Introduction A year ago, a few salespeople served 300 outlets with annual revenue of just over 30 million; A year later, 20+ salespeople serve 5,000+ outlets with annual revenue exceeding 100 million; In just over a year, how did he do it? In 2017, New Distribution organized a survey of 22 major cities across the country, systematically investigating the coverage, penetration, supply chain organization, platform operations, delivery capabilities, and service visits of various FMCG B2B platforms in different market areas. In the Chengdu market, in addition to national FMCG B2B platforms such as JD掌柜宝, Alibaba Retail Link, and Zhongshang Huimin, local FMCG B2B platforms also performed prominently, and Huijinhuo is one such representative. With over 300 daily orders, 16,000 registered users, and 5,000+ active customers, this is no small feat for a platform just over a year old. More importantly, the platform has been profitable since its inception. In just over a year, how did Huijinhuo achieve such rapid growth in a competitive environment with giants like Zhongshang Huimin and Alibaba?
1. The Right Entry Point It is understood that most platforms in the FMCG B2B industry currently start with beverages and alcohol as their entry point. The high-frequency, rigid demand characteristics of beverages and alcohol allow platforms to quickly break into the market during development, but the high fulfillment costs and difficulty in achieving economies of scale further limit the growth of FMCG B2B platforms. "Nationwide, there are relatively few distributors handling full categories; in contrast, in third- and fourth-tier cities, more distributors handle full categories because the market scope is small enough. However, in first- and second-tier cities, this full-category approach may not work," Huijinhuo founder Gong Tao told us. Before starting his own B2B venture, Gong Tao worked for a domestic FMCG company for many years, and his rich industry experience gives him unique insights and understanding of the FMCG industry. "Different product categories have different requirements for warehousing and logistics. Focusing on the snack food sector, I believe this is the most efficient way to combine our resources." Additionally, entering the FMCG B2B field from the snack food angle also allows Huijinhuo to maintain its unique competitive advantages in the market:
E-commerce platforms like Zhongshang Huimin and Dianshang Hulian supply full categories, while Huijinhuo focuses on snacks, reflecting differentiation and reducing direct conflict with Zhongshang Huimin, Alibaba Retail Link, etc.;
Strengthening and deepening one category can form a differentiated core competitiveness;
There are relatively few leading brands in the snack food industry, and consumers care more about product quality and taste. In other industries, consumers have stronger brand awareness. This situation directly results in many products being exclusive agents in certain regions; once consumers develop a preference for a particular flavor, it becomes difficult to find substitutes locally, further enhancing terminal stickiness to the platform.
2. Current Industry Status About Subsidies Since last year, the FMCG B2B industry has attracted significant attention from the capital market. Platforms such as Zhongshang Huimin and Dianshang Hulian have successively received substantial capital support. Subsequently, the entry of internet giants Alibaba and JD.com intensified market competition. Against this backdrop, subsidies and discounts to compete for small store resources are common. "The B2B market is different from the C2C market. B2B products are for resale, while C2C products are bought for direct consumption. Consumers focus on experience, while small stores care more about price and profit. Therefore, subsidies in the B2B market are not that important. Additionally, because the B2B market is large enough, small stores can absorb large amounts of subsidies. So using limited capital to cultivate the market may not have much effect," Gong Tao said regarding the current industry situation. "FMCG B2B platforms will acquire users through subsidies, discounts, and promotions in the early stages of market development to seize market share in the shortest time. However, in the long run, subsidies are ultimately not a healthy business model. I believe that competitors will eventually return to the right track as the industry develops." About Rebranding Relevant data shows that there are currently 6.8 million mom-and-pop retail stores in China. They are mostly distributed in third- and fourth-tier markets. Although their overall level is not high, hundreds of billions of FMCG products flow through them to consumers. To improve the overall operational level of retail stores, in the early days of the industry, investing in franchise convenience store chains became a trend; in the past year or two, with the rise of B2B, rebranding retail stores has become increasingly common. "For our company, we should be more focused. Competitors are doing rebranding and O2O, but in the early stages of development, we believe the value of B2B lies in truly creating value for small stores, helping them reduce costs, providing richer products, and a better ordering experience. If we haven't established supply stickiness and the experience isn't good enough, I think rebranding is worthless." Gong Tao, who comes from the traditional FMCG industry, told us, "Rebranding is something traditional companies have been doing for a long time, like Master Kong, Uni-President, and Jianlibao. Some small stores have had their signs changed repeatedly, but stickiness hasn't been established. Such rebranding is actually worthless." About Empowering Small Stores What defeats mom-and-pop stores is not just the supermarket next door or chain convenience stores, but also Meituan and Ele.me. "In my view, most small stores currently have no need for digital tools. The core needs of small stores are to reduce procurement costs and increase sales revenue. But currently, Taobao, Tmall, JD.com, Meituan, and Ele.me are all competing for the sales revenue of mom-and-pop stores," Gong Tao said when discussing the survival of retail stores. "Small stores also use various methods to increase their revenue, such as offering free delivery services. In the past, people communicated by phone and text; now, store owners use QQ groups and WeChat groups to enhance communication with consumers and understand their needs." Gong Tao said about retail stores, "As the store owner population becomes younger, their independent consciousness is awakening. No matter how small, every individual has their own brand. How to use information tools and methods to genuinely improve the operational conditions of retail stores is what internet companies need to do."
3. What Exactly Do Small Stores Need? After nearly a year or two of development, various FMCG B2B platforms have sprung up like mushrooms. According to New Distribution data, in 2017 alone, more than 80 FMCG B2B platforms were added in China. Some of these platforms start with product categories, some differentiate by delivery speed, and some aim to show advantages through business models, but all of them target retail stores without exception. "Unlike the immediacy of general consumer purchases, B2B store procurement is planned. We need to distinguish what the real needs of small stores are. We have also conducted market research. For small stores, price is always the first priority, followed by service, which includes multiple dimensions such as returns and exchanges, and delivery timeliness. I think it's better to improve other aspects to enhance overall service levels rather than spending a lot of cost on delivery speed." Unlike beverages and alcohol, snack foods have slower circulation and shorter shelf life, so returns and exchanges are an unavoidable issue for any company dealing in snack foods. "The products sold in small stores generally fall into two categories: one is best-selling products, and the other is products pushed by salespeople, many of which are often not easy to sell," Gong Tao told us. "In terms of product selection for store orders, the platform actually has an obligation to filter products for the store. What sells well and what doesn't, due to the cognitive limitations of small stores, store owners don't have the ability to make such distinctions, but platform companies are different. Because of data accumulation, platforms have the ability to do this. In the context of consumption upgrading, consumer needs are becoming more diverse, which determines that the procurement needs of small stores will also become increasingly different. Therefore, on one hand, platforms can enhance their service capabilities to small stores through big data; on the other hand, they can reduce the cost of returns and exchanges caused by unsold goods." What are the real needs of small stores? On one hand, they want to increase their own profits; on the other hand, they want to reduce their operating costs. From the profit perspective, how can small stores increase their profits? Looking at the products currently sold in small stores, tobacco and alcohol have relatively transparent prices and lower profits due to their rigid demand and high frequency. "The real profit source for small stores is long-tail products that can bring profits. How to meet the procurement needs of small stores for long-tail products is the true value of B2B platforms."
4. FMCG B2B Market Under Giant Competition With the entry of capital, the FMCG B2B industry will inevitably enter a state of accelerated integration. Under this situation, do traditional distributors and regional B2B platforms still have opportunities? "Small stores will not order from only one channel, and brand owners will not allow such a situation. The market is an invisible hand. From the laws of economic development, this phenomenon will not occur. There will definitely be more participants in the industry, and the market share of giants will definitely be diverted." Gong Tao firmly told us, "This also contains countless opportunities for the vast number of entrepreneurs. On the contrary, giants have educated the market through the power of capital and also brought new thinking to brand owners. In exchanges with brand owners, many have realized the future trend of B2B platforms. However, the functions of traditional distributors will not change; they will only separate non-core functions, but services to terminals will ultimately remain with distributors." For more FMCG B2B information and insights, you can follow the WeChat official account below: -END-