Why can online fruit marketing make money?



L is my college classmate, a computer network link. When I was in college, I started accepting orders for IT projects. Life was self-sufficient. After graduating from college, he registered a local e-commerce company in Chengdu and started selling fruits online. The direction of e-commerce ventures was as early as expected, but the idea of ​​selling fruits online is really puzzling me.

The marketing of fruits through the Internet is still in the stage of trials in China. The stability of the business conditions, the ability to effectively control risks, and how to balance costs and benefits are problems that need to be faced. So I had a lot of questions about L's fruit marketing model.

1. Our online shopping is convenient and quick. Fruits can be found everywhere in physical stores, supermarkets, farmers' markets, etc.

See all the streets and alleys of the city, which are already very convenient to buy. Do you still need to buy online? L's company

In the end is how to locate it?

2. Customers can only know the product information through pictures, texts, etc., can't understand the quality of the fruits to be purchased, the information asymmetry that may be encountered, and how can they be improved?

3. Fruits are perishable, easily moldy, and their supply is greatly affected by seasonal factors. How does the company solve the warehousing problem?

4. Under the online marketing model, what are the costs and benefits, and how can the company profit?

In order to answer my questions, I asked L about the busy schedule a few days ago. L asked me to explain the company's strategy and operations in detail. This suddenly dawned on me. Combined with the specific knowledge of management economics, I summarized L's management approach.

【Question one】

Generally speaking, the conclusion of any business is a game process. Both sides of the transaction hope that their interests will be maximized. For the enterprise side, of course, it is hoped that the product will be sold at a higher price so as to ensure that there may be more profits. However, for consumers, different products have different price elasticities (price elasticity refers to the sensitivity of corresponding changes in demand for a product when the price of a product changes).

As modern people are increasingly concerned about topics such as dietary health, nutritional balance, disease prevention, and beauty and weight loss, fruits are a necessity in people's urban life. As people deepen the concept of health, green, organic, and environmental protection, it is expected that people's demand for fruits in the future will increase unabated, so that fruit is a commodity with lower price elasticity.

In addition, income determines consumer behavior. People in different income classes have different sensitivities to fruit prices. The following figure is based on a number of statistical data "map of different levels of fruit demand." From the figure below, it can be seen that high-income people have great changes in the price elasticity of fruit, and low-income people have little change in the price elasticity of fruit.

Utilizing the low sensitivity of higher income groups to prices, L has positioned the company as a “high-end fruit website”. In addition, in addition to satisfying the dietary needs of consumers, high-end fruits can also be used as gifts to share with friends and family. Therefore, the website is dedicated to publicizing the concept of “send fruit to send health” and it has positioned itself as a “gift fruit website”. Nowadays, most of the fruits sold on L's website are imported high-quality fruits, and they provide exquisite gift wraps and door-to-door service in Chengdu's third ring, which increases the appeal to specific customers.

In fact, we also observed that most of the fruits in the market are low-end routes, and the packaging is simple and crude. If L continues to follow the low-end route, first, the positioning of the website itself becomes vague and its characteristics are not clear; second, it is very likely that the low-end fruit market that has become saturated already will be opened, and people are more willing to go. Nearby supermarkets or vegetable markets buy cheap fruits instead of buying them online. Third, even if people are willing to buy online, L’s company is faced with the risk of return because it is responsible for distribution. The cost has increased but the benefits have not increased. How does the company continue to operate without profits?

At present, the supply of imported fruits in Chengdu is not saturated and prices are still high. L company's online sales model can make up for the market supply gap for high-end fruit. In summary, the feasibility of fruit e-commerce is still very large.

[Question 2]

In theory, in the environment of e-commerce, customers can search for product information on the website, break through the space constraints, and make better purchasing decisions in a short period of time. However, for the customer, the factors that influence the purchase decision are mainly the quality factors of the product. The offline market's merchandise sales are generally the real information obtained by the consumer after touching, using, or testing, thereby trusting the seller to make a purchase decision. In the online shopping model, consumers are likely to encounter information asymmetry due to product decisions based only on images, text, and other information.

This information asymmetry may be manifested in several aspects: First, the symbol quality information issued by the seller is inconsistent with the actual quality information of the commodity; Second, the buyer's psychological expectations are too high and result in dissatisfaction with the actual quality information of the commodity. It is easy for L Company to sell fruits of this particular nature to cause actual and expected inconsistencies and to form an adverse selection.

L company is also very concerned about the above-mentioned issues, is actively doing the following work for customers to provide more comprehensive services.

First, the company recommends that customers use cash on delivery to pay for the purchase of fruit. In this way, the customer can personally inspect the fruit at the first time after the fruit is delivered to the customer and check the payment after the satisfaction. Second, the company is also brewing third-party evaluation modules to increase "customer rating", providing a mechanism for customers to write down the post-purchase feedback information on the website in order to guide new customers to make rational purchase decisions.

[Question 3]

It is due to the characteristics of perishable fruit, mildew, and seasonal factors that affect the characteristics of the fruit. Suppose the company stores fruits by renting freezers. If the fruits are unmarketable, they will bring a lot of inventory backlog. Incalculable bad debt costs. Even if the fruit is sold well, because the order quantity is fluctuating, it is often impossible to effectively budget and estimate, and it is difficult for the company to determine the specific amount of stock.

The possible situations are: when the sales volume is good, the inventory requirements cannot be met because of the shortage of fruit in stock; when the sales volume is poor, a large amount of backlogs of fruits and mildew are caused and the company suffers losses.

L then found several high-quality imported fruit suppliers to negotiate with them. L hopes to sign a long-term supply agreement with them, that is, each time the website receives the customer's fruit order, L can directly transfer goods from their fruit storehouse, settle the payment monthly, and pay a fixed percentage of the fixed price.

[Question 4]

The main costs of the fruit e-commerce website are: main business costs (product costs, distribution costs, return costs), other business costs (office rental fees), sales expenses, management expenses (related to employee salaries, equipment, depreciation and amortization) Wait. The main income: product sales revenue, freight income.

As mentioned earlier, the main cost of fruit comes from the supply costs paid to upstream suppliers, which also include product prices and some fixed costs. The distribution costs of the product include the depreciation of the delivery vehicle, the fuel and gas of the vehicle, and the salary of the delivery personnel. In order to attract customers, the company also decided to enjoy a 50-yuan fruit free shipping discount. In fact, there are only a few customers who order fruits under 50 yuan each time. Therefore, the cost of distribution mainly depends on product revenue. Most online shopping customers are bought in large quantities, and the cost of sales includes product promotion costs. Since the company itself is based on a web carrier, its publicity is mainly conducted on the Internet, such as through important forums, blogs, and websites. The way the company's information is posted on the website has played a good role in publicity, and the cost is not very expensive compared to the entity advertisement. Another important one is the office rent, equipment depreciation, staff wages and benefits.

The above-mentioned costs are the necessary costs for the operation of an enterprise. As an e-commerce company, his most prominent feature is that the cost-saving effect is far greater than the incremental cost.

Increased costs: Fixed warehouse occupancy costs, distribution costs

Cost savings: warehousing costs, bad debt costs, distribution costs, marketing costs

To cover the above costs, the company must guarantee a reasonable price. Companies choose to take the high-end route is a wise choice. Taking into account the "Vebren effect" in economics, that is, "the higher the price of some commodities, the more they will receive consumers' favor." This phenomenon was first noticed by the American economist Veblen. For high-income non-elastic people, they are more eager to pursue taste and style, and thus also support L's high pricing strategy.

L company's key marketing focus is to keep some high-quality customers, such as agreements with some companies, L directly to the company for the distribution of employee benefits, meeting fruit and so on. L also strives to conduct customer relationship management (CRM). While actively expanding new customers, it also strives to maintain a loyal old customer base. For example, the company has a special large client commissioner to provide personalized services for large customers. As the economic law of Matrell (also known as the 80:20 rule) mentions that the business management of enterprises should focus on the key 20%, so when it comes to CRM, L company focuses on maintaining 20% ​​of large customers because This part of the customer can bring 80% of the company's revenue. The facts are indeed true. So far, most of the company's large customers have been used for the second time. This has ensured stable orders and sales revenue.

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