The diva and I cross each other

Chapter 485 Finalizing the Cooperation Plan
“Mr. Luo, your idea is good, but it is actually unrealistic to directly find the fruit farmers at the source,” said Mr. Li.

"Why is it unrealistic?"

“There are two reasons. First, at present, many domestic production areas that can produce fresh fruits and vegetables on a large scale are controlled by some capital. The fruits and vegetables grown by farmers are directly bought by them at low prices. They are the first-line contractors.

Second, apart from this group of people, the fruits and vegetables grown by farmers themselves are too scattered and the quality control is inconsistent. It is too time-consuming and laborious to negotiate purchases from each family one by one. "Mr. Li replied.

Luo Ming didn't expect that there were so many twists and turns here. How did Pinduoduo achieve direct connection of agricultural products with production sites in its previous life?

Is it also the contact with the first contractor?

Luo Ming felt that things were not that simple. Pinduoduo’s vegetables and fruits were indeed cheaper than those on other platforms, and even cheaper than offline, and the quality was also good. It should not be simply because of these big contractors.

In fact, Pinduoduo did bypass these large contractors, and the method they adopted was not as complicated as Luo Ming thought. It was to directly engage in a price war with the large contractors.

By giving farmers a few cents more per pound, the big contractors will be driven away.

To put it bluntly, it’s still the same takeout war, with capital coming in to launch a dimensionality-reducing attack.

But no matter what, Pinduoduo has indeed brought benefits to farmers, allowing them to sell the fruits and vegetables they have grown with great effort at a higher price.

Pinduoduo can even accept that farmers do not sell the fruits to them, as long as they do not sell them to large contractors. They can open their own stores on Pinduoduo to sell the fruits, and Pinduoduo will still provide relevant preferential policies.

This has led many farmers to choose Pinduoduo as their first choice for selling vegetables and fruits.

Luo Ming didn’t know much about the rise of Pinduoduo and didn’t know there was such a thing going on. Therefore, Luo Ming didn’t know what to do next.

Fortunately, Rong Mu was quick-witted. He said directly, "Boss Li, we shouldn't be too timid when doing business. I think we should take a dumb approach and send people to talk to the farmers who grow vegetables and fruits. We can give them more money per kilogram and use the money to get rid of the dealers who monopolize the farmers' vegetable and fruit market."

"That's fine, but it might offend some people."

“Will Baidu be afraid of them?”

Mr. Li smiled and shook his head. There were only two or three small companies in China that Baidu was afraid of. Mr. Li didn't care about those companies that made money by exploiting farmers.

“Then there is only one problem now. If the prices of agricultural and sideline products on our vertical e-commerce platform are very low, it will affect their sales in offline physical stores and online stores.

You should know that about 4.1% of fruit farmers in China choose to operate their own fruit stores offline, and 12.6% of fruit farmers have online sales channels.

Our prices are too low, which means that fruit farmers will be cut off from their previous channels, and I am afraid that many fruit farmers will be dissatisfied with this.”

Luo Ming and Mr. Li both knew about the concern that Rong Mu mentioned.

In its previous life, in 2009, Taobao started a price war during the Double Eleven shopping event.

Because the cost of marketing through the Internet is much lower than that of several levels of offline dealers, this led to very cheap online shopping prices in the early stages, which destroyed the interests of offline dealers.

Naturally, these people will not accept this. When this force gathers together, no brand dares to ignore it.

No matter how convenient the Internet is, it cannot be popularized to everyone. If you offend the offline market, then you can only sell your products through the Internet in the future. Isn’t that courting death?
As a result, after multiple rounds of bargaining, a balance was reached among the three parties. The prices on the online shopping platforms increased significantly, and were only slightly cheaper than those in physical stores, or the prices were the same, thus forming a balance of interests.

Some brands will also launch special online edition products, forming two categories of goods with offline products, thus avoiding price conflicts between the two channels.

Although online shopping platforms aimed to replace offline physical stores in the early stages, on the one hand, few manufacturers would agree to give up offline operations and only do online business; on the other hand, their own profits would increase significantly after prices increased.

Taobao is better as it is just a third-party platform. However, the model of JD.com is to purchase goods first and then sell them to consumers. After the prices of goods are raised, the profits are staggeringly large. This is why Alibaba was jealous and created Tmall.

A similar thing happened in this life, but it happened during a group purchase. Mr. Li was also an eyewitness, so he had some concerns about the plan proposed by Rong Mu.

Because the vertical e-commerce he wants to do is not just about fruits and vegetables.

Baidu can negotiate directly with farmers for fruits and vegetables, and it is not afraid of those people, but it cannot do the same for all the subsequent products, right?

Rongmu knew what Mr. Li was thinking as soon as he saw his expression. He smiled and said, "Mr. Li, you must think that when our vertical e-commerce platform expands, we must cooperate with the brand owners. At that time, we can't deal with these companies like we deal with the distributors on the farmers' side, right?"

Mr. Li nodded.

"Mr. Li, you have fallen into a misunderstanding. Who says we have to deal with brand owners?

Luo Ming just said that our vertical e-commerce is positioned in the mid-to-low-end market.

This means that the things we sell will not be from big brands. Pursuing cost-effectiveness is the only purpose of our vertical e-commerce platform. We don’t need to deal with these brands at all. "If we don’t get the goods through them, how can we guarantee the quality?" Mr. Li asked.

“Who made the Apple phone?”

"Foxconn!" Mr. Li answered subconsciously, and then Mr. Li suddenly realized: "Mr. Rong, do you want to go directly to a big brand for OEM?"

“Yes, it is OEM, especially those capable OEMs.

Now when a product reaches the hands of consumers, it is usually produced by OEM. The brand owner makes a lot of profit, and then it is the turn of several layers of distributors.

After these procedures, the price of general products may have increased several times. If we can do this, we can reduce the price of goods to the extreme. "Rong Mu said.

Hearing this, Luo Ming's eyes lit up. Rong Mu was truly a genius. He came up with an idea and then Rong Mu filled in all the missing pieces.

Mr. Li remained silent. He also knew that the factory price of a product and the price it received by consumers were usually about three times or even more different.

Rong Mu's idea is indeed feasible.

Let’s take a company like Li, whose main business is air conditioning, as an example.

The air-conditioning base they built in a certain place has an annual output value of 650 billion yuan and a production capacity of 600 million units. The average factory price of an air conditioner ranges from 2000 to 2000 yuan. The cost of a central air conditioner that sells for to yuan is only yuan.

But on the market, his ordinary 1.5-horsepower air conditioners are basically more than 2500 yuan, and central air conditioners or floor-standing air conditioners are even more expensive.

As an Internet giant, Mr. Li knows these things very well.

If it is OEM, the brand owner will earn higher profits. Letting the OEM factory sell directly on the online platform can indeed avoid the trouble of merchants' conflicts between offline and online channels and save a large part of the cost.

But there are also many products that are not suitable for this approach!

Rong Mu also knew this, and he continued, "I know that Mr. Li may feel that some products are not suitable for this route.

Home appliances, digital products, or other commodities that involve safety, user experience, and are relatively expensive will not work on a platform like ours. We will definitely not do business in this area in the early stages of our platform's development.

Because the basic market for these things is JD.com, which is owned by Dong Ge, and Taobao's Tmall Mall are competing for the market share. If we do this, we are putting the cart before the horse.

Therefore, our platform should not think about those unnecessary things. What we should want to do from the beginning to the end is to provide some simple and low-cost products.

For example, knives, forks, kitchen utensils, socks, gloves, hardware tools, hangers, toilet paper, etc.

Many of these are fast-moving consumer goods, and users generally do not care about the brand. Brand owners on the market generally dislike the trouble of production, so they all adopt the OEM model.

If we can provide channels to direct manufacturers, then this will be the lowest marketing cost for the manufacturers.”

After hearing this, Mr. Li already had an idea in his mind. Just as Rong Mu said, they didn't need to compete with Taobao and JD.com for business. As long as they picked up the things that Taobao and JD.com threw away, they could make a fortune.

There is absolutely no need to touch the interests of Taobao, which currently occupies the mid-range market for online shopping, and JD.com, which occupies the high-end market.

No matter how big an online shopping platform is, it is impossible to suppress all merchants.

As long as some merchants pay attention to offline channels, it is destined that e-commerce platforms will not be able to make all offline channels disappear. At most, they can have some impact and make them less shady.

For the huge interest groups that have already taken shape, the only way to succeed is to either bypass them or use absolute dimensionality reduction to strike them.

Baidu will not and cannot do these things, so it is just right for it to focus on the market of low- and mid-end fast-moving consumer goods and agricultural and sideline products abandoned by Taobao and JD.

Thinking of this, Mr. Li had made up his mind. He asked Luo Ming and Rong Mu, "Mr. Luo, Mr. Rong, are we going to start contacting the OEM factories for these products now? Have a connection with them or something?"

Luo Ming shook his head and said, "Mr. Li, I don't think we need to rush now. Alibaba has just started to allocate resources to Tmall. Small merchants who are not squeezed out in a year or two will not be able to survive."

“I think so too. Baidu is also an Internet giant. If Baidu starts to contact suppliers, it is hard to guarantee that Alibaba will not notice it.

We should start with vertical e-commerce for agricultural and sideline products, and then contact OEM factories when the time is right.”

“Yes, then let’s start with vertical e-commerce for agricultural and sideline products and overseas shopping.

In the early stage, we will focus on vegetables, fruits and seafood. When we have enough users, we will then move to full e-commerce!" said Mr. Li.

(End of this chapter)