The effect of 3--net interest rate on the value of the Business-to-consumer from the stock market

Section 2: The impact of net interest rates on valuations

Even if the company's sales do not grow, if net interest rates increase every year, such companies will be a money-making machine – but it is more difficult to increase the net interest rate for a long time than the growth of sales.

Net profit comes from "sales-cost-expense", so the effective means of raising net interest rate can also be divided into three items such as "increase the retail price so as to increase the gross profit rate, reduce the purchase price so as to increase the gross profit margin and reduce the operating cost".

Let's start with the simple, how to reduce the purchase price so as to improve the gross profit margin.

Generally speaking, procurement is a quantity of the game, a large amount of bargaining capacity, a large amount of bargaining power. We often hear retailers bullying suppliers stories (entry fee, more rebate, longer period of account), playing "bad" abroad is Wal-Mart, in China is Gome (su ning slightly better), why suppliers are willing to be bullied without resistance? Without him, the purchase of large ears, retailers control the consumer's view, the lack of (this is why gree to build their own store system, why Lenovo to build the mall, proprietary Taobao). It is the best example of the East Jingdong procurement channel in the early years, even less than the new eggs, but with the rapid growth of Beijing and east, now Jingdong has claimed that 80% of the source can be from the manufacturer, the overall generation level of direct supply.

A special situation, how to manage, motivate the procurement team, to prevent or reduce kickbacks and other harm to the company's behavior, is also a major issue. Especially in the same industry procurement, whose management system is more reasonable, execution is better, you can have more opportunities to get better prices than peers.

However, whether by management or by volume growth, the range of purchase price reduction is limited every year, although Jingdong is new eggs, Xun several times, the retail price is similar, but its purchase price difference of one or two points already is the limit. Therefore, it is very difficult to improve the gross profit margin and lead the competitor by continuously reducing the purchase price.

(Note: The above mentioned purchase price reduction, essentially refers to get better prices, emphasis and peer comparison!) Because a product like 3C falls Fast, its purchase price is normal, but the retail price is also falling in the same range. So the enterprise to get the extra advantage, must be more than the peer to get a better price. It may be misleading to look at literal light. ）

The difficulty is to increase the gross profit margin by reducing the operating expense rate of the enterprise. In the United States is sg&a, research and development costs, in China is operating costs, management fees, financial costs.

Generally, with the increase in sales, many fixed costs will be diluted, the cost rate of the enterprise will appear a convergent downward curve. But the outstanding enterprise must reduce the expense rate, the creative optimization resources use, optimizes the business process.

New eggs, for example, beat the American rivals early on, relying on the service outsourcing China, with a large number of wages "meager", skilled Chinese development engineers and 8-level English proficiency in the use of skilled customer service in Chengdu and Xi ' an, significantly reduce the operating costs, so that the continued low prices to hit competitors. Jing Dong also last year will be customer service layout to Liu's hometown of Jiangsu Suqian. After the recent pay rise, Foxconn has also relocated its product chains to the Interior and Vietnam (in fact, it has already been laid out).

There are a number of similar examples. Amazon, when, Jing Dong, new eggs, every guest these day huge orders company, through the WMS system and the process of micro-optimization, can significantly reduce the average processing costs per order, since the establishment of logistics distribution and self-mention point, in order to achieve a certain amount can also reduce the average cost per single processing, in this not to repeat, Give a few examples of operations.

Example one: When the company is small, one day more than 10 single, arranges 1 storehouse tube from grasps the goods to the packing handover to 3PL all to be done, also does not need very excellent backstage system, looks at Taobao and Shopex's order center content grasps the goods on line. When the day 50 single, maybe 2 people can handle, at this time we will want to how specialization, let a person specialize in grasping goods, a person specially pack and paste waybill. When orders grow to 500, specialization may already be fine, QC posts have also been added (before 1, 2 people QC can not talk about), and each position of the system put forward higher requirements, the people who want to grasp the bulk of the purchase order, the QC people hope not only with the naked eye identification can also scan the gun, Packaged people will be further subdivided into folding carton and packaging, put invoices, stickers, people want to achieve the change of handwriting for printing ... At this time the original system has not been met, small companies to consider the last small WMS system, such as shop housekeeper. When it comes to 2000 orders, each position needs more refined system, for example, the cargo is not only want to print the bulk printing, but also want the printing of automatic sorting for the order of grasping (behind a lot of system logic, a single item of orders put together, 2-3 items in a certain order to play, Multi-item orders with the seeding of a unified print a large scratch manifest, the actual catch people are also divided into some with fruit picking, some sowing, some combination; QC people start to require a wireless scan gun and can automatically press the ENTER key for a long distance to enter the next order of QC Packaging people want the uniform box specifications to use certain mechanical assistance (such as Packer, plastic sealing machine, etc., the choice of filler also began to consider how the most convenient, such as to do not put the filler hanging up; invoices and waybill people want to change from printing to continuous printing, and can be filtered by way of distribution after a dozen, will be home urgent send together dozen, yuantong together dozen, Not a picture of the East ...

Finally, when we look back at history, we find that our per capita processing volume is from the first 1, 2 person per capita dozens of single, slowly increase to 100 single, eventually increased to two hundred or three hundred single or even four hundred or five hundred single, split in each order on the total operating costs are also significantly reduced (rent, equipment depreciation, artificial, the only drop is less supplies more difficult).

Example two: one months or so before Shanghai's program Boston, the host and Yu said when how to save operating costs, the use of the old junk rack disassembly after another use, let people listen to awe, when it is really not easy to go to today, even if the Amazon has a lot of support in the United States, there is such a spirit when it will not fall.

Example: consumers can see but not necessarily think of, such as van and Amazon's order list in the upper right corner will be missing a piece of things, obviously tore off a sticker, and the size and package outside the distribution surface is the same; in the actual out of the library process, only need to print once, on the same time to complete the capture and distribution orders two documents, Save a printing (but only if the premise is self-built express). In the early years, many consumers complained about the bad quality of the box when they received the parcel buy Jingdong goods to get a SanDisk box as the outer packaging, sometimes the box is a bit rotten, this is because the company when the cost control is more stringent, has not yet used a unified outer packaging, a carton a few dollars, almost and freight is quite, wool out in sheep, If you really use a good box, the price of the product will go up. These every bit of savings, is not only the spirit of the electricity quotient, but also the regret of the electric business, retail is a hard trade, the consumer sounds very high-tech very internet, but unfortunately the essence is still retail, not waste.

But it is even more regrettable (and "regrettable") that the term is very high in terms of the company, although the excellent companies have done a lot of effective work to reduce the cost of operating costs, but this in the stock market response is flat. Because such a cost rate drop is often one-off, it is difficult to continue every month, and the execution of a good competitor can quickly imitate, and it brought about the increase in gross profit margin is limited, can not be large-scale replication. (but still very important in the competition)

Finally talk about the most difficult, but also the capital market, how to improve the average retail price of products so as to improve gross profit margin. This can also be broken down to improve the existing product gross margin, the introduction of new products (or enter the business scope).

For platform-class consumer, most of the products are standardized, so what can be a more expensive book than Amazon (or vice versa)? Why do consumers buy accounts?

Reason one: no one I have. For example, Jingdong with product line rich, can be in and new eggs, Xun coincident product line price follow, and in new eggs, Xun no product line on the appropriate fare increase. Consumer time is limited, visit Taobao will be tired, many people want a stop shopping, also save the freight. In fact, the goal of Jingdong has been extended to cosmetics, mother and child and department stores, the new category of the gross margin itself is higher than the traditional 3C, so to improve the average gross profit is helpful, the key to see how big sales accounted for.

Reason two: people have my excellent. Similarly, we all have something, whether Jingdong services can do a better job to retain consumers or even form a word-of-mouth effect? Although Paidai on the Beijing-east complaints, but Beijing east is really trying to build competition barriers, on the one hand, intimidation of the follow-up, on the one hand, and the second and third place gap. For example, the newly launched Beijing-East 211 (11 o'clock in the morning before the next single afternoon delivery, evening 11 o'clock before Dandi 2nd morning delivery) services, 100 service after sale (100 minutes after receiving the goods to solve the problem). Although the current rate of service reach estimates have yet to be improved, but the BoE dare to raise standards is admirable. When the Beijing-east through a few quarters of the operation of the service reached the rate of 95% or even 98%, 99% after the Beijing-east even if the increase in the retail price of some products, presumably consumers will not easily leave. You are provide decoupled service,you deserve decoupled price.

For brand consumer, how to improve the brand premium? Paidai perplexing has a lot of wonderful ideas. See here, I'm Zang. Personally, the best case scenario is Apple, which has been in recent three years:

Since the launch of the iphone in January 07, Ipple has grown both in sales and gross profit margins, with gross margins rising from around 29% in 06 to nearly 42%, leading directly to the growth of net interest rates in the figure below (from 10.3% in 06 to 22%+ in 2010 Q1, Rose a staggering 12%, to know Jingdong's gross margin is also only 5%.

The only stock price drop in late 08 was due to a slowdown in sales and gross margins of the 09q1 and Q2 as a result of the financial turmoil, and once again, after the iphone 3Gs and the economic recovery in June 09, share prices rose rapidly as sales and gross margin increased. Notably, Apple's sales in fiscal year 09 rose by more than 14% from $37.5 billion in 08, but in the same period it rose from 35% to 40%+ and to 14%. Companies that can do the former abound. Can do the latter rare. The 2010 iphone4 and ipad are on the land, so let's wait and see.

But it is a pity that although rare Apple has been able to raise its gross profit margin for 4 consecutive years, the 260+ dollar's share price is only 21 times times more than that of Amazon's 50 times times.

On the one hand, it is clear from the above column of sales that Apple's sales growth in 08 and 07 was significant (52% and 27% respectively), but that its net interest rate had continued to grow since 09, but sales growth had started to slow, only about 15% per cent. In 07, 08, the highest Apple PE reached over 40 times, far more than 21 times times the current high, more than today by the market pursuit. This once again shows that for capital markets, the scalability of sales is better than net interest rates, and it is more likely that the rapid growth of net interest rates will be luck and unsustainable, even if Apple has produced a different answer in the past 3 years.

The industry, on the other hand, "drags" Apple, after all, the investors in the eyes of Apple is only a consumer electronics manufacturers, although the creative constantly, new products repeatedly success, not to be distinguished, but its valuation and Nokia and other giants do not have the essential difference, but in an industry "part" of the new products. And Nokia's valuations are now about 23 times times the 07-year peak at the bottom of the price is only about 30 times times. Amazon, with its high tech and internet aura, is more likely to be a hot, lovely woman with a thin veil and a more lethal appeal than a veil-less apple.

The comparison between Apple and Amazon has the following implications for Chinese brands:

First, fast-rising sales are more important than raising gross margins and net interest rates in order to raise short-term valuations and be more popular in the marketplace. So VANCL just keep the net interest rate positive, the current pursuit of further sales promotion more important, the corresponding is to expand sales channels (such as Open shop), attract more new users, stimulate more repeat consumption, increase product line (under the Vancl brand is the expansion of women's clothing, bags, shoes, etc., In terms of capital, it also includes new platforms such as Vjia.

Second, in the medium to long term, the growth of sales also has a slowdown in the day, when the once High-tech Internet high growth halo subsided, although there is a higher capital turnover efficiency, lower operating cost rate, but not high margin will become VANCL pain, The final accounting of the net interest rate is lower than the traditional clothing companies, so Vancl PE will also be lower than the United States (generally thirty or forty times times P/E). From this point of view, whether the Vjia can open the situation, contribute more net profit, the future is a run-off point; or when sales growth slows down, and when there is an experience shop at the bottom of the line, it is appropriate to adjust the VANCL price strategy to lift some, and to consider increasing the relative high margin of the brand, Take the Masamaso route to increase the average gross profit margin.

However, from the recent report of an interview, aging on the brand positioning of the ideal may not be high-end, citing the old words: "Foreign brands why not so cut?" They sell so much, they go too far and engage in China for 15 years, and in the past 15 years China made it really a sweatshop. We're still talking. Why do you want to sell 290 for every customer who sells 29 dollars? They all sell 290,390, and some shirts sell 3000, all made in China. It shouldn't be. "Such an idea is very touching and admirable, but capital markets are relentless, and if, after a few years, VANCL is really 10 billion, growth slows, and VANCL still has the kind of a low-cost strategy (not to expand the high margin product line), my crystal ball will say that Vancl is still a good investment, But not as traditional giants, because 3, 4% net interest rate and 10%+ net interest rate, after all, the gap is a bit big.

(Note: Of course, in the case of sales growth, the net rate gap is large, there is a battlefield will also have a significant image of valuation, that is, the use of capital efficiency, asset yield, which is section3 to say)

Section 2 Summary:

Sales growth in most cases is more important than net interest rate growth, more sustainable development potential, net interest rate growth is relatively one-off.

In the case of a slowdown in sales growth, it is necessary to raise net interest rates, in three specific ways, the importance of the impact of valuation in descending order: increase average selling price > reduce operating cost rate > reduce procurement costs. The reason for this arrangement is precisely because the degree of ease is also descending, the most difficult to do in the front, do not easily be copied, it should be more pay.

To be Continued