2019 Box Office fills in the pits

Author | Zhu Ruomiao

Editor | Shao Lele

After three years of rapid expansion, Box Office now has more than 160 offline stores. But after entering more cities, the problems that come with expansion are also coming to the fore.

According to last year's data made public by the box horse, the box horse fresh life has seven mature stores that have operated for more than 1.5 years, with average daily sales of more than 800,000 yuan for a single store, and a single-store ping efficiency of more than 50,000, which is two to three times that of the same type of hypermarket. But for Boxmart, which has opened 86 stores in 2018, the percentage of mature stores is only 8%. For Ali, who is redoing new retail, this report card is not ideal.

In the third year of entering the offline retail industry, Box Horse, which hopes to use the Internet to build a new retail system, ultimately did not bypass the threshold of the traditional retail industry. The retail industry, which is very close to consumers, is still a business that pursues localization and differentiation. For retail companies, whether online or offline, it is ultimately to face this complex, diverse consumer market.

In a recent interview, Hou Yi, CEO of Boxmart, reflected on their early expansion model. "We opened more than 100 stores in one breath last year, and after entering 19 cities, we found that Box Office Shanghai, Box Office Beijing, and Box Office Chengdu are going to have big problems if they are the same. Because fresh food is highly regionalized products, fresh food is closely related to the consumption habits of local people." And today's box horse has gradually abandoned the standardized store expansion model.

Although the speed of expansion of the box horse in 2019 is still not slowed down. Not long ago, box horse put forward a plan to expand the number of stores to 200 by October this year. But it has also entered a new round of rapid adjustment.

In March of this year, the box horse will adjust its large store model to "a large four small" store system, the launch of the box horse mini, box horse food market, box horse F2, box horse small station four new models. Taking this step, Box Horse hopes to utilize the flexible small business model to rapidly cover the urban areas where the previous large stores could not enter. In May this year, after three years of rapid expansion of the box horse for the first time closed a store in Kunshan.

Hou Yi called 2019 a year of "filling the pit". The constant iteration of the box horse behind a huge and heavy operation of the retail market, the question of retail is the next box horse need to answer, but also this is all the development of "new retail" business companies have to overcome the hurdle.

Compared to its first store in Shanghai three years ago, Boxmart has made a series of adjustments to its merchandising, customer orientation, and product mix.

At the level of merchandising, Box Office, which had previously emphasized unified membership, unified merchandise, unified price, unified marketing and unified payment online and offline, is now gradually abandoning the unified store model. The box horse early implementation of all-packaged food sales strategy, now also adjusted to the introduction of corresponding packaging strategy according to different regions. At present, in Boxmart Fresh Life stores in the surrounding areas where the house price is more than 50,000 yuan, the food sold in the store is still mainly sold in full packages. However, in some suburban stores, the box horse has abandoned this strategy and turned to the bulk sales model.

Today's box horses are also increasingly location-oriented. Hou Yi, in an early interview, argued that "location is not important to us". In Beijing, the first store of the box horse was opened in Shilibao outside the fourth ring road.In the first half of 2018, most of the stores of the box horse were mainly located outside the fourth ring road. But with the further expansion of Boxmart, Boxmart's view of location has changed.In the second half of 2018, Boxmart began to open its stores into Xizhimen, Shuangjing and other areas within the third ring road of Beijing where the flow of people is dense.

In terms of commodity structure, Boxma's adjustments have also become more refined. Now it has a special space in some stores as a "cheap food counter", which is aimed at price-sensitive consumers. Once made into a hit king crab, Boston lobster and other high-priced seafood is still sold in stores, but the number of individual categories and the total number of large seafood in the store are decreasing.

"Big seafood is still sold today, the market is there, but it's not as sought after as it was in the past few years. So today if you still have to go into new retail to sell big seafood, basically the expiration date is one month." Hou Yi mentioned this year when reflecting on the big seafood model in the keynote speech "2019, the battle to fill the pit".

The big stores need people to continue to buy goods, when people's freshness to the big seafood after the past, it can bring sales growth is not much, once as a new retail label of the net red seafood is just a tool for the stores to attract traffic. According to Hou Yi, the seafood currently on sale, regional, seasonal stronger crayfish, hairy crabs and other small seafood is now the store's main seafood products.

This series of changes in the box reflects its reflection on the "new retail".

2019 is a year in which the new retail model represented by the box horse has a concentrated outbreak of problems. In May this year, the box horse for the first time after the closure of stores, its competitor Yonghui two months later also closed its super species in Wujiaochang. On top of that, Meituan also shut down its three Little Elephant Fresh stores that opened in Changzhou this year, leaving only two stores in Beijing.

China as a huge consumer market, regional development differences determine the mainland market diversified consumer groups and differentiated consumption habits. This has led to the box can not be as it began to plan, through the creation of boutique fresh food supermarket standardized template quickly "copy" to the whole country, to complete the expansion of the occupation of the market.

After the wave of store closures, the box horse, which has been running for three years, has begun to be "grounded". This result also reflects the characteristics of the retail industry itself, this relatively close to the consumer consumption scene, it is destined to be a heavy operation of the business.

Although these new retail companies, hoping to use online orders and a series of digital transformation of traditional retail to improve efficiency, and to seek new profit space in the retail industry. But this model still needs to answer the question - "Can online become a profitable path for retail in the future?" Hou Yi mentioned in a recent interview that the core of profitability is that the gross profit revenue per order should be greater than the logistics costs.

This also means that the more online orders, the higher the logistics costs it needs to bear. The current ratio of online and offline orders is 7:3, if the store can not improve the gross profit, it still can not solve the problem of loss. Hou Yi believes that the key to improve gross profit is to clarify the positioning of the store - whether it is positioned as a boutique supermarket or a hypermarket. The former means that stores need to improve unit price, while the latter needs to further improve the store's business management capabilities, through the store quality to drive sales. These two roads, either one of them points to heavier operations.

By 2019, the box horse has no longer mentioned the previous five "unified". "Today's new retail is definitely not a version, today's box horse fresh life is definitely not a kind of commodity is enough, but to return to the basic theory of retailing according to local conditions, that is, positioning theory. For different business districts, different cities, you have to go for the institutional configuration that meets the income level of local consumers, consumption habits required." Hou Yi said in an interview.

For the box horse, only big stores are not enough. Since 2017, the box horse has been exploring new retail formats in addition to large stores.

In December 2017, Boxma's first convenience store format, Boxma F2, opened in Shanghai. It continues the logic of the early box horse supermarket retail with food service. Compared with traditional convenience stores, it is more like a dining stall for high-end customers, mainly to meet the immediate dining needs of the office crowd.2018, after Ali's shareholding in RT-Mart, BoxMart and RT-Mart cooperated to launch the "box pony". They take advantage of RT-Mart's store resources in the suburbs of first- and second-tier cities and in third- and fourth-tier cities, exploring the model of small stores to assist in the national expansion of the box horse.

But early attempts by Boxma to diversify its business were not successful. As of January 2019, the number of box ponies was only 16 units. In April this year, Box Pony's first store in Suzhou announced its closure. As for the convenience store format of box horse F2, Hou Yi bluntly mentioned in an interview with Lianshang.com not long ago that "F2 our first version of the opening failed, and has been pushed back."

From the early box horse F2, box pony and other store formats, its store layout and positioning is not yet clear. But by the end of 2018, refined operation became one thing that Hou Yi emphasized more. With this, the box horse more systematic adjustment of the store system.

The box horse in March this year put forward a "big four small" store system new model, followed by the recent launch of the breakfast pick-up cabinet Pick'n go serving the first-tier city commuters, to start the "1 + N The "1+N" multi-format layout. In addition to the box horse, the new retail companies that were originally chasing big stores are now making their stores smaller.

Yonghui this year launched a similar Yonghui market life with the box horse market, and service community Yonghui Mini. the small elephant division of the United States in April officially launched the United States to buy food, the use of the front warehouse model to launch a free distribution, the fastest 30 minutes delivery of the online grocery shopping service.

This year, the box horse in the store layout of a clear change is that it also began to do the previous clearly not optimistic mode - front warehouse. Now the box horse also began to re-evaluate the value of the front warehouse.

In Hou Yi's recent interview, he mentioned that the reason why the early box horse did not do the front warehouse is that the front warehouse store is too small, storage categories are limited, it can not meet the main box horse in the high-end customer groups of consumer demand, and the efficiency of the front warehouse and the price of the customer unit is relatively low, wear and tear and the cost is very high. But Hou Yi also recognized the advantages of the front warehouse. It can flexibly cover more areas, which is not possible in the big stores of the box horse.

Dingdong buy groceries using the front warehouse model, although the establishment of only two years. But according to 36 Krypton, its repurchase rate has already exceeded that of the box, and although Dingtong grocery traffic is only one-tenth of that of the box, its order volume is close to that of the box. In addition, than Dingtong buy groceries earlier than the front warehouse model of the daily fresh, has basically verified its front warehouse model in the Beijing market. According to David Wang, the current inventory turnover rate of daily fresh front warehouse is 2.5 days, the loss rate of 1%, lower than the loss of 5% to 10% of domestic supermarkets.

Relying on the front warehouse model to quickly penetrate into the city's various regional spaces of the competitors, further competing with the box horse it has not yet had time to penetrate the consumer market.

This has also prompted Boxmart to make further store split adjustments. "We don't think the front warehouse can make a profit on its own, Dingtong grocery shopping current model will never make money, unless it grows another model outside of this traffic model. But if you want to burn money, then we burn together." Hou Yi said in a recent reference to the front warehouse.

In addition, through the layout of the "1 + N" store system, the box horse is more accurate to the urban customer segmentation.

With the acceleration of urbanization in China and the increase in population density, the diversity of urban space also means the stratification of consumption. This is the space for retail development. With the change of domestic demographic structure, the consumption of domestic residents in the community is also increasingly becoming the scene of competition for new entrants to the retailers. In recent years, the rapid development of community group purchasing and convenience stores are all based on the rapid development of the community. This is also at the beginning, the box horse did not pay attention to the urban hinterland.

The original positioning of the customer base in the first and second tier cities in the high-end customer base of the box, and now also in the repositioning of the customer base it has to face. Now the box horse also talked about "sinking", and re-breakdown of the functional areas of the city, launched a store model for the community, CBD and other areas.

At present, with the help of the small station of the box horse, the box horse plans to fully cover its services in the main urban areas of Beijing and Shanghai by the end of this year. In addition to the small station, the box horse launched the box horse vegetable market is mainly positioned in the community and suburban areas, the market will not have a dining area, the target audience to the middle and old, price-sensitive people. The goods in the store are also different from the fine packaging in the big store of Boxmart Fresh Life, and sold in bulk form; Boxmart F2 is positioned in the city's office building business circle, providing convenience store services for the office workers in the city.

Although Boxmart mini is a smaller version of Boxmart Fresh Life, its customer orientation is significantly different from Boxmart Fresh Life. Its main positioning will be oriented to the relatively weak spending power of the city's customer base. Located in suburbs and towns, the area of BoxMa mini is only one-eighth of that of BoxMa Fresh Life, and according to Hou Yi, the daily sales of the first BoxMa mini in Shanghai were around 80,000 yuan. After the test in Shanghai meets the expectations, the box mini will enter the third and fourth tier cities.

In addition, Boxmart has signed contracts with 13 real estate developers, including Indigo, Xincheng, Evergrande, Biyuyuan, and Sunac, to reserve store properties for expansion. Hou Yi also revealed in an interview with Lianshang.com this year that the community shopping center of the box horse will also open in September this year.

To this point, the box horse has extended its tentacles from hypermarkets, fresh food e-commerce, and catering to more retail scenarios such as shopping centers, convenience stores, and small supermarkets. Every field it faces fierce competition. Box Horse needs more than just technology, the adjustment of the management and operation level is also a step it must follow as soon as possible.

"Physical retail or to return to the essence of retail" is Hou Yi's most frequently mentioned idea at this stage.

In the process of rapid expansion, the flaws in the management of the box horse have been exposed. Especially in 2018, it has been exposed to a variety of problems caused by management flaws. In September last year, Boxma Fresh Life Bairong World Trade Center store was interviewed for failure to categorize kitchen waste. By the end of last year, Boxma had been exposed to four food safety problems one after another. These include the replacement of date labels for carrots in the store, the sale of expired Liltai coconut milk, moldy dragon fruits, and the sale of crucian carp was detected with excessive enrofloxacin and other issues.

Along with the multiple retail formats that Boxmart has been rapidly laying out this year, it is in dire need of a more scientific management system to face this diversified, and clearly localized, retail market. Also for this reason, from the beginning of 2018 box horse has begun a series of adjustments at the level of business management.

Some of the earliest changes are reflected in the recovery of operating rights.

Previously, in order to rapidly expand, in addition to the self-management model, a small number of regions used the model of joint operation with regional supermarket brands.In August 2018, Ali registered the Hangzhou Box Horse Network Standing Technology Company Limited in Hangzhou. The behavior was seen at the time as a precursor to Ali's recovery of its right to operate box pony in the Zhejiang region from Sanjiang. Due to the poor performance of the box pony, the box horse has also recovered from the hands of RT-Mart the right to operate the brand.

In addition, the box horse in the talent training also began to pay attention to training "their own people". Hou Yi said that most of the staff of the current box horse from the social recruitment. Next, the company will focus on the training mechanism from college students to general managers. He hopes that in the next one or two years to train the staff of the box office to understand the culture of Alibaba and understand the new retail.

Secondly, in terms of supply chain, Boxmart is also exploring and integrating Alibaba's resources to meet the needs of Boxmart's expansion.

For the high-frequency consumption of fresh food to build competitive barriers, the ability of the supply chain determines how far it can go in this competition. Self-branding is a new area that companies are expanding in the highly competitive new retail market today. Previously, in order to improve its competitiveness, the box horse launched its own brand "daily fresh". In addition, according to Hou Yi, this year's box horse private brand accounted for 15%, and in the next three years this proportion will grow to 50%. Wing Fai also previously proposed to increase the proportion of private brand sales program. At the end of last year, Yonghui launched its own brand "Yonghui Preferred", and said that by 2020 the proportion of free brand sales will increase from 3.6% in the first half of 2018 to 15% to 20%.

Self-branding requires a more efficient supply chain system to work with it. At present, the "daily fresh" is the base of direct procurement model, the selling period is only one day. For Box Office, the increase in the proportion of its own brand puts a higher demand on its supply chain.

In order to adapt to the sales volume of the box horse, the box horse on the one hand, different from the traditional supermarket supply model, from the beginning through the buyer model to supply. The buyer is responsible for the entire chain from production to sales, reducing the intermediate links of suppliers and improving efficiency.

On the other hand, with the increasingly fierce competition in the community and fresh food sector, the entire Ali system is also adjusting to provide more support for Boxma.

In December 2018 Ali announced the transfer of Ego, which is responsible for the fresh food operation of Tmall Supermarket, to Boxmart. In the new round of organizational upgrades announced by Alibaba Group in June this year, the box horse was upgraded to an independent business group. For the box horse, the identity of the independent business group is conducive to its better integration of the resources of Ali's fresh food business sector, and further promote its integration with the Tmall Supermarket fresh, hungry, and other lines of business.

In addition, in the box horse internal organizational structure, in order to adapt to the complexity and diversity of the retail market, it itself is also exploring a set of coordination between the headquarters, branches and stores management methods. Hou Yi said, specific to the supply chain level, large products, core procurement by the headquarters is responsible for, but specific to the local, there are branches to determine the specific sales categories.

Going into the third year, the box horse, whether from the model or operation are experiencing a new period of rapid adjustment. According to Hou Yi's vision, it will cover all cities with a population of more than 1 million, and the speed of expansion will not stop. In terms of profitability, he hopes that BoxMart's future net profit will reach 7% to 10%. To realize these goals means that Boxmart still needs to make adjustments based on changes in the competitive environment. At present, from "big" to "small" box horse is just an adjustment stage it is going through.

"The biggest ability of the box horse now is that it can be constantly iterated". In the face of this heavy operation of the retail industry, the ability to iterate may be the weight of its fight for the initiative.