Small profits but quick turnover, the worst business strategy

Hello, welcome to listen to Jia Zhen for 5 minutes, I am Jia Zhen.


Today we are going to talk about a topic:


Small profits but quick turnover is the strategy that most businesses will choose, but it is the worst business method.


To be honest, when I first started thinking about this question, I rejected it from the bottom of my heart.


I believe that you are also resisting in your heart, thinking: Jia Zhenzhen has become an unscrupulous businessman little by little.


Because from the moral level, at first glance, small profits but quick turnover is the embodiment of conscientious sellers, and earning several times profits is synonymous with “profiteers”.


But in fact, after listening to me, you will find that only profitable businesses can change the world.


A businessman with no profit, no matter how kind-hearted it is, is powerless.


Why small profits but quick turnover is the worst business model?


Because the purpose of small profits is to sell more , in essence, they still want to make more money, but they just want to win customers and increase sales by reducing profits.


Two questions need to be considered here:


1. With a small profit, will you be able to sell more?

2. Assuming that small profits can lead to more sales, how far can it go?



small profits

Will it be possible to sell more?


I don’t think so, otherwise Pinduoduo would have been number one in the world long ago.


Reason: “Cheap” is one of several user needs .


You go to Taobao to search for mobile phone cases and sort them by sales volume. Is the one that sells the most the cheapest?


Not really.


You see “Qian Aunt”, a vegetable seller, the value it provides is fresh , and does not sell overnight meat.


People who have this demand don’t care that it is a little more expensive than the vegetable market, because in the eyes of Aunt Qian’s users, freshness is more important than cheapness.


Many entrepreneurs come up to choose a small profit strategy, essentially because they lack self-confidence and ability.


Because, if you like low-priced customers, it is the easiest to obtain, and you can just have a lower price than your competitors.


But at the same time, it also has the least competitive barriers. As long as it comes out lower than you, you will have no advantage in an instant.


Moreover, products with low gross profit do not mean that you can give users the feeling of high cost performance.


In other words, small profits do not equal high cost performance .


For products with free shipping on 9.9, even if you don’t make any money, or even lose money, you will find that there will be more negative reviews.


Even if the same product, if you upgrade the visual, improve the packaging, and sell it for 39, you will find that the evaluation will be much better.


why?


Because all products cannot escape one word: emotional value .


Or translated from a scientific point of view, placebo.


I believe that diseases that cannot be cured by modern medicine can be cured through remedies.


But I think it is not the remedies that cure the patient, but the placebo.


Religious belief will generate emotional value outside the product, and this value will even go beyond the product itself.


Low-priced products are difficult for users to generate emotional value, and even have a reaction force.


To sum up, I don’t think small profits can necessarily lead to more sales, for two reasons:


1. From a competitive point of view, there will be no barriers to competition.


2. From the user’s point of view, it does not necessarily bring the user’s recognition of the product.


The proof is that you can see that 99% of the brands or companies on the market can give you a sense of cheapness and cost-effectiveness, but none of them are low-margin, such as Coke and Nongfu Spring.



Assuming that small profits can be high sales

how far can you go


Take 10,000 steps back, assuming that you are the 1% of the few, and you can bring more sales through small profits. Can this model work?


If small profits can be sold more, it will bring about an increase in total profits, but a core question is ignored here: will sales increase, will costs increase?


The vast majority of company costs are personnel costs. The more thin-profit an industry is, the more labor-intensive it is.


That is to say, as sales increase, personnel costs will also increase accordingly.


So whether small profits but quick turnover can go on in a cycle, the core is that when the number of people is increased, the human efficiency cannot at least decrease.


For most companies, it’s the exact opposite.


The mom-and-pop shop is the most efficient. Two people can do what five people can do. The more people there are, the lower the efficiency.


So in reality, we can see that mom-and-pop shops can make money by choosing the strategy of small profits but quick turnover at the beginning, but it will become more difficult as they go on. Because they are not good at management, the more people there are, the lower the efficiency of people.


Unless one day, technology advances to a certain extent, machines can replace people, and sales labor costs can be marginalized.


Otherwise, small profits but quick turnover will always be the worst business model, either not doing much, or the harder you work, the more money you lose.


In reality, we have also seen that as long as the low-margin strategy can persist for a few years, and it can do well, most bosses have a commonality of “weekly pickling” and achieve the ultimate in cost control and efficiency improvement.


Young bosses who have a dream of counterattack and choose a small profit business strategy are especially prone to bankruptcy.


Because after he made sales, he thought that what he was squandering was profit, but in fact it was the account period given by the factory.


Having been doing e-commerce for so many years, there are many similar cases around.


To summarize:


For small profits but quick turnover to work, the key is efficiency . The more people there are, the higher the efficiency of people.


If you can’t do this, you can only treat small profits but quick turnover as a short-term tactic, not a long-term strategy.


Therefore, I sincerely advise our 108 members. If you start with small profits in the early stage, unless you are particularly good at management, you can ensure that the human efficiency will not be reduced.


Otherwise, you must consider being a new store, jumping out of your comfort zone, no longer taking low prices as the core gameplay, and trying to find the different needs of different users.


When one day, you can no longer rely on low prices and can increase the sales of the store, you can truly enter the door of business.


When you have a day when your product has enough profit margin, you will find the sense of mission as a businessman.


The businessman’s moral is to increase the value of the product, not to reduce the price.


Use the profits the market gives you to optimize services, upgrade products, and change the world.

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