【Ebang Power News】On September 27, at the "2021 Ebang Future Retail Conference - New Traffic Summit" held today, Chang Bin, founding partner of Qicheng Capital, delivered a speech entitled "What is the Next Wave of Consumer Venture Capital?" " speech. Since the second half of this year, traffic-driven consumer startups have made a sharp correction compared with last year, and Qicheng Capital, as a professional fund with industrial background, has brought a different perspective of thinking to the ebb and flow of new consumer entrepreneurship.
Chang Bin believes that if startups want to break through the growth ceiling brought about by traffic drive, they still have to return to the unchanging principle to construct a more comprehensive business model foundation.
"When you reach the ceiling of the number of new people you are defining, you will immediately encounter your ceiling when you run out of your user circle."
"We can do the supply chain, but we can't grasp the traffic outlet of the front-end iteration, and the growth will not be efficient."
In the face of growth bottlenecks, Chang Bin pointed out that for differentiated strategic companies, after the first stage gets the potential energy period, it is necessary to strengthen the supply chain in the second stage, expand omni-channels, and open up a single channel dependence. For cost-leading companies, after obtaining the mass market share, the second stage should be to extend the brand online and offline and add traffic.
It is reported that the 2021 Ebang Future Retail Conference New Traffic Summit is co-hosted by Ebang Power and Star Chacha, with the theme of "YYDS", to explore which elements of future retail are likely to become "eternal gods"? It will also bring unlimited reverie about "new traffic" to the industry, and more than 40 senior celebrities in the industry will come to the scene to share, analyze the current situation of the industry, and work with the industry to "break the superstition of traffic, relieve traffic anxiety, and find traffic to break the game".
Warm reminder: This article is a shorthand preliminary review, to ensure that the original intention of the guests on the spot, uncut, or omissions, please understand.
The following is a transcript of the speech:
Chang Bin: Good morning, everyone! It is a great honor to be able to participate in the events of Ebang Power, and the annual Ebang Summit is a bellwether for the entire industry. The theme of today's event is "YYDS", the God forever. Every growth, every opportunity, or to be able to implement to the final victory, which is also the common expectation of all industry practitioners.
First of all, Kai Cheng Capital is a fund that focuses on consumer investment. After more than ten years of consumer investment, from the last round of e-commerce platforms to the establishment of Qicheng in 2016, I clearly feel that when the new platform becomes a new generation of retail infrastructure, the golden wave of China's consumer entrepreneurship has begun.
When we founded Kai Cheng Capital, our goal was clear: to invest only in consumption, only in China's new generation of brands and retail, and we must invest in those companies that eventually became YYDS. Standing at this point, I would like to share some phased summaries.
Why didn't the word "vent" be used? Frankly speaking, the wind rises and falls. But when we choose consumer investment and entrepreneurship, the outlet is not important to us. What Kai Cheng has to do is to spend 10-20 years and focus only on consumer investment. We're not here to have fun, we're going to win. From the perspective of focusing on investing in consumer funds, I offer some ideas for building strategies.
At what stage has the new wave of consumption arrived? What does the future hold?
Half a year ago, many people felt that the new consumption was really fragrant. But from the second half of this year, everyone will feel that the days are really hard, and the turning point is so unexpected. At this point in time, we will not talk about the industry's promising prospects, but talk about what else needs to be done.
The consumer industry has been a big year for more than a year. Many consumer companies started businesses and got a lot of financing. But stretching the timeline, what stage of the wave is it today? Any innovation is not linear upwards, not from victory to victory, but a curve of continuous iteration.
Development is divided into several stages: the first stage, the embryonic stage. The second stage, the expected expansion period. The third stage, the bubble bursting trough period. The fourth stage, the maturation period. The trend of development is ups and downs.
Back to the new consumption battlefield where everyone is trying to start a business today, where are we? Where is the past and the future? Everyone's heart is different.
Let me share Kai Cheng's views:
In the past, there was a saying in the industry: all consumer brands are worth redoing. It's about an opportunity to innovate – with new supply chains, new platforms, new traffic, a new generation of entrepreneurs, with new approaches. This sentence encourages and motivates entrepreneurs and investors to invest in the new consumption field, because it is a natural time, location, and people.
But when people come in, business is not always good. We reached the inflection point. Because of new infrastructure such as Douyin, many consumer brands experienced 5-fold or even 10-fold growth last year, and sales have risen all the way. But when entrepreneurs are ready to double or triple this year, they encounter a decline ranging from 10%-30%, which is the problem today.
After breaking the original expectations, under the simple belief that "all consumer brands are worth redoing", there are a few questions to ask:
Is growth gone because of the platform and traffic? Ever wondered how big this market is? How significant is the innovation?
Are our inputs and outputs reasonable? So many places can spend money, is it appropriate to input and output long-term short-term relationships?
Even if there is no profit today, is the long-term business profitable? During the period of high growth, many people did not ask this question, even investors did not ask.
How fierce is the competition? Are there barriers to my business?
In the past few years, there have been many outlets. But the business on the outlet is most afraid of getting together. If 30 people were to do the same thing, it would already be a very bad business. Everyone is the same hard-working, hard-working, innovative, and at the same time mobilize all their resources to fight. But how many people will eventually be able to go public and exit and generate excess returns? The result is very heart-wrenching.
But in the end, when the industry reaches maturity, there will certainly be a group of people who adhere to long-termism who will win. How many $10 billion, $100 billion companies have been produced by this wave? I can't predict that number either.
We have $1 billion companies, and I want ten billion dollar companies to reach double digits. But whether it can challenge a company of hundreds of billions of dollars depends on the time and place. Two or three of the first batch of new consumer companies that have been listed have received $10 billion, and there has been a recent correction, and the business and business structure are being readjusted, but there is still hope. Consumer investing is a serious game and we want to be the one who wins last.
"Change" and "Change" in the Consumer Business
There are opportunities for innovation in the consumer sector. Innovation stems from change, and traffic platforms, channels, supply chains, and organizational forms have all undergone tremendous changes. But after calm analysis, it is found that what remains unchanged in the entire industry is that we still do consumer business. The consumer business has been tested by history for a hundred years, and it is necessary to return to the 4P core, back to the product, price, promotion, etc., back to the competitive strategy that Mr. Porter said, differentiation or cost leadership. The new change is just the beginning, and if you want to win, you still have to go back to the principle of invariance, which is the basis for constructing the business model.
Two growth paths for new consumption
Next, let's talk about two groups of Qicheng Capital's methods of studying new consumption. There are different paths to new consumption.
The first category, in fact, is also a very mainstream business in the market, called new categories and new products. Add another principle, and that's the new crowd. In the past two years, the hottest thing has been the Z generation crowd, they have been widely studied, and many consumer brands are basically around them. It's a typical model, a model that crosses a chasm.
When choosing new people, new categories, and new products, consumer companies basically face five groups of people: innovators, early users, early volkswagens, late volkswagens, and laggards. There is a corresponding theory called crossing the chasm. Why do so many startups suffer? Because there is a gap, this is the line of life and death, you can win by crossing the past, and you may fall if you can't cross the past.
Because the people and products selected are usually two: product innovation + traffic driven, or marketing channels. The problem to be avoided by this model is that it does not grow much, because its main growth comes from the dividends created by the category increment. At this time, the platform is willing to help you, all aspects are helping you, the initial growth is very fast, but it will definitely face a period of adjustment. This is also the problem that many brands encounter today, that is, the number of new people corresponding to the ceiling, when your user circle is consumed, the growth curve is not sustainable. Many companies adopt this competitive strategy, called differentiated competition.
Another path, a new model in the old category, find a new product form in the existing category, and there are many entrepreneurs looking for changes in the business model, based on channels, crowds, prices, especially based on product presentation. Adopt an efficient competitive strategy, and efficiency starts from cost advantage, from the middle mass market, because this part of the market has the largest base.
Usually when such companies enter the market, the core capability is supply chain capability, because it must create product differences or cost performance on the back end. The so-called price performance is not the price, but under the same performance, find a way to reduce the price by 30%, 50%, or increase the performance by 30% or 50% at the same price, which is the rise of the cost performance.
The advantage of the mass market is that the space at this time is still relatively large, but the challenge is that there is always a big brother above you, and there is always a deeper little brother below, which is still more difficult. Therefore, getting to the middle market immediately faces the next choice, up or down.
For example, on the JD.com and Taozhi platforms, many companies have no financing, and companies that directly achieve billions of scale abound, they do not talk about new groups of people and new channels, but they are also facing upward or downward decisions. Pinduoduoduo, community group buying do not do? They have quantities, but the profits are lower.
There is also a way to meet the needs of users in the high-end market, assuming that consumers are willing to buy a very good quality T-shirt, but mainstream consumer brands on mainstream platforms have no way to meet it. The challenge of this type of company is the ceiling of demand, the ceiling of ability at the time of transformation.
The long-term solution to the new consumer sector: brand capabilities and supply chain capabilities walk on two legs
At today's point in time, the above two types of companies are difficult, although the growth challenges in the past are also great, but the confusion of the next continuous growth is even greater.
Capacity shortfalls are what limits growth. Those who will do traffic do not understand the supply chain, and those who will do the supply chain are not very sensitive to traffic. Next, everyone is facing a problem: because the traffic does not understand the product, it cannot get profits, and once the investment reaches the ceiling or the competition has no way to differentiate, the growth will be stuck. Can do the supply chain, but can not grasp the front-end iterative traffic outlet, growth will not be efficient. If you want to transform from the wind into an eternal god, you must walk on two legs together.
From this perspective, we would like to put forward in a clear and clear way:
For enterprises with differentiated competitive strategies, when the first stage gets the potential period, in the second stage, it is necessary to strengthen the supply chain strongly, expand the omni-channel, and open up a single channel dependence.
For cost-leading companies, when they get the mass market share, the second step must be to extend the brand online and offline and add traffic.
It is also very important that today's new differentiation either learns to do incubation internally or do an extension of mergers and acquisitions externally.
Be a bridge for new consumption to carry forward the past and the future
Let's share some of the practices we did ourselves. When Qicheng was established, we set our mission as a bridge to help China's new generation of consumption champions.
We only do consumption, distilling out a few scenarios:
Two scenarios are found in offline retail, one is the community, and the wandian community chain around the community. These new categories revolve around the format of the community, will become a long-term industry, in this theme scene we invested in Qian Dama, pot circle, they are the benchmark of China's new generation of retail.
Another scene is Shopping Mall, a chain of thousands of stores gathered offline, such as hippocampus, which is a photography brand. There is also the boutique coffee chain Mstand.
Among the online brands, one category is FMCG, such as October Rice Field, with the supply chain of Wuchang, there are already nearly 50 million users online, the proportion of repurchase is very high, and there is a leading share in the Jingdong and Tmall rice categories, which is achieved in the same competition with the previous generation of big brands. We have also invested in brands such as Delmar, Plant Care, UNNY and more.
We are also looking for the combination of brand and supply chain, looking for a balance point in business models, and looking for companies that use the supply chain as a solid foundation to expand their business.
So when we're talking about new consumption, what exactly are we talking about? Is there only one mainstream discourse system? Today's mainstream is new crowds, new categories, new products, corresponding to new platforms, new traffic drivers, and the logic of a new generation of entrepreneurs.
But in the transition period of the industry, encountering challenges, entering the trough period, we also want to bring another perspective to the market, if your goal is to become the ultimate winner, then for many entrepreneurs, their focus should be driven from traffic, products, crowds, and further to the supply chain as the core cost leadership capabilities. On top of the differentiation strategy, create and develop a second pillar of competence.
From the first day of its establishment, QiCheng was a fund that only did consumption, and we hoped to invest in major events that could affect hundreds of millions of users and be closely related to consumers' lives. In the process of new consumption development, QiCheng hopes to play a bridge. We must know more about online than offline people, better understand offline than online people, understand platform and traffic better than people in the supply chain, and understand the supply chain better than people who do traffic. Becoming a good partner of new consumer companies, accompanying and assisting entrepreneurs, and achieving China's new generation of consumption champions is our mission to create China's new generation consumer fund Qicheng Capital. I hope that through a platform like Ebang, I can have more exchanges with everyone and win the final victory together.
Thank you!