With the rising of rent cost and labor cost and the sharp drop of profit, more and more catering enterprises tend to bypass the buyers at different levels and directly connect with the upstream producing areas (agricultural products bases and manufacturing enterprises). The vertical integration of supply chain has become a new topic for catering enterprises. Compared with the first two kinds of resource-integrated supply chains and all-category supply chains, vertical category supply chains are more detailed, and management and operation are deepened according to different industries and fields.

What is vertical integration?

Vertical integration: a product goes through many stages from raw materials to finished products and finally to consumers. If a company was originally in charge of a certain stage, when it began to produce raw materials provided by its past suppliers, or when it began to produce products made of raw materials it used to produce, it was vertical integration. Vertical integration refers to the merger of two different levels of business in the production process, which is a method to improve or reduce the control level of the company's input and output distribution. Such as food factories and supermarket chains.

Vertical integration is a difficult strategy for the company to improve successfully. It is usually complicated, expensive and difficult to reverse. In order to ensure the market of their products, the manufacturers of the previous process often integrate the distributors of the next process. This is good when the economy is booming. When the demand drops to a level that can only maintain the utilization rate of the factory, many companies find themselves greatly reducing the prices of the following distributors. This often has the effect of driving competitors out of business without integration, making customers reluctant to accept the subsequent price increase.

There is no small market in China, so it is necessary to be a big fish in a small fish pond. This is the thinking in the field of vertical segmentation, and the winner in the future is the vertical segmentation industry. It can effectively reduce operating costs, increase customer unit price, increase repurchase rate, and make business no longer difficult.