The future is bright, but the road is winding. This saying fits B2B perfectly. However, the winding road can be torturous. B2B entrepreneurs initially targeted the pain points of retail stores, the weaknesses of channels, and the imagined power of the internet, but almost all of these assumptions failed in B2B practice. The role B2B will play in the future channel landscape may be something B2B startups never imagined. In the early days of B2B, distributors were panicked, but now they are calm. In contrast, B2B platforms still cannot determine which model will become mainstream in the future. I am firmly bullish on B2B, but bearish on the current mainstream models. Below, I will analyze why most of the B2B paths and models once envisioned are not viable.

B2B's First Assumption: Disintermediation. Disintermediation means shortening channel links. B2B even envisioned directly connecting with brand owners. This inherits the logic of C-end platforms. When Liu Qiangdong established JD New Routes, he said that retail stores are irreplaceable. So, what intermediate links can be replaced? Only channel distributors. Obviously, many B2B players do not understand traditional channels well. For most first-tier brands, they are already self-operated in central cities, with orders in the hands of brand owners. Distributors only handle capital, warehousing, and delivery functions. County-level cities are mainly distributor-dominated, but they are not yet the main battlefield for B2B. Using county-level GMV cannot raise money in the capital market. Small brands are willing to connect, but B2B often ignores them. Unless brand owners are willing to give up channel control, first-tier brands will never hand over their entire channels to B2B platforms. The hegemony of C-end platforms has already reminded brand owners of the principle that big stores bully suppliers. The logic of the Chinese market tells us: having only brand power without channel power is absolutely unworkable. Personal opinion: For FMCG, the current channel has almost no room for compression except for the second-tier distributors serving C-class and D-class stores.

B2B's Second Assumption: Replacing Distributors. When it comes to distributor issues, everyone can list many problems. But when asked to do what distributors do, most people dare not. Suddenly, B2B comes out and says, I can. Let's analyze the main channel functions that distributors carry: capital function, order function, warehousing and distribution function, and promotion function. Order function (commercial flow): Undoubtedly, B2B has an advantage in integrated orders, and this will definitely belong to B2B platforms in the future. Warehousing and distribution function (logistics): Undoubtedly, unified warehousing and distribution have advantages. Whether done by the platform itself or by third parties, there are advantages. I believe logistics will have two integrations: third-party warehousing and distribution will further integrate B2B platform orders. Promotion function: B2B may not necessarily have an advantage here. Although B2B can conduct electronic promotion or personnel promotion, for regional promotion, small organizations have an advantage. I will not elaborate here but only present the conclusion. For mature products, B2B's electronic promotion has an advantage. For immature products, small organizations' personnel promotion has an advantage. Long ago, I pondered a question: Why is China's channel so fragmented? In "Chinese-style Marketing," we proposed a unique Chinese marketing concept: Interactive Marketing. Interactive marketing means both buyers and sellers are salespeople, bargaining, and the result is mutual satisfaction. Interactive marketing relies heavily on personnel and emotional investment. This is not a platform advantage. The future channel landscape will definitely have distributors (or promoters) and B2B platforms jointly carrying channel functions. Symbiosis, integration, and shared prosperity are the reasonable channel patterns. Do not harbor dreams of dominance.

B2B's Third Assumption: Platform Traffic and Traffic Fees. The profit source of C-end platforms is mainly the redistribution of platform traffic. Traffic fees come from bidding. There is a saying now: Most merchants on C-end platforms do not make money because traffic fees are too expensive. Traffic fees are expensive due to the 631 pattern of C-end platforms. That is, the leader takes 60% of traffic, the second tier takes 30%, and the rest take 10%. BAT all follow this pattern. This means the C-end platform landscape is close to oligopoly and monopoly. Traffic is the platform's biggest resource. The reason C-end traffic fees are expensive is determined by the platform landscape. C-end traffic fees also remind manufacturers: relying on platform traffic without independent traffic will definitely lose bargaining power. B-end platforms will also have a traffic guidance role in the future, but they will not achieve the same landscape as C-end. First, the future landscape of B-end platforms will definitely be oligopolistic, with multiple platforms forming a "terrifying balance" pattern, and the leader will not be particularly prominent. Second, B-end platforms have high repurchase rates, so traffic guidance is less effective than C-end. The product structure of retail stores is generally stable and does not change much. When ordering, they usually directly pull up their regular products. Even if there are new products, they dare not order rashly. Therefore, the value of B2B platform traffic guidance is reduced.

B2B's Fourth Assumption: Franchise Stores. Franchise stores have tactical value but no strategic value. I am not entirely against franchise stores. Those that can be franchised are C-class and D-class stores. The proportion of CD-class stores in retail is lower than we imagine, and it is still declining, especially in central cities. Even if all CD-class stores are franchised, what then? Another value of franchise stores may be to force upstream. The current channel situation is: brand salespeople (for first-tier brands) and distributor salespeople control orders for A-class and B-class stores. Unless there is a reliable B2B platform, they will not easily let go. CD-class stores either get distribution from second-tier distributors or purchase from wholesale markets. For manufacturers, franchising CD-class stores cannot accumulate the energy to force manufacturers.

B2B's Fifth Assumption: Traffic is King. In 2015, I proposed that B2B is a distributed platform, unlike C-end's centralized platform. What supports C-end is nationwide delivery; what supports B-end is urban delivery. The efficiency of urban delivery depends on traffic density. 1 billion in traffic concentrated nationwide versus concentrated in one city are completely different concepts. So, there is the concept of total volume being king versus regional being king. B2B's initial success must be regional dominance; ultimate success must be total volume dominance. First, build regional density, using high-density orders to reduce warehousing and distribution costs. Reduce costs through efficiency, and attract merchants with cost advantages. There is criticism, but there must also be construction. What is the normal logic of B2B? I think it is the following three sentences: Does it improve efficiency? Does it reduce costs? Does it leave data? First, B2B is an efficiency system. This was the consensus at the B2B conference organized by New Distribution at the 2016 Fuzhou Autumn Sugar Fair. Efficiency can reduce costs. Where does B2B's efficiency come from? It comes from integrated orders and unified warehousing and distribution. The higher the order density, the higher the warehousing and distribution efficiency, and the lower the cost. Of course, management factors are not discussed here. So, regional dominance is so important because only with regional dominance can there be order density and efficiency. Regional dominance is difficult to achieve by only serving CD-class stores; that is a big pitfall for B2B. You must adopt a service mindset, use efficiency and cost advantages to win the collaboration of brand owners and distributors, rather than subverting them, forcing them, or making them yield. Second, B2B certainly leaves data, and "data empowerment" is the main way to make profits. Data-based financial services, such as internet finance. Data-based precise communication and promotion, rather than traffic guidance. Precise promotion and communication can generate incremental growth, while traffic guidance is about doing existing business at a low price with paid traffic. Data-based product development and services. All decisions are based on data. Finally, to summarize: With a collaborative and service-oriented mindset, gain the recognition of brand owners and distributors, obtain mainstream orders; use order density to gain efficiency and cost advantages; use big data to empower manufacturers, improve their operations, and let them voluntarily pay for services. -END-