Famous, Innovative And High-Quality Products Solve The Cost In The Link With A Perfect Supply Chain System

On November 15, 2013, a red and white logo "ten yuan store" opened in Guangzhou Zhonghua square. No one would have thought that seven years later, this small commodity chain has opened 4200 stores in 80 countries around the world, with an annual revenue of 9 billion yuan.

The prospectus was submitted to the US Securities and Futures Exchange (NYSE) for us $100 million. Ye Guofu, founder, chairman and CEO of mingchuangyupin, holds 80.8% of the shares, Hillhouse capital and Tencent hold 5.4% of the shares respectively.

According to the Hurun global Unicorn list 2020 published by Hurun Research Institute, nine Unicorn enterprises in the new retail industry are on the list, and Xicha and mingchuang products rank the top two with an estimated value of 14 billion yuan.

People who have visited famous creative products all know that the shops of mingchuangyupin are usually opened in shopping centers or commercial streets, with bright and clean decoration, and the style is like UNIQLO + Muji. However, the goods sold are surprisingly cheap, including eyebrow pencil 10 yuan, lunch box 10 yuan and earphone 15 yuan. Although they are cheap, they still have some sense of design and reasonable quality.

According to the prospectus, in the financial year ending June 30, 2020, more than 95% of mingchuangyu's products have retail prices below 50 yuan in China. In April this year, ye Guofu, CEO of mingchuangyoupin, also said that the price of mingchuangyu products would be greatly reduced, the price of more than 95% of products would be controlled within 29 yuan, and the price of newly developed products would be reduced by 20% - 30%.

How to reduce the price and ensure the quality and profit? Yibang power took a deep look at the prospectus of famous innovative products and said that the core of the discovery is three words - supply chain. Efficient supply chain management makes the time from design, production, transportation and sales of famous and innovative products shorter, lower cost and rapid expansion.

The prospectus mentioned the supply chain 75 times, and Yibang power summarized and refined it. Combined with Ye Guofu's previous public speech, the secrets of the supply chain of mingchuang superior products were summarized as follows.

1. From the factory to the store, there is no middleman to earn the price difference

Traditional retail enterprises usually have multi-level distribution systems such as distributors, wholesalers and retailers. However, there are no such intermediate channels for famous innovative products, which directly place orders with factories. The products produced are transferred through 18 warehouses around the world and then sent to regional stores.

The requirements for selecting suppliers of famous and innovative products include: production quality, production capacity, industry reputation and status. At present, there are more than 600 suppliers of mingchuang superior products, some of which are international famous OEM suppliers, such as yingteli and cosmetz for cosmetics and skin care, chihuadun for fragrance and perfume, Jiacheng group for cutlery and tableware, and Jiangsu Sanxiao group for toothbrush.

Mingchuangyoupin will provide suppliers with production related suggestions on a regular basis, including product quality, production efficiency and cost control, and dispatch experts for on-site guidance.

However, mingchuang superior products do not depend on individual suppliers, and the contribution of a single supplier to inventory is no more than 10%.

The cooperation agreement between mingchuangyu products and suppliers will stipulate the delivery requirements and quality control standards. If the supplier fails to deliver the goods on time or the product quality is defective, the supplier shall pay liquidated damages to mingchuangyu products.

2. Centralized purchase and payment on time

Why are high quality suppliers willing to cooperate with the same name to create excellent products? Ye Guofu had previously shared his experience: top leaders, smashing with money, placing large orders and giving cash.

Ye Guofu will personally negotiate with suppliers to show their importance, and impress suppliers with large orders and timely payment.

There are more than 4000 stores of mingchuangyu products, and many "popular products" have been created. For example, 100 million eyebrow pens have been sold. This mass customization purchase improves the bargaining power of mingchuangyu products.

The biggest fear of the factory is that the account period is too long and the cash flow is at risk. Mingchuang high-quality products have given the suppliers an attractive accounting period of 15 days. We should know that the purchase accounting period of a small enterprise can reach two or three months, because a long account period can generate capital income. But mingchuangyoupin has abandoned this part of the benefits.

3. Whole process digital system of supply chain

How to effectively manage 600 suppliers and multiple links in the supply chain? There is a set of "supply chain management system" for mingchuangyoupin.

This system includes designers, product managers and suppliers, so that every link can be digitally managed to improve the efficiency of inventory management and shorten the order time.

In the product design stage, the product manager will send the preliminary product design to the supplier for comments; when the product is confirmed to be available for marketing, the system will automatically place an order with the supplier, and the supplier will produce according to the order; after the product is produced, the supplier will manage the logistics from the factory to the warehouse according to the required time and place; through the supply chain management system, the supplier can obtain the terminal information Real time sales data, dynamic optimization of production plan.

The supply chain management system has an automatic replenishment module, which can adjust the replenishment process of stores' best-selling goods inventory, and calculate the unsalable SKU between stores and make timely adjustments.

A quality control system will also be included in the quality control system for supplier inspection.

Famous and creative products, pinduoduo, Taobao Special Edition

Based on the above points, famous and innovative products can achieve more categories, lower prices and faster turnover.

At present, it covers 11 core products such as textiles and household electronics. In the fiscal year ending June 30, 2019, the inventory turnover rate of famous innovative products was 63 days. Affected by the epidemic situation in the first half of the year, the inventory turnover rate was 78 days in the fiscal year up to June 30, 2020.

Every seven days, the product team selects 100 new SKUs from 10000 product ideas, which is called "711 principle". In the last fiscal year, mingchuangyoupin launched an average of 600 new products per month.

"For a consumer brand, its sales volume in the short term depends on the flow; after it has started, it needs to find ways to improve its efficiency; the essence of improving efficiency is to see who can control or create a supply chain." Fengrui capital Li fengzeng said.

Because of its strong control over the supply chain, the cooperation mode between mingchuangyu products and stores is also different from that of other franchised brands. The store franchisee (retail partner) does not purchase goods, nor is it responsible for the operation of the store. It is only responsible for the rent, decoration and water and electricity expenses of personnel. It is more like an investor.

As of June 30, 2020, mingchuangyu has 2047 employees, including 613 employees in charge of product development and supply chain management, accounting for 29.9% of all employees.

In this sense, famous and innovative products actually borrow other people's stores to directly connect factories and consumers to realize their own supply chain capacity, which is similar to c2m mode.

In recent years, c2m has become a hot topic in recent years, which means that the company's demand for high-quality products is higher, that is to say, the production capacity of c2m has been improved to meet the demand of consumers.

In the "new brand plan" of pinduoduo in 2018, more than 900 enterprises participated in c2m customized production, involving more than 20 categories of clothing, digital, home appliances, etc;

In 2019, JD will launch c2m reverse customization five steps with digital appliances as the core;

In 2019, Suning launched c2m platform, first applied in the field of home appliances;

In March 2020, Alibaba launched an independent app - "Taobao special edition", and announced the "super factory plan" and "double hundred goals". In September, Taobao's special edition was connected with Alibaba 1688, integrating three digital platforms, namely processing customization, wholesale distribution and retail.

For famous and innovative products, the competition from pinduoduo and Taobao special price version will be more direct, not only for consumers, but also for suppliers.

It is not difficult to understand that the purpose of famous innovative products is to obtain more funds to establish higher barriers to competition. According to mingchuang Youpin's prospectus, the raised funds will be mainly used to expand global stores and retail networks, upgrade warehousing and logistics networks, and further enhance digital operation systems.