Business philosophy hidden in the retail chain

The road to building the StoBtoC platform
Retail chain companies that have experienced particularly rapid growth in the past few years often have a platform feature – the StoBtoC model. S is the Supplier, which is the supply chain, S can be given to the small B, and the small B goes to the C-end to transform the consumer.

Any company that has done a relatively successful job is better at controlling the relationship between S and B. If S is too weak on the B-end, it means that the B-end gain is too small; some companies that do well, such as MINISO, Ziyan Baiwei, are all strong link-enabled, but if S-B The end tube is too deep and may have problems. So how to master the “degree” between the two is a philosophical issue, which is related to the top-level design of the model.

Compared with the S end, B subcontracts the marketing business and helps the S end to acquire users. The empowerment of S to B is embodied in the tool. S provides a digital tool to help B import C, so that a large number of C-side users and small B themselves generate data links. The S end can skip the B end and directly understand the C end, and then push the user demand to guide the supply chain.

In the traditional manufacturing industry, some products are considered to be particularly good after they are produced, but in reality consumers do not buy them. From this point of view, crowdfunding is not just a simple fund activity, but a marketing campaign. This is very important because it allows consumers to comment and vomit, and S-side gets real-time feedback.

Therefore, from the perspective of capital, this type of company has a particularly high valuation in recent years, and its valuation has grown particularly fast. For example, a boutique department store brand in a third- and fourth-tier cities has no worries about life.

The shortcoming of the big format is the poor reproducibility. The advantage of the small format is that it is aggressive and easy to copy. However, the small business is essentially a business that borrows traffic. Site selection is particularly important. It depends on the existing traffic, which directly determines the success or failure of its business.

Peter Drucker once said that what is the purpose of the company? It is to create your own users and create your own sticky users. So, from this perspective, for Rui Xing, how many customers get more important than how many cups of coffee are sold. The accumulation of users has laid a good foundation for the extended category.

Small business and big business, how to compare
Let’s first take a look at the history of traffic evolution: in the past, people were looking for goods and shopping offline. The mode of the market stipulates the time, place, flow of people, and flow of goods, both of which have traffic. How to better regulate traffic? The department store format has emerged, and only a flow of people is enough. From the perspective of delivery, the cost for the merchant is low.

Let me talk about the issue of category, but also the efficiency of shopping. From the lack of goods to the abundant products, the market is the basic demand for the settlement of large-scale business, that is, the demand for one-stop shopping. When people go to the store to go shopping, they definitely want the goods to be rich, so the big business has the ability to collect.

However, traditional large-scale businesses such as department stores and hypermarkets have also been challenged in recent years. The more efficient the shopping in cities, such as first-tier cities, the demand for one-stop shopping is declining, and professional stores are becoming popular; the lower the line, the higher the demand for one-stop shopping, below the third and fourth tier cities. The hypermarket is still growing. High-line cities open small stores, and the lower-tier markets open big stores. This is a trend in today’s retail formats.

From the history of other countries, the higher the per capita GDP, the more polarized the business, the larger the business will be built to the ultimate scene, the super shopping center will evolve, and the suction capacity will be stronger. There is no room for survival in the middle of the big business, because the service of the super-large format is better and more comprehensive, and it has the function of social scene, which brings the ultimate experience.

However, the shortcoming of the large format is that the copyability is poor. The advantage of the small format is that it is aggressive and easy to copy. However, the small business is essentially a business that borrows traffic. Site selection is particularly important. It depends on the existing traffic, which directly determines the success or failure of its business.

The small format also has the characteristics of single category and clear target customers. Therefore, it is easy to be diverted by competitors of the same category, and the single-store model is easily broken. Therefore, the small business is likely to be a short-term, the old-fashioned store that can survive for decades, usually a super-large store.

The Baiguoyuan itself is a category killer. Separate the categories in the department store to form a professional store, which is called the category killer. Today there are more and more subdivided category killers. Several listed companies in the lo-mei industry have opened thousands of stores, and they are all category killers.

This specialty fruit shop in Baiguoyuan may also run into problems. From the short-term perspective, the first year of the store opened in the community, the image is fresh, the positioning is clear, the service is high quality, and the traffic of the old husband and wife fruit shop is absorbed, and the business performance is very good. In the medium term, in the second and third years, single stores will continue to grow. But from a long-term perspective, the single-store profit model is prone to downside, because it does not kill the husband and wife fruit shop next to it – the husband and wife shop is not standardized operation, the cost is always lower than you, and will imitate you to decorate the store.

Insight into consumer behavior is at the heart of the selection. Retailers use their expertise to make choices for consumers to increase sales efficiency. For example, Xiaomi, specifically for men to make choices. The premise of this model is the consumer’s trust in the retailer. If the brand explodes, then don’t play.

Therefore, when your store’s customer ability begins to decline, the single store profit model will be broken. At this time, iterations will be carried out, and shop upgrades will be carried out every time to maintain your competitive advantage.

Thinking about chain trap
In essence, the money earned by the chain companies is the money of economies of scale – the revenues are growing at a high speed, but the costs are not growing at a high speed, which results in a rapid growth of gross profit.

But at some stage of the chain expansion, cost growth will exceed revenue growth.

Such chain traps will recur, and for the first time generally appear in the process from 10 to 100 stores. Because when the store is copied, the management team will be completely different from when there are only 10 stores. The investment began to increase greatly, the deposit accounted for a large cash flow, the training was invested, and IT was also invested, while the benefit income did not keep up. In addition, the single-store model actually has a lot of uncertainty, especially if the model is weak, it is more likely to encounter a chain trap.

There are two ways to deal with chain traps:

Financing, using financing cash flow against negative operating cash flow. Ruixing’s financing ability far exceeds your imagination, so that the people who eat melon have no jokes.

After the big step forward, the big step back, quickly optimize the scale to an affordable level, and let the cash flow turn positive.

Chain traps will appear repeatedly, essentially in a phased scale that is not economical. For the enterprise, this is another philosophy – to control the pace of scale expansion.

The development of chain enterprises is very much like the development of living organisms. Single cells have evolved into multi-cells, and multi-cells have evolved into organizations. They have not evolved in one step and come back again.

On the whole, the chain is an offensive business, it must be iterated, and it must be kept moving forward, and it is impossible to keep it. Businesses that have problems and are not updated are dead.

If the chain has formed a monopoly in the region, the vitality will be stronger. But if you attack everywhere, it will be more difficult.

We can split any retail chain into two companies, one is a store company that is designed to transform consumers; the other is a supply chain company, which is the largest source of scale. The supply chain can be divided into two types, one is to sell other people’s home, and the other is to sell their own production.

The core of the CostCo retail model is: the profit of the store company is not all, the whole profit is to go out, the pursuit of scale, in order to force the supply chain to reduce costs. The store only earns membership fees, and in this way, it hits Wal-Mart and becomes a pure supply chain company.

Then look at the chain store model, the store is flat and flat. Products are not easily differentiated, and service is the key to determining differentiation. Trying to squeeze the cost of upstream coverage of the headquarters with economies of scale.

Chain companies need to make a portrait of the user on the B side, and it is a reason to make a portrait of the C-end consumer. Why should Xiao B join you? In fact, for small B, the demand for profit is not so high, because small B is mostly an individual entrepreneur, they join you this project is compared with the previous life. For example, Mei Yijia, why is it in Dongguan? Because Dongguan is the capital of manufacturing, a large number of workers work there, the average salary is 4500. If you open a convenience store, you tell him that he earns 10,000 a month, he will go with you, and their profit expectations are relatively low. .

The creation of MINISO can be achieved in a short period of time. It is the background of the rapid decline of traditional clothing brands. These clothing brands have a lot of location resources in the mall. If the clothes are not sold well, they can cooperate with MINISO to open the grocery store. It is.

Therefore, what kind of expansion strategy is adopted depends on the top-level design and what kind of money is earned.

SKU more and less speculation
How good or bad is it to sell? To put it simply, most of them are more and more, then less.

Suzuki Minwen of 7-11 mentioned an approach in the “Philosophy of Retailing”, which is a hypothetical cycle of verification. What is good to sell, what is not easy to sell, not what you want to come out, but try it out. In fact, the goods sold in convenience stores are now tens of thousands of iterations. The average product iteration rate for a Japanese convenience store is 40% to 50% per year, which is a way for new brands to emerge.

Consumer demand is a one-stop shop, so the hypermarket is a highly long-tailed model with tens of thousands of SKUs, but the products that are really good to sell still follow the 28 principles. For the brand side, in the hypermarket, this scene competes for customers, and it has evolved into a shopping guide to intercept consumers. As a result, the sales rate of products is very high, so we can often see the same category in the hypermarket. The guide of the brand sells the product to you. This shows that our sales efficiency is still very low.

The demand for one-stop shopping is declining, and the hypermarket has evolved a more extreme model in Europe and America. For example, Alezi is a discount store for the SKU (Stock Keeping Unit).

At the same time, consumers are less willing to spend less time shopping. Many people don’t hate cooking, but they hate buying food, so they buy food and eat fresh home e-commerce. This kind of grocery shopping experience is very good.

When consumers are further rejuvenated, the significance of the home model is to help you get rid of the selection syndrome. When you visited the hypermarket last time, you found that there are 15 brands of dried bean products in Guangli District, which gives consumers how to select?

Insight into consumer behavior is at the heart of the selection. Retailers use their expertise to make choices for consumers to increase sales efficiency. For example, Xiaomi, specifically for men to make choices. The premise of this model is the consumer’s trust in the retailer. If the brand explodes, then don’t play.

Private brands transform consumer trust in retailers into products.

Social e-commerce is the same. In the group of “families who love each other”, the cognac that cousin shared with you must be especially delicious – trust comes from acquaintances. In fact, to do the catering industry is to maximize the trust of consumers.

The category is reduced and the consumer demand is not reduced, so the purchase of a single commodity is large, increasing the right to speak with the upstream game. There are two main points here: first, the scale is large; second, the trust of consumers.

So coming back to the question of the number of SKUs at the beginning, for retailers, most of the time is a combination of effective games.

The most vulnerable point for a retail chain is inventory, especially clothing brands. Before the brand that made a lot of groceries, a popular one did not catch up, the inventory was seriously backlogged, and the operating efficiency was seriously reduced, and it died.

Chain competition – falling pits and climbing pits
The competition in the retail chain industry is very cruel, and the basic fast-running model has imitators. Some people joked that the strategy of business management is not made by themselves, but by competitors. All strategies are coping strategies.

There is no single model in China that can run through the country. The most promising ones that are currently seen are the Yonghui store model and the store model of Meiyijia desperately opening a store. Most of them are low-line cities that are anti-surrounding first-tier cities, and do a good job in low-tier cities.

Why is the model busy copying without running? Because I always feel that someone behind the butt is chasing you. To consider playing against competitors, we must consider how to keep the opportunity and suppress others. For example, some positions in the mall may not have positive returns, but in order to become the first place, you have to take it.

Thinking about the scale boundary problem
Some retail chains tend to overestimate themselves and underestimate the ability to build systems, especially for Internet companies. Internet e-commerce claims to open a million convenience stores.

The business model you choose will definitely face the ceiling of your business model. Go thinking about the ceiling. Some big store models, such as South Beauty, are positioned to take high-end business, with 15 to 20 first-tier cities and three or five second-tier cities.

For convenience stores, it is difficult to make money in less than 500 cities in a city. Many of them die at 200 this stage because of the great relationship between operating efficiency and density.

Grab traffic, Internet companies mostly do a good job. But the problem lies in the supply chain. To understand what supply chains these users match, can you know how big my model can run?

There is no single model in China that can run through the country. The most promising ones that are currently seen are the Yonghui store model and the store model of Meiyijia desperately opening a store. Most of them are low-line cities that are anti-surrounding first-tier cities, and do a good job in low-tier cities.

In the big market of China, there are different business philosophy. The most trusted consumer is multi-business, and even more powerful is across regions. For example, Yonghui store, how to look like a big store.

Standard and non-standard
A food veteran of more than a decade has said that Chinese food standardization is a false proposition. Because consumers have a high demand for experience, Chinese food is slightly simplified, and the sense of experience is reduced. But for operators, standardization can optimize efficiency, and it cannot be scaled without standardization.

There are two models in Japan that can be used for reference. The first one is NITORI. It is called Japan’s IKEA. It is highly standardized. The employees can have no brains. The new employee training will send a book, and the whole back will be able to work. The other is Don Quixote, taking a diversified route, the store is messed up, let the consumers find it, pick it up, have the experience of Taobao, the store has a lot of power to organize the goods themselves (of course, in their own In the system, 40% are for sale, and 60% are self-determined by the store.

There are also two successful cases in China, with fresh legends and fresh gifts. The fresh legend advocates a high degree of standardization, and the food and fresh food is the vegetable market route.

Standard and non-standard are two different business philosophy, each with its own advantages and disadvantages, the key is to find the degree between the two, to achieve the optimal solution between business efficiency and consumer experience.

Human insight
Fundamentally speaking, “how fast and good” can’t be achieved at the same time.

Consumers’ desires can never be fully satisfied, and can be summed up in one word – it is difficult to fill.

Therefore, operational efficiency is impossible to be absolutely absolute. The thing we are doing is to find a balance between how fast and how fast, and not to do these four things at the same time.

How do you balance these four points? Insight into human nature is a perspective of thinking.

The common characteristics of human beings: lazy, pursuing excitement, pursuing timely satisfaction, and difficulty in achieving lagging satisfaction.

For example, why do Chinese people have a large proportion of the taste of spicy? Because of the stimulation. Everything that is addictive is not good at first, but the stimulus leaves addiction.

Long period and short period
The basic business is big business, such as selling vegetables and selling meat. Popular are small businesses, because there must be cycles in the fashion. When we invest, we have to think about whether it is a five-year cycle or a 10-year period, because many businesses are less than 10 years old.

The benefits of a basic business are long periods, and the downside is that it is difficult to differentiate. For example, Aunt Money does not sell overnight meat, others will learn. This is easier said than done, but it is hard to do. For example, tea, hi tea is more than expected by Hongzhang. Xicha is refurbished on a quarterly basis, but after 10 years, whether this industry will exist or not is a problem. Coffee has been back and forth in the past 30 years