Wang Junzhou, president of Gome, stated that the low cost of e-commerce is misunderstood

Recently thinking about a question, what will the country do in the future?

In April and May of this year, Gome was planning a strategy to promote the same price both online and offline. The core of our thinking was centered on the needs of consumers. The demand of consumers was the price. If the online price is lower than the offline price, why does the consumer go to the store under the Gome line? Low-cost promotion is a long-term one, allowing online and offline same prices to become a reason for consumers of different channels to choose Gome.

In fact, before Jingdong issued Weibo price cuts, we formulated a plan for online and offline prices. Why did we not say this at 10 o'clock on the same day? We originally did not want to fight this price war. We plan to launch the same price online and offline. Jingdong first sounded and named the country Gome. They said that the price would be 10% lower than Gome and three years of Jingdong would not be profitable. This kind of provocative language has caused us to respond, otherwise consumers It will be misleading. Therefore, we decided to respond at this point in time and proceed with our plan, but only made some fine adjustments to the original plan.

When the price war was fought, Gome let everyone feel like it was silly. Only we had the lowest price and the most abundant supply. In fact, we are fully prepared for the past two months and follow the original set of strategies and guidelines. Just on the day before the e-commerce battle, we just discussed the online and offline promotion plans in the conference room.

Consumers can see that on the day of the price war, we launched online and offline ads with the same price. If the temporary preparation is too late, we have to print for 3 days, and we also need to do newspaper advertising, outdoor advertising, Shop promotion and layout, if not prepared in advance, simply too late.

In fact, from the sales results, the E-Commerce War has worked well. You see the physical stores on August 17-19, and the traffic volume in these three days has quadrupled.

Why does Gome have to implement a multi-channel strategy?

Regardless of Japan or the United States, relatively mature markets, offline retail physical stores still account for about 80% of the total, and online sales channels as a supplement to differentiated demand, accounting for about 20% of market share. The sales volume of Best Buy, the largest home appliance chain company in the US, accounted for 95% of the total sales, and its online e-commerce accounted for only 5%. More consumers are still willing to enjoy the experience of shopping in a physical store. Sometimes there is no purpose for shopping on the street, and online can not satisfy this kind of fun.

As a mainstream channel for consumers to purchase electrical appliances, the ground shop is a long-term one. The future must be something we can see. Only those retailers that have strong online and offline businesses are the most valuable companies. Many channels can meet the needs of different consumers. This is our long-term strategy.

The key is how companies can support this long-term strategy?

We have been doing online and offline sharing platforms for nearly a year: purchasing platforms, information platforms, after-sales services, ERP, and human resources sharing. These platforms also support the operation of more than 1,700 stores and two e-commerce sites.

After the price war, one Amoy announced that Gome's website had the most growth in traffic, one was well-prepared, and the second was that the shared platform played a role.

Gome website is more directly facing the client, giving customers better low-price, high-quality goods, and many e-commerce back-office jobs are shared with the group. The cost of our ERP is invested in hundreds of millions. This is not the investment and cost that can be borne only by the online e-commerce companies. Another key factor is the construction of the logistics system. No matter how much money is spent today, the construction of the logistics platform will take a long time to accumulate.

Gome has established more than 300 logistics bases for more than 20 years, which constitutes a nationwide logistics network. Professional logistics companies support this logistics network and its scale is here.

In addition, in terms of procurement costs, in any case, the sales scale exceeded 100 billion yuan, so that everyone recognized that your procurement costs are 3% to 5% lower than the average cost of e-commerce companies with a scale of only 10 billion. This is the scale of procurement. Cost advantage.

E-commerce is only an initial stage, and it is an era of large-scale wars. It may not be the case that anyone can finally stay, but consumers who buy things will definitely stay. Today we are still paying for home appliance manufacturing companies that were bankrupted several years ago. In the future, is it possible to place an order for a website that is not yet sustainable, if the company is not there, where will consumers' rights be sought?

The changes in the market are the most difficult to predict. Good competition is conducive to the survival of the fittest, which is conducive to improving the service and management level. Therefore, channels and manufacturers will be eliminated. As early as the 90s of last century, when home appliance manufacturing enterprises fought a price war, we realized the impact of the brand integration of Chinese home appliance manufacturing companies. After the integration, the brand that lacks core competitiveness has not disappeared. We are still performing at that time. Some home appliance brands have an 8-year warranty promise, but also provide after-sale platform protection.

E-commerce costs are not low

From the current point of view, the e-commerce business model has the disadvantages of high costs, low profits and losses. In fact, the cost structure of offline stores is lower than that of e-commerce. Because e-commerce procurement costs are higher than offline, the sharing of after-sales platforms also provides protection for the future.

How is it possible to achieve the same price both online and offline? Whether it is online or offline, everyone is operating at an operating cost of 11% to 13%. From the cost structure analysis, general e-commerce websites, logistics costs account for 5%~6%. The logistics cost of the ground floor stores accounted for less than 1% of the total cost. Gome has accumulated a long-term store sales capacity. The logistics cost supports a sales scale of 100 billion, and the cost is less than 1%.

It is generally believed that “the line is definitely cheap” is mainly based on some visible and desirable cost factors. For example, offline stores need facade rental, store management and maintenance, as well as the expenses of numerous sales staff, and these online channels are basically absent.

And when you spread out the costs, you will find that the logistics and procurement costs are much higher online than offline.

In purchasing, in the retail industry, the scale determines the purchase price. In the offline stores represented by Gome and Suning, the annual household appliance purchase scale is over 100 billion yuan, while JD is only about 20 billion, and the purchase scale determines that the purchase cost of offline stores is lower than 4% on average. With the advancement of procurement, this number will increase.

After e-commerce advertising costs are measured, the current cost of e-commerce advertising and traffic is about 4%, while the advertising cost of offline stores is about 1.5%, and the cost of offline store advertising marketing is 2.5% lower than that of e-commerce. .

The online labor cost is 4.5%, the offline labor cost is about 3.5%, and the offline store is 1% lower than the online store.

Pure e-commerce companies represented by JD.com use the third-party logistics distribution resources more. The logistics cost is about 6%. The offline stores represented by GOME have their own logistics and distribution bases throughout the country, and the logistics distribution costs are average. About 0.6%, the logistics cost of offline stores is 5.4% lower than that of e-commerce.

In addition, there must be a fixed cost investment for the operation of the company. From the economics principle, the larger the scale of business, the lower the marginal cost. Because the scale of e-commerce is relatively small, the amortization cost of a single product is also higher than that of offline channels.

The online technical and administrative expense rate is about 2.5%, while offline channels have more in-depth cooperation with suppliers, and offline channels generally have more marketable products than online, which can rapidly expand the sales scale of commodity products. Effectively improve the turnover rate of retail enterprises, reduce storage, logistics and other costs.

From the above comparison, it can be seen that the low online cost is a misunderstanding. In fact, according to GOME and Suning’s many years of publicly listed performance reports, the average consolidated gross profit is about 18%, the operating expense ratio (cost) is about 13%, and the net profit rate is about 4%; the current average gross profit of e-commerce is About 7%, the operating expense ratio (cost) is about 17%, and the net profit rate is about -8%. Therefore, the operating cost of the e-commerce is higher than the offline operating cost, resulting in long-term losses.

Online order is the direction of the price line

Future consumption patterns should be built on strengths and weaknesses. "Online price ratios and offline orders" will be a long-term trend.

Since online is difficult to replace offline, and online and offline have their own unique advantages, when the combination of offline and online, to achieve information sharing, procurement, logistics, distribution, warehousing, experience and supply chain cooperation and other resources , will become the most valuable and most competitive retail business development model.

The consumption model will eventually affect the development of the industry. With the growth of personalized consumer demand, online buying has become an irreversible consumer trend. At the same time, the offline platform also has the advantage of zero-distance consumer experience that is not available online, the information support advantages of shopping guides, and the user's peace of mind and after-sales service.

In the retail industry, both on-line and off-line, the sustainable retailers in the future must adhere to honesty, advocate honesty, enhance their own management and management capabilities through rational and fair competition, and truly promote the healthy development of the industry. This is also the original intention of Gome's proposal of “maintaining market order and promoting the healthy development of the industry” recently. It has publicly called for boycotting irrational competition behaviors that are mutually defamatory and mutually disintegrating.

Gome’s vision is to become a respected home appliance retailer. “Two-lane same price” is a strategy that is currently being promoted. In the future, Kobha.com will develop an integrated category, while Gome Mall will be closer to synchronizing with offline stores, focusing on the appliance business. At present, over 70% of GOME's product prices are lower than Jingdong Mall. At the same time, other products also implement flexible policies at any time. Gome promised that the price of Gome stores will continue to be lower than Jingdong Mall.