Since the second half of 2017, founders of many FMCG B2B platforms have collectively fallen into deep anxiety, partly due to shrinking cash reserves as market scale expands, and partly due to increasingly difficult financing, plunging the entire industry into an unprecedented capital winter. Many have even begun to question whether the FMCG B2B track is a false proposition.
Recently, the FMCG B2B platform Dianshang Hulian was exposed by numerous media outlets for defaulting on supplier payments and employee salaries, with the founding team being sidelined and large-scale layoffs occurring. Undoubtedly, this has had a huge impact on the industry. However, in the FMCG B2B industry, Dianshang Hulian is far from the only one facing problems.
01 When the nest is overturned, no egg remains intact According to incomplete statistics from New Distribution, as many as 25 B2B platforms ceased operations or transformed between 2017 and 2018 alone. The specific list is as follows: From the above data, it can be seen that the platforms that ceased operations include both national B2B platforms covering multiple provinces and cities, such as Dianshang Hulian and Yatang Xiaochao, as well as regional B2B platforms such as Bang Xiaodian and Tiantian Mai, with self-operated B2B platforms being the majority. After analyzing and summarizing the reasons for the cessation and transformation of many B2B platforms, New Distribution believes there are three main points:
- Insufficient industry maturity
In the early stages of industry development, user education costs are too high. This has led some B2B platforms to invest significant time, manpower, materials, and funds in cultivating small shops' ordering habits during the early market development phase, yet they still fail to cultivate shop loyalty.
IT, warehousing, and distribution infrastructure investments are huge, and capital investment is insufficient. Especially for self-operated B2B platforms, infrastructure investment is a bottomless pit; every new market developed requires a massive investment.
- Entrepreneurs' insufficient understanding of the industry leads to high trial-and-error costs
Currently, most platforms have unclear profit models and engage in blind expansion. Under the assertion that "even a pig can fly if it stands at the right wind," a large number of platforms, in a rush to seize the capital windfall, ignore business laws and blindly expand rapidly.
Misjudging market conditions, severe subsidy and cash-burning phenomena, attempting to gain market share through subsidies and cash burning.
Insufficient management and operational capabilities, making profitability unattainable. The FMCG industry is essentially a business that requires refined operations, but B2B platforms overemphasize growth speed during development while neglecting refined operations, leading to insufficient profitability.
- Capital trial-and-error and competition issues
FMCG B2B entrepreneurs lack understanding of the capital market and lack sustained financing capabilities;
After internet giants such as Alibaba, Tencent, and JD.com entered the FMCG B2B field, other investment institutions stopped paying attention to the FMCG B2B track. 02 The development of B2B is a long process of industry upgrading New Distribution believes that in the FMCG industry, even without the entry of B2B platforms, other new technologies would emerge to transform traditional commodity distribution channels. Online shopping took nearly a decade of development before gradually being widely recognized and accepted by consumers. Similarly, the traditional FMCG distribution system has taken nearly two decades to gradually improve, which determines that the digital transformation of traditional channels by internet information tools will require a long period and cannot be achieved overnight. On the other hand, from the current state of industry development, distributors still play an irreplaceable role in certain regional markets. This also determines that FMCG B2B is not a winner-take-all industry; scale effects ultimately cannot bring about efficiency improvements in regional markets. Even if the major players on this track are only internet giants like Alibaba, Tencent, and JD.com, many regional markets will still see oligarchic fragmentation and fierce competition, and there are also many hidden players on this track. During the development process, distributors will inevitably face a round of elimination and upgrading as new technologies and models develop and mature. Among them, some traditional distributors will be able to transform into internet distributors through internet technology. 03 Digital upgrading of channels is an inevitable trend All industry changes come from the need for internal efficiency improvement, and the popularization of information tools further determines that digital transformation of channels is an inevitable trend. For C-end consumers, the development of e-commerce has changed the original delivery methods of goods, altered the lifestyle of the younger generation of consumers, accelerated the integration of online and offline retail scenarios, and brought new market growth for brand owners. Similarly, channel digitalization can help brand owners shorten the distribution layers of goods, accelerate the turnover speed of goods; it can also help brand owners visualize promotional activities, improve the serious information distortion in traditional promotional activities, and enhance the efficiency of information transmission. In addition, the application of digital tools can help brand owners obtain downstream sales data, grasp the flow of goods, and thereby provide effective data support for marketing strategy formulation and product development. At present, although some B2B platforms have encountered difficulties and setbacks during development, this does not affect the overall progress of the FMCG B2B industry. In particular, a large number of brand owners have begun to awaken and gradually try cooperating with B2B platforms, which will inevitably bring about improvements in the collaborative efficiency of all links in the supply chain. On the other hand, regional chain retail enterprises such as Dongguan Meiyijia and Xi'an Meiyitian have also begun to leverage their existing supply chain advantages to vigorously develop B2B, which to some extent promotes industry development. In the early stages of B2B development, emphasis is still on density and efficiency. Regional B2B platforms with obvious local supply chain advantages may achieve profitability before national platforms. For capital, at this stage, with all entrepreneurs being more rational, entering and laying out regional platforms may also be an excellent investment opportunity. In summary, the trend of channel digitalization is irreversible. Even if all current B2B platforms ultimately fail, the internet's transformation of traditional distribution channels and its enhancement of commodity circulation efficiency in the FMCG industry will never stop. As New Distribution has always believed: It is not the internet that kills distributors, but high efficiency will always replace low efficiency. -END-