Zhang Jindong: Why Did Sunning O2O Fail This Year?

When the outside world is empty, it seems unthinkable that there are no negative news.

"Some people say we can't do that. They just stare at the short-term figures. Transformation is not shouting slogans. Such a strategic layout must be pushed forward and implemented step by step. This is 51 years old. Zhang Jindong Rare moments show strong personal feelings.

In the first quarter of 2014, Su Ningyun's net profit in the first quarter was a loss (net profit -4.3 billion yuan), and its share price dropped sharply, dropping nearly 30%.

As a result, the outside world about "Suning Internet transformation stranded" argument is rampant. When "elite" reporters visited the headquarters of Suning again, such doubts were at its peak. The words "failure" and "stranding", which were dubbed by the industry and the media in the transformation of Suning, were deeply stimulated by Zhang Jindong, chairman of Suning.

To a large extent, the bearish of the outside world is not only due to the transformation of Suning itself, but also because of the impact of the Internet wave on China's retail industry, a major structural change has taken place. In the past three or two years, Alibaba and Jingdong mall have gone wild, and Tencent, Baidu, and vertical electricity suppliers have been grabbing too much attention, so that Suning seems to be marginalized.

At the moment, the Jingdong mall and Tencent, which already have the help of Jingdong, are now landing on the US stock market with capital strength and opening another round of "omnipotent" growth with IPO. How does this taste for Zhang Jindong?

"This is a good thing, IPO will make electricity providers more standardized and transparent." Zhang Jindong answers the reporter of excellence.

There were people around to persuade Zhang Jindong to supplement the advantages of other businesses. Zhang Jindong replied: "other people's strengths, Su Ning's learning is also difficult to surpass, but it is easy to lose their strengths." "Now, we have a clear goal and clear path, which is different from the development stage of crossing the river in the past, and it is even more impossible to lose our strength."

In May 8th, the 2014 Suning cloud investors exchange conference, Zhang Jindong to more than 200 investment institutions and individuals put out: "Suning the most difficult time is about to go, we have seen the curve from the bend to the dawn." Because Suning is in the forefront of the industry in its transformation to O2O all channel retailers, it is still the leader of this wave of new business wave.

This expression is not only because Zhang Jindong is a born heroism, but also because he decides O2O is the ultimate form of business in the future. As early as more than 10 years ago, Suning proposed the fusion mode of online and offline.

In fact, since last year's O2O concept has been heating up, various signs are confirming Zhang's judgement. BBK and Han Guang Department store opened the road of self built online shopping mall; the Alibaba managed to infiltrate the Yintai network through Yintai department store for several years; the convenience stores like fast passenger and good friends became the "tentacles" under the Jingdong mall; the Wangfujing department store, Tianhong mall and so on introduced WeChat into the room and looked forward to mobile breakout; more small and micro retailers were reunited with Baidu.

In contrast, Suning, the industry leader who has grown up with the old rival Gome in the past 20 years, is especially decisive in its Internet transformation from "down" and "up". In the past few years, Suning has spared no effort to carry out on-line purchase of e-commerce, "de electrification", and carry out the whole category expansion.

A series of strategic moves in 2013 also set off a more powerful storm of change within Suning: Renaming the "Suning cloud merchants", adjusting the management structure, opening up the double line parity, launching the open platform, upgrading the stores, and carrying out cultural innovation. In this way, sunning set up a O2O integrated channel map for all channels and online offline platforms.

"Suning's round of O2O transformation has no precedent in the history of business in the world, and WAL-MART is also exploring, and the difficulties are imaginable". Zhang Jindong used a consistently hoarse and firm voice to say, "we must not shrink from half a step, even if we become pioneers and martyrs".

So, how can we break through the weak links such as traffic, life services and payment? How can Zhang Jindong lead Suning 180 thousand employees to open up and merge the more than 1600 offline stores in the whole country with suning.com online mall?

　　 More thorough O2O

Start in June 8, 2013. Double line parity "Strategy as the core symbol, Suning launched O2O fully to a year. All kinds of market evaluations brought about by the pains of performance and blood have posed a greater challenge to Zhang Jindong's transformation.

Online and offline prices quickly pulled down the average gross profit margin of Suning, which allowed some industry analysts and media to directly compare the data of Jingdong mall and sunning cloud business, and concluded that "Suning is not as good as Jingdong".

"I really don't know how they come to the conclusion of our failure. We can't compare it with the earnings figures carefully." Zhang Jindong spoke frankly to reporters. According to Jingdong prospectus, Jingdong sales revenue in 2013 was 69 billion 340 million yuan, while Suning financial report disclosed a sales revenue of 105 billion 400 million yuan during the same period. Industry experts explained: Despite positioning online B2C retailers, suning.com is part of the Su Ningquan channel retailer, taking the direct comparison of Jingdong and sunning, a wholly channel channel, "totally logical."

Although Suning paid some price for "double line parity" and other strategies, but in Zhang Jindong's view, the most difficult stage of Suning transformation has passed, "the group of tens of thousands of people in their diligent efforts, the effect is also very obvious", then only need to move towards the strategy of O2O resolutely implement.

It has to be said that the establishment and rapid development of suning.com is the precondition for the transformation of Suning O2O. Suning's massive and full retailer transformation campaign should be traced back to five years ago.

Five years ago, Suning beat its old rival, Gome, to the top of China's retail industry. It was also at the time of the beginning of 2009 that the Suning online mall was officially renamed "suning.com". At that time, Jinming, vice president of Suning Appliance Limited by Share Ltd, compared the offline retail market with Gome's competition to the "army", while the newly emerging online market was "air force". Of course, the market environment was still "land wars".

That year, WAL-MART's revenue reached $400 billion, 20 times that of Amazon. Jingdong mall's annual sales volume is only 6 billion yuan, but the loss seems to be far from being expected. No one will take Jingdong seriously. But it is expected that the momentum of e-commerce is much faster than people think. Since 2010, Jingdong mall has developed a large amount of financing and has developed rapidly. Ma Yun's Alibaba has begun to shift its focus from C2C to B2C, and intends to subvert the layout of China's commercial retail industry from the Internet.

As the growth of offline retail industry is in a bottleneck, Zhang increasingly feels that online channels are not only a supplement, but a driving force for SUIN's continued high growth in ten years. The "army" status can not be shaken, but the "air force" has become the key to winning the battle.

After a round of us discussions and a group of internal discussions held for several days, Zhang put out the strategic positioning of "WAL-MART + Amazon", which is 300 billion yuan online and 350 billion yuan under the line. "Future Suning will be a scientific and intelligent enterprise. By 2020, Suning Appliance will also create a virtual Suning equal to the physical store."

Since 2012, suning.com has made significant breakthroughs in the number of users, daily average traffic and average daily orders. The annual revenue increased from 5 billion 900 million yuan in 2011 to 18 billion 336 million, an increase of 210% over the same period last year.

Suning.com also carries a key opportunity for Su Ning's transition from electrical appliances and 3C to the whole category of retailers. With many years of accumulated supply chain integration capabilities, logistics and after-sales service system, Suning has identified ideas and has entered the department stores, daily necessities, books, health care, education, financial products, virtual services and so on.

In addition, Yi Hui has introduced the vertical businesses such as fan, Le bee and excellent purchase. Data show that by the end of 2012, the number of SKU purchased has reached 1 million 500 thousand, and is still in rapid growth.

Not only online, but also the inner circle battle of the whole category expansion has been introduced into the line. Along with the development trend of retailing under the line, Suning has built Expo super store directly, and its business category covers 3C, traditional household appliances, books, department stores, daily necessities, financial products, virtual products, etc. In Zhang Jindong's plan, "super shop" is the highest form of Suning's flagship + Internet strategic offline store.

But the two "suns and real" Su Ning must integrate each other and rely on each other to form the "one body and two wings" trend. It is not easy to do so. This is the need for major operations inside.

And the killing of "double line price" is a symbolic step for Zhang Jindong to build Suning O2O integrated retail system. "Double line price is not simply to pull the price to the same level. We want to provide consumers with an integrated and consistent retail service through this mode, forcing our internal supply chain, procurement, sales and backstage to be unified."

　　 O2O The core of development is to eliminate the bottleneck of consumers' online and offline shopping experience. For this reason, Suning once again launched a vigorous renovation project of "store Internet" under the line. According to the plan, this store will open free WIFI, implement the electronic price tag of all products, and set up the electronic shelf of multimedia, and will also use the Internet and Internet of things technology to collect and analyze various consumer behaviors, and promote the entity retail to enter the era of big data.

The project was launched last year and has achieved initial success. According to the earnings report, Suning increased by 6.36% over the same period in 2013. But it will take at least two years to complete the project.

"Compared with Tmall and other pure online platforms, Suning's O2O has natural advantages and has gone more thoroughly." Chen Shuguang, an expert of the e-commerce Expert Committee of the Ministry of Commerce, believes that after the implementation of Suning's double line price, its wide store will become the forefront of its O2O.

　　 The 20 trillion battleground

The audience at Stanford University gave the applause to Zhang Near East. A year ago, in the United States, a keynote speech of "Suning O2O exploration" made Zhang Jindong express his ideal in a foreign country.

At the same time, Ali, Jingdong as the representative of online business is also in full swing stirred up a big discussion of the O2O mode - the conclusion is that offline stores and online platforms should no longer be pinch, but should speed up the integration, conspire 20 trillion of the big market.

Maybe there is a technical disadvantage, but this O2O exploration campaign, Chinese companies are not inferior to their European and American counterparts. The world wide acclaimed all channel operation representative, also the online and offline integration model Messi department store, in 2013, US $3 billion sales came from online sites, but accounted for only 9%, which is not as good as Suning.

Of course, in terms of the current competition pattern, Suning's choice of targets should be more suitable for Ali and Jingdong. However, in the course of the formation of O2O, Suning is "bottom-up", while Ali and Jingdong are "top-down".

Jingdong's O2O line is expanding slightly later. At the end of last year, dozens of executives from Liu Qiangdong (micro-blog) and Jingdong convened in the suburbs of Beijing to close the meeting in the end of last year. Finally, O2O was identified as one of the major strategies of 2014. Liu Qiangdong's O2O logic is that Jingdong combines a number of ERP providers to transform information systems, commodity systems, supply chain systems, payment systems and membership systems for offline stores. Jingdong then provides online distribution services through online collection orders and offline logistics capabilities.

In April of this year, following the cooperation with Tang Long convenience store in Shanxi, Jingdong announced that it has entered into cooperation with the convenience stores such as fast passenger, good neighbors and good friends, covering 15 cities and more than 11000 storefronts.

In contrast, with Taobao, Tmall's two largest electricity supplier flow platforms and "killer" Alipay, Alibaba has many advantages in O2O. Its strategic concept of O2O is to open up traffic, membership system, payment system and even the final goods through two dimensional code and Alipay, and hope to cover all retail businesses with over 1 billion sales and more than 100 stores in China.

The "sample room" built by Ali is Yintai department store. At the end of March, Alibaba group announced that it would make strategic investment in Yintai business with HK $5 billion 370 million. The two sides will open up the future commercial infrastructure system under the online and offline business, fully open up the membership system and payment system, and simultaneously realize the docking of commodity system.

Another notable concern is the Tencent with WeChat. With the WeChat platform approaching 400 million of the active users, Tencent has the largest viscous flow on the mobile Internet, attracting many traditional retail businesses such as top grade discounts, Tianhong shopping malls, Wangfujing department stores and so on.

In contrast, Suning's online access is at a disadvantage. Huang Yuanpu, a O2O research expert, analyzed to "elite" reporter that "relying only on Yi Po, Yi Bao Bao, PPTV, and full seat net is not enough to win the competition in this competition. After all, Suning is at a disadvantage on the line. Maybe Suning should continue to enhance its layout and talent base through acquisitions."

The idea of controlling online resources by means of mergers and acquisitions is indeed very appealable to some giant companies. For example, WAL-MART, in the past year alone, WAL-MART has continuously acquired new technology companies such as social Nova TastyLabs, data analysis Inkiru, e-commerce development platform OneOps and website performance optimization company Torbit, and has also attracted many excellent engineers.

In China, Alibaba group has acquired and stakes high German map, fast taxi, unfamiliar street and American group network, which not only grabbed the "entrance" resources, but also increased the "plate" for its listing fundraising. In contrast, Suning's merger is still conservative.

However, having a strong "online" resource is only part of the O2O strategy. The ultimate convergence of online and offline is actually to build a larger business information transfer platform, which includes the comprehensive flow of marketing information, customer information, commodity information, order information, logistics distribution, service information and so on. At the same time, it also needs docking, transformation and optimization with the original business process, information system and data platform of the enterprise. This is a huge challenge for many traditional retailers who grow up in a rugged business model.

Mao Chunjing, director of e-commerce strategy at IBM Greater China, said to most talented reporters, "most traditional retailers have missed the best time because of late start, but that does not mean they have lost the opportunity. After all, this is a brand new business form, still in its infancy, and the future is still vast. "

Now, not many people will doubt the determination of Suning transformation, but when the online business is in the limelight, Suning has enough information and ability to grab a bigger share in the B2C electricity market. At the same time, it has completed the unique O2O layout through 1600 Internet stores transformation. The outsiders seem to be pinching Zhang Jindong's sweat.

"Up to the three quarter of this year, I believe everyone will see a new look of Suning." Zhang Jindong's response is obvious to the competition that leads to the same goal.

　　 Why are strategic performance poles apart?

Since its renaming in early 2013, Suning's share price has experienced a roller coaster shock, from a high point of 14.33 yuan to a low of five or six yuan.

"These two years are in a period of rapid transformation of the whole industry. The strategic thinking, tactics and various means to cope with fierce competition in Suning transformation are all improved in the process of continuous changes, which inevitably encounter some growth costs." In Huang Yuanpu's view, Suning's path to Internet transformation still has many challenges.

For example, behind suning.com's full scale expansion and massive opening up of all categories of enclosure warfare, some problems have also begun to emerge. The most important point is that different categories of play are not the same.

"3C is to sell hot products, can play inventory turnover; clothing, department stores are blooms, must take seasonal combination; mother and child's core is supply chain relationship; let alone" zero treasure "," cloud letter "and other pure Internet play. These are totally different ways of operation, which are far beyond the resources organization process and management experience of Suning. " An anonymous business observer said to "excellence" reporter.

Zhang Jindong also attributed the strategic direction and performance to the "lack of focus". In the face of investors' questions in May 8th, Zhang Jindong responded with Suning's three new focal points: "consolidating large household appliances, highlighting 3C and nurturing mothers and babies".

Our company has always been Suning's traditional superior category. Suning's idea is further consolidated through strategies such as strategic cooperation with home appliance manufacturers, underwriting customization, after sales service and two or three line city expansion, and continues to open up the gap with its competitors. As a traditional flow center, 3C products are both highly online and offline, and their importance is increasing.

What surprised the investors is that the third fist categories that Suning established were mother and baby. For this reason, Suning held 10th anniversary celebrations for red children in Beijing in May, and for the first time issued a clear strategic plan: giving it greater autonomy and decision-making power, and providing full support for its backstage resources; it is expected that in 2014, 8 new entities will be opened, and SKU will increase to 500 thousand at the end of the year. Suning hopes to establish the status of the first brand of the mother child market in red children.

"It has to be said that this is a wonderful move," Li Chao, an analyst at Analysys International, told the "elite" reporter. "Apart from the vast space of the maternal and child market itself, the move effectively improves the existing consumption structure of Suning, and at the same time forms an effective complementarity with the appliances 3C and general merchandise categories."

Compared with the whole category expansion, the outside world is more sensitive to the negative effects of the "double line parity" strategy.

Some commentators believe that the same price strategy has broken the original interest system to some extent, but Suning has no new compensation mechanism, which has led some suppliers to go closer to their competitors.

Zhang Jindong obviously does not think so. "Sunning relationship with suppliers is not the relationship between negotiators. The interest of both sides is to understand and grasp the needs of users, operate the market and serve users together. Suning will change the past dominated by negotiation game mode, and transform the mode of commodity cooperation driven by user demand.

The development of Internet technology, the application of big data, and the means of social marketing also provide a realistic condition for Suning. Suning hopes to dig out the big data through long-term accumulation of member data, access traffic, order information and so on, to achieve accurate demand forecasting and order driven, and create new Internet retail gameplay such as innovative underwriting, group buying and pre-sale.

Based on the deep changes in the supply chain, Suning launched a series of projects like "mobile phone family plan", "S-TV plan" and "S+ air conditioner". All of them have made a good response. The rush to buy TCL mobile phone and mobile phone has triggered a market boom. Taking this opportunity, Suning hopes to establish a new cooperation mode with important suppliers. For example, some suppliers like Samsung and other suppliers are actively planning to set up an independent joint business department, and integrate management from user group, product demand, order forecast, joint promotion and so on, and get through the full value chain.

The relationship with investors can increase communication to establish investor confidence, and supplier relationship can be bound by deep cooperation. However, for users, the user experience caused by any detail can lead to the breakdown of user relationship.

In fact, user experience has been the most criticized issue of suning.com for some time.

In the early days of development, because most of the purchase system was still independent reconstruction, the operation mechanism of independent procurement, independent sale and shared logistics was hard to get enough support in category expansion, technology system and logistics network.

In the same period, Jingdong and Tmall were relatively mature, with clear focus and rapid growth. Even under the leadership of Li Bin, President of Tesco, it has maintained a good growth rate, but it is difficult to take care of the details in some test skills.