Half a year ago, a towel factory owner Xu Yao and his friends in the support of Poundland, set up its own brand “ZhenJianLiangPin”, in this short six months, sales are expected to break 50 million yuan.
But Xu Yao is not happy. Because the new brand is still in the loss, about 400,000 yuan in half a year. Although he called it an “acceptable loss”, the way of profitability is not yet clear.
What is even more frustrating is that in the past two months, he has been trying to recommend “ZhenJianLiangPin” in offline supermarkets, but the above-mentioned sales miracle can not knock the door of large supermarkets purchasing department. Most of the superstores do not recognize the “Poundland” brand, the other side reveals distrust, think Poundland on the 9.9 yuan things no good goods.
This is a case of the “new brand plan” and C2M model advocated by Poundland from 2018. In the C2M model, the C side gets the best price/performance ratio, and the platform gets the traffic. On the one hand, the performance is growing significantly, but on the other hand, these factory managers, who are “good at production but not branding”, have also entered into a deep water area that they have never been involved in before. They need to face various problems, such as losses and difficulties in getting out of the brand circle.
The following is Xu Yao’s own account, he will reveal, C2M model, the real state of M survival.
Getting on board with Poundland
My hometown is Gaoyang County, Baoding City, Hebei Province, which produces 1/3 of China’s towels and is known as the “Towel Capital”, where almost every household is engaged in the towel-related industry. This is a red sea market with low value-added and technical barriers and fierce competition. With the monopoly of a few local head companies, small and medium-sized factories can only do OEM for brands.
Our local leader is Sanli Group, where I worked for a while after I retired from the military in 2008, and left Sanli Group in 2009 after I got married to do business in the raw material of towel yarn for a while, supplying yarn to a towel factory in Gaoyang County.
But the good times did not last long, about 2011, I supplied the towel factory towels lagged in sales, can not pay back on time, the veil factory’s capital chain broke. Later, at the suggestion of friends, I simply do their own towel processing factory.
I started the factory in 2013, mainly towels, towels thin profit, profit is between 16-20%. At the beginning, I rented a storefront in Goyang County to do wholesale. At that time to do mainly offline, if there is a volume, I markup 10 cents on the goods. The factory does not seek a high price, not to lose money, a little thin profit, as long as the turn fast.
Later, I opened a store on Taobao. At that time, Taobao is still very able to go goods, with a cell phone to take a few pictures uploaded to the store, the flow and customers came.
Two or three years ago, Taobao is not good to do. The main reason is that the traffic cost is too high. A day spent more than 6,000 yuan to buy “through train” traffic, there is no room for profit. In addition, Taobao is too popular, many of our local wholesalers are doing Taobao store, which leads to very fierce competition, profit margins are getting smaller and smaller.
Ali set up Tmall store, although said to be complementary with Taobao, but in our view, the competition is greater than complementary, we want to upgrade these small and medium-sized businesses can not find the doorway. Tmall store is very valuable, some time ago, I have a friend, selling Tmall store sold 300,000 yuan. He was registered when the Tmall store first came out, or a full category store.
I want to upgrade to do Tmall, but the Tmall store is too expensive. If you want to upgrade your Taobao store to a Tmall store, you need to shell out a deposit of 60,000 yuan and pay an annual service fee of 60,000 yuan. The store completes sales of 180,000 yuan per year, half of the deposit of 30,000 yuan will be refunded, and all 60,000 yuan will be refunded for completing 600,000 yuan, plus, 5 points of commission will be deducted.
Listen to friends say, open the Tmall store also have to have someone, a relationship, gifts to be eligible to open the Tmall store. Later look at the news report said that in early December this year, Ali investigated and punished nearly 20 involved in the integrity of the issue of Ali Xiao Er, involving cell phones, clothing and other investment, including a men’s investment Xiao Er bribed more than ten million yuan. Now it seems that what the friend said may be right.
Taobao’s second to our side, not quite take care of us these small and medium-sized factories, they only focus on those well-known brands big factories, such as Sanli Group, etc..
My factory had 50 or 60 employees at the most. in 2018, I entered six new machines, each worth more than 300,000 yuan. After getting in the machines, one person can look after two pieces of equipment, I cut half of the labor, and their monthly salary reached $7,000 to $8,000. The monthly expenses of raising equipment and workers, the pressure is still quite large. Online Taobao can not take large goods, offline profit is thin, and gradually the whole factory is not running very well.
Once, I saw my face next to the courier station all day to go goods, a question, only to know that the go is the goods of Poundland, at that time, I began to resolve to go Poundland.
We are the source factory, who can play price war with us on Poundland? The most common towel, the cost of only two or three dollars, plus logistics costs, 9.9 yuan or even waist cut price, we can still maintain a competitive advantage.
After doing a few months, I got the first place in the towel category sales on the Poundworld platform. Later, Poundland’s second to our side, take the initiative to invite us to dinner, or dinner AA, send gifts they do not receive. I heard that Poundland management is strict, the second does not accept gifts, more dare not receive kickbacks.
I have been doing Taobao for several years, have not been to Hangzhou once. But since doing the Poundland store, I have to go to Shanghai three or four times a year, that is the headquarters of Poundland, the marketing department and the Ministry of Commerce to all our foundry people in a large conference hall meeting, teaching us how to get traffic, how to operate the store.
In June 2020, people from Pindo’s business department approached me and suggested that I re-do a brand with two factories in Shijiazhuang that do home textiles. Pindo called this the “New Brand Program”. They suggested that we buy a sub-brand of a major brand, “Zhenjianliangpin”, because in their opinion, the brand we bought directly had a reputation and could open up the market.
Before, we mainly do OEM, to Jellybean and other famous brands OEM, but also to some large wholesalers, wholesalers produce goods do not “turn the brand”, leaving the side The stitches are sent to the wholesalers, and they sew the logo on themselves. This part of the production accounts for 80% of our output.
Now, the e-commerce platform approached me, and surprisingly, we want to give us the opportunity to do branding, or quite excited, after all, have their own brand, you can get a premium. The most common square towel on Tmall, Sanli Group’s Tmall store can sell to more than 20 yuan, almost half of the profit, this is the brand premium.
I felt at that time, do a new brand, this will be the best bonus opportunity for Poundland.
Platform support
When you have a new brand, Poundland will give support in all aspects.
Poundland prefers to support brands. For example, during the double 11, if there are 10 resource spaces on Poundland App, 8 will be given to big brands and only 2 can be given to white labels.
In order to support us, Poundland deliberately opened a brand conference with more than 20 media visits, which was very loud. In addition to marketing support, Poundland also participated in our production with C2M model, and the platform gave us data support, such as keyword hot search index, soaring index, etc.
At first, I thought, this model is too good to make sure what we were not sure before. With this type of order production, at least the goods produced are ahead of the real demand.
The way Poundland communicated with us was simple, by phone. For example, on the platform, which keywords search volume soars, which new categories have the first signs of getting up, Poundland’s second call with us to communicate. In other words, our production, Poundland is deeply involved.
After getting the new brand, is to expand production capacity, I will be part of the OEM production capacity directly to produce “ZhenJianLiangPin”. Take advantage of the platform to support the flow policy, hit the pop-up.
I have a partner, Tao Zilong, who got his name by “burning” (investing) 80,000 yuan in one day by opening a through-train (advertising) in Poundland. There are more than a dozen stores with annual sales of more than 10 million yuan on Pindo. We have no shortage of people who understand the traffic game and operational skills.
As a result, during the Double 11 period, we got the top sales of Duo Duo’s home textile category; from the beginning of the launch in June, the sales in a single month exceeded 10 million yuan.
I know, simply by virtue of its own capacity does not get the scale advantage in a short period of time, the cost of such investment is too large, the asset is too heavy. Therefore, the platform and a few of us came up with the solution of uniting other towel stores, brand licensing and joint production. Vertical union of industrial zones, such as the integration of towels in Gaoyang and Hebei Shijiazhuang Shenze cloth.
Our policy at the moment is that other stores apply to use our trademark, sign a 1-year contract, pay a deposit of 10,000 yuan, and charge no other fees, but accept our quality standards and supervision. Currently, more than 40 towel-type stores have obtained our authorization.
During the 618 period, we received feedback from Poundland that the search index of “coral velvet household products” had soared. In the context of the start of the school year, I decided that this data was available and immediately decided to look for a store that specializes in “coral fleece”. After sending friends to find a store, identify the qualifications, complete the signing, and paste the trademark of “ZhenJianLiangPin” production.
The beauty of this franchise model is that in the C2M model, when the platform feeds us data, we can quickly build a supply chain instead of reforming our own production line. This is not the same as the traditional outside perception of C2M. This model is asset-light and has low trial and error costs.
Our authorization contract is signed once a year. If there is a situation where there are many consumer complaints, we let the merchants solve it by themselves, and if there are many times, we directly cancel the authorization. We and the platform official will also from time to time spot checks, using the name of ordinary consumers randomly buy goods, fake, fake a fine of three or ten, is a real penalty.
Poundland has a special sampling department, if they get feedback from consumers that there are fake goods, they will fine the store, or even close the store, and all the fines are returned to consumers in the form of “coupons”, so you can see that Poundland has a lot of coupons.
Stores that use the “ZhenJianLiangPin” brand have a stable monthly delivery of more than 20,000 orders, while these factory stores, if they do purely offline business, the order volume is not stable. These factory stores, if they are purely offline, the order volume is not stable. Previously, the epidemic destroyed many small and medium-sized factories. Now that they have money to earn, they will not move stones to smash their own feet.
The reality of losing money
Everything looked good, as if a new brand and business empire was about to emerge. But the reality is not so good, rapid expansion or other reasons lead to our new brand is still in the embarrassing situation of “loss”, according to my estimate, the 4 According to my estimation, the loss was around 400,000 yuan in the past 4 months.
We summed up a few reasons, which can be summarized into a few points.
First, we adopt a low-price strategy. For example, 618, double 11, the use of low-price strategy to play our visibility. Other brands may sell 80 grams of towels for more than 20 yuan, then we will sell 100 grams at the same price, as long as we do not lose money, we can even sell at cost.
Second, the brand is supported by Poundland, so, at present, our sales channels are limited to the “Poundland platform”, and visibility is also limited to the platform. Although the official Poundland did not explicitly say that this product is monopolized by Poundland, but the inner meaning, we all understand.
Thirdly, the cost of generation operation and training services is too high. Our agency, free of charge, is responsible for the operation of the authorized store training, this part of the labor costs account for most of the loss. Some stores don’t know how to operate, so we have to invest the cost to train them.
My partner and I are not in a hurry to make a profit, we expect to achieve no loss of money by next year, or to achieve profitability, the profit model we have not yet clarified. But we just want to make the brand bigger and more people know about it for now.
One of Pindo’s big brothers, who is also my hometown, told me that Pindo has a lot of traffic, but the conversion rate is very low. He showed me the revenue of Poundland and Alibaba, Poundland’s third quarter revenue was 14.21 billion yuan; Alibaba’s second quarter revenue was 155.059 billion yuan. This is a big difference.
However, there is no doubt about one thing, now we this path should be able to run through, just need time. For example, three squirrels, they are a typical “Tao brand”, I have observed the model of this, is typical of the platform with traffic up, and the beginning of the time, they do not have their own factory. They do not have their own factory. After the brand up, now they lay stores offline, the development is quite fierce.
The life and death situation of OEMs
In fact, we have to face more challenges. In addition to internal challenges, there are also external challenges to transforming from a foundry to a brand manufacturer.
Getting a ticket to Poundland doesn’t mean the door to the world is completely open. Traffic and low price strategies don’t always work.
In the past two months, I have been recommending “Zhenjianliangpin” in offline supermarkets. I went to Zhejiang and Jiangsu three or four times a month, knocking on the doors of supermarkets door to door, asking if we needed supplies. But our beautiful sales performance could not knock the doors of the supermarkets’ purchasing departments. The other side reveals distrust, thinking that the 9.9 yuan stuff on Poundland is not good.
Low price is not always a panacea. Offline supermarkets prefer big brands like Southern Living and Jellybean, even though the latter’s public selling price in supermarkets is several times higher than ours in a condition of equal quality.
Gao Yang towels were named in the 2020 315 Gala. The evening pointed out that there are some manufacturers in Gaoyang who make towels with raw materials such as off-cuts recycled cotton. After the evening aired, it quickly triggered a shock in the industry. In addition to the brand, for some of the foundry, is tantamount to eating rice bowl was broken.
This matter is a towel big brand stabbed out, they even sent a short video naming afterwards to teach us how to do towels. I had dinner with a few industry friends to talk about this matter. We all know that the problem does exist, but the avalanche down, no one is more innocent than anyone else. We all know in our hearts why this matter was stirred up by the media, but we all keep quiet.
Foundries want to get ahead, want to grow, even want to turn over the board and reshuffle the cards, how can the vested interests of this industry not hit you? Only, our influence is now limited to the Poundland system, not yet out of the circle, not worth their shot, but this battle sooner or later have to fight.
Go to the southern cities more, I envy Yiwu, Hangzhou and other places. As far as I know, Yiwu’s logistics costs have dropped to one or two yuan, while the northern side is more expensive. In the north, the cost of express delivery accounts for a large part of the weight. This also means that I produce a white label towels, shipped to Yiwu, they labeled after sales, there is still a profit margin.
But in Gao Yang, towel companies are falling over each other, competing for users and fighting price wars, making profit margins lower and lower. I’m not afraid of price war, I’m afraid that the other side with inferior products and I fight, there are many such disputes in the past, which is one of the reasons why I want to do branding.
I want to unite other companies to set up a towel industry e-commerce association, I also talked to the people in northern China of Jindo, the other side also said that it is possible, but there are also difficulties, this association must introduce some local leaders as important positions. I told the people of Poundland that it must be the merchants who lead this association, or rather not set up, if the outsiders lead the insiders, certainly not do well.
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