"Chinese Zappos" Dream Shoes B2C Panic Transformation

Zappos, founded in 1999 and located in Henderson, Nevada, USA, is the world's largest footwear B2C website, invested and founded by Tony Hsieh, a Chinese American. In October 2009, Zappos was sold to Amazon for 1.2 billion dollars. Zappos was founded to make it easy to buy shoes in the United States. Zappos does not win at low prices. Most of its website products are sold at the original price. Therefore, Zappos's weapon against the traditional business field is not price, but service.

Zappos provides a 7 × 24 hour shopping service via the Internet and free two-way delivery. In order to let users choose the right shoes, Zappos encourages customers to order three pairs of shoes. When the goods are delivered, select the most appropriate pair and return the other two pairs. In addition, returns are fully supported in 365 days. In order to provide fast delivery services, Zappos built its warehouse near the World Port hub of UPS in Kentucky, USA (almost the center of the United States). Through UPS transportation, 70% of customers are provided with delivery service within 48 hours.

Zappos does not spend a lot of money to smash advertisements, but only does public praise. But they are willing to spend a lot of money to build a call center with hundreds of people. Customer service personnel do not preset lines, do not calculate the call time, and only pursue each communication to develop into a trust relationship.

This service standard has almost become Electronic Commerce The benchmark of the enterprise.

　　 From transformation to failure of zappos mode

At the end of 2010, it was reported that Zappos would enter China through Letao, a domestic online shoe city. Although both sides denied this, Zappos revealed that it was optimistic about the prospect of B2C in Chinese shoes. When Xie Chuangang, the head of Zappos international business, came to investigate the domestic footwear B2C market, he predicted that there would be a large platform level company in China's footwear B2C and eventually become a department store platform similar to Amazon. When he saw Letao and visited its warehouse, Xie Chuangang made a prediction: according to Letao's practice at that time, he would not only surpass Zappos, but also probably triple its valuation and revenue.

At that time, Letao was planning its own improved Zappos route. In addition to fashion measures such as 7 × 24 online shopping on the website and supporting customers to order two pairs of shoes, Letao made some non Zappos model adjustments according to its own situation.

Zappos is a "physical distribution" in the United States, that is, brand shoe manufacturers and agents wholesale to Zappos, and Zappos delivers shoes to its own warehouse for online sales. When picking up the goods from the brand shoe dealer, you should settle the payment at that time.

On the other hand, Letao has adopted the "physical warehouse consignment", and the brand shoe factory will place the goods in Letao's warehouse and Letao will sell them on a commission basis. According to the regulations of Letao, from the date when a shoe is put on the shelves, after the expiration of one month, Letao will hand over some of the shoes to the brand shoe factory, and some of them will be detained as service fees. The products that have not been sold will be returned to the brand shoe manufacturer, and the manufacturer will then supply other styles. "Real inventory consignment" not only does not need any funds, but also can deposit a large amount of funds on the online shopping platform, which is basically equivalent to "no business".

With confidence, Letao continued to raise funds. In 2008, online Letao received $2 million of angel funds from Lianchuang Ceyuan, and in June 2010, it received $10 million of financing from Detong Capital and Tiger Fund. In January 2011, three old shareholders in the first two rounds of investment of 200 million yuan, after taking the money, Letao Beijing , Shanghai, Guangzhou, Wuhan, Shenyang, Chengdu and other cities have built warehouse storage centers, covering all major regional markets in China. At the beginning of 2012, Letao continued to get the fourth round of financing, and Morningside Venture Capital followed up.

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Before this year, Letao also just caught up with the rapid outbreak of domestic B2C in the past few years, and multiple rounds of financing driven Letao to reach its own peak in 2011. Whether in terms of user visits or brand attention, Letao is almost at the top of the shoe industry. However, the cold winter of e-commerce and capital since the third quarter of last year has cooled Letao ahead of schedule. The valuation of the fourth round of financing has shrunk, and nearly 80% of the advertising budget has been withdrawn, making Letao enter this year. The traffic has dropped by 60% to 70%, and the brand attention is also declining. It seems that Letao has faded out of the competition in the footwear B2C market.

The lukewarm operation has made the money become the dry food to barely survive, and there is no profit yet. Le Tao's Chinese Zappos dream is almost broken. In the middle of this year, Letao suddenly changed its writing style and announced that it would launch five private brands and weaken the agency part to carry out a thorough transformation. Chance Chance, Lavis Lavie, Imosii, MANWELL and C+have become the new hope of Letao.com. This early pioneer of Chinese footwear B2C entrepreneurship has no more fighting spirit to wrestle with the B2C consignment platform that is now struggling hard.

The "out" of Le Tao should make his old enemy Hao Lemai breathe a sigh of relief for the time being, but Li Shubin may not have a clear idea of what to do next. This is also a dreamer of "Zappos China Dream".

In May 2007, Li Shubin, CEO of Hollemay, and Lu Ming were just looking for entrepreneurial projects together. At that time, one requirement was that the market should be large, the price should be between 300 and 500 yuan, which was suitable for Chinese consumption, and the gross profit should not be less than 20%, which was suitable for distribution nationwide.

After a round of research at that time, it seemed most feasible to do a project of Zappos mode, and this concept had been recognized by some investment banks at that time. In addition, the concentration of online shopping of footwear products in China was still low. Li Shubin also had a dream early:

　　 Do Chinese zappos

Haolebai has not completely imitated the business model of Zappos, and has carried out local transformation in the selection, warehouse and return of goods. Choose goods with Chinese thinking, and only make the top sports brand shoes in the market that can cover 80% of the population.

Due to some problems in human and financial resources, Haolebai did not follow Zappos's "three pairs of shoes". At first, it was just accurate in the size of products of different brands, providing the length corresponding to the size of each brand, and customer service specifically reminded users of "foot measurement". But later, after getting some money, he began to push "two pairs of shoes" to improve his transaction rate. However, this later became an important reason for the high operating costs.

At the beginning, Hollemay was different from Letao. Hollemay followed the zero inventory management of Zappos. In order to synchronize all goods and counters like Zappos, no additional warehouse will be set up. When there is an order, we will go to the counters under the agency to pick up goods. This problem is extremely prominent when Haolehai develops to a certain scale. All goods are scattered in various counters, often facing the problem of multiple stores to pick up one order of goods, which is very inefficient. So, like JD and Dangdang, they began to build their own warehouses, and even later built their own logistics.

The improvement of infrastructure and services such as warehouse and logistics has really made Haoleyao grow stronger, but behind this relatively high-quality service, it also burns a lot of money every day to maintain.

There have also been several rounds of financing since the launch of Haolebai. In June 2009, Sequoia Capital invested 10 million dollars in Haolebai. In July 2010, Defengjie, Intel and Sequoia Capital invested another 17 million dollars in Haolebai. In May 2011, Tencent strategically invested 60 million dollars in Haolebai. With the round of capital injection, Haolebai's business data in all aspects hit many new highs.

However, when the market became colder in the second half of last year and the financing environment became worse this year, Holemay quickly entered a plateau period, operating at a loss, experiencing difficulties in expanding its scale, reducing investment in advertising, and falling traffic and market attention.

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Faced with such a situation, Letao chose its own brand, while Haoleyai Li Shubin took a different path. Li Shubin said that Haoleyai would not be its own brand. The brand concentration of shoes is much higher than that of clothing. It is almost impossible to create a new brand in the shoes category. Therefore, the result of Haolebai was forced to expand on the platform, and it successively went to sports, outdoor, children, clothing and luggage. The previous Zappos ideal was also forced to leave.

Among the leaders of domestic footwear B2C, in addition to Haoleyao and Letao, it is generally believed that there is only one Yougou website that has developed rapidly since it was established last year.

Can Yougou become China's Zappos? It is also impossible. This is a website that has been born with a golden spoon. It has not broken away from the most common growth mode, taking money, burning money and exchanging traffic, but has not yet reached the bottleneck and transformation step.

Now we are making a good dash relying on the supply chain, brand and capital of Belle Group. However, the precedent of Letao and Haolebai has proved that it is difficult to manage the passenger flow generated.

It can also be seen from Belle's medium-term financial report and recent adjustment of Yougou that Belle's attitude towards Yougou has begun to change subtly. Belle's e-commerce business has reduced the gross profit rate of Belle's traditional business by 0.5%, and Belle will never have any scruples about e-commerce layout, so half of the $200 million promised by Belle to Yougou has not yet been realized.

Therefore, Yougou is also exploring more channels to reduce costs and expand benefits. In August, it launched the flagship store of Dangdang.com, whose products include 18 shoe brands and sportswear brands under Belle Group.

Buying Yougou from Belle is a traditional exploration in e-commerce. There are many problems that cannot be avoided in traditional e-commerce, such as different ideas. Therefore, Belle may be more cautious in the investment of Yougou in the future. In the process of strategic transformation, it must have new requirements on the profitability of Yougou.

　　 Where is the bottleneck

"China Zappos" has turned from dream to fantasy, and B2C competition in footwear has become survival. What is the B2C problem in the field of shoes?

From the reasons for the transformation of several footwear B2Cs, we can see that Le Tao Bi Sheng said that it is difficult to get rid of the loss dilemma even if the scale is large, so Le Tao dragged its own brand as a lifeline. Li Shubin of Hollemay said that it was necessary to accurately estimate the order to reduce costs. Xu Lei of Yougou said that it was necessary to find ways to avoid conflicts with tradition. Han Buyong, a famous shoe store, complained that the price of the advertising platform had increased 10 times in four years. Dong Xinda said that the cost of acquiring users and high user stickiness are too low. Guo Hongchi, CEO of Xijie.com, summed up the most comprehensive idea to solve the relationship between capital, cost and profit. This is also the biggest problem of footwear B2C and even the whole B2C.

The gross profit of shoes is basically about 20%, while the operating cost of B2C shoes is often not low. Take Xijie.com as an example, the operating cost is 10%, the storage and distribution cost is 3% - 4%, and the marketing cost is 10%. After overall accounting, the net profit is negative, and the loss is 6 to 8 points.

Compare some highlights of Zappos that domestic shoe companies often follow.

Zappos wants to give away "three pairs of shoes", while Le Tao and Hao Le Mai start to give away two pairs of shoes. The cost of giving away one pair of shoes is quite different from that of giving away two pairs of shoes.

An operator who is familiar with the B2C distribution rules of footwear has calculated this: at present, the cost price of domestic intra city express delivery of each pair of shoes is about 10 yuan, and that of two pairs is 20 yuan. If one pair is returned, the round-trip express fee will reach 30 yuan. If both pairs are returned, the express fee will be 40 yuan. For the delivery cost of each pair of shoes in different places is more than 10 yuan, the express price for two pairs is more than 30 yuan, and the express fee for returning one pair is nearly 50 yuan. If both pairs are returned, the return delivery cost will be about 70 yuan.

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Such services have directly increased the cost of B2C logistics of domestic footwear. However, the online shopping environment in China is quite different from that in Europe and the United States. Almost all brands entering the Chinese market must adapt to the price diversification of the same products in China, allowing discounts and large discounts. On the one hand, Haolebai and Letao should follow the high level of service rhythm, on the other hand, they can't get rid of the price competition, and the profit space that has been compressed is squeezed or completely offset by the rising operating costs. Therefore, B2C footwear with almost a small scale in China is unlikely to be profitable.

Similarly, the turnover rate of footwear products is related to many supporting services. It is obviously difficult for Haolebai and Letao to achieve a one-stop service that allows users to try on, experience and return goods with third-party logistics for distribution. So, reluctantly, a few footwear B2Cs represented by Haolebai started to build their own logistics, while the human Hardware and so on have greatly increased the cost.

In addition, the market environment is not good, the manufacturing enterprises have too many products, and each brand dealer and agent has a large backlog of goods. They need a large warehouse, and they need to compete with all the agents at all levels of the brand dealer to compete with each other in terms of price, marketing, and advertising. The next round of money is still unknown. In such a high-risk operation state, B2C in such a vertical field as shoes is bound to encounter unprecedented challenges. At present, nothing is better than to live first, and the way to live is not to continue wasting, but to transform.

Letao has chosen to push the brand and operate its own brand with a gross profit of more than 30% or higher. Haole Buy simply cuts the surface with points and quickly extends to other fields such as children's shoes Children's wear, outdoor sports, luggage accessories. It seems that it can expand its scale and increase its profits at the same time. Yougou began to shrink, reduce its advertising, and open flagship stores in many department stores.

　　 These life-saving transformations are somewhat hasty

Although the gross profit will increase when Letao is transformed into a brand, the R&D cycle of new products and brand building are more expensive and time-consuming. In sports shoes, China has seen many of its own brands before, with competitive quality and price. However, when facing many large overseas brands, all of them die. Only a few domestic sports brands can still occupy a certain market.

For Letao, it has taken many rounds of financing before, and investors must have requirements on the scale. In such a highly concentrated field, if the brand can not be made, it is impossible to talk about the scale. In addition, Letao also has to bear the operational risks of the platform, which will be a greater test for the capital chain and retail capacity of e-commerce.

It is also a phased trend this year for vertical websites to seek third-party platform cooperation opportunities to obtain mature users, orders, etc. and reduce input costs. Yougou, Letao and Taoxie all settled in Dangdang. Haole bought in Amazon and No. 1 store. The main orders of Mingshiku, Taoxie and Xijie also came from third-party platforms such as Taobao store.

In addition to entering the big platform, Haole Buy is constantly accumulating strength in expanding categories, and category expansion allows itself to increase gross profit to attract long tail users. However, the difficulty of warehouse management and the sudden increase of inventory pressure caused by the extension of the product line have also made Holemay very dangerous. In April this year, internal employees reported that Holemay had forced it to lay off 30% of its staff due to the occupation of funds by self built logistics and inventory backlog. Recently, it was rumored that Holemay's capital chain was tight.

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In addition to the transformation plans of Haoleyao and Letao, some other enterprises have also explored new ways. Xijie.com is exploring the B2C2C model, and has successively made system docking with small and medium-sized online sports sellers and upstream suppliers. When consumers place orders in these sellers' stores, the orders will go directly to the Xijie.com system, and Xijie.com will deliver goods directly to consumers. Every time a single order is closed, Xijie.com will automatically deduct the purchase cost, delivery cost, storage cost, etc. of small and medium-sized sellers. Xijie.com acts as a middleman and binds the interests of all platforms, which relatively reduces the operational risk of a single official website.

Although there are still many transformation plans, B2C transformation of footwear is obviously a scene of panic and survival. In the industry, it used to be about who could win the last game, but now it has become the two main players who can become the final PK first.