After three years, Hou Yi, the founder of the box horse fresh life, recently once again in the WeChat group called out to the United States group Wang Huiwen, the theme was switched from the last food and beverage takeout to fresh food retail, the core of which is to say: self-management model is the future of fresh food e-commerce.

This "shouting" did not create as much buzz as last time, no public reports appeared. However, some market participants have forwarded the content of the "shouting" to the Commercial Observer, in a small exchange of views.

In recent days, the Commercial Observer has been wondering where the future of fresh food is, whether it is done through platforms or through self-management, and who can get through? Or rather, who can make the market bigger.

Recent shout-outs about the fresh food track.

Shoutout about takeout three years ago.

A

Non-standard

Before exploring what model is better, it is better to understand some of the basic characteristics of fresh food.

The business of fresh food is characterized by short-term insurance and easy to damage, is the shortest supply radius of all commodity categories, the need to minimize the supply radius.

This leads to the localization of fresh food, localized business performance is obvious. In addition to some fruits, root vegetables, frozen aquatic products, etc., the rest of the fresh items are difficult to low-cost long-distance transportation directly to consumers.

Fresh high-frequency low gross profit, low gross profit is to say that the gross profit margin can be relatively high, but the unit price is low, high loss leads to the amount of gross profit is not high. For example, a single 2 dollars of greens even if there is a 50% gross margin and how it is, the gross profit amount is only 1 dollar.

Most importantly, fresh food is non-standard, at least in China's current industrial environment is non-standard. The Commercial Observer does not agree with Hou Yi that fresh food is a standard product.

Because from the actual operation, it is because of the non-standard characteristics of fresh food is difficult to scale the development of fresh food, to standardize the cost of fresh food is too high, need a lot of money. It is also because of the non-standard of the fresh food is to lead to the management of fresh food is very difficult, often "scale is not economic" situation.

So, through the self-management to do standardized fresh food, the development of decades down to see, in fact, did not appear to be able to do a particularly large enterprise.

To manage the difficulty, for example, non-standard characteristics, even if the standardization of a fresh item, processing and packaging up boxed for sale, the appearance may look similar, but in fact, not the same, the procurement cost can be a lot of difference. The key is that there is no way to compare the different procurement costs of fresh food.

Like very retailers, fresh business development to a certain scale, in the management level often face great bottlenecks, there will be too much gray space, the front end of the "even and not lock" situation. On the surface may be investment issues, chain management issues. But the essence of the procurement problem, "root" in the non-standard characteristics of fresh food.

Fresh non-standard characteristics of how to come?

In addition to the characteristics of the category itself, such as short-term insurance perishable, a freshness of a price, the freshness of the daily performance is not the same.

It also lies in the fact that China's agricultural production is very decentralized, with more than 500 million permanent residents in the countryside. This also leads to non-standard at the initial planting end. There are different seeds, different levels of planting techniques, different logistics and other infrastructure, different soil conditions, and different geographic and climatic environments in each region of China's vast expanse. Rural areas are a natural economy, and the decentralized production methods of small farmers also lead to a large amount of asymmetric information. And so on.

In the past, we often see agricultural products stagnant, price volatility of the news, partly because of the fragmentation of agricultural production, information asymmetry.

But there is also a misunderstanding here, that is, quality agricultural products are never worried about sales, Ningxia beach sheep, grass side of the yellow cattle, including Jingdong do "running chicken", etc., can not be bought.

High-quality fresh food to buy to give friends and relatives is also a very "face" thing, how will be lagging behind, in fact, is not worrying about sales.

The stagnant sales are often the result of poor quality, or transportation and other infrastructure. In the past, we often through the WeChat circle of friends to help sell lagging fruit fresh, now in the circle of friends to help sell lagging fresh people less and less. Because if the quality is not good, but also recommended to friends to sell, is a very shameful thing. Logistics fulfillment can not lead to the delivery of fresh food is bad, not only can not help people, but also easy to offend people.

So, the non-standard of fresh food is the backwardness and non-standard of the whole industrial chain. From seeds to seedlings, planting, warehousing and logistics to retail delivery.

Fresh food is not standard.

Even on the consumer side, fresh food consumption is non-standard.

Chinese people don't eat cold meals, they eat hot meals three times a day. The hot food habit leads to a variety of tastes and rapid changes in the Chinese diet. The imbalance of economic development, and the traditional rural natural economy (to solve the employment), different climatic environments brought about by the eating habits to each place are self-contained, which in turn lead to regional consumption of large differences. Therefore, China's consumption habits are more "decentralized" and non-standard compared to developed markets.

Two

Platform

Talking about the characteristics of fresh food, and then talk about the mode of fresh food.

The existing fresh food model, on the broad category, the main two pieces: platform model and self-management model.

Let's start with the platform model.

It can be said that the platform model is so far, China's fresh food retail, especially fresh food e-commerce, really big, and even the only successful model.

Vegetable market is a platform model (small business integration), offline hypermarket is also a platform model in the early days (joint venture, non-self-operated), the most successful online fresh food, or even the only successful one is Jinduoduo, or a platform model.

Why the platform model to do fresh food can do big? What are the advantages?

The Business Observer believes that there are mainly the following 4 points.

1, the supply and demand ends of fresh food consumption are scattered, the middle of the circulation fulfillment link is based on a weak foundation, and the main body of the business is also relatively decentralized. This has led to this track becoming the world of individual merchants.

In turn, the platform model is more adaptable, and the efficiency of doing supply and demand matching is very high. If there are only a few buyers and sellers in the market, there is no need for a platform.

2, the non-standard characteristics of fresh food lead to its easier to do differentiation, the consumer side of the dietary tastes of a variety of people are willing to accept new things, increasing the space for differentiation.

Individual households are flexible, responsible, high integrity, easier to play the differentiated value of fresh food. Resulting in a market that can survive a large number of individual households. The platform model can be loaded into the massive merchants, the differentiated value of fresh food to amplify, attracting a huge number of users to come in, and then do a large volume of transactions.

3. Fresh food dispersion also leads to unstable supply, and poor upstream shipping stocking ability.

Now the fresh market, to do high order volume is not a problem, a promotion down the order volume can be done very high. The problem lies in the supply side, in the fulfillment side, especially on the supply side, the upstream enterprises are generally small, do not have a stable scale of preparation for shipping capacity to meet higher order quantities, or promotional needs.

At the same time, the limitations of the supply side also lead to gaming, negotiation is very costly and labor intensive.

For example, if a supplier has the capacity to process 100,000 units per day, it only has the capacity to do 100,000 units, and it can't possibly do higher volumes. If you want to promote, the day you want to do 200,000 copies of the order quantity, the upstream can only supply out 100,000 copies. In this case, the supplier if you know you want to do a big promotion, the supply price may also rise, a variety of quality grades of products will be mixed together in the supply, because he is clear about the localized fresh market, you do not have other supply channels to meet the demand for order volume.

And the platform model in this case relative to the self-supporting have an advantage, because you can load all the small merchants, mass suppliers into mass retailers, and then connected to the mass of users, do efficient matching. Then, the mass supplier aggregates the supply capacity of different specifications and then matches the mass users, the order volume can be made higher. Suppliers (become retailers) become their own pricing their own supply, but also a lot less gaming, negotiation pain. Instead, the volume can do a lot.

The management of the platform is very simple, the organization can do a very flat, build digital standardized infrastructure, automated management of price and flow bit show and fulfillment process can be, human efficiency is very high.

But if you want to control the supply chain, build a standardized, scaled supply capacity, then you need to burn a lot of money.

4, amplified the value of information technology.

The "monopoly" of the Internet platform is mainly a "monopoly" of information. In the field of e-commerce, the Internet platform model, the main thing to do is to efficiently match and interact with commodity information, there is no inventory model (pre-sale), the commodities online, digitalization, informatization, and then with the mass of users to do efficiently match the supply and demand information interaction. This is a very efficient and rewarding asset-light model.

But it's hard to do this offline, for one thing, because of geospatial constraints. More importantly: digitalization is more difficult to go, because the offline is a model with inventory, to the dynamically changing store spot inventory digitization, informatization is more difficult, high investment, transformation complex, but the return value is general. Compared to the pure online channel, the return is too poor.

So, theoretically, there is no inventory model of the transaction volume, the greater the value of informatization, the higher the return (information data flow advertising products with high gross margins). Therefore, online in advocating C2M, C2B, to sell to pick the model, want to get rid of fresh spot inventory transactions, full pre-sale. Go are platform model, are trying to amplify the value of information technology.

From this point of view, the Internet's powerful final "landing point" will inevitably return to the platform of the powerful, at present, the platform integration of supply and demand information is the most efficient, in fact, this category of fresh food is the same. Because if you want to do fresh food, the value of information technology is limited. (Self-operated can operate a limited number of items, limited service user groups, transaction volume by the time and space limitations have a great impact.)

The above is the platform model advantage, but the platform model to do fresh food also has some challenges.

The most central is still the problem of cost coverage.

Fresh gross margins are too low, losses are too high, but also need more manpower to take care of the need for high-cost cold chain fulfillment environment.

This leads to the platform model to do fresh, in fact, can not cover the cost. (Gross margins are low, and platforms have to draw commissions.)

The reason why the food market can do a lot, a big core reason is that there are government subsidies.

Offline hypermarkets have also been successful in the past with their affiliate model, but their profits don't come directly from fresh produce.

The hypermarket through the fresh "outsourcing" merchants to gather customer flow, and then through the flow of cash profits, profitability model is actually a commercial real estate profit model. (The customer flow gathered by the fresh food is transformed into the purchase of high-margin goods to obtain profits, as well as the collection of entry fees, shelf fees and other advertising revenue, store street store sublet rent).

Late hypermarkets from the associated fresh transition to do their own fresh, is because: electrical appliances, clothing, FMCG standard products and other businesses continue to be diverted, non-food business has been unable to do, fresh gathered traffic has no place to realize.

This has led to the transformation of hypermarkets to do their own mode of fresh, fresh categories to be able to directly generate profits, fill the performance, and not just a "diversion tool".

After all, in the past, through the associate platform way to do fresh food gross margins are very low, fresh food business is a lot of unprofitable.

But the transformation of hypermarkets to self-managed fresh also has a big problem, because everyone is in transition, resulting in fierce competition, fresh food ability to attract customers continues to decline.

Although the transformation of self-managed fresh, supporting the performance of the big box stores in the past five or six years of growth, many companies have been able to stabilize the performance of the plate and achieve growth, the core driving force is the fresh business to pull. But when we all strengthen the fresh food, online and offline do fresh food, supply and competition has increased, bringing the decline in customer attraction.

So, from the hypermarket all the way to the development of view, the platform fresh model allows hypermarket chain to grow, the transformation of self-managed fresh model, play the value of the performance is stabilized. But with the increased competition, the development of the present, the self-management approach to do fresh looks also difficult to continue to do great.

The threshold of fresh food is too low, differentiation and relatively easy to do, a large number of small individual merchants can do, so many competitors, the self-management way to do fresh food to do big is very difficult.

Subsequently, it is Jindo peer-to-peer platform model appeared, the platform model is not with the small merchants, individual households in direct competition. Rather, it is the small merchants into the platform, so that small merchants and small merchants to compete. The platform sets the rules and harvests the huge volume of transactions and data.

Pinduoduo made it big. Validated the platform model in the fresh food e-commerce market, still as offline food market, is the best transaction model, can carry the largest transaction volume of the transaction model.

But Poundland is the same as the offline fresh food platform, and also needs to cover the cost issue.

Fresh low gross profit is not profitable, the platform is difficult to draw much commission. To pump high commissions, merchants may run away, fresh and impossible to "monopoly" (a single Internet company is unlikely to monopolize the commodity information, it is impossible to do "two choices").

So, like the past big box stores, fresh gathered traffic from other categories to profit from the flow of advertising to make money? Can you grab some digital advertising market from Ali, Jingdong and other hands? Is one of the keys to the future.

Another big key is that most of the fresh food categories are localized business categories, short insurance easy to damage, so, through the online B2C to do fresh food platform, there are also great limitations. Like meat, leafy vegetables, etc. is very difficult to operate, the fulfillment end does not support (3-day fulfillment time limit to meet the demand, fulfillment costs are also high), so, Poundland is also doing community group-buying platform model, cut into the localized fresh items operating.

This road can theoretically continue to do fresh platform volume, but will also increase the financial pressure of the platform.

Three

Self-operated

Self-operated model to do fresh food, at present, it seems that the advantages are mainly reflected in four points.

1, can better do differentiation.

Self-management to do fresh food, can be better output standards, processes, help better do differentiation. The value of the differentiation of fresh food is amplified.

2, improve quality.

Relying on traders to supply, the quality of supply is not stable. And self-control of the business process, especially upstream, to do the origin, can better make the quality of fresh food.

3, digging deep into the industry chain profit.

Self-control process, reduce handling, circulation links, help to go to the middle, digging industry chain profit.

4. Reduce information asymmetry.

Self-control of the supply chain, to the origin in order to know the bottom price, relying on traders to supply, is more difficult to know the bottom price of fresh.

Fresh this category of high-frequency, supply and demand dispersion, information asymmetry, daily price fluctuations are relatively large.

The challenge is:

1, fierce competition.

Due to the low threshold of fresh food, supply and demand decentralization, resulting in fierce competition, at present, the company's business tends to compete with individual households. Self-employed way to do fresh food did not do a particularly large, to a certain size when the bottleneck is obvious.

2, management difficulty.

Fresh non-standard can not be compared. The procurement of non-standard products in fresh food has always been the dead end of self-owned fresh food retail companies.

First, all the incentives of the corporate system are greater than the gains of direct corruption.

For example, many online companies are also doing self-owned fresh food, initially with the mantra that online is digital and transparent, and can eliminate corruption. However, these online self-managed companies have later appeared in a corruption case (undisclosed). Some of the "subjects" are also friends and classmates of the founders.

Fresh non-standard can not be compared, "supply price" is too much room for change.

A lot of fresh food retail company's fresh food business ability to decline, profit decline, customer attraction ability to decline, on the surface of the front-end operation of the problem, but the essence of the problem is the procurement problem.

Some market participants believe that the procurement of fresh non-standard products is the hope that by doing large-scale volume to bring the advantage of winning the market self-management mode of death. "Volume advantage" in the individual merchant's high degree of commitment (more fight, goods will be carefully selected), in front of the high degree of integrity, simply can not be reflected.

Therefore, the market often say, fresh business "scale is not economic". In the case of cross-regional expansion, fast performance is more obvious.

3, big investment.

As fresh non-standard, to produce scale effects, we need to invest heavily in standardization. From the planting end to circulation to retail.

The Commercial Observer believes that this is not something that can be accomplished by a single company, and this could be a trillion dollar investment.

4. Prices will get more expensive the more you sell.

For example, assuming a supermarket has only a 100-month lifecycle, do you think the supermarket's fresh food sales performance is the highest at that stage?

According to some marketers, "Sales are highest in the first month of opening, and then, month by month, they go down. That's because in the first month the supplier gives you the lowest price, because when you develop new customers, the supplier gives the lowest supply price. So, do you have the luxury of suppliers getting cheaper and cheaper, it's impossible, it will only get more expensive."

5. Cheap labor costs.

Because of the cheap labor costs in China, it leads to a huge population of people who grow and sell vegetables. Investing in automated equipment can produce efficiency value, cost advantage, many times not as good as the "manual workshop".

The huge crowd of vegetable sellers "exit" is a long cycle of things.

So, from the above advantages and challenges, the self-management model to do fresh often represents the "right", but in the actual operation, the bottleneck is very big, and now there are very few companies through the self-management of fresh to do fresh, can be particularly large.

The self-supporting model, compared to the platform model, is not at all in a quantum leap in terms of transaction volume.

What does this tell us?

The current self-management model is definitely not the future either, and it definitely still needs to find ways to cover the gray space in the larger mechanism in order to further break the game and break through the development bottleneck.

And from the point of view of the current development of large Internet companies, each is also running, trying.

Ali, Jingdong is comprehensive, do is "platform + self" model.

Pinduoduo, the United States is mainly a pure platform model.

In the darkest hour, we need to catch the light with a discerning eye.

But more importantly: simmer.

Often, the failure is not because you can't find the direction, but because you can't get through to the end.

In the current fresh food retail market, all tracks are simmering.

For upgrading and growth to build up strength and simmer, to get through the tough and simmer, for the market share and simmer, for the rivals and simmer, to break through the limits of self-simulation and simmer.

It's painful to stay up, but there is no future if you can't stay up.

The 2021 (4th) China Fresh Retail Conference, organized by Commercial Observer, will be held on September 22nd - September 24th in Shanghai.

At this year's conference, we will focus on the topics of how to stay up, for how long, and what to stay up for.

One session at a time, we welcome the fresh food retail industry*** to enjoy the wisdom.