Short Circuit Economy: How To Sell The Factory Price $1, Retail Price $3 Product To a Few Cents?
Today I will share with you the third core logic: short circuit economy.
First of all, let’s see a story.
Mr. Wang runs a daily-use sundry goods shop, and he buys from the wholesale market every week. Business would have been fine, but ever since there was “evil” Taobao, people nearly don’t buy from his shop. Mr. Wang is nervous, but the retail price of Taobao is even much lower than his purchasing cost. Want can he do?
Writing to a newspaper office and TV station, lambasting Mr Ma for destroying the real economy? This is a sign of weakness. The strong should fight like a man. Now that Taobao challenge you with “short circuit economy”, then return it with “short circuit economy”.
What’s short circuit economy?
I want to go to Ningbo from Shanghai. How can I get there? Both Shanghai and Ningbo are near the sea, but they are cut off by the sea. In the past, I had to drive from east to west, from Shanghai to Hangzhou, and then from west to east, from Hangzhou to Ningbo.
From the map, Shanghai, Hangzhou and Ningbo are almost equilateral triangles. The straight distance from Shanghai to Ningbo is really not far, but it is cut off by the sea. From Shanghai to Hangzhou and then to Ningbo, the distance is a full double. So, the highway toll collector, because of the sea, earned a lot of money.
Do we have a method to short circuit Hangzhou? At this time, the airline stands up: let’s fly directly from Shanghai to Hangzhou. We build connections in the air to short circuit Hangzhou.
After the flight was opened, my journey time was greatly shortened and I never drove to Ningbo.
The ground traffic was not convinced .
The hangzhou bay bridge opened in 2008. From Shanghai to Ningbo, cross the sea directly, faster than flying. So I never flew to Ningbo again.
The flight short circuit the high way, and the bridge short circuit the flight. Business progress is the need to keep short circuits that once seemed necessary, but today seems to be inefficient link, so as to optimize the trading structure, rather than complain about the progress of The Times.
Let’s go back to the original case. How to deal with Taobao, a powerful enemy? — Short circuit economy. In the past, from products to customers, Have general agent, provincial level agent, wholesale market and your daily grocery. Can we short circuit all the general agent, provincial level agent and wholesale market? If we can, how could your price higher than Taobao?
Ye Guofu, a Guangzhou boy, decided to have a try. In 2013, he founded a company that runs groceries, named MINISO, and soon opened 1,100 stores.
In the groceries industry, the past $1 goods, sold to consumers for $3. Ye Guofu found the manufacturer and asked him, “I have 1,100 stores to buy from you, can you guarantee the quality, at the same time, reduce the price from $1 to $0.5.” With such a large quantity, the manufacturer thought it was acceptable.
Then Ye Guofu built 7 big warehouses, “short circuit” general agent, provincial level、city level agent and wholesale market, and only add 8-10% of the price as the brand operation fee, directly supply the stores. Then, each store adds a gross margin of 32 to 38 percent to the final consumer.
In the past, the cost is $1, and the retail price is $3. But now, the cost is only $0.5, adding 8-10% of the brand fee and 32-38% of the store gross profit, the final retail price is less than $1.
Through “short circuit economy”, for the same quality product, the price of MINISO is less than 1/3 of the price of others. In 2017, only four years after its establishment, the company’s annual sales volume has reached 10 billion.
Concept: short circuit economy
What’s short circuit economy?
In the past, it was a long process from product to consumer: D，Design；M，Manufacture；S，Supply Chain；B，Business；b，business；C，Consumer.
Each link of “D-M-S-B-b-C”should be charged.
Short circuit economy is to establish a direct connection across nodes, optimize transaction structure and improve business efficiency.
MINISO from M (Manufacture) directly to B (Business), short circuit the S (Supply chain)–including general agent, provincial level、city level agent and wholesale market, so we can call this short circuit economy “M2B”.
Then which trading structure can we optimize with short circuit economy?
The Tmall shop is using the efficient Supply chain (S) to supply the products to b (business) directly, short circuit the intermediate wholesaler “B”. This short circuit economy is S2b.
In fact, this is the same as being human. With lifelong learning, we are new to ourselves every day and never stop. Be yourself and be better yourself.