For JALA Importance of "Centralized Goods Management" Is On Par with 5G

In 2020 the "Centralized Goods Management" project of JALA Group's CHANDO has triggered widespread discussions in the industry. As the pioneer in the beauty makeup industry, JALA's move is beyond the imagination of the existing productivity of the industry.

On October 12, 2020 the launch ceremony of the new "Centralized Goods Management" model and Wuhan warehouse of JALA Group's CHANDO was held in Wuhan. At that moment the group's key project, which had been prepared for 3 years, finally appeared because the COVID-19 pandemic has accelerated the process. 

In order to enable this major project, JALA did not hesitate to mobilize the manpower, material resources and financial resources across the whole company to break and restructure the supply chain management, the company's organizational structure and channel relations. Similar to when people questioned 5G when it emerged: "Is it worth paying for the unknown?"

As Zheng Chunying, Chairman and President of JALA Group, said: "JALA is the first enterprise in the beauty makeup industry to engage in centralized goods management. Despite the difficulties, we still fight tooth and nail to promote the "Centralized Goods Management" model in an all-round way because we believe it is of milestone significance to all stakeholders in the value chain."

01

How does CHANDO’s "Centralized Goods Management" model work?

Literally speaking, "Centralized Goods Management" is the obverse of "Multiple Stocks". The latter refers to the concept that in all the provinces and cities cosmetic distributors keep their storage independently, and the sales and logistics channels among brand stores, CS (Cosmetic Store ) and KA (Key Account) and even online channels are also independent. It is hard to achieve interconnection among all warehouse inventories.

"Multiple Stocks" is an inevitable stock allocation method under the current understanding that “channel is king”. This has been the standard in the cosmetics industry for a long time. In the early years, cosmetics brands adopted a multi-level distribution system in order to quickly develop markets in various places. Over time it became normal to see hundreds and thousands of distribution teams across the country.

However, the model has the drawbacks: 1. Warehouses cannot be interconnected. "Multiple Stocks" creates a large amount of inventory and this affects the turnover efficiency; 2. The model has greatly contributed to the problems such as channel conflicts and disorderly pricing. In the long run, the rights and interests of consumers will inevitably be impacted; 3. Enterprises cannot truly understand the flow of products or consumer preferences.

Therefore, CHANDO, as the pioneer, initiated the "Centralized Goods Management" project to abandon the current challenges caused by "Multiple Stocks" among distributors and channels. By CHANDO setting up multiple warehouses across the country, all the distributors' purchased goods will be included in the warehouses, with the exception of a few direct sales channels. The terminal orders will be delivered to the stores by the third party cooperative logistics S.F. Express. This enables all channel stock sharing, unified allocation and visual operation.

The significance of the change lies in that JALA completely steers clear of the overstock risk of distributors in the future and greatly improves the distribution efficiency of logistics. Wei Zigang, General Manager of Hubei Haolin Daily Necessities Co., Ltd., which has already adopted the new "Centralized Goods Management" model, told the reporter that the delivery to consumers is 6-12 hours faster than the previous model where the distributor picks up then delivers the product to the store.

It is worth noting that the "Centralized Goods Management" model is not just focused on a certain channel. Through the powerful cooperation with S.F. Express, JALA has enabled 5 of the 14 warehouses to undertake B2C businesses in addition to B2B. In other words, these warehouses not only serve offline distribution, but also provide delivery services for e-commerce consumers.

02

Is the purpose of "Centralized Goods Management" only to control prices/prevent channel conflicts?

As early as three years ago, JALA started to think about the "Centralized Goods Management" model. At that time, conditions were not mature and there was resistance both inside and out. However, the pandemic in early 2020 has acted like a catalyst and has accelerated to expose the existing problems in China's cosmetics market and spurred the online and digital development of the entire industry.

As Zheng ChunYing said "Digital transformation is a must-have for enterprises in the future. It is extremely urgent for offline enterprises to carry out digital transformation. Without it the result is not that consumers will leave you, but you will leave the consumers."

 △  Zheng Chunying, Chairman and President of JALA Group

Following the opening of the Wuhan warehouse all 14 warehouses of JALA will be launched across the country in the subsequent month or so. He said bluntly "If we adopt this model only for preventing channel conflicts or controlling prices, it will not be worth the cost and effort."

The reason why JALA wants to adopt the "Centralized Goods Management" model is not to reduce costs. On the contrary, it will temporarily increase logistics costs and capital costs according to statistics. "In fact, "Centralized Goods Management" is designed for the era of digital user operation, designed to be closer to consumers to better serve them, and to create greater value for consumers and clients, thus realizing sales growth."

Specifically, first "Centralized Goods Management" can continuously provide consumers with stable high-quality products and services and create value for consumers. Second, it can protect the interests of customers. If operators do not have reasonable room for profit, they will lose the motivation to operate and will not be able to provide high-quality services to consumers. Third, it can maintain the brand value. Only by managing prices well can the brand value be guaranteed and the value be brought to consumers.

Xu Qian, Vice President of S.F. Express, also said that by adopting the new "Centralized Goods Management" model, the beauty makeup industry will undoubtedly be able to hold data, the largest intangible asset, in its hands. Through transparent logistics and backstage, JALA can get more accurate information on consumers' region, age, preferences and other characteristics, enabling brands to know more about consumers.

03

Will distributors be eliminated?

Certainly the "Centralized Goods Management" model will greatly transform the relationship among the supply chain, distributors, terminals and consumers in the beauty industry. Since the news was officially released on October 12, many people in the industry have expressed a concern: Are distributors still necessary for the industry?

JALA's answer is positive. Distributors are not only necessary, but they will play a very important role in JALA’s digitization process.

"The "Centralized Goods Management" model is the basis for enterprises to implement digital transformation, which represents the advanced productivity of the industry.  Enterprises need to build corresponding advanced production relations to improve productivity. Distributors should gradually transform into digital service providers in the future, as sales teams should transform into digital service employees, so as to press ahead together through transformation." Zheng Chunying said. 

Stores will continue to place orders from distributors after the model is adopted. However, logistics and capital are no longer the focus for distributors, which should change from the original role of providing logistics, cash flow and terminal retail management to a consumer-centered role. Distributors will now do a premium job in terminal retail management and user operation through digitalization. In other words, the era of competition through utilizing internal strengths has arrived.

In particular, for stores with low productivity and store owners who are not fully prepared for digitization, distributors should carry out a series of digital construction to help offline stores access to Internet-based operation and provide offline customers with tools, methods, thinking, knowledge and other necessary measures.

Zhang Feng, General Manager of Xiangfan Chengfeng Commerce and Trade Company, who participated in the launch ceremony of the Wuhan warehouse, told the reporter that the distributors will retain two functions after the "Centralized Goods Management" model is adopted. 1. Client function: The company needs to make an order connection between its own system and S.F. Express system. 2. Service function: Relying on the powerful data resources of JALA Group, distributors can grasp the digital nodes to better serve clients.

Song Jianmin, General Manager of Hubei Heyond Commerce and Trade Company, also praised the contribution of the "Centralized Goods Management" model in brand image maintenance, strict price control and prevention of channel conflicts. He was especially impressed by JALA’s efforts in maintaining market order in recent years. He will set up his own service team and make the service more meticulous in the future.

Zheng Chunying has also been mentally well prepared for the resistance in the future reform. He has reserved a buffer time of 2-3 years for this complicated, long-term and systematic reform. JALA looks far ahead and aims high rather than staying static. As new trends flood into the industry, JALA’s determination and courage shows that the true industry leader is the one who bravely stands on the crest of a wave.