Price reduction does not degrade quality! The biggest time in 17 years! Just announced

On November 29th, Yang Yinfen, the helm of Liangpin Shop, sent an internal open letter to all employees:Firing the first shot of "reducing prices without degrading quality"

It clearly puts forward:The largest price adjustment since the establishment of Liangpin Store in 17 years, the average price reduction of more than 300 sharp goods and explosive products was 22%, with the highest drop of 45%, focusing on snacks with cost optimization but no impact on quality and high repurchase rate.

Good shops wield knives inward, which is the same as the problems encountered by many brands that take the quality route at present: the consumption habits are changing with the naked eye: both necessary and necessary. Both the price and the quality are good.

At present, like Box Horse and Anta, good shops have to fight a tough battle. On November 27th, Liangpin Store held the second extraordinary shareholders’ meeting in 2023, and Yang Yinfen, one of the founders of Liangpin Store, was elected as the chairman and general manager of the company. Yang Yinfen took office, the first knife cut down the price at the same time, the internal repeatedly stressed:The price will "go down" and the quality will "not go down".Good shops will never be low-quality and low-price, but adhere to the high-quality route and return to the initial heart of "the quality of conscience, everyone’s shop".

Can a good shop go through the cycle again through drastic reforms?

Return to "everyone’s shop" and be "delicious but not expensive"

On Yang Yinfen’s desk, there are several hot snacks such as nuts and dried bamboo shoots, and different brands of small packages are marked with different prices.

The smell of price war pervades the general manager’s office.

Yang Yinfen’s mind is highly vigilant about the word "price comparison". Price comparison is a price war.

Before the establishment of Liangpin Shop, Yang Yinfen worked as the general manager of Kelon Electric Appliance Branch. The price war broke out at the earliest time in China, and the most tragic one was in the home appliance market, which violated business common sense and made profits thinner than blades.

Yang Yinfen, who rolled out from the price war of home appliances, is more willing to jump out of the price war to see this competition-

"In the era of rational consumption, letting consumers benefit is the optimal solution. The price adjustment of good shops is an adjustment made in response to changes in the external environment and consumer demand. Enterprises must go to the right place alive, reduce prices without degrading quality, and squeeze water from the supply chain and operation and management costs. "

This year, flat replacement products are very hot. The consumer psychology behind the popular word "Pingwei" is that,Consumers want goods with lower prices but the same quality.

Yang Yinfen said that competition makes them see their own problems more clearly, that is, consumers feel that good shops are "expensive". Now, the good shop will return to "everyone’s shop".Let consumers feel that "delicious is not expensive."

Why do good shops make consumers feel expensive?

In August this year, a duck tongue with a price of 528 yuan per kilogram was complained by customers that it was expensive. Later, some media compared 11 duck tongues on the market, and the most expensive one was 798 yuan per kilogram. Compared with the leisure snack brands on the same track, the price of good shops was the lowest, and the duck tongue products on the market were expensive, mainly because the raw materials of finished duck tongues raised the price.

From the consumer report, on September 13, 2023, WeChat tweeted, "Comparison of 11 duck tongues, the most expensive is more than 700 yuan a kilogram, how to choose between price and quality? 》

Nuts, seafood, beef and other categories are all facing this practical problem, because raw materials have raised the overall selling price, giving people this feeling of "expensive".

There are also some perceptions of conduction in business operations: the price tag of good shops and stores has only a single catty price for a long time, without any conversion expression, such as the price tag in Sam will directly convey the price of a small bag, and there are some publicity messages to weaken the impact of the catty price on consumers. In addition, although the price tag of good shops is "Jin price", the cash register system is "kg price", and young consumers "feel bad after seeing the small ticket".

The combination of the above factors makes consumers feel the pain of "price backstab". Behind it, it is also a signal of great changes in consumer psychology-under the economic cycle, consumption power has undergone structural differentiation. In the past, consumers were willing to pay a premium for quality, but now they need goods with a more "quality-price ratio".

Only reduce the price, not lower the quality.

New changes have taken place in the industry.

China’s first discount snack player’s wife appeared in Zhejiang in 2010, but the discount snack shop opened in the past two years, actually stepping on the current economic cycle.

The White Paper on Hard Discount of Snacks in China shows that the discount snack shops sinking into the community are 20%-40% cheaper than traditional retail stores; Average single consumption is 30-50 yuan.

Yang Yinfen said that good shops take the route of high-quality snacks, the cost of raw materials, the input cost of all links in the supply chain, quality control standards, etc., so the price is higher than that of discount snacks; However, if the price is adjusted again, the good shops will not become discount snacks. "The business models are different, the operating costs are different, the brand positioning is different, and the industry ecology is different. Even if it falls to the price of discount snacks, it will not solve our problems."

What is the problem with good shops? "Under the business philosophy of insisting on making high-quality snacks, there is no internal balance between price and quality, and some qualities that consumers don’t care about have caused misunderstandings to consumers. Now, we must optimize these unnecessary costs and return to competitive pricing. "

Back to competitive pricing, but the good shop drew a red line for itself-only price reduction, not quality reduction. Under this red line, optimizing unnecessary costs and cutting off worthless waste become the key.

What is worthless waste?Reflected in the quality control, it is necessary to control the quality that consumers really care about and squeeze out unnecessary costs, taking the quality route, but the products are not so expensive.

Taking nut products as an example, as raw material-based products, in the past, good shops required suppliers to purchase raw materials with specified specifications in the market, and the procurement cost remained high due to high grade.

Now, on the one hand, good shops bring the purchase of bulk nut raw materials into the direct mining system with suppliers, on the other hand, they change the strategy of raw material acquisition, carry out unified market mining, and then classify raw materials. Use different types and grades of raw materials to make different types of products.

Taking macadamia nuts as an example, products with different specifications are used to produce canned nuts, bagged products and comprehensive nuts. Small fruit has the advantage of high kernel opening rate and fullness, so it is used in comprehensive kernel products. By maximizing the use of raw materials, the price of each type of products has dropped by 5-10 yuan.

Another kind of raw material products has also found a way to reduce costs. Dried mango, as one of the explosive products of good shops, has been deeply loved by consumers. Dried mangoes used to be purchased from abroad and transported to China for processing, and there was a waste of raw materials in the middle. This year, good shops have greatly reduced the transportation costs of fresh fruit imports and the waste of finished products by supporting suppliers to set up factories overseas.

In order to achieve "price degradation, quality does not degrade",Yang Yinfen also set up a "Maori red line" internally, and once it is higher than the red line, it will "all fight back".At the same time, the internal cashier system is being tested: quickly identify the gross profit of 1600 items, and the cashier system cannot settle accounts above a certain proportion. In this way, internal teams are forced to reduce intermediate costs and improve management and operational efficiency.

To reduce the price, it is necessary to let consumers feel it.

Since July this year,Good shops began to explore the new pallet structure, and finally realized that the products with popular price and drainage products accounted for 80% of the total.

For this pallet structure, Yang Yinfen elaborated like this-

"The high-quality route goes up, the selection standard is the highest, and it is better to eat, healthier and fresher; Intermediate layer, which sets down the standards that consumers don’t care about in raw materials and auxiliary materials to meet the price requirements of consumers; The most cost-effective product at the bottom is a product that gives consumers thoughts. The key point is to cover young people who agree with the brand and provide them with more and better choices. "

This strategy focuses on differentiated competition. Under the growth flywheel formed by "low gross profit, high turnover and large scale" of discount snacks, homogenization competition is a fatal injury, only to see who is cheaper and who is in a better position. Good shops should build competitive barriers through differentiated innovation, so that consumers can feel that good shops are "delicious and not expensive".

Crispy pancakes sold for 200 million yuan in 2021. The special feature of this product is that 18% fresh potatoes are added to the formula, which makes the biscuit have a unique aroma and taste. This potato is a good product. The shops and suppliers compared the potatoes from all producing areas in China, and after more than 300 experiments, they selected Tengzhou potatoes in Shandong. Tengzhou potato has a high degree of standardized planting, which is convenient for machine peeling and saves costs greatly. The seasoning of crispy pancakes is exclusively provided by a Thai company, which keeps the unique taste.

Because of the scale effect due to the high basket-lifting rate, good shops have long ago hit the gross profit margin of this product to the lowest, and the 300-gram product sold for 12.9 yuan, making it a differentiated "explosive product". At present, the price of 1.32kg products of the same type in Sam is 59.8 yuan, which translates into 22.65 yuan per catty and 21.5 yuan per catty for good shops.

Yang Yinfen said that good shops should make more differentiated "low-priced explosives" like crispy pancakes. Low-price sales is not to engage in absolute low prices, but to make a step on the actual needs of consumers, to give consumers more than expected prices, and to bring more than expected experiences.

In some new products with explosive potential, "scale first, then profit" will enhance the purchasing scale and bargaining power of good shops and provide consumers with more products with high quality and price ratio.

Except for a few areas and special stores, nuts such as macadamia nuts, pine nuts, pistachios and cashews, meat snacks such as pork breast, duck neck and roasted sausage, and explosions with high repurchase rate such as spicy strips, dried beans, bread cakes and melon seeds are now the main force to reduce prices.

Taking nuts as an example, the price reduction of macadamia nuts, pine nuts, almonds and other nut products after price adjustment is up to 40%.

The pork jerky with the first order rate is the key product of this price adjustment. The price of the classic pork jerky is lower than that of Sam, Boxma, 89 yuan, Sam, and 65 yuan, a good shop. A bag of 60g hand-torn preserved meat, membership price of 5.9 yuan, dropped by 40%.

It is not difficult for customers who often visit good shops and stores to find that nearly 30 products of bread and cake products have membership prices: take scattered waffles as an example, the decline is 38%, and rye toast (300g), whole-wheat toast with red dates (300g) and low-fat whole-wheat toast (170g) are all frequently purchased.9.9 yuan……

Now, when we walk into the good shops, there are more explosive snacks that are lower than those in 9.9 yuan, and the prices of these hot snacks such as ganliren, kelp and dried mango are all down. The current membership price of another explosive product, Flandy Strawberry Dried, is only 49.9 yuan/kg, down 40%.

The price of crisp dates (35g), which has sold hundreds of millions of bags and been "stamped and verified" by numerous foodies, was also transferred from 7.9 yuan to 5.9 yuan for one bag.

Yang Yinfen said that the price reduction is below 20%, and consumers don’t feel much. "Everyone thinks you are expensive, so you must change, stay the same, and you will die."

The bottom line of price reduction comes from the improvement of supply chain efficiency

"This is a major business change for the company." Yang Yinfen said that good shops must ensure that they are still at the poker table in the future.

According to the consulting data of Ai Media, from 2010 to 2022, the size of the snack market in China will increase from 410 billion yuan to 11,654 trillion yuan, and it will maintain a steady growth trend in the next few years.

The plates in China snack market are expanding, but the channel reform is fierce, and the market share of good shops is shrinking. According to the data of Euromonitor and China Merchants Securities, in 2022, the market share of good shops is 1.6%, and the number one Mars is only 3.5%. The snack market is very scattered, and there is no scale effect.

In such a short time, there are so many discount snack shops in the market, and the attack speed is so fast, just like Ali and JD.COM looked down on Pinduoduo in those days. Now, the market value of Pinduoduo, which started from the low-end market, is four times that of JD.COM. Will such "low-end subversion" happen in the snack circle?

The exterior is changing vigorously. Where should the good shops go in the future?

Yang Yinfen believes that there is a certain capital bubble in the snack industry. There are 18 snack brands in a county. Is it that the enthusiasm of China consumers to eat snacks has suddenly increased by four or five times? The snack industry earns hard money, noThe low price supported by profit cannot be copied and sustained, and then there will be a elimination period and a cooling-off period.

Good shops have their own way to go.

According to the third quarterly report of Liangpin Shop, 291 new stores were opened in the third quarter, and the sales in South China, Southwest China, North China and Northwest China all achieved double-digit growth, and the sales of direct retail business increased by 35.33% year-on-year.

By opening a store to seize the blank market, expand the scale, gain sales growth, further improve efficiency and reduce costs. Yang Yinfen said that under the current competitive situation, good shops give priority to revenue growth, reduce profit requirements, and benefit consumers and cover a wider range of people by integrating supply chain resources.

Yang Yinfen frankly said that this competition made him see that there is still room for improvement in supply chain management of good shops, and good products need to be upgraded again.

All recessions are essentially replaced by lower-cost and more efficient models. Yang Yinfen, who rolled out from the price war, has a clear understanding of this. A good shop that is about to enter the age of 18 needs a new supply chain revolution to complete the "adult ceremony".

"We are not afraid of being caught, and what can’t kill us will make us stronger." Yang Yinfen said.

To be friends with consumers, this "supply chain revolution" must be fought down.

At present, it is not only good shops that are making large-scale price adjustments to cope with this change in the retail industry.

During this period, the box horse fresh played the "moving mountain price", which set off the prelude of the box horse reform. The low price of "moving mountains" mainly comes from the reform of supply chain.

The low price of discount snacks comes from low gross profit, high turnover and large-scale opening of stores. Through opening and joining, it can expand rapidly, make large-scale sales and form an absolute right to speak on the price of suppliers.

Yang Yinfen said that good shops and discount snacks are two completely different species. Discounting snacks is a channel logic, not a supply chain, not producing snacks, but a supplier. Good shop is channel+product logic, which has established a long industrial chain that goes straight back to the origin of raw materials. It is determined by the self-operated model that packaging should be designed, research and development should be done and product quality standards should be made.

The two have formed different price logic, and the methods of squeezing water from the supply chain are also different.

The way for a good shop is to squeeze water from lean management, save costs, and get rid of all wastes that customers think are worthless, so that every partner in the industrial chain can become a participant, contributor and beneficiary of reducing costs and increasing efficiency.

Back to the key question, why can good shops concentrate on reducing prices in a short time and directly benefit consumers?

On the surface, this is a price war, but in essence, it is a supply chain revolution. The key to winning is who has the ability to fight this supply chain revolution, and who has the ability to fight can truly reduce prices without degrading quality.

Squeezing water from the supply chain is a game of discourse power, cost control, product quality, production efficiency and commercial efficiency. To obtain a reasonable and competitive cost and have sufficient control over the supply chain, the core is to get the advantages of the whole chain, not just one port.

There are 330 suppliers of good shops. To control such a huge supply chain network and achieve a breakthrough requires long-term accumulation and upstream and downstream capabilities of the entire supply chain.

Yang Yinfen told suppliers that this industry is undergoing profound changes, and all walks of life are involved. If you don’t, you will be swept away by others. But this kind of roll is definitely not the ultimate squeeze on suppliers. "Suppliers are insecure and people don’t play with you." Yang Yinfen said.

This revolution began as early as 2020, and the strategic goal of the good shop this year was to form a breakthrough in cost audit. Help suppliers improve their lean management capabilities through 12 dimensions, such as job standardization, automation and continuous flow operation. In that year, good shops visited nearly 30 suppliers, and the procurement cost of suppliers decreased by 19.13 million. In 2021, the cost was reduced by 23 million.

The data accumulated in this large-scale audit provides an important reference for cost pricing, and the good shop has established a cost database and a set of digital management system for managing supply chain costs.

Still in 2020, the good shop promoted the factory to send the "seven-day fresh" model directly, and it took only seven days for nuts to be placed from order to harvest every day, which greatly improved the freshness. Good shops broadcast live in the factory, so that consumers can see the improvement of speed and efficiency with their own eyes. The conversion rate has increased by 102% and the repurchase rate has increased by 89%. The factory direct delivery mode saves 6 million yuan in logistics cost one year. Now, this mode is fully promoted in the supply chain system of good shops. And the premise of promotion lies in:

All factories that produce "7-day fresh" products need to meet a strict condition-on this single product of comprehensive nuts, the qualified rate of arrival in 2019 can reach 99.5%, that is, no more than 5 defective products per 1,000 pieces. In addition, the good shop also reached an agreement with the factory-the factory authorized to open the monitoring of the production process to the quality control personnel of the good shop and implement cloud monitoring for every link.

The explosion of over 100 million pieces of fragrant iron eggs dropped by 23% this time, and the space for price reduction was dug out from lean management. Under the guidance of the good shop, the supplier saved 1.05 million yuan a year by optimizing the production equipment, changing the method of peeling eggs, upgrading the packaging technology, and introducing color sorters instead of manual selection of "flower eggs". At present, the price per catty of this product is 39.9 yuan, and 92g of the box of Ma Xiang halogen iron eggs in bags is 9.9 yuan, which translates into a price per catty of 53.8 yuan.

The logistics carton of the New Year Festival has been reduced by 18.4% in 2022. Can it be squeezed further this year? The good shop will disassemble the packaging box, dig it one by one and adjust it one by one. It is estimated that the cost will be reduced by 8.62 million yuan in 2024.

In the end, these little costs are reflected in the price reduction of products and the benefits are given to consumers.

Where is the difficulty in the price reduction reform of good shops?

"It is necessary to further build consumers’ quality mentality for good shops; And be alert to the inertia of internal system operation. " Yang Yinfen said:"Snacks are popular products. What we do is the business of people who love life and enjoy the quality of life. The key for us to be friends with consumers is to ensure quality, and never make low-quality and low-priced products. Always remember that our initial intention is to be "the quality of conscience, everyone’s shop."

Contributor: Cai Yudan

Editor in charge: