---
title: "An Old Hand's View on B2B: Good for Small Shops, Bad for Manufacturers—What Do You Think?"
description: "The article argues that e-commerce platforms, acting as secondary distributors, disrupt traditional FMCG distribution by undercutting prices and eroding dealer profits, while offering little benefit to manufacturers. It suggests that while e-commerce may benefit small retailers, it harms the entire supply chain and calls for strategic, long-term thinking over short-term gains."
author: "东来西往"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2017-06-17"
language: "en"
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# An Old Hand's View on B2B: Good for Small Shops, Bad for Manufacturers—What Do You Think?

> The article argues that e-commerce platforms, acting as secondary distributors, disrupt traditional FMCG distribution by undercutting prices and eroding dealer profits, while offering little benefit to manufacturers. It suggests that while e-commerce may benefit small retailers, it harms the entire supply chain and calls for strategic, long-term thinking over short-term gains.

Click the image for details
Click the image for details
**Moved the Cheese?**
Which piece of cheese has e-commerce moved in traditional distribution?
Both domestically and internationally, new marketing theories are constantly emerging. The development of a new approach is undoubtedly an improvement or even a redefinition of the marketing world. A few years ago, when I was still a high school student, I was particularly interested in "robots" (which can now be defined as part of artificial intelligence). One of my teachers once told me that robots, in the final analysis, execute four commands: where I am, where I want to go, how I get there, and what I do there. I cite this small example to illustrate a point: while marketing concepts and strategies are constantly changing and evolving, the golden rules behind them have not changed at all. This is why, even after my student days ended and I have been in marketing for many years, I still believe in the 4P theory (Product, Price, Place, Promotion).
I like to break things down and analyze problems. When my market area faced the overwhelming attack of e-commerce, I encountered the same troubles as many of my peers. The main cause of this trouble was the "price" link, followed by "promotion." **E-commerce is not a production enterprise; it is just a product platform. Its channel is not unique compared to traditional distribution channels. In other words, e-commerce provides an additional new channel for the end customer. When only price and promotion remain, traditional distribution operations begin to be challenged.**
**The Disruptor's Mindset**
When any new thing is born, if it does not want to be immediately eliminated, its only means is to rely on its remaining trump card to survive. After all, only by staying alive is there hope. As a marketing person for a leading domestic brand, I deeply understand the negative impact of price chaos on the entire market. E-commerce is actually a secondary distributor with a relatively complete product range. Its trump card (almost the only one) is the completeness of categories and items plus price discounts. In the first few years of e-commerce's rise, when I visited the market, I could see receipts from some terminal stores purchasing through e-commerce, not only with unit price discounts but also with promotional support. I know the ex-factory price of every single product of our company by heart, and every time I see the prices offered by e-commerce, I feel helpless.
**The prices of products from various manufacturers provided by e-commerce are far lower than the normal market price, and on top of that, they add various promotional supports, which is actually a disguised way to lower prices again.** As FMCG professionals, we all understand a very simple truth: the more popular the products of big manufacturers, the more transparent their prices in the region, and the lower the profit margin.
Typically, for well-known domestic brands such as Master Kong, Uni-President, Coca-Cola, Pepsi, Nongfu, Wahaha, etc., their normal profit margins are actually very low. With prices almost transparent, the dealer's profit margin is almost between 1-3 yuan, and basically tends to be around 2 yuan. **The greatest harm of e-commerce is that it deprives local dealers of their net profit and then adds the double blow of price fluctuations.**
For more terminal stores, this new thing called e-commerce may be a good thing, but for manufacturers, dealers, and even sales personnel, it is by no means a good thing. The worse consequence may not only be a conflict of channel concepts, but may also lead to direct verbal or even physical conflict.
**The Value of Customer Relationships**
Sometimes I discuss a question with my colleagues: How much is customer relationship worth? The answers are almost the same, at most 1 yuan. Even pessimistically, we can say that **customer relationship is actually worth only 5 mao**. Of course, since the unit price of each product varies, I can frankly say that when the price difference exceeds 1 yuan, customer relationship becomes pale. Whether the unit price is 60 yuan or 10 yuan, the taboo in marketing is to maintain a relatively stable price system and then add other market details. But what we see is that price instability keeps rising one after another. As an old marketing person, I know very well that cross-regional selling (channel conflict) is extremely harmful to the entire market. **Such a potential "business opportunity" actually exists clearly in our market. Without a good price system as support, how can we talk about market operations?**
Another disadvantage of e-commerce is even more obvious: **the concentration and constraint of products**. Any product it sells on consignment is a product that is nearly mature in the market, in other words, it is a common product. This is typical thinking of a secondary distributor, and it is also the inevitable attribute of it being only a media platform. In marketing, there is a professional term called "market segmentation," which can be interpreted in many ways.
But now we see that while the entire market's products are highly enriched and diversified, the intervention of e-commerce channels does not bring much benefit to the market. Every company's product person will not let their hard work go to waste, just as every e-commerce platform does not want to try any new product. E-commerce has no obligation to do market development for us; it cares about its own vested interests and the advantageous products it already controls. For any enterprise that strives to innovate, all it can do is to provide continuous hard work and then add profits, provided that this profit may directly cause fierce conflicts with your dealers.
Some manufacturers have even added fuel to the fire, exacerbating the situation of drinking poison to quench thirst. The current overall real economy of the country is relatively sluggish, and consumer spending is weak. The direct consequence is increased pressure on companies, dealers, and sales personnel. Some manufacturers, in order to temporarily alleviate pressure, have added fuel to the fire. **While knowing that their lifeline has been grasped by e-commerce, they still divert the disaster elsewhere.** Cross-regional selling has not only not been curbed, but has become one of the few lifelines. Don't they know the truth that "one day of digging a pit requires ten days to fill"?
**Conflict of Thinking**
The conflict between traditional FMCG distribution channels and e-commerce channels is not just a simple conflict between "traditional" and "internet thinking." Every manufacturer's share in every region (let's take prefecture-level cities as an example) is often in the millions, tens of millions, or even hundreds of millions. Market operations require skill, not shortcuts. There are countless e-commerce platforms selling clothes, socks, and shoes, but few go bankrupt in batches.
On the one hand, prices are opaque; on the other hand, the marketability of the product is not high; and thirdly, a well-constructed price system naturally distinguishes consumers. But at the FMCG e-commerce level, what we see is that almost all partners regard it as "chicken ribs" (something of little value).
It sells your products, relying on a delivery model that may not be advanced or fast, and only relying on a slight price advantage to make you feel helpless. Please remember a truth: once any product is hit to a low point in a certain region, if you want to make a comeback, you will undoubtedly have to pay several times the previous effort, and it may even be impossible to stand up again.
**Learning from History**
Among American airlines, the most famous is probably Boeing, which also produces military aircraft. But there is another airline company in the United States—Lockheed Martin. This is a company specializing in the production and sales of military aircraft. If the U.S. government wants to procure military aircraft, both Boeing and Lockheed Martin can participate in the bidding. Under the same production conditions and technology, even if Lockheed Martin's quotation is slightly higher than Boeing's, the government may still give the order to Lockheed Martin to produce military aircraft, rather than to Boeing. The main reason is that Boeing also has the capability to produce civilian aircraft. **If Lockheed Martin goes bankrupt due to a long-term lack of orders, the remaining Boeing may arbitrarily raise prices in an environment without competition. Operating by using rules reasonably and effectively, rather than focusing on immediate vested interests, is the strategy of a high-level player.**
In 1644, the year of Jiashen in the lunar calendar. In the spring of that year, Emperor Chongzhen, who had the most subjects in the world, hanged himself on Coal Hill. The laid-off postman Li Zicheng from Mizhi County, Shaanxi, forced his big boss to die. The Ming Dynasty had been in turmoil for years, and the collapse of the building was only a matter of time. At that time, the most capable fighting force of the Ming Dynasty was stationed at Shanhai Pass to defend against the Manchus, with about 80,000 troops being the last hope of the Ming Dynasty. When Wu Sangui learned that the emperor had died for his country, his first thought was to surrender. At this time, Wu Sangui knew very well that setting up his own banner would be a dead end, and defecting to the Manchus was even more unrealistic because in the long-term confrontation and war, both sides had blood on their hands. At this time, defecting to Dashun was the best policy, and in fact, he did so. However, when he was halfway there, news from Beijing surprised him greatly.
Li Zicheng had always claimed to "equalize land and exempt taxes," and he had brilliantly established an institution—the Bixiang Zhenfusi (a torture and extortion agency). In plain terms, it was to kidnap and extort money from landlords and rich households to maintain the operation of his "state machine." Unfortunately, he extorted Wu Sangui's family. There were also rumors that it was because of a woman that Wu Sangui defected, but these are ultimately just legends. Wu Sangui's betrayal was not so romantic; it was more the keen judgment of an old hand who had long been in officialdom. He judged that the Dashun regime in front of him was just a mob, a group of petty people temporarily successful. Such people would not have lofty political consciousness, let alone political prospects. When history reached this point, a bizarre scene appeared. Can we understand that Wu Sangui was forced by reality to betray the Ming Dynasty and then betray Dashun?
When every enterprise encounters a dilemma, appropriate judgment and choice are undoubtedly the best policy. But how should we examine our own situation? While pondering market opportunities in the complex and ever-changing market, do we need to judge our future trends from a higher perspective? As we move forward step by step, it is difficult to foresee the trends of the distant future. But we can move slowly along the path we can touch under our feet, even if it is step by step.
**Zhao Bo's Comment:**
It depends on the perspective of analysis. If you look at the industry from the industry's standpoint, this conclusion is not wrong, but it is a bit simplistic to only look at defects without looking at advantages.
If you add two more dimensions to the analysis—one being the entire supply chain and the other being time—the result may be different. FMCG has never been a single link, but the service value of the entire chain. Second, if you expand the time scale, you will find that the industry has always been in dynamic change. The FMCG supply and marketing industry is only thirty years old. From supply and marketing cooperatives to wholesale markets, to dealer agency, to deep distribution, the changes in the last ten years have been significant. It cannot remain unchanged forever. Maybe e-commerce is really an option. Can edge innovation break through? The larger the industry, the larger the turning radius of change. But that does not mean the industry does not turn. Whether it can subvert the FMCG industry depends on who is being subverted. In fact, the voice in this matter lies with consumers. All changes are based on changes in consumers. Without consumer insight, all inferences are problematic. Moreover, most FMCG brands are not conservative. Many companies are actively trying e-commerce channels. Procter & Gamble's online sales have already exceeded Walmart and Carrefour. Most practitioners in the industry have been evolving and trying to change. Whether it will be subverted in the future is hard to say, but the future will definitely not be what it is today.
**New Distribution's "7th B-end E-commerce Study Tour" Countdown: 3 Days!**
**Event Schedule:**
> June 19-23: Suzhou · Shanghai · Hangzhou
> 19th: Check in at designated hotel in Suzhou;
> 20th: Visit Suzhou Medline;
> 21st: Visit Shanghai Hd;
> 22nd: Visit Hangzhou Wangcang;
> 23rd: Return or free time for sightseeing;
**Introduction to the Platforms to Visit:**
**Medline**
Youshang Software, a well-known domestic information system provider, launched the "Medline" brand in 2015. Medline, based on Youshang Software products, uses artificial intelligence technology as its internal strength and efficient operation as a breakthrough to help dealers create a new B2B business model. It has provided software technical services to dealers in more than 50 cities nationwide.
**Hd Company**
Shanghai Hd Information Engineering Co., Ltd. (hereinafter referred to as Hd Company) is a first-class domestic management consulting and software R&D company for commercial circulation, e-commerce, and modern logistics solutions.
Since its establishment more than 20 years ago, it has been committed to creating modern commercial management models for customers. Hd's systematic products and solutions with independent intellectual property rights have strong competitiveness in the three business formats of chain retail, commercial real estate, and warehousing logistics. It currently supports more than 500 well-known large and medium-sized commercial enterprises and group users in 30 provinces across the country. It is the largest retail software provider in China.
**Wangcang**
Zhejiang Wangcang Technology Co., Ltd. was established in June 2011. It is the earliest and currently the only large-scale independent fourth-party intelligent warehousing and distribution service provider in China. Wangcang has been committed to the innovation, implementation, and daily operation of refined and collaborative warehousing and distribution solutions for e-commerce enterprises. Today, Wangcang has the capability to provide solutions from B2C e-commerce warehousing and distribution to B2B+B2C full supply chain integration (warehousing and distribution).
Relying on its self-developed adaptive warehousing and distribution comprehensive management system, combined with years of warehouse construction and in-warehouse management experience, as well as self-developed equipment, Wangcang has formed comprehensive competitive advantages. Wangcang's system can seamlessly connect with all sales platforms, enterprise ERP, logistics and express resources, and in-warehouse operation resources (such as equipment, labor, warehouse area application, etc.). Through our services, the efficiency of a single warehouse can be greatly improved, achieving resource interaction and allocation between warehouses. Through big data, we provide value-added services such as supply chain optimization and supply chain finance for cargo owners. At the same time, through open systems and management advantages, we provide franchise business for warehouse owners.
**Organization Form**
************1. Company visit
2. Actual market case visit
3. On-site explanation
4. One-on-one communication************
Participating dealers only need to pay a registration fee of 200 yuan
Other expenses are self-paid
Long press this QR code or click "Read Original" to register
**Long press the QR code to add WeChat for registration**
**Group Photos of Previous Study Tours:**
**Group photo of the 6th B-end E-commerce Study Tour, from top to bottom: Zhongke Shangruan, Shuhai Supply Chain, Yunmei Co., Ltd., Yishang Logistics.**
**Group photo of the 5th B-end E-commerce Study Tour, from top to bottom: Huiwangxing, Beiquan, Tongying Tianxia, Quanshihui, Zhongke Shangruan.**
**Group photo of the 4th B-end E-commerce Study Tour, from top to bottom: Alibaba Retail Link, Qianmi Network.**
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