At the Alibaba Retail Link annual meeting on August 28, 2019, and with Tencent continuing to invest heavily in Yijiupi, the two giants once again demonstrated their ambition and persistence in targeting 6.8 million small retail outlets.

-01- FMCG B2B: A Difficult Journey with Many Regrets In fact, the once-hyped FMCG B2B sector quieted down in 2018. Platforms like Jinhuobao, Bangxiaodian, Yatangxiaochao, Dianshanghulian, and Xingliyuan, once the darlings of the industry, collapsed one after another. There were also the ambiguous Zhanghetianxia, the strategically contracting Zhongshang Huimin, and the active players Yijiupi and Best Store Plus. Meanwhile, Furong Xingxing and Meiyijia (Caihua Commercial Trading) worked hard on closed-loop operations, and the two leading brothers, Alibaba Retail Link and JD New Channel, continued to fight on.

FMCG B2B is a transformation based on the reorganization of traditional channel structures. In fact, this kind of reform, which is detached from C-end users, is like water without a source (lacking the support of the broad masses).

Manufacturers and brand owners hold an ambiguous attitude of seeming cooperation but not really. Because redistribution based on existing stock is unwelcome to manufacturers, who are value creators; they always crave incremental markets. Of course, for the current beneficiaries, the channel intermediaries, this is a threat to their livelihood. They see B2B platforms as a major enemy, and the life-and-death struggle between suppression and counter-suppression has never ceased. As for the 6.8 million small retail stores, the protagonists, their role has miraculously changed; they in turn regard B2B platforms as sheep to be sheared.

As a result, whether from the user side, brand owners, intermediaries, or small retail stores, FMCG B2B platforms find themselves in an awkward position, unloved by all.

-02- Community Group Buying: Keeping the Roots of Users Just when FMCG B2B seemed to be at a dead end, God opened a window. The industry considers June 10, 2017, when Xingsheng Youxuan started its first group, as the starting point. In fact, Xingsheng Youxuan is a 2C platform incubated by the 2B platform Furong Xingxing. History converges here, and it is also the crystallization of the wisdom and persistence of pioneering explorers.

Following the leader Xingsheng Youxuan, there are many shining names in community group buying, such as Shihuituan, Shixianghui, Tongcheng Shenghuo, Xiaoai Youxuan, and Youjingyoutian, as well as thousands of small platforms operating in the vast third-, fourth-, fifth-, and sixth-tier markets.

The 12-character motto of community group buying is: Online pre-sale, offline self-pickup, unified procurement and distribution. In logistics, it follows the logic of low delivery costs for local commerce; in information flow, it follows the logic of low display costs for search e-commerce; it is a marketing model based on the ultimate experience of C-end users.

Three traffic pools for community group buying:

First: The relationship traffic of group leaders. The semi-acquaintance relationship between group leaders and users forms communities, embodying Dr. Shi Wei's trinity of "relationship, cognition, and transaction" in a seamless closed loop.

Second: Platform tool traffic. The platform uses internet mini-programs to connect with users and content to engage them, making what you see is what you use, and what you see is what you get.

Third: Product brand traffic. Transitioning from category consumption in the startup phase to brand consumption in the mid-game, the power of brands has become prominent in attracting users, serving as the third lever for community group buying!

Since it is social retail, there is a natural connection between group leaders (store owners) and users. This relationship directly changes cognition, and transaction is the natural result after cognition.

It can be said that this relationship builds a bridge for the public domain traffic of physical stores. Through the toolization of mini-programs and WeChat groups, it connects the fragmented and lost relationships, transforming them into private domain traffic. Traditional retail (including Tmall and JD search e-commerce) relies on content marketing and mass communication to change cognition and form transactions.

Three closed-loop value chains of community group buying:

First: Integration of people and warehouse. People refer to group leaders. The flow of goods and funds is connected online, while logistics delivery is achieved through offline front warehouses. People are the store, and the store is the people, achieving a closed loop with the integration of people, store, and warehouse.

Second: Integration of stores and groups. Stores refer to retail store owners who act as group leaders. The users based on the retail store and the fans based on the group leader's WeChat group are integrated, achieving a closed loop.

Third: Integration of product and effect. Manufacturers, as the source of the supply chain, accumulate brand value with every sale, using tangible assets to precipitate intangible assets, and tangible progress enhances intangible value, achieving a closed loop.

The three closed loops of community group buying directly lead to the trinity of "online, community, and offline."

Looking at community group buying from the perspective of the three flows (information flow, goods flow, and capital flow):

Information flow is a cognitive process, with product display as the core of communication and dissemination; goods flow is the physical product moving through levels of warehousing; capital flow and goods flow are opposite in direction at each level. We can deconstruct this by comparing offline physical channels vs. community group buying.

B2b2c is the traditional offline physical channel model. B is the supply chain, b is the retail store, and c is the consumer. Information flow and goods flow move down simultaneously, while capital flow (payment) goes in the opposite direction.

S2b2c is the community group buying model. S is the platform with the supply chain at its core, b is the front warehouse/group leader, and c is the user. The key point here is that information flow and capital flow are online, fully integrated with mobile internet, making information flow the main driving force, capital flow coordinated online, and goods flow executed offline.

Comparing the two, physical channels rely on historical data for blind testing and forecasting, purchasing products, displaying them in stores, and waiting for consumers to buy. Due to changes in unknown conditions, this leads to ambiguity.

In contrast, community group buying starts from the C-end: What to buy? Who buys? When to buy? All are clear and explicit. Due to intelligent purchasing and channel big data, it leads to accurate forecasting.

-03- Community Group Buying: Angel or Disguise for B2B Platforms? For physical small stores, search e-commerce like Tmall, JD, and Vipshop has cut off the left arm, and social e-commerce like Yunji, Global Hunter, and Beidian has cut off the right arm. After two cuts, they are on their last legs. Community group buying directly opens online stores for traditional small stores, using SaaS systems to bring in lost and disconnected users. The corporate mission advocated by Xingsheng Youxuan, "empower the upstream, revive stores, and change consumer consumption patterns," is also an accurate portrayal of the entire industry track.

In fact, small retail b-stores are at the capillary end of business models and are the most sensitive to all business models. When they realize that many products delivered through community group buying can also be sold on their store shelves, small c orders and small b orders are combined here, making the integration of BC operations a reality.

In reviving/empowering/supporting small b stores, B2B platforms and community group buying have a direct intersection. However, the former is like old city renovation, while the latter is like building a new development zone.

Lin Xiaohai, the operator of Alibaba Retail Link, finally understood that the mission of B2B is not to sell goods for brand owners, but to act as a purchasing agent for small b retail stores, transforming store categories through supply chain grid management.

From the very beginning, community group buying has been clear about who it serves.

Because it combines the dual identities of retail store owner and community group leader, community group buying, under the banner of group buying and the guise of community, is actually doing B2B work!

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