Three Master Strategies for Traditional Enterprises to Transform into O2O

The 3rd Beijing Trade Fair, jointly hosted by the Ministry of Commerce of the People's Republic of China and the Beijing Municipal Government, was held in Beijing at the end of May. As the organizer of the e-commerce conference, the E-Commerce Committee of the China Association of Trade in Services held the E-Commerce Innovation Development Forum on May 30. The following is the speech transcript of Zhang Rongyao, Chairman of Rongchang Laundry.

Zhang Rongyao: Good afternoon, everyone! At this morning's meeting, someone said to represent the characteristics of the mobile internet in a few words, and I said the biggest feature of the mobile internet is entertainment. The PC internet is an era of technology. The mobile internet is an era of entertainment.
In China, among the top ten internet e-commerce companies, nine are pure internet e-commerce enterprises, and only one, Suning Appliance, is a traditional enterprise. Why is that? This is the second question I mentioned.
The third question is, nowadays everyone says Xiaomi's marketing is so powerful, Xiaomi is all about fan marketing. Suppose we set the price of Xiaomi phones to four thousand yuan, what would happen?
How to solve these problems? My own view is: First, no matter what, I have to make my product especially fun. Even the most boring things should be made interactive, fun, and entertaining. Second, will traditional enterprises be disrupted again? PC-based e-commerce disrupted traditional trade. When mobile e-commerce arrives, I believe mobile e-commerce is service trade, a service industry. When the service industry connects with e-commerce, will all our product services be vulnerable? Third, Xiaomi's core is still its cost-effective products. As a laundry company, how do I make my cost-effectiveness the best? When traditional enterprises become e-commerce enterprises, some will definitely dominate. I firmly believe some traditional enterprises will successfully transform into mobile e-commerce. If even a laundry company like mine can transform, I believe everyone will be full of confidence.
Just like when I attended some forums and events, all traditional enterprises came full of confidence to listen, but after listening, they felt: finally, we can sleep peacefully because we are completely out of the game.
After listening to them, they felt you guys are too awesome, we have no way to compete. An important point: the tiger and the elephant said let's discuss and ask a small fish how it learned to swim. The fish said I don't know how I learned to swim, and I can't teach you.
I think the transformation of traditional enterprises involves the three practical issues I just mentioned. I have been transforming for 14 years, starting from 2000. The biggest change was that although I have been in laundry for 24 years, I have never actually washed a piece of clothing. I have been pondering how to innovate and transform. In March and November 2000, I had two particularly exciting moments. In March, Goldman Sachs wanted to invest in me and asked some questions. At that time, I felt troubled because Goldman Sachs asked about my pain points that I hadn't even thought of. I said you are amazing, you haven't done laundry, how long did you study laundry? How do you know my pain points? But later I understood that investment banks have their own rules and routines. It made me realize that doing laundry through a chain franchise model has no future. Also, the pain points I felt and those visible to outsiders are two different things. In November 2000, I cooperated with Sina to do online laundry and realized a principle: I originally wanted to specialize in laundry. Before 2000, manufacturing was booming, and everyone was pondering whether manufacturing should specialize. I once wanted to produce laundry technology and detergents, but later found my understanding of the industry was wrong. I originally thought I was in the laundry industry and studied my technology. After cooperating with Sina, I realized my core competitiveness is my customers. I should specialize around my core competitiveness. So I want to share my painful transformation with everyone here. I almost moved an Italian dry-cleaning machine manufacturer to China to produce dry-cleaning machines. Later I found fortunately I did not start production.
Later I found that true specialization must be centered on core competitiveness, not industry specialization, because your understanding of your industry may be wrong. I began to transform all my data and resources toward my customers. I grasped my ultimate customers, and my franchisees naturally followed me. Environmental issues, heavy asset issues, especially problems like not finding store managers, not being able to rent shops, decentralized finances, and not being able to hire employees from other places—each of these problems was a deadlock with no solution. Later, I took these problems to CEIBS, seeking advice from my teachers and classmates on how to solve them. Near graduation, I found a new solution: the "one leads four" model, which later won the national best management model award.
My suppliers, for example, my equipment used to become a bargaining chip for landlords because I placed millions worth of equipment there and couldn't move. After networking, customers found laundry more convenient. When franchisees opened, they had no business for the first two years, but once opened, I gave them many customers. They were very happy. It finally became a truly customer-based B2C industry, not a business always relying on franchisees or terminals.
The truly powerful B2C companies are still the batch like Haier, which create ultimate products for users. Last week, when chatting with a friend about transforming to O2O, I said you have no users. Go back and check your reports to see how much revenue comes from pure users. At a recent Ministry of Commerce seminar, I said the service industry should be open, WTO should protect it, and how to protect it domestically. I asked, is the laundry industry really a service industry? Of course it is. Was I originally in the laundry industry? Now I am not. In my store, five or six employees are working, but only the front desk employee truly provides service. I think the service industry is hard to be replaced by e-commerce. If laundry is a service industry, I am hard to replace. Those in front provide service, those behind do processing. The level of service depends on how long our employees interact face-to-face with customers.
Later I realized I had to find a way to transform and define the service industry under the internet. Under the internet, all the troubles a user has when washing clothes are my responsibility. In traditional enterprises, washing clothes means taking clothes over. My store is open 13 hours, I have tried my best, but customers say when I want to wash clothes, you are not open yet, and when I come back, you are already closed. How hard or tired you are doesn't matter. Customers are not satisfied! Some customers bring a new piece of clothing to wash, saying they just bought it and want to wash it once. Our employees, because of various issues, first say unpleasant things upfront. Customers say I haven't even worn it yet, and you say a lot. But traditional enterprises are like this. We are now completely different. So in transformation, how to solve these headaches—everyone knows laundry has a very high complaint ranking. Later I found the complaints in the laundry industry are not the problem of any boss or enterprise, but the business model. Using a chain franchise model to meet user needs is too difficult.
Later, I increasingly realized that B2B is greedy. The era of mobile internet has overturned the 20/80 rule. The 20/80 rule means 20% of customers generate 80% of the profits. So you need to serve the 20% of customers well. Now it's different; those 20% of customers enjoy the service quietly! But the 80% of customers, after you help them with laundry, they help promote you everywhere. When a customer is doing laundry, they say: I had a button fall off, and when I came back, the button was still missing. The purpose of washing is to wear the clothes again. I want to solve all these problems.
In the era of PC internet and e-commerce, why were the retail industry and manufacturing enterprises so vulnerable? One reason is that China's retail industry is too weak. Walmart has stores all over the world. In China, it's hard for Hualian to reach from Beijing to Shanghai. Also, when a customer buys a TV, they want it delivered to their home. The supply chain and production are fragmented. If there had been a company like Walmart doing everything, I believe JD.com wouldn't be so powerful. Suppose chain hotels existed first, then Ctrip. Think about whether Ctrip would have grown so fast. If the pattern changes to mobile internet, we must be fully prepared mentally; it won't necessarily be vulnerable. We will rack our brains to figure out how to solve problems. Later, I started E-Dai Laundry, where one bag, no matter how many clothes inside, costs 99 yuan per bag. Recently, someone broke the record by packing 124 scarves. Washing offline would cost at least 1,400 to 1,500 yuan. We hold weekly, monthly, and annual bag king contests. I never buy luxury cars because I feel I can't support it. But when Tesla came out, I went to buy one. After buying it, I didn't use it; I let users be the first to use it. You can pay 99 yuan (for E-Dai laundry) and still ride a Tesla.
We have been to JD.com and Xiaomi, this was at the Beijing Auto Show. This is the biggest bag king (list of clothes packed). We teach customers how to pack more, and what methods to use to pack more!
(User) Pain point: Doing laundry in the community is very troublesome. Laundry only costs 50 yuan, but parking violations get fined 200. Originally, they don't blame you, but when they enter the store, they already feel resentment. Now several children have been killed by being trapped in washing machines.
(So) leave all these things to us. You can pick up clothes anywhere, even where you eat. After washing, clothes are hung on the balcony, but the smog is severe. We dry immediately after washing. It takes 20 machines to iron one piece of clothing. Everyone is welcome to visit our demonstration center at 798. When we pick up and deliver clothes, we don't inspect them. You just sign once and we take them away. What if users complain? We talk about probability. Quibbling? Compensation, whatever amount you say. Now we have user data; complaints, points, and the quality of home washing machines can all be ranked. It's completely different now.
What about offline? Offline stores, this is a store I saw in London. London has 1,500 stores, and this guy is amazing! At that time, I visited more than 30 entrepreneurs and was shocked. All your household chores and troubles are solved here. I can't see which mobile internet company can replace it. Alterations, zipper repairs, watch repairs, key duplication can all be done. (So) SF Express should focus on delivery, and leave the service to us. We can make the service perfect. I've been in the service industry for more than 20 years. In CEIBS, I founded the tennis association, and they say every time we play, how do you always manage to serve the water so well? I was puzzled: Isn't that what should be done? Why wouldn't I serve the water well? It's a habit. I seem to be serving tea and water all day long, and I enjoy doing it. If laundry can be done, I believe other industries can do it too! Thank you all!