Mr. Zhou Meng
Traditional retailing’s transformation to omni-channel
--exclusive interview for Zhou Meng, CEO of Five Star Appliance, president of Best Buy (China) Co., Inc., SVP of Best Buy Co., Inc.
Traditional retailing must transform to omni-channel. Omni-channel is an important aspect in e-business and internet today. O2O is the core development direction for e-business. The key for traditional retailing transformation to omni-channel is: first, crossover and cooperation with other firms; second, complementary each other’s advantages; third, the base of company itself-online and offline work should be in place. When all the general conditions above have been equipped, both sides have the possibility to make omni-channel cooperation.
Chinese retailing growth rate and profit decline last year. Mr. Zhou believes it is because on the one hand the more intensive competition, on the other hand the further anti-corruption policy, the weak demand of GDP growth and influence of e-business.
The sale anf profit of traditional retailers facing challenges has been the fact. We need to more concentrate on the relationship between e-business and physical. First, the marking force of e-business is much stronger than its real proportion of social retailing consumption goods; second, the decline of traditional retailing operation profit is not only due to e-business but also its own competition. The growth rate and profit rate of traditional retailing sale down leads to the transformation to omni-channel.
The scale of e-business is larger year on year, but making profit is still very difficult.
So far, the development of e-business is impacted by media hype seriously, but the proporation in the total retail sales of customer goods is not very big. Up to December, 2013, China net retailing market accounts for only 8.04% of total retail sales of customer goods. However, it develops very fast. By the end of 2013, China e-business market dealing is as much as 1.02 billion, up 29.9% year on year.
With the development of e-business market and the ferious competition, online sale competition leads to average purchase cost of the population. E-business continues to profit difficultly in the future. Whether e-business shopping malls or their tenants in the general B2B website are difficult in making money. That is to say, when physical retailing is in difficulty, e-business is difficult too. The key point is online and offline will get together inthe end.
In the aspect of foundation output, direct e-business doesn’s cost in rent and outlet decoration and with less labor in operation maintenance. It spends much in supply chain construction, so the gross profit is less; physical chains have the system in the early of supply chain construction layout, however, it put outs more in the aspect of rent and labor cost than e-business. Thus, online and offline firms should learn from each other in the difference between online and offline cost input, customer resources maximization and revenue maximization.
Taken O2O as the core development direction, online and offline cooperation are imperative.
Today, there are plenty of operation patterns such as B2B, B2C, B2B2C or CtoB, CtoBtoC. No matter any model, e-business should develop in the core of O2O. Typical O2O is the cooperation between Alibaba and Intime. Intime needs the online population from Alibaba and Alibaba needs flow of Intime. Thus let’s learn again why online and offline cooperation are imperative. One is for cost, and the other is flow. Online firms costhave advantage of rent and labor, but not of advertisement cost; offline firm mature logistic system is their differentiation advantage, however it cost a lot in rent and labor cost. The resources
complementary online between offline enterprises will be the tendency, especially for thosemiddle and small companies and regioanal companies.
SNS rises suddenly and it is different from traditional e0-business.
The other pattern of O2O development is cooperating with Tencent to create a strong public WeChat platform by making use of Tencent WeChat platform to develop WeChat members. It is also a new channel for commence through SNS.
The big difference of SNS is making friends first and then money. The people in SNS have social demands as well as commercial demands. At present, there is no successful market mode since the SNS developed now. The reasons is below: first, the communication mode of SNS is of fragmentation. Second, the capacity to produce e-business is less. Making commercial activities in SNS public WeChat platform may forms B2B pattern. And whether the commercialization of SNS will impact the participation or not is still a question.
Traditioanl retailing must transform to omni-channel.
Physical retailing must do well in its own work first. The most impact to physical retailing is population to urge us to step in omni-channel. Get population back while you promote yourself. No matter you deal in omni-channel or traditional retailing, you still need to focus on goods freight, scene experience, channel, price, payment, service, innovation and other links. Doing well in every link which is the essence of retailing is our first living factor.
The second living factor is attracting the flow from different channel to get customers through traditional internet, mobile internet, TV shopping and other possible channels. Offer high quality service for customer’s consumption in omni-channel age. The input in this aspect is still very valuable for traditional retailing.
In 2013, Chinese retailing is in a troubled time. The e-commerce development makes impact on traditional physical business. The traditional retailing channel has entered omni-channel retailing time. What is omni-channel? For the question, we specially interviewed Mr. Zhou Meng, CEO of Five Star Appliance, president of Best Buy (China) Co., Inc., SVP of Best Buy Co., Inc in the fifth forum of retail outlet of Mall China (shopping centers)-China commercial real estate corporation convention(More than 200 shops in 7 provinces in China belong to Five Star Appliance. Its sales is about 14 billion to be the third chain appliance enterprise after Gome and Suning.).