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Chapter 474 The Fat Sheep Falls into the Trap

What are your thoughts?

Mohammed was indeed not only targeting Google; the fact that they brought it up indicates that they shared the same idea.

Ernst leaned forward slightly, slowly revealing his purpose: "Have you heard of flash sales?"

Mohammed nodded slightly, a knowing look on his face. "Of course, since we're going to invest in your company, my team will naturally conduct a thorough background check."

Flashbuy, an e-commerce company in the online shopping sector, has been attracting much attention despite not yet having officially launched its own website.

Both Amazon and Walmart consider it their biggest competitor in the future of the e-commerce industry.

However, being the most threatening does not necessarily mean that one can break through the encirclement and achieve the final victory in this e-commerce war.

"To be honest, I don't have a good opinion of this company." Mohammed showed no politeness or tact whatsoever.

Ernst remained unusually calm in the face of such direct questioning.

He chuckled softly, his tone laced with a hint of mockery and derision: "Mr. Muhammad, if I may be so bold, your investment advisor or information gatherer must have been reading too many newspapers and had their brains fried."

"Flash sales release very little information to the public. All the information about them is basically based on media speculation, which has led to a lot of false information spreading within the industry."

"Most of the information in the media is pessimistic about flash sales, and it's too subjective."

Mohammed did not entirely agree with this, stating, "Even so, the media's views are not entirely without merit."

He countered, "Walmart's meteoric rise in e-commerce and Amazon's astonishing performance after changing its business model are objective facts."

Ernst's e-commerce website has yet to launch, and the media believes that whether flash sales adopt Amazon's pure e-commerce model or Walmart's online-offline integrated model, these two major tracks have already been seized by the two giants.

Mohammed continued, "And you can't deny that Amazon's performance has increased dramatically since the No. 1 update, with this year's growth rate expected to reach 313%, which shows that consumers recognize Amazon's value."

Since Amazon officially expanded its product categories on the 1st, it has been releasing its marketing data to the public every day.

Wall Street is almost frantic about Amazon's high growth, adjusting its expected stock price almost daily, making it a darling of capital.

"So I would say that your investment advisor knows nothing about e-commerce and only gets information from newspapers; he's just out of his mind." Ernst gave a disdainful look.

How much useful information can you find in newspapers? What you see is always what others want you to see.

"Bezos proudly declared that Amazon's inventory has increased fivefold." Ernst then sneered, "But behind these figures lies a serious operational imbalance. This boundless expansion is eroding Amazon's capital efficiency."

"I know without even looking at the detailed data that Amazon's inventory turnover rate has dropped by at least 30%, and the ratio of inventory costs to revenue has increased by at least 8%. While Amazon's category expansion has brought revenue growth, it has also led to a significant decline in its operational efficiency."

"I'm not saying that boundless expansion is bad." Ernst revealed some information about flash sales. "In fact, both Walmart and the upcoming flash sales have a richer product range than Amazon."

"But increasing product categories does not necessarily mean that capital efficiency will decrease. Amazon's problem is that they have not found a way to balance category expansion and operational efficiency."

Upon hearing this, Mohammed asked with interest, "Could flash sales really solve this problem?"

Ernst didn't answer directly, but instead kept everyone in suspense, saying, "Walmart provides us with a great case study."

He said slowly, "Have you ever thought about why we can't bring Walmart's daily discount model from its brick-and-mortar stores online?"

"Walmart's Everyday Discount model attracts consumers with low prices while quickly clearing out slow-moving inventory, effectively improving capital turnover efficiency. If this model were applied online, wouldn't it solve the inventory problem for e-commerce platforms?"

"Flash sales plan includes limited-time sales events. By dumping inventory at low prices, we can quickly reduce the inventory of slow-moving products, thereby improving capital efficiency and accelerating cash flow recovery."

Not only Mohammed, but even Louis Astor sat up straight and listened attentively to Ernst's explanation.

He further explained, "We will launch limited-time discount events every day based on user purchasing behavior and market demand. For products with serious inventory backlogs, we will offer larger discounts to attract consumers. In this way, we can not only reduce inventory costs, but also increase user activity and loyalty."

"Aren't you afraid I'll tell Amazon about this strategy?" Mohammed suddenly joked, trying to test Ernst's reaction.

Ernst, however, seemed completely unconcerned. He shrugged and said with a hint of arrogance, "Whatever."

This confident attitude surprised Muhammad, who looked questioning.

"The e-commerce industry faces far more than just inventory issues," Ernst continued. "Amazon constantly encounters new problems in its operations, while flash sales continuously solve these problems. From this perspective, our competitive advantage is comprehensive, not just based on a single strategy."

To prove his point, Ernst further analyzed Amazon: "For example, Amazon's concept of a 'store of everything' seems like a full-scale attack on Walmart, but few people have noticed that its repeat purchase rate has dropped to 52%."

At this point, he looked at Mohammed and asked, "Do you know what the customer repurchase rate was when Amazon focused solely on books?"

Muhammad answered without hesitation, clearly having done his homework: "78%."

Ernst was somewhat surprised, not expecting the other party to know, "It's only been a few days, and Amazon's repurchase rate has dropped by more than 25 percentage points. This drop is quite astonishing."

"It is undeniable that the influx of new users has lowered the repurchase rate to some extent, but this is not the main reason."

"Another issue is the supply chain system, which is Amazon's biggest problem. They don't have Walmart's strong supply chain, and the rushed preparations meant that they couldn't get an ideal purchase price for many products. This resulted in many products not being profitable, and the cost-effectiveness of the products was not high. If users felt it wasn't worth it after buying it once, they wouldn't choose to buy it a second time."

"So you see, the biggest price reductions on Amazon's low-priced products are in their familiar books and video products; they don't dare to significantly reduce prices on other categories."

Ernst rambled on and on, talking to two complete novices about the internet.

What good or bad? Everything has two sides.

These same problems with Amazon can also be applied to flash sales.

Ernst took advantage of the other party's lack of knowledge, which caused Mohammed to fall into deep thought.

"Then why should we choose flash sales?" After a moment of silence, Mohammed looked up at Ernst and asked.

Ernst seemed to have anticipated this question. He smiled slightly and said with absolute certainty, "At least one thing, I believe it absolutely meets your fund's strategic needs."

"Oh?" Mohammed was indeed intrigued, and he gestured for Ernst to continue.

"That is the strategy of precision, diversification, and localization of flash sales."

"I can't reveal too many specific details, but I'll just say a little bit."

"At the supply chain level, we have already established partnerships with local Saudi jewelers and perfume manufacturers to promote local specialty products globally through flash sales. This path of internationalizing local brands should be highly consistent with your fund's strategy of supporting local industries, right?"

"We have this kind of cooperation model not only in Saudi Arabia, but also in many other parts of the world. Compared to Flash Sale, which treats regions like Saudi Arabia as just sales markets, we prefer to be a bridge connecting these regions with global consumer markets, allowing products from these regions to reach wider markets."

For Middle Eastern sovereign wealth funds, supporting local industries and enhancing national brand influence are important strategic goals.

And what Ernst said is exactly in line with this goal.

So, as soon as he finished speaking, he saw Louis Astor secretly give him a thumbs up.

His move instantly found Muhammad's sensitive spot, bringing him to orgasm.

When it comes to investing, making money is definitely the goal.

But if it involves a higher-level strategic issue, then whether or not it makes money becomes irrelevant.

Ernst's statement undoubtedly takes online shopping to a new level, enabling Saudi Arabian products such as jewelry and perfumes to be sold worldwide through partnerships, which is key to enhancing Saudi Arabia's influence.

What Louis Astor didn't know was that the so-called collaboration was all made up by Ernst on the spot.

If we can secure investment from the Saudi sovereign wealth fund, wouldn't cooperation be an incredibly simple matter?

Let alone the fact that Saudi jewelry and perfume already have a certain market, so what if there isn't a market?

As long as the money is right, I'll sell all the camel dung for you.

If all else fails, you can buy it yourself in a flash sale; after all, you're only seeing sales figures.

Sure enough, Muhammad's eyes lit up noticeably.

"Name your price," Mohammed finally made his decision, his tone tinged with urgency.

Ernst subconsciously rubbed his hands together, feeling like he was seeing a fat sheep but didn't know where to start.