The deadly temptation and deadly crisis of PPG

2007, the most popular domestic e-commerce keyword should be "PPG". PPG in the domestic e-commerce enterprise is almost a myth, as if overnight, television, newspapers, magazines, building ads everywhere are PPG ads, and its 07 sales performance was exaggerated by the media to 700 million, this figure even beyond the already developed 9 years old E-commerce Enterprise Dangdang, 07-Year Sales of excellence net. PPG's rise also to the already full speed of E-commerce has brought a shot of the tonic, for a time, the country almost everywhere are selling shirts website.

But the rapid development of PPG, a series of problems have followed. For example, the recent continuous newspapers in arrears of suppliers, fabric containing formaldehyde, a new round of financing blocked, investors questioned and other issues, and the recent emergence of the old founder of the Vancl, then in the hand with PPG, to PPG caused a moderate pressure.

What makes PPG rise in such a short period of time, and what makes PPG so mired in crisis?

The Deadly Temptation of PPG

First let's look at the value that PPG brings to customers:

1, PPG depth excavation of customer segmentation needs

I used to buy 4-5 times a year in the mall clothes, every time to buy clothes are a painful process, in the crowded mall back and forth, and stuffy and tired, to try clothes back and forth. This is not counted, bought and accompanied by girlfriend to visit the women's clothing store. It's not easy for men to go shopping.

But since can buy a shirt on the internet, it is more convenient, direct online can buy, the selection is also very convenient, basic spend 5 minutes can be done. From this perspective, PPG's vigorous growth, with the convenience of online shopping experience is not unrelated.

2, reduce the intermediate link, greatly reduced the price

Industry people know that the production cost of clothing is very low, Beijing Zoo clothing wholesale market, in the mall to sell seven hundred or eight hundred of the clothes often dozens of pieces can be bought.

Or take ppg. PPG's shirt production process is basically like this: first to the Wire factory to buy lines, then find cloth factory production cloth, cloth production, and then let the Guangdong or Zhejiang Enterprises OEM production of shirts, and then through the catalog sales or telephone orders or online sales of the form of clothing sold out, such as compared to save a lot of intermediate links, The cost was suddenly lowered. Because the cost is low, therefore, the price can also be low to let the ground shop exclaiming, inferior.

3, to help customers choose

I just took part in the work to buy mostly more than 200 shirts, then the situation has a point, buy more than 1000 shirts, but found that, regardless of quality, and regardless of price, basically washed three times later, on good and evil, because there will be folds. In this case, it is better to wear 200-300 price, nothing more than buy a few.

However, if you often go to the mall, you may have different mentality-you or how much fire can not resist the temptation of various brands. PPG is also the user's grasp of this mentality, providing a lot of classic style to allow users to choose.

Because not only meet the needs of customers, but also created a low-cost, and to help customers make the choice, so ppg in the bombing of crazy ads, sales show an explosion of growth.

But PPG also returns several fatal mistakes in the course of operation, which leads to the crisis after the rapid growth.

The deadly crisis of PPG

I. Financing the gambling agreement makes its strategy too aggressive

PPG's last round of financing, should be 30 million U.S. dollars, when the financing of the signing of the agreement, agreed to 07 need to complete 700 million sales, if less than 700 million, the company's valuation on the corresponding decline, and the corresponding management of the shares will be significantly diluted.

I think that after financing, the PPG executives who are still in the joy of Victory are considering the 07-year-shattering expansion plan:

1, if you want to complete 700 million of sales, we should be in accordance with the size of 700 million sales, to do the promotion.

2, PPG Normal period of gross margin should be 50%-60%, then the corresponding need to prepare more than 300 million goods.

3, considering that the shirt direct sales is a new business, to achieve fast enough growth rate, it is necessary to rely on promotion to pull, plus is so high margin business, so to follow the 40–50% to advertise.

4, the corresponding, personnel, logistics, warehouse, call center should be based on such scale to do expansion preparation.

Unfortunately, because of various factors, 07 PPG completed only 300 million of the sales, all the plans were broken. In this process, facing the huge sales pressure of PPG in the sight of more and more distant from the target, facing a dilemma: not to increase the delivery, certainly not finished;

PPG is not able to the last few months to completely abandon the established sales target, in the market put on the brakes, do a full range of contraction? Can, nothing can, but bad is bad in, ppg most of the advertising fee has been spent (PPG 07 years advertising costs close to 300 million). In addition, the goods have been piled up in the warehouse. Although PPG said it is zero inventory, but in fact from the start to buy the line will start to pay, from the purchase line to production, the cycle of at least 2-3 months time. The so-called zero inventory, the actual money has been spent, but the goods in other people's warehouse.

So, at the end of last year, PPG did a long, massive inventory sale to get rid of the backlog caused by the gambling deal. Therefore, at the end of 07, the market rumors that the PPG supply chain should be due to the arrears should also be caused by these problems. Accordingly, in the logistics, warehousing and call center, PPG also caused a great loss.

Second, the Internet business accounted for too low

In fact strictly speaking, PPG is not an e-commerce company, because PPG mainly through television promotion + catalog sales promotion, rely on telephone ordering to deal with customer orders. PPG 07 orders from the online ratio should be no higher than 20%. So it can also be said that PPG is a telephone ordering company.

Telephone order in relation to the network order, there are many problems, the most important is the cost and expansion. Telephone orders to large-scale venues, callcenter systems, agents, personnel costs. According to the current situation of the industry, every 3-4 calls will produce a deal order, the average number of calls per order to 3-4 minutes, calculated, each order to bear the cost of personnel in about 4 yuan, in addition to the allocation of other costs, each order at least 6, 7 yuan, accounting for each of the amount of about 5% of the ratio.

In addition, telephone orders if the order volume increases too fast, the call center processing capacity will be greatly reduced, will also result in a large number of customer complaints and orders lost.

and online orders basically do not need any cost, and will not be too many system capacity constraints. This is also the reason Dangdang has not started the phone subscription.

A big problem with the low Internet order is the dependence on the advertising transition. As we all know, do Direct TV and directory direct sales, customers will be very dependent on the ads and directories, centralized television delivery and distribution, the order may be tens of thousands of tens of thousands of growth, and no advertising, customers do not know what merchandise can be bought, there is no order. And every time you want to grow your order, you need to keep on advertising.

And if you pull the user online to buy, online is a best commodity display site, users are accustomed to browsing the internet, there is no need to spend money to print catalogs and do TV promotion. Only need to cultivate the user's internet inertia, or by advertising (including Low-cost direct mail and SMS) to remind the old users "often to see."

I have previously done a preliminary statistics, online shopping on average every old user back 4-5 times a year, and the directory and TV sales brought customers will only buy once.

So, PPG non-internet phone ordering mode, resulting in a huge cost, while too dependent on advertising, and this time, it is necessary to budget carefully, to see the advertising investment brought about by sales and profits can offset advertising costs. If there is a slight problem in advertising, it will bring huge losses.

So what about PPG's advertising campaign? Let's see

Third, advertising is too rough

And friends to talk about PPG, we do not understand why PPG is just a shirt direct sales company, but playing so many brand image ads, television, subway, buildings, newspapers everywhere are, but also please Wu to do endorsement, almost became the 07-year AD king. In particular, TV ads, see Wu wear different shirts appear, no price signal, at most leave a phone number. A lot of customers can't even read the ad.

There are also directory ads, I have done some research. Before we do online retail, we have carefully studied the largest catalog sales company in Mai Lin, their orders are basically from the catalog, M18 in the newspaper entrainment directory, from President Beichun to market director to Market Manager, the whole link is in the scene, It was feared that the issuers would keep the catalogue in the dustbin in order to cheat advertising fees. In the distribution of the choice of the crowd, M18 do is more sophisticated, continuous testing, until the rate of a slip to achieve a certain standard to dare large-scale launch. So the M18 of the regular catalogue can reach more than 5%

And we have done this kind of attempt: from the catalogue of the selection, to the style of the catalogue, to the distribution of the choice of the people are trying to imitate M18, and the person in charge from M18 came. But the results of 100,000 copies of the catalogue, the return rate is 1/1000, but also to send a high rate of email.

I also have a friend of the company to see Macaulay and Red Children's directory to do well, but also began to do the directory attempt, the result of Waterloo, the return rate of 1/1000 is not yet. One reason is that many catalogs have been sold to garbage stations by employees, and their bosses are still in the dark.

I think that PPG's full-page advertising and catalog entrainment in the newspapers will also suffer the same problem. These 4 a company from each year to spend a few billion advertising fee of the people can fine to M18 this degree?

Also, PPG on the network advertising, because the network can do accurate monitoring of ads, so PPG on the network is too strict, too deliberately required portal ads immediately bring sales to offset the cost of advertising. And their lack of experience in the network, the Web site and shopping flow is not in the convenience of doing enough articles, the result is that the use of too much of the portal site resources but did not bring too much sales. So later, most of these big portals have lost their interest in PPG, and PPG has reduced the network. Through our monitoring, PPG's advertising fee is only 1% on the network.

Four, did not reduce customer purchase threshold

Look at the current VANCL promotion policy, new customers buy the first shirt as long as 68 yuan, greatly reduced the customer online to buy a shirt on the threshold, although not without the worry about the quality of the shirt, but fortunately the price as long as 68 yuan, in the outside stall to buy that price. At the same time Vancl also have 40 percent snapped up ah 3 pieces of 199 ah, such gimmicks, so users flocked to. At the same time Vancl also set 200 yuan has preferential policies, so that the appropriate pull up the cost of orders. Aged to do the start of the commercial, career change to do the shirt direct sales, or a pretty strong professional.

In contrast, PPG 07 's leading promotional policy is 4 pieces of 500, 5 pieces of more than 700. Although the unit price is very low, but to PPG's product does not confirm the new user, how dares to buy 5, if the size is not right, or the style is similar, that should do. It is a mistake to try to pull the order amount, but the result is appropriate.

Also, you now go to Vancl home to see, will find at least 200 cities can pay, and on PPG's website, it took a long time to find, originally their goods to pay more than 200 cities. This is another site design failure.

To sum up, I think the PPG financing of the gambling agreement to make its strategy too aggressive, the internet accounted for too little, advertising too rough, did not reduce the customer's purchase threshold, is its 07 into a crisis in the fatal point. I wonder what other people think?