Talk about a distribution model that has swept e-commerce

Editor’s introduction: With the development of the e-commerce industry, even if you don’t leave home, you can buy the goods you want across provinces or even across borders. What kind of model is working behind this? The author of this article introduces one of the e-commerce models – a piece of agency, let’s take a look at it.

Talk about a distribution model that has swept e-commerce

As a consumer, we can buy all the goods we need in the market, from furniture and appliances to daily necessities. Where there is demand, there is buying and selling.

When I was very young, we carried out a series of transactions and transactions that could only be done offline, and the types of items you could use depended entirely on the development of the shopping malls around your home, and I still remember that my father traveled to give me a set of small toys that I bought from the big city, which was simply a novelty for me as a young man.

With the development of the e-commerce industry, consumers can now buy the goods they want across provinces or even across borders even if they stay at home. As a consumer and trading product, I can’t help but wonder, what kind of model is running behind this? Today’s introduction to you is a very popular e-commerce model in the industry: a piece of agency.


1. Commodities

Consumption is inseparable from commodities, in the vast hundreds of millions of goods, which commodities do merchants choose to sell, and what are the standards. Before officially entering the theme, first look at the two attribute characteristics of the commodity, the attributes of the commodity can be summarized into two: frequency and gross profit.


1. Conceptual explanation

  • Frequency: Frequency is well understood, which refers to the number of times it was purchased
  • Gross profit: Gross profit is the profit obtained after the sale of the commodity, without removing the fixed cost, here is also compared to distinguish a concept called net profit

Let me illustrate with an example: Xiao Wang opened a fruit shop, mainly selling apples, mangoes, and bananas. The total sales of fruit he sold this month was 10,000 yuan, the total price of fruit was 6,000 yuan, and the monthly rent, water and electricity, and labor input costs were 1,000 yuan.

So this month, the gross profit of Xiaowangjia Fruit Shop = 10000-6000 = 4000 yuan; Net profit = 10000-6000-1000 = 3000 yuan

Cleverly, you must have guessed the difference between gross profit and net profit:

Gross profit = Sales Revenue – Cost of Sales

Net profit = sales revenue – cost of sales – fixed expenses

Calculation formula :

Gross margin = [(Sales Revenue – Cost of Sales) / Sales Revenue] 100%

Net Profit = Net Profit / Sales Revenue 100% = (Sales Revenue – Cost of Sales – Fixed Income) / Sales Revenue * 100%

Back to the point, the two attributes of a commodity include frequency and gross profit. According to the 4 quadrant, it will be divided into four categories: high gross profit purchase frequency, high gross profit purchase frequency, low gross profit purchase frequency and low gross profit purchase frequency.

  1. With high gross profit and high purchase frequency, such as private brands, the quality of goods can be guaranteed, and the brand effect and user stickiness are also enhanced
  2. High gross profit and low purchase frequency, such as 3c category, can pull purchasing power through marketing and increase profits
  3. Low gross profit and high purchase frequency, such as daily necessities, food products, can be used as drainage products to enhance user interaction
  4. Low gross profit and low purchase frequency, the main role to supplement the rich category, although it may not be sold, but it must be there. Create a one-stop shopping atmosphere for users

Merchants will choose their own brands according to these four dimensions to enrich the goods in their stores


Second, what is a piece of forwarding

1. Own warehouse mode

In general, the general supply chain model in the industry is mainly divided into two categories, the first is to have their own warehousing capabilities, place goods and materials in their own warehouses, and be responsible for packaging and shipping by internal employees.

Common ones, such as some private brands, have their own storage capabilities. The advantage of this model is that the pricing power and after-sales standards are their own decisions, and they can also improve the user experience, the delivery rate can be guaranteed, and the unified packaging can also improve the sense of quality.

However, the disadvantage is that the storage cost is high, labor costs, site costs, etc. are relatively high, generally for the own warehouse for gross profit is a great requirement, low gross profit will inevitably lead to losses.

Role Definition:

  • Buyer: For consumers, his core appeal is to buy good and cheap goods, so he does not pay attention to whether the seller is a manufacturer or not, and who can bring him the lowest price under the same quality of goods, he will choose who.
  • Seller: seller is the manufacturer, from pre-sale, delivery, after-sales are their own responsibility, the advantage is to have a say in the pricing of goods, delivery timeliness, after-sales standards are independent control, can give buyers preferential prices as much as possible, before there was a period of time of hot [factory direct sales] concept, is to create no middlemen to earn the difference, the price is more affordable, to attract consumers. However, once the sales are poor, the supply of flow is insufficient, the fixed expenditure cost of warehousing and manpower cannot be avoided, and whether it can be truly profitable, I personally think it is relatively difficult.


2. One piece of consignment

The second is that it does not have its own warehouse ability, which belongs to a proxy mode. So what is a daisy? In fact, a consignment model mainly solves the problem of sellers who do not have established warehousing capacity to sell.

Role Definition:

  • Buyer: Ibid., the consumer who purchased the goods.
  • Seller: After signing a contract with the manufacturer, the seller is responsible for selling as a distributor and earning the difference. The manufacturer is responsible for delivery and after-sales. Obviously, this model is “light” for sellers, and there is no need to bear fixed costs such as various manpower and venues. But again, because it is not controlled by yourself, the delivery time cannot be controlled, the packaging of goods may not be uniform, and the user experience is general.
  • Manufacturers: For manufacturers, everyone is your salesman, and you can quickly sell through different channels. Similarly, the sales capacity of different merchants is different, it is likely that the manufacturer invested in the labor cost of delivery and docking each merchant, but in the end, due to the weak sales ability of the merchant itself, the after-sales return rate is high, resulting in the manufacturer’s final loss and no longer renew the cooperation.


Third, how the trading system supports different business models

Is there a difference in the interaction between systems in different business models?

As shown in the following figure, the roles involved in the transaction link are as follows:

  • C-side/business background: Serves as the entrance for users to trigger orders
  • Transaction orders: Data consistency verification is carried out, and promotions, goods, and inventory are queried for pricing
  • Commodity inventory: After passing the data consistency verification, the inventory is locked and the inventory is deducted after payment
  • Fulfillment: After the payment is successful, the order notification performance is created to create a fulfillment form, and the positive process of the virtual goods ends; For physical goods, the fulfillment system is issued to wms to notify shipment
  • wms: wms issues a designated warehouse, the warehouse completes the printing surface list, out of the warehouse, the system will automatically send back the single number
  • After-sales: When initiating after-sales, notify the warehouse to intercept the goods, and when it is judged that the warehouse has intercepted the goods or has received the return, then refund is made

The above is the transaction delivery logic of the self-operated warehouse, for a piece of delivery mode, the entire process of [order issuing warehouse] [single number return] [after confirming the return can be carried out after the sale] process is completed through manual offline docking, at the same time, can not be placed before the system automatically do some logical restrictions related to the warehouse, such as freight, such as restricting the delivery area, etc., can only be manually limited.


Fourth, personal thinking

In my work experience, both the operation mode of taking over the self-operated warehouse, but also the operation mode of taking over this kind of generation, in the division of posts, warehousing belongs to the supply chain part, the invoicing and sales of the self-operated warehouse is a very complex set of logic for both the supply chain business itself and the system, for companies that just want to choose a new e-commerce track to test the waters, a generation mode is the best choice.

This time is mainly to try to sort out this kind of a piece of the model of distribution, for the part of the self-operated warehouse, there has been no opportunity to go deep into the warehouse to investigate the practice, worried about misleading everyone, here will not be much to repeat.

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