There are many people who have transformed into e-commerce in Laogao E-commerce Club, and Mr. Sun from Xuzhou is one of them. It has been opened in a traditional industry for more than ten years and was forced to transform into e-commerce in 2018. I stepped on many pitfalls along the way, and finally opened up the underlying logic and became much more transparent. So I decided to set up an office point in Shanghai in 2022 to find the next plan for the long-term goal.
Set up an office in Shanghai
When talking about whether the overall cost of working in Shanghai will also increase, Mr. Sun said that high costs are certain, and there is no doubt about this. But he still insists on the correctness of decision-making. Although the labor costs in Shanghai are higher than those in Xuzhou in all aspects, it is definitely much better than Xuzhou from the perspective of product research and development and talent reserves.
"Xuzhou recruits a designer or e-commerce operation position. After recruiting for half a year, no one can get in. Even if someone comes, the quality is not very good."
Mr. Sun explained that this is not a matter of salary. No matter how much you give, it is difficult to get in. This is the difference between cities.
The talent density in Shanghai is much better than that in Xuzhou, which is the only reason why Mr. Sun is determined. When I started my business, I chose Xuzhou because Xuzhou is very close to my hometown in Anhui. After working in Xuzhou for many years, I opened my own factory in 2006, which was the production of traditional manufacturing.
The manufacturing industry has been in operation for many years, mainly to supply some e-commerce sellers, which is an important part of the supply chain. Although there was twelve years of accumulation in the manufacturing industry, because of the limited understanding at that time, it was only in the local customer base in Xuzhou. At that time, the customer scope and customer radius were very narrow, and all the business was carried out in this small city.
Starting from 2018, Mr. Sun felt that the e-commerce trend was quite good, so he began to try it and started the road of e-commerce. After entering e-commerce, I felt that the overall market structure was completely different. I started doing it in the second half of 2018 and have basically been taking detours. When e-commerce really started, it was the end of 2019.
The detours open up the underlying logic
The transformation of traditional manufacturing industry into e-commerce will definitely take detours, because the thinking of traditional manufacturing bosses is completely different from the operational thinking of e-commerce. It has very high requirements for the level of awareness of corporate traders, which is a very sad hurdle.
Mr. Sun gave an example. They recruited an operator and tried to charge a few hundred yuan to drive the express train. The next day, they continued to charge it, so they asked if the operation had sold goods? When he heard that there was no sales, Mr. Sun said he would not open it. He said this is the division between operations, because the distance between operations is like a mountain, and you cannot understand what operations tell you for a while.
Once you don’t understand, two situations are likely to occur. Either after the good operation comes in, it doesn’t match the boss’s own perception and cannot do the job. Either you are recruiting bad operations, and you can't tell what he says because you don't understand, so you can't tell whether it's good or bad. During those two years, Mr. Sun's company staff came in and left, and then left again and again. The labor costs were wasted a lot.
"I think the quality of e-commerce is still the boss's understanding of the underlying logic of e-commerce, which is very important."
Mr. Sun summarized the detours in the past two years. Our operation and art workers recruited a group of people, and the entire team was built. After half a year of work, people left. They couldn't do it anymore and kept repeating.
Later, Mr. Sun realized that in the end it was not the team that was not good, but the boss, the trader's cognitive problem, and the boss's understanding of the underlying logic of e-commerce. As long as the underlying logic is readily understood, the e-commerce business will develop very quickly.
How did cognition be opened?
Mr. Sun said that he mainly learned how the traders’ underlying logic of e-commerce was opened up. He participated in some training, which was a three-day and two-night training. He opened up his cognition at once. With his understanding of the basic operations of e-commerce, he understood everything. Only after the boss understood it , the company's employees could cooperate, otherwise he would not know where to go.
Mr. Sun said that when the boss understands the underlying logic of business, he will know clearly what kind of place to go and how to go. After the clarity is complete, the boss can convey it to the team, and the team is clear. In this way, if the goals of the upper and lower levels are consistent and the ruthlessness is strong, the profit will definitely not be too bad.
Every time a payment is made, Mr. Sun adopts this strategy. A team concentrates firepower, and lays out the product matrix and store matrix. All teams use matrix horse racing methods to "attack" one goal. Mr. Sun has basically never failed in the past two years of attempts.
That's why he wanted to come to Shanghai to work, and Mr. Sun wanted the team to go to fission.
"Select a good point, then do a good job of product strength and polish it. Several teams go together and run together. After running, there will definitely be bad things, but there will definitely be good things."
He believes that if the direction is right, all teams may be able to come out.
Mr. Sun has been following this strategy in the past two years. He invested 4 teams in the Mid-Autumn Festival in 2021, and only 1 team came out, which is still quite dangerous. Afterwards, Mr. Sun analyzed the reason, mainly because the personnel could not come in. Due to the restrictions of local talents, there was no selectiveness in recruiting operations, and both good and bad had to be used, because no one came in, which was also a headache for him.
Only after being priced upstream has been reduced, will it transform into e-commerce
Why did Mr. Sun change from traditional manufacturing to e-commerce? Mr. Sun said that the situation was quite awkward at that time. At that time, the trend of traditional manufacturing continued to go down. There was only one core of corporate competition, which was price war. Both online and offline are in price wars. In the past, Mr. Sun has been providing supply chains for e-commerce , helping many e-commerce sellers to achieve the top spot in the industry.
After cultivating an e-commerce customer, they will in turn ask to lower their prices. Price reduction is a contradiction between the supply chain and the factory, and Mr. Sun is also very clear about this. Everyone knows that products and supply chains account for a very heavy proportion. In the early stage, when sellers did not need to pay and the sellers did not pay, the factory kept supplying the goods and supporting them. The sellers put the money from the goods into the direct train and started to promote this product. In the end, the factory supported the production of this plate. The seller has the ability to operate, but the factory has the ability to supply.
After years of cooperation, many sellers have become the top player and began to demand Mr. Sun’s price. The price will go down every year, and finally forced the factory to lose its way. Mr. Sun said that because the price has dropped so much, he basically doesn’t want to do it until the end of every year. At that time, he thought about whether he could do e-commerce as well.
In the past two years, Mr. Sun’s e-commerce has developed rapidly and made good profits. His products have always been original and have put a lot of thoughts on the product development port. When facing the market, there are two possibilities: either the model cannot be matched, or the hidden demand of the market is grasped and the first wave of dividends is obtained.
In the first year of transforming into e-commerce, Mr. Sun developed a packaging for New Year's goods, which achieved the top 1 in the national market in those two years. The items used for Spring Festival Gala and major galas are all bought in this way. Sometimes when I go on a business trip, I feel very accomplished when I see my own packaging at the station.
Mr. Sun said that at that time there was a 50% gross profit. As long as the market rose, there were more people watching. When a group of people came in, it was difficult for them to get a 20% gross profit. Later, the price was lowered every year, and the profits were reduced to normal levels.
"This is in line with the market rules. It is already very good for a product to have a bonus period of two or three years."
Pursuing the non-standardization of standard products
Recalling the factory experience over the past ten years, Mr. Sun is still very proud. He said that many sellers have completed their families and started their own businesses through supply chains, and there are also some TOP-level big sellers who are doing seasonal products and don’t make much money in normal times. Every year, they can earn more than 1 million by working with them during the holidays.
After doing e-commerce, Mr. Sun has been continuously polishing the product port, only looking at the size of the market, looking for a product differentiation from the size of the market, so that the standard products are non-standardized. This is the action that General Manager Sun has been doing. He believes that the differentiation of standard products is suitable for all categories and products.
Now Mr. Sun’s e-commerce business is not just about packaging, but also about food and gifts. I feel it’s pretty good in the past two years. Currently, the team has a stable staff of about 60, and more than 100 people will be there every year during festivals, because some temporary personnel are needed to come in.
The scale is average, but the profit is done well. The lowest line of product profit cannot be lower than 50% gross profit, otherwise it will not be done, and the highest line profit will reach 70%-80%. Mr. Sun’s requirement for the product R&D team is that 50% gross profit is the bottom line . For example, the cost of a thing is 10 yuan, and I sell it for 20 yuan. This is the bottom line. Products below this bottom line will not be developed.
Mr. Sun pursues a premium of 1-3 times or 1-5 times as much as possible, but this also depends on the R&D team's product selection and product development capabilities. In the past two years, Mr. Sun has basically not moved towards the TOP, but has spread the whole thing . Many stores have been put together to make each store less prominent, but the overall turnover is enough to avoid some vicious competition.
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