"Let go of fantasy and accept reality." Since the first half of 2020, this sentence has been constantly flooding the ears of entrepreneurs. After the control of the epidemic and the economic recovery, many people have gradually forgotten this sentence. But now, consumer entrepreneurs need and must do just that.
After nearly two years of fermentation, the entire social economy and various industries after the epidemic are in a grim situation. The tension in international relations, the uncertainty brought about by the war, the comprehensive contraction of the value of the Chinese stock market, the trillions of DOLLARs in ashes, and the capital market is in a mess. The intermittent suspension of supply chains and logistics, the ups and downs of public opinion...
Accepting reality is the first step and necessary condition for startups to survive in the short term, develop in the medium term, and realize value in the long term. Tsingshan Capital is still firmly investing in consumer projects, but what we need to do more now than the icing on the cake is to send charcoal in the snow, and the attitude of facing reality is the key to whether it is worth re-igniting.
Face reality, recognize reality, and accept reality. But what is not optimistic is that as an early-stage investment institution that faces different start-ups every day, most of the entrepreneurs we contact have only faced reality, and have not yet recognized reality, let alone accepted reality and made correct decisions.
What is the reality that needs to be recognized?
Traffic dividends will no longer exist in the short term
From the first day of consumption, the term "traffic dividend" appears frequently. From the earliest Taobao to Xiaohongshu, to Douyin, Kuaishou, to today's Tik tok time window that most overseas brands want to target. In recent projects, most brands will mention one channel - private domain. The market has forced startups to retreat again and again, and finally retreat to the only territory they can control.
Why? The so-called depression and dividend are the welfare of the pioneers, and the pioneers will have certain advantages, but after gathering a large number of practitioners and capital in a short period of time, the depressions will soon be filled. As long as it is a dividend, it will definitely disappear. It's just that the day came too soon.
The era of the Tao brand led by three squirrels, Handu clothing houses and seven grids ended around 2013, when a large number of traditional brands began to enter Tmall, and the weight of the Tao brand on Tmall was getting lower and lower; at that time, there was a media article: "The era of lying and making money is over." After the tide receded, there were only a few brands that still stood.
Looking back at this wave of gold rush in recent years, if you draw a vein from it, the most obvious thing you can see is the change of ROI.
Every time the forerunner sets a benchmark, there are countless followers who come forward and follow. At the beginning of the birth of 17 years of perfect diary, it chose the Little Red Book, through a large number of kol, koc diversion; when talking about the project, there were many projects that were planted by the Little Red Book and then drained to Tmall Taobao, taking the beauty industry as an example, the ROI was basically above 5; in 2018, the Douyin fire, after which it quickly entered the process of commercialization, there were many projects through the Douyin to do drainage, the ROI was outrageous, and more than 10 abounded.
Even many times, everyone does not know where the traffic comes from, and inexplicably sells a lot. This high input-output ratio continues until the end of 2020. Starting from Q1 2021, many founders began to feel that the ROI began to decline significantly, and by the recent chat about the project, the 1:1.5-1:2 ROI seems to be quite satisfactory.
Among them, everyone followed the footsteps of the traffic dividend and told the story of the "trembling" brand, the Kuaishou brand, and the Pinduoduo brand under the continuation of the Tao brand; but it was found that the traffic dividend seemed to be gone. Not only the content platforms of Xiaohongshu, Douyin, and Kuaishou, but also the big platforms of Taobao, Pinduoduo, and JD.com, entrepreneurs can't afford to invest.
Many new brands take the "Little Red Book Grass + Zhihu Endorsement + Shake Fast Cargo + Tmall To Undertake Traffic" as the standard formula, and plunge into the "flow". However, it's 2022 and the formula is no longer useful. What awaits new brands is the peak of the traffic dividend, the inner volume and the Red Sea, and a group of sober consumers – good-looking design, exquisite packaging, and good-sounding words are no longer key factors in consumer purchase decisions.
Excerpt from some entrepreneurs' statements:
"Recently, it is good to talk with capital, and it is good to talk to peers, but it is a time point to figure it out." Douyin opened an e-commerce, everyone feels ok, steady and steady offline matrix to 2, 3 years, Douyin only needs 4, 5 months, and now the Douyin dividend has disappeared 40-50%. If the starting point is to really do what to do, to really do a brand, you have to really think about how to make a three-dimensional brand. From last year to this year, it is a brand that has said that this year's target is 50 million vibrato, next year's 100 million, and the next year offline closed loop. We need to break the illusion of current financial model projections. Is there a brand that can be called a brand? Jingdong has also produced a number of brands, can there be any brands that can be called brands? Everyone pursues ROI, but Coca-Cola is certainly not a street shout, buy and buy traffic on the line, he has achieved access, value for money, and people are loved. ”
"Now the phenomenon of vibrato, similar to the tao series of small two began to come out to start a business to do branding, that group of people to do brand who has become? Do businesses and enterprises that do a good job of offline closed-loop have the experience of Taoji? No. When the small two collective came out to start a business, a mouthful of one I want to do a brand, next year 300 million flow, these people can only do CMO, can not be CEO, how much we believe, but this amount is not necessarily called a brand, must not be called a brand. Now everyone is still overwhelmed by the prosperity of traffic, but the category also has a dividend period and a recession period. At this time, the flow is very large, but when it comes to the next dividend category, you will be stupid. ”
"Known as China's most capable of doing traffic people, XX, this set of traffic play, network resources to the top, can make more than a dozen brands on Tmall, and Tmall category first, but he does not have the ability to close the brand loop, he can only "eat a platform", how to become a brand after sales? As a result, the title of "the most leading brand of women's sex toys" was gone, and there was a serious loss. People who can complete the online and offline closed loop are very lacking, online people are easy to find, many, offline people with this ability are too lacking. There are many drawbacks to the playing style of the Tao system, many categories have flowing dividends on the platform, and if the head on the top does not have the ability to break the circle, you cannot make money. ”
"XX audio, offline 100,000 points, less than 100 million a year, a point less than 1,000 pieces a year, before the online and offline half open, offline responsible person after the offline direct drop, IPO direct cool, the built system can also fall into this within a year." This shows the importance of offline closed-loop, its brand power is actually OK, but the brand closed-loop ability is not. ”
"Adult products, China's third jasper." Brand power does not need to be questioned, anyone knows that it is a condom, but Jasper's offline is a loss, we can imagine what the level of offline requirements are. The ability to play offline is much higher than the understanding of traffic requirements of online play, brand positioning, crowd consumption habits, and understanding of regional differences, and you can't do it without understanding. ”
Where exactly does the traffic go?
The trigger for barbaric growth: competition between platforms
When a platform is born, the platform itself will have the motivation to give certain benefits to the forerunners, and because of the imperfection of the mechanism, there will be a lot of loopholes that can be drilled in the middle.
Therefore, the platform's traffic characteristic advantages (such as Kuaishou Douyin's video content, Pinduoduo's cost-effective tags) + the platform's benefits to the forerunner + platform mechanism loopholes together constitute a "traffic dividend". When the growth of the platform itself peaks, the number of merchants has been stationed enough, and the platform's mechanism is becoming more and more perfect, there is not much arbitrage space left.
Capital, enterprises, and consumers have collectively accelerated the speed at which the tide has receded.
After the start of the epidemic, capital accelerated into the consumption battlefield, and a large amount of hot money poured into the consumer industry, how was this money spent? Most of the money spent is on the placement and recruitment. And where did the money go? Generally, it is a complete set of several pieces: most of the cost is spent on the content laying of the Little Red Book, the Douyin Fast Hand Streaming, the Alimama Toolbox, various live streaming goods and celebrity endorsements, self-broadcasting, and private domains are all done with the budget.
Last year, he chatted with the owner of an MCN agency in Hangzhou, and he joked that the money invested by capital in the two years of 2020-2021 has made many anchors rich. His own institutions were only marginally profitable. When the market is the hottest, the live broadcast room of the head anchor will generally send some gifts privately in addition to the normal pit fee + point. At the beginning, everyone sent brand-name bags, and at the craziest time, two competing brands directly transferred 1 million in order to occupy the pit of an anchor. By 618 and Double Eleven, various brands have broken their heads and begun to prepare half a year in advance. The requirements of the head anchor are very high, the new brand has not established a brand advantage, and there are only two general roads: more money + lower price.
To be honest, before 2017, the word "GMV" was rarely heard in the consumer industry. Even now, "GMV" is not an element of communication within the industry, everyone talks about "income". The influx of a large amount of capital has brought the term originally used in the Internet industry to the consumer goods industry. When each item talks about GMV, the caliber will be different, some will include discounts, and some will include returns. But there is still a lot of capital that only recognizes GMV.
Therefore, in such a GMV supremacy context, a variety of market chaos has emerged. Plagiarism, IQ taxes, crazy discounts and promotions, all in order to have a pretty GMV number at the end. Catching up with the peak of traffic such as Double Eleven and 618, it does not matter how much money it costs, what is important is that after this wave of impulse, there will be a higher valuation in the next stage of financing.
Under this carnival, there are many consumers who have benefited, and of course, there are many consumers who have suffered. We observed a lot of enterprise repurchase data, there are many enterprises repurchase bizarrely high, and finally found that most of the repurchase is in the big promotion, and even many consumers only in the case of promotion to repurchase this brand, there are also a lot of "bad money" in the industry, the plagiarism, counterfeiting, IQ tax products through the sale of low prices, the market is more mixed than ever, interest algorithms, thousands of people traffic mechanism does not seem to reduce the risk of consumer decision-making.
The channel side and the brand side are essentially game relations, although it is a game game many times, but the Internet platform in the game of self-correction, repair ability is far greater than the brand side, so any traffic dividend is short-term, just the brand's east wind, do not produce illusions, mistaken for the company's ability.
Only by co-opting consumers and their own camps can companies avoid falling behind in this game.
Capital dividends will no longer be available in the short term
In the post-Internet era, the areas that could be invested in the early days narrowed, and a GAP period emerged. At the end of 2019, the epidemic began, online consumption began to grow rapidly, the online penetration rate of many categories hit a new high, during which many fast-growing consumer goods brands emerged, and many star companies also sought to go public in the past two years, with valuations no less than high-tech companies. This allowed a very large number of capitals to see the opportunity of consumer investment, entered the market, and reached its peak at the end of 20 years.
Media, venture capital agencies, e-commerce and content platforms have blown the storm. At the busiest time of 2020-2021, there are too many projects to see. At the end of 2017, the valuation of most consumer seed projects ranged from 5-20 million, and in the past two years, many projects have 100 million tickets, and some even 300 million or 500 million. The craziest time is even directly according to the founder's original rank pricing, consumer business executives, CEOs, Ali P8, P9, as long as they come out to start a business to get ten or twenty million, the basic problem is not big. Institutions have been staring at the employees who want to come out of the big factory, a founder is surrounded by seven or eight agencies a day, tired one night to go back to the hotel to rest, found that there is another agency in the hotel lobby from the afternoon began to crouch him almost a day. In this way, the valuation of early-stage consumer projects has been raised to a point that is difficult to understand.
By the end of 2021:
"BP sent more than 100 institutions that are still watching consumption in the past six months, and 70 of them said that they did not look at it and directly refused." The remaining 30 met and boasted about the good products, and then there was no follow-up. ”
"In the first half of last year, I just came out of a big factory and wanted to do consumer entrepreneurship, I don't know where the news came out, a lot of investors addEd WeChat to meet, angel round financing was quickly completed." But when the refinancing came out in the second half of the year, the market changed dramatically, but fortunately the data was not bad, and finally half of the expected valuation was raised. ”
"According to last year's plan, more new products will be launched this year, more channels will be covered, and some circle-breaking things will be done in marketing, and the corresponding teams will also be configured in advance." But when we talked to the institutions that had been chasing us in the last round, we found that they had transformed to see hard technology and medical care. ”
"Last year we ranked second in terms of the number of financing cases completed in the consumer track, but this year we will be all in web3."
The above words come from entrepreneurs and FA in the consumer track, and many consumer investors around them have also begun to consider new career directions. These conditions reflect the drastic changes in the capital environment of the consumption track in the past six months or so.
When the wave of consumer investment in 2020 comes, many friends around, entrepreneurs, investors, many of them have begun to do FA, the project is too much, the money is too much, do not worry about the deal, do not worry about the deal; from the middle of 2021, the trading market began to change, everyone began to take the consumption case dropped to 50%, and then at the end of the year fell to 10-20%, to this year, the FA that is still receiving the consumption case has been very little, even when talking about many projects, Let me help recommend them to the FA that is better to do with consumption.
This is very realistic, because the case of consumption cannot be sold. A FA friend who specializes in the field of consumption, in the second half of last year, only a single consumption early project has been traded so far, which took nearly a year, for FA, the efficiency is too low, and many FA have begun to turn to the direction of ARVR, metaverse, and biotechnology.
The pessimism of the market has begun to spread, how to adjust the posture and mentality, how to face the "consensus" of most investors to obtain sustained financial support, will be a great challenge for future consumer entrepreneurs.
The reason is obvious that the first batch of newly consumed listed companies performed disappointingly in the secondary market, the valuation system began to adjust, and pessimism was transmitted to the primary market. When the "outlet" blows, the market shouts "all categories can be redone", all kinds of capital enter the game, entrepreneurs of various backgrounds and motivations enter, the market blows up an irrational bubble, and there is a mismatch of capital assets. Speculative entrepreneurs and investors disrupted the market, and the market began to clear both in the past six months.
The underlying reason is the structure and cost of capital.
USD funds and RMB funds constitute capital in the primary market. Let's first look at the RMB fund, today, 80% of the focus of the RMB fund on the market has shifted to technology and carbon neutrality, local governments as the main source of funds for RMB venture capital funds, venture capital as an important means of investment attraction, today's RMB VC funds can be said to have almost no pure market-oriented funds, are more or less composed of government guidance funds, and the government's guidance fund orientation is technology and carbon neutrality.
Looking at the US dollar fund, since last July, the listing of Chinese stocks in the United States has been suspended for nearly eight months, and going to the United States to list is the main exit method of the US dollar fund, and the closure of this door has made the US dollar fund tighten rapidly since last July, and the investment speed has dropped sharply.
The tension brought about by the situation in Russia and Ukraine spread to the listed Chinese stocks, so that almost all of China's listed companies in the United States had a market value cut off, a huge amount of financial ashes, the company invested in the past dollar fund had time to exit, last year the fund still had 5 times the return, and now even a loss.
In such an environment, the RMB fund AND dollar fund will not have the enthusiasm for consumption for different reasons.
Please note that it's not that there is no enthusiasm now, and it won't just be that this year there is no enthusiasm. Entrepreneurs must recognize reality.
If past achievements are bubbles, overheating, dividends, and luck, why insist on starting a business and investing in the consumer industry?
The key things have not changed in the past two years, and they will not change in the future.
"What is unchanged?"
Consumption-driven economic growth will not change
The country's growth must have a grip, promoting internal circulation and stimulating consumption is the most practical means to promote our country's economic growth, and common prosperity and increasing national happiness are also the most important ways to catalyze consumption. In the three main economic engines of export, investment (infrastructure), and consumption, exports and investment are slowing down, and relying on consumption to drive economic growth is not a choice.
Stimulating consumption is a big topic, including demographics, including value orientation, supply chain reform, etc., as far as entrepreneurs are concerned, providing better products, innovative products, products with value propositions is the trend of the times.
Technology will not change through consumption conversion
Don't think that the focus of the times is on technology, not on consumption. Even the best semiconductors also need electronic consumer goods to be realized, and even cleaner energy needs to be made into a consumable power source, in addition to big country projects, most of the technology is ultimately the supply chain of consumer enterprises.
Just as the transformation from amino acids to condiments, from semiconductors to computers, technology to consumer goods requires more entrepreneurs with market sensitivity, innovation consciousness and brand philosophy to achieve.
There is always a new mind left to the brand to occupy will not change
Consumers grow up generation by generation, each generation has its own language and values, and no matter how big the brand is, it is always anxious about how to acquire a new generation of young people. Solid product and service innovation, to provide new consumers with a better consumer experience, this is always a demand and a market.
How to adjust the mentality, face, recognize, accept the reality, and still insist on doing the right thing?
Think about why you started a business. If the long-term goal is still there, strengthen the heart and get back on the road. Otherwise, stop starting a business, there is no wind to take advantage of for a period of time, and you can only step on the mud step by step. Entrepreneurship has never been glamorous, if what you like is halo and bubble, now that these are gone, you can also go
Adjust expectations, adjust expectations, adjust expectations. Don't let expectations overwhelm cash flow and drain capital reserves. Now it's not a trough, a fall, a fall, but a zero. What to do is not a linear extension of the work of the past year, not to solve various specific problems in front of you, but to return to the original intention, back to the first day of entrepreneurship, make products with heart, and communicate with consumers with heart.
Forget about the smooth and growing, high valuations and rolling money of the last two years, and remember what really accumulated. Maybe it's the team running-in, maybe it's the industry recognition, maybe it's the brand concept, or maybe it's the recognition of upstream and downstream resources. Every decision in the future is a new beginning, a pawn in the day, insisting on the right things, that is, things that can be accumulated and cannot be donated.
Revaluate, re-develop the overall strategy, reconnect everything you can work with. Clear inventory, tighten delivery, manage receivables payable, streamline your team. When all aspects are shrinking, find one or two things that still have to bet or even bet heavily, they should be your core competitiveness in the eyes of consumers, the key buying point, and the foundation of your life. Keep the people who can fight with you, they are the seeds of today, the elders of the future.
Man is the root of everything. Pigs can fly on the wind outlet, and in adversity, the right people are needed, and people who can lead the team to create achievements and lay a good foundation to practice "people will win the day".
There are founders with cognition, feelings, and resilience, the team is there, and the business will be there.
Yes, in the deepest of difficulties, we still have to talk about greatness and talk about the future. The quality that takes us out of the predicament has the most realistic means, the most stress-resistant heart, the long-term vision, and the grandest ideal.