Crisis and Opportunity Economic growth has repeatedly slowed, and capital markets have been unusually volatile, seemingly heralding another capital winter. This is undoubtedly a perilous period for every entrepreneur and investor. However, "If winter comes, can spring be far behind?" Looking back at not-so-distant history, it's easy to see that periods we once regarded as crises gave rise to a batch of era-defining giants, including BAT. Beneath the surface of crisis, there lies a huge demand for transformation and change. We believe that those who can seize this demand, solve problems with innovative thinking, meet needs, and reshape the landscape may well give birth to the next BAT. Today, overcapacity in traditional industries has forced companies to adjust and transform: reducing costs, increasing revenue, and improving efficiency. This is an excellent opportunity for the internet to leverage its strengths and intervene in traditional industries. Delving deeper, in the adjustment and transformation of traditional industries, physical methods of cost reduction are nearly exhausted, and the space for increasing revenue is squeezed. Only by focusing on efficiency can new breakthroughs be found. If we can strengthen the flow of bits in the information world to weaken or even eliminate unnecessary flow of atoms in the physical world, we will see an industrial upgrade that greatly improves efficiency based on information technology and internet operations. The opportunities this presents to all entrepreneurs and investors are self-evident. Classification of B2B Trading Platforms The success of Zhaogang.com has made many entrepreneurs and investors see the huge opportunity in B2B trading platforms. In the past three quarters alone, Zero One Venture Capital has come into contact with nearly 500 startups trying to get a piece of this big pie. Based on our observations, these B2B companies can be roughly divided into the following four categories:

  1. The first type of B2B is production raw materials. In this type, upstream enterprises produce and provide products, while downstream enterprises purchase them as raw materials for production. Downstream enterprises apply their wisdom and labor to process raw materials into their own products. As products flow through the value chain, they generally undergo transformation, and the increase in value comes from the labor provided by the enterprise, its technology, intellectual property, etc. In fact, raw materials are further divided into two types: The first is bulk commodity production raw materials. Examples in vertical industries include steel produced by steel mills becoming rebar, cars, rice cookers, etc., downstream; plastic raw materials becoming toys, tableware, and other goods downstream. The second is non-bulk commodity production raw materials, such as fabric becoming bed sheets and shirts at home textile and garment factories, fresh vegetables becoming delicious dishes in restaurants, and auto parts entering repair shops, where they are billed to car owners along with the mechanic's service.
  2. The second type is commodity trading. Here, upstream enterprises sell finished products, and downstream enterprises buy them to sell in their own stores without further processing or manufacturing. They mainly leverage their store's location or other resources to facilitate sales, thereby adding value. Relevant vertical industries include fruits, Chinese herbal medicines, alcoholic beverages, clothing, fast-moving consumer goods, hotels, air tickets, etc.
  3. The third type is non-raw material items. Purchasing enterprises buy these items mainly for use in their production and business activities, and they have no direct relationship with the products they sell. The end users of these items are enterprises themselves. They do not appreciate in value during their lifecycle; instead, they depreciate. Examples include IT products, printed materials, office supplies, tools, and equipment.
  4. The fourth type is services. As mentioned earlier, enterprises need to purchase services in various fields such as logistics, advertising, consulting, and law, which most enterprises cannot provide themselves. The corresponding expenses are generally recorded as enterprise costs. The Logic Behind the Rise of B2B Trading Platforms The rise of B2C e-commerce is largely due to their provision of delivery services. Consumers no longer need to go to malls and supermarkets; they can sit at home and wait for products and services to arrive. E-commerce provides consumers with services that did not exist or were not common in the original industry, completely subverting the original service model. For B2B platforms, logistics and supply services already existed; it is rare for enterprises to purchase goods at a market and bring them back themselves. So, does B2B e-commerce fail to transform traditional industries like Alibaba did? Not at all. Zara is a highly efficient company in the traditional apparel industry. It makes extreme use of high-speed information transmission, collecting every piece of effective information such as fashion trends, customer needs, and sales status, and quickly feeding it back to all aspects of operations, greatly improving inventory turnover and reducing unnecessary costs. Zara's success has made its founder Ortega surpass Buffett to become the world's second-richest person. In contrast, other established apparel manufacturers still use complex dealer systems, focus on sales orientation, and strive to sell their goods rather than provide more popular products. This system of using high-speed information transmission and feedback to improve production and operation efficiency is exactly what the internet can bring. But citing Zara's example is not to tell everyone that you should roll up your sleeves and do everything yourself, streamlining links to do self-operated business. "Comparative Advantage" In a company's entire production and operation activities, not every link can truly create value. Those activities that can create value are the company's true competitive advantages and the source of revenue that the company needs to focus on. Links or activities where the company lacks competitive advantage should be outsourced to other professional agents or outsourcers. Examples include product distribution, procurement sourcing, logistics, warehousing, etc. In economics, this is called "comparative advantage." The time, manpower, and material resources a company spends on things outside its competitive advantage represent a huge opportunity cost. The internet's assistance enhances each individual's comparative advantage while also greatly increasing their opportunity cost. In this evolutionary process, the Matthew effect will become more pronounced. Trading platforms with greater comparative advantage will stand out during the transformation and adjustment of traditional industries, replacing outdated and inefficient original trading systems (such as auto parts cities, textile cities, and other large trading markets). Enterprises choosing to cooperate with such platforms actually reduce their opportunity costs. Originally, distribution might require three to five levels and thousands of dealers. After internet platform connection, it might only need one level and dozens of dealers, while also reaching customers never contacted before, increasing sales. Originally, procurement required asking dozens of dealers for quotes; now it might intelligently filter out 2-3, with even better prices. Originally, information in logistics, warehousing, and sales was not connected; now platforms integrate data from each link, efficiently completing the entire process while also providing timely feedback to adjust production or logistics, greatly improving inventory turnover and reducing unnecessary waste. In a word, helping enterprises spend less and earn more is the core competitiveness of B2B trading platforms. This core competitiveness comes from the internet's efficient information transmission and feedback mechanisms. Self-operated Model vs. Platform Model When B2B e-commerce entrepreneurs start out, should they choose a platform matching model like Alibaba or a self-operated model like JD.com? Which model is better? The advantage of the platform model is its lightness: at the beginning, there is no need to stock goods, provide logistics, warehousing, or financial services. The disadvantages are thin profits and difficulty controlling customer experience. The advantages of self-operated are that profits and customer experience can be controlled, but costs are higher and initial investment may be large. We analyze from the parameters mentioned earlier, industry characteristics, and other variables (such as average order value, logistics costs, procurement frequency):
  5. Bulk commodity raw materials: The industry is huge, often trillions in scale. Generally, upstream is concentrated, downstream is very fragmented and cross-industry, products are relatively standardized, SKUs are few, price fluctuations are large, and there are many intermediary distribution levels. Based on these criteria, it seems very suitable for self-operated, but in reality, it cannot be done because the biggest characteristic of this industry is high average order value and large supply, making the threshold for self-operated too high. Therefore, at the beginning, only a platform matching model can be chosen, and when the platform cannot establish trust and scale, transactions can only occur offline between the two parties. In the future, depending on development, it may integrate transactions, logistics, and other related services.
  6. Non-bulk commodity raw materials: The industry is relatively large, upstream is more fragmented, downstream is also fragmented, but generally not cross-industry. Products may be standardized or non-standardized. SKUs vary greatly depending on the industry, with some having thousands and others up to tens of millions. However, the number of high-frequency SKUs is not too many, and price fluctuations are moderate. Based on the above characteristics, we believe both self-operated and platform models have merits. Self-operated can start with high-frequency SKUs, first build volume, expand cash flow, then negotiate better cooperation terms with suppliers, avoid the problem of stocking too many unpopular long-tail SKUs, and better control customer experience. Platform can avoid investing too much manpower and material resources in other services such as logistics, warehousing, and sorting in the early stage, and can focus on matching transactions. On the other hand, a platform can have a complete SKU from the start, providing downstream customers with more choices.
  7. Commodity trading: The industry is large, SKUs are generally very numerous, products may be standardized or non-standardized depending on the industry, upstream and downstream are both fragmented, and there are many intermediary distribution levels. For this type, we believe the key criterion is whether the industry's products are standardized. For products that can be standardized, such as fruits and alcoholic beverages, self-operated may be a better choice. The platform directly connects production enterprises and sales enterprises, bypassing intermediate channels. If products cannot be standardized, such as ready-made clothing wholesale and FMCG industries, self-operated would face inventory pressure, making the platform model more suitable.
  8. Non-raw material items: The industry is relatively large, upstream is fragmented, downstream is very fragmented and cross-industry, with numerous SKUs, including both standardized and non-standardized products. For this type of industry, a platform model is more suitable. On one hand, because there are many SKUs and upstream is fragmented; on the other hand, because downstream enterprises in the platform are also end customers, procurement is relatively low-frequency. If self-operated wants to build volume, it needs to rapidly expand customer acquisition. Additionally, service radius and logistics cost constraints also pose higher challenges for self-operated.
  9. Service-type B2B: Industry sizes vary, with logistics being the largest. Enterprises purchasing services are also end users. In such vertical industries, if you do self-operated, your enterprise becomes one of the service providers in the industry, possessing professionalism and core value in the industry value chain, unlike dealers or intermediaries. It is more about using internet methods to improve service efficiency, gradually growing into a qualified competitor, but development speed will be slower. As a platform, the core value is to find the best and most affordable services for downstream end enterprises, while handling various service matching processes, allowing enterprises to buy and use immediately without worrying about other things. Even through integrating service providers, it can improve service efficiency and reduce the unit cost of services for enterprises. In this type, the most important principle for entrepreneurs choosing between self-operated or platform is: follow your heart. Conclusion In our investments, we have summarized the characteristics of different vertical industries to obtain more universal conclusions. But in reality, entrepreneurs often change their routes and adjust along the way, and may eventually find that different paths lead to the same destination: those who started with self-operated later also do platforms, and those who started with platforms also want a piece of the self-operated pie. So we hope that entrepreneurs first have goals and expectations, think about what kind of company they want to build, and then need keen insight, resolute decision-making, and execution, constantly testing and growing on the road ahead. As a young institution, Zero One Venture Capital is willing to learn from entrepreneurs, share our experiences and insights, and do our best to help. Excellent Product Promotion Recommendation Reasons:
  10. Category innovation: The first DHA brain gold drink in China, which helps adolescent brain development, opening a new blue ocean in the beverage market.
  11. Unique and eye-catching packaging: Patented dragon claw bottle design, the first sci-fi and fashionable beverage bottle internationally, extremely outstanding in terminal display. Advanced imported sports cap, first introduced in China, fashionable and cool, with high technical threshold.
  12. Distinct selling points: China's first brain gold drink, a brain-health beverage, with fun and fashionable bottle design, ensuring product popularity.
  13. Weak competition: Shanlong is a completely original category and appearance, with few competitors.
  14. Huge consumer base: Targeting students and teenagers, channels concentrated with young people such as schools and internet cafes can see rapid sales growth.
  15. Small investment, big profits. Can trial sell in small quantities, terminal retail price 5 yuan, huge profits. (Due to busy work, please do not disturb if you are advertising or have no experience and channels. Thank you for your support.) National blank market hot recruitment, miss no more Long press the QR code below to directly add Manager Lin's WeChat: Guangdong Heyuan Fengsheng Food and Beverage Co., Ltd. Website: WWW.FOODSUN.CN -END- The best FMCG dealer learning platform in China Focusing on providing professional, practical, and applicable tutorials for enterprises and dealers Committed to helping Chinese FMCG dealers grow rapidly The most professional and practical knowledge base in the FMCG industry Reply with the red number below to get corresponding content Reply with number 1 to view the complete knowledge base | 001 Excellent article selection | 002 Dealer market operation | 003 Terminal visit management | 004 Sales supervisor skills | 005 Sales improvement techniques | 006 Channel expansion | 007 Managing dealers | 008 Dealer development | 009 Dealer internal operations management | 010 Team management | 011 Efficient distribution techniques | 012 Sales manager's skills | 013 KA operation methods and strategies | 014 First lesson for new sales | 015 Internet, brand | [Long press QR code to follow] **To join QQ/WeChat group, please click: Read original text