-commerce, we can compete rationally and build a healthy ecological circle together. Put resources and energy on the creation of value, so that more people can enjoy e-commerce to bring us the benefits of a new way of life.