FindSteel.com achieved profitability last year: Steel e-commerce is profitable

Steel e-commerce is finally making money!

Recently, Wang Dong, CEO of Zhaogang.com, told a reporter from the Economic Daily that although the annual report has not yet been officially disclosed, it is expected that in 2016, Zhaogang Mall's steel sales volume will be approximately 13 million tons, the company's revenue will be approximately 36 billion yuan, and its net profit will exceed tens of millions of yuan.

Since its full-scale rise in 2012, steel e-commerce has quickly eliminated the information asymmetry of traditional steel trade, compressed the intermediate links of multiple layers of agents, and allowed steel mills to directly face users, greatly improving supply chain efficiency, thanks to its advantages of price transparency and efficient information. However, it is worth noting that although the industry prospects are broad, for a long time, the gross profit margin of steel e-commerce has been low, business models have been seriously homogeneous, and the profit model has not been clear, with most companies in a state of loss, relying on financing and continuous blood transfusion from the capital market to maintain their development. Therefore, as the first steel e-commerce company to announce that it achieved profitability in 2016, Zhaogang.com not only broke the market's doubts about steel e-commerce's "only burning money without making money," but also took the lead in firing the first shot in the industry's turnaround to profitability.

There are three key points to profitability: firstly, the growth of high-quality customers and the continuous improvement of repeat purchase rates; secondly, the continuous improvement of the quality and quantity of cooperating steel mills and the continuous optimization of cooperation policies; and thirdly, the company's operation and management are becoming increasingly refined and even intelligent." Wang Dong said that last year, Zhaogang.com's full industrial chain business made a comprehensive effort, and businesses such as the trading platform, warehousing and processing, Pangmao Logistics, and Pangmao Finance have gradually formed a joint force. The full industrial chain service model provided by Zhaogang.com has further enhanced the platform's stickiness.

In 2016, Zhaogang.com made breakthroughs in industrial chain extension, successively cooperating with Haier Group to jointly build the cross-border e-commerce platform Hotoem project, jointly building Zhaogang Pipe Network with Tianjin Steel Pipe, jointly building the Pang Pang Dog supply chain platform with Panhua Group in Southwest China, and jointly investing with Shanxi Elite Technology to create Zhaojiao.com, a professional e-commerce platform serving the coal and coke industry chain. Its venture capital institution, Pangmao Venture Capital, invested in approximately 20 B2B companies last year. At the same time, overseas business has gradually expanded, and in addition to the earlier South Korean branch, branches in Vietnam, Thailand, and Dubai have also been put into operation.

Currently, Zhaogang.com's main profit model is "matching + self-operation (Zhaogang Mall)", while also integrating logistics, warehousing, processing, and finance into the industrial chain, bringing a systematic solution to the steel trade circulation industrial chain and providing one-stop service to customers. According to Wang Dong, in the past, small buyers who wanted to buy steel needed to make more than a dozen Tel calls to inquire about prices, compare prices, negotiate prices, and lock in goods to complete an order. Now, through the Zhaogang.com platform, customers can make one Tel call or submit an order online, and Zhaogang.com can help buyers quickly match suitable sellers free of charge. Therefore, Zhaogang.com has gradually become the procurement order entry point for small and micro service providers through intermediary matching.

With the "matching transactions" becoming increasingly large, some steel mills have also actively approached the platform, hoping to sell on Zhaogang.com, thus smoothly opening up self-operated businesses. Through exploration, Zhaogang.com has used the "price-guaranteed agency sales" model in its self-operated business.

"Price-guaranteed agency sales" means that we do not buy products from steel mills, but the steel mills set prices themselves every day, and Zhaogang.com sells them to small and micro users at the prices set by the steel mills, while charging commissions from the steel mills." Wang Dong said that this change is of great significance to steel companies, because traditional steel trade is extensive and large-scale wholesale, without retail channels. Retail steel transactions allow steel companies to have stable sales volume, directly obtain information and contact the market, adjust product structure according to market changes, and the retail profit is much higher than wholesale. While helping both upstream and downstream parties obtain benefits, Zhaogang.com's own value has also been realized.

The profitability of Zhaogang.com, on the one hand, has tested the current business model, and on the other hand, it also proves that steel e-commerce is being recognized by more and more customers, and upstream and downstream users have initially developed the habit of using steel e-commerce platforms for steel trade.

In addition, the most prominent industrial value of steel e-commerce lies in the fact that the large amount of terminal customer transaction data accumulated by e-commerce allows steel mills to achieve the survival of the fittest through data, and to carry out targeted adjustments, transformations, and optimizations of product lines. Guided by terminal transaction data, it promotes cross-regional and cross-variety cooperation among steel companies, achieving precise production nationwide and improving the utilization rate of enterprise production capacity.

With the support of big data, the way steel mills manufacture has changed from the past large-scale production to order-based personalized production, which can achieve lean production and cost reduction and efficiency improvement." Wang Dong said. (Reporter Li Jing)