Speaker:Wang Jianlin (Founder and Chairperson of Dalian Wanda Group Inc., Ltd.)
Subject:Transformers: Creating New Commercial Value and Wanda’s Road to Transformation
Time:April 21, 2015
Host:China Entrepreneur Club
[Editor’s note]
At the "2015 China Green Company Annual Conference", Wang Jianlin said that the current trend of the real estate industry has changed. The industry has reached an inflection point. This inflection point is not V-shaped, but L-shaped. It takes a long time to balance supply and demand. Real estate will be difficult within ten or eight years.
Wang Jianlin said that Wanda is trying O2O and Internet finance because Wanda needs to transform. One of the reasons for this is to use its own transformation method to smooth the cycle of the industry.
The following is an excerpt from Wang Jianlin’s speech by The Paper (www.thepaper.cn):
Increase user experience with O2O model
How will physical enterprises go in the future? Will they also learn from the Internet? I told the company not to be afraid, but to embrace the Internet bravely. In fact, like our industry, how to do the Internet is a new topic. We mentioned the concept of O2O, which has only been done for a year now.
First, increase the experience and stickiness of offline consumers. What does it mean to increase the experience? For example, there are now four Wanda Plaza in Shenyang, and more may be added in the future. Some consumers find that the parking spaces in the square are full after going there. Before, consumers only found that the parking spaces were full when they arrived at Wanda Plaza, and then they had to spend a lot of time queuing up. The O2O model means searching for relevant information at home, you can check if there are parking spaces, and you can even book parking spaces in advance.
However, there is a problem. This type of project that increases the experience is a money-burning project. Where is the company’s profit direction? After more than a year of exploration, we have now found a new direction, which is to move in the direction of Internet finance.
Utilize big data for internet finance
Now Wanda Commercial is changing from heavy to light. In the past, we held our own assets or paid all the rent. Now we have a lot of investors, including our internal and external investors, who are willing to invest in us, and let us be responsible for the design, construction, investment promotion, operation, and management. We will share a part of the funds.
From here, we remember that we are currently experimenting with a new wealth management product issued by one of our own Internet companies. This wealth management product is invested in Wanda Plaza, and the share of Wanda Plaza is transferred to the annual profit and rent dividend. The Internet company leaves a small part of the profit and then distributes it to investors.
In the process of studying O2O, we found that Wanda has a huge advantage, the flow of people is very large. There were 1.60 billion passengers last year, and it is expected to exceed 2 billion this year. In 2020, according to the most conservative estimate, more than 6 billion people will enter Wanda’s plazas, hotels and resorts. This is just the most conservative estimate.
According to a person once a month, there are at least 500 million active users. There may be more in the future. These resources are our customers who will issue Internet financial loans in the future. Because his consumption data may not be completely recorded in first- and second-tier cities, such as Beijing and Shanghai, but for third- and fourth-tier cities, his consumption data is very complete.
Wanda wants to become the largest card issuer in China
At present, our O2O is going in these two directions. One is to spend money to increase the experience and increase the stickiness. Second, through Internet finance, to obtain profits and increase the further expansion and development of O2O.
There is a third thing in the future. If there are enough members, two or three hundred million, or even three or five hundred million, we will issue a Wanda’s own innovation card. The name has not been decided yet.
As long as all members come to my store to spend, there is no annual fee for this innovation card, and there will be subsidies and points for using this innovation card.
This kind of innovative card costs billions of dollars a year. As for the expenses related to the use of the card, where does the money come from? We have generally signed an agreement with the pilot merchants to spend one yuan on this card. At present, all the pilot merchants have agreed, so we use a large crowdfunding method to digest it.
So in the future, our goal may be to become the largest card-issuing bank in China within five to six years. This will further stimulate support for offline O2O.
I believe that because of Wanda’s offline opening of fifty or sixty stores every year, 500 million to 1 billion increased offline data support every year, our O2O, this "Internet +", will definitely create a new model in the business.
Moreover, this "Internet +" stimulates and strengthens not the excess capacity, but the commercial consumption, cultural consumption, tourism consumption, and sports consumption that China needs to further contribute to China’s economy and explore. There is no new model of O2O "Internet +" in the world.
"Touching the Net" is for transformation
Why should we try O2O, why should we try Internet finance? Because Wanda needs to transform. Transformation is an eternal topic, and it is impossible for any enterprise’s business model to remain unchanged. If it remains unchanged, it will disappear from the list. We see that the companies that appeared on the list 30 years ago are now less than 20%. Maybe in another 20 years, or even 50 years, there may be only ten companies left in the top 500. This change is very large and must be adapted.
In addition, Wanda needs to gain a greater competitive advantage. In the real estate field, although there are no national competitors, there are still regional competitors. Nationally speaking, in our industry, there is a saying that there is only one, no two. Through this transformation, we have gained more room for development. In several industries where we have comparative advantages, such as real estate, cultural industry, tourism industry, sports industry, etc., our goal is not only to have a certain competitive advantage, but also to exclude competitors, so that competitors cannot enter.
I also hope that Wanda’s transformation can achieve the purpose of not being affected by the economic cycle. China’s economic downturn began in 2013. Although the RRR and interest rates were cut, the economic improvement was still not particularly obvious, indicating that China’s economy is in a downward channel, and the decline has not stopped. This is the economic cycle.
The real estate industry has reached an inflection point
What will the cycle bring? It may bring a fatal blow to the cyclical industry. This industry is real estate and bulk materials, which are typical cyclical industries. For example, when real estate is selling well, it goes up when it is not easy to sell, and it enters the economic downturn cycle. No matter what, it is difficult to sell.
What is particularly uncomfortable is that the real estate industry has been in the real estate industry for so many years, in 1993, 1994, and in 2007 and 2008. At that time, it was very difficult. No matter how much the price was reduced, we did not buy it. The reason why we transformed was that we had our own ideas and used our own transformation methods to iron out the cycle of this industry.
For example, we invest in light assets, investment funds or wealth management products. Our purpose is not to be affected by the economic cycle. Whether house prices rise or fall has nothing to do with us. We don’t have to consider house prices.
The current trend of the real estate industry has changed, and the industry has reached an inflection point. This inflection point is not V-shaped, but L-shaped. It takes a long time for supply and demand to balance, and real estate will be difficult within ten or eight years.
The real estate industry can never return to the "buy is earn" situation, and the "make money while lying down" situation is over. The industry has changed, and we have made a judgment on the long-term trend. We feel that we can no longer take the path of sales to earn cash flow, and we have decisively adjusted from 2004.
Transformation is in line with national strategic adjustment
Wanda’s transformation is also in line with the country’s strategic requirements. The whole of China is transforming and restructuring, and it is better to pay the price for the country to transform. Our country will shift to a domestic demand-based economic development model. More than 60% of the products we produce are now sold to foreign countries, and our consumption rate is 40%. Products worth 100 *******st be sold to foreigners for 60 yuan to support our development. The current consumption rate in the United States may be 85% to 90%, and in developed countries, it is basically 70% to 80%.
In the future, our production will be domestic independent consumption, and this economy will not be so dangerous. This has the voice over, and there will be no anti-dumping. If our market is large enough, all markets will be in China.
Another point is that Wanda’s transformation is accelerating investment, not in excess capacity, not in cement and steel, or even in automobiles. What we are investing in now is the service industry, which increases employment and expands domestic demand, and it is what the country needs. Investment in e-commerce is high-tech, and investment in tourism is encouraged and supported by the state.
Corporate culture determines Wanda’s transformation
Wanda’s transformation is determined by Wanda’s corporate culture. Wanda is a company that keeps tossing and turning. We are constantly changing ourselves and seeking changes, because only by constantly seeking changes, constantly looking for newer models, and longer-term cash flow can this company be safe and meet the eight words mentioned to the company more than 20 years ago, "International Wanda, a century-old enterprise".
We have worked hard to continuously find in practice. Now we believe that Wanda has been balanced with four industries, relying on and supporting each other to form a good ecosystem and ecosystem. I estimate that this company will have no problem for a while, regardless of whether I am there or not.
I hope that my greatest contribution in life will be to create a great organization, and this organization is still there.