Xiaomi’s new retail innovation practice

In just a few years, Xiaomi has entered the scale of 100 billion yuan and has embarked on a triathlon mode of “Internet + mobile phone + new retail”. How does Xiaomi understand and practice new retail? How is the Xiaomi House’s efficiencies of 270,000 yuan in the world? The Xiaomi Ecological Chain Strategic Planner and the original Xiaomi Home Sales Manager share your mystery with you.

Three outlets in the new era

We believe that there are three outlets in the new era:

1. The Internet of Things era. After the traditional Internet era, now is the era of mobile Internet, the future, will be the Internet of Things era of the Internet of Everything. Therefore, Xiaomi has done a lot of IoT products, such as air purifiers, sweepers, etc., all of which can be interconnected and connected. It can be interconnected with AI speakers. This is the first point of our layout. .

2. The era of big consumption. Now with the rise of 230 million new middle-class products in China, China will enter a big era of consumption upgrading. We believe that all Chinese products are worth repeating. Consumption upgrades are the second big gust we think.

3. Channel revolution. This is what we call new retail. The traditional offline channels generally have low operational efficiency, and the basic cost rate is 20% to 30%. Xiaomi hopes to have the same efficiency as offline, that is, the cost rate can be within 10%. . In this way, any product that goes online and offline will have the same efficiency and cost. We hope to insert the wings of efficiency into the new retail.

The general trend of consumption upgrade

Not so much new retail, it is new consumption, because new consumption will be a bit wider than new retail. Retail may only contain a few simple transactions, but if it is consumed, it actually contains a lot, including consumer-conscious things and upgrades in consumer structure. At present, talking about consumption upgrading is actually mainly an upgrade of the consumption structure. Because China’s current Engel coefficient has reached less than 30%, it means that people are spending a lot of money on eating now, and demand is showing a spurt of growth.

I divided China’s overall consumption development into three stages: the first stage was from 1949 to 1978, and the main consumer driving force was the population. The second stage is the rise of mobile Internet after the reform and opening up in 1978 to 2008. The main driving factor of consumption is the economy. At this stage, consumption concerns “big is good” and “more is better”, mass production of large quantities of consumption, less emphasis on product design and Life aesthetics. The third stage is from 2008 to the present, the consumption driving force of the whole society is the upgrading of consumption consciousness. The whole tendency of consumption has shifted from family to individual. I used to buy products for the family. Now, we buy personal products, such as iPads, watches, and razors. I only belong to me. This kind of personal consumption products are Rapid development, and consumption will be diversified and differentiated. For example, we only bought one watch, now we have to buy three pieces – one for a date, one for business, one for sports. Consumption has been broken down, so many new market segments have been born.

After these three stages, you can foresee:

1. Home appliances will grow from household appliances to personal electrical appliances. In the future, there will be more and more small household appliances, and like hair dryers and electric toothbrushes will explode.

2. The whole society is more service-oriented, because the material is already rich, and everyone will pay more attention to services. In the entire business, large department stores and supermarkets are basically declining, and channels such as convenience stores and e-commerce companies that can better meet consumer service needs will grow to a certain extent.

3. The catering industry will shift from fast food to some changes in restaurant style. In the past we ate, maybe ten people gathered together to eat a meal, and now we are looking for a restaurant in groups of three to five, to have a taste of life to eat.

4. The whole society will tend to be branded more and more, and brands will become less and less important, such as MUJI. In the future, consumers will actually consume more rationally, and everyone will tend to buy good and cheap goods. This is one reason why Xiaomi will do so many products and pursue the ultimate price/performance ratio.

Three-wave demographic dividend for mobile internet

There was a saying before that “the Internet entered the second half”, but I feel that the dividend has only just begun, and the era of big consumption has just begun. The entire mobile Internet will probably have three waves of demographic dividends.

The first wave was basically before 2014, which was the first core Internet users who used PCs. Xiaomi also got an explosive growth with this core netizen. This person is the new middle class of 230 million today. Where are they spending now? They are now fresh in the box and are strictly shopping at NetEase.

With the penetration of the Internet into third- and fourth-tier cities, a second wave of demographic dividends was triggered. The second wave is about 560 million people, mainly young people in small towns. Young people in Xiaocheng started to use a large number of Internet access in 2015 and 2016, bringing the rise of companies such as vivo and OPPO, including fast-moving companies. This wave of people mainly in shopping, such as gathering micro stores, famous products.

Why is the era of big consumption just coming? Because there is still a huge wave of demographic dividends – from 600 million to one billion people, that is, the difference between the population of Taobao and WeChat, that is, the mainstream of the small town that has just started surfing the Internet. It is because of this crowd that a company like this is born. Why can you do it? I personally think that the main reason is that there are a large number of people who have no Internet access in the four-tier to six-tier cities. In fact, they are not without Internet access, but they are not bound to mobile payments. But now because of the WeChat red envelope, these people have a huge mobile dividend when they have mobile payment capabilities, and their energy consumption is very huge.

This third wave of population is now the focus of Xiaomi, because the ultimate goal of all products of Xiaomi is to meet the 80% demand of 80% of users.

Xiaomi understands the new retail

There is a huge opportunity for the entire consumption, and the new retail revolution triggered by the consumption upgrade is actually not too unified.

For example, the new retail that Ma Yun understands is the integration of online and offline. The definition of Alibaba is a data-driven pan-retail format. What Jingdong understands is unbounded retail to optimize costs and improve efficiency. The experience is the main one; and as Ye Guofu understands, it is product-centric, and the product can be done well, there is no online or offline. Everyone’s understanding is actually different.

In fact, the consumer’s needs have not changed, because consumers always pursue a better product, a better experience, meet his needs in a timely and convenient manner, and in line with his emotions and values, can be happy in shopping.

Therefore, Xiaomi’s understanding of the new retail is through the online and offline interactive integration method, which can bring the experience of e-commerce to the physical store, let the physical store insert the wings of efficiency, improve the experience, improve the efficiency, and bring the high quality price. Good products that are cheap and genuine are sold to consumers.

Different from Jingdong, Ali, and Chuangchuang, Xiaomi understands that the new retail must first do a good job, upgrade the consumption on the supply side of the product, and then sell it to consumers through efficient circulation. Because there are not many companies that can really make new retail and products, and Xiaomi is exactly what both do, so the new retail that Xiaomi understands must be based on the new retail of supply-side reform.

Any product in China is worth repeating. When doing a great product that touches people’s hearts, “people call people a thousand words, goods are called people to come first”, put it in any channel, you can achieve explosive growth, so I think no The new retail of product and supply-side reforms is a hooligan. There are too many people talking about business models today. There are too many people talking about various technologies, but the products are not good and everything is empty talk.

Some time ago, the 164 unicorn companies released by the Ministry of Science and Technology, I took a look at the list, all social and financial. There are only a handful of companies that are doing business in a down-to-earth manner and doing a good job.

Xiaomi’s business model

Through the mobile phone, TV, router and all the products of the ecological chain, the hardware matrix composed of 100 eco-chain companies is actually the first level of the whole millet model “Triathlon” or “three-level rocket”. The small profit to achieve the purpose of obtaining customers is equivalent to the free mode of software. Xiaomi’s hardware is almost not making money, just to use hardware to obtain consumers.

Then, Xiaomi through the new retail including Xiaomi.com, Xiaomi Home, and the goods, to achieve efficient sales, end-to-end sales to consumers, and then through MIUI, big data cloud computing, Internet film, financial and other support The profit of the enterprise. This situation is actually a model of a “three-stage rocket.” Relative to vivo, OPPO and other companies, they are fighting with us for mobile phones, but we are fighting with them is a “three-stage rocket”, because the mobile phone is actually only an entrance to Xiaomi’s traffic.

The advantages of boutique e-commerce

Speaking of new retail, let’s talk about the product and the millet home. Because Xiaomi Mall should be very familiar to everyone, it has been done for many years and is China’s fourth largest e-commerce.

First of all, let’s talk about the products. The products are actually a selection of life e-commerce. Why does Xiaomi want to choose a living e-commerce? There is some logic behind it. Jingdong and Tmall are already a traditional company in a certain sense, that is, the traditional e-commerce, which is actually a very fearful. Jingdong and Tmall have some traditional ills:

1. Jingdong and Tmall do not produce products themselves, but only improve the operational efficiency of the products. The e-commerce, such as NetEase’s strict selection and the product mall, is based on the supply-side reform, which means that the product is jointly developed with the factory to participate in the design, and the product is optimized from the production side, and then sold to the consumer. .

2. We shop at traditional e-commerce. For example, if you buy a Nike, you actually need to pay a brand premium of 200 yuan for this Nike brand. This 200 yuan has nothing to do with the cost, just this Brand money. However, like the products, Netease carefully selected, they also cooperate with the Nike factory, and then the 200-dollar brand premium to kill, even the supply-side reform is better than him, and then sold to the consumer, this In fact, it saves consumers money and further optimizes costs.

3. We are now in Jingdong, or into Taobao Tmall, especially young people, shopping will be very painful, because it will brush out hundreds of pages of goods. The selection of e-commerce, such as possession and strict selection, is based on the selection, which means that there are only two in each category. For example, the box, only two models, the price is 1/10 of the day of the Momo, Samsonite, the quality is 10 times better than the traditional e-commerce, consumers only need to buy, do not have to compare, very worry-free. It is based on a select model, similar to a model of Costco Costco.

4. The selected e-commerce is direct F2C or C2M, which can directly feedback the information of the consumers to the factory. After the factory completes the consumption upgrade and then feedbacks to the consumers, it has advantages over the traditional e-commerce. At present, there are not many categories on the product platform, but each one is based on the selection, based on the responsibility of the consumer, so it can be done so well.

So everyone saw that Tmall is now doing “Taobao New Election” and Jingdong is doing “fine creation.” These very good companies are all in the layout of quality e-commerce, which is also a big trend.

I think that this quality-selected e-commerce is actually more mainstream than social e-commerce and content e-commerce. Because some of the social e-commerce companies are actually partial to consumer downgrades, and do not really solve the needs of consumers, more to borrow the demographic dividend to develop. Therefore, I believe that the core of the product mall is based on the selection, can eliminate the brand premium, improve the circulation efficiency, can be reformed on the supply side, and achieve end-to-end sales to consumers to better meet the needs of consumers.

The logic of Xiaomi House

After talking about the product mall, I will simply talk about Xiaomi’s home. Xiaomi’s home is currently 270,000 yuan, the second in the world, second only to Apple. The core logic is that its sales can be made infinite, and the floor is equal to the sales divided by the area. In this case, sales are the key.

Sales = passenger flow × conversion rate × customer unit price × repurchase rate, Xiaomi home is committed to the ultimate in these four links.

1. Passenger flow. Our location has changed the location of traditional 3C. Apple and Huawei will choose street shops and communication streets, while Xiaomi is the benchmark for fast fashion, like H&M; and Zara, which is directly on the first floor of the mall. And when the site is selected, there will be a lot of big data in the background, because there are already 300 million rice noodles. Through the positioning of MIUI, you can know where the rice noodles are and go to the place near the rice noodles. This is actually a combination of the traditional location method and the Internet, so that accurate location selection, only a large passenger flow. Millet House’s daily traffic can reach the Apple store’s weekly traffic.

The other is a combination of categories. Xiaomi’s home is based on the new category of new retail stores, while the traditional 3C is like Huawei and Apple. Consumers have to change their mobile phones for a year and a half, and the traffic is naturally low. The millet home has towels, toothbrushes, and some fun products every week, which determines its traffic will be very high. Xiaomi House has made all the products into a high-frequency purchase combination, and then uses some Internet drainage methods to drain consumers from the line to the offline.

We don’t quite agree with some of the new retail companies to take offline offline, or to the offline is relatively scientific. Because consumers only experience products and recognize them in your store, they really recognize the company.

2. Conversion rate. In Xiaomi’s house, even a towel and a toothbrush are the ultimate explosions. In this case, consumers will buy something when they arrive at the store, and the conversion rate will naturally be high. At the same time, online and offline prices are a standard, because if you have different prices, consumers are very easy to jump after the comparison.

3. Customer unit price. The main factor is that the entire product structure is based on the connection, that is to say, a consumer does not buy one in the store, but when buying two or three, four or five, his customer price is naturally high. For example, if you buy a camera from me, you will naturally buy a router for me, because my router is equipped with a hard disk, which allows the video captured by this camera to be played on the router, while other routers are not. All of our products are based on interoperability, so the connection is naturally high, and all products are experiential, consumer experience, and naturally willing to buy.

4. Repurchase rate. This is not the focus of most traditional companies, and we are very concerned about the user’s repurchase. For us, the purchase is just beginning. We never pay much attention to the order of the transaction. That is, our clerk has no KPI assessment. He only needs to stand on the consumer’s point of view. For example, if your home is a living room of 18 square meters, then I will give you a 55-inch TV. I think you can achieve very good visual effects at this distance. I won’t push you 50 or 65, I am completely Make recommendations based on the user’s interests, rather than recommending to consumers based on traditional stores. Under such circumstances, if the consumer’s reputation is good, the purchase will naturally occur.

Operation of people, goods and fields

The above four key points can be done well, and it is the core of Xiaomi’s home to achieve the ultimate efficiency, and the operation of the entire millet’s home, goods, and farms is also quite good.

1. People: Just said, in fact, we are not a single store operation, we are a single customer operation, operating the entire consumer, so our store inherits the reputation of Xiaomi. This word of mouth is king, essentially a kind of user’s thinking. So in our store, you can see a lot of parties, such as New Year’s Eve, popcorn and city clubs.

There are two key points to doing word of mouth. The first key point is the sense of participation. For example, we hold popcorn, choose the starting place from rice noodles, perform the program from rice noodles, and design the process with rice noodles. The whole process is attended by rice noodles, creating a stage for expressing self and gathering for rice noodles. For example, our orange run, often organize some rice flour running, are based on the sense of participation in the design.

The second key point is to exceed expectations. The key to word of mouth is still more than expected. In a five-star hotel, just enjoying five-star service will not be well-received, but if you enjoy five-star service in a one-star hotel, you will have a reputation.

Nowadays, many companies talk about fans, talk about the community, and talk about user operations. Most of them are actually a slogan on the wall. There are not many real ones that can be implemented. This must be a value that is implemented from top to bottom. If you visit Xiaomi, you will find that if you are a partner, it is very difficult to see Lei, but if you are a user and rice noodles, it is very easy to see Lei. Including the New Year’s Eve, Ray will personally drink with each table of rice noodles to say something. This is actually an essential user thinking from top to bottom. It is the core to use people well.

2. Goods: Products with good products will leak to Xiaomi Mall, and products sold by Xiaomi Mall will leak to Xiaomi Home. When leaking from thousands of SKUs to two or three hundred SKUs, all SKUs The models are all explosions, 100% sold, and will be transferred three or four times a month. The efficiency of the fund and the efficiency of the whole operation are extremely high. Therefore, precision selection is also a key to our efficiency and ultimate efficiency.

3. Field: Aside from the new technology, I would like to talk about the fact that the entire store must be based on emotions, because consumption has never changed since ancient times. In addition to shopping, the need for social and experience, and happiness through shopping has remained the same. Therefore, there will be such a scene in the store of Xiaomi: Many children play the glory of the king under the table, and the clerk explains the product to the elderly in detail. You will feel that the entire store will have a home feeling, which is based on a temperature, a humanistic concern.

In the end, Xiaomi’s home will make the user’s experience very good through the refined operation of people, goods and fields. Naturally, there will be spread and there will be a reputation. However, I think the most crucial thing about Xiaomi’s home is the formation of a brand personality.

In the past, most companies actually did “cards” and did not “products.” To be a “card”, you are a company that makes toilets, you are a company that makes rice cookers, you are a company that makes paper towels, and so on. The company of the future must be a company that does “products” and “brands”. First, you must have products and have your personality. In the case of a charismatic personality, it is a trend in the future to operate “products” + “cards”. The core of the millet model essence is that it is a very “good” company. By investing in 100 eco-chain companies, it will drive the development of 100 industries like squid, and force the manufacturing upgrade and go with very low profits. Sold to consumers.

Some time ago, Xiaomi promised globally that Xiaomi’s comprehensive net profit margin should not exceed 5%. If it exceeds 5%, all profits will be returned to users. This is the “product” of a company. Because companies and consumers are opposite in some sense, companies want to make more money, consumers want to spend less, but when a company can stand on the side of consumers, the strong trust relationship it establishes is The benevolent is invincible and unfavorable.

Therefore, Xiaomi sells products and sells more genuine and touching products to consumers through new retail, changing people’s lives, and through the strong trust relationship with consumers, the final effect is not to use Talk about conversion rate, don’t talk about profit, don’t talk about anything else, consumers go to the store with their eyes closed (we call it “blind buy”). Because he believes in this business, he is tied to the business for a lifetime. This is actually the core of the entire millet model.

New retail must be based on user experience thinking to do a good job, using consumer goods thinking to do marketing. Its stores must use lifestyle thinking to make life-promoting stores, and use lifestyle thinking to make brands. The ultimate core is to use business civilization to do business. Because only in this way, we can win the hearts of the people and serve consumers forever and solve the needs of users.