Why Do We Need To Raise Salaries For Most Team Members?

Over the past month, for most Chinese companies, cutting corners, lowering salaries and ensuring cash flow are the main words.

But in March 11th, Huang Zheng, the founder of NASDAQ:PDD, said at an analyst conference call: "we need to raise salaries for most of our team members."

This is somewhat strange to the outside world.

This time, the "retrograde" is partly due to the thanks of the staff who held their posts during the epidemic. Another reason lies in the recent earnings report: in just 4 years, GMV has broken through trillion, and the user scale has surpassed Jingdong and nearly 600 million. It is the staff that it helps to win much of this achievement. So retaining talent is to retain the future.

The number of employees is close to 6000, the average age is only 27, and the average GMV is nearly 170 million. Such excellent results are hard for the outside world to come into contact with.

So before making a lot of efforts to publish these data, the outside world compares it to the general electronic business platform, such as Ali and Jingdong.

01 long term doctrine

Since it was born, it has been labeled with various labels. However, with the publication of a financial report, the external cognition is constantly being subverted.

Two years after its establishment, GMV has broken through trillion yuan in the past 4 years, and has grown into one of the three largest providers of electricity in China. Growing up has not slowed down, but has kept the distance from competitors.

In March 11th, NASDAQ:PDD launched its fourth quarter and 2019 earnings report. What surprises people about this financial report is not that they are going to enter the Fifth Ring Road more than the Jingdong.

Next, give priority to this financial report.

The biggest bright spot in the earnings report is that the volume of the platform has reached a new level of "trillion", and the total GMV (total turnover) has reached 10066 yuan in the whole year, up 113% from the 471 billion 600 million yuan in the same period last year.

It is worth noting that in the fourth quarter of 2019, the number of users who had sped up a lot has achieved rapid growth. Whether active buyers or monthly users (MAU), spelling is the second largest electricity supplier in China.

By the end of 2019, the number of active buyers in the platform reached 585 million 200 thousand, a net increase of 48 million 900 thousand in the single quarter, a net increase of 167 million over the same period last year.

In the fourth quarter of 2019, the average monthly number of APP users was 481 million 500 thousand, a net increase of 51 million 900 thousand in the single quarter, a net increase of 209 million over the same period last year.

To achieve nearly 600 million users' spells and increase the retention rate and repeat purchase rate of these users, the liquidity and ARPU (average revenue per user) will be increased after that.

At the same time, revenue has doubled. In the fourth quarter of 2019, the platform achieved revenue of 10 billion 790 million yuan, and realized 30 billion 140 million yuan in the whole year, an increase of 130% over the previous year.

A lot of revenue comes mainly from online promotion fees and commission fees. The latest report shows that 2019 of the fourth quarter, a total of nearly 90% of the total revenue comes from online promotion service fees, while the platform trading service commission income accounted for 10%.

With the magnitude of user scale and income level reaching a certain scale, the scale effect of the Internet will generate tremendous power, increase consumer contacts, diversify the income structure and improve profitability.

In this quarter, this trend is gradually emerging, and a lot of losses are narrowing.

Under non general accounting standards (Non-GAAP), the net loss attributable to common shareholders in the fourth quarter was 815 million yuan, narrowing sharply compared with the loss of 1 billion 900 million yuan in the same period last year.

In the future, a lot of benefits will benefit from scale effect and marginal effect, and marginal cost will also decrease rapidly.

That is to say, at present, the negative factors that concern the outside world, such as income structure and profitability, will be improved to a greater extent with the arrival of the inflection point of scale.

Unswerving pursuit of double growth of users and revenues, which does not care about short-term profits, is the embodiment of persisting in the doctrine of long term.

02 deviate understanding

In the recent earnings call conference, a lot of management said: "the penetration rate of the electricity supplier industry has reached only 25%, but we are not in a hurry to compete in the industry. Our focus now is to continue to establish trust with users, enhance user stickiness, and provide users with interesting and interactive experience."

Much attention has been placed on users, not eager to compete in the industry, but the outside world has often tried to compete with Alibaba and Jingdong.

On the surface, everyone is an electricity supplier, but the comparison between the three is not appropriate, for two reasons:

[1] the development stages of Jingdong are different.

At present, it is highly inappropriate to compare a company that has only been established for 4 years with other mature platforms. Because the growth stages of enterprises are different, they need to be observed from different dimensions.

Monetization rate (revenue divided by GMV) has always been a key indicator to evaluate the profitability of the e-commerce platform, and is also a great expectation for investors.

At present, the monetization rate is only 2.99%, while Ali reaches 6.58%. It is thought that this is the main difference between the commercialization and Realization of the two.

However, it is worth noting that the development stages of many companies and Alibaba are different. From Huang Zheng's point of view, the main goal of this year is still to invest in users, that is, continue to attract new users through subsidies and increase the repeat purchase rate of active users.

For the current stage of spelling, its average revenue per user is about 1/7 to 1/8 of Ali, and there is much room for improvement in the future.

2. The nature of Jingdong is different from that of Ali.

Unlike the traditional electricity providers represented by Ali and Jingdong, a lot of spells were born from the very beginning, representing the "new electricity supplier mode".

Traditional electricity providers are people looking for goods, and users find goods through search and browse. Therefore, traditional electricity providers emphasize unlimited supply so that users can have more choices.

The new electricity supplier mode is a human centered business ecosystem, pushing commodities to consumers. Therefore, the new business model as a representative of a lot of spells, has been talking about the optimization of upstream, and factory cooperation.

The new business model offers competitive advantages such as discovery buying, centralization of traffic and social fission in providing products with good quality and affordable prices.

At the same time, we need to use more unique traffic distribution logic to lower the traffic cost, the cost of goods and the difference between middlemen and get the core competitiveness of low cost.

Therefore, a lot of business models and Ali, Jingdong are essentially different, not suitable for comparison.

As you can see from the two points, the most important task at present is user data and revenue growth data. Compared with the competitors in the same stage, we can see that a lot of spells are very good at this stage.

For example, in the fourth quarter, Alibaba, Jingdong and three major electronic business platforms of the Jingdong are 18 million, 48 million 900 thousand and 27 million 600 thousand respectively. The number of new users is two times that of the other two.

It only took 4 years to set up a lot, and its market value reached US $38 billion, while the Jingdong was established for 22 years, and its market value is now 56 billion dollars.

From GMV, it takes more than 4 years to break through trillions of transactions, and Alibaba and Jingdong break through trillions of time in 14 and 20 years respectively.

It is biased to ignore the process and compare maturity to maturity.

03 new business, new world

As a representative of the new electricity supplier mode, there is much room for imagination in the future.

At present, the capital market simplifies the understanding of many businesses as a general electronic business platform, and it is very irrational to compare the data with these platforms.

Because the traditional electronic business platform is just "listing" products, waiting for users to search.

Many of them are different. The new business model can optimize products, select businesses, customize products, reduce prices, and on the other hand, can actively push and cover users at all levels.

[1] penetrate into every link of the industrial chain and create "low price explosion".

The core of many new business models is to build products with low price. The key to this is customized products, coupled with the compressed supply chain.

Take Jiangxi's "paper towel" explosive Kexin as an example. In 2016, it sold a lot of bags and sold 261 million packets of paper towels in only two years, which is a legend of Jiangxi's manufacturing industry.

Through sales volume and data, Wu Li Ying, the head of the company, found that many users were more concerned about the cost performance, and felt that a large paper towel was wasted.

To this end, the factory specifically introduced 180mmX122mm's small size bamboo pulp extraction paper, and transferred the production line to the raw material supplier's rwin group's Park. The transportation cost dropped from 300 yuan / ton to 8 yuan.

A lot of published data show that during the two years of development, nearly 1000 similar factories and factories have been incubated, and the order volume has achieved several or even dozens of explosive growth.

In the new e-commerce mode, the form of presentation of goods is mostly based on single product rather than brand. In the past, the multi SKU mode with brand as granularity has high demand for the brand's capacity, and the cost is also great.

And the "low price explosion", which is much more liquid production, focuses on the depth rather than the width of SKU. Brands can concentrate their capacity on 2-3 core products.

In this way, on the one hand, we can reduce product lines, reduce intermediate links and scale up so as to reduce costs. On the other hand, we also stabilize the supply chain, enabling factories to have stronger resistance to the risks of raw materials and labor costs, and at the same time, less SKU inventory.

At the same time, a lot of businesses do not charge any entry fees to merchants, nor do they receive commissions, saving the cost of the channel. The brand can give consumers lower prices, thereby creating a burst of money. For the platform, it also gains a lot of traffic.

[2] "sinking" and "floating" cover users of all strata.

Another difference between the new e-commerce mode and the traditional electricity supplier is that it can take the initiative to push and cover all the users of all sectors.

At the beginning, a lot of rely on ultra low price goods, free mail and WeChat social chain in the sinking market rapidly rising. This game has been able to dig up a large number of users in the sinking market.

In this process, more and more people gradually build and introduce acquaintances and semi acquaintances in WeChat, strangers flow, and develop the function of active push.

In the flow of acquaintances, a lot of invitations have been developed, such as inviting lists, haggling for free, helping to get free and receiving cash every day, so that users can bring many people who are most familiar with them, including good friends, relatives, neighbors, colleagues and so on.

In terms of the flow of semi acquaintances, a lot of games should be developed in addition to a lot of games, such as more orchards, more love elimination, and golden pig making big money.

These games linked links are more likely to be shared by friends to half familiar friends or to WeChat groups.

In the stranger traffic, the most common way is to use strangers to spell the single function, which will bring benefits to users while allowing users to create a sense of belonging and identity for a lot of ecology and help users retain.

Having laid down the market, half of the market has also been gradually marching into the second tier cities. Up to the two quarter of 2019, GMV was almost half full of many cities from the second tier cities.

From the earnings report, a lot of money really increased the trust of a second tier user through the "ten billion subsidy", and people were willing to spend more money on spelling more.

In the three quarters of the 10 billion subsidy package, the number of new monthly buyers increased to a record high, and before the launch, the growth rate has dropped to its lowest level.

Over the years, the number of active buyers reached 585 million 200 thousand, a 48 million 900 thousand increase over the previous quarter, more than 18 million of Alibaba and 27 million 600 thousand of Jingdong, and began to sprint "600 million people are using many spells".

A good omen is that a lot of marketing costs show a downward trend. 2019Q4 is also in a better position than the first 7 quarters, which means that every marketing expenditure can earn higher revenue growth.

From the above example, we can see that this new mode of electric business overturns the simple purchase relationship between users and platforms, and becomes a mode of life.

The difference between the new electricity supplier and the traditional electricity supplier can be seen from the large number of iron powder.

Moreover, as the company continues to develop multiple traffic cut in ways, covering all sectors of the user, and the 2B industry chain, its future will be a world-class e-commerce platform.

If you do not understand the nature of many new businesses, continue to "simplify" a lot, just regard it as a traditional electricity supplier, it is doomed to see its huge potential space in the future.