Chapter 338 - 214: Advancing Cautiously (Part 3)

Chapter 338: Chapter 214: Advancing Cautiously (Part 3)

He even regretted how thoroughly he had rejected them. ’Why on earth did I have to go and provoke a lunatic like Junxiao Business Management?’

"Let’s hear your thoughts."

Miao Lei considered this for a moment. "Our only option right now is to withstand this wave of attacks," he said. "Otherwise, the tenants’ sales will suffer, which will directly lead to vacancies. When that happens, the value of the square will be severely impacted!"

"And how do we do that?"

"We need to ramp up our promotional activities to a level no lower than Junxiao Square’s. But that requires a massive amount of capital. From what I understand, every store in Junxiao Square is currently spending two million a month on sales promotion, and their PR events to drive traffic are also extremely well-funded."

"That’s not business, that’s just burning money!"

’Has Junxiao Business Management gone mad? Two million in cash vouchers a month? Are they trying to run a business or a charity?’

"The current retail environment is poor, and businesses are struggling. Junxiao Square’s strategy is the most direct way to boost sales performance, so the tenants are extremely cooperative. Their prices are the lowest in the entire city!"

Wan Chao stubbed out the cigarette in his hand. He wasn’t in the retail business, but looking at the situation from a consumer’s perspective, even he found it daunting.

His opponent was a lunatic, and a relentless one at that.

One wrong move could lead to utter catastrophe.

His earlier composure was gone. If he could go back in time, back to when Junxiao Business Management made its acquisition offer, he would never have been so arrogant.

"Xiao Miao, in your judgment, how long can they sustain this strategy?"

"It’s hard to say. According to conventional business logic, this strategy should be unsustainable. But then, Junxiao Business Management has never done anything conventionally."

’That’s right,’ he thought. ’At a time when virtually all commercial management companies are adopting asset-light operations, Junxiao Business Management is doing the exact opposite, going all-in on heavy assets!’

’How much rental income does a single square even generate in a year? And Junxiao Business Management is pouring in nearly twenty million for marketing. How can they possibly make any money?’

’Of course, you could argue that it draws crowds and increases the square’s value, and you wouldn’t be wrong. Those are long-term returns.’

’But if none of your projects are profitable in the short term, how do you support rapid expansion? It simply defies all business logic.’

Take, for instance, the very reason Miao Lei had come to see Wan Chao.

The agreement between Minghan Commercial Management Co., Ltd. and Wanhong Real Estate for Wanhong Square stipulated an annual rent of 30 million.

Minghan Business Management would then collect rent from the tenants, profiting from the difference.

Wanhong Square’s total annual rental income from tenants was around 60 million, but that didn’t mean Minghan Business Management’s profit was 30 million.

Staff salaries would cost 6 to 8 million a year. Miscellaneous expenses would be at least another 2 million. And even a minimal marketing budget would run about 2 million.

Then there was the pro-rated share for the salaries of headquarters’ senior executives, which was another 2 million or so.

All told, Minghan Business Management’s net profit from the Wanhong Square project was just a little over 10 million a year.

And keep in mind, this was already one of the most premium projects in Jiangzhou City.

If he were to adopt Junxiao Square’s high-spending approach, the project would immediately start losing money.

And then, Miao Lei would probably be fired on the spot. Who could tolerate turning such a prime project into a money-loser?

No boss would accept the excuse that it was because Junxiao Square was using unconventional tactics.

Bosses the world over only want to hear good results. When it comes to excuses for failure, they just want you to shut up and fix the problem. Otherwise, what’s the point of paying you?

The intricacies weren’t complicated. As soon as Miao Lei laid it out, Wan Chao could weigh the pros and cons.

But he was an old fox. Miao Lei had come today asking for a handout, and who willingly takes money out of their own pocket?

"Xiao Miao, you need to report this to your group and apply for funds immediately," Wan Chao said. "I’ll also put some pressure on them. If you can’t turn this project’s performance around this month, I might have to consider switching management companies when the contract is up for renewal!"

’Damn it, so you’re another one who doesn’t play by the rules,’ Miao Lei cursed inwardly, though he managed to force a smile.

"President Wan, I’ll communicate with my group, but facing Junxiao Square’s offensive, we truly can’t fend them off on our own!"

"Wanhong Square is a joint project between our two companies. We prosper or suffer together. Isn’t it right for you to offer some support as well?"

Wan Chao said, somewhat displeased, "I handed such a great project over to you to manage for only thirty million a year in rent. You call that not enough support?"

Miao Lei knew the man just didn’t want to cough up any money. But in this situation, for Minghan Business Management to take on Junxiao Business Management alone would be like an ant trying to shake a great tree!

Minghan might have over thirty projects nationwide, but its annual net profit didn’t even reach 100 million. That was because some of those projects were guaranteed to be losing money. There were only a handful of profitable projects like Wanhong Square in the entire country.

And Junxiao Business Management? They were backed by Junxiao Investment Group, which bought properties like they were buying cabbages. They’d settle on a price of over a billion and pay it outright, as if they had an endless supply of cash.

He couldn’t let Wan Chao off the hook, because that would be sealing his own fate. If he dared to ask the group for two million a month for sales promotion activities...

The group would ask what purpose he served. Was it to help them lose ten million a year?

"President Wan, I’m hoping the project can provide some funding. I’ll apply for more funds from my group, and we can weather this storm together. This is for our mutual benefit!"

"My initial thought is that we need to prepare for a long-term battle, perhaps for half a year. That means I’m hoping to get five million from the group, and for the project to match it with another five million!"

Wan Chao rejected the idea without a second thought. "Impossible!"

It was absurd. He might seem like a big shot, the owner of Wanhong Square with countless assets to his name.

But assets and cash were two completely different things. He collected 30 million a year in rent, but he had a lot of people to support. He even had a mistress to provide for.

Asking him for 500,000 would be painful enough; 5 million was asking for his life!

’Where would the money for his mistress come from then?’