How to grow quickly and profitably regionally

The usual gross profit margin of fresh food is 30-50%, and the daily excellent fresh can reduce the average performance cost to only ten yuan.

Although in the eyes of some people, fresh electricity suppliers are "burning money" industry, however, its emergence does make the circulation of agricultural products improve efficiency and reduce costs. Especially in some categories and regions, through the upstream and downstream both ends of the force, fresh electricity suppliers in the upstream gradually changed agricultural production and organization, downstream constantly in the consumer field to shape the brand of agricultural products.

Daily fresh is a fresh electricity supplier that has risen rapidly in the past two years, and has achieved regional profits. Will its rise and profitability stand up to scrutiny? How can the model and experience inspire the industry? The author hopes that through his own independent observation combined with the investigation and interview of the enterprise, can find out one or two.

Fast-growing e-commerce upstarts

Daily fresh was established at the end of 2014, after the development is very rapid, as of mid-2016, Daily fresh to the outside world disclosed its monthly orders of more than one million, monthly sales of nearly 100 million yuan. Unilateral data may not be used as evidence, let's look at some third-party statistical data: the following is the author in the middle of this year on the major fresh electricity supplier data statistics, the figure on the right table for all kinds of third-party statistical data, the left table for the author combined data and research to give qualitative evaluation.

Despite the prevalence of Internet exaggeration, there are few objective third-party statistics on mobile e-commerce, but from some existing statistics and official disclosures, Daily Youxian, which was established less than two years ago, has indeed developed rapidly.

Advantages in unique mode

At present, there are thousands of domestic large and small fresh electricity suppliers, from the operation model, product selection, market positioning and other aspects have shown a variety of models, the choice of different models for operational efficiency, profitability, market competition is crucial. As a latecomer, Daily Fresh draws on the experience of the former and establishes its own unique model:

1. The business model is B2C mobile e-commerce, that is, customers place orders through wechat or App, and then deliver them to customers;

2. The selection of all categories is selected to cover daily fresh needs, but the SKU is streamlined and controlled at about 300;

3. Warehousing and distribution is total warehouse + micro warehouse, two nodes and three sections of logistics. Push the micro cang front to the community and business circle closer to customers, and serve ten first-tier cities in the early stage;

4. Small size packaging, eat more and choose more, 2 hours delivery in core cities, to meet consumers' immediate fresh consumption needs.

The first point is the commercial nature of the model, and the other three points reflect their own characteristics.

Under normal circumstances, the SKU of large fresh electricity suppliers is about 3000-5000, and the SKU of daily fresh food is controlled at about 300, which means that there are only 1-2 product choices under each type of fresh food. For example, apple currently only has gala fruit, yellow Marshal and Kina fruit, and eggs only have a 15-piece package of firewood eggs.

This way of selecting SKUs has one obvious disadvantage and two hidden advantages. The obvious disadvantage is that it may not be able to meet the demands of some consumers for selection and comparison in the purchase decision-making process. The hidden advantages are bright spots: First, most of the purchase of raw ingredients belongs to the consumption behavior of light decision-making and efficiency, so the selection of products for consumers can accurately grasp a specific consumption behavior; Second, the selection of SKUs can greatly improve operational efficiency and reduce operating costs.

In the selection of fresh electricity suppliers, the author has made an empirical summary, that is, through the added value of the product and the difficulty of electricity suppliers (that is, the warehousing, packaging and logistics of the product, etc.) the product is divided into four categories, as shown in the following figure.

Under normal circumstances, e-commerce should put more effort in quadrant 1, 2 and 3 products, try to avoid quadrant 4 products. The selection of Daily Food products is basically in line with this approach.

The warehousing and distribution mode of daily fresh food is: origin procurement → city sorting center (total warehouse) → community distribution center (micro warehouse) → user. At present, the service has been opened in ten cities, and a total warehouse has been set up in North China, East China and South China respectively, and then a micro-warehouse has been set up in a radius of about 3 kilometers for the user. At present, there are about 200 micro-warehouses, of which there are nearly 100 micro-warehouses in Beijing. The two-hour service covers the main urban areas of six cities, and the two-hour service in the remaining four cities is also being laid out.

Another difference is the small size of the product packaging. Many fresh e-commerce products are "volume", the reason, on the one hand due to high logistics costs, the need to pull up the customer unit price, on the other hand, fresh food distribution and packaging requirements are high, full box sale can reduce packaging costs.

Because of the front micro warehouse closer to the customer, most of the products only need to be loaded into the handbag during distribution, reducing the packaging cost; At the same time, although small specifications are purchased less, different products are purchased more, a small amount is bought more, the customer unit price is not affected, and it also meets the needs of users for food richness.

Through this pattern design, Daily Youxian is presented in front of users with a rather lightweight image: a small number of selected products, small size packaging for convenient consumption, and fast delivery in 2 hours... This is a very attractive product and service for a specific consumer group.

Latecomers break the market

With a good product and service, the next problem is to expand the market. The current fresh electricity suppliers are in a period of fierce battle, even if the overall market is still rising, but there are already signs of regional and phased mature markets in first-tier cities. In this case, if the latecomers want to break the game and become the main competitors, in addition to the support of funds, they must seek innovation and breakthrough in the way of transmission, so as to reduce their own entry costs to the greatest extent.

The marketing of Daily Youfresh is basically a three-step process: the seed users are relatives and friends from the founding team; Base users come from co-marketing; After having a basic customer base, Daily Fresh has done more promotion by relying on mobile social networking to let old customers bring new customers, such as the introduction of sharing red envelopes, and the number of new customers and orders is very considerable.

Through the analysis of the user portrait, it can also generate different promotional promotion scenarios, this form of marketing, more accurate, more efficient, and less costly.

Previously, Delicious 77 had a large number of advertisements in the subway, such a practice is not only expensive, but also inaccurate. At the same time as the marketing period, if the promotion is more accurate, more efficient, and less expensive, you can win the market opportunity.

Regional profitability under sophisticated operations

At present, the penetration rate of fresh electricity suppliers is 2-3%, and there is still a lot of room for growth, so the enterprise strategy is more important to expand the market than to seek profit. But if there is no profit model, can not see the profit expectation, it is difficult to seek financing, once the money is tight, it will soon fall down.

Through exquisite operation management and cost control management, Daily Youxian has achieved positive cash flow and regional profits.

Back to the 300 select SKUs. Streamlined SKUs can greatly reduce two aspects of operating costs: on the one hand, explicit warehousing and logistics costs; On the one hand are the hidden costs of managing operations, which include procurement, IT operations and marketing.

Another way to reduce costs is to convert variable costs into fixed costs, so that the marginal cost decreases as the number of orders increases. For example, the refrigerant packaging cost of each product is a variable cost, which will increase with the increase in order volume, but the cold storage cost is a fixed cost, and with the increase in order volume, the cost of each product will be reduced.

It is through the design of total warehouse + micro warehouse that more variable costs become fixed costs. Usually, fresh express needs to pre-cool the product, add ice, put it into the foam box, and finally pack a layer of express carton, which is because the goods need 1-2 days in the way of distribution, if not the packaging work, it is likely to affect the quality of the product.

In contrast, each micro-warehouse of daily excellent fresh radiates a distribution radius of 3 kilometers, and it takes less than 2 hours to distribute the goods from the micro-warehouse to the customer, and most fresh products do not need cold fresh packaging in this case, only a handbag can be used. In this way, most of the variable cost of packaging is transferred to the fixed cost of cold storage, and with the increase of order volume, the amortized cost is very small.

At present, there are many enterprises in the market using the total warehouse + warehouse model, which is a challenge for inventory management, especially the inventory of fresh products. The inventory of the warehouse is too much, which will cause loss and occupy funds; Less, it is easy to lead to shortages, and will make consumers dissatisfied, so a more accurate cover forecast is particularly important for the warehouse model.

In the founder team of Daily Best Fresh, COO Zeng Bin used to serve as the key account manager of Southern China retail and the general manager of flat panel Division in Lenovo, and he is familiar with sales forecasting models. CEO Xu Zheng is also a math professional, the two people according to the characteristics of the fresh industry and operational data, developed a new algorithm and replenishment model, can make the inventory turnover days of conventional goods to 1 day, warehouse shortage rate reduced to 10%.

The usual gross profit margin of fresh food is 30-50%, and the daily excellent fresh through exquisite operation management and cost control management can reduce the average performance cost to only ten yuan, so that the customer unit price can be easily profitable at about 100 yuan. Daily Youxian's recent financial figures also show positive cash flow and regional profitability in the Beijing area.

Challenges ahead

Daily fresh along the way seems to be very smooth, easy to get angel investment at the beginning of the business, and then in less than two years to enter the first echelon of fresh electricity suppliers, and now in the operating data to achieve positive cash flow. However, for the fresh e-commerce market, which is still in the growth period and has many variables, there is the rapid rise of today and the unknown challenges of tomorrow.

In response to the possible challenges ahead, the author interviewed Mr. Zhang Chengdong, Vice President of marketing of Daily Youxian, and the following are the three main questions raised by the author and Mr. Zhang Chengdong's answers.

Q1: Select SKU, small size packaging, Tmall fresh supermarket is also similar. The difference is that there are few 2 hours of daily excellence, and Tmall has more advantages in volume, how to deal with the competition?

Zhang Chengdong: For now, 2-hour delivery is a competitive difference, but also a competitive barrier. Pre-position mode requires a certain amount of operational accumulation, but also has technical barriers. Building our own front positions is a key strategy that we have been resolutely executing, a strategic determination and execution capability that may not be available on some other platforms.

These are on the one hand, at the same time, we are also doing branding efforts, have their own brands and strive for the exclusive agency of some brands, so as to ensure the advantages of channels. At present, we have created several independent brands, such as Razvette, which imports pork in cooperation with farms in France and Spain and processes it in China. In the depth of brand cooperation, and the domestic time-honored month Sheng Zhai signed a strategic agreement to expand the market.

In addition, in our B+ round of financing, there are 10 million level credit provided by Huachuang to create fresh supply chain financial services, to provide T+1 payment to high-quality suppliers, and closer cooperation with suppliers can deepen the relationship and reduce procurement costs.

Q2: Daily Fresh is currently targeted at middle and high income people, who have the purchasing habit of prioritizing efficiency over decision-making. How does the penetration of this market segment continue to increase? Will there be a stage bottleneck?

Zhang Chengdong: At present, the market penetration space is still very large, and many peers are needed to build the market. On the other hand, it can reduce costs through better operation, improve quality, and increase the competitiveness of the traditional model, which will further improve the penetration rate.

In the current wave of consumption upgrading, the upgrading of fresh consumption and even the entire grocery consumption is very interesting. As long as we can continue to create value in product quality, origin brand, selling price and distribution efficiency, this penetration rate will continue to increase.

Q3: Are there any plans to expand SKU? What if after the expansion of SKUs, the high efficiency + low cost operating model formed by the previous selection of SKUs fails to a large extent?

Chang: There are plans to expand SKU, but not too much. When we expand SKU, we will consider from two aspects: on the one hand, we will continue to present consumers with the feeling of selected supermarkets, just like the famous foreign supermarket chains Costco and Aldi; On the other hand, the impact on the operating model should also be considered. So even if we expand SKUs, it won't be too much and it won't affect our core competencies.

In the future, daily fresh may encounter more challenges, we wish these fresh e-commerce entrepreneurs can continue to explore innovative business models, and use more advanced management models to make the industry more efficient, lower costs, and enhance added value, which is not only beneficial to e-commerce practitioners, but also to the source of producers and terminal consumers. This is also the real value of fresh electricity suppliers.