Click the image to register for participation Ten-second full-text overview I. Overview of FMCG (definition, classification, characteristics, FMCG and urban distribution) II. History of FMCG distribution channel changes & logistics distribution history from 1978 to 2017 III. The "newness" of the new environment (changes in consumption, channels, and markets) IV. Opportunities for FMCG B2B logistics in the new environment (platforms, convenience stores, specialized physical stores, capital attention, brand fragmentation, rise of large cities) V. Appendix: Technical chapter on urban distribution (similarities and differences in development directions, building core competitiveness of enterprises) I. Overview of FMCG 1. Definition and classification of FMCG 2. Characteristics of FMCG 3. Why discussing urban distribution inevitably involves FMCG (1) FMCG has a relatively large volume; it is a type of high-volume goods that reaches a certain scale. (2) FMCG distribution destinations are numerous and scattered, covering a wide range and system. (3) For urban distribution, the largest demand comes from FMCG and clothing. If FMCG is not handled, the scope of urban distribution becomes much narrower. II. History of FMCG distribution channel changes & logistics distribution history from 1978 to 2017
- Before 1978, that is, before the reform and opening-up. At that time, there were cooperatives. Due to material shortages, the state implemented unified sales, unified purchase, and unified allocation. That is, procurement was organized by a dedicated team, sales were handled by the cooperative's dedicated sales team, and allocation was completed by the supply and marketing cooperatives.
- Late 1980s to early 1990s, cooperatives collapsed. A bit earlier, around the early 1980s, individual shops emerged in rural areas or urban-rural fringes, giving rise to non-state-owned channels for purchasing goods and logistics systems. During this process, some transport drivers gradually appeared, but there were few private transport companies for state-owned goods; individual drivers undertook specific freight work.
- 1996-2010 was the third stage. There were two representative events:
- First, in 1996, Walmart entered China, bringing the hypermarket and supermarket format to China for the first time, followed by Carrefour and Metro. Before 1996, China's retail industry was not open to foreign investment, but Walmart and Carrefour cleverly exploited a loophole. They called themselves consulting or management companies and promoted themselves in China through cooperation. For example, a store's promotion and operation needed consulting company help, but in reality, Carrefour had the final say, including product layout, counter design, and logistics planning.
- Second, around 2000, third-party logistics arrived. The first entrants were DHL, Sinotrans-DHL, etc. They also provided logistics for Walmart and Metro, creating the form of third-party contract logistics.
- After 2010, information circulation channels became broader and more diverse. Online channels include JD.com, Vipshop, and Yihaodian; offline physical stores include more convenience stores and supermarkets. In this era, logistics distribution also changed. At this time, trading companies and manufacturers no longer kept their own vehicles but outsourced logistics to specialized third-party companies. During this process, urban distribution relatively gained scale. III. The "newness" of the new environment 1. Changes in consumption Recall the era of green trains; travel was measured in days. On the train, there were always attendants pushing carts and shouting: "Sunflower seeds, instant noodles, ham sausage, beer, beverages, mineral water." At every relatively large station, passengers would get off to buy supplies from stalls on the platform. As China's railways have developed, high-speed rail now spans over 20,000 kilometers. When riding high-speed rail, you'll notice few people eating instant noodles; the mainstream is boxed meals, ordering dishes, takeout, fried chicken, and Zhou Hei Ya. Drinks are no longer limited to water but include Starbucks. In fact, the topic of instant noodles is not only of concern to Chinese people; even the BBC has discussed it. A few days ago, a BBC news article explored what caused the decline in instant noodle sales in China. The main reasons are roughly as follows: first, improved quality of life, consumers want better food; second, population migration, migrant workers returning home; third, upgraded tourism facilities, changing habits; fourth, smartphones and the internet provide another "instant food," namely takeout. The current takeout trend is interesting: people would rather spend 5 yuan on delivery, order a 20-yuan takeout, and wait 40 minutes to solve dinner than spend 5 minutes cooking a 10-yuan pack of instant noodles. These changes in consumption have a significant impact on product structure and a considerable impact on some FMCG foods. Using a few representative companies, the industry situation in recent years can be summarized as: 2. Changes in channels B2B basically enters hypermarkets, standard supermarkets, or wholesale departments, but in reality, many B2B directly enter small shops, which involves B2B platforms. 3. Changes in the market China now has 30 cities with a population of over 8 million. What does 8 million mean? According to city size classification, 8 million is a mega-city. In such a super-populated city, the division of labor must be particularly dense. Chongqing is China's most populous city (over 30 million in 2016), but its urban population is not large (as shown in Figure 1 below, China's total urban population and urban population share), with the urban population accounting for only 27.94% of the total population. Compared with it, Beijing and Shanghai have populations between 20-25 million, but the urban population share is as high as 85% or more. Cities like Chongqing have low concentration of built-up areas, and with the largest area among Chinese cities (82,400 square kilometers), the population density is not high. Figure 1: China's total urban population and urban population share The highest population density in Chinese cities is Shanghai, with a built-up area of less than 1,000 square kilometers, but the built-up area population density is as high as 21,400 people per square kilometer (as shown in Figure 2 below, China's built-up area and urban population density). However, besides Shanghai, Shenzhen (13,200 people/sq km), Wuhan (11,900), Zhengzhou (11,900), Foshan (11,900), Handan (11,700), and Nanjing (11,100) also have high urban population densities. Therefore, urban distribution needs to be strengthened not only in first-tier cities like Shanghai but also in many second-tier cities. Figure 2: China's built-up area and urban population density (thousand people per square kilometer) Based on the above figures, the current development trends are:
- The dimension of individual cities is expanding, and the physical area covered by cities is also expanding. Many single cities now have built-up areas of several hundred square kilometers, which is quite large.
- The rise of city clusters, such as Guangzhou-Foshan integration, Xi'an-Xianyang integration, Suzhou-Wuxi city cluster, Nanjing-Yangzhou-Zhenjiang city cluster, Wuhan + Tianmen/Xiantao/Xiaogan/Huangshi/Huanggang/Ezhou, Zhengzhou + Kaifeng/Luoyang/Xinxiang/Jiaozuo/Xuchang/Pingdingshan/Luohe/Jiyuan, all present good opportunities for urban distribution.
- The formation of seven key logistics node cities nationwide, from north to south: Shenyang, Langfang-Wuqing (previously Beijing, but now Beijing's Fifth and Sixth Ring Roads have basically no logistics nodes), Shanghai, Foshan, and in the central and western regions: Wuhan, Xi'an, Chengdu.
- Homogenization. This includes homogenization of urban construction (ring roads, subways, etc.), homogenization of logistics restrictions (what size vehicles are prohibited from entering urban areas, time-based restrictions, etc.), and homogenization of urban consumption (population mobility).
- Increasingly strict restrictions on delivery vehicles in cities.
IV. Opportunities for FMCG B2B logistics in the new environment
The above analyzes environmental changes from three aspects: consumption, channels, and markets, and explains the "newness." Changes in consumption structure will lead to changes in consumer products, which in turn will lead to changes in the logistics behind those products. Therefore, the new environment also brings many opportunities for FMCG B2B logistics.
V. Appendix: Technical chapter on urban distribution
1. Similarities and differences in development directions 1:
2. Similarities and differences in development directions 2:
3. Core competitiveness of urban distribution enterprises: The five optimal QCDSF, i.e., the comprehensive optimum of quality, cost, delivery, stability, and flexibility.
4. Several thoughts
- As an enterprise, to survive, if there are negative news or restrictive factors in the industry, you must ensure that the impact on your own enterprise is less than the impact on the industry.
- Don't give up easily. In fact, urban distribution is not easy now. It's not just you; others are also struggling. In the end, it's about who can survive. If you survive, you may be able to weather the storm.
- Have cross-industry communication mechanisms and structural thinking ability. What kills you is often an industry/enterprise that seems unrelated to you (Did takeout and high-speed rail, not Master Kong's peers, kill Master Kong?)
- Endurance is not the goal; endurance is for a better tomorrow. In difficult times, don't forget to persist in dreams and hopes, and protect the saplings (core technical personnel and potential management personnel).
- Pay attention to the balance between quality and speed. No matter how good the strategy, it needs the support of daily operational indicators. Source: Logistics Salon (ID: logclubcn)