PepsiCo: Deciphering the business logic behind cross-border e-commerce

During the global financial crisis in 2008, the economy began to deteriorate and export business was not easy to do. Xu Xinhua wanted to visit the United States and planned to set up a company there to achieve localized sales in the United States.

At that time, he hadn't thought about becoming a cross-border e-commerce business. "I just wanted to go downstream. I wanted to sell my products directly to wholesalers." Guangdong Bestay E-Commerce Xu Xinhua, chairman of the Co., Ltd. (hereinafter referred to as "Baishitai"), recalled to "CEConline".

There is a little interlude here. Xu Xinhua began to apply for a visa in 2007, but was rejected three times in a row. When he went to apply for a visa for the fourth time in 2010, he had given up hope. "The first three times I was very careful and did a lot of preparation work very carefully. This time I thought that I had fallen in love, but I will not go again. The main reason is that my English is very poor, and every time the visa officer will ask the same question: Why do you go to the United States with such poor English? I will ask them, all of you Americans are good at English, how many of you have managed the business well?" Xu Xinhua said with a smile, but this time he passed it inexplicably.

In 2011, after getting the visa, Xu Xinhua lived in the United States for a period of time. During this period, he purchased daily necessities through e-commerce platforms such as Amazon and eBay. The experience was not bad, so he tried to sell his own products. , began to test the waters of cross-border e-commerce business.

At first, PepsiCo mainly produced and sold self-made products (F2B, B2B). Since 2011, it has started to deploy a global sales network and began to get involved in cross-border e-commerce export business. Now it is the first international F2C e-commerce chain enterprise in China, mainly engaged in the research and development, design, production and cross-border e-commerce trade of power supply and home appliances. F2C (Factory to customer) cross-border e-commerce model, that is, a sales model in which products directly reach end retail consumers from manufacturing plants through an e-commerce platform. In 2015, when cross-border e-commerce companies gathered together, PepsiCo was listed on the New Third Board.

Transformation and Rebirth

"I didn't plan to do 2C at first, but I felt pretty good when I tried it. I could sell dozens of them a day, and I thought if the sales could be in the previous order of magnitude. , the profit is very considerable." Xu Xinhua said.

When PepsiCo was doing 2B a few years ago, it was basically immortal. At that time, the gross profit of 2B was about 10-20%, and the cost was almost the same as the cost in the end, sometimes it was slightly profitable and sometimes slightly less. Loss; after switching to 2C, it can achieve a gross profit of more than 60%. Although various costs such as management and marketing are higher, the overall net profit is still more than 10%. According to Xu Xinhua, the net profit after tax of PepsiCo last year was as high as 14.5%.

At the end of 2011, Xu Xinhua was basically convinced that this was a feasible way, and he began to increase investment in it, and the company tilted towards 2C. In 2013, PepsiCo had a landmark event. Their B2B director resigned. He believed that the company focused on 2C development and lacked support for him. Xu Xinhua did not intend to give up the 2B business, but with the resignation of the head of the B2B business, he was touched, and he stopped recruiting people for the position, leaving the department to develop on its own, and the morale of the B2B business department increased after the head of the department left. Down, the remaining people watched the 2C business continue to grow, slowly and continuously left, and this department slowly disappeared.

After Baishitai fully turned to 2C business, in order to solve the problem of localized service in overseas regions, it successively established branches in the United States, the United Kingdom and Japan to ensure that customers can receive better services, and at the same time, it also has a strong impact on brand building. can provide better support.

There is also a small reason. At that time, Xu Xinhua mainly wanted to impress overseas consumers that PepsiCo was a foreign company, but he didn’t want local people to know that it was a Chinese company, because at that time, Chinese made in Overseas was labelled as "low quality", so we chose to register the company locally from the beginning. "We won't shy away from being a Chinese company now, but we still avoided it in the early days," Xu Xinhua told CEConline.

For enterprises engaged in cross-border e-commerce business, overseas warehouses are the most important part of their overseas layout. Some companies are relatively small and do not have the strength to set up their own warehouses overseas, or some companies have a certain scale, but in order to reduce management pressure and do not want to have overseas employees, they will choose public overseas warehouses.

Because he attaches great importance to the brand, Xu Xinhua started to build overseas warehouses simultaneously in the three countries when he registered overseas companies in the United States, Britain and Japan. In this way, the local contact information can be left on the sales platform, and when the customer has a problem, the customer service can help him solve it in time. Xu Xinhua believes that sometimes "bad things" should be turned into opportunities for transformation. "If he returns the product, he can directly return it to me, and I can help him with various processing in time, or teach him to use it. At this time, the customer can basically stay loyal. If you deliver the product to Managed by Amazon, its customer service does not understand product problems, and consumers will directly 'roughly' let them return when they say there is a problem. At this time, you will lose these customers invisibly, and the customers may never be in the future. I have chosen this brand." Xu Xinhua said.

The managers of PepsiCo's overseas warehouses are all locals now. At first, Xu Xinhua tried to dispatch from China, but he couldn't stay. Xu Xinhua once brought two salesmen, a man and a woman, to work in an overseas warehouse in the United States. Both of them learned English and had a certain understanding of overseas, but they couldn't stand it for a few months. At that time, no one would do overseas assignments, and even if they were dismissed, no one was willing to go. Xu Xinhua analyzed to "CEConline", "The main reason at that time may be that the company was too small, there were few employees, and there was little choice."

Since then, Xu Xinhua has started to recruit local people, but the labor cost will be much higher, and there will be some problems in all aspects of communication, so he is now looking for some local people, but some local people are not very good. He is good at positions such as warehouse management, and he simply recruits some people in China and sends them out. Now that the company is big, the recruitment information will directly state that it is an expatriate, which is still very attractive to some people who want to go abroad.

At the end of 2014, PepsiCo began to have contact with the domestic cross-border e-commerce industry. After listing on the New Third Board in 2015, PepsiCo's popularity in the industry has rapidly increased. Public information shows that BESTEK's own brand "BESTEK" has become the most popular well-known brand of automotive electronics, power supplies and digital peripheral accessories in North America, Europe, Asia and other countries and regions; market share and business coverage The scale has grown rapidly, and many products have ranked first in the category brand and sales volume in online markets such as Amazon and eBay, and their sales performance has tripled every year.

In the first half of 2016, the operating income of PepsiCo increased by 111% year-on-year, the net profit growth rate reached 206%, and the net profit attributable to the company's shareholders increased by 203% year-on-year, truly realizing the company's leap-forward growth and investment In a win-win situation for both parties, PepsiCo has become a leader in F2C export e-commerce.

Building brands and products

The transformation of PepsiCo into cross-border e-commerce is largely due to Xu Xinhua's brand complex.

"In the early years, I felt that I had no future in trading. Later, I didn't have a good time to switch to a factory. The competition in the factory was also very fierce. Isn’t it better for a brand owner! With the brand premium, the business life is a little easier and the ability to resist risks is stronger. Brand dream, but when I was doing 2B in the past, the customers were very strong, and the partners were all brand owners. They couldn't use my brand. No matter how good conditions you gave him, he would not do it. I tried to push it, but There is no way."

Xu Xinhua's brand path can be said to have started from cross-border e-commerce, Pepsi Tai is the Chinese name transliterated from BESTEK, and BESTEK is Xu Xinhua's early overseas brand name. In order to facilitate publicity, this brand name is also directly used as the name of the overseas company. Later, in 2015, its Chinese company shares were restructured, and the three words PepsiCo were added to the new company name.

"When I took the English name in the early days, I didn't have a deep understanding of the market. At that time, I thought that BESTEK would represent the best technology, and I wanted to change life through this. That's what I chose at that time." Xu Xinhua Say. However, at present, he believes that to change life, the best technology is only one aspect. In addition, it is necessary to have an in-depth understanding and cognition of consumers. Grasp the changes in consumers' needs may be based on his living habits. Cognition, awareness of human nature. "Looking at the mobile phone, you say how high-tech it is, it may not be particularly high, but after the smartphone comes out, it has indeed changed a lot in life." He said.

When doing cross-border e-commerce, as there are more and more opportunities to contact consumers, the understanding of their various needs is getting deeper and deeper. After doing cross-border e-commerce export business for a period of time, Xu Xinhua found that compared with domestic consumers, overseas consumers are willing to pay some costs for their preferences, and are willing to pay for good brands and good product designs. In his opinion, the support of the brand is entirely the product. Of course, making a product is not the same as making a brand. You can make a product at high, medium and low levels, but not a brand. To make a brand product, you must be high-quality or even high-quality products. "Otherwise you will die as soon as you spread it, so do word of mouth."

Therefore, after transforming into a cross-border e-commerce business, Xu Xinhua not only built overseas warehouses, but also changed products. In the past, many things were not well done, but the companies themselves did not know that since the advent of the Internet, consumers' opinions have been fully expressed, and consumers have become more and more critical. Xu Xinhua found that traditional offline products in the past. It does not meet the needs of consumption upgrades. Since then, he has started to make product iterations through the Internet model. He believes that the products in the e-commerce stage should become simpler, which can make consumers easier to use, simpler to make decisions, and easier to purchase; build word-of-mouth and customer experience based on quality.

Xu Xinhua requires that every aspect of the product be strictly controlled. Before the product is approved within the PepsiCo R&D system, the design scheme will be carefully reviewed. Only after passing the product will it enter the R&D stage. When the prototype is made, there are special testers and experiencers in the R&D department to review the product. , After the R&D department itself has accepted it, it will be sent to a third-party certification agency for certification, and finally it will reach the quality department of Besttech. They can only enter the production stage after the product has passed the inspection.

In Xu Xinhua's view, companies that are preparing to transform into cross-border e-commerce should firstly match their products with the platforms or channels they want to do. If you focus on the developed country market, the product must be very refined, and the customer experience and reputation of the product should be maximized. If the target is developing countries, the cost performance is particularly important. On the basis of the same quality, the performance should be better, or the price should be lower.

Xu Xinhua also pays special attention to the incremental market when choosing products. "In fact, in the process of doing cross-border e-commerce, we can't always compete with others for stock, and we need to increase it. At this time, we can achieve high-speed growth. It is much easier to develop, and it is much easier.” Xu Xinhua said that they are paying attention to this when choosing products now, especially those categories that have been neglected, and they give priority to this category. Due to logistics and capital problems, home appliances belong to the incremental market in e-commerce. Xu Xinhua is now researching the field of smart home appliances, hoping to achieve better results in this area in the future, and even become the industry leader. This is also his The goal and direction of the effort.

In addition, if you only focus on cross-border e-commerce platforms, you should also pay attention to the differentiation of regions and platforms. "Some countries have no problem choosing Amazon, but in some countries Amazon is not the best. On the surface, Amazon may be more famous, but some products are more effective on other neglected platforms. Companies that are new to cross-border e-commerce business must pay attention to this.” Xu Xinhua said.

Facing the challenge head-on

"Cross-border e-commerce is a channel, and it will be saturated after a certain degree. In fact, it is already saturated at present, and now there are 'traditional cross-border e-commerce'. It's called, the future will be more about the combination of online and offline," said Xu Xinhua, who has also begun to do this. In 2016, Xu Xinhua re-established the 2B team. It is hoped that in the next three years, 2B and 2C will account for half of the business. Although 2B has great challenges, in the process of doing 2C in recent years, PepsiCo has gradually built its brand. Yes, this is good for 2B.

At the same time, retail and distribution should be integrated. Xu Xinhua also began to prepare overseas agents this year. Now, in those countries that PepsiCo cannot set foot in through e-commerce platforms, they use the agency distribution model.

At present, PepsiCo is highly dependent on third-party e-commerce platforms, which is also a concern of Xu Xinhua, because after many platforms become larger, they will gradually ignore the consumer experience. However, Xu Xinhua believes that the time to build a platform is now ripe, "because e-commerce platforms have actually closed down a lot before, we have to build an e-commerce platform and can't do it like them. Now the traffic in the Internet is the most valuable, but the traffic is the most valuable. Basically, it has been divided up by BAT. If you have no way to get cheap traffic, it will definitely not work.” Xu Xinhua said that he hopes to continue to build a good brand this year, and wait for the company’s brand awareness to rise to a new level. Starting next year, he should The platform can be built gradually.

In addition, management issues are also a problem faced by enterprises transforming into cross-border e-commerce. For PepsiCo, after fully moving towards F2C, it is easy to do things well and make profits relatively easy even though all links are under control. Improvement and branding are easier to stand out, but the longer the chain, the more points of natural management, and the higher the requirements for enterprise managers. Based on Kazuo Inamori's "Amoeba" business model, PepsiCo has established a partnership division system, continuously upgraded its business philosophy, built a high-quality platform, and built a business of "everyone becomes an operator, and everyone is a partner" platform.

"The reason why there are so many cases of companies with unsuccessful transformation is because the people at the helm of the company can't keep up with the pace of development after transformation, and their concepts and management can't keep up." Xu Xinhua said to "CEConline".

Picture/ Yu He