Xiaogou Electronics was founded in 1999, becoming one of the successful companies who made a success on Taobao/Tmall, successfully transforming its traditional business to e-commerce operation.
From Traditional Retail Business Model to Ecommerce
Unlike traditional retail business model, a well-executed e-commerce platform gives Xiao Gou Company a more cost-effective way to reach to a wider range of Chinese consumers. Staying solely on online retail platform helps Xiao Gou company to channel synergies to attract consumers from all parts of China, unlimited to the geographical limitation of offline stores, helping them win and retain the most valued customers – and to do it profitably.
Xiao Gou Company estimated that the sales closed by a sale staff in a departmental store is near to the number of deals Xiao Gou Company closes in a day on one single e-commerce platform. In addition, online sites serve as effective marketing tools, as shoppers increasingly rely on web searches and reviews. These sites provide an effective way for filling gaps in a company’s physical store network, including untapped markets with little competition or product offerings that might not be available in physical stores.
Xiao Gou Company believes that stellar product quality is the key to retaining customers. Xiao Gou Company’s purchase team stations at Suzhou, where its suppliers are located, to frequently conduct inspections on productions, so to ensure quality control from raw materials to final products.
Xiao Gou Company promises a “7 days return/exchange” service to all customers. Even with such flexible return/exchange service, and a monthly sales of 20 000 vacuum cleaners monthly, Xiao Gou Company manages to keep its refund rate at a low 0.9% due to its outstanding products quality.
Post Purchase Customer Service
Apart from producing quality products, another aspect Xiao Gou Company holds dearly is providing excellent customer service. Xiao Gou Company sees this as a crucial value-adding component, where only constant upgrading and improving of customer service can help to establish customer-brand loyalty. This has allowed Xiao Gou to champion all major ecommerce platforms as the No 1 vacuum cleaner for five consecutive years.
Domestic brands such as Midea, Haier and Deerma as well as international brands such as Philips, Panasonic and Electrolux are Xiao Gou’s main rivals. Domestic brands especially have less product differentiation, from product specifications to price and to design.
Target customers of Xiao Gou are mainly customers between the ages of 25 to 40 and the bulk of Xiao Gou sales tend to be for household purchases.
Xiao Gou’s current marketing efforts are solely based online. It takes forms of promotional advertisements on latest Xiao Gou products. Xiao Gou’s brand manager revealed that there is no deliberate intention of focusing their marketing efforts online.
As Xiao Gou is only operating through online ecommerce platforms, it naturally directed its marketing efforts on the web. Xiao Gou’s brand manager also mentioned that they haven’t found a right timing or campaign idea to launch an offline campaign. Execution of an offline campaign is possible and will need to contain a strong message and have an effective delivery.
This post is an excerpt from BizAsia, a student society of Guanghua School of Management, Peking University.