I think all offline business models can be put into a coordinate system, in which one axis is service and the other axis is product.

The unit of sale for service businesses is generally time, and the quality of service is non-standardized; while the unit of sale for product businesses is the number of pieces, and the quality of products is standardized.

For example, massages and gyms are typically sold by the hour, and clothes and jewelry are typically sold by the product. Catering and milk tea and other merchants, under the premise of the relative stability of the customer unit price, and ultimately is also biased towards service-oriented selling time (so for the catering industry, turnover rate is the most important indicator).

So after the rise of online channels, selling products offline business is the most powerful blow, because the product is standardized, you can buy online there is no need to go offline. The impact on businesses selling services is relatively small.

So now the offline business is talking about a word "experience". Retailers are adding more experience and service elements to their models, trying to add a layer of non-standard veneer to standardized products to attract people into the store.

(For example, the most obvious difference between the restaurant and retail experience is the "temperature" attribute of the food. That's why the most common guan dong yu, buns, and grilled sausages are all about heating up the standardized products of retail to deliver a better experience and higher gross margins.)

Because offline physical stores have more points of contact with customers, it's easier to create an all-encompassing experience and more interaction with the user, ultimately leaving a 360° brand image in the user's mind.

However, there is also a bottleneck for service-oriented businesses, which is that the ceiling for selling time business is extremely low, and it is difficult to expand the volume, so these businesses have also begun to study and launch standardized products.

So the whole family in Shanghai began to appear in the dining area, and the catering business began to introduce standardized products of takeaway package options, which is a typical example of the so-called "catering retailization, retail catering". (Actually, that's something Ikea has been playing around with for a long time - how many people go to Ikea for the dining area rather than the furniture?)

So, I believe that due to the dual need to get traffic and continue to grow, ultimately a big feature of new retail is the combination of service and product selling.

II) The combination of online and offline

For all offline businesses, the final account can be calculated using a formula:

Profit = number of people entering the store * conversion rate * customer unit price * margin

We've already talked about it above, and one of the downsides of offline service-oriented consumption is that the number of people to be served is capped, so it has to be solved by productization.

That's why Xi Cha has now started selling soft omelettes.

When a brand is so hot that there are so many people in line, it means that the supply capacity can't keep up with the demand side, and because of the nature of the product, which needs to be made on the spot (selling a service, an added experience, a time-attributed product), the supply capacity is destined to be capped.

So the profitability of the enterprise has actually reached a bottleneck, that to earn more money, the best way is to expand the product line, so that each user's unit price increase, then sell milk tea supporting products, and is the standard product is the best choice.

But another problem with offline service is that there is a ceiling on the flow rate (i.e., the number of people entering the store).

Generally speaking, the natural traffic of a shopping district is the maximum traffic ceiling that a store can get. This is also different from the Internet business, where every Internet company has a theoretically infinite amount of traffic on the line.

So another feature of new retail is the combination of online and offline traffic, omni-channel customer acquisition and realization.

In the past, the business growth rate of various catering retail companies is often proportional to the input, and there is no marginal effect of diminishing. So the unit economic model of the Internet company is constantly changing, while the restaurant retail company is basically fixed.

That is to say, a restaurant company, how much money can make basically depends on how many stores. Each store opened costs an equal share of rent, labor and raw material costs, and gets a return within expectations.

So many VCs feel that offline business is still an investment opportunity for PE and not suitable for VC investment. However, in the new retail era, if the omni-channel problem is solved, the offline traffic can continue to flow to the online consumption, and the lifetime value of users will be significantly increased.

Then eventually, perhaps the problem of growth potential and speed can be partially solved, and the valuation of the enterprise will be higher.

(For example, since Xi-Tea is so popular with customers and has developed a certain brand recognition, why not take advantage of the situation later to come out with an online platform of its own, on which it sells a standardized portfolio of products other than milk tea and bread?)

Three) The ultimate state of new retail

I have been observing the layout of Meituan for some time, and I found that they have laid out a whole ecological chain of enterprises, from the uppermost source of goods, to the intermediate catering business management tools, to the final delivery, etc., either through their own business or through investment.

I think what Meituan is doing is the construction of the bottom service facilities in the catering industry, and ultimately a whole chain is Meituan's ecology.

So imagine, from the beginning of the purchase of goods to the final delivery link has been built, there is a whole set of ERP system in the middle, then each catering business, in fact, is the virtual service provider of the Mission, are the outer layer of the customer service tentacles.

Then the ultimate new retail is the same, each physical store, are with the basic sales ability of the experience center and brand development hall, each store is also a large system of inventory outsourcing, but also online sales of regional sorting centers.

So, ultimately, whether it is Ali or Jingdong, the ultimate end state should be to make the best of the infrastructure, so that every businessman has become a disguised wage earner.

And this thing is really quite suitable for convenience stores to play, writing here, in the long run is really more on the convenience bee expectations.

Four new retail investment logic

Finally, based on these analyses, for investors (especially early stage investors), I think there are two investment opportunities exist:

1) Vote in the line of synergistic effect of online and offline, there are service and product combination point, can quickly through a single point to make the word of mouth and the brand of the merchants and teams. (Although it is still difficult, but assuming that can partially meet these, after that can be handed over to the PE to invest in the expansion)

2) can be in the offline retail ecological chain to empower, such as class ERP system.