The electric business industry made three big mistakes

Abstract: This article extracts from the electronic industry publishing house new book "I look at the electricity quotient", the author is the cat founder General manager Huang Jo. From the emergence of Taobao, to the flow of rich but do not understand the business of Tencent, Baidu missed the opportunity, and then to buy, shopping guide, mobile power business rise, the traditional enterprise

This article extracts from the electronic industry publishing house new book "I See the electricity quotient", the author is the cat founder General manager Huang Jo. From the emergence of Taobao, to the flow of rich but do not understand the business of Tencent, Baidu missed the opportunity, and then to buy, shopping guide, the rise of mobile power, the traditional enterprise back, Beijing-east domineering exposure, where the customers go low, Amazon internal force deep and so on, Huang Jo have a profound interpretation

China's electric business has probably gone through 10 years, looking back, the electrical business Decade has its own achievements: sales data rise year by day, the user scope continues to expand, the relevant facilities gradually complete, the whole online shopping ecological environment preliminarily formed.

But 10 years down, the electric business industry has made three big mistakes, or said there are three very serious misunderstanding: one is that the scale is the benefit, the second is that the flow is everything, the third is excessive reliance on price war.

Myth 1: Scale

Scale has the potential to bring about a reduction in unit costs, but there is no direct causal relationship between scale and efficiency, and the world has a large and inefficient enterprise everywhere.

From the offline retail view, the super large-scale enterprises on a few, more retail companies themselves may not have much, but its operational efficiency, customer loyalty has done quite well, such as Watson, Ikea, H&m, there are many.

To step back, the scale effect can only be meaningful within the scope of the operation. A common example is to increase sales by selling at a lower price, thereby obtaining a more favourable price condition by exchanging prices. The scale effect, for example:

A. Purchase volume of 100 units, each price of 180 yuan, the price of 200 yuan, gross profit margin of 10% (selling price/price)

B. Purchase Quantity 1000 units, each price 170 yuan, the price 188 yuan, gross profit margin 10% (price-Enter price/price)

If the company's sales costs around 10%, by increasing the cost of reducing sales, can make up for the loss of price reduction, which is a meaningful price strategy. Note that this is not only the price reduction, its own operating costs, to each sales cost to do a simple calculation, but also to reduce from 20 yuan to 18 yuan. But if it is:

C. Purchase quantity 100 units, each price 180 yuan, the price 200 yuan, gross profit margin 10% (price-Enter price/price)

D. Purchase quantity of 1000 units, each price of 178 yuan, the price of 188 yuan, gross profit margin of 5.3% (selling price/price)

Each sales cost is still 20 yuan, or slightly better, 10% or 18 yuan, in this case, to the amount of price change can not take you out of the loss.

In fact, many electric companies, the loss margin is far from the increase in the amount of procurement can be resolved.

Sales of digital goods, the overall increase 4%~5%, the cost rate 10%~12%;

Sales of cosmetics, the overall increase 18%~20%, the cost rate 30%~35%;

These are not the scale effects that can be explained. There needs to be another reason to explain this madness. The reason is to try to borrow money from others to burn a size and influence. This method may be effective 10 years or eight years ago, because at that time the electric business is still a brand-new blue sea, can create a size to occupy the initiative, but today's situation, the network marketing cost is high, the industry giant has been produced, the operation model is relatively shaped, in this case, and then try to construct subsidy sales of the size of influence, It is not in the situation.

Myth 2: Traffic

Traffic represents the number of customers, offline retail has always emphasized position position, that is, customers will have business. In the Internet, this shows the number of users, the number of UV visitors.

But business is far more than just being patronized. It is important to have guests, but it is more important to have someone to pay, that is, I like to emphasize the bag rate.

Or an analogy:

a.10000 a uv,100 user to complete the purchase (bag rate 1%);

b.5000 a uv,200 user to complete the purchase (bag rate 4%).

Obviously B is more valuable.

Lifting bag rate requires the overall operation of the website of the electric business: The business logic of the page display, the picture and description are attractive, the goods are plump, the service is reassuring, the shopping link is smooth and so on. This is not just a traffic can cover.

Baidu and Tencent are giant-level traffic sites. The former do have ah, le cool days, successive failures, the latter Pat and QQ Mall for many years did not see a turnaround, enough to prove that the flow is far from all the electricity business.

What's more, at the rate of 1%~5% only among the electric business sector, by upgrading the purchase of the conversion rate itself can produce how much efficiency? A lot of times the electric companies feel that the flow is not enough, to spend more traffic, in fact, you may wish to change the angle of thinking, if your current purchase conversion rate is 1%, As long as you increase the conversion rate to 2% through more granular operations, you're free to get a lot more traffic. Who can imagine a line of retail (except the very high-end luxury goods) every day in the guests come in only 1% of the people pay, and then still crying shouting the lack of flow?

We all understand that there is a loophole effect, the so-called 1% bag rate, that is, every 100 users landing your site, and finally only one person to complete the purchase. Some of the obvious funnels here include: Search – The user cannot find the product, the display – the picture and description cannot hold the customer's impulse to purchase, or his questions about the details of the product are not fully answered; payment-payment and delivery links make the user feel uncomfortable or uneasy. The electric business industry tends to overemphasize the number of users landing, ignoring the loss of customers in the process of buying and transforming. With the growth of the Internet population dividend tends to be flat, this very low purchase conversion rate of the situation if not from the operational point of view to achieve fundamental improvement, the electrical business leakage State must become the industry's biggest ailment.

Myth 3: Price war

The price war is everywhere, but it has not seen such a reckless approach as the Chinese business industry, regardless of cost, without a planned and strategic price war.

In mid-August 2012, the Beijing-east launched the online price war, for Suning and Gome, said that its big home appliances must be cheaper than rivals 10%, Suning said, his online large appliances prices if not less than jingdong, he would rather wall.

Do you remember the story of the Chinese ancient Chu people selling spears to sell their shields? My shield is strong, no weapon can be punctured, and my spear is sharpest, nothing can be worn out.

China Central Television has done a statistic, BoE announced the price war within two days, prices more than 120 goods, an average of 15.82%, the difference of 200 yuan, the price of goods 440, the average decline of 9.75%, price difference of 152 yuan, from the number of products, price, but this is put smoke bombs, Because half of the price of goods is out of stock, the other half is a lot of goods.

Accurately speaking, the electricity merchant's this kind of price war, is a very bored war of words.

1. Not real price reduction, let the consumers, but a gimmick, attract attention. A blunt remark: the consumer is a monkey fool, lack of business ethics.

2. A limited number of commodity prices may have led to a number of new customers to buy, but more users in the purchase price after, or simply do not buy things, or commodity prices have not been reduced, big call fooled. Actually offended more users. When you do a price war promotion, not only to see the positive effect, but also to fully assess the possible negative effects.

In other words, your special offer is only available in dozens of units, rushed's intention to buy a user may have thousands of people, in addition to very lucky to buy a few people, the overwhelming majority of users to go, they feel cheated, you are likely to lose a group of original loyal customers, so I remind said: do any promotions, You can't just look at hundreds of more orders on your day, but also see how many hits you've caused, and the side effects you've created.

3. Damage the relationship with suppliers, production enterprises.

Promotional activities should be carried out under the precondition of full prior coordination of the relevant parties. The electricity merchant still only occupies the single digit of the social retail. Suppliers, production enterprises need to consider the price balance of each channel. Need to consider stocking, supply. This kind of whim of the price of words war, said the good thing is aggravating, make the supplier unprepared, unable to deal with other sales channels of pressure, unable to meet your order needs, it is likely not to cooperate or even interrupted with your cooperation, finally make the scene can not be cleaned up.

4. The most lethal negative effect is that this kind of no substance price war of words, the destruction of the original relatively fragile electric business industry, so that more people inside and outside the industry to add a bit of e-commerce like fooling around, doing things at all not reliable evaluation.

A good price war is to be fully prepared, sharing two examples here:

Case 1: Offline Businesses--I was responsible for the Dutch million-long supermarket, we have a few anniversaries of the day to discount the promotional arrangements, such as the 10 anniversary, the whole day for the 90 percent, 12 anniversary 88 percent, and so on (estimated to 20 years after the new promotion scheme should be considered).

Our approach is: 1. Advance with the supplier to obtain support; 2. Inform the customer in advance; 3. stock in advance. For the price of particularly sensitive goods to take the form of limited purchase, such as beer per person limited to buy 1 cases, TV limited to buy 1 units, etc. 4. Schedule and crowd guidance in advance, do a good job of extending business hours and customers to enter the plan.

As a result, sales for the day were 8 times times the normal value. The gross margin of the day is very low, but the gross margin is slightly larger than the usual daily average value, the day out of stock quantity control within 3%, no big dispute. This kind of activity manufacturer cooperate, the customer is satisfied, the retailer also does not lose money.

Case 2: Taobao Mall's "Double 11" promotional, willing to participate in the merchants (most of the clothing jewelry home bags category of brand manufacturers) 50 percent sales, a day. Demand prices can not rise after the drop, can not be out of stock, the result of a day down more than 10 billion RMB transactions, is the usual value of more than 10 times times, but also a very successful promotional case.

But in the field of business, we basically do not see this kind of planned and rhythmic promotional activities. So I say, the price war for the Business-to-consumer is a war of words.

Perhaps from a marketing perspective that attracts more users ' attention, the goal is achieved, but the retail industry is most taboo to try to fool customers. You think yourself very clever, rely on a few words of sensational words to earn a lot of users, but how many eyes there is no longer look at you!

Why the electric business industry has so many irrational madness, crazy burning money to buy traffic, crazy price kill, crazy expansion category ... In an environment where almost no company is profitable, people talk about losing money in a plausible sense.

The reason is actually very simple, spend other people's money, create their own exposure rate, let the enterprise to struggle, we are playing the game of drumming.

My assessment of the industry over the past decade has been: China's electricity business decade, in general can be distinguished as Taobao form and the form of the company. Taobao form is generally healthy, benign, although there are a lot of fake problems, there are not perfect tax stamps, but also the recent rise in various advertising fees Taobao complaints, but the overall majority of Taobao sellers rely on their own hard work, break out a piece of heaven and earth, many Taobao sellers, Amoy brand operations can be profitable. For platform providers Taobao and Taobao Mall, through the development of a new business model, itself is moving towards profitability. And independent of the form, or generally speaking, Amoy form, almost no exception is a very hard to burn money, very crazy, also very AH Q, is an overall unsuccessful ecology. Not only did not build a distinctive business model or operating norms, so far does not have the profitability, and almost all the company in addition to the constant change money, in the mode of building and the operation of the site is not very good.

When the company was a profitable business before the IPO, it was a great leap forward for the first time. Results of the second quarter of 2012, sales 1.2 billion, operating loss of 126 million, retail is a meager industry, the industry almost all enterprises in the profit and loss of positive and negative 3% adjustment and improvement. Margin space is extremely limited. This big loss of the situation, there are thousands of subjective and objective reasons, or worrying.

When more and more founders of electric power spend most of their energy on the round of financing, please do not forget the old saying: Come out and mix, sooner or later.