B2B E-commerce: Think Through Your Model Before You Act

In 2016, B2B e-commerce is poised for takeoff. E-commerce giants, distribution companies, distributors, logistics firms, and small entrepreneurs are all jumping into the fray with different strategies. Some super platforms are eyeing the market, some new platforms are burning cash on subsidies, and some entrepreneurs have made small gains. After half a year, only a few are happy, and the industry seems to be mostly filled with worry.

Why is this happening? Is B2B e-commerce hard to do? Is the market bad, or is the scale potential poor? No, the market's prosperity has confirmed its potential and scale. The large-scale losses stem from a lack of consideration for the business model, especially in the FMCG sector.

In B2B e-commerce, rushing in without thoroughly thinking through the business model is much more costly than in C2C. Unlike C2C, where you can fix a poor product detail page or packaging, in B2B every step is a major move, every action is significant, and every change involves supply chain adjustments and hundreds or thousands of terminals.

B2B e-commerce is a scale business. If you haven't figured out your model, don't act rashly.

What is B2B e-commerce doing? Can burning money make B2B work?

Teacher Liu Chunxiong said that burning money in B2B is ineffective. B2B itself is about saving money; burning money cannot create a real business.

Let's first look at why C2C burns money. First, given the high development of China's internet industry and the bubble nature of its capital market, any successful C2C project cannot be seen simply as a consumer business promotion. If you think of C2C consumption subsidies as benefiting the people, you are completely wrong.

Every project of internet giants is supported by a strong financial supply chain. We all know WeChat Red Packet spent a lot of money during the Spring Festival Gala. Why? To get everyone to enable WeChat Pay. Didi and Kuaidi fought for so long. Why? To gain a huge customer base and get them into the habit of paying online. Of course, the latter is the key.

That's the nature of C2C. What about B2B?

B2B is a real business. Facing thousands of business transactions at every terminal every day, what use is a 100 yuan subsidy for downloading an app? Who would care? That's not business; that's opportunism. The core of B2B is to simplify business models and improve efficiency through internet tools. This is the real issue every participant in B2B should consider.

Even giants like JD and Alibaba.

First, super giants use large capital and subsidies to build super scale, but in the FMCG industry, they cannot establish ultra-large-scale low-cost advantages. So, this approach doesn't capture the real core. Internet giants' ideas and transformations in the FMCG field can build mature warehousing and distribution systems, but compared to traditional models, there are two points that are almost impossible to change.

Most enterprises have already established deep distribution systems, so their products can basically reach county towns in one step. Thus, centralized warehousing is meaningless. The warehousing facilities of internet giants are not necessarily better than those of local distributors.
Because FMCG turnover is extremely fast, if internet companies want to meet terminal requirements, they need to invest considerable financial resources to build turnover warehouses. Currently, JD's warehousing facilities are not up to par, let alone Cainiao's.

These two points are almost fatal. Regional B2B e-commerce platforms, with their centralized procurement, storage, and distribution models, can achieve lower costs and higher efficiency than internet giants.

Second, burning money can only bring temporary victories, not decisive success.

Terminals only seek higher profits; everything else is nonsense. Second-tier distributors are like grass swaying in the wind, and terminals are even more so. We've said this clearly in the industry for years. Terminal stores only care about one thing.

Low prices, small profits but quick turnover. This is the core. Many B2B platforms communicate with terminals every day. Burning money cannot create user habits, let alone stickiness or loyalty. If you burn money to give terminals their first "internet" education, congratulations, you are the master who introduced them to the trade, but you don't know who will get the final egg. If you become a pioneer inadvertently, you lose more than you gain.

Finally, let me share a small viewpoint. What is the total annual revenue of all e-commerce platforms like Alibaba and JD? It's hard to count. But what is the total annual retail sales in China? I think it is far, far greater than the total of internet companies. So, B2B is the same. The layout formed over thirty years of reform and opening up is not so easily overturned. Of course, this is also a good opportunity.

In summary, burning money cannot achieve real success.

Construction and Entry of B2B Business Models

Teacher Lu Changquan once said that brand marketing should be "grand in the big picture, sharp in the details." I deeply agree, and I believe this phrase not only represents the core of brand marketing but also the core of business model construction.

What does "grand in the big picture" mean?

B2B e-commerce consists of five key links, which in order of transaction occurrence are: product production, product distribution, B2B e-commerce platform, platform-to-store, and community O2O.

The so-called "grand in the big picture" means accurate positioning! Concise! Be the undisputed first choice in your segmented field. If you achieve that, you have achieved grandeur.

In fact, from the perspective of business model establishment and entry, if you can achieve core competitiveness in any one or two of the above five links, it is already remarkable. If you can occupy three of the five links, that's the ability of a god.

Of course, there are other solutions. For example, if I can't do it myself, I can integrate others to do it. This is a solution, and it reflects your ability to integrate resources.

What does "sharp in the details" mean?

The most painful thing in this world is to do something but always start from your own perspective, which is what we often call "building a cart behind closed doors." B2B e-commerce does not have high requirements for user experience, but it has very high requirements for understanding user needs. This is fundamentally different from C2C. C2C has high requirements for user experience, but as for needs, according to the law of large numbers, there will always be suitable customers, and needs can be educated.

If you cannot identify the real needs and pain points of users, you cannot find the right way and timing to enter. For example, what are the pain points of community stores? Is it getting up early to stock up? Is it unprofessional management? Is it the generally low quality of bosses? Is it wanting to keep up with the times but not knowing how?

Maybe yes, maybe no.

So, to enter sharply in the details, you need to research, confirm it's right, match appropriate resources, and enter quickly, like a thunderbolt, to achieve final success.

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