Home delivery vs. self-pickup, they explain the “last mile” of fresh food thoroughly

At the 2019 (Second) China Fresh Food Retail Conference, "Business Observer" invited Zhang Xiaohui, co-founder of Yonghui Yunchuang, Shen Bin, founder of Liangxian Fresh Food, and Vice President of Suning Xiaodian Store Operation Center Manager Wang Qi and Greentown Supermarket Assistant General Manager Ma Tengfei *** are exploring solutions for the “last mile” of fresh food.

1

Home

Business Observer: The four companies here have all done home business, including Liangxian, which is also experimenting with front-end warehouses. How can we see the home market? ? How big will the market size be?

Zhang Xiaohui: I just clicked on the data I shared. The current market share of Daojia should be more than 30%, which is consistent with my expectation. It may reach 50% in the next three to five years.

Shen Bin: I think everyone’s expectations on this number are generally similar, around 20%-30%. It’s more about the difference in market proportion between first-tier, second-tier, third-tier and fourth-tier markets.

Maybe there is more demand in first- and second-tier cities, which has a lot to do with the crowd’s sensitivity to time. Therefore, this market has undergone major changes in the past few years. This problem did not exist ten years ago.

Wang Qi: In fact, Suning stores are doing both home delivery and in-store delivery. There are front warehouses and in-store delivery methods. I think whether a model can ultimately be recognized by consumers, the most important thing is whether it can make a profit. For capital and for enterprises, the ultimate goal is to see whether it can make a profit.

Regarding the home-delivery business, I always feel that its fulfillment costs may affect its possibility of profitability. From the perspective of the global fresh food retail industry, no company’s home-delivery business accounts for more than 10%. Compare. Even in China, the current capital drive may be very popular in the past two years, but how much higher may it be in the future than now?

Ma Tengfei: Actually, I am more optimistic about the home business. First, users have been educated by the Internet for many years and have developed Internet consumption habits. Second, as cities develop and the pace of life accelerates, consumer demand for convenience will become an important form of consumption for office workers, and home delivery services will be an important choice for consumers. The third point is that now that 5G has been promoted, online shopping will be more convenient and the customer experience will be better for customers.

Business Observer: Mr. Zhang is the main person in charge of Yonghui’s home delivery business. Can the front warehouse cover the fulfillment costs? What is Yonghui's front-end warehouse market share in Fuzhou? Zhang Xiaohui: Let’s not talk about market share. Fuzhou’s population is about three to four million. Currently our monthly income is more than one million. In a family, usually one or more people download (our) APP. (It can then be inferred) 70%-80% of households in Fuzhou have become our monthly active users. There are basically 190,000 daily active users.

I think it (front-end warehouse delivery) is a new e-commerce. The biggest problem of traditional e-commerce is that the traditional logistics system and express delivery system cannot support the category of fresh food. It is difficult to imagine SF Express helping you deliver fresh food. New infrastructure is needed to provide such convenient services, and Internet users' convenient service of instant delivery of fresh food products is actually not well satisfied.

Regarding whether the cost can be covered, it is actually very difficult under the current situation and the current competitive landscape. It will be (covered) in the future.

How many of the students here raised their hands after listening to yesterday’s sharing (the agenda for the first day of the Fresh Food Retail Conference). (After the live interaction), most of them listened. All the guests yesterday can actually divide their views into two directions. One part is like Lawson's convenience store and convenience food. The basic point of view is that the post-80s, 90s and post-00s have become the main consumer group, and they will choose premium prices for convenience. wait.

The other group are those who make self-pickup reservations. Their views are all that cheap is the way to go.

But I think there is no perfect business model in the world. (It requires) rich categories to match needs, preferential prices and guaranteed systems, etc. No store or business format can be in four aspects at the same time. Do it to the extreme.

But if you want to survive, you must be able to achieve the ultimate in a certain value point. Each store will occupy a certain position in this value space. And I think there is a complementary relationship between these business formats. If (people’s lives) will get better and better in the next ten years, then I think more and more people will be willing to pay a premium for convenience. If we think that people will become increasingly poor in the future, they will become more and more price sensitive. This is my point of view.

Business Observer: Liangxian used to do B2C fresh food e-commerce business, but recently it has experimented with front-end warehouse business in Shanghai. How is the situation in this area? Can you go on? Shen Bin: We have tried different models, and front-end storage is one of the directions we are currently testing. Let me share with you a few points. During the process of testing front-end warehouses, we will find that (B2C and front-end warehouses) have naturally different data performance. One is the difference in unit price per customer. (B2C) will naturally be higher. Everyone tends to be a hoarder and will buy a few times a month, two to four times.

The front warehouse is more of a daily need, similar to the need for going to the store, and may be purchased once every two or three days. The data in some areas is very interesting. Some users will buy front-end warehouse services every day or two to three days, so the unit price per customer is often relatively low. Therefore, if we insist on covering the performance costs, it is actually unrealistic in the early stage. Because you still need to cultivate user habits and make some subsidies. However, these two groups of people (B2C and front-end warehousing) are actually quite different groups of people. Because the needs of the front-end warehousing group are very rigid, there is actually a certain value-added space, so this future service is included in the pricing. In terms of value-added, there are opportunities to make some changes.

In addition, we will find some differences in conversion rates. Everyone knows that the conversion rate of Taobao and Tmall is between 2 and 5, usually 3 to 4 points. (Vertical category) B2C generally depends on whether you can segment it in the vertical field. Between 10 and 20, the conversion rate of front-end warehouses is particularly strange, which is also a topic we have been studying recently. Our front-end warehouse conversion rate will be close to 50%. Of the 100 customers who come in, half will place an order. The purpose is very obvious, which is to form a habit.

Moreover, old customers are very loyal and 100% retained.

I think this is a segmented group of people born in the 80s, 90s and 00s who have a strong need for this thing (at home). Therefore, we believe that front-end warehousing does not mean that it serves all people. It can only serve a certain group of people at present. However, this group of people is likely to develop the habit of long-term offline purchasing in the future. Therefore, this (front-end warehouse) is not a solution to the problem. This is the kingly approach, because retailing will eventually have to cater to more and more customers.

We believe that front-end warehousing is a better supplementary method, especially for companies with different business formats like Yonghui. We believe that the combination of different models in the future will be an interesting expectation.

Business Observer: 50% conversion of front-end warehouse is quite high. I would like to ask about Suning Store. Suning has built a Suning Store and a front-end warehouse in order to explore the last mile. Now it is doing self-pickup in the store. But it feels like the front-end warehouse is no longer the focus at present?

Wang Qi: In fact, we have been thinking about fresh food. Last year, we opened 3,000 Suning stores, and this year, we will open more than 6,000. To launch such community stores on such a large scale and covering more than 70 cities, how to operate fresh food has also taken many detours.

Community fresh food stores sell fresh food on-site in the store. In fact, everyone knows that (the industry as a whole) suffers a lot of losses, so we need to change the method.

Later, we looked for a front-end warehouse, but found that the cost of the front-end warehouse was still very high in the initial new dimension, because it was a dark warehouse, and customers didn’t know it was there. One warehouse, so we found that the cost investment and the repurchase process are very painful.

And maybe the acceptance level is better in Shanghai. Different cities across the country have different acceptance levels. We are also working on front-end warehouses now, including every Carrefour store, which will become one of our warehouses. In this case, during Double 11, there will basically be nearly 400 warehouses.

In April and May of this year, we started to operate a store-pickup model.

(So), how to distinguish between the front warehouse and the market (self-pickup).

I think there are two dimensions. The first one is in first- and second-tier cities like Beijing, Shanghai, Guangzhou and Shenzhen. Maybe customers’ demand for front-end warehouses has higher requirements on time and timeliness, and front-end warehouses will be more suitable. its a need.

But in third- and fourth-tier cities, (consumers) may have more time, pursue cost-effectiveness, and require efficiency, so it may be possible to pick them up at the store.

This is from a city perspective, and there is also a consumer age dimension. In fact, everyone has just said that there are more young people in e-commerce now. For young people, the front-end warehouse delivery model more popular. For China, the main group of people who buy food are middle-aged and elderly people. These people may have particularly high requirements for cost performance, so they may prefer to pick up food at the store. We have been exploring and doing community group buying. For me personally, judging from my 20 years of experience in the fresh food industry in Japan and China, this is also the first time I have spoken publicly. I think the in-store pickup model may be specific for chain fresh food. model.

Business Observer: Greentown Supermarket is deeply involved in Puyang, Henan Province. According to traditional market classification, Puyang is a fourth-tier market. Greentown's current self-pickup business is doing very well and is very lively. I would like to ask, in the third and fourth tier markets, is it better to do pre-sale self-pickup, home delivery, or pure in-store delivery? Ma Tengfei: We started incubating the home-to-home platform in 2015 as a supplement to the in-store business. (Daojia) has a 30-point (gross profit margin) for fresh food, and the overall price is about 25 points. The current average customer price is about 45 yuan, and the gross profit per order is about 11.5 yuan.

The in-store business prepares goods for the home-delivery business, and the home-delivery platform gives the store a 7-point profit share, which is more than 3 yuan.

Our delivery fee per order is about 6.9 yuan. We use outsourcing and have cooperated with Dianwoda and others. This fee accounts for about 15 points (of the unit price). Therefore, the net profit of home delivery business is about two points.

If the order is less than 39 yuan, we will also charge a certain delivery fee. Taken together, the average net profit of each order from the home delivery business is about 2 yuan, accounting for more than 4 points (unit price).

For the home-delivery business, we do it with the purpose of steady promotion without burning money. In terms of fulfillment costs, it is (now) a state of low profit.

(We think the home delivery business) is still okay. Looking at the data reports, the home delivery business is more inclined to (become) a regular form, and the order volume is roughly regular, so (for the home delivery business) In terms of energy, I don’t have much to invest now.

The pre-sale and self-collection model is still very popular. Everyone, including us, has been affected before. (Currently, we) have really good results in the pre-sale and self-collection business.

2

Supply Chain

Business Observer: The "last mile" solution, whether it is delivery to home, store, or pre-sale and self-pickup, in supply Are there any differences at the chain construction level? Does Yonghui have a say in this matter? Zhang Xiaohui: Yes, because we have both home delivery and in-store pick-up services. We have tried both. The supply chain is indeed different.

As Mr. Shen just said, these business formats face different groups of people. In fact, this is the case. When it is divided into in-store and home-based stores, in-store stores are further divided into hypermarkets, convenience stores, and community fresh food stores. These different stores also face different customer groups. (So), how can these different stores (unify and standardize) do self-pickup?

Regarding what Mr. Wang just said about customer groups, I would like to add that the users of Daojia started from the post-80s generation. (But) in fact, even for the elderly, it is even launched in third-tier cities. The response to home business has exceeded expectations and imagination.

(So) I have also been reflecting recently that when we talk about middle-aged and elderly people and housewives, we actually have to make a distinction. Their consumption habits are not always to buy cheap (things), and (consumption habits are not) there is no loyalty. (For example) Those born in the 1960s may be different. This middle-aged and elderly group will treat themselves better, and their values ????will be different, which will lead to different behavioral habits.

In fact, the demand for home delivery in third- and fourth-tier cities is also very strong. Once people experience a more convenient lifestyle, it is difficult to return to the original inconvenient lifestyle. After getting used to paying with mobile phones, it is difficult to adapt to the unpleasant experience of paying with cash.

Therefore, there will be a lot of convenience (level demand) for the supply chain.

(From the perspective of city classification), is there a home market in third-tier cities? I think yes, the disposable income in third-tier cities is not necessarily less than others, and people in third-tier cities are not necessarily more diligent than those in first-tier cities. However, the choice of products will be different due to the personalities and psychological needs of different groups of people.

A person who has relatively more time and is more diligent will be willing to go to a supermarket to buy (stock up) and process it himself. A relatively lazy person, whether poor or rich, will like to eat convenience dishes.

In the future, we believe that more users will be willing to pay a little premium for a better and more convenient life, so that all aspects of the costs (of home delivery services) can be better covered.

Shen Bin: My understanding is that home delivery, in-store delivery, and self-pickup have different competitive points.

For example, I have been researching the matter of self-collection recently, and I found that self-collection is actually more of a cost advantage, which is such a consideration.

As we all know, fresh food is a slowly growing stock market, and the number of surrounding people is a very stable value, so its (incremental) demand is limited.

Why is there a demand for self-pickup? Because through the reservation method, it may be able to reduce some losses, and (compared to the home delivery service) self-pickup can reduce some home delivery costs. (These) people who are often concerned about costs (will benefit from it), (they) may give priority to using the self-pickup service. .

But if you are facing some young people who are accustomed to home service, basically self-pickup is not an ideal (choice). I have asked many young people, and they are too lazy to get the self-service locker downstairs. (So, for) Home, my understanding is that it is a value-added service, and it is more suitable for those who do not want to go 500 meters downstairs. Some people (the needs of) are going to pick it up within themselves.

Going to the store is another area, which is where Yonghui is better at. The people it faces, including experience, is a deeper knowledge.

From a supply chain perspective, home delivery and store delivery are actually complementary forms. Because in terms of online ordering (home delivery), in addition to meeting basic needs, it can actually be expanded to more SKUs.

In community-style stores, a store generally has between one thousand and two thousand SKUs. If there is an online store, if this shelf is well managed, a fresh food store can usually handle more than one thousand. Four thousand to six thousand skus, maybe more. Hypermarkets such as these can provide more than 10,000 SKUs, which can meet very long demand.

So when these needs are fully demonstrated, these offline experiences can bring some offline traffic, low-cost traffic.

Home service can meet the sticky needs of users. So when it comes to the supply chain, we actually believe that fresh food must be done well.

Business Observer: Suning has made a lot of arrangements in the fresh food supply chain in the past. What do you think of this issue? Wang Qi: Let me make two points. Following what (everyone) just said, (I think) the pick-up method at the store is the best, and it may be the best for the front desk.

I don't deny (the value of) on-site purchases and front-end warehouses, but (they) may be a complement.

Why do you say this? There is a balance to consider (the balance between the consumer side and the business side). To be profitable, for consumers, what they pursue is cost-effective products and their user experience. For enterprises, it is nothing more than wanting us to have more profits, starting from the aspects of cost and efficiency.

The most difficult thing to do offline (chain) is standards. That is to say, there are losses on the operation side, and standards need to be set, displayed, and sales must be promoted. (And) the in-store pickup model can (solve the standard problem).

Four sentences: the best display is no display, the best standard is no standard, the best sales is no sales, and the best loss control is no loss.

There is no need for display when customers place orders (online), (then) do they need to train (store) staff on product attributes (knowledge, etc.), how to keep it fresh, and how to discount, (store) no need Standard.

Everyone has always said "no overnight meat is sold" in terms of loss control. For self-pickup, (that is) there are no overnight dishes or overnight meat. Customers buy it the day before and pick it up the next day. The biggest loss is not that it cannot be sold on the same day, but that it is stored for two or three days and the store does not discount it, which leads to such loss. If (only looking at) the sales on the same day, in fact, there is almost no loss at the store end.

The best sales is no sales. How do you say this?

What the company sells is absolutely high-frequency stuff, because the cost (self-pickup) is very low, and it can be directly fed back to customers. Customers can buy it through word of mouth as long as it is cost-effective. (Self-pickup) No need to do too much publicity.

Therefore, for the front desk, (pick up in store) is the easiest to copy and the easiest to find the best balance between customers and enterprises.

The front-end (requirements) may be the simplest, while the back-end may be the most complex. This is what we really feel after doing it.

Because (self-pickup supply chain) requires absolute timeliness.

Customers who use in-store pickup or home delivery services have particularly high requirements for the quality of their products, which we are well aware of. If the quality (of fresh products) is low, there is a timeliness (problem). After consumers place an order at 21:00, they will get the goods at 7:00 the next day. The company must complete the packaging and delivery of the goods to the store, which has very high requirements on timeliness and supply chain. I think this is the hardest one.

The second is quality. (Online pre-sale and pick-up in store) require absolute quality, which is different from offline. Offline, if you want to purchase ten kilograms of goods today, (the supplier) may have sent you eight kilograms of goods with no problem, (two kilograms of goods with problems were rejected by the logistics). But customers don’t know how many kilograms of goods you have purchased.

If this is the case, the self-pickup model will not work. The ten items ordered by the customer today must be given ten items, because the contract has been signed (the consumer paid and placed the order the day before), and there is a contract. relation.

If you fail to provide suitable products and good quality products, you are in breach of contract and you will have to pay compensation. So it is very difficult. (Self-lifting) It is the lightest on the front end, and the hardest on the back end.

Ma Tengfei: Regarding the supply chain issue, I will continue the topic of Mr. Wang and Mr. Shen.

I agree very much with what Mr. Shen just said. Customer needs for home delivery and self-pickup are different. Perhaps home users pay more attention to convenience and have certain requirements for quality. They are actually not very sensitive to price.

Self-pickup users are more interested in the cheapness of a product, and they are willing to pick it up only because of the cheapness of the product.

Therefore, from the perspective of the supply chain, when it comes to product selection, for home delivery business, we must not only pay attention to product selection, but also grasp the quality.

For users who pick up products at the store, on the one hand, they should pay attention to quality when selecting products, and on the other hand, they should control the price advantage when purchasing. The second is the delivery aspect.

In fact, the focus of the home delivery business is on the delivery service, because if the quality procurement is done well, the store will be more concerned with the delivery service. For example, we promise to deliver the goods to the customer in 30 minutes.

But for self-pickup users, since self-pickup is a pre-sale model, a large number of orders are gathered in a short period of time and transferred to the warehouse. It may take that night or even early the next morning to deliver these goods to Stores have great considerations about logistics.

The third point is collaborative work.

In fact, the home-delivery business is a step-by-step process, which means that the normal shopping needs of some consumers can be met by purchasing goods based on the store's normal delivery.

But for self-pickup, like when we do group shopping and pre-sale self-pickup, we need to make a product plan about two weeks in advance, and review the product a week later. Are there any (to be) changes in price and purchasing quality?

Therefore, this process, procurement, planning and promotion, and even logistics have a high linkage effect. Our employees face a sense of urgency and pressure.

Three

Endgame

Business Observer: Last question, what is the endgame of the “last mile” of fresh food? Will it be a composite form, with how many stores equipped with one front warehouse? Zhang Xiaohui: The opposite of going home is to go to the store, not pick up. The essence of self-pickup is pre-sale, otherwise wouldn’t it be better to go to the store and choose by yourself? The opposite of pre-sale, or the opposite is real-time.

How many of you have thought about what to eat for lunch tomorrow? The essence of pre-sale is planned consumption, which is not in line with the living habits of us Chinese or the public. The current main selling point is low cost, because pre-sales can bring lower losses, passing this benefit to consumers and giving them a lower price.

Users will always distinguish between different groups of people. There will be some users who receive subsistence allowances and buy products on sale every day. There are also some users who choose more convenient services.

We found that the flow of users between several business formats will basically be simultaneous, depending on the user's mood and scene. The weather is nice and I want to go out for a walk, but I don’t want to go out because I’m tired. If I have to take care of the kids, I just place an order on my phone. I think it is more of a complementary scenario and we will prosper together in the future.

Shen Bin: I think the "last mile" itself is a new thing. Because it used to be in-store business, but recently there was a home-delivery business, which shows that a new demand has emerged.

New retail is originally designed to solve the problem that traditional services cannot keep up with the needs of new people. Therefore, in terms of the technical solutions currently provided for the last mile, it is nothing more than who can deliver goods faster and who can deliver goods at a lower cost.

Another point that everyone should consider is that if you try to open a fruit shop in Lujiazui, I think the possibility of failure is very high because the rent and other costs are too expensive.

Therefore, at this time, it is often more cost-effective to provide a dark warehouse (front-end warehouse) or B2C online in terms of fulfillment costs.

When going to fourth-tier cities, people have a lot of time at their disposal, transportation is convenient, and parking is convenient. Going to the store becomes a natural choice due to the (low) fulfillment cost.

(So,) when facing different groups of people at different stages, we should consider it comprehensively. There is actually no absolute point in it (the last mile).

But in terms of real life, after all, Daojia will definitely seize part of the demand for stores. (For example) in the past, Daojia was 100%, and Daojia took 20% of the market. This is very likely to happen. Yes, this is a very painful point offline, especially in first-tier cities.

Therefore, if today's enterprises want to deepen their development, they must not have a single combat capability. They should have sea, land and air capabilities, and they should be available in stores and at home.

Wang Qi: This is a difficult topic.

I think there must be demand for home delivery first. (But) the focus is still on the store, and another section is divided into picking up in the store or purchasing on-site.

There is probably no community fresh food company in the world (currently) that can be profitable with less than a thousand stores. This is the potentially fatal point of chain fresh food. It is difficult to copy and standardize.

Then, in-store pickup may be a solution.

When it comes to user experience, I talk about three kinds of user experience. When we were young, when we were in elementary school, junior high school, especially elementary school, everyone had dinner before 8 o'clock. During dinner, my mother would ask What will you eat tomorrow?

At this time, my mother may write it down and purchase it after get off work the next day (but she may face a shortage). The meat is gone, the fish is gone, and the vegetables are gone. Even if there are any, the quality Not necessarily guaranteed. Pre-sale self-pickup (can solve this problem), the mobile phone can solve the ordering problem in one or two minutes, which can ensure that no matter what time it is tomorrow, as long as you arrive at the store before 9 o'clock, you can pick up the freshest products that belong to you. So is this more in line with the current life scene of O2O Internet?

Supermarkets have been developing for 20 or 30 years now, and I don’t know how to move forward. This method is one of the alternatives. The second scenario is that I believe many of you here do not live with your parents. Are you worried about your parents' health?

If you can give your parents a thousand yuan in a community store, there will be a store that will work with the best nutritionists in the country to create a healthy meal suitable for your parents, and cut it and wash it for you. Okay, then ask your parents to pick it up at the store, so that the store manager can see your parents every day and communicate with them, or give your parents a cup of health tea every day and drink a cup of health tea at a fixed time. (Would the experience be better this way?) The third scene is the scene of men's fitness, women's beauty, or pregnant women and the elderly having a healthy meal.

This is difficult to do offline. If you go online, you can customize this meal in advance. It will be washed for you and you can fry it at home. This is more suitable for the future.

People who make fresh food have always hoped to be able to sell more than just pure fresh food ingredients. Why can restaurants sell food at twice or three times more expensive than offline fresh food stores? I have been working offline for many years, moving potatoes and selling onions every day, but how much money do I make from selling potatoes?

Ma Tengfei: I don’t think it’s the end game, because consumer demands are constantly changing. Maybe ten or even twenty years ago, we didn’t even understand what home delivery and in-store pickup were. , because consumers will make a change now when they have new needs.

We are more responding to the needs of consumers at different levels. In fact, Mr. Ding (formerly Life COO Ding Xiuhong) said it very well today. If there are no physical stores to rely on, online is not suitable for fourth-tier cities. , is very difficult to survive. Whether we are pursuing product quality, convenience, or cheapness, we (stores) provide the solution.

Regarding pre-sale self-collection, I think our pre-sale self-collection is more about making a life proposal for consumers and guiding them to try different lifestyles. Maybe (consumers) have not thought before that making a text introduction may generate impulse to consume.

I think that in the last mile, we need to build a fresh food store plus the Internet, whether it is in-store or self-pickup. It will be based on physical stores. While providing good physical store services, We must embrace the Internet and take advantage of the convenience of home delivery and the cheapness of pre-sale and self-pickup to meet the needs of consumers at different levels.