Back to the prime of life

Chapter 201 Collision
"...We didn't just figure out the issues of expanding product categories and logistics this year. In fact, we had already thought them through by the end of 07 or the beginning of 08. We had a pretty clear understanding of them and had gone through several rounds of internal discussions. Expanding product categories was to reduce the average customer acquisition cost, and investing in logistics was to ensure the user experience."

Moreover, now that we have thought it through, we will resolutely commit ourselves. There are indeed temporary difficulties, but these are not due to any mistakes in the company's operations or errors in the decision-making of the management. The main reason is the financial crisis that occurred at the end of last year.

The period of heavy investment coupled with the financial crisis—while this may sound like self-justification, it is indeed the truth. Fortunately, the worst of the situation passed by the end of last year, and cash flow pressures have been somewhat alleviated.

In the office, General Manager Liu sat on one side, while Lu Changge and Xu Huiya sat opposite them on the other side.

Lu Changge originally thought that Xu Huiya was going to pass the checkpoint alone, but she didn't expect that her group had separated from her and entered one after another after they arrived, making a total of four people.

They all belong to Titanium Capital and all work around General Manager Xu Huiya.

Lu Changge was brought here to be brainwashed. Although he had already refused in his heart, he deliberately found a seat on the side and tried to be invisible.

Xu Huiya wouldn't let him off the hook, and said to President Liu, "Today I've also brought a partner with me, which is also a company requirement. Regarding logistics, your two companies have completely opposite views. President Lu, would you like to share your thoughts with us?"

She probably didn't know that Lu Changge had already had some brief contact with the boss in front of her, but there was no need to bring it up in this situation.

And President Liu didn't seem to mind Lu Changge's arrival.

Successful people are actually less prone to emotional outbursts than ordinary people. They are more willing to listen to different opinions. On the contrary, people with less knowledge and poorer cognitive abilities are less receptive to completely opposite viewpoints.

This is what they mean by "ignorance is bliss".

Lu Changge also knew that Xu Huiya had actually introduced them. From the perspective of investors, investing in similar companies could do many things, such as promoting resource integration between the two parties.

"Mr. Xu, regarding whether or not we need to build our own logistics network, I have a clear attitude and viewpoint: I believe both paths have the potential for success. There are no absolutely correct answers in business operations, only choices that match one's own strengths."

The reason why Lumang Company resolutely avoids logistics is fundamentally related to its own genes. We are a platform apparel brand that mainly deals in small, low-priced goods, while JD.com started with high-priced, standardized goods such as 3C digital products.

What does that mean?

It's like a thief has a hundred reasons to steal from JD.com, but not a single reason to steal from Luman.

"Hahaha." This example was so extreme and sudden that all the senior executives from JD.com across from them laughed.

"Therefore, our requirements for delivery security are low. If the goods are lost or damaged, we can simply send another one. But Mr. Liu cannot do that. Also, as the average order value increases, consumers become more sensitive to delivery time. This is easy to understand. Most ordinary people don't spend thousands of dollars every day, so once they decide to spend money, they expect to receive the goods as soon as possible. These are two key differences. Furthermore, building your own logistics network is costly, requiring continuous capital investment in the initial stages..."

If Lu Changge's memory serves him correctly, the money JD.com raised in 2009 was actually spent by the end of the year.

They've had a tough time these past few years, facing accusations of operating at a loss.

"For companies with high average order value and high gross profit margin, large investments are still acceptable. At least they have an imaginative future to convince investors. But for Lumang, our profit margin per item is very low. Perhaps Mr. Xu believes me, but capital is ruthless. I think most investors will not believe that a company that makes a few dollars from selling a piece of clothing has the ability to survive with such heavy assets."

In comparison, transferring the burden of logistics at this stage through third-party partnerships is better not only from a financing perspective but also from an operational perspective.

Lu Changge's sharing contained almost no industry jargon or technical terms, but the principles he explained were very simple and easy to understand.

The more he does this, the clearer he is about the matter.

When both of them make valid points, it puts Hsu Hui-ya's judgment to the test.

So she pressed on, "Mr. Liu, if you were in Mr. Lu's position, would you handle the logistics?"

This old fellow looked simple and honest, but he was actually extremely clever. He actually said, "I'll do it."

What could Lu Changge say? A big shot is a big shot, isn't he?

"Why? Do you think the issues that President Lu just mentioned aren't problems?"

"Of course not. His analysis was very insightful, but I might be a bit bolder and take a bigger risk. Ultimately, abandoning this step means abandoning a part of the user experience, and I still believe that the user experience must be perfected. Perfection creates value. And I firmly believe that as long as a company creates value, the market and consumers will reward it."

Xu Huiya seemed quite satisfied. She nodded, then turned to Lu Changge and asked, "President Lu, what about you? You're in President Liu's position, what do you want to do?"

Now was not the time to argue, so Lu Changge spoke the truth: "I'll do it."

"Hahaha."

"What's the reason? Is it the same as the user experience that Mr. Liu mentioned?"

Lu Changge shook his head. "They're not quite the same. Mr. Xu, if JD.com builds its own logistics network, it will have a completely different business approach from third-party logistics providers. Think about it: one prioritizes minimizing the handling of goods, while the other prioritizes handling as much as possible."

This point is not difficult to grasp if you understand it.

The more outside logistics companies handle, the more orders they get; they'd love to move a single item around in every direction, as long as someone's paying. But logistics companies serving their own e-commerce businesses will definitely try every means to improve efficiency and reduce costs, especially avoiding the need for goods to be moved around so much.

After thinking for a few seconds, Xu Huiya's eyes lit up. "President Liu, this is an interesting suggestion."

"Yes, we have considered it ourselves, but we rarely talk about it to outsiders."

Lu Changge continued, "Many people now say this is a heavy asset model, but if you think about it according to the logic I just mentioned, once the self-built logistics reaches a certain scale and the delivery is also scaled up, the cost will be significantly lower than that of third parties, and then a 'lighter the heavier' moat will be formed."

"The heavier the better?!"

This conclusion is quite surprising.

In fact, the cost of a product is fixed, regardless of where it is sold or whether it uses its own logistics. Moderate logistics costs exist, and the cost is ultimately borne by the consumer. Therefore, once this moat of increasing weight and decreasing efficiency is formed, it becomes a very deep moat.

Xu Huiya had made up her mind. "There's a saying that goes, 'The person who understands you best is always your rival.'"

"No, we also plan to cooperate more with President Lu, and we are two completely different companies."

Lu Changge was also making his own plans, so he brought it up now: "Mr. Liu is right. Our two companies are completely different, and I have faith in JD.com's management capabilities. I'm even thinking of cooperating with Mr. Liu on logistics."

For the past few years, JD Logistics has not been open to external parties. It was only after it became an independent operation that it began to solicit business on its own.

However, things are all made through conversation.

It's not that Lu Mang doesn't pay; it's just a matter of how much they pay.

Seeing that her attempts to sow discord had failed, Xu Huiya lost interest in continuing. As for whether she would invest later, and whether the investment would be in the tens of millions or hundreds of millions of US dollars, that was no longer Lu Changge's concern.

But his visit today was indeed valuable.

Mr. Liu had already taken notice of him during his last visit to Beijing. In the meantime, Lu Mang has been on a crazy marketing spree and has successfully raised funds. Even he hadn't expected that such a young boss would lead such a successful company.

Judging from recent trends, this young boss Lu not only has a very clear understanding of the company's business model, but also pays great attention to risk management. As someone with experience, he clearly understands the significance of the actions taken by Lu Changge.

In his view, Lumang can already be considered a successful company. Even if it is not profitable at the moment, it has the qualifications to be profitable. Even if its turnover is still small, it is still a small but beautiful company.

Furthermore, Lu Changge possesses a significantly higher level of insight into the industry than others, which is quite rare.

Even putting all that aside, this little guy and his brand are gaining popularity among young people very quickly.

Although the term "traffic-grabbing" doesn't exist now, this practice has existed for hundreds or even thousands of years.

In short, putting aside feelings and focusing solely on interests, Lu Changge is a business ally worth having.

Later, Hsu Hui-ya asked them for a separate office so they could have internal discussions and report to the higher-ups to see how the investment would be decided.

Lu Changge was invited to President Liu's office.

Lu Changge also knew that this guy was a heavy drinker, so he had his assistant arrange a dinner party right in front of him. He even asked him with a smile how much he could drink, and said that the people he knew from Huai River all had a high alcohol tolerance.

Really ferocious.

Moreover, this man, who had climbed his way up from the bottom, was also very savvy in social interactions. He proactively suggested to Lu Changge, "President Lu, do you know someone in our company? How about we invite her along tonight? Is that convenient?"

This,
He glanced at the assistant next to the man and felt a little envious. The assistant must have reported this. How thorough! He didn't even have a penny to his name yet.

As for Mr. Liu doing this, it was also to give him face. He really knows how to handle people.

"That should be convenient, thank you very much, Mr. Liu."

"No need for formalities between brothers. We should cooperate and help each other from now on."

Lu Changge had some other thoughts. In any case, this guy was very successful in business and would be a billionaire in the future. Since he could get to know him at this stage, there was no need to avoid him.

As for the rumors and gossip that accompanied him, they had nothing to do with him or his money.

"Mr. Liu, there really is room for cooperation between us."

(End of this chapter)