Expand business to the Chinese market

Let me talk about the current situation first:

Japan: mainly entities, e-commerce is not well developed

China: The impact of e-commerce on the entity is vast, and there is a tendency to replace it in many areas. For example, the computer city has been completely replaced.

United States: E-commerce and entities coexist. Most of the successful physical businesses still exist. E-commerce is also developing very well. Where I have been, Hong Kong is the most similar to Japan, and there is basically no e-commerce.

Any business is inseparable from a core problem:

There are four reasons why consumers choose a purchase channel:

1. Cheap or cost-effective
2. Convenient, save time and effort
3. Get more information to support the purchase
4. Shopping comes with entertainment or social consumption

In fact, comparing these four points in different countries or regions, you can roughly understand why e-commerce vs. offline commerce is such a form.

These forms are closely related to population density, traffic environment, offline business development stage (the degree of development of the supply chain), and labor costs.

In short, the business form is determined by the characteristics of the demand side (consumer) and the supply side (supply chain). This is too abstract and specific; let's first analyze why China's e-commerce is so developed.

2005-2015 is the era of China's "e-commerce explosion." In this era, the Chinese market has two major characteristics:

1. The manufacturing industry is highly developed and tends to be surplus, and the prices of many products at the production end are meager
2. Retail channels (chain retailers) are in the early stages of development, with high costs, high price increases, low efficiency, and poor service

Everyone can understand the first point, so let me focus on the second point.

Taking clothing sold offline as an example, the price increase rate of clothing in developed countries (the double rate from ex-factory price to retail price) is usually 3-6, while the price increase rate of Chinese clothing is usually 6-10.

Therefore, it is standard for the same quality of clothing to be half cheaper in the United States and Japan than in China. Thus, Taobao started with a dress for no reason. Offline stores sell 700-800 (8 times the price increase) of clothing, and Taobao can easily buy it at 200 or 300 (the price increase is 2-3 times).

Clothing is another trillion-level market, instantly turning Taobao into a retail giant. Other non-standard products in the retail sector are similar. For example, parents in a county in Shandong, China, want to buy toys for their children. These toys used to enter the wholesale market in Guangdong, China, from production (for example, Dongguan, China), and then a large wholesale market in Shandong. The call went to Guangdong to buy goods. The regional wholesale market went to the provincial level to purchase goods. The owner of the toy store in the county went to the regional wholesale market to buy goods. The prices were increased layer by layer.

Prices are getting higher and higher, and options are becoming fewer and fewer. Buying on Taobao is likely to be in the hands of consumers through only one or two layers, and there are more choices and more information to assist judgment (user reviews and ratings). The same is a toy; let's take a look at the situation in the United States. Toys "R" Us almost monopolized the U.S. toy market before the emergence of e-commerce. Toys "R" Us has a substantial single retail store, emphasizing "experiential shopping." Children can play in it for a day and take the toys away, by the way.

Such a large-scale store is not much different from a medium-sized toy wholesale market. Instead of struggling to choose for their children online, parents might as well throw their children in a physical store and pick them for themselves.

Of course, as the penetration rate of e-commerce in recent years has increased, and other large supermarkets have also set up vast toy sales areas to compete with Toys "R" Us, the life of Toys "R" Us has become more and more difficult. As a result, it's about to close down.

A similar business form in China (not a toy, only a similar format) is the Decathlon Sports Supermarket, which also uses a considerable experience shopping environment + relatively cost-effective products to attract customers. Life seems to be going well now.

These business forms appeared before the emergence of e-commerce in developed countries. In China, in the era of e-commerce, it has not yet matured, and as a result, e-commerce will directly "overtake."

Another fundamental reason China's e-commerce replaces entities is that it is close to the supply chain and can enormously compress middlemen. As a result, fewer middlemen make the difference, which is cheap and quick to respond. In the United States or Japan, too many products need to be imported, and there are no domestic manufacturers.

Importing is not something a small company can do just by starting a business, so it is gradually concentrated in the hands of large merchants with resources, sales, and premium capabilities. Naturally, these big businesses can also control pricing power.

Finally, we are reaching the end customers through "chain retail." "There is no middleman to make the difference." In the United States and Japan, they cannot do it as long as they sell imported goods.

Therefore, it is not easy for e-commerce merchants to form a price advantage. Moreover, in China, many manufacturers use direct sales or similar to direct sales (for example, hiring an e-commerce operator) to achieve factory direct sales or similar to factory direct sales.

Naturally, the efficiency is much higher. This directly bypasses offline businesses with high markup rates and low efficiency.

So here comes the question...

In the recent epidemic, Amazon's stock price doubled in four months, and Bezos became the richest man after the divorce. So why is there a monster-level e-commerce giant like Amazon in the United States? But not in Japan? Two words: convenience. When shopping offline in the United States, if you use one word to describe it, it's "unpretentious," if you add another comment, it's "and boring."

The United States has a large area with sparsely populated people and very scattered people. Transportation is basically driven by cars. Generally, there is a regional commercial center every ten or twenty kilometers along the highway. The number of businesses is about the same as our small shopping mall. Still, they are usually single-story buildings, so the paved area is vast, and they walk inside. Walking is also tiring.

There are far fewer products to choose from in commercial centers than in China, and services are also very monotonous. Boring and boring. Moreover, American commerce is highly chained. From the east to the west, every Shopping Mall is a few brand merchants, and the things they sell are not much different, and there are very few tricks.

Because of the low population density and the limited population covered by each business center, businesses dare not purchase niche commodities, quickly forming inventory and affecting turnover efficiency. Thus, Amazon is like opening the door to a colorful world for Americans.

What you want and what you want is fresh. Amazon has integrated the scattered and sparse market into a sizeable centralized market through the Internet. It can provide a variety of products, and naturally, it is beautiful to consumers. This problem does not exist in Tokyo, Osaka, or Hong Kong. Because most of the Japanese population is concentrated in big cities like Tokyo, the situation is very similar to Hong Kong. With a high population density, it can carry highly personalized and diversified offline businesses. And it is easier to improve efficiency through scale.

Therefore, the abundance of goods and commerce we see in Tokyo and Hong Kong is much higher than that in the United States. The population density is high, and the shopping efficiency of consumers can also be improved. A variety of products can be bought on the way to and from get off work.

The Americans may have to drive a car for a long time. E-commerce is neither "cheap" nor "convenient" enough, and naturally, it does not have sufficient comparative advantages over offline businesses. E-commerce can only become a "recovery," and it is challenging to develop into the mainstream. Finally, the large scale and high penetration rate of e-commerce have also reduced China's logistics costs to an almost abnormally cheap level.

In the past, a courier sent a car to one area, then a car to a community, and then to only one building because of the increase in order quantity and efficiency. Although the logistics cost has risen rapidly in recent years, the delivery cost per order of the express company has continued to decrease. Moreover, because logistics costs account for a low proportion of goods prices, Chinese e-commerce sellers can hardly consider logistics costs.

Japan and the United States each have their own practical problems. The U.S. has vast land and is sparsely populated. Couriers drive vans to deliver goods. Not only are the transportation costs high, but they can't even go to many stores every day. Although the population density is very high in Japan, the urban traffic management method has been solidified and rigid. It is hard to imagine that the Japanese traffic management department can tolerate the electric vehicles and electric three-wheelers that run around the streets and park randomly in China.

Suppose the cost of express delivery is only RMB 5. In that case, you can buy a box of socks to send a single express, so there is a "one-piece free shipping" business form such as "Pinduoduo" in China. In the United States, the average delivery cost per order for e-commerce companies is about $8, which is already more expensive than a box of socks.

This makes it difficult for orders with low customer unit prices to be delivered through e-commerce. So, naturally, it limits the scope of e-commerce penetration. Although there are still many latitudes to analyze and many topics to talk about, I just want to come to an end after writing this.

To sum up, I wrote four latitudes at the beginning:

1. Cheaper or more cost-effective Chinese e-commerce companies generally have price advantages over offline e-commerce companies. The U.S. and Japanese e-commerce companies have less obvious price advantages than offline, or they are not universal.
2. Convenient, time-saving, and labor-saving. In China or the United States, convenience and labor-saving are the primary purchasing powers. Japan is not. It is already very convenient offline in Japan.
3. Get more information to support the purchase. In China, from quality to product features, you can get more information online. Americans can also compare products online and buy products that are not available offline. But in Japan, because Offline commerce is intensive and developed, and online advantages are not prominent
4. Shopping comes with entertainment or social consumption. In China, entertainment and social interaction are the central differentiating competitiveness of offline business and e-commerce competition. The United States... is unpretentious and dull, and there is a lack of entertainment online and offline. Social attributes Japan's offline entertainment and social networking are very developed, and e-commerce has no advantage in this regard

In short, in the future, China will definitely be the most excellent online product in the world, and it is also the most exciting place offline, not one of them.

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