New Online Business Conference - Lei Jun: Make the retail industry e-commerce efficiency

　　Lei Jun: Hello everyone, I am just like everyone else. I am very excited to attend the online business conference. Thank you Alibaba for giving me such an opportunity.

　　Xiaomi is also a very, very young company, and 7 years have passed in a blink of an eye. Looking back on the seven years of entrepreneurship history, there are actually some small achievements:

　　The first point is that as a startup company, Xiaomi has started its business with about ten people and seven or eight guns. Entering an extremely competitive market. Among them are Apple, Samsung, Huawei, and Lenovo, and there are many experts. A small startup company actually showed such a picture. It took only two and a half years to become the number one in China and the third in the world. Actually, when I think about it today, I feel a little incredible. It was so incredible that it created the second miracle: in the five years since this small company was founded, it achieved annual revenue of more than 10 billion US dollars. This is a miracle in the history of human business! So what is behind this miracle? To say something more cliché is innovation! What has Xiaomi innovated? Of course, I am very grateful to this era, and many people have recognized Xiaomi's innovation. This is the top 50 of the world's innovation 50 released by BCG at the beginning of this year. Xiaomi is very honored to be selected. At the same time, another Chinese company was selected. This is the top 50 of the world's innovation 50 announced by FsB. 6 Chinese companies were selected, and Xiaomi is also among them.

　　So what is Xiaomi’s innovation? As a product company, Xiaomi’s first innovation is innovation in core technologies. What has it innovated? Let me give you a few simple words: The first Xiaomi MIX, where is the Xiaomi MIX phone? It is the first full-screen phone released worldwide. Its full screen has reached 91.3%, which is such a full screen. I believe everyone has read a lot of news today, and other companies are making full screen mobile phones. Xiaomi, a young company, has led the trend of global technological development. What's behind this trend? It was our continuous investment in core technologies a few years ago. When we released MIX technology, Xiaomi has 102 invention patents. I give this example because I heard that Apple also wants to launch full-screen mobile phones. Here, a Chinese company as young as Xiaomi has led the trend of world development in this matter.

　　Let’s talk about the most core mobile phone chips in the mobile phone industry. I am also honored to tell you that after three years of hard work, Xiaomi released the The Paper S1 in February this year. This is the fourth mobile phone company with high-end chip R&D and manufacturing capabilities after Apple, Samsung and Huawei. Actually, this is really not easy. After the release of the first generation of chips, I really didn't expect to receive so many users' support. What are their evaluations? It is said that this S1 chip is really good to use. Actually, I was quite excited at that moment.

　　Let me summarize: I printed a table on the screen. Last year, Xiaomi applied for 7,071 patents worldwide and obtained 2,895 patents, half of which came from the international market. This number should strongly illustrate Xiaomi's innovation. Of course, today is an online business conference. It is not enough to just have products and technology. I think another important reason why Xiaomi has achieved achievements in the past seven years is the innovation of its business model. So what is Xiaomi’s business model? I drew a simple picture because many people don’t think they understand Xiaomi very much. So I was wondering, today I will communicate with you, how can I communicate our business model? I think our business model is very different from the mobile phone companies that everyone understands.

　　First of all, we are actually a triathlon company. Since its inception, we have been talking about triathlons. We do hardware products, mobile phones, TVs, sweeping robots, and many interesting hardware products. At the same time, we also do the Internet, and there is another very, very important link, which is that we do e-commerce and new retail, and we are the same as everyone else. I will talk about why this business model is like this later? Like everyone else, we opened a flagship store on Tmall five years ago, and tomorrow will be the fifth anniversary of our Tmall flagship store. Mr. Zhang, tomorrow is the fifth anniversary! In fact, it is the triathlon business model that has led to Xiaomi's success. Let me talk about what is the idea of ​​Xiaomi’s business model? It is to use the idea of ​​Internet+ to make mobile phones and make touching and affordable products. Maybe you think what does the Internet have to do with making mobile phones? I think the Internet is a completely new idea and a completely new methodology. So what are my two most important understandings of the spirit of the Internet? It is the ultimate user experience and efficient operation. These are the two most core points of Internet+. In fact, the difference between doing the Internet and traditional business is the understanding of user experience, which is how you can make the user experience very well, form a positive reputation, and spread it on a large scale. So how does the ultimate user experience work? In the Internet era, the most important thing is that the Internet has brought us a very good tool, allowing us to listen to users’ voices, respond quickly, allow users to participate, and improve users’ opinions quickly. This is the source of customer experience.

　　To give a small example, in the first few years of our Xiaomi, we received 150 million opinions on the Xiaomi forum. In fact, how do you summarize these opinions after collecting them? How to organize it? How to use it effectively is actually a very difficult problem. When I introduced the Xiaomi model on many occasions, I gave a small example. I said that the Xiaomi model is actually the mass line. It is how to mobilize everyone. The Internet is a very advanced tool. How to mobilize everyone, then how to collect and organize everyone's opinions and come from the masses to the masses is the real charm of the Internet. In addition to collecting a large amount of opinions, we also mobilized netizens to participate in the construction of Xiaomi. In the early days of our Mi UI, all the versions in languages ​​in more than 20 countries were voluntarily helped Xiaomi. So we, a very small person, have strong competitiveness as soon as we come to the fore, because we have united millions of netizens to work together.

　　The second point I will introduce to you: efficient operation. Thanks to Alibaba for promoting the concept of e-commerce and improving the entire society's understanding of efficiency. I think the efficiency of e-commerce is unquestionable in the entire traditional channel. Of course, the core of improving efficiency is to improve efficiency throughout the whole process. This efficiency of e-commerce accounts for at least half of the efficiency of the entire process operation. Let me give you a small example:

　　Xiaomi bracelet. With the upgrading of consumption and the progress of society, more and more people like sports. Three years ago, we made a bracelet. This bracelet is designed to meet market demand and we have several technical breakthrough points:

　　1. At that time, if we had a foreign bracelet, we could only use it for 5 days and not waterproof. I told them if we could make one that could be used for 60 days, or if we could make one that could be waterproof, even if we took a shower, we could wash it with a bracelet. In this way, your use time will be greatly increased, and the user experience will be very good. So the first thing we think about is how to make this product well.

　　2. Using the e-commerce platform, we sold such a bracelet for 79 yuan. At that time, foreign brands sold for 1,400 yuan. These two tricks were used to improve efficiency and make the products carefully, combining the two.

　　In the first quarter of this year, Xiaomi bracelets have ranked first in the world. In fact, Xiaomi’s core is to make both products, e-commerce and the Internet. Many people may say that Xiaomi does this with such a complex business model? Think about it, there are so many large companies, and the competition is very fierce. As a very small startup company, Xiaomi wants to break through. When we started our business 7 years ago, we said that we should use the complexity of our business model to break through. A business model that is too simple can easily be crushed by giants. How can you design a business model that is complex enough? Use diligence to form new barriers and moats. So, many people don’t understand what company Xiaomi is? First of all, Xiaomi is a mobile phone company; secondly, Xiaomi is a mobile Internet company, because the mobile phone category, smartphones are the entrance to the entire mobile Internet; more importantly, Xiaomi is an e-commerce company. This is something that many people don’t understand. If you understand this business logic, you will understand everything Xiaomi does.

　　Our e-commerce is a type of retail industry. If we want to grow further, the most important thing is how to use e-commerce technology and e-commerce methodology to promote the transformation of the retail industry to achieve online and offline linkage. So in February last year we started the attempt to "new retail". Before trying, many people told me that you must not run a store. There is no one in the store now, the rent has increased, and the clerks are very expensive, and you will lose a lot in the end. I was really scared to death by everyone and felt that traditional stores could not be used. However, at the last moment of the beginning of last year, I still wanted to give it a try. Since we use the Internet to do mobile phones, why can’t we use the Internet to do retail? This is where I want to do "new retail". I opened my first Xiaomi Home last year. So far, I have opened 137 stores, and I have opened 14 stores a day last weekend alone. What am I reporting to you here? I really don’t brag, and I’m going to make a hit. Today, Xiaomi Home has the second best footprint in the world. What is the concept of the second world? Compared with our leading retail stores in China, our square footage efficiency is more than 20 times. We can use the cost of e-commerce to conduct retail. I think the essence of "new retail" is high efficiency, whether we can achieve e-commerce. If traditional retail can achieve e-commerce efficiency, the world will become a better place.

　　Let's take a look. This is how everyone goes to Xiaomi Home on weekends. If there are pictures, I have videos. Please help me broadcast them. There are videos and are sincere.

　　How popular is Xiaomi Home? We opened another one in India! In India, we couldn't find a very good and suitable store, but we just found a 50-square-meter store in a supermarket. After opening, we had 10,000 people came on the first day, and the entire street was blocked. We sold 5,000 mobile phones on the first day. Since then, five hundred pieces are sold every day, and basically this is the store.

　　What I want to share here is why it is so popular? There are a few very important sentences in the video just now. From the user's perspective, everyone thinks that you can buy things at Xiaomi Home with your eyes closed! In fact, this is a great affirmation for a retailer.

　　The second one is for the mall, they say that Xiaomi Home is their hottest store. Basically, the supermarkets we entered have become well-known stores. In Beijing, we opened ten months last year, we were 250 square meters on the first floor of the underground, and the entire mall was 100,000 square meters. Their store manager told me: "Our sales account for nearly 10% of the entire mall"! So at the beginning of this year, they awarded an award called Quanyou Star, which has a well-known traffic and the highest sales.

　　So how did we do the new retail of Xiaomi Home? This is what I hope to share with all online merchants. In the era of Internet efficiency, first of all, whether you have the ability to make hot products is the most important thing. It is because popular products mean traffic, reputation, sales, and efficiency. So how we make hot products is the most important thing in the Internet era. Because today's information explosion, there are a lot of various information. If you are not a hot product, consumers may not be able to pay attention to you at all.

　　For example, the Xiaomi 6 we released this year has a more beautiful zoom and two-color shot, and the product has a very good reputation after it was released. Of course, because the process it uses is too complicated, mass production is now facing great difficulties, and many consumers are criticizing us. At this point, we are improving delivery.

　　In addition to the Xiaomi mobile phone series, we are actually the number one in the world in power banks. Air purifiers are also the world's number one. We are also the world's number one in the balance bike. We are also the world's number one in the sales of sweeping robots. We have done more than ten firsts in China and five or six firsts in the world, and we have so many good products. So why does Xiaomi make so many products? This is also something that many people are very anxious or worried about Xiaomi. Here, you are an online merchant. From a retail perspective, my store only sells mobile phones. This is a low-frequency application, once every two years. This means that I have to spend a lot of market expenses, which means that the overall sales efficiency is very low. So what is the core of Xiaomi retail? Is the right product portfolio. Of course, how can you make the product well by making so many products? How to control the quality of the product? This is a huge challenge. Xiaomi implemented a plan four years ago, which was to make the big ship a fleet, promote the ecological chain plan, and incubate more than 90 companies, each of which was done according to the Xiaomi model. So Xiaomi is actually a corporate group, it is not a company. Each company focuses on doing only one thing, focuses on it, maintains a very high level, and this is today's product portfolio.

　　What is the core of the second consumption upgrade? It is a design upgrade. In this era when appearance is justice, how we can make products well and design is the key. What level is Xiaomi’s design? We have won two design awards this year: one is the best design award for Red Dot; the second is the design award for German IF. Both are very difficult to win, and the number of awards is small every year.

　　Speaking of design awards, we have won 140 international design awards in the past, so in today's new retail era, the importance of appearance has been raised to a very high level, and the consumption era is very important for appearance.

　　The third one is high cost performance. So, how did Xiaomi achieve high cost performance? This is thanks to Xiaomi’s Triathlon business model. In order to promote consumption upgrade, I understand this way. Consumption upgrade is not about the increasing price of products. Consumption upgrade is the same price, and you can buy better products. It has good performance, good quality and beautiful design. Therefore, Xiaomi set a close-to-cost pricing at the beginning of its business, so that we can make high-quality and cost-effective products. Then, after serving a large number of customers, the business model of making profits through the Internet.

　　So let’s take a look at what we achieved after we upgrade from e-commerce to new retail? We can use the same products as e-commerce and the same prices as e-commerce, and enter offline stores. So there are so many online merchants here, I suggest you open a store and try it. In fact, using the advanced retail ideas you have mastered is enough to make your offline store very popular. Of course, there are many technical elements involved. How do we drive traffic through online and offline, how do we use online tools to improve the efficiency of the retail industry? This is too technical. Today's time is not enough. I will share with you another day how we connect online and offline, and how we achieve e-commerce efficiency. In this regard, I will only tell you one result. Judging from Xiaomi’s internal practice, the efficiency of our offline chain is very close to that of e-commerce. I think it only takes a while to reach the same level as e-commerce. So what I want to share today is that as a new retail company, Xiaomi believes that we have strategically verified the possibility of new retail. So I want to change Xiaomi's business model to put it more commonly: Xiaomi wants to be a Muji in the technology industry, use the Internet technology and methods to conduct offline retail, have a rich product portfolio, and maintain high-quality, high-value, and cost-effective product characteristics. These things are worn together to form the Xiaomi model.

　　The host asked how many people here have used Xiaomi products? Can you raise your hand? Did the host see it? This is from the voice of the people. So Xiaomi represents the future, Xiaomi represents high quality, and Xiaomi represents lifelike. What was my entire purpose of running Xiaomi 7 years ago? Because I had retired ten years ago, when I was 40, I suddenly thought that my life could not be over like this. I had to do something that made me proud and excited. I used to do software and the Internet. Before, I founded Zhuoyue.com in 2000, which is the first generation of e-commerce in China. So, so I was wondering, what problems are facing in Chinese products? Why is there no one in the store? Why can’t our products be sold? Why do we go overseas to buy? What went wrong with us? I think I found the problem. I think China has good manufacturing capabilities and China has good craftsmen, engineers and designers. So why are we not doing our products well and why are consumers not satisfied? In fact, the essence lies in the inefficiency of business. Whenever we go to a retail store, we need to add at least 100%, even 1000%, or even 2000%. I think electronic consumer products are not serious, 8 times women's clothing, 5 to 8 times women's shoes, 20 times cosmetics. Everyone, let's think that the money for making this product is only 100 yuan, and it costs 1,000 yuan to buy it. Do you think consumers are stupid? It is precisely such retail efficiency and commercial efficiency that have enabled Chinese domestic products to be in China 7 years ago. To be honest, the evaluation is not high. After Xiaomi’s 7 years of innovation, at least there are more people using domestic mobile phones today, right? Anyway, I have never used domestic mobile phones 7 years ago, and no one is using them around me. With the help of Xiaomi, it has promoted the progress of the industry, not only promoted the progress of the industry. Even the air purifier is good and cheap. Do we make the power bank well and cheap? So we are promoting progress in all walks of life.

　　If you are here, Xiaomi’s entire ecological chain is also open, and more people are welcome to promote the progress of new domestic products.

　　Finally, I would like to tell you a conclusion. I think e-commerce is also a type of new retail. I think our innovation in the retail industry has just begun. Just like the unmanned supermarkets run by Alibaba, with all kinds of innovations, I believe that with the progress of China's retail industry in the future and the commercial revolution of the retail industry, it will actually be of great help to the promotion of the entire Chinese society.

　　The difficulties we encounter in the retail industry today were actually encountered in the United States more than 60 years ago. Any product in the United States has to double the price and start selling it. The founder of Walmart saw such an opportunity, restraining greed and reducing its gross profit margin to 22.5%, and persisting for 20 years to become the world's number one, and another 40 years. Including like the United States and Costco, it is even more crazy and more extreme than Walmart. The online merchants here hope that everyone will study the history of Walmart and Costco and understand today's problem, which is actually business efficiency. Costco's business creed is that the price increase rate of any commodity is controlled from 1% to 14%. If it is to exceed 14%, it requires approval from the CEO and the board of directors. In the 30 years since their establishment, the board of directors has never approved the gross profit margin of any product exceeding 14%. It is this spirit that has won the trust of consumers. I took a look at Costco's market value and their PE not long ago. Their PE is more than 30 times, the same as Google. So I think retailers like Costco are actually Internet+ companies. They meet all the core concepts of Internet companies. Although they seem least internet-friendly. So there is nothing embarrassing about doing retail. I think the key issue is that you make the retail industry e-commerce efficiency, which is awesome, thank you everyone.

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