Exclusive Interview With AOKANG CEO -- Wang Zhentao

It is one of the most important challenges for entrepreneurs to see whether or not they can see the trend and adjust their strategic direction. Taking China's shoe enterprises as an example, the inventory crisis in recent two years is not a temporary illness, but an inevitable outcome after the rapid development of China's footwear manufacturing industry. If the enterprise is obsessed with dealing with the inventory of fire fighting marketing, it will lose a chance to adjust and upgrade.

First of all, overcapacity in manufacturing is a universal problem. Not only is the shoe and clothing industry, but the overcapacity has brought a lot of backlog. The household appliance industry can dig deep into the countryside (or even dig too much), but there is no such possibility in the shoe and clothing industry. Discount sales promotion has become the main theme of the footwear industry in recent two years. But on the other hand, this is the time for brand display power (although domestic independent brands are still in a depressed state in the minds of consumers compared with international brands), taking the brands of AOKANG group as an example, the consumption downturn has a greater impact on Kanglong and Red Flamingo with lower brand awareness, while the same store growth rate has dropped significantly, while AOKANG brands have performed better.

Secondly, the consumer behavior of shoes and clothing has changed, one is the more high-end brand, and the two is the frequency of consumption. Although this means that shoes and clothing enterprises can sell more products, consumers need not homogenized products, but more differentiated and personalized products, which requires shoes and clothing enterprises to enhance market insight. In addition, the renewal cycle of footwear consumption is greatly reduced, and it also challenges the speed of new product R & D design and listing.

　　 AOKANG Wang Zhentao, founder and chairman, believes that for footwear companies, products, customers and pricing are highly convergent, and the key to competition lies in the speed of competition. Therefore, he proposed to "sell shoes like fruit," and divided the traditional four seasons into eight seasons, designed and developed new products according to the characteristics of each small season.

AOKANG also formulated the "fashion line" strategy for the high inventory of the existing monopoly mode this year. The "fashionable assembly line" is a new concept put forward by AOKANG in the marketing process. Its goal is "24 hours of R & D, 3 hours of production, 24 hours of logistics, and 30 world shelves". With the characteristics of "fast", the concept of production line is extended to the whole ecological chain of shoes and clothing enterprises.

If we can really achieve rapid marketing, we can naturally raise the turnover rate of capital and reduce the cost of inventory. Wang Zhentao once said: "selling products can earn ten yuan, selling brands can earn one hundred yuan, and making capital operations can earn ten thousand yuan." Making fast fashion and improving capital utilization is the strategic direction for AOKANG's future operation.

But fast fashion is by no means an overnight move. With AOKANG's "eight season" new product, this means that the number of stores will increase, the cost of storefront will increase, and the selling price of single products will be reduced, which may affect the gross profit. That is to say, the fast fashion "fast" test is the ability of a company to grasp the market as a whole. It shortens the product development cycle, requires enterprises to be extremely sensitive to the market, and extracts the fashion messages at the fastest speed and embody them in the products. This puts forward higher requirements for the production of products. At the same time, it must have strong logistics system support and greatly improve the circulation speed of products. In addition, "fast" also involves price control capability, sales forecast and supply chain reaction speed. What efforts will AOKANG make to achieve the established strategic goals?

In July 24th, Huatai Securities (601688, stock bar) issued a research report that AOKANG International (603001, stock bar) growth in the first half of the year was expected to be slower than expected, and both revenue and net profit were negative growth. The terminal consumption continued to be weak, and the annual profit would be negative growth. In 2013, it continued to transform to retailers, so as to enhance operational efficiency and improve performance in the short term. The effect of strategic transformation is not temporary. Perhaps this is the pain caused by the rudder of a giant ship, and its long-term impact remains to be seen.

　 Ultra fast operation of fashion line

Reporter: what is the strategic positioning of AOKANG at that time? Why did it adjust its strategic position at that time? How did AOKANG achieve its strategic goals?

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Wang Zhentao: AOKANG's positioning is China's leading footwear retail service operator. The background of this strategy is that first, the trend of the whole industry is rising production costs, overcapacity, and weakening foreign trade demand; secondly, the rise of new shopping centers such as e-commerce and commercial complex.

AOKANG plans to gradually achieve strategic goals through the following ways: first, to carry out "intelligent manufacturing" excellence, first, to strengthen the construction of upstream supply chain system (R & D, production, logistics), and the two is to strengthen the construction of downstream terminal management system (storefront, operation, customer). For example, we put forward the concept of "fashion pipeline"; secondly, AOKANG entered e-commerce, such as AOKANG mall, opened online flagship stores on Taobao, Jingdong and other e-commerce platforms; finally, upgrading the existing terminals to the International Pavilion, and the International Pavilion was a new business model promoted by AOKANG to break through the predicament of the retail industry, and innovatively integrated the brands of different levels of consumer groups into a region to provide consumers with more convenient, fashionable and international consumption experience. At present, the International Pavilion of AOKANG's high-end experience has opened 10.

Reporter: as a support system to support the strategic positioning, what is the definition of "fashion pipeline"? What are the requirements for AOKANG to achieve this goal?

Wang Zhentao: "fashion line" is a new concept put forward by AOKANG. The goal is super fast operation, "24 hours of R & D, 3 hours of production, 24 hours of logistics, 30 world shelves". With the concept of "fast", the concept of production line is extended to the ecological chain of footwear industry.

This requires us to have a strong market sensitivity. We need to meet the requirements of the "quick" requirement of the entire operation ecosystem chain, and shorten the product production cycle. At the same time, we must ensure product quality and ensure the positive image of the brand from the source. In addition, to achieve smooth operation of the "fashion line", we can not do without the support of logistics system, and we must greatly enhance the speed of product circulation.

Reporter: product development cycle shortens, involves many links, how does AOKANG achieve this?

Wang Zhentao: in May 2010, we established the AOKANG science and technology literature service station to improve the ability of information collection, generalization and integration. At the same time, AOKANG established a high-tech digital R & D center with an area of 8000 square meters, digitalized all the equipment, upgraded from 2D to 3D, and all operations were carried out in the computer, and the operational requirements could be completed instantaneously. In terms of R & D, in 2002, AOKANG set up two shoe design centers. In 2006, AOKANG established the Dongguan international R & D center. In 2007, AOKANG established the first comprehensive footwear technology research institute of China, the AOKANG footwear technology research institute.

Reporter: fast fashion has put forward higher requirements for product production. What is the current situation of AOKANG's suppliers? How to achieve the organic coordination of supply, production and marketing?

　　 Wang Zhentao At present, AOKANG has an upstream supplier of nearly 100 and downstream partners. Such a huge industrial system, any partner and a link will affect product quality and brand building. To this end, AOKANG will continue to work hard to improve the overall quality of the industrial chain, and will introduce a series of measures to improve the standards of raw material procurement, leather specification, environmental protection testing and so on, and at the same time, improve the brand requirements for downstream partners. Only through the overall upgrading of the chain can we enhance our core competitiveness, make the brand stronger and continue to be strong.

AOKANG will further integrate global supplier resources to achieve global production, establish an international production workshop, turn employees into shoemaking engineers, integrate equipment, personnel and resources, and replace automation with automation. AOKANG will be like Boeing to assemble aircraft and BMW to assemble cars. By integrating from manufacturing to "intelligent manufacturing", it will greatly shorten the time of shoes from workshop to store, and improve the quality of shoemaking.

By integrating the industrial chain, AOKANG will turn resources into capital and finally achieve the overall goal of going global. We will make rational use of domestic and foreign two kinds of resources and two markets, export brands to developed countries and become strong industries. In less developed areas such as Southeast Asia, we need to establish channels, strengthen supply systems, and support AOKANG's brand development through diversified and benign interaction.

Reporter: ultra fast operation also needs logistics system support. What preparations has AOKANG made for this purpose?

Wang Zhentao: in order to realize the logistics speed of selling shoes like selling fresh fish, AOKANG will carry out the construction of information logistics. It plans to build six logistics centers in China over the past three years, and integrate the multi brand resources with the six logistics centers to drive the seven regions. The future function of logistics centers is to make orders, production and distribution. It is necessary to form a 2-3 hour sales distribution ring. Regional sales companies only manage, do not have warehouses and stocks, but set up warehouses at terminals, and achieve rapid increase in efficiency through fast logistics. Wenzhou headquarters and Shanghai and Guangdong logistics centers are being built, and Wuhan, Beijing and Shenyang logistics centers are listed on next year's list.

Reporter: what do you think of China? Shoes and clothing brand Today's challenges and opportunities?

Wang Zhentao: the challenge is that with the entry of famous foreign brands and the rise of new brands, the competition for domestic shoes and clothing is becoming more and more intense. The adjustment of this consumption cycle will also promote the industry reshuffle. The development of enterprises with less R & D investment, less brand building and weak channel capabilities will increase the degree of concentration of shoes and clothing industry. The opportunity lies in the fact that the potential of the domestic market is still great. The future urbanization will bring more opportunities. With the upgrading of consumption and the increase of consumption level, the demand for quality brands and quality products will increase. The brand concentration of the industry will be higher and higher. This is a good opportunity for brand integration, expansion and merger.