Liu Qiangdong: The Internet Must Reduce Costs And Improve Efficiency For Traditional Industries.

Today, China "

The summit was held in Beijing.

Group CEO Liu Qiangdong said in the speech of "Internet + retail" that the Internet must reduce costs and improve efficiency for traditional industries.

If we fail to do so, all Internet participation will end up in a vacuum. It is doomed to fail.

He pointed out that China

It has gone through four stages: the markets, the shopping malls, the chain stores and the e-commerce. The core reasons for the continuous replacement of each stage are related to cost and efficiency.

On the cost side, Liu Qiangdong said that when consumers get the product, they have to increase their prices through layers. Finally, they need to pay extra cost for 30%-50%, which is the necessary cost of the retail trade mode.

In terms of efficiency, Liu Qiangdong said that the most important indicator of measuring retail sales is the number of days in stock turnover.

Liu Qiangdong believes that only by greatly reducing the cost of retail and improving the efficiency of retail business can the brand manufacturers be reborn, so that brand manufacturers can have better profits and better cash flow to invest in R & D, innovation, and produce more and better products for consumers. Finally, the whole industrial chain can enter a virtuous circle.

The following is the full text of Liu Qiangdong's speech:

Ladies and gentlemen, good morning, since we have talked about "Internet + retail", I have always wanted to show you how the whole retail industry has evolved over the past thousand years, and what kind of main line to promote the development of the entire retail industry, with the first business model since the human society.

What is the first business model of human society since business? In fact, it is retail.

The first thing was to exchange things and things, and later to have shells as money, and later to gold, silver and paper money to gradually electronization.

Since the beginning of the human society, all retail formats can be roughly divided into four parts. The first is the market. In 80s, we lived in the countryside. Every week we went to the market every weekend. The market was set up on both sides of the street. This is basically the first C2C mode that focuses on Trade and trade, including the Zhongguancun computer city so far.

Of course, now gradually moving out, many trade and trade, the government to ease traffic pressure to move out, this is the first model.

The second mode is shopping malls. In the streets of every county in 90s, all of the daughters in the village should bring their own daughter-in-law to buy goods and buy watches in the city.

The big shopping malls are basically the second formats we retail, and they soon replaced the market in many big cities.

The third stage is the chain store type, such as WAL-MART, Carrefour, Yonghui, including Gome and Ningdu, which are the form of chain stores.

Why are the four models constantly replacing? According to our research, besides the continuous user experience, the most important reason is that every new format can replace the last one, which is related to cost and efficiency.

If we analyze, for example, Zhongguancun computer city, many C2C models, if the cost of the entire channel is calculated, it will probably require 30%-50% channel costs, not only the last small stalls, there are two batches, a group of them, and the national total distribution, provincial sales, city dealers, county-level distributors to wholesalers, four or five levels plus each layer must add a layer of profits.

Therefore, when consumers get the product, they have to increase their prices through layers, and at the end, they need to pay 30%-50% extra cost. This is the mode of retail trade. This format must have some cost, because it is a set of industrial chains, which requires a lot of stratified batch and two batches of cooperation.

Second, efficiency.

The most important factor in measuring retail sales is the number of days in stock turnover, that is, the number of days in stock turnover. This is also a very important aspect of logistics cost.

The average turnover of inventory in retail trade is 50 days and 100 days. That's why ten years ago, everyone went to buy a computer in Zhongguancun computer city. No matter HP or Lenovo, there was a production month behind it. Basically, it was two or three months ago.

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You go to Zhongguancun to buy, (computer) first to get digital China, Beijing agents, then to Hailong distributors, and then to Hailong store, each layer has a large number of chains, every time there are losses, there are costs and time.

So, it will take two or three months to get to the consumer.

After three months of production, two months later, the hard disk price dropped, the motherboard reduced, and finally, the profits of the brand manufacturers were very few. The products that consumers received were two or three months ago, and they were not the latest ones.

So the inventory turnover is about 50 days.

Second shopping malls, according to our accounting, we also need 25%-35%'s channel cost. We also need 50 days -70 days of turnover. Until now, if we analyze all the shopping malls retail formats, it will be about 50-70 days.

The inventory turnover days of wholesalers supplied to shopping malls are not included.

Why did chain stores quickly attack the entire retail industry? Basically, before the absence of an electricity supplier, in fact, the global chain stores have replaced the big shopping malls and the retail market as the mainstream of the retail industry. The core of the chain is that the first time the retail chain has reduced the rate to only 20% or even less than 20%, it is also the first time that retail chains have been able to control the inventory turnover days for about fifty or sixty days.

To today's electricity supplier, we analyze whether the electricity supplier has any value, whether the electricity supplier can replace the chain store on a large scale to become a fourth format, and become a mainstream of future retail. I think we still need to analyze the electricity supplier in addition to bringing the user experience improvement to the consumers, bringing convenience, can the cost of the whole industry drop significantly, can we effectively improve the efficiency of the whole industry.

You can read our earnings report over the past two or three years. The number of operations has answered this question. The cost rate of Jingdong's electricity providers has never exceeded 12%. You see in our earnings report that our rate of fees may be 14%, because there is "home", there are many other costs to be put together. We only have to look at the electricity supplier's expense rate by only about 12%, and for the first time, the cost of the whole channel is reduced to less than 12%.

Our inventory turnover days are only more than 30 days. We managed 2 million of the products in inventory management. There are only 50 thousand kinds of traditional retail inventory management. There are no more than 150 thousand kinds of products. The total number of WAL-MART's products is only 150 thousand. However, Jingdong manages over 2 million kinds of inventory products, and 200 storehouses all over the country. We can still control the turnover days within 40 days, 30 days.

Only by greatly reducing the cost of retail and raising the efficiency of retail can we feed back the brand manufacturers, let the brand manufacturers have better profits and better cash flow into R & D, innovation, and produce more and better products for consumers. Finally, the whole industry chain can enter a virtuous circle.

Therefore, regardless of "Internet + retail" or "Internet + travel", "Internet + dining", all walks of life have common characteristics. If the Internet wings can fly, the Internet must reduce costs and enhance efficiency for traditional industries.

If we fail to do so, all Internet participation will end up in a vacuum. It is doomed to fail.

Thank you very much. Thank you.