The electric dealer is a long-distance running that keeps up the break-even point

[Guide] Once you have chosen the path of the electric dealer, do not expect to fight with the opponent in a day to day, in a sense, this is a constant elevation of the break-even point of the long-distance running.

Yin Seng/Wen

The war in the electric business world ended not with a bang, but a series of "poof". Once you choose this road, do not expect a battle with the opponent overnight, this is a constant elevation of the break-even point of the long-distance running, a large number of both can not in the cost, also can not make the difference in the company, will be similar to the Amazon, Taobao, such as the squeeze water evaporation.

Start with the most watched events of the moment: From 2009 Taobao began to launch the Singles Day on November 11, the so-called "online shopping carnival", which almost became the annual assessment day for all E-commerce sites to prove their mainstream position. Perhaps Alibaba originally hoped in this way, will be more tightly chasing its website and entrepreneurs, far behind.

Indeed, this fatigue tactic did work to some extent: some of the once well-known and mainstream websites, including the Fank, were dragged out of breath. Of course, out of breath, also includes Taobao merchants and courier companies.

On the surface, for businesses and express companies, this is a rare opportunity to do big business, but in order to grab an important position in the limited space, or the opportunity is very small, or have to risk the cost of the opportunity, the impact of this unconventional event, may also include the purchasing power of overdraft users, So that some businesses lose their own business in the day-to-day transactions.

For the Express company, although the short-term can increase the delivery orders, but many of them may not lack of orders, rather than the regular delivery requirements, not only will damage the user's impression of it, but also damage the order of their operations management.

Another legacy of this "festival", it may be that a fixed expectation has been added to the user's online purchases, which will benefit not only Taobao itself, but the industry as a whole, as the electricity industry (and perhaps, if it is willing, the entity retailer) deals with inventories on a large scale each year, adjusting the category, The time to test the supporting capacity of the integrated trading, which is equivalent to the different electrical machinery every day of the dredging overhaul.

In a sense, everything that happens in this day is like the usual form of warfare in the electric business world-though that may not be the original goal of the inventor, Jack Ma (Weibo) and his Alibaba, they may well want to do it quickly with this elaborate game rule-there will be no "bang" instant solutions, Only the endless "poof" sound.

First of all, some electric dealers, in response to this day, always strive to be in the product of the richness of uniqueness and price competitiveness of the first, while the former user value development capabilities, the latter depends on the overall operating capacity of a power quotient, both of which include the elimination of the information corner, and its ability to match the specific point of view of people.

For example, in terms of user value development, the ideal is to provide timely solutions for any instantaneous needs of each user, while in terms of operational efficiency, it also requires a reasonable matching of information to seek the best overall balance between cost and return.

Others, however, are more likely to want to digest inventory, attract new users, or even just defend themselves-because when other electric dealers do this, they will disappoint consumers and convey the impression that the company lacks strength. Of course, those who take the opportunity to fish in troubled waters of short-sighted, this is not considered in this article.

So, here are two questions: first, along the product/service-price of the road, whether to determine the final winner, and the second is similar to the impact of large promotions on the user in the end how much, more widely seen is how it will affect the market value of the company.

Before answering the first question, look at the performance of Amazon, one of the industry's best known global companies: its current market capitalisation is more than $160 billion trillion, more than 1200 times times the earnings of the last four quarters.

Amazon made its annual profit for the first time in 2003, but its profitability has not turned up with the increase in size and competitiveness, but has been hovering over the edge of small profits and small losses. For example, its net profits for the past six quarters were: Profit 7 million, loss of 274 million dollars, profit 98 million, profit 82 million, loss 7 million, loss 41 million.

Specific indicators: As at September 30 of the quarter's income of 17.1 billion U.S. dollars, an increase of 24%, gross profit margin of 27.7%, logistics and other performance costs accounted for 12% of the Revenue, research and development and content costs accounted for 10%, market costs accounted for 4%, operating loss of 25 million U.S. dollars; Revenue in the past nine months has increased 22.7%, gross profit margin of 27.6%, logistics and other performance costs accounted for 11.6%, research and development and content costs accounted for 13.3%, market costs accounted for 4.1%, operating profit margin of 0.5%.

2007 (that is, five years ago), Amazon's annual revenue of 14.8 billion U.S. dollars, less than the last quarter of the income, but the growth of the scale does not lead to cost reduction, such as 2007 its performance cost of 8.7%, research and development and content cost of 5.5%, market costs accounted for 2.3%, Are far below the current, gross margin of 22.6%. Over the past five years, Amazon has increased by 9.5% in three-per-cent costs, while gross profit margins have increased by only 5.1%.

Take a look at Amazon's biggest competitor, Wal-Mart (for users, what really matters is the overall value, not the way it gets): Wal-Mart earned 117 billion dollars in the quarter ended July 31, an increase of 2.3% per cent, gross profit margin of 25.3%, operating, sales, general and management costs accounted for 19.4%, Operating profit margin 5.8%, the past six months income growth of 1.7%, gross profit margin of 25%, operating, sales, general and management costs of 19.1%, operating profit margin of 5.76%.

Imagine if Amazon, for the hypothetical "bang" approach to war, with a price war, Wal-Mart can follow-although its gross profit margin is two or three percentage points lower than Amazon's, but its operating profit margin is higher than five points above, even at the expense of two 3%, it has two percentage points of operating profit.

If Amazon thinks its position is strong enough to take a higher margin (whether it is pushing down or raising prices), not only does Wal-Mart, suppliers and consumers disagree, but more small and medium-sized players may flock to the industry because, for their investors, Amazon's profit margins are The more space is left – they simply accept a lower rate of return than their Amazon shareholders, and if the space exceeds the minimum expected return they can accept.

The best strategy Amazon can take is to try to keep its meager profits so that it can rule out a large number of weak-willed, speculative competitors, and expand sales to lower the average cost-although it doesn't seem to be a reality in the past few years, in addition, it is rumored that the Internet can improve efficiency, So Amazon should be able to try to improve its overall asset turnover, although in 2012 Wal-Mart's total asset turnover was 2.3, and Amazon was only 1.88.

Amazon's biggest advantage at the moment is that it is growing at more than 10 times times the size of Wal-Mart, which represents the online shopping model of the user from Wal-Mart (although Wal-Mart has started shopping, but I still see it as a representative of the offline store), to the speed of the Internet. In other words, Amazon can only hope and wait for changes in the behavior of its users, and try to make itself a good place in this behavioral change.

This could explain the potential impact of such actions on corporate value as the Double 11 promotions: It could speed up the transfer of users from offline to online purchases, which would increase the value of a leading electric trader.

Although the number of such occasional irritating purchases can be translated into general behavior, there are also questions about how loyal a promotional site can be, and even if users end up making online shopping an intrinsic behavior, there is also the way to go, because now mobile shopping has become one of the most important new directions, And traditional leaders like Taobao are built on the PC Internet.

But anyway, once you've chosen the path of the electric dealer, do not expect in a day to fight with their opponents, in a sense, this is a continuous drive to raise the break-even point of the long-distance running, a large number of both can not be in the cost, also can not make a difference in the company, will be similar to the Amazon, Taobao is so crowded with water that it evaporates.

(Yin Seng Number "value Line": Jia-zhi-xian)