Chapter 391: Learn from the best.
Zhang Yaya was wrong.
Although there was the disadvantage of the logistics and labor costs, Amazon still beat Wal-Mart until they fled on all sides and they weren’t the undisputed overlord anymore.
But in the industry where online shopping was booming, the second ranked of the warehouse supermarkets Costco rose all the way up with their annual turnover and market shares continuing to rise as they created a miracle in this internet era.
Their business model was really simple and as Chen Huan said.
Quality of goods and services.
The quality of good included two aspects. The first was the quality of the products itself as it must be good and the things that people usually bought mustn’t be bad qualities otherwise customers wouldn’t come for a second time.
The second point was the price, which was commonly known as price performance ratio.
Wal-Mart’s 26% profit margin on his merchandise was the world’s first, which made them a lot of money.
But Costco was only around 13%, which was basically half of Wal-Mart.
This profit margin, adding the various taxes etc… it wasn’t really profitable and they may lose money if they weren’t careful.
With that price performance ratio, was Costco’s business good?
Amazon’s products weren’t as cheap as Costco.
If it was a large purchase, it was obviously better to drive to one of Costco’s shops.
After all, there was no such thing as free shipping all the time in the US unlike in Zhejiang.
The fuel cost was much cheaper than the delivery fee.
There was nothing to say about Costco customers service, it was satisfaction to all customers all the time.
Could you imagine that the watermelon that you bought didn’t taste good and you could just take the remaining half and return it?
Could you imagine that you could return a trouser you bought just because you felt it wasn’t comfortable?
Could you imagine that you could return a fish you bought 12 years ago but you forgot about it and left it in the freezer?
Well, Costco reimbursed all the things mentioned without problem.
This would make people think that the service was good and there was nothing to worry about when buying.
When someone thought that a supermarket was reliable, they naturally would be more inclined to buy there.
This was a kind of shopping satisfaction.
Commonly known as the ‘customer is king’, that was the feeling.
Another supermarket similar to Costco was a regional supermarket in Zhongyuan China.
They never were out of Zhongyuan but became a myth in the new era supermarkets.
Lei Jun from his world only admired two retail companies in his life and he made pilgrimage to both of them. (I believe he’s talking about Lei Jun, The founder of Xiaomi)
One was Costco and the other was Fat East Coming.
Moreover, the word ‘Pilgrimage’ was said by Lei Jun himself on his verified Weibo.
Even people like Lei Jun used the word ‘Pilgrimage’ to talk about the two stores, it showed how amazing those two were.
They could get the recognition of Lei Jun who had vision beyond his time and their business model had flourished for 50 years without any problem at all.
The price of Fat East Coming wasn’t as cheap as Costco but their customer service was far superior.
They were like the upgraded version of Haidilao in customer service.
In a city where they opened a supermarket, the other supermarket was doomed to die no matter who they were.
So they deliberately closed one day each week to give those small supermarkets a way to survive or they would be done.
How nice were they?
But why did such a great Fat East Coming didn’t expand to the entire country like Haidilao?
The reason was very simple.
Any good service didn’t rely by just being self-conscious but by their salaries and honors.
Fat East Come only developed in the prefecture-level cities in Zhongyuan and had about twenty to thirty stores. The salary they gave was generally more than double the average salary of the cities.
Even a cleaner could achieve the same salary as an office worker so what reason did those workers have to not do well?
Get out if you didn’t want to do it well, some other people would do it.
That business model could be done in third-tier prefectural cities but Fat East Come wouldn’t be able to maintain it if it was in the big cities.
They couldn’t pay their cleaner 20k a month, right?
What about the specialized service staff? The middle level staff? The senior staff?
There was no way to make that much no matter how good their business was!
So their business model was to only remain in third-tier cities and not leave Zhongyuan.
Because of the logistics, transportation and management costs would increase if they expanded far away so it wasn’t worthwhile.
Compared to the imperfect Fat East Come, Costco also had some flaws.
Their profits relied on their membership fees and their annual tens of millions of members was their main source of income.
But Costco also stipulated that their subscribers could withdraw at any time just like how they bought products.
In a developed country, only a very few people would be greedy and abuse that cheapness.
But what if they came to a developing country like China?
The quality of customers here were much worse and many of them would take advantage of that without stop.
It would definitely fail if they took the American’s approach.
That was why Costco didn’t open its first store in China until 2019.
Back to the present.
This world didn’t have Costco or Fat East Come so Chen Huan could use their business model or other useful model to help them improve the situation.
Of course, they couldn’t make a carbon copy of what was just mentioned but adapt it to the current situation and Lin’an.
For example, Costco’s annual membership fee, Wal-Mart tried it before but the effect wasn’t very good, let alone Costco’s even pricier one.
Even if Lin’an had a developed economy with a large middle-class but taking into account the pressure on housing, education and retirement, it was impossible to compare to the American consumers.
That was also an important reason why low priced goods exploded in popularity even in the four most developed cities of the country.
Any business model that didn’t take account of the regional situation and rigidly applied would definitely fail.
Chen Huan needed to integrate the two supermarket’s model while avoiding their unsuitable strategy so it had an immediate effect on the Zhang family’s supermarket.
But the problem was he knew it was guaranteed success but Zhang Yaya didn’t know that!
Zhang Yaya already started to feel Chen Huan was unreliable and was just talking on paper.
Because Chen Huan had no experience in operating a supermarket at all.
How could he understand the supermarkets around the world by just going to the US once for the Olympiad?
For a moment, Zhang Yaya felt disappointment toward Chen Huan and wasn’t interested in the ‘essence’ Chen Huan talked about.
But she still exerted restraint and didn’t leave.
Chen Huan saw her lost expression and couldn’t help but find it funny, “If you believe me, I will ask Xiao Shuishui to give you a copy of the plan in two days for you to take a look first. If you find it good enough, I’ll explain it more in detail.”
Zhang Yaya also thought it through.
As long as she didn’t think of him as the savior but someone to reference to, what was so bad about it?
He didn’t ask anything from her family and was just trying to help so she shouldn’t be ungrateful.