---
title: "B2B E-commerce PK: 'Remove Distributors' or 'Strengthen Distributors'?"
description: "The current state of B2B e-commerce: there are over 1,000 platforms nationwide, with 4-5 in each county. Following Alibaba's investment in B2B, JD.com has also entered the field, signaling an impending B2B battle. B2B e-commerce has split into two camps: centralized platforms like JD and Taobao, which aim to remove distributors, and distributed platforms, which are currently popular and center on distributors. These two models are now in direct competition, and the question is which will succeed."
author: "刘春雄"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-01-22"
language: "en"
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---

# B2B E-commerce PK: 'Remove Distributors' or 'Strengthen Distributors'?

> The current state of B2B e-commerce: there are over 1,000 platforms nationwide, with 4-5 in each county. Following Alibaba's investment in B2B, JD.com has also entered the field, signaling an impending B2B battle. B2B e-commerce has split into two camps: centralized platforms like JD and Taobao, which aim to remove distributors, and distributed platforms, which are currently popular and center on distributors. These two models are now in direct competition, and the question is which will succeed.

**Let me first talk about the current state of B2B e-commerce: there are over 1,000 platforms nationwide, with 4-5 in each county. Following Alibaba's investment in B2B, JD.com has also entered the field. A B2B battle is imminent.**
**Now B2B e-commerce has split into two major camps. One is centralized B2B e-commerce, represented by JD and Taobao, characterized by 'removing distributors'; the other is the currently popular distributed e-commerce, characterized by placing distributors at the core.**
**These two camps have starkly contrasting features: one is centralized, the other distributed; one removes distributors, the other centers on them.**
**These two models are now in a PK. So, who will succeed?**
**Concepts**
**Centralized e-commerce** means a single platform for the whole country, like JD and Taobao today; distributed e-commerce means each region forms a platform, and then a large national platform is formed.
Currently, distributed B2B e-commerce is in full swing, but the attention is on centralized B2B e-commerce, which hasn't started yet.
**B2B Consensus: Community Convenience Stores Are Irreplaceable**
Unlike C-end's complete 'disintermediation,' B2B e-commerce implies a consensus: community convenience stores are irreplaceable. Everyone is 'courting' retail stores, especially community convenience stores.
Liu Qiangdong's remarks at the annual meeting on January 16 were quite pertinent: 'Mom-and-pop stores are hard for other formats to penetrate. For example, in every village in rural China, there is at least one small shop. When we went to towns to survey, users felt it was too far to buy from JD, including Taobao and Tmall. Wang Wu in the town sells phones; he has been selling phones for 15 years, very well, with excellent service. If there's any problem, they can find him to solve it. They rely on social connections. Within a small community, they have a unique survival model that is hard for us to compete with. This goes beyond price, quality, and service.'
Liu Qiangdong spoke the truth. The biggest impact of C-end e-commerce is not on convenience stores but on hypermarkets and shopping centers, the so-called 'bag-carrying shopping.' Convenience stores have not been greatly affected.
This is related to the product attributes of C-end e-commerce. C-end e-commerce generally involves high value-added or high-value products that are not for immediate consumption. Convenience store products are generally low-value with obvious random consumption characteristics. It can be said that the biggest feature of convenience stores is convenience, which other businesses, including e-commerce, find hard to replace.
Courting convenience stores indicates that 'disintermediation' is being revised; first, B2B does not remove retailers.
**B2B Divergence: Can Distributors Be Replaced?**
The biggest divergence between centralized and distributed B2B e-commerce is whether distributors can be replaced. This has also become a topic of discussion and even mutual attacks in communities.
**Distributed B2B e-commerce centers on distributors, characterized by integrating distributors into the internet and using the internet to optimize channel structure.**
**Centralized B2B e-commerce is typically characterized by removing distributors, which implies an admission that distributors can be replaced, at least partially.**
**It's hard to imagine that both are B2B yet diverge so greatly.**
The role of distributors has always been controversial, mainly the 'wholesaler uselessness' theory. There were debates in the early 20th century in the U.S., in the 1960s in Japan, and in the late 20th century in China. Especially with the expansion of manufacturers and the development of key accounts (KA), distributors have become the 'sandwich cookie' between giants.
Despite the debates, distributors' share in commerce has declined, but their total turnover has risen. That's the overall trend. Will this trend change in the internet age? China's channel reform has always been a marketing theme, indicating that channels are very important.
**Core Point: Dare Manufacturers Give Up Distributors?**
Instead of debating whether distributors can be replaced, ask manufacturers: Do you dare to give up distributors?
Different manufacturers may answer differently.
Some world-renowned brands, like Coca-Cola, might indeed dare to give up distributors, as long as they are confident in relying entirely on pull marketing for new products, abandoning push marketing. But such manufacturers are few, perhaps none.
Some small manufacturers, whose networks are not well-established, like small food manufacturers, have little to give up.
I believe most manufacturers do not dare to give up distributors. Even if forced onto centralized platforms, they would only put some products on the platform while keeping others with distributors, separating the two.
Why don't most manufacturers dare to give up distributors? Mainly because distributors bear the functions of capital pooling, maintaining customer relationships, market expansion, and new product promotion. Without distributors, manufacturers would have to bear these themselves, which is difficult for them in China today, mainly because the terminal market is highly fragmented.
Distributors have a reason to exist. This is the premise for predicting the fate of B2B.
**Are Retail Stores Interested in B2B?**
Consumers buy one item at a time online. Retail stores buying online are not buying one item but for long-term purchase, intending to sell long-term.
If it's a well-known brand and the price is cheap, retail stores are interested in ordering. If it's not a well-known product and no one promotes it, would retail stores be willing to order? I doubt it.
When JD and Taobao do B2B, it means acting as national distributors. Do they have the capability to promote nationwide?
Judging from their C-end performance, they do not have this capability. So how centralized B2B will work is not yet clear to us observers.
**Can JD and 1688 Act as National General Distributors?**
When JD and 1688 do B2B, it means acting as national general distributors for manufacturers. Do they have this agency capability?
**Undoubtedly, they do not have this capability, especially for new product promotion.** They are still playing the game of traffic redistribution. Even if they cannot act as national general distributors, they hold retail store orders (traffic) and will force manufacturers to comply, even if unwilling.
**The Fate of Distributed B2B**
Since for most manufacturers, the regional functions of distributors are indispensable, distributed B2B will definitely have a market, and the total market size will be much larger than centralized e-commerce.
Distributed B2B e-commerce is characterized by leveraging existing distributors, integrating with the internet, optimizing channels and management, improving efficiency, and saving costs. Some platforms are doing very well now, although they are still regional platforms, and only in areas like cold chain products, FMCG, and baijiu. There are now over a thousand such platforms. In the future, some will succeed and some will fail, but as a model, it has been proven successful.
**The Fate of Centralized B2B**
Centralized B2B e-commerce like JD and 1688 is something only they dare to do. For them to succeed, first, the logic must be clear, and second, the operational technical content is high.
From a business logic perspective, the logic of centralized B2B is not fully understood, at least not by us observers. Perhaps we are slow-witted.
Ma Yun is very smart and skillful in operations. He technically chose cross-border e-commerce as a breakthrough, which is a very clever choice.
Why is Ma Yun clever? First, the current strong domestic purchasing power cannot find an outlet; part of it spills over abroad, and another part will choose foreign products domestically. Second, many newly imported products currently do not have a well-established domestic network, so there is no legacy burden. This makes success much easier.
If Ma Yun's cross-border e-commerce succeeds, he will definitely march into domestic products' B2B. This is my observation of Ma Yun: as long as he finds an entry point, he will tear open a big gap and force everyone to follow him. At that time, even if domestic manufacturers are unwilling to follow, it will be difficult. This is like the C-end e-commerce era, where large manufacturers were initially reluctant to enter, but later invested at any cost.
JD's B2B is harder to predict because too little information has been revealed. If it's like 1688, the possibility of success is relatively high. If it directly starts with domestic manufacturers, it will be very difficult.
What are the difficulties? First, mainstream manufacturers are reluctant to enter early because they are held hostage by existing stock; entering would offend distributors and affect their business. Second, if the manufacturers on the platform are not mainstream, retail stores will not be motivated to order. This is like the current baijiu e-commerce: without Moutai and Wuliangye, there's no traffic, but Moutai and Wuliangye have no incentive to join.
Even if centralized B2B succeeds, manufacturers will treat them like they did with C-end: develop a product line suitable for centralized B2B e-commerce, while continuing to work with original distributors as before. After all, manufacturers already have three product systems: channel products, terminal products, and C-end e-commerce products. Would they be afraid to add a fourth B2B e-commerce product line?
**What Should Distributors Do?**
If JD and 1688's B2B e-commerce succeeds, it will inevitably divert some of distributors' sales, affecting their volume. Under the dual impact of C-end and B-end diversion, distributors will have a harder time.
How should distributors respond? The simplest way is to increase barriers to minimize the impact of centralized B2B.
A single distributor cannot build barriers. The C-end e-commerce case tells us: no matter how big the manufacturer, they are just scattered soldiers in front of Ma Yun. Moreover, in B2B, they are just distributors.
I believe distributors must respond from two aspects: first, build regional B2B platforms, i.e., distributed B2B platforms; second, many regional distributors jointly build platforms and barriers, turning the B2B battle into a fight between 'local snakes' and 'powerful dragons.'
**Conclusion**
**B2B e-commerce is a major trend, and its scale is much larger than C-end, at least 10 trillion yuan. This is beyond doubt.**
**Distributed B2B e-commerce can succeed; there is no dispute about that. The question is who will be the final winner, as distributed e-commerce will also compete, and not many will remain.**
**Whether centralized B2B e-commerce can succeed depends on whether the business logic is clear and the level of operation. Don't think that just because giants do it, they will succeed. The failure of JD and Taobao's rural e-commerce has already proven that any extension is difficult. Ma Yun has been successful as a venture capitalist in recent years, but his overall operations in innovation have not been successful.**
**-END-**
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