Using the "dual store" model to enter second- and third-tier cities, this maternal and infant e-commerce has given a sample!

　　Maternal and infant e-commerce has been around for 18 years, but many mothers will still spread a lot of money into traditional offline channels. Public information shows that the entire maternal and infant product market size will exceed 3 trillion in 2018, of which online channels account for 23%, about 76 million yuan, and offline channels account for 77%, about 2.4 trillion yuan.

　　Every weekend, all kinds of maternal and infant complexes and children's playgrounds are extremely lively. As an active offline group, maternal and infant populations are naturally linked to experiential consumption, especially in the vast second-, third- and fourth-tier cities where information is relatively asymmetric, an offline maternal and infant store that can provide experience is undoubtedly the most natural entrance to open the mother's pocket.

　　Whether it is Miya, which recently acquired Youyoutang to plan a children's playground, or JD.com, which announced that it would open more than 5,000 maternal and child experience stores, it is all about offline opportunities, and this is also the direction that Baby Gezi, a cross-border direct mail e-commerce company, is expanding.

　　Unlike many platforms that start from first-tier cities and gradually sink to low-tier cities, Baby Grid has set its sights on second-, third- and fourth-tier cities from the beginning, and has broken the vicious circle of "only opening a store but not making money, and the more you open it, the more you lose", turning losses into profits last year, and further expanding profits this year.

　　Baby Grid, which was listed on the New Third Board in December 2015, just released its first quarter financial report this year a few days ago. The report shows that Baby Gezi's total revenue in the first quarter of 2018 was 64.7343 million yuan, an increase of 309.78% over the same period last year. The net profit attributable to the company's shareholders was RMB 2.7839 million, an increase of 137.62% over the same period last year.

　　It is worth mentioning that the net profit in the first quarter exceeded the full year of last year (the net profit in 2017 was 1.8775 million yuan). The significant increase in profits, in addition to the increase in profit margins brought about by optimizing supply chains, logistics, etc., is also largely due to the successive opening of offline stores.

　　At a time when offline operating costs are rising and gross profits are greatly reduced due to industry competition, how does a maternal and infant cross-border e-commerce company with no offline operation experience achieve counter-trend profits? How does it think about the consumption of this maternal and infant population as it enters second-, third- and fourth-tier cities? With these questions in mind, Titanium Media recently interviewed Zhang Tiantian, CEO of Baby Grid, and talked about Baby Grid's offline exploration this year.

　　1+X mother-child complex + community operation

　　Baby Gezi was founded in 2012 and officially launched the cross-border e-commerce platform in October 2014. It is a B2C maternal and child e-commerce platform focusing on overseas direct mail. In the second half of 2017, Baby Grid began to explore the offline market and launched the offline brand - Grid Excellent.

　　When talking about why Baby Grid is planning offline, Zhang Tiantian gave two reasons: one is to build user stickiness through some offline experiences and interactions; the other is to expand the business line horizontally, carry out industrial integration, and establish a "big platform" ecological chain.

　　Unlike many platforms that adopt the heavy asset model of building their own offline stores, Baby Grid chose to join the light model. In Zhang Tiantian's view, the time and investment cost of the self-operated model are relatively higher, and if it can form a relatively strong binding with franchisees, it doesn't matter whether it is self-operated or not.

　　This year, Baby Grid launched the "1+X" maternal and infant complex model integrating maternal and infant retail, children's play, swimming and other consumption formats. By increasing diversified experiential consumption, it will open up more profit points outside the retail sector, which is why many franchisees are willing to join Baby Grid.

　　Currently, this part of the experience business outside of retail is completed by Baby Grid and franchisees, and Baby Grid trains and supervises them to assist them in operations.

　　"In fact, we found that as long as you strengthen subsequent operational support, after-sales, etc. through process, you can basically achieve strong control of each franchise store. If you achieve strong control, it will be like a pan-self-operated feeling." Zhang Tiantian said.

　　In addition, another major difference between Grid Youpin and other maternal and infant offline stores is that it is "opened at the same time with both stores". Every franchise owner can have two stores, offline maternal and infant stores and online micro-stores, which enables differentiation of online and offline products, and also facilitates franchisees to carry out continuous social operations for customers.

　　Specifically, the main products of offline maternal and infant stores are imported goods for general trade. The advantage is that the arrival cycle is fast, and consumers can go directly to the store to experience and purchase. The online "Wei Store" is a bonded area and overseas direct mail products, and Baby Gezi provides products and a complete set of supply chain logistics services. Baby Grid will regularly train shop owners to help shop owners further revitalize their customers and use social marketing to increase customer stickiness.

　　The opening of online "WeChat Store" can help store owners to dispel their customers' concerns of being "washed" by the online platform, and can also help Baby Grid expand the social e-commerce channel.

　　Data given by Baby Gezi shows that generally, joining a Baby Gezi Youpin 1+X imported maternal and child store can make more than 50% of the money in 3 months, which is largely due to Baby Gezi's "0 gross profit supply" strategy and the contribution brought by various amusement formats.

　　The so-called "0 gross profit supply" strategy means that all the products of Grid Youpin are provided to franchisees with zero gross profit, while Grid Youpin only charges franchisees the franchise fee and brand usage fee. So, will this concession to franchisees increase the risk of the platform?

　　Zhang Tiantian regards the "0 gross profit supply" strategy as exchanging time for space, that is, relying on his own global supply chain advantages, hoping to attract more franchisees in the shortest time and open as many stores as possible.

　　Zhang Tiantian told Titanium Media that the offline franchise store Gezi Youpin charges a one-time franchise fee. The contract is signed for three years, but in three years, it will also involve an annual brand usage fee, which is about 8,000 yuan.

　　As the store scale continues to expand, on the one hand, the scale of brand usage fees will generate considerable returns. At the same time, since it is a supply chain that radiates online and offline at the same time, the bargaining power of the platform will also increase accordingly as the scale increases. At this time, the gross profit space generated by the product will bring additional profit points to the platform.

　　However, the franchise model has always had many problems, such as how the platform can control the quality of franchise stores. According to Zhang Tiantian, Baby Grid has cooperated with China's quality certification authority to carry out supply chain product evaluation certification. In the future, every product supplied to the store will correspond to a traceability QR code. Once consumers find that the store sells products without the QR code, they can report it to the platform.

　　In addition, since the inventory ERP management involves the store’s cash register system is equipped with Baby Grid. Through these two methods, Baby Grid has achieved control over the store’s supply.

　　Why are second-, third- and fourth-tier cities?

　　Since the second half of the year, Baby Grid has already owned nearly 200 lattice premium stores offline, and has completed the signing of contracts almost every day. These stores are mainly located in second-, third-, fourth-tier and below cities. According to Zhang Tiantian, currently, there are already lattice premium stores in fifth-tier cities, and even counties below fifth-tier cities.

　　When talking about why it is only deployed in second- and third-tier cities, Zhang Tiantian said that this is actually not determined by Baby Grid's subjective intention. When the franchise model was first launched, Baby Gezi believed that the franchise fee was not cheap, and then it was made full-imported goods. It is logical that first-tier cities will have higher acceptance, but it turns out that this is not the case. Later, Baby Grid also analyzed the reasons and came up with several possibilities:

　　First, first-tier cities have rich channels for obtaining information and are very convenient to purchase goods. The urgent need for offline maternal and child stores is relatively low;

　　Second, all costs in first-tier cities are very high, and the risk of opening offline stores is relatively greater.

　　"In a place like Beijing, if you want to rent a store of 100 square meters, you may have a rent of 800,000 yuan a year. But the rent for opening a store in Mianyang, Sichuan is 80,000 yuan a year, which is ten times the difference. Then the labor is the same. In Beijing, you can't hire a person if you have to spend 2,000 yuan to hire someone, but in third- and fourth-tier cities, 2,000 yuan is considered a high salary in the local area." Zhang Tiantian explained.

　　Third, drives consumption upgrades. In the vast number of second-, third- and fourth-tier cities, there is still a certain amount of information asymmetry, and the purchasing channels are not as rich as those in first-tier cities.

　　"The demand is large enough and the cost is low enough. In addition, most of our shop owners are born in the 1985s and 1990s, and the mothers account for the majority. Many of them want to do something by themselves, so the conversion rate of their decision to do this is much higher than that of first-tier cities."

　　So, does this mean it will be difficult to make money by opening a store in first-tier cities? In Zhang Tiantian's view, if you only do single retail, the risk is great, because after the intensification of competition, the gross profit of goods becomes lower and lower. If you can no longer achieve a huge improvement in square-level efficiency and human-level efficiency, it will be difficult to cover the high cost.

　　But if multiple experiential consumption formats can be integrated outside of retail and customers are willing to pay for service and experience, then first-tier cities with high population density will show their advantages.

　　"The style of playing in first-tier cities and second-, third- and fourth-tier cities is still different. If you are just retail, the higher the city level, the greater the pressure you will be on retail, because it is too convenient. But when I went to fifth-tier cities, I saw that some places have to queue up for babies to take a bath. This is the difference."

　　　What are cross-border e-commerce now competing for?

　　In 2016, a sudden "storm" of the new cross-border policy brought the cross-border market into the calm after the "wheat harvest". Although the new policy has changed several times, tax reform has been a foregone conclusion. On the one hand, cross-border e-commerce companies face pressure to raise prices, and on the other hand, it also makes the boundary between cross-border and general trade no longer so obvious.

　　If in the past few years, people have regarded cross-border as an industry, cross-border can only be regarded as a new category addition or a supplementary form of general trade, and cross-border e-commerce has to join the competition with comprehensive e-commerce.

　　Zhang Tiantian believes that whether it is cross-border or general trade, what kind of value and services can be provided to consumers is becoming increasingly important.

　　Online, many large platforms have formed their own traffic black holes, but this has not hindered emerging platforms from acquiring users through niche segmentation and content scenario creation. In Zhang Tiantian's view, online traffic is becoming more and more expensive, but traffic is becoming more and more fragmented, and the acquisition channels are becoming more and more fragmented.

　　In the era of flood traffic, due to the cheap traffic, platforms use massive traffic to complete a conversion rate. However, in the current fragmentation of traffic, the accuracy of traffic has become more important. In Zhang Tiantian's view, accurate traffic is actually lower than massive traffic.

　　"In the past, people were very lazy and just blocked the traffic entrance and bought it. Now it is not that easy. Now we are reducing traffic costs online through content and building offline channels to acquire users. So if you can generate truly valuable content and services, your traffic costs can be completely reduced."

　　So, why are many community e-commerce companies that started out in content? In Zhang Tiantian's view, the form of content is very important, which determines the accuracy of obtaining traffic. Content must be combined with demand and scenarios. The biggest problem with community e-commerce is that the content quality and requirements are unclear, that is, the content traffic is not accurate.

　　"The traffic is not accurate enough, and the conversion rate will be low. In addition, a heavy supply chain is added, so many people make money when they are in the community. But once they are grafted onto a heavy supply chain, it becomes a loss of money. Because the traffic is not matched, the relationship between your content and the product is not handled well."

　　To ultimately convert content into consumption, it is not enough to have good content alone, and the service needs to be maximized. Zhang Tiantian divides services into two dimensions: one is price service, that is, constantly attracting users with low prices; the other is experience service, that is, giving users some exclusive or unique experiences.

　　So what Baby Grid is doing is to make the prices of hot products at the same price online and offline, or to attract consumers to the store with a slight subsidy, and to achieve profitability by increasing the repurchase rate and long-tail products.

　　At the same time, since it is easier to establish a trust relationship with consumers offline, on this basis, Grid Youpin reduces consumers' price sensitivity through interaction and experience, thereby achieving long-term profit goals.

　　In addition, let the franchise owners become small tentacles to carry out community marketing, so as to turn the one-time retail business into acquaintance and experience business with a longer life cycle. "We have done a calculation that an offline store only serves 300 precise users a year, and each user only spends 1,000 yuan per month, which is enough." Zhang Tiantian said.