Thinking: On The Pinduoduo Car Sales 50 Million, A Loss Of 400000

Half a year ago, Xu Yao, the owner of a towel factory, and his friends set up their own brand "Zhen Jian Liang pin" with the support of pinduoduo. In this short half year, sales are expected to exceed 50 million yuan.

But Xu Yao was not happy. Because the new brand is still in the loss, about 400000 yuan in half a year. Although he called it an "acceptable loss," the way to make a profit is unclear.

What's even more frustrating is that for the past two months, he has been trying to recommend "selected simple and good products" by the offline supermarket. However, the sales miracle mentioned above can not open the door of the purchasing department of large supermarkets. Most of the supermarkets do not recognize the "pinduoduo" brand, and the other side shows distrust. They feel that the goods with the price of 9.9 yuan from pinduoduo are not good.

This is a case study of pinduoduo's "new brand plan" and c2m mode advocated by pinduoduo in 2018. In c2m mode, the C-terminal obtains the goods with a price performance ratio of ￥ and the platform obtains the traffic. However, at the m-end, there are hardships and joys. On the one hand, the performance is growing rapidly. On the other hand, these factory directors who are "good at production but don't understand the brand" have also stepped into the deep-water area that they have never set foot in. They need to face various problems, such as loss, difficulty in brand exit, etc.

The following is Xu Yao's autobiography. He will reveal the real living state of m in c2m mode.

01、 Got on the car of pinduoduo

My hometown is Gaoyang County, Baoding City, Hebei Province, where one third of China's towels are produced, known as the "towel city". Almost every household in the local area is engaged in towel related industries. This is a red sea market with low added value and low technical threshold and fierce competition. Under the monopoly of several local companies, small and medium-sized factories can only do OEM for brands.

Our local leader is Sanli group. After I retired as a soldier in 2008, I worked there for a while. In 2009, after I got married, I left Sanli group to do the business of raw material veil of towel for a period of time, and supplied the veil to the towel factory in Gaoyang County.

But the good time is not long. About 2011, the towel factory I supplied was unsalable, unable to pay back on time, and the fund chain of the veil factory was broken. Later, on the advice of my friends, I simply made my own towel processing factory.

I started to set up a factory in 2013, mainly making towels. The profit is between 16% and 20%. At first, I rented a front desk in Gaoyang County to do wholesale. What I did at that time was mainly offline. If there was a quantity, I would increase the price by 10 cents and then I would take the goods. The factory does not ask how high the price is, no loss, a little small profit, as long as it turns fast.

Later, I opened a shop on Taobao. At that time, Taobao was still able to carry goods, take a few pictures with mobile phones and upload them to the store, and the flow and customers will come.

Two or three years ago, Taobao was not easy to do. The main reason is that the traffic cost is too high. A day more than 6000 yuan to buy "through train" traffic, there is no profit space. In addition, Taobao is too popular. Many of our local wholesalers are doing Taobao stores, which leads to fierce competition and smaller and smaller profit margins.

After the establishment of the tmall store, Ali said it was complementary to Taobao, but in our opinion, competition is greater than complementarity. We small and medium-sized businesses can't find a way to upgrade. Tmall shop is very valuable. Some time ago, I had a friend who sold it for 300000 yuan. He was registered when the tmall store came out, or a full category store.

I want to upgrade to tmall, but the tmall store is too expensive. If you want to upgrade Taobao store to tmall store, you need to pay a deposit of 60000 yuan and an annual service fee of 60000 yuan. The sales volume of the store is 180000 yuan per year, half of the deposit is refunded 30000 yuan, 600000 yuan is returned, 600000 yuan is returned completely, in addition, 5 points of commission are deducted.

According to my friends, you have to have someone to open a tmall shop. You can only be qualified to open a tmall store by giving gifts. Later, according to news reports, in early December this year, Ali investigated and dealt with nearly 20 Ali sophomores who were involved in anti-corruption issues, involving mobile phones, clothing, etc., and one of the men's clothing merchants was bribed more than 10 million yuan. Now it seems that my friend may be right.

Taobao's sophomores come to our side and don't pay much attention to our small and medium-sized factories. They only pay attention to those famous brands, such as Sanli group.

My factory has 50 or 60 employees at most. In 2018, I entered six new devices, each worth more than 300000 yuan. After entering the machine, one person can look after two sets of equipment. I cut half of the labor force, and their monthly salary reaches 7000 yuan. The monthly expenditure on equipment and workers is still under great pressure. Online Taobao can't walk large goods, offline profit is thin, and gradually the operation of the whole factory is not very good.

Once, I saw that the express station beside my front door was carrying goods all day. When I asked, I knew that it was the goods of pinduoduo. At that time, I began to decide to go pinduoduo.

We are the source factory, who can fight price war with us in pinduoduo? The most common towel costs only two or three yuan, plus logistics costs, 9.9 yuan or even a cut price, we can still maintain a competitive advantage.

After a few months, I got the towel category of pinduoduo platform. Later, pinduoduo's sophomores came to our side and invited us to have a meal. They didn't accept gifts. It's said that pinduoduo is strictly managed. The sophomore doesn't accept gifts and dare not accept kickbacks.

I've been Taobao for several years, and I haven't been to Hangzhou once. But since I became a pinduoduo store, I have to go to Shanghai three or four times a year. It's the headquarters of pinduoduo. The people from the marketing department and the commerce department give us a meeting hall for all the agents of the factory, and teach us how to get traffic and how to run the store.

In June 2020, people from the business department of pinduoduo came to me and suggested that I and two home textile factories in Shijiazhuang should work together to rebuild a brand. Pinduoduo calls this the "new brand plan.". They suggested that we should buy a sub brand of a big brand, "Zhen Jian Liang pin". In their opinion, the brand directly purchased has a basic reputation, so as to open up the market.

In the past, we mainly engaged in OEM work for brands such as jieliya and other brands, and also sent goods to some large wholesalers. The goods produced by the wholesalers were not "brand-name", leaving stitches on the edge and sending them to the wholesalers, who sewed their own trademarks. This part of the output accounts for 80% of our output.

Now, the e-commerce platform to find me, even to give us the opportunity to do brand, is still very excited, after all, have their own brand, you can get a premium. The most common square towel on tmall can be sold for more than 20 yuan in the tmall store of Sanli group, with almost half of the profit. This is the brand premium.

I felt at that time that it would be a bonus opportunity for pinduoduo to become a new brand.

02、 Platform support

With the new brand, pinduoduo will give support in all aspects.

Pinduoduo prefers to support brands. For example, during the double 11 period, if there are 10 resource bits on pinduoduo app, eight will be given to big brands, and only two can be given white cards.

In order to support us, pinduoduo specially held a brand press conference, with more than 20 media visiting, which was very powerful. In addition to marketing support, pinduoduo also uses c2m mode to participate in our production. The platform provides us with data support, such as keyword hot search index, soaring index, etc.

At first, I thought, it was a great model to make sure what we were not sure about before. In this way of order production, at least the goods produced are ahead of the actual demand.

Pinduoduo's communication with us is very simple, which is to make a phone call. For example, on the platform, which keyword search volume soared, which new categories have signs, pinduoduo's sophomores call us to communicate. In other words, our production, pinduoduo is deeply involved.

After getting the new brand, it is to expand the production capacity. I will directly transfer part of the OEM production capacity to "select simple and good products". Use the flow policy supported by the platform to crack down on funds.

One of my partners, Tao Zilong, got his name because he once "burned" (invested) 80000 yuan a day by driving a through train (advertising) in pinduoduo. His acting operating company had more than a dozen stores selling more than 10 million yuan in pinduoduo last year. We are not short of people who understand traffic games and operation skills.

As a result, during the double 11 period, we won the sales champion of pinduoduo home textile category; from the beginning of its launch in June, the monthly sales exceeded ten million yuan.

I know that relying solely on our own capacity can not achieve scale advantage in a short period of time. Such investment costs are too high and assets are too heavy. Therefore, the platform and several of us came up with the idea of combining other towel shops, brand licensing and joint production. Industrial belt vertical Union, such as Gaoyang towel and Hebei Shijiazhuang Shenze cloth art integration.

Our current policy is that other stores apply for the use of our trademark, sign a one-year contract, pay a deposit of 10000 yuan, do not charge other fees, but accept our quality standards and supervision. At present, we have authorized more than 40 towel stores.

During 618, pinduo reported to us that the search index of "coral velvet household products" soared. In the context of the opening of the school, I judged that the data was available, and I decided to look for a shop dedicated to "coral velvet". Ask friends to find the shop, identify the qualification, complete the signing, and paste the trademark of "Zhen Jian Liang pin".

The advantage of this franchise store model is that in c2m mode, when the platform feedback data to us, we can quickly build the supply chain instead of reforming our own production line. This is different from the traditional cognition of c2m. This mode is light assets and low cost of trial and error.

Our authorization contract is signed once a year. If there are many complaints from consumers, we will let the merchants solve it by themselves. If the number of times is too many, we will directly cancel the authorization. We and the official platform will also conduct random inspection from time to time, and buy goods randomly in the name of ordinary consumers. If it is fake, one penalty will be three or ten, which is the real penalty.

Pinduoduo has a special sampling department. If they get feedback from consumers that fake goods are rampant, they will impose a fine on the shop or even close the store. All the fines are returned to consumers in the form of "coupons". Therefore, you can see that pinduoduo has many coupons.

Stores using the "Zhen Jian Liang pin" brand have a stable monthly volume of more than 20000 orders. However, if these factories and stores only do offline business, the order volume is not stable. Before, due to the impact of the epidemic, many small and medium-sized factories were destroyed. Now that they have money to earn, they won't lift a stone and hit themselves in the foot.

03、 The reality of loss

Everything looks good, as if a new brand and business empire are about to rise. But in fact, it is not so beautiful. Due to the rapid expansion or other reasons, our new brand is still in the embarrassing situation of "loss". According to my estimation, the loss is about 400000 yuan in these four months.

We have summed up several reasons, which can be summarized into several points.

First, we adopt a low price strategy. For example, 618, double 11, use low price strategy to make our reputation. Other brands of 80 grams of towels may sell more than 20 yuan, so we can sell 100 grams at the same price. As long as we don't lose money, we can even sell them at cost.

Second, the brand is supported by pinduoduo. Therefore, at present, our sales channel is limited to "Pinyin platform", and its popularity is also limited in the platform. Although pinduoduo official did not make it clear that this product is monopolized by pinduoduo, we all understand the inner meaning.

Third, the cost of agency operation and training services is too high. Our acting operation company is responsible for the operation training of authorized stores free of charge, and this part of labor cost accounts for most of the loss. Some shops don't know how to operate, so we have to invest in the cost and train them.

My partners and I are not in a hurry to make profits. We expect to achieve no loss or make profits next year. We have not made clear the profit model. But we just want to make the brand bigger and let more people know about it.

A big brother of pinduoduo, who is also my hometown, told me that pinduoduo's traffic is very large, but the conversion rate is very low. The number of users is not much different from that of Taobao, but the revenue is less than 1 / 10 of that of Taobao. He showed me the revenue of pinduoduo and Alibaba. The revenue of pinduoduo in the third quarter was 14.21 billion yuan, and that of Alibaba in the second quarter was 155.059 billion yuan. This is a big difference.

However, there is no doubt that we should be able to run through this path now, but it will take time. For example, three squirrels are typical "Taoxi brand". I have observed the model of this one, which is based on the platform and traffic. At the beginning, they did not have their own factory. After the brand got up, now they shop online, and the development is very fierce.

04、 The fate of OEM

In fact, we have more challenges to face. In addition to internal challenges, there are also external challenges in the transformation from OEM to brand manufacturer.

Getting tickets for pinduoduo does not mean that the door to the world has been fully opened. Traffic and low price strategies don't always work.

In the past two months, I have been recommending "Zhen Jian Liang pin" by the online supermarket. I go to Zhejiang, Jiangsu and other places three or four times a month, knocking on the doors of supermarkets door to door and asking if they need supplies. But our beautiful sales performance can't open the door of Shangchao purchasing department. The other party showed distrust, and felt that the goods with 9.9 yuan were not good goods.

Low prices are not always panacea. Offline supermarkets prefer famous brands such as Southern life and jieliya, although the public price of the latter in supermarkets is several times higher than ours under the condition of the same quality.

At the 315 party in 2020, Gaoyang towel is named. It was pointed out at the party that some manufacturers in Gaoyang made towels with leftovers, recycled cotton and other raw materials. After broadcasting in the evening, it quickly caused a shock in the industry. In addition to brand manufacturers, for part of the OEM, it is no different from the job of eating.

This incident was revealed by a large towel brand. They even sent short video roll call after the event to teach us how to make towels. I had dinner with some friends from the industry to talk about it. As we all know, the problem does exist, but no one is more innocent than others. We all know why this matter will be exposed by the media, but we do not speak.

How can the vested interests of this industry not attack you if you want to get ahead and grow, or even want to overturn and reshuffle? It's just that our influence is limited to pinduoduo system. It's not out of the circle. It's not worth their efforts. But this battle will have to be fought sooner or later.

I envy Yiwu, Hangzhou and other places. As far as I know, the logistics cost in Yiwu has been reduced to one or two yuan, and it is more expensive in the north. In the north, express costs account for a large proportion. This also means that the white brand towels I produced will be delivered to Yiwu, and they will still have profit margin after being sold.

But in Gaoyang, towel enterprises are fighting with each other, competing for users and fighting price wars, which makes the profit space lower and lower. I'm not afraid of price war. I'm afraid that the other party will fight me with inferior products. There have been many disputes like this in the past, which is one of the reasons why I want to be a brand.

I want to set up an E-Commerce Association for towel industry with other enterprises. I also talked with people from pinduoduo in North China. The other side also said that it was ok, but there were also problems. This association must introduce some local leaders to take important positions. I told the pinduoduo people that the association must be dominated by businesses, otherwise it would rather not be established. If the layman leads the expert, it will certainly not do well.