Decision-making service costs: Suning's transformation urgently needs to ask multiple parties

In the Internet era, traditional enterprises must actively respond to transformation in order to reach the next peak. However, transformation is often easier said than done. Looking at domestic and foreign companies, only a handful of them can save themselves through transformation, and if they are not careful, they often end up losing everything.

1. The importance of leaders’ thinking

Internationally, the transformation battle between Apple and Sony, two hardware manufacturers, has become a textbook example of both positive and negative. Before Apple became popular, it had been working hard on its PC business, but it had been slow to make a name for itself. Since Apple CEO Steve Jobs decided to focus on smartphones, Apple has begun to move towards a new era. The birth of the iPhone not only had a strong impact on the mobile phone industry at the time, but also announced the arrival of the Apple era.

However, the transformation caused Sony to suffer a Waterloo with an overall decline in performance. Faced with the impact of the market and up-and-coming companies, Sony lost its footing in the transformation. The multi-dimensional development of game consoles, televisions, mobile phones, etc. did not allow Sony to regain the glory of the Walkman era, and it has fallen into the embarrassing situation of being "neither up nor down" at this stage.

In China, there is also a company that is in the process of transformation and has become the focus of public opinion. At the end of July, Suning.com released its 2014 first half performance report. In the first half of the year, Suning achieved a total operating income of 51.16 billion yuan, a year-on-year decrease of 7.9%; among which the net profit attributable to shareholders of the listed company was a loss of 749 million yuan, compared with a net loss of 734 million yuan in the same period last year, a year-on-year increase. Online revenue was 8.28 billion yuan, a year-on-year decrease of 22%.

In the past six months, although Suning has actively made many moves for transformation, the unsatisfactory financial report figures have announced the failure of Suning's transformation. In a sense, Suning's transformation tragedy represents the collective dilemma faced by domestic retail enterprises that started out as home appliance chains. If Suning wants to safely survive the transformation period, it still needs to learn from its competitors.

2. Assistance to team execution capabilities  

During the transformation period, Suning has made frequent moves. Last year, Suning acquired the video website PPTV and Redbaby.com. In January, Suning obtained a virtual operation license. In May, Suning launched a film-sticking business to attract traffic. In June, Suning established cooperation with Barcelona, ​​etc. The frequent hype has attracted a lot of attention for Suning. However, as a retail giant, Suning has lost focus on its main business, and both its physical stores and online businesses have shown a weak trend.

As JD.com CEO Richard Liu said in a recent speech, "In the past, when many people failed, they said that changes in policies, changes in the market, changes in consumer demand, technological development, etc. led to their failure. That's all nonsense. In the end, it's all because of human failure."

From closing offline chain stores that provided 90% of its profits in 2004 and going all out to e-commerce, to deciding to build its own logistics in 2007, Liu Qiangdong has been facing various doubts. Many people thought JD.com was reckless and that logistics would eventually bring JD.com down. Despite the pressure from all sides, JD.com still focused on logistics to develop its online business, and its high-quality logistics services have accumulated a lot of good reputation for JD.com's future development.

Gome, which is in the process of transformation like Suning, also chose to focus on one point and started from changing the operation mode of traditional stores. The first is to change the way of displaying samples of goods, and divide the brands of each category into three categories according to the proportion of market demand: directional brands, demand brands, and selective brands, to ensure the display rate and meet consumers' demand for the richness of product experience.

In terms of price, Gome stores proactively provide consumers with online price comparison services to dispel the misconception that "online is cheaper than offline". In addition, store employees strengthen explanation services to address the problem that some consumers are not familiar with smart home appliances and 3C products. After the focus, the profitability of Gome's traditional stores has improved. In the Internet era, Suning's blind following and chaotic rhythm are issues that Suning's leaders urgently need to reflect on at this stage.

The biggest problem facing Suning at present is that consumers generally respond to poor service experience, and for most consumers, they will only give the merchant one chance. This situation can often be seen in Suning stores offline: customers wander around, waiters don’t pay attention, the home appliances on display are of a single type and highly homogenized, and the entire store gives people a lifeless feeling.

Online, Suning claims to have "the largest logistics infrastructure among Chinese companies", but there is a world of difference between scale and service. It is often difficult for consumers to give a better evaluation of Suning's logistics services.

In the past decade, JD.com has been the most controversial company among Internet companies, but its team building is still worth learning from for its competitors. Liu Qiangdong said, "I think that no matter what country, social environment, legal and cultural environment, the failure of a company is only because of its poor team. There is no other factor. All other factors are excuses.

"In recent years, the JD team has used its efficient execution to make users feel strongly dependent on its ultimate logistics services, greatly improving the standards of e-commerce logistics in the minds of consumers. The connection between hardware construction and consumers requires a team. It is difficult to win the hearts of consumers by simply relying on the "largest" scale.

3. Promotion of core competitiveness

It is well known in the e-commerce industry that Dangdang's core competitiveness is books, JD's core competitiveness is 3C home appliances and logistics, and Tmall's core competitiveness is clothing. So, what is Suning's core competitiveness? Since calling for transformation, Suning has been engaged in Internet finance, virtual operators, and smart hardware. Suning is doing everything, but there is no focus on profitability.

The only thing Suning can do to intimidate its competitors is home appliances and logistics, but its cost control and efficiency are completely inferior to JD.com. Compared with the grid-like logistics of ordinary express delivery companies, JD.com's logistics is hub-like, that is, from JD.com's warehouse to consumers.

Moreover, due to the integration of warehousing and distribution, JD.com can use big data to help suppliers allocate goods to appropriate warehouses in advance, so that goods only need to flow twice from the factory gate to the hands of consumers, namely from the factory to the JD.com warehouse, and then from the JD.com warehouse to the hands of consumers, thereby greatly reducing costs.

It is understood that in 2013, JD.com's inventory turnover days were 32 days, and the average account period was only 39 days. Liu Qiangdong said that 39 days means that cash can be turned over more than ten times a year, and the efficiency of the entire industry will be improved. JD.com's overall operating expense rate is currently 10.3%. Excluding daily necessities and other products, it may reach 15-20%. If the cost of technology and other costs is excluded, the comprehensive operating cost rate of all electronic products is only about 8%, which is about 50% lower than that of Suning and Gome, two major home appliance chain stores.

At this stage, JD.com is working hard to expand its channels, which is actually Suning's biggest advantage. In the future, Suning needs to work hard to connect online and offline channels at a deeper level, and to make great efforts in areas where other e-commerce companies do not have advantages, so as to create core competitiveness. The day of the "818 Hundred Days Battle" is getting closer and closer, and we need to wait and see how Suning will fight this battle.

Looking at the development trajectory of domestic e-commerce, it shows a trend of the strong getting stronger. When facing the impact of the Internet on the traditional market, blindly hyping concepts and losing focus on layout will eventually lead to the company's inability to keep up with the execution ability and cause capital waste. The various setbacks encountered by Suning during the transformation period are also what other e-commerce retail companies need to prevent.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.