America's No. 1 financial conglomerate

Chapter 464 Financial Crisis

"But what does this have to do with increasing publicity in these areas?"

Ak asked, puzzled, "Our online media campaigns and newspaper placements have already achieved comprehensive coverage of these sparsely populated areas. However, the offline promotional plan developed by Flash Sale focuses primarily on offline delivery."

At this point, Ak paused for a moment, then said, "Since you yourself said that these rural populations are an important potential market for online shopping with considerable consumption potential, then why are you now spending so many resources on offline promotion?"

Ernst remained calm, his hands clasped on the table. "The absence of demand now doesn't mean there will never be demand in the future; the lack of conditions for conducting business now doesn't mean there will never be. Cultivating the market and stimulating demand requires advance planning and guidance."

For the time being, Ernst will definitely not bring the flash sale's online and offline store combination model to small cities or towns with fewer than 20,000 people.

But this doesn't mean it won't happen in the future, or that we won't need to promote it in these places.

Express delivery stations are a good thing. Although this model is difficult to develop in the US market due to factors such as regional differences, consumption habits, and logistics systems, this does not mean that the core logic and operational ideas of this model cannot be learned from and applied.

"Even in sparsely populated rural areas, there is still a certain market demand for food delivery services. However, at present, it is mainly done by merchants themselves, resulting in inconsistent service quality and difficulty in guaranteeing delivery time."

"If Flash Sale can connect with offline catering cooperation channels in the future and incorporate catering delivery business into our service system, then the overall business volume will definitely be significantly improved."

If we can find local convenience stores, gas stations, and other businesses with a certain amount of offline traffic and service capabilities to cooperate with, and let them help Flashbuy solve the last-mile delivery problem in a similar way to delivery stations, while also undertaking some local delivery services, then it is not impossible to carry out business in these small places.

First, spread the word about GG (Google's name) so that people in these areas know that flash sales include not only online shopping but also a combined online and offline shopping model. I'm sure some savvy people will contact customer service to seek cooperation.

Through them, business scope can be expanded at the lowest cost, with almost no other large-scale costs except for a certain initial investment in GG fees.

Towns and cities with populations between 5,000 and 20,000 are an important part of the United States’ residential areas. There are more than 20,000 such areas across the country, and their residents account for nearly 40% of the total population of the United States.

If areas with a population of less than 5000 are also included in the statistics, then the population of these areas accounts for more than half of the total population of the United States.

Faced with such a large potential customer base, Ernst could not afford to give up, whether from the perspective of market development potential or long-term strategic planning.

The people in the conference room looked at each other in surprise. Among them was Affili, who was unaware that Ernst had such an idea for the first time.

He not only wants to integrate offline convenience stores, but also offline restaurants.

Think about those restaurants that are packed on weekends; they are attractive to both consumers and the restaurants themselves.

Consumers no longer need to be frustrated by the lack of seating; they can simply enjoy delicious food at home by clicking a few buttons online and paying a few dollars for delivery.

And restaurants no longer need to worry about this, as not expanding their stores means losing customers.

Expanding stores will increase costs on weekdays and non-rest days.

With a dedicated food delivery platform, all the problems are solved.

"But there's a crucial issue here: if we launch a large-scale promotional campaign in these areas to raise awareness of our face-based flash sales service, but the actual service is delayed, won't this create resistance and negative impressions among local residents over time?"

"I'm afraid that when we actually launch the service in the future, it will backfire and we will encounter market rejection and distrust, which will create even greater obstacles for our subsequent business development."

Ak's concerns were not unfounded, and some of the management members present nodded in agreement.

After all, building brand reputation is not something that can be done overnight. Once the brand image is damaged due to a disconnect between advertising and service, it will take more time and resources to repair it.

Faced with Aker's doubts, Ernst gently shook his head. "These concerns you raised are merely guesses based on our subjective judgment. Before actual operation and market verification, no one can accurately predict what the final result will be. Perhaps consumers will be even more excited? It could actually be a positive impact."

Seeing that Ak Meier remained silent and simply sat in his seat, Ernst assumed that the other party had accepted his point of view. Just as he was about to speak, another dissenting voice rang out.

"I disagree. I still believe that it will be more effective and avoid unnecessary waste of resources to carry out targeted publicity and promotion after our service system has been fully deployed in these areas."

The speaker was Selena Carson, the CFO of Flashbuy, who is also the only woman on Flashbuy's senior management team.

Ernst hadn't expected Selena to raise an objection at this moment. He paused for a moment before explaining, "You have to understand that neither our Flash Sale's own operating system nor the community stores that cooperate with us can proactively expand their business scope to these low-population-density markets, given their current cost structure and profit model."

"These regions have limited market size and relatively dispersed consumer demand, so there is not much profit to be made, and they may even suffer serious losses due to failure to compete."

"Therefore, we must change our thinking. We can no longer follow the traditional expansion model, which is to first set clear business expansion goals and then carry out corresponding publicity and promotion. Because, given the current situation, we may never be able to achieve expansion goals in these regions in our lifetime."

"We must adopt a reverse thinking approach. We should first conduct large-scale publicity and promotion to attract local small cooperative merchants with certain resources and capabilities. We should let them bear the initial operating costs and business risks and earn this hard-earned money. At the same time, this will help us expand our business scope and achieve mutual benefit and win-win results."

After listening to Ernst's explanation, Selena gave him a complicated look, her rosy lips twitching slightly as if she wanted to say something, but ultimately she remained silent.

Although it was only for a brief moment, Ernst noticed it. He smiled gently and said sincerely, "Selena, the purpose of this meeting today is to have a thorough discussion and brainstorm ideas. If you have any thoughts or different opinions, please feel free to speak them out without any reservations."

Seeing Ernst say this, Selena took a deep breath and said seriously, "My objection has nothing to do with whether the ideas are sound or not, but rather that the expenses are too high."

After glancing at everyone, Selena continued, "I just did a quick mental calculation. To maintain our GG's popularity, we definitely need to put up posters and advertisements in convenience stores and other places in these cities. On average, if we choose 30 stores in each region, it will cost about $1000 per month."

For convenience stores in small towns like this, the cost of posting posters for advertising is very cheap.

A partnership can typically be established for around $20 to $30 per month. Even for stores in good locations with high foot traffic, the fee will not exceed $100. The specific amount will be negotiated and determined based on the actual situation of each store.

Selena's tone turned serious. "But what everyone needs to understand is that there are nearly 30,000 cities and towns with a population of less than 20,000 across the United States. If we calculate based on an advertising budget of $1000 per region per month, then the company's monthly advertising budget in these regions would be as high as $30 million."

"This is just the cost of poster advertising. If we take into account other forms of offline promotion after the business is integrated, such as distributing flyers and sponsoring local events, the cost will increase further."

"3000 million US dollars?" When Selena uttered this number, Afel couldn't help but exclaim in surprise, clearly not expecting such a huge expenditure.

He hadn't cared who he supported before, but now he glanced at Ernst, though he still didn't say anything.

"Actually, there's no need for so much expense. Why not consider utility poles?" Ernst said.

"Absolutely impossible," Ak denied. "Those GGs on those telephone poles, you can stick them on one minute and they'll be torn off the next or covered by other GGs the next. That's gang territory."

How could Ernst not know these things? Just look at the graffiti on American utility poles; they're all gang-related, like those for selling sex or prostitution.

Even those who seem normal, like those working at barbershops or selling CDs, also have connections with gangs and are often peripheral members.

Anyone who has been to the United States will see pairs of sneakers with their laces tied together hanging on the power lines on the streets. Don't even think about touching them, or you'll get into big trouble.

This is how local gangs divide up territory; the territory is their domain, including the GG spots on utility poles.

"Then let's cooperate with them and make sure our GG is safe and sound. As for those big convenience store posters, we can put them in cities with larger populations and find those local chain stores, where the prices should be the lowest."

"I estimate that a monthly expenditure of around ten million US dollars should be sufficient."

Cities with fewer than 5,000 people generally don't have many gangs, so you can just stick "GG" signs on utility poles anywhere, which will save a lot of advertising costs.

"That's a lot too," Selena still objected.

"Is there a problem with your finances?" Ernst finally understood what she meant.

Selena nodded slightly, a worried look on her face. "Yes. Currently, all of the company's expenses are continuously increasing, including personnel salaries and benefits, equipment purchases, maintenance costs, office space, etc. Each of these is a considerable sum. In addition, there's the advance warehouse project you previously proposed, and the rider team we're recruiting and training to expand our delivery business. These projects all require substantial financial investment. When you add up all these miscellaneous expenses, our company's fixed monthly expenditures have exceeded one hundred million US dollars."

At this point, Selena's expression turned somewhat resentful, and she looked at Ernst with a complicated look in her eyes. If someone who didn't know the situation saw her, they might think that Ernst had done something to her.

With a hint of helplessness in her voice, she continued, "The initial two hundred million US dollars in start-up capital you invested has long been used up. In order to maintain the company's normal operation and business expansion, we currently owe the bank more than one billion US dollars in loans, and the company's debt-to-equity ratio is already at a very high level."

Ernst awkwardly touched his nose, knowing that this matter was indeed related to him.

Green's four billion dollars were laundered through trade, but even if Ernst used the high commissions he received to cover it, there was still 20% of the outstanding payments for the orders in China that hadn't been settled, which was still not enough.

They could only use those goods as collateral at the bank to borrow another $1.6 billion, which they then handed over to Green for liquidation.

It's fair to say that flash sales these days involve taking out loans to purchase a lot of inventory, but they also end up with a mountain of debt.

Ernst stroked his chin and realized that he really needed to raise funds.

What follows is a money-burning war, and I don't want to fill this bottomless pit.