A couple of days ago, I had a conversation with a distributor doing B2B, and we talked about Retail Link. He felt it was a pity. The distributor mentioned, "In my region, the physical warehouse part of Retail Link was profitable, but Alibaba no longer has the patience to wait." During this period, New Distribution visited many regional B2B distributors, confirming this judgment. We saw that whether in high-tier city large markets or low-tier city small markets, there are many successful cases of distributors doing B2B. Why can't internet giants do well in FMCG B2B? Why can distributors do well in regional FMCG B2B? Breadth without density Cannot do well in FMCG B2B Alibaba's Retail Link was part of the "Five New" new retail, digitizing the wholesale and retail industry. But ideals were full, reality was skinny; Alibaba's desired "new retail" format ultimately failed to materialize. The losses from new retail were endless, and the core e-commerce business was under attack from Pinduoduo. Under multiple pressures, Alibaba completely lost patience with the long-cycle task of transforming offline physical retail. From its true start in 2016 to its shutdown in March 2024, Alibaba Retail Link's plan to use internet technology to transform over 6 million mom-and-pop stores in China was declared a failure. Why do most national platforms like Retail Link fail at B2B? 1. They pursued breadth, not density Back in 2017 and 2018, many B2B companies received capital financing and embarked on rapid national expansion, blindly pursuing the number of outlets. This is a typical internet company characteristic: pursuing coverage breadth. They didn't care how large the scale was in local regional markets; as long as they built up breadth, relying on the scale of the national market, they could still become an important sales channel. But this was clearly a cognitive error. FMCG B2B and B2C are completely different logics. B2C customers are consumers, characterized by price insensitivity, extremely low repurchase rates for single categories, but extremely diverse product needs. Even for long-tail products, under massive customer demand, they can generate huge sales. This leads to a situation where the stronger the supply chain of a large platform, the higher user stickiness, easily forming a Matthew effect. B2B users are small shop owners, characterized by continuous high-frequency repurchase, focusing on profit and turnover rate, and extremely sensitive to price and product sell-through rate. Small shops have limited operating area, limited shelves, and limited SKU capacity. Long-tail products do not bring stronger competitiveness to large platforms; instead, they increase delivery costs. In the FMCG B2B field, user density and order density within a single region are the keys to victory. The shorter the delivery radius, the greater the density, the higher the efficiency, and the lower the delivery cost. Fulfillment and delivery costs are the most core costs in FMCG B2B, and the natural low-value, heavy-logistics attributes of FMCG mean that FMCG B2B must emphasize delivery density. Therefore, large warehouses with long-distance delivery do not have cost advantages. FMCG B2B must win by density. Only by building up store density and order density within a region can a single region operate healthily and stably. In this regard, traditional offline distributors have natural advantages in local regions, being familiar enough with the regional market and stores. 2. Cross-regional circulation does not bring cost advantages Many people have a misconception that collective procurement prices are necessarily cheaper. But for major brands, this view is not valid in most cases. In China's FMCG industry, agency attributes and regional protection are objective facts. Goods cannot circulate across regions; any slightly sensible manufacturer will not destroy their own price system. So the product advantages in a single region are hard to radiate to other regions. It's simple: if you do well in B2B in Chengdu, it has nothing to do with Chongqing. No matter how big the platform, in regional markets, they compete at the same level as distributors doing B2B. Additionally, for circulating products on the market, no matter how much a single platform purchases, can it compare to the volume a provincial distributor consumes? If it's not more than the distributor, why should it be cheaper? Small brands and new products do have advantages in collective procurement, but frankly, FMCG B2B has weak new product promotion capabilities. The success of any new product in the market is a process of multi-channel integrated operation, creating scenes and atmospheres, which B2B cannot do for now. 3. Using wholesale logic for B2B has no moat Early national B2B companies mostly stepped on a pitfall: using wholesale logic for B2B. If you use wholesale logic for B2B, it's essentially no different from a wholesale market. It's just putting best-selling products on an online platform and selling them at low prices. What role is a small shop owner? A professional buyer. The store is his livelihood; buying and selling goods is his job. If it's just low-priced circulating products, he will definitely shop around. The final result is that small shop owners attracted by low prices have no loyalty whatsoever. So, from the end to the beginning, the essence of doing B2B is to provide small shops with one-stop product supply chain services. Going one level deeper, it's helping small shops with deep operations and product selection, not simply wholesale selling. 4. Complex organization, low operational efficiency The internal organizational processes and systems of giants are also quite complex. When the market changes and a product needs a price adjustment, professional managers initiate approvals, which go through layers of review. By the time approval is confirmed, the market opportunity is gone. B2B is not the only way out for distributors But it is indeed a good business Two years ago, New Distribution conducted terminal small shop surveys in four cities including Jinan and Mianyang. Data showed that 76% of surveyed stores in two high-tier cities were using B2B for ordering, and in two low-tier cities, over 60% of surveyed stores used B2B for ordering. Let's share another set of data: from March 15 to April 15, during that month, after Retail Link shut down, a leading B2B platform in Guangdong saw over 3,000 new self-registered small stores. This fully demonstrates that small shops have adapted to ordering on FMCG B2B. But there is a misconception: many people think the main reason small shops order on B2B is low product prices. This concept was actually caused by internet giants entering with heavy investment; in that era, they used low prices to cover up the inherent advantages of B2B. When New Distribution conducted terminal small shop surveys, the top two reasons for stores using B2B ordering were "convenient ordering, saving time and effort" and "diverse products, rich choices", while "cheap prices" only ranked third. In fact, many small shops reported that ordering on B2B was not cheaper than getting goods from distributors. "I order most of my beverages on B2B. Beverages sell quickly in my store. Previously, ordering from salespeople required dealing with multiple different salespeople, and calculating various policies was time-consuming. The time from salesperson feedback to order confirmation to delivery was too long; sometimes I was out of stock for a long time. Ordering on the mini-program is very convenient, saving time and effort. Every evening, I take stock of sales and place a one-time order, and delivery is usually within a day or two." This was shared by a mom-and-pop store owner during a market visit in Shenzhen. For terminal small shops, with limited operating area and relatively fixed customer flow, the core is earning from turnover and price differences. If we use the retail industry's "more, faster, better, cheaper" to measure the needs of terminal small shops, the order should be fast, more, cheap, good. In a region, doing deep and thorough work, truly focusing on the underlying needs of small shops, providing fast, accurate, and efficient one-stop supply of a full range of goods, is definitely a sustainable good business with a moat. Moreover, distributors have certain advantages when doing regional B2B. The essence of the supply chain business is cost and efficiency. Lower cost, higher efficiency, delivering goods to stores. In terms of cost, based on past resource accumulation, distributors have lower localization costs. For example, for warehousing, through customer relationships or personal connections, they can find more cost-effective locations. In terms of efficiency, distributors have shorter management paths and can quickly respond to market feedback, reducing many uncontrollable risks. Distributors doing B2B Is not transformation, but career change Many distributors ask us: Is doing B2B an opportunity? Am I suitable for B2B? New Distribution has always emphasized that distributors doing B2B is indeed a good business, but there must be clear awareness: not all distributors are suitable for B2B. Distributors doing B2B is not transformation but a career change; the operational logic of the two is fundamentally different. In the agency business, distributors serve brands, doing localized brand operations and coverage, helping brand owners do marketing; in B2B, distributors serve stores, helping stores with product selection, operations, and services. From the underlying logic, these are two different industries. What difficulties do distributors face when doing B2B? From a city dimension, the larger the city, the higher the probability of B2B success. The reason is simple: the more mom-and-pop stores, the greater the possibility of two-way selection, but at the same time, competition is fiercer. Of course, small cities can also do it. As long as the population is over 1 million and the number of small and medium store outlets exceeds 3,000, there is an opportunity, but the difficulty is relatively greater, requiring high operational capabilities from distributors. From a category dimension, distributors of different categories face different main problems in B2B, and the difficulty varies greatly. For water and beverages, the resistance is high handling costs and obvious off-peak seasons; for snacks, the resistance is low consumer loyalty, high requirements for product strength, and many SKUs, requiring high warehouse and logistics management; for daily chemicals, the resistance is high brand loyalty, and paper products mainly sell through modern channels, with weak sales in circulation stores. These are just the initial difficulties. Once you do B2B, you will eventually develop into a full-category supply chain. This means the business operation logic is also changing, from single-category, all-scenario, all-channel to multi-category, single-channel operations. The operational difficulty coefficient increases exponentially with cross-category. Moreover, the initial investment cost is also something distributors need to consider clearly. Distributors doing B2B have a long pre-loss period. Only when order capability and delivery capability improve can true scale operations be achieved; this is the basic premise for profitability. So, before doing B2B, be prepared for a career change and the pre-loss period. Treat it as a new venture with all your might, and only then will you have a chance to do it well. Recommended Reading