Xia Lei from ICZOOM: Five Major Weak Points of MSMEs
Many enterprises build their business models based on Long Tail Theory. What if Long Tail Theory is applied to the electronic components industry?
In the Global Distribution and Supply Chain Leaders Summit held by Aspencore on November 9th, Mr. Xia Lei, CEO of ICZOOM, gave a speech titled, “An Innovative Union of E-Commerce and Supply Chain”. In the speech, Mr. Xia shared his experience and perspective about how Long Tail Theory can be applied to the electronic components industry to serve micro and small- to medium-sized enterprises (MSMEs).
Mr. Xia Lei, CEO of ICZOOM
Long Tail Theory
Amazon, Alibaba , Tencent and other e-commerce businesses have experienced huge success in the tide of global internet information exchange. It is noticeable that all these successful enterprises rely on Long Tail Theory. In the words of Mr. Xia, Long Tail Theory means “numerous soldier ants gathering together to take advantage of information exchange online, whose marginal cost is nearly zero. Solider ants are enjoying the kind service that they never had before”. What if Long Tail Theory is applied to the electronic components industry?
According to the Ministry of Industry and Information Technology of the People’s Republic of China, MSEMs are the companies that make less than 400 million RMB in revenue a year; and there are more than 3 million MSEMs in China. From Mr. Xia’s point of view, these 3 million MSMEs are Long Tail users. Obviously, this is a huge market.
In order to find out the best way to serve MSMEs, we need to understand their weak points.
Five Major Weak Points of MSMEs
First of all, MSMEs don’t have sufficient and reliable marketing resources.
For example, a small-sized manufacturer of chips does not have any customers, even if its product is cheaper, faster, and equipped with better capabilities because of poor marketing resources.
Secondly, MSMEs don’t have on-time and efficient information of supply and demand.
For example, you are a customer from Amazon who wants to place an order that needs to be delivered in two weeks. To complete this order, you are willing to pay twice as much as the market. Unfortunately, since you are a Long Tail customer, the entry bar is too high for you to cooperate with famous authorized distributors. At the same time, there might be a peer who happens to have the kind of products that you are looking for because his Indian customer just cancelled the order. However, there is no way you can connect with him because you don’t have access to such supply and demand information.
Thirdly, MSMEs lack professional management software and platforms.
It is evident that all the internal software serving MSMEs is not good enough. As a consequence, MSMEs have to rely on general platforms such as Yonyou and Kingdee.
Fourthly, there is no customized supply chain service platform for MSMEs.
There are only a few companies that are specialized in the electronic components industry. And most supply chain service platforms are not specialized in this industry either.
Finally, MSMEs do not have access to financial resources and they have poor risk resistance capacity.
Mr. Xia identifies himself with MSMEs regarding these weak points: “My partner and I detected these issues when we were working as a small enterprise six years ago. For MSMEs, it takes a spade to dig. So we built a service platform for them.” Mr. Xia introduces to us how ICZOOM differentiates itself from other platforms.
Mr. Xia Lei, CEO of ICZOOM
To start with, ICZOOM is an open, transparent, and free exchange platform.
Ever since its establishment in 2012, the core of ICZOOM is the “innovative union of e-commerce and supply chain”. Mr. Xia points out: “ICZOOM is a crystal exchange platform that does not charge middle price (?). Being a neutral and passive service platform, it’s not biased against any products. More importantly, the software for the platform and supply chain are combined in one, both being independently developed by ICZOOM, because the two parts are tightly bound to each other and they cannot be separated.
Secondly, ICZOOM provides open and free marketing resources.
Made for small- to medium-sized manufacturers and solution providers, there are individual tailored sections. Mr. Xia emphasizes that all the self-developed software has been based on cloud technology since the beginning. According to his design, the exchange platform (ICZOOM.com) is at the top, while Customer Relation Management (CRM), Supply Chain (SUPP) and Financial Management System (FMS) lay below. At the moment, the exchange platform and CRM are open to users. The other two systems—SUPP and FMS—will open up to customers within the next couple years.
In addition, all software is modified and developed continuously according to the needs of customers, as long as what is identified is a common problem.
Mr. Xia promises that ICZOOM will do all the work at zero cost, even if it takes 10 engineers to work on it for half a year. He will not impose any charges on the users because it’s a self-improving process that eventually leads to win-win cooperation.
Mr. Xia also points out that electronic components are products; therefore, the core of everything is keeping these products safe and secured. The application of cloud techniques and development of software and exchange platform is all centered around products. ICZOOM has established two self-managed warehouses in Hong Kong and Shenzhen. Since the software is independently developed by ICZOOM, the whole process is fully under control. Mr. Xia expresses his wish that the manufacturers can open their bar codes to the public. It will substantially increase the reliability of logistics management.
Finally, Mr. Xia shares his perspective on the finance platform. According to Mr. Xia, ICZOOM has been building a risk control model to support the finance platform. After a two-year field test, the model is proven to be reliable. Furthermore, a few banks are getting involved to explore the possibility of connecting this model to the banks’ capital pool. Making reference to the bank, Mr. Xia points out that one of the most important trends in the future is combining all the information of weak relevancy together. This information will be redefined by the risk control model. And the outcome will be acceptable by the social capital and bank’s capital.
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