---
title: "After Regional Platforms Turn Profitable, Is Spring Really Here for B2B?"
description: "Since Alibaba and JD.com announced their high-profile entry into the traditional FMCG distribution sector, the view that giants will dominate has been widespread in the industry and capital circles. But can these deep-pocketed internet giants really succeed in the FMCG industry, where the waters run deep? New Distribution believes that FMCG B2B will go through three development stages: the new platform stage, the new business stage, and the new ecosystem stage. After the early phase of brutal expansion, most B2B platforms have now entered a strategic adjustment period in the new business stage. In the early days..."
author: "刘少德"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-04-14"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/6iibHUZzVlomfc9JERvJAg"
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---

# After Regional Platforms Turn Profitable, Is Spring Really Here for B2B?

> Since Alibaba and JD.com announced their high-profile entry into the traditional FMCG distribution sector, the view that giants will dominate has been widespread in the industry and capital circles. But can these deep-pocketed internet giants really succeed in the FMCG industry, where the waters run deep? New Distribution believes that FMCG B2B will go through three development stages: the new platform stage, the new business stage, and the new ecosystem stage. After the early phase of brutal expansion, most B2B platforms have now entered a strategic adjustment period in the new business stage. In the early days...

Since Alibaba and JD.com announced their high-profile entry into the traditional FMCG distribution sector, the view that giants will dominate has been widespread in the industry and capital circles. But can these deep-pocketed internet giants really succeed in the FMCG industry, where the waters run deep?
1
**Brutal Growth Driven by Capital**
New Distribution believes that FMCG B2B will go through three development stages: the new platform stage, the new business stage, and the new ecosystem stage. After the early phase of brutal expansion, most B2B platforms have now entered a strategic adjustment period in the new business stage.
In the early days, driven by rapid capital catalysis, a batch of native B2B platforms such as Zhongshang Huimin, Best Dianjia, and Yijiupi were able to develop rapidly nationwide. Especially after Alibaba and JD.com entered the market strongly, the pace of B2B platforms' land-grabbing across the country accelerated, and various problems followed. First, the Wuhan FMCG B2B platform Bang Xiaodian was forced to stop operations due to funding issues; then, the industry's leading player, Dianshang Hulian, was repeatedly exposed for owing supplier accounts and failing to fulfill contracts; after capital entered, the founding team was reportedly sidelined, which was lamentable.
Entering 2017, brand owners and B2B platforms gradually entered a honeymoon period of cooperation. After the initial phase of "don't understand, look down on, don't cooperate," brands represented by Coca-Cola, Unilever, and Mondelez began to test cooperation with B2B platforms.
At this time, problems in the brutal expansion of B2B gradually emerged. "Price chaos, disrupting the original price system," "serious channel diversion, goods being dumped everywhere," "sales declining instead of rising after cooperation"—all tested the patience of brand owners in cooperating with B2B platforms. Not long ago, Red Bull even issued a document to stop distributors nationwide from cooperating with B2B platforms represented by Alibaba's Lingshoutong.
**So, where exactly does the problem lie in FMCG B2B?**
Wang Xing said that too many people focus on boundaries rather than the core. This statement still applies to the FMCG B2B industry. According to incomplete statistics, from 2013 to the end of 2017, more than 30 platforms had received financing in the capital market, with total investment exceeding 8 billion RMB. Driven by capital, B2B platforms expanded their boundaries by continuously opening warehouses, adding personnel, and adding vehicles, and through this brutal expansion, they completed early capital accumulation. However, with the entry of two internet giants, Alibaba and JD.com, various VC and PE institutions began to gradually retreat. After all, no matter how strong the capital strength of investment institutions, they ultimately cannot cross the three mountains of BAT that stand before China's internet. As a result, B2B platforms lacking capital supply had to begin strategic contraction. Undoubtedly, the entry of Alibaba and JD.com accelerated this change in the FMCG B2B industry.
2
**Build High Walls, Stock Up on Grain, and Delay Claiming Kingship**
The FMCG industry is ultimately a highly regional industry, pursuing terminal coverage density and product circulation efficiency. The greater the terminal coverage density, the higher the product circulation efficiency naturally. It is undeniable that national B2B platforms represented by Alibaba and JD.com have strong capital strength, which can help them quickly establish scale advantages nationwide. However, due to the strong regional characteristics of FMCG, this scale advantage may not necessarily translate into cost advantages in the FMCG industry.
The essence of business is profit-seeking. In the situation of severe losses and no profitability in sight, we see national FMCG B2B platforms beginning to make strategic adjustments to improve their revenue conditions. In stark contrast, regional platforms are rapidly developing and rising.
In the second half of 2017, the New Distribution team conducted a survey of 22 major cities across the country, systematically investigating the coverage, penetration, supply chain organization capability, platform operation capability, delivery capability, and service visit capability of various FMCG B2B platforms in different market areas. Among these, we discovered a large number of FMCG B2B platforms that are rooted locally and deeply cultivate their regions, such as Yishenghuo in Chongqing, Xingaoqiao in Hunan, Yihaoshenghuo in Guangdong, Huijinhuo in Chengdu, Wanquansupei in Fujian, Dianda in Jiangsu, and Kuaile Zhanggui in Shanghai. These regional platforms are not at a disadvantage in competition with internet giants that have capital and technology advantages, and even show signs of catching up in many aspects, making them worthy of the title "regional kings." "Build high walls, stock up on grain, and delay claiming kingship" has also become a true portrayal of many regional platforms.
For regional platforms, the biggest advantage is the density of store coverage and the strong supply chain organization capability formed over a long period in the region. "The convenience stores that are now in the spotlight, I started doing ten years ago," said Tang Guangliang, founder of Xingaoqiao, in an interview with reporters. Taking Hunan Xingaoqiao as an example, there are about 30,000 traditional grocery stores in Changsha, and Xingaoqiao covers more than 10,000 stores. Excluding chain convenience store brands like Meiyijia, Xinjiayi, and Huimiba that have already formed complete supply chain systems, Xingaoqiao has covered nearly half of the traditional grocery terminals in the Changsha area.
For Xingaoqiao, the increase in store coverage density further drives the improvement of order fulfillment efficiency, and with it comes higher bargaining power with upstream brand owners and distributors in the supply chain. Rooted in the region and deeply cultivating the market also allows Xingaoqiao to firmly hold the position of the number one convenience store brand in Hunan, all of which are things that national B2B platforms cannot achieve in a short time.
Regarding the current situation of competition among heroes in the FMCG B2B industry, Tang Guangliang believes, "Some brands are number one nationally, but in each war zone, they are nothing. FMCG must be regional kings. At least create an original table; the source file's table is very important (Excel table). If your table is wrong, you'll take it away on a USB drive... This is very stupid."
3
**N+X Multipolar Competitive Landscape**
Many people believe that after internet giants like Alibaba and JD.com entered FMCG B2B, other platforms have little opportunity. But is the FMCG B2B industry really a winner-takes-all game? The author believes not. The natural characteristics of FMCG determine that procurement is regional and requires strong timeliness of service. In this case, local B2B platforms still have great opportunities. From the perspective of industry development, the current N+X market structure has clearly begun to take shape. N refers to national B2B platforms represented by Alibaba's Lingshoutong, Zhongshang Huimin, and Yijiupi, while X represents numerous regional B2B platforms that deeply cultivate their regions and have strong competitive barriers.
As of now, the layout of Alibaba and Tencent in the offline retail market has basically been formed. Tencent has acquired stakes in Yonghui, Bubugao, and Hongqi Chain, while Alibaba has invested in RT-Mart, Sanjiang Shopping, and Lianhua. An obvious signal is that in the short term, although the two giants will continue to negotiate with offline retail enterprises, they will obviously not involve the capital level.
Similarly, in the FMCG B2B field, the Alibaba camp already has Lingshoutong, Best Dianjia, and RT-Mart e-Lufa, and Tencent will naturally not stand by. According to informed sources, in addition to JD New Path, Tencent has densely deployed several FMCG supply chain enterprises. Obviously, Alibaba and Tencent's harvesting of leading FMCG B2B platforms has also ended. For some B2B platforms that want to seize the opportunity to quickly cash out through capital, although they still have value to sell at a good price, the window period is clearly not long.
For more B2B platforms, the primary issue to consider at this stage is how to survive better, which requires platforms to carry out refined category operations, adjust product structures, and shift from the initial pursuit of market scale to the pursuit of profit.
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