Summary of Key Points
Meng Fanzhong, the chairman of Biyoute Commercial Group, shared two core principles for the company's stable development at the Lianshang Network conference: Trust is the foundation (treating employees and customers with sincerity and kindness) and The supply chain is the lifeline (reducing costs through reform and working together). He used Biyoute's example of an average annual growth rate of 22.5% over the past decade to illustrate that treating employees well can retain them, while treating customers well earns their trust. Supply chain reforms—such as adjusting purchase prices and establishing shared supply chain companies—are crucial for competing in the market and surviving. Small and medium-sized enterprises (SMEs) need to unite to break through these challenges.
1. Trust is not just empty rhetoric; it's about treating employees and customers with genuine care
Meng Fanzhong described trust as the "foundation of a building on sand," and gaining trust comes from treating employees and customers with sincerity from the heart, not just putting on an act.
- For employees: Biyoute offers among the highest salaries in the retail industry in Northeast China. Last year, the company spent 1 billion yuan on salaries, social insurance, and housing funds for its employees. Middle-level managers were provided with cars worth 120,000 yuan, and those who worked for 15 years received trips to the Maldives or cruises to Europe. After retirement, they continued to receive monthly subsidies for 15 years (for example, a manager retiring at 29 would receive 9,000 yuan per month). Even after revenue exceeded 10 billion yuan last year, the company changed its working hours to have fewer days off without reducing salaries, which was worth an additional 40 million yuan in labor costs. As a result, there were almost no resignations among middle and senior management—employees felt that the company offered them a promising future and were therefore motivated to work hard.
- For customers: Biyoute ensures that even if it incurs losses, customers do not suffer. More than two decades ago, the company adopted Pang Donglai's policy of allowing returns without any reason (even if there was no quality issue with the product). During the melamine scandal, milk powder could be returned without a receipt. During the pandemic, vegetables were sold at wholesale prices, resulting in a loss of 3.2 million yuan but gaining customer recognition. If the price tag did not match the actual price at checkout, Biyoute would compensate customers 10,000 yuan, which led to better store management. These practices have made customers trust the company, ensuring stable foot traffic and sales.
2. The supply chain is the lifeline; two reforms saved Biyoute
Meng Fanzhong emphasized that without a strong supply chain, a supermarket cannot survive. Biyoute has overcome two critical moments through supply chain reforms:
- 2019: Realizing that purchase prices were higher than those at convenience stores, Biyoute pressured suppliers to lower their prices. The company was losing 35 million yuan per year in Harbin for half a year; it discovered that customers and employees preferred to shop elsewhere because suppliers were charging more than they did. After adjusting product prices to match those of convenience stores and forcing suppliers to make up the difference, sales and profits recovered within three months. Biyoute also introduced daily deliveries, freeing up 14,000 square meters of storage space that could be used for other purposes, reducing rent and labor costs.
- 2023: When wholesalers increased prices by 20%, Biyoute took the lead in establishing a shared supply chain company. It found that wholesalers were charging the same high prices as the supermarket itself, making its products more expensive than those at snack stores. After visiting Japanese distributors, Biyoute reduced the overall markup to just 5%. The "Zhenshimei Supply Chain Company" now has six warehouses and serves multiple regions, including Northeast China and Shandong, with the number of cooperating companies increasing from 24 to over 60. With lower purchase prices, Biyoute can compete with online retailers and snack stores.
3. SMEs need to unite to build a strong supply chain
Meng Fanzhong pointed out that individual SMEs cannot obtain low prices on their own and must work together:
- Why unite? Small companies lack the bargaining power to get lower prices from suppliers, and wholesalers often charge high markups (for example, a local distributor in Anhui charged 20% more, while Zhenshimei only charged 5%). This makes it difficult for SMEs to compete with online retailers.
- How to unite? Companies should invest proportionally based on their sales volume and become shareholders of the supply chain company, effectively acting as wholesalers for themselves. For instance, Zhenshimei's 24 companies pooled their resources, reducing purchase prices by 16%, making its products cheaper than online ones. Meng Fanzhong advises SMEs in Anhui to form a joint supply chain to withstand online competition.
4. Biyoute's key indicators of stable development: cash flow and healthy stores
In addition to trust and a strong supply chain, Biyoute adheres to two other principles:
- Healthy cash flow: The company never delays paying employees' salaries or owes money to banks (only taking short-term loans for spring inventory). 90% of its products are purchased with cash, which is essential for providing benefits to employees and paying suppliers on time.
- Healthy store operations: Over the past 11 years, Biyoute opened more than 100 stores, closing only six that were not profitable. All remaining stores are profitable. The company expands quickly but carefully, avoiding maintaining unprofitable outlets.
5. The future of the industry: Large supermarkets need to address three shortcomings
Meng Fanzhong compared domestic and international markets: in developed countries, large chain supermarkets account for 50-80% of market share, while in China, this figure is only just over 20% and declining. The main challenges are:
- Low operational efficiency: Many supermarkets still use large storage facilities, leading to high costs.
- Weak supply chains: High purchase prices make it difficult to compete with convenience stores and online retailers.
- Lack of genuine care for employees and customers: Many companies treat "good treatment" as a formality rather than a fundamental value.
He believes that by addressing these issues, large supermarkets in China can become mainstream players and offer better products and services to customers.
In conclusion, Biyoute's success lies in its commitment to **treating people (trust) before focusing on business (the supply chain). Sincerity towards employees and customers builds a stable team and customer base, while supply chain reforms and cooperation help reduce costs and ensure survival. These lessons are valuable for all retail companies, especially SMEs.