After the small B2B boom in the second half of last year, B2B has shifted from verbal disputes to market competition. The so-called small boom was actually a large number of brand owners participating in pilot projects. Piloting means observing, not embracing. The results of observation include Red Bull blocking Lingshoutong, saying B2B disrupts prices and market order. There are also more extreme views that B2B is a joke. Some platforms say B2B is a trend, and those who don't keep up will be eliminated. Don't fight the times. Going further, it's close to 'cutting yourself off from the people.' Extreme and paranoid views are not advisable. My consistent view: B2B will definitely succeed, but the one that succeeds may not be you. Among so many platforms, the vast majority will die or be acquired. If brand owners never do B2B platforms, they might really 'cut themselves off from the people,' but embracing it wholeheartedly now may not be a good thing. Although the debate over B2B models has come to an end, the competition for operational efficiency has just begun, and some haven't even started yet. The first stage is staking out territory, the second is operational efficiency competition, and the third is capital integration. My advice to brand owners: encourage pilot observation, don't encourage betting on one horse, don't encourage taking sides. Without piloting, you can't learn by just watching. Don't encourage taking sides or betting on one horse, because you don't know who will succeed, so betting is useless. The B2B track is still long, and there is plenty of observation time. B2B will definitely be a balanced and symbiotic pattern. An unbalanced pattern is not tolerated by society. 01. B2B: Planting trees or picking fruit? If the cooperation between brand owners and B2B platforms is a matching model, peaceful coexistence is no obstacle at all. Unfortunately, the matching model is not the mainstream of current B2B. A year ago, it was even considered that the matching model was not viable. One more thing: I have always believed that the matching model is the most reasonable model. This concept has not changed to this day. If it is a self-operated model, one issue cannot be avoided: what products to do? What products to do seems like a simple technical issue, but for platforms it is a big issue. For platforms, what products to do directly affects GMV. GMV affects financing. For brand owners, it involves whether B2B is picking fruit, planting trees, or both planting and picking. There are roughly three product models for B2B cooperation with brand owners. 02. Model 1: Doing best-selling products For best-selling products, strong brand owners will not open A-class and B-class stores. B2B's advantage is coverage of C-class and D-class stores. Liu Zhongmin from Yantai Yishang said that a well-known multinational platform entered the Yishang platform and found 20% blank spots. This is exactly what brand owners are interested in, because 20% blank spots mean incremental space. For brand owners with weak incremental growth, it is absolutely tempting. However, the increment from 20% C and D class stores will never contribute more than 5% to overall sales. The other 80% of C and D class terminals will compete with second-tier distributors. For best-selling products, the platform's bargaining chip with distributors is price. Low price is the only effective method. Even if there are other methods, the cost is too high and they can't solve the immediate problem. Platforms need traffic, so they must do best-selling products. The business model of distributors is naturally to use best-selling products for traffic and third- and fourth-tier brands for profit. B2B platforms directly disrupt the rhythm of distributors. You should know that distributors still account for a considerable share of brand owners' sales. Of course, if B2B platforms really fully take over C and D class stores, that's fine, but even platforms that are 'king of the region' cannot do it. If B2B platforms disrupt prices all the way and fully take over C and D class stores, I think brand owners would have no objection, but B2B platforms cannot do it. For the sake of less than 5% incremental blank spots, if channel prices are chaotic, brand owners will intervene at some point. For brand owners, doing best-selling products means B2B platforms are picking fruit. 03. Model 2: Doing brand-new products How long does it take to promote a brand-new product? Those who have done traditional marketing know that it is an extremely long process with a very low success rate. Nielsen data: In 2014, Nielsen tracked 15,000 new products, and in 2015 only 50 were found. The one-year survival rate was less than 1%. To be honest, I doubt Nielsen's data. Maybe it is true for KA, because KA has deep thresholds. The survival rate in circulation should be higher. Even with the mature promotion system of the channel, the success rate of new products is still so low, let alone B2B platforms that rarely study promotion issues. B2B platforms have advantages in electronic policy promotion for mature products, as they can transmit information to terminals more quickly. If new product promotion were just information transmission, China would not need 80 million marketing people. Factors such as customer relationships, continuous visits, experience, and policies, when combined, still give personnel promotion an advantage. Promoting new products is planting trees, but unfortunately B2B platforms lack the capability and patience. 04. Model 3: Doing quasi-new products At the 2018 Spring Sugar Fair, at the exchange meeting between brand owners and platform merchants organized by New Distribution, many people proposed: Can brand owners launch new products exclusively for platforms? Wang Chaocheng from Yijiupi said that if brand owners give best-selling products to B2B, they can't explain to offline channels. He suggested either different brands, different categories, or different specifications, in any case, there must be differentiation. This statement was tailor-made for the liquor industry and basically does not apply to other industries. If the brand is different, it is a completely new thing. Can B2B platforms handle it? If the specification is different, it is actually still grabbing existing market share, still having direct competition, and is a fake new product. Mr. Wang's proposal may be effective in the liquor industry, after all, liquor has more OEM, but in other FMCG industries, it is probably difficult. Brand owners doing B2C do differentiate products. But the category attributes of B2C and B2B are extremely different. This issue was discussed two years ago, so I won't go into detail. B2B quasi-new products are essentially best-selling products in a different guise. Moreover, if a new product is given to B2B platforms, is it unified across platforms or differentiated for each platform? How many new products must brand owners prepare for platforms? Doing such quasi-new products is also picking fruit. 05. B2B is currently still picking fruit From the above analysis, B2B platforms almost have no ability to promote new products; they can only do best-selling products or imitate best-selling products. Who made best-selling products? Brand owners and original distributors made them together. Making a best-selling product requires time and money. Since the cost is paid, there must be premium recovery. Premium recovery gives B2B price space. B2B has not paid the cost, so it can offer low prices. Or, it subsidizes low prices. This is typical fruit picking. Fruit is limited. If all platforms go pick, it will be picked clean soon. Especially now, during product upgrades and mainstream replacement. Old fruit is almost picked, and new fruit is not fully ripe. If those who plant trees cannot pick the fruit, they will not plant trees. Now some platform owners openly say that channel diversion is justified. Some people think it is a bit exaggerated. Even Alibaba, with its grassroots tactical moves, Ma Yun still sings high-profile. Don't B2B platform owners even have the mood to sing high-profile? 06. Who plants trees? First, let's look at what actions count as planting trees? Channel planting trees means continuously promoting new products and continuously creating new profit space. Planting trees, of course, also requires nurturing trees. We will temporarily ignore this part of the discussion. It takes ten years to grow trees and a hundred years to cultivate people. In fact, the cycle of promoting new products is not short; it takes many years. Uni-President's Tom Yam Noodles ambushed for 6 years before volume increased. From the organizational structure of B2B, it does not have the organizational function of planting trees. B2B currently cannot afford to plant trees. Without GMV, it cannot finance. Tactical actions dominate platform behavior, so how can it care about 'ten years to grow trees'! Now, the function of promoting new products is either borne by distributors, by brand owners, or jointly. Since brand owners and distributors are the main bodies of planting trees, B2B platforms must respect them. For example, decentralization, if it means eliminating distributors, and if they are truly eliminated, B2B platforms must bear all channel functions. If they cannot bear it, don't mention eliminating distributors. Don't think that under the banner of the Internet, you can revolutionize anyone. 07. How to plant trees? In the era of deep distribution, promoting new products was relatively easy. Distribution + promotion easily led to sell-through. After 2014, traditional promotion functions failed, and new promotion functions did not grow. The channel problem is a big problem. The lack of new promotion functions does not mean the channel does not need them. In 2017, I proposed new promotion and new communication, which is actually to give the channel promotion functions. Practice has verified that it is more effective than traditional 'distribution + promotion'. Traditional distributors handing over integrated functions to B2B platforms is a trend, don't doubt it. Whatever can be integrated, platforms have advantages, such as order integration and unified warehousing and distribution. Only by focusing on core functions can distributors find a way out. The new core functions of distributors are: new promotion + new communication. Even the emergence of new promotion platforms in the future is not impossible. In promotion, interpersonal relationships are still very necessary. As long as interpersonal relationship advantages are needed, small organizations have advantages, platforms do not. For brand owners, new promotion + new communication is creating independent traffic that can be controlled. In the future, the game between independent traffic and platform traffic will be quite fierce. Of course, some distributors may not succeed in transformation, or even fail on a large scale. That's no big deal. The business world will not be incomplete because of the absence of laggards. On the contrary, it will be more beautiful because of the addition of new forces. 08. New channel pattern In the FMCG field, from the circulation of mainstream brands, it has been quite optimized (mainly referring to AB class stores; CD class stores still have space). In the future, there will not be an extra link because of B2B. For example, the logic in Figure 1 is not valid. Similarly, there will not be one less link because of B2B. For example, the logic in Figure 2 is also not valid. Even if B2B eliminates distributors, B2B itself is a new link. The most likely channel pattern is: successful transforming distributors and B2B platforms jointly form a new link, with channel functions redistributed between distributors and platform merchants, each leveraging their own advantages, as shown in Figure 3. Source: Teacher Liu's Forum (ID: liuchunxiong1964) -END-