01 We are entering a new business era

Before I start, I want to share a few signals with you:

The first is the status quo in China, where a new generation of consumers is beginning to rule the market. When we were doing “Charm Blue”, the post-90s and post-95s were still a segmented market, but today they have become the main force of consumption.

Second is the current status of the global Internet. The acquisition cost of users has exceeded the lifetime value of users. This is not what I said, it is the result of “Internet Queen” (Mary Mickel) quoting data from Morgan Stanley. What does that mean? The users you buy with advertising, earn a lifetime of money from him, can’t earn the cost of advertising, which is an important change in today’s business era.

The third is the US market, and we are seeing the rise of “native digital vertical brands.” What is a native digital vertical brand? We will talk about it later. This is a phenomenon that broke out in the United States from 2017, and the growth rate is very fast, even surpassing the wave of e-commerce by Amazon and Alibaba.

What do these three signals represent? We are entering a new era of business. The benefits of the new business era are changes, and the benefits of change are risks. Why do you say that?

Let me ask you first, what is the most fundamental question in business? It’s where the profits come from. If you can think about this, I dare not say that you are a successful entrepreneur, but at least it will beSuccessful businessman.

On the source of profit, I finally found that only three points are reliable and stable:

The first is “monopoly” and the second is “license.” But these two points have little to do with most entrepreneurs, so the third point is very important, called “risk”.

If we neither reach a monopoly nor have a license, we must seek profit at risk. If someone says that I did not take risks to make money, it is definitely not reliable. There must be many people in this business to compete with you.

So Why is it a good thing to enter the new business era? Because risk means profit. But how to seize the opportunities of the new era and make a profit? This is a very important question.

02 “Time” and “User” are the two cornerstones of brand building

Facing the changes of young consumer groups, we say that we are a brand methodology to increase our mental share. It’s not necessarily reliable, because the business world is ever changing, and everyone’s business is different, but it has at least a legendary business result. I hope everyone can be inspired while listening to the story.

The story took place in December 2014. We sat in the office and suddenly charged $ 590 million. You must have experienced this kind of moment, and you suddenly have a lot of money on your account. No matter whether this money is 10 million yuan or 100 million yuan, it will be the beginning of your distress.

Because no one will give you money for free, he will either because of a license, or because of a monopoly, or risk. No doubt I got the money because of the risk, but this money also means a word that entrepreneurs particularly hate: gambling.

The best entrepreneurs don’t sign and gamble. For example, Hi Tea, which has doubled this year, its founder refused any bet on capital. But the money is too big, we can’t say no.

The conditions for gambling are very harsh: we are required to increase our sales by 10 billion within 18 months, and we must not lose more than 400 million.

The entry-level scramble for smartphones is China’s most brutal business battlefield, and I’m sitting in the office with a white board in front of me writing the name of our new brand: “Charm Blue”, with sales of 0.

At this moment, I have learned the first lesson as an entrepreneur: the growth is everything. Without growth, dreams, ideas, and values ​​are meaningless.

But after one year (2016), weThis battle was won, achieving a growth of 350%, and achieving the world’s first growth force in the industry. If you sell 100,000 units a year, doubling it 10 times is easy. But at a time of real scale, we have the largest global growth rate among mobile phone brands with annual sales of 4 million.

When you have completed a bet on scale, he will ask you for profit. How can I get more profit from users?

1. In addition to technology leadership and cost leadership, the third possibility: insight and design leadership

What exactly do brands do? We didn’t know it at the time. But in 2017, the results we achieved were like this:

First, the proportion of young consumer groups after 90s, we are No.1 among all brands;

Second, we really make money. In the world ’s most brutal commercial battlefield, facing those who play cost, efficiency, and flat channels, we also earned two points. At an operating scale of 20 billion, it is 400 million a year.

Looking back today, this result is mainly due to two key choices we made:

The first option is that we do growth segmentation. If I said this three years ago, everyone would definitely think that it doesn’t matter. I can win without doing a growth segment.

But I started to be a post-90s and post-95s user in 2014. Five years have passed since today, and all my efforts in the past have suddenly become more and more valuable. If we chose to do post-80s business in 2014, we may not have the opportunity to share the insights of young consumer groups today, because post-80s are no longer the main consumer groups in China today.

Of course, market segments have scale issues, but if you are making business decisions as a challenger, growing market segments are important. It has two benefits:

First, it can help you avoid the main force of your opponent. Although I am facing the most powerful opponent, I avoided Xiaomi and Huawei and only need to face Redmi and Glory.

Second, after choosing 90 or 95, you choose to be friends with time.

When we came out for financing, the capital export rate of the entire market was only 4%, which should be the worst situation in the past decade. But we still got TS agency fees and beat the market a full 40 times. Because in the past five years, no team has been able to continuously accumulate capabilities and experience in a time-favorable dimension.

The second option is that we also cancelConsumer insights into leading brands. Some time ago, an essay from Diaoyao led to a debate: What is a brand? What is a label? My judgment criterion is: when a company needs to obtain more profits, the first response is to reduce costs, which is the label; the first response is how to build a brand and occupy the minds of consumers, it is the brand.

To be honest, We did consumer insights initially because our opponents were too powerful, and we can only do that.

Huawei is a technology leader. You have any possibility on this battlefield, but there is only one point. It is impossible to surpass Huawei to make a stronger technology lead.

Xiaomi belongs to cost leadership. The core capability of cost leadership is not worse than technology leadership, because it requires extremely comprehensive capabilities. Once you reach the cost lead, you can be in a very stable position.

When entering a market with large capacity or high growth, you will definitely encounter these two kinds of opponents. But what if you don’t have an advantage in either of these areas? I can tell you that in addition to technology leadership and cost leadership, there is a way to win: insight and design leadership.

Why is insight and design leadership likely to win? First, in the ten years I have been in Japan, I have seen many companies come out this way; second, such companies are still very few in China. If you want to win on this road, there are actually few opponents.

So For consumer entrepreneurs, if you can’t do No.1 with leading technology and cost, then you should do No.1 with insight and design leadership.

2. The two cornerstones of brand building: era, user

Both key choices are essentially a spirit: Persist not “me too”. This spirit is contrary to the number of ways to make a label. What is a good label and what grows high? I do the same. But brands are going to occupy a place in the minds of consumers, so they must not be like others.

So many people pass by every day. Has anyone left a place in your heart? No. But if someone walks down the street this morning wearing penguin-like clothes, will you remember him? This is very likely. Standing not “me too” is essentially the core spirit of Charm Blue, and it is also the spirit that can achieve the brand.

Maverick is simple, but how can it be established commercially? What I want to emphasize here is the time dimension . If it is a label, you may see the success or failure of the business in 1-3 years. But it takes at least 3-5 years for the brand, and it is possible to do it under very smooth conditions. Recycling the entire brand ’s value, which takes 8-10 years, is normal.

In the beginning, I emphasized that change brings risks, and risks bring profits. But when doing brand fit, such a long cycle must have a relatively stable cornerstone to cope with change. What are the cornerstones of brand building? I think there are two:

The first is “users”. After 90, 95 has become the main consumer of today, but this market was enough to support our business 5 years ago, so as long as it is growing By market, users are stable for 5 years;

The second is “era” . What era is China today? There are many labels, such as the rise of great powers, and this wave of trends is stable for three years.

So don’t look at what your competitors are doing, but watch how the user and the times have changed. In this way, you have the opportunity to create a strategy that is different from your opponents, and can be established in business at the same time.

03 The consumer market can also release more than 90% of brand space

1, post-90s consumption power is 4 times that of post-80s

Let’s look at the times first. To understand the background of the whole era, the first is definitely to look at the population structure and find the largest consumer group in the market. Affected by family planning, young consumer groups are declining, but this rate is less than 5%, and the largest decline cycle has basically passed, and it will get better and better in the future.

In the current cycle, there will be about 20 million fewer young consumers per year. But I ask a question: Are they spending more or less? Ali has a statistic: Each dollar spent on Taoism after 80s will cost 4 yuan after 90s.

This means that, although the population of young consumers is declining at less than 5%, the consumption scale has increased by 400%. So Xiaoyaozi came to a basic strategic conclusion: we no longer take Jingdong as our main opponent.

I said why? He said that the transaction age of JD users is increasing, it went to the “one dollar” side, but Ali is still working on the “four dollars” side.

Today, because of the age of the transaction and its corresponding consumption scale, Ali’s main competitors have become Pinduoduo. Pinduoduo’s trading users are young, but the area is sinking.

But why can the post-90s spend so much money and it is 4 times the consumption power of the previous generation?

The first is because the post-80s may have various burdens; the second is because the house is not bought after the 90s and 95s. I got an interesting statistic and found that the proportion of people who buy a house after the 90s is less than 5% This is an important reason why they can release such a strong consumption power.

So we still face a very good business future, and the consumption scale of the new generation of consumer groups will continue to grow.

2, we are in the golden age of brand entrepreneurship

Second question, although we know that this is a market that is still growing in size, from the perspective of the entire business development logic, centralization seems to be an inevitable trend.

For example, in the mobile phone industry, although everyone’s sales are constantly growing, the gap between head brands and other brands is growing, which means that the industry’s concentration is getting higher and higher.

So is there any chance for a new brand? Actually there are. Let’s take a closer look. How does Huawei continue to gain market share? Relying on the continuous increase of sub-brands, from glory to P series, Mate series and so on. This is not an accidental phenomenon, and Xiaomi also has several sub-brands.

Although the market is statistically concentrating on the head, the means for centralizing the head is to constantly be a sub-brand. This means that consumers are segmenting their minds and they are asking for more brands.

The same is true in the US market. We just mentioned the outbreak of “native digital vertical brands”. How many brands have they started over the years? They can get consumer support, and many have achieved valuations of more than $ 1 billion, and there are now funds dedicated to investing in such brands.

So whether in China or the United States, there is still plenty of room for the number of brands. At the same time, there are even smaller commercial units in the United States that cannot be called brands, called maker (can be understood as individual producers, craftsmen).

It originated from an e-commerce website called ETSY. After listing, it now has a market value of more than US $ 5 billion and sales of US $ 1 billion. It has as many as 1 million sellers on its platform, namely makers. Where does Alibaba’s main sales come from? It is a top 500. From the two extremes of the business world, from the most concentrated top 500 brands to the most dispersed one million makers.

I ask Xiaoyaozi ETSY as a threat? He said no, it was too young. But we clearly see that the axis of the business world is gradually moving from the top 500 to the direction of 1 million. How much?You know, but the most reasonable business world in the future will not only be the top 500, but the top 5,000 or even 50,000.

This means that the entire consumer market can release more than 90% of the brand space. We are really in a golden age of brand entrepreneurship.

3. New brand opportunities under “a little luxuryism”

The number of brands will continue to grow, but the next question comes again. Will there be so many brands that will lead to vicious competition, and eventually everyone will not make money?

This actually involves the question of profit. Let ’s take Japan as an example. Because in some aspects, we will look like Japan in the future: The economy is slowing down, the population is aging, and young people are becoming more and more Buddhist.

We inspected the Japanese electric fan market and found that the cost-effective brand accounted for 60% of the market share. On the basis of the former, a brand that doubled its price gained 30% of the share. Everyone guessed that it occupied the remaining 9%. How many times is the brand markup rate in the market? 7 times.

This actually represents three types of brands, cost-effective, mid-range and high-end. The characteristics we see are that the market share of mid-range brands is declining.

In response to this signal, a new word called “a little bit of luxury” appears in Japan. Young people have no money and don’t want to feel that their life is too failed. What should I do? Resolutely buy high-quality products, but in areas of interest, you should never buy bargains.

China’s “a little bit of luxury” is buying poisonous shoes. There was a previous consumer survey that asked consumers what percentage of their monthly salary they would buy, and it would be easier to make decisions. I remember what I observed from the pre-80 consumer group. The data is one-third. But Young people now have completely deviated from this rule, and they are willing to spend their full monthly salary to buy shoes.

We assume this market division to the limit. Assuming that 90% of the market share is taken away by cost-effective brands such as Xiaomi, do we have hope in the face of this business pattern? I tell you, there are still.

If you calculate the net profit, you will find that although 90% of the market is occupied, its net profit is actually similar to 10% of high-end brands.

Is “little luxury” only 10%, will it become 5% in the future? We don’t know, but we still want to be friends with time. Finally, in the trumpet we see, the quality is increasing and the quantity is decreasing. More or less you will still save some money, but you ca n’t spend all this money at Xiaomi ’s House.

To sum up, the space of traditional mid-range brands is squeezed. If the price / performance ratio is good, it is the mainstream of the market. If not, then it should be a high-end brand. Double the markup rate to be a real brand, not a label.

04 Commercial changes in China: the intermediate stage of buyer market and value co-creation

Let’s take another look at China’s business changes, which is the historical process of China’s entire business environment. If this thing is not clear, many of your judgments will be very confusing.

In China’s commercial changes, we can only look at one word: excess capacity can basically explain most of the problems. Why do you say that? Everyone knows that there is a word called “seller market”. The seller’s market will evolve into a buyer’s market as the production capacity is satisfied. But do you know what the next stage of the “buyer’s market” is?

The buyer’s market is already emphasizing the brand, and its next stage is called “value co-creation”. How do you understand it? We start with the seller’s market.

What are the core competencies of the seller’s market? It is supply, capacity, product. As long as things can be made, they will definitely win.

When communicating with a large number of post-60s entrepreneurs in China, they often come up and ask about production lines, costs, and funds, because they have succeeded in this way. They are in a seller’s market. Organizing production and organizing resources is more important than getting consumers.

What are the core competencies required by the buyer’s market? The answer is differentiated products and brands.

The production of light society is no longer possible. Production is just a supply chain. Honestly earn 5% and take 6 months. Therefore, in the buyer’s market, the status of production capacity is reduced, and the status of brands is enhanced. This is the fundamental reason why everyone can get a lot of money in the supply chain today.

What about “value co-creation”? It is service customization and brand value proposition. This is not my own nonsense, it is the 7-11 history of Japan ’s most successful offline commercial chain.

7-11 won the first stage of the market after the war by strengthening supply 7 days a week and 10 hours a day. When the market entered the second stage, it began to provide differentiated own products.

When the market entered the third stage, it began to provide community services, such as mailing, ticketing, and so on. It is a microcosm of the historical evolution of Japanese business.

Why Japan? Because China’s business changes have not yet been completed, we can refer to Japan and predict the future to a certain extent. China’s historical stage must be overcapacity, not the seller’s market.

The entire e-commerce market has undergone a huge evolution. The era of Taobao fire was to solve the problem; the era of Jingdong fire was to solve the problem; when Haitaohuo was later, it was already a solution to beauty Is it a question of the brand I want?

At the same time, the number of newly opened offline shopping malls is constantly increasing, and the purpose of the flow of people has clearly changed from looking for features and low prices to looking for experiences, designs and brands.

If you say to a girl born in the 90s today: Let ’s go to Zhongguancun to see if Huawei ’s latest mobile phone is cheap? She would frown, but if you say: Go and see if it looks good? She will be more likely to accept the invitation.

These are reminding us that the entire consumption direction is changing towards experience and value proposition, which is the so-called “value co-creation”. But there is one thing we can’t explain in this trend: Pinduoduo, gathered and liked.

So to establish the concept of the evolution of the entire business process, we must also understand another question: How should China’s business market be divided?

Different statistical companies will have different divisions. I only tell you a very simple number: 3331, remembering this number, you can at least understand the real area. Chinese market.

“3311” is the summary of the largest consumer standard industry in China’s 2C. Specifically, the Yangtze River Delta accounts for 30%, the Pearl River Delta accounts for 30%, and Beijing, Chengdu, and Wuhan account for 30%. , And the rest of the rest accounted for 10%.

There are two interpretations of this number:

The first is to say that if you make a new brand, you can live if you first win the Pearl River Delta, and then the Yangtze River Delta is very good. If you can win Beijing, Chengdu, Wuhan, then you are a national Big brand;

The second interpretation is that there are so many people in that 10% of the vast area, and there are a lot of opportunities, so after Pinduoduo went public, all investors were talking about sinking the market.

In fact, the commercial distribution of China today is very uneven. I do n’t even think Beijing, Chengdu, or Wuhan need to think about it. As for that 10%, II believe that due to the large number of capital admissions, it will also grow quickly.

In the “3331” situation in the Chinese market, it is precisely because the front 90% of the concentration is so high, and that 10% is growing so fast, will someone argue whether the consumption is upgrading or not. strong> Downgrade.

If we only look at the “333” market, China has already overcapacity, and there is no doubt that it has entered the intermediate stage of the buyer’s market and the value creation market.

Finally, I summarize some of the more important features of today’s era:

First, after 90 and 95 began to dominate and drive the growth of the young market; Second, the number of brands continues to grow; Third, the profit is low The high ends are concentrated, and the space for mid-range brands is squeezed. Fourth, China is in the middle of a buyer’s market and value co-creation.