On October 23, 36Kr held the "WISE×C2M Intelligent Customization Ecological Summit" in Shanghai. From the "era of big manufacturing" to the "new customization era", user demand drives ecological manufacturing, and C2M helps build a new ecosystem of "intelligent manufacturing". The summit invites enterprises and investors related to the industry chain to share the future of smart customization that they see from the front line.
Because the consumption itself has a relatively strong anti-cyclical attribute, the country's consumption growth momentum is also very fierce, coupled with the entire consumption chain in the supply, circulation, demand side has undergone obvious changes, now the consumer side is very hot, but consumption is not the most preferred area of VC, to do a good job of consumption, the key is to improve some of its shortcomings as a low-explosive industry.
Brands can improve to some extent the problem of low input-output ratio and not steep growth curves, but problems such as product differentiation and low user loyalty, as well as obvious ceilings, are not enough for brands alone. In this regard, Zhang Ye, founder of Tsingshan Capital, said: Brand is the premium source of consumer goods, and the supply chain is the moat of consumer goods.
Good morning, and it is a pleasure to come to 36Kr to communicate with you.
Now new consumption is relatively hot, many new consumer companies have achieved good results in a short period of time, why is the consumer end so hot? There are three backgrounds, one is because consumption itself has a relatively strong anti-cyclical attribute, which is particularly important in the current economic environment; second, the country's consumption growth momentum is very fierce, some people say that the growth of China's total social retail sales in 2018 is not slowing down? If you take it apart, you will find that the slowdown in growth is mainly because of the two major pieces of real estate and automobiles, and daily necessities, beauty and the like, still maintain a rapid growth rate of 13%-14%; third, the entire consumption chain has undergone obvious changes in supply, circulation and demand.
When everyone talks about consumption, they are talking about brands, but in fact, it is not enough for consumer entrepreneurship to only consider brands, and a company that only does brands is not a good company.
Compared with the fields of science and technology Internet and biomedicine, consumption is not the most preferred field of VCs. VC is most concerned about high-explosive growth industries, and the VC industry also appears because of the birth of high-explosive growth enterprises and industries. Consumption generally conforms to the model of PE or M&A funds.
Why isn't consumption particularly in line with the VC model? Let's look at the main points:
First, the degree of differentiation of consumer goods products is very low. Everyone makes e-cigarettes, you make mint flavor, I make mung bean flavor, you make round ones, I make flat ones. Even the difference between cars and mobile phones in more complex consumer goods is very small, let alone consumer goods such as food and clothing.
Second, the margin of input-output ratio of consumer goods is very obvious. For example, it is difficult to make social products, but once a product is widely accepted by society, consumer goods are basically a model of 1 yuan input and 1.2 yuan output. Like Internet products, once a new drug is developed, the market size is unlimited. One of the disadvantages of consumption not conforming to VC is that the input-output ratio is too obvious.
Third, user loyalty is not high, especially for small and medium-sized brands, there is almost no user loyalty. For example, out of the early adopter mentality, or the recommendation of friends, or a delivery experience that is not good enough, consumers may jump to other brands.
Fourth, the growth curve is not steep enough. Doing consumption requires production, needs channels, needs to establish user cognition, each link has its own rhythm, and it needs to invest money, unlike technology or Internet products, there is a very steep growth curve.
Fifth, the ceiling of consumer goods is very obvious, and we see that a large number of domestic consumer goods brands have only achieved a scale of 500 million or 1 billion.
These are the reasons why consumer goods are relatively not in line with the VC model. What can be done to improve these shortcomings and shortcomings? The input-output ratio can be improved to some extent by branding. When the brand attaches spiritual attributes to the product, or establishes a brand premium, it can partially improve the input-output ratio, that is, the input of 1 yuan has 1.5 yuan or 2 yuan of output.
The growth curve is not steep and may also be improved by branding. At present, most of the consumer-side entrepreneurship relies on OEM and rarely produces itself. At the end of the channel, because there is a model of e-commerce without borderless shelves, the problem is not big. In the area of capital investment, because there are VCs in, you can tell stories, and the problem is not big. As long as the momentum is established in the early stage through brand marketing capabilities, the growth curve can still have a relatively steep presentation in the early stage.
But product differentiation, user loyalty, and ceilings are not enough for brands alone. For example, buying cocoa from Brazil, buying nuts from Australia, producing them in Switzerland, importing them into China, and selling them domestically as their own brands, the price is lower than that of chocolate nuts produced domestically. The fundamental thing is that there is a very solid supply chain behind it in order to make differentiated products.
Low product differentiation requires market insight to make you push back product design capabilities, and more importantly, it needs matching supply chain support.
User loyalty is not high, how do large consumer companies solve this problem? First, the cost performance, I use the ultimate cost performance to make you have no other choice, so that your jump cost is very high, the ultimate cost performance behind must be a deep supply chain capability. The second is the multi-brand line, I use a multi-level product structure, use the brand matrix to meet your early adopter psychology, or to meet your diversified needs, the method of large enterprises is mainly these two.
So, how to solve the obvious problem of the ceiling? There are many categories with such a large market size, so it can only be solved through the brand matrix and multi-level product structure. The multi-level product structure and brand matrix need strong supply chain support, the brand behavior is only a copying process, and the supply chain behavior is the core. These problems need to be solved by the supply chain, and it is not enough to just do branding.
We summed it up, what is the brand? The brand is the premium source of consumer goods, and the supply chain is the moat of consumer goods.
How to do the supply chain? This topic is very big and cannot be spoken out for a short time. Today we talk about a key word, "incremental", and increment is the stimulant of the industry. In the incremental market, the birth and growth of enterprises are exceptionally smooth.
Assuming that the scale of an industry is a market size of 50 billion, the annualized market growth rate is 18%, and after five years, the scale of this industry is about 114 billion, and the pet field is like this. Assuming that the market size grows by 64 billion in five years, as a company wants to achieve a market share of 10 billion in this 64 billion increment, it will be much simpler than assuming that the market size was originally 114 billion, without growth, and you achieve a market size of 10 billion.
How simple is it? It was like I had just walked from my seat to the stage, and I had to climb Mount Everest between the difficulties.
In the stock market, competition is very cruel. One more piece, eat a little more, and someone else will have a little less. In order to defend their market size and enterprise size, enterprises will adopt many methods.
For startups, incremental markets are a factor that must be considered. What do good businesses do? Good companies will create increments for the industry themselves, and realize their share in the process of creating increments for the industry. Creating an increment for the enterprise is equivalent to other people in the upstream and downstream of the industrial chain who have benefited more or less because of the increment you have created.
In a chain with a very complex industrial chain, most other players do not care how much you gain, but value whether they know whether they will achieve growth in it. Because of the incremental benefits brought by your product strength and model, other people's willingness to cooperate with you is very high, and with the willingness to cooperate, there is a premise for optimizing the industrial structure, improving industrial efficiency, and expanding industrial boundaries. Once you can optimize the structure and expand the industrial boundary, you can establish your own barriers and moats in the industrial chain.
Take two startups as an example, they have one thing in common: the industrial chain is very complex, not a simple consumer product.
One is "looking for a beautiful machine", which is a second-hand mobile phone e-commerce. The original market size of second-hand mobile phones was very small, but the company found that it was not because the market demand was small, but because there was no complete solution in the market, which was a backlog and buried hidden demand, so the company team made a product to provide the market with pre-sale, sale and after-sales solutions. In this way, many young people in the second and third lines, third and fourth lines may jump the original budget level from OPPO, vivo, and Huawei mobile phones to the purchase of second-hand Apple mobile phones.
The supply chain of second-hand mobile phones and second-hand 3C is very complex, the new machine is top-down, the second-hand is bottom-up, and its chain is very long and very dispersed. "Find a beautiful machine" through its own content operation and brand building capabilities, user reach capabilities, quickly brought incremental to the industry, it integrated 3,000 suppliers, in the 10 regional junctions to establish 10 large supply chain service centers, customized a series of mechanisms and systems, so that the original industry entrepreneurs collectively benefit. Whether it is the checkout cycle or the gross profit margin, it is improving, then process reengineering, IT system reengineering can be realized, and the efficiency of the entire industry can be improved. In just over two years, this company has gone from 0 to 3 billion, which is a very typical company that optimizes complex supply chains through products.
Another company, "Take Your Time," is a flower retail company. The supply chain of flowers is actually similar to that of agricultural products, but when it comes to the supply chain of agricultural products, it is very complicated. Originally, flowers were gift attributes, and gifts were only purchased when needed, such as holiday anniversaries. But through subscription-based retail, they changed flowers from gift attributes to FMCG attributes. Consumers order FMCG products that are delivered to your home or company every week for a quarter or a year, so that the market size of flowers naturally increases. After increasing the market size, it did not expand to other categories because it created such a traffic and formed such a volume, but instead optimized and integrated the supply chain upstream.
The upstream of the flower industry has many links such as breeding, seedlings, planting, communication, logistics, transportation, and the last kilometer, so "take a little time" to establish the market or industry discourse power in a short time, and in turn sign flower fields in the upstream, establish an open platform, cooperate with farmers, customize flower varieties from overseas, establish information systems, cold chain systems, etc., and become a very typical industrial company.
These two companies are typical consumer goods companies that use products to drive the market, use the market to establish the right to speak, and in turn deepen their cultivation in the industry, and we just think that all consumer goods companies should try to learn from or use this path.
To sum up what we are communicating with you today, what should the consumer side do? We can't just do brands, we should bring industrial increments through product strength, establish the right to speak, so as to optimize the industrial structure, and forge corporate barriers through multi-level products and brands.
This is what I want to share with you today, thank you!