What is the most profitable thing to do in Shaoguan, Guangdong?

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One grain of sand, one world.

Some seemingly insignificant small businesses often contain the greatest truth in the business world.

When Shi Zhenrong, chairman of Taiwan Acer Computer, was a boy, he helped his mother sell duck eggs and stationery. Duck eggs are 3 yuan per catty, which can only earn 3 jiao, and only 10 yuan of profit. They are also easy to deteriorate and will break if not sold in time, causing economic losses; stationery is highly profitable, and a business of 10 yuan can earn at least 4 yuan. Yuan, the profit is more than 40, and the stationery will not be damaged. It seems that selling stationery is more profitable than selling duck eggs.

But in fact, Shi Zhenrong later told his experience that selling duck eggs was far more profitable than selling stationery. Although the profits of duck eggs are low, they can only be turned over every two days at most; although the profits of stationery are high, they sometimes cannot be sold for half a year or even a year. Not only does the backlog of costs accumulate, but the profits are eroded by interest earlier. Duck eggs have low profit but quick turnover, so the profit is much greater than that of slow-turnover stationery. Shi Zhenrong later applied his experience in selling duck eggs to Hong Kong and established a "small profit but quick turnover model", that is, the price of the product is set lower than that of his peers. Although the profit is low, the number of customers increases, the capital turnover is fast, the inventory is small, and the operating cost is high. For the reduction, the actual profit is greater than that of peers.

The way Shi Zhenrong and his son sell duck eggs is based on a common theorem in business: return on assets = profit rate × turnover rate. The business acumen of young Shi Zhenrong is reflected in his ability to consider profit margins and turnover rates at the same time.

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But many Chinese people do not have such business acumen. They often ask: "What kind of business is the most profitable?" Undoubtedly, they all have their eyes on it. In terms of profit margin, the turnover rate is ignored, that is, it is concentrated on projects (industries) with large profit margins. However, projects with large profit margins often have slow turnover due to high prices. At this time, once the funds cannot be turned around in a healthy and rapid manner, not only will the terminal retailers themselves be overwhelmed by inventory, but the entire industry chain will also be in crisis.

Robust in the era of He Boquan once encountered such a disaster. In 1997, He Boquan decided to get a piece of the jelly market. The initial market response to the launch of Robust Jelly in August was really enthusiastic, and sales channels were clamoring for it! Want goods! Around the Spring Festival in 1998, the market seemed to have reached the peak of madness, with dozens of wagons in one province often asking for goods. He Boquan got excited and immediately expanded production capacity, increasing the number of production lines from 2 to 4, 6, and 8. When all 48 machines on the production line were installed and put into production - the terminal suddenly declared unsalable! The original Robust jelly was all crowded in the channels and did not reach the hands of consumers. Normal capital turnover failed to form, Robust quickly fell into a sweet "jelly whirlpool", and the market quickly collapsed. Hundreds of millions of dollars were lost.

Why does this happen?

Obviously, this is another version of the "beer game." The famous "Beer Game" clearly tells people how the funds in the entire industry chain are accumulated in inventory and cannot be turned around properly:

Retailers found a "Lover's Beer" that was easy to sell , so the volume of goods reported to wholesalers was increased once a week. However, the wholesaler's request to the manufacturer for additional shipments cannot be met until four weeks later (because it takes time for the manufacturer to expand production). Therefore, during the five weeks of waiting, retailers continued to eagerly increase their demand for goods. At this time, the wholesaler will mistakenly think that the terminals are selling well, so he will be enthusiastic and exponentially increase the volume of goods requested from the manufacturer. At this time, the manufacturer will also restlessly believe that the terminals are selling well, so he will also greatly expand his production capacity and expand Yield. The entire industry chain has been stimulated by a gradually amplified misinformation. When a large amount of goods finally arrive at the terminal, retailers will discover that the actual market demand is only a small part of their own mountain of inventory! At this time, he will suddenly stop asking for goods, but the wholesaler's inventory has increased several times, and the manufacturer is still speeding up production day and night!

——The final outcome is that the circulating funds in the entire industrial chain have turned into terrible "sunken capital" and become "dead goods" that no one wants and cannot be turned around. Manufacturers, Businesses all lose money.

The failure of Robust Jelly was due to the inventory backlog caused by the “information amplification” effect.

For the same reason, China's home appliance industry is in trouble. In 2004, the national inventory of air conditioners exceeded 8 million units, and the entire industry's inventory accumulated more than 12 billion yuan. Some people predicted that such inventory would inevitably lead to the breakage of a large number of corporate capital chains. Sure enough, there were nearly 90 fewer air-conditioning brands in 2004 than in 2003, and behind every brand that went bankrupt, a large number of dealers were buried. Therefore, Midea believes in a saying: "It is better to sell less than to have more inventory."

When there is too much inventory, capital turnover will slow down.

No matter how much inventory there is, capital turnover is just a dream.

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We believe that the essence of different businesses is actually the same. This is true for Shi Zhenrong, and it is also true for He Boquan, that is to grasp the essence of turnover through confusing appearances. However, most people are so indifferent to turnover that authoritative expert Cheng Xiaohua has repeatedly shouted: "This is the easiest issue for most companies to ignore, but it is also a very critical and even fatal issue!"

Today , the competition of capital turnover rate has become the core of modern business competition, so you must always be aware of: First, how much money do you have lying in the warehouse and sleeping every day? What is the effective utilization rate of inventory funds? Second, how many times does your capital turn over each year? How much profit will you make if you transfer it once a week?

①The manufacturer has large supply volume and low price. This is the most important condition for Hongtusanbao to accelerate turnover at a lower price than its competitors;

② More favorable account period. Cash holdings have greatly increased, and cash flow has become more benign;

③ Product buyout. The huge sales volume makes the manufacturer willing to let Hongtusanbao sell its new products exclusively;

④Special supply of products. A unique product customized by Hongtusanbao from the manufacturer.