In recent years, you will find that Internet tycoons with a company market value or valuation of more than 500 billion yuan have retired, which makes everyone feel a bit sad. After all, these tycoons are not more than 60 years old, and the youngest is less than 40 years old.
This is definitely not a normal phenomenon, because there are many super rich people overseas who have to work until they are over 80 years old, such as Buffett, Charlie Munger, etc.
Why did these super rich people in China turn to the background at such a young age?
This is all related to the newly revised Anti monopoly Law of our country, which aims to restrict Internet giants’ unnecessary expansion in various industries. Because some companies may have a market value of 1 trillion yuan, but they can access 10 trillion yuan of funds, which is a very terrifying data. So much capital is enough to reshape an industry, or to bring down all the previous operators of this industry and create a new monopolistic industry.
It is undeniable that the entry of Internet giants can improve the efficiency of the industry to a certain extent, but it may cause large-scale unemployment.
Liu Qiangdong once stated many years ago that the essence of e-commerce is to replace three traditional store servers with one person who has attended university. If e-commerce creates 10 million new jobs, it will also cause 30 million people to lose their jobs.
It is hard to imagine that capital controls every industry through the Internet. What will our life be like?
The Anti monopoly Law has curbed the occurrence of this phenomenon to a certain extent, and it will also put some pressure on the original business of Internet giants, prompting their scale to shrink to a certain extent. Don’t be surprised or sigh, because the reason why they were able to expand quickly before was because they were built on illegal foundations. For example, choose between two options.
The slowdown of Internet giants has actually given ordinary people a good entrepreneurial environment, which is beneficial for more people to find opportunities. What they need is a new business model.
We can first review how the capital model has developed!
Assuming we are in a small town with a total of 10 supermarkets, Lao Wang’s supermarket operates the best with an annual turnover of over 10 million yuan, while the other 9 supermarkets have an annual turnover of 5 million yuan and a net profit of around 1 million yuan.
What should capital do if it also wants to enter this industry? It’s definitely not going to open a supermarket myself, but to talk to an industry leader and ask him to acquire his peers, ultimately playing a monopoly.
At this point, capital will approach Lao Wang and express their willingness to invest 54 million yuan, accounting for 30% of Lao Wang’s shares. Lao Wang cannot do anything else with this 54 million yuan and can only acquire the remaining 9 supermarkets, each valued at 5 million yuan.
But when Lao Wang went to talk to these 9 bosses for the first time, he was turned down because the 5 times P/E ratio was too low, and what was he doing with this 5 million yuan? It’s all one problem.
Lao Wang came to the capital with doubts. What should he do if the other party does not allow the acquisition?
Capital smiled slightly, don’t panic, they don’t want to be acquired because they feel they haven’t felt the pain yet. Normally, the gross profit of a supermarket is around 30%. If we sell at wholesale prices, will we attract customers from other supermarkets? After all, it’s a lot cheaper.
For example, for the same product, everyone’s wholesale price is 10 yuan, while the retail price in other supermarkets is 13 yuan. However, Lao Wang’s supermarket only sells it for 10 yuan, which is actually selling at a loss. This will leave other supermarkets powerless to fight back, as they have their own rent, employee salaries, and so on.
It may not take more than six months for the other nine supermarkets to kneel down and beg for mercy, but at this time there will be no purchase price of 5 million yuan, it will drop to 4 million yuan, because their revenue has declined severely and their profit situation is not optimistic.
This is the most typical model of capital burning money subsidies, competing to see who is richer.
After Lao Wang successfully acquired 9 other supermarkets, he achieved a monopoly on the small town supermarket business. Subsequently, 10 supermarkets can gradually increase their prices by boiling frogs in warm water to bring them back to the level before the price war. Even worse, some may raise the selling price again. For products with a wholesale price of 10 yuan, the retail price has risen to 15 yuan, and the gross profit margin has soared to 50%.
Thus, the profits of the supermarket began to increase significantly. Slowly, consumers will also find that they have less and less money to spend. What should they do at this time?
Don’t be afraid, supermarkets allow you to borrow money to make purchases through their credit system, as long as you repay the money on time. What should I do if I really can’t afford to pay back the money? You can apply for installment repayment, as long as you pay a little interest every month.
In this way, the supermarket has transformed from its original retail business to the financial sector, and as a result, its value will double, becoming a supermarket sought after by capital.
However, we can also find that the more developed such supermarkets are, the more difficult it will be for consumers to save money, and ultimately consumers will have to rely on the supermarket’s borrowing to survive, which is not a good phenomenon.
Perhaps we also want to use capital to operate supermarkets, but we will find that we don’t have as much money as capital, and we can’t play this game with capital at all.
So the question is, how can small and medium-sized enterprises break through?
Let’s go back to the small town supermarket itself. The biggest core competitiveness of the supermarket is its location and price.
What should Lao Wang do if he wants to attract customers from the other 9 supermarkets to the maximum extent without the help of capital?
This is actually a problem that most entrepreneurs are facing, and the first approach we need to eliminate is to follow the same method as other supermarkets.
Disruption and Refactoring clearly states that you can never defeat your peers using industry standard methods, which is unrealistic.
Supermarkets also have special methods to do it, and the most mainstream way is to compete on price and directly fight to the end.
In the book ‘Disruption and Reconstruction’, we take Costco, an American warehouse style supermarket, as an example to explain how supermarkets defeated their peers by implementing a membership system.
Why is membership system particularly suitable for supermarkets?
The reason is that supermarkets simply cannot achieve a perfect balance between location and price. If a supermarket wants low prices, the location may be relatively biased. If a supermarket wants good location, the price will definitely be expensive, after all, the rent is quite expensive.
Excuse me, if you are Lao Wang, would you choose a better location or a lower price?
I advise everyone to choose low prices, especially in supermarkets, because consumers are still very sensitive to prices.
For example, the 500ml cola we usually drink is sold for 2.8 yuan in some supermarkets and 3.5 yuan in others. People who often drink cola can feel the price difference of less than one yuan.
Of course, if it’s just such cheap cola, people may choose a nearby supermarket.
What if we sell Kweichow Moutai? Other supermarkets sell it for 2888 yuan/bottle, while we sell it for 1499 yuan/bottle. There is only a distance of two kilometers between the two supermarkets. Would consumers choose to run two more kilometers to buy the cheaper Maotai?
In fact, consumers are willing because every consumer has an accounting system in their heart, which calculates better answers. What we can do is to comply with this psychology of consumers.
Even ordinary daily vegetables, fruits, eggs, milk, etc. can be cheaper by more than 1 yuan per kilogram, and adding them together can save a lot of money.
The reason why Costco is more popular than Wal Mart after entering China is that supermarkets choose the way of ultra-low prices. The maximum markup for all products does not exceed 11%, in order to break even.
Isn’t opening a supermarket just for making money? Why does Costco open a supermarket to avoid making money?
The reason is that it is a membership system, and the main profit comes from the annual membership fee. The purpose of supermarket capital preservation is to give products an absolute advantage in price compared to other supermarkets. The products sold inside are even cheaper than online prices.
But if we want to go in and buy things, we have to pay an annual fee of 299 yuan, and only members can enter.
Many people have found through calculations that even if this supermarket is far away, it is still worth it, because buying a large quantity of products once may save hundreds or even thousands of yuan, and there is no reason not to apply for membership.
In fact, we can seriously study Costco’s business model, which is different from the traditional Wal Mart model, because Wal Mart attaches great importance to location, so it is difficult to reduce the price.
Membership is currently the simplest business model, but it is suitable for multiple industries. This is the charm of business models, as long as the underlying logic of things is found, it is easy to design business models that disrupt the industry. This is also the easiest point for small and medium-sized enterprises to break through.
What if our industry is not supermarkets, but foot baths and beauty shops? How should I proceed?
I believe everyone has their own answer. If you really can’t come up with a good business model, you can refer to the case study of “Disruption and Restructuring”, which may give you some inspiration.
In general, the retirement of Internet tycoons has reduced the simple and crude money burning games, and ordinary people have more entrepreneurial opportunities. As long as you have a unique understanding of business models, you have the hope to become “princes of one side”.
This is both the best and worst era, where disruptive innovation and new business models are integrated, and the whole world is your stage!
In the world of new business, there are no industries that have been eliminated, only companies that have been disrupted and eliminated. In the future, all business competition will focus on disruptive innovation and business model reconstruction. If a company or a boss lacks the ability to disrupt and restructure, they are destined to fail prematurely.
Please remember: Without innovation, there can be no imagination; Without imagination, how can we be competitive!
