From August 20 to 22, the 6th China FMCG Conference, the 3rd China FMCG Hard Discount Conference, and the 3rd China FMCG Distributor Conference were successfully held in Shanghai. Over the three days, 2,000 brand owners, distributors, service providers, and retailers from the FMCG industry gathered to discuss reshaping enterprise capabilities and growth paths. On August 22, Mr. Cai Zhicheng, founder of Chengdu Laiken Information Technology Co., Ltd. and former founding partner of Huijinhuo, delivered a keynote speech titled "A Different Kind of High-Quality Platform-Based Distributor," which resonated with many manufacturers and distributors present. Mr. Cai has over 20 years of experience in the FMCG distribution industry, providing operational consulting services to thousands of FMCG distributors and helping nearly a hundred FMCG trading companies achieve digital warehouse process upgrades and B2B transformation.
New Distribution is pleased to share the highlights of his speech with our readers.
The Market Environment for Distributors in an Era of Shrinkage
In the past year or two, business has become increasingly difficult. There are many reasons, but I believe the two core ones are: the silent roar of consumption and the surging tide of online plunder. This represents two levels: first, the overall market is shrinking; second, while the overall market shrinks, offline is also shrinking. So how is consumption shrinking? Consumption power = population * purchasing power * consumption desire, and consumption desire represents consumer confidence. According to data released by the People's Bank of China in July, the stock of narrow money (M1) decreased by 6.6% year-on-year, indicating that the actual funds people use for consumption have decreased. Meanwhile, broad money (M2) increased by 6.3% year-on-year, about 20 trillion yuan, suggesting that people prefer to save rather than spend. The reason behind this is insufficient consumer confidence—they either don't want to spend or don't dare to spend. Why does this happen? I won't elaborate here, but let's look at population data. From 2019 to 2023, the population has been on a continuous downward trend. The population decreased by 800,000 the year before last and by 2.08 million last year, so the trend of population decline is set, determining the downward trajectory of the overall consumption market. Secondly, the momentum of online plunder has not diminished. Over the past nine years, online consumption as a proportion of total retail sales of consumer goods has increased by 16.3%, while offline has decreased by 16.3% over the same period. If we put this into specific amounts, based on the 47 trillion yuan total retail sales of consumer goods in 2023, 16.3% is equivalent to 7.66 trillion yuan, approximately 1.079 trillion US dollars. For reference, Saudi Arabia's GDP in 2023 was also 1.07 trillion US dollars, ranking 19th among global economies. In other words, online sales have taken away a market share equivalent to that of Saudi Arabia. Population decline is inevitable, so offline shrinkage is an inevitable trend that cannot be changed.
Building a High-Quality Platform-Based Distributor
Since we cannot change the status quo, what should we do? Survival of the fittest; we must adapt to the environment. In an era of offline shrinkage, the only survival rule is: seize competitors' customers and prevent your own customers from being taken away. How to achieve this? By building a high-quality platform-based distributor. Here, "high quality" means we need to meet two necessary conditions: 1. High platform increment and 2. High-quality growth. These correspond to two capabilities: first, the platform must have the ability to seize customers; second, the platform must have the ability to quickly become profitable. Because every distributor is doing business with their own hard-earned money, they cannot invest indefinitely; both are indispensable.
Many people think they know what increment is, but from my conversations with many distributors, they often don't. For example, a distributor originally had monthly performance of 6 million yuan, and after building a platform, it grew from 0 to 3 million. Is this 3 million an increment? The answer is not necessarily. The correct formula for increment is: Platform increment = total performance after building the platform - traditional performance before building the platform. Let's analyze this case in depth. In the first scenario, the platform achieves 3 million, but offline traditional performance might drop to 2.6 million. In this case, there is not only no growth but a decrease of 400,000. This is also the likely result of moving offline old customers online. In the second scenario, the platform achieves 3 million, but offline only decreases by 1 million, making total performance 8 million, so the increment is 2 million. Therefore, high performance does not equal high increment; a platform without increment is at best just an ordering tool. Next, let's assess our understanding of platforms: look at some platform homepage images and try to identify their problems. If you can spot the problem within seconds, you are usually one of two types: 1. A distributor who has successfully built an incremental platform. 2. Someone responsible for platform operations with deep understanding. If you cannot immediately spot the problem, you might be: 1. A distributor who has built a similar platform but without increment. 2. Someone planning to build a platform but hasn't started. 3. Someone with no intention of building a platform. So, what inevitable problems will the platforms in the images above face? 1. New customers are unwilling to register, making promotion difficult and costly. 2. Even if new customers register, they don't place orders or place very few. Such platforms have no increment, but some distributors say, "Start with old customers and gradually bring in new ones." However, old customers rarely bring new customers. The essence of this statement is the inability to directly acquire new customers, so they start with old customers. But if your platform is only for defending against old customer churn, it is far from enough. Because in the face of an offensive platform or a high-quality platform, trying to defend with a mere mall is fragile. The best defense is offense; improving the quality of the platform is key.
How to Become a Different Kind of High-Quality Platform-Based Distributor?
If you don't know how to proceed, the key is to find professional support. I recommend Chengdu Laiken Information Technology Co., Ltd. Our positioning is as a digital solution service provider specifically for FMCG distributors. Personally, from 2016 to 2018, I operated the Huijinhuo platform as a founding partner, growing it from 0 to 200 million yuan in two years, making it a full-platform distributor. After the platform was acquired in 2018, I exited, making me one of the earliest B2B distributors to successfully exit in the B2B field.
What benefits can Laiken provide to distributors?
First, we provide integrated SaaS software, including B2B mall + inventory management + finance + field sales + warehouse WMS + delivery, all in one, to improve efficiency and reduce costs for distributors.
Second, platform empowerment. Many distributors find it difficult to independently build a platform regardless of the software they purchase. Laiken provides consulting and micro-consulting, combined with our products, to help traditional distributors upgrade to platform-based distributors.
What are the results of Laiken's empowerment? A distributor from the northeast built a platform in May and June. Like many distributors, they faced issues of not being able to push it or get orders, with an average daily order value of only 2,000 yuan. Laiken conducted a micro-consultation on June 26. After four days of adjustments, the new plan was launched on July 1, and the average daily order value reached 14,500 yuan, a 600% increase from May. By the end of July, it reached 17,000 yuan per day, 800% of May's figure, and this was with less than 40% of the plan implemented; the remaining 60% requires time to execute. In August, the incremental customers alone are expected to reach 1 million yuan.
After discussing increment, let's talk about quality. Look at these mall interfaces again. It's not that these platforms necessarily have problems, but for this type of distributor, what problems are they likely to encounter? Q1: Slow profitability—the profit cycle is dragged out (2-3 years is common). Q2: Unstable profitability—long-term inability to "stably profit" (profitable for two months, then losing money the next two). Many people think early losses are part of strategic investment, but this is a misconception: they mistakenly classify all early losses as strategic losses. True strategic losses require a clear budget for strategic investment; anything beyond the budget is not. Why are strategic losses acceptable? Because of another misconception: as long as you run fast early on, you will definitely profit once sales rise. But running fast doesn't mean you'll make money in the future. For example, Zhanghe Tianxia, Yunmayi, and recently Bianli Xiaoer, including Alibaba's Lingshoutong—which one didn't run fast? Which one didn't have hundreds of millions or even billions in sales? But in the end, they all couldn't sustain the burn. The key point is that the core category mix determines the platform's profit cycle and whether it can achieve stable profitability. Here, I summarize three core factors that prevent platforms from achieving stable profitability.
First, wrong category mix leads to high marginal costs.
Second, sales rely on general goods, and any move is wrong.
Third, blindly copying other successful platforms.
All three problems stem from a lack of positioning in the early stages. Why? 1. The goal of positioning is the path to differentiated competition. First, those who learn from me survive; those who imitate me die. If you want to learn, you should learn others' thinking, logic, and operational fundamentals, not copy their mall, categories, combinations, or pricing. Second, rather than being better, it's better to be different. A high-quality platform's core goal is to seize others' customers. If you're exactly the same as others, how can you seize them? So you must have differences.
2. How to position? Consider the market dimension, self dimension, and competition dimension.
1 Market dimension: Population base, consumption habits, consumption level, and climate conditions determine the core requirements for category mix.
2 Competition dimension: Analyze the number of competitors, their strength, their strong categories, and strong regions... Choose a strategy that suits you.
3 Self dimension: Financial strength, capabilities and experience, personnel scale, brand accumulation... Determine the pace of development. Focus on yourself, find the right positioning, and you can do things well.
Here's another example: a distributor in Henan cooperated with Laiken in October last year, but before formal cooperation, we spent about half a year communicating and discussing specific operational details, including when to start, where to start, how to break through, and what tactics and strategies to use. So since the warehouse opened, it went very smoothly. Of course, because the boss, Mr. He, came to Zhengzhou alone from another place, rented a warehouse on site, and assembled goods, there were many difficulties along the way. But from the warehouse opening on October 15 to December, sales reached nearly 1 million yuan in three months. In January this year, Mr. He adjusted his previous positioning. From January to April, average daily sales were between 20,000 and 30,000 yuan. Laiken provided a second consultation in April, completed adjustments by the end of June, and launched a new plan on July 1. In the first nine days after launch, sales peaked at over 80,000 yuan per day. Two highlights stand out: First, increment—all customers on this distributor's platform are new, not a single old customer; Second, the platform achieved break-even within 9 months, and August and September are expected to see at least 20% monthly compound growth. This also shows that being a platform distributor requires thinking, logic, and underlying capabilities to achieve rapid growth and profitability in a shrinking market.
In Conclusion
Here is my WeChat QR code. If you don't know how to upgrade to a platform-based distributor, or if your platform isn't gaining traction, has no increment, or hasn't been profitable for a long time, feel free to contact me anytime.
Finally, in the era of shrinkage, the only survival rule is: seize competitors' customers and prevent your own customers from being taken away. I wish you all prosperous business and abundant wealth.
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