---
title: "Breaking: Jack Ma Enters FMCG Supply and Distribution, Alibaba to Bypass Distributors for Direct Store Delivery—This Time the Wolf Is Really Coming!"
description: "Yesterday, Feiyu posted an article titled 'Breaking: Alibaba Giant Enters FMCG Offline, How Long Can Traditional Distributors Survive?' mentioning that Alibaba officially launched its retail version of 1688 services, entering the traditional FMCG supply and distribution sector, bypassing distributors and secondary wholesalers to directly supply retail stores. The author's first reaction was shock, followed by fear, as this model, if successful, could completely disrupt China's retail distribution system and potentially eliminate the distributor industry that has existed for over 30 years."
author: "赵波"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2015-11-02"
language: "en"
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---

# Breaking: Jack Ma Enters FMCG Supply and Distribution, Alibaba to Bypass Distributors for Direct Store Delivery—This Time the Wolf Is Really Coming!

> Yesterday, Feiyu posted an article titled 'Breaking: Alibaba Giant Enters FMCG Offline, How Long Can Traditional Distributors Survive?' mentioning that Alibaba officially launched its retail version of 1688 services, entering the traditional FMCG supply and distribution sector, bypassing distributors and secondary wholesalers to directly supply retail stores. The author's first reaction was shock, followed by fear, as this model, if successful, could completely disrupt China's retail distribution system and potentially eliminate the distributor industry that has existed for over 30 years.

Yesterday, Feiyu posted an article titled 'Breaking: Alibaba Giant Enters FMCG Offline, How Long Can Traditional Distributors Survive?' The post mentioned that Alibaba officially launched its retail version of 1688 services, entering the traditional FMCG supply and distribution sector, bypassing distributors and secondary wholesalers to directly supply retail stores! The editor's first reaction to this news was shock, and the second was fear, because once this model is fully realized, China's retail distribution system will be completely broken, and the distributor industry that has existed in the Chinese market for over 30 years may be completely eliminated through a dimensionality reduction attack. More critically, the internet is about to destroy you, but it has nothing to do with you; some distributors may not even have room to resist.

**Introduction to Alibaba 1688 Service Providers:**
Based on Alibaba's globalization strategy, Alibaba's 1688 has launched a new offline layout under the 'Hundred Cities, Ten Thousand Stores' model, creating a 'Global Shopping' experience at your doorstep! The 'Hundred Cities, Ten Thousand Stores' plan will leverage Alibaba's big data integration advantages, using an 'Internet + Traditional Retail' model, cooperating with global quality suppliers, and relying on a dedicated purchasing APP to help retail points achieve online source tracing for purchases and efficient offline retail, ultimately bringing global quality products into thousands of households.

**What does this mean? Let me explain simply:**
Alibaba recruits ground promotion teams in every city across the country to develop terminal stores, getting them to install Alibaba's purchasing APP. Terminal stores place orders through the APP, and Alibaba directly delivers goods from its DC (distribution center) via Cainiao logistics to the retail stores!

Currently, 1688 service providers focus on offline retail of imported goods, but in the near future, it is believed that Alibaba will definitely cooperate with domestic manufacturers to enter the domestic FMCG sector.

**Advantages of Alibaba's 1688 Model:**
Before discussing Alibaba's 1688 model, two concepts need to be clarified: **Non-planned purchase goods and planned purchase goods:**

Non-planned purchase goods: These are goods that consumers purchase without prior planning, decided on the spur of the moment. Consumers have low tolerance for delay and require immediate availability.

Non-planned goods are common in FMCG categories such as alcohol, beverages, and some foods. The characteristic of non-planned goods is that they must be available through a wide network of retail stores to meet consumers' time requirements. Thus, retail stores become the best channel for satisfying non-planned purchases.

Planned purchase goods: These are goods that are planned in advance, with low time sensitivity. There is no clear boundary between planned and non-planned goods; it depends on consumer behavior. Most goods sold on traditional e-commerce platforms (Tmall, Taobao, JD.com, etc.) are planned goods.

**Alibaba's 1688 model is a new B2B model centered on supplying non-planned goods to terminal stores!**

The model's feature is compressing the layers between factory and consumer. Goods are ordered online, bypassing distributors and secondary wholesalers, directly reaching small B terminals, reducing handling times and flattening channels, greatly improving logistics efficiency.

The current traditional distribution model involves too many product handlings! The author roughly estimates that in China, goods are handled at least 5 times, up to 8-10 times, from factory to consumer. This logistics cost does not include channel distribution profit requirements. If all these are revolutionized, at least 30% of product costs could be reduced.

Imagine if the price of goods normally sold in a terminal store suddenly becomes 30% cheaper online than your offline supply—whose goods do you think the store will take?

When this model fully solves channel efficiency issues, most pre-packaged FMCG products, except short-shelf-life and low-temperature goods, could potentially be disrupted by this model.

**Other B2B Models Impacting Distributors:**
Yijigou, with a background from Hejun, is also doing online ordering APPs. Their operation model is to set up local logistics companies, lease social vehicles to local distributors for centralized distribution. Distributors only need to hire salespeople and provide terminal services.

Currently, they have received 50 million yuan in Pre-A round venture capital and are negotiating an A round. In new markets, they use their own ground promotion teams, offering terminal stores a 20 yuan rebate for first orders over 300 yuan, and a 3% rebate on subsequent orders, for rapid expansion. By providing free distribution to distributors, they attract many trading companies to join, driving terminal retail outlets to order online. Once scale benefits are achieved, they profit by providing value-added services directly to manufacturers.

This type of B2B is springing up like mushrooms across the country, such as Yingxiaotong's 'Hui Xiadan', Kuaixiao Guanjia in Jiangsu and Zhejiang, Beijing's 008, Tongcheng Pifa, Zhanghe Tianxia, etc. Although details differ, they all use B2B models for FMCG supply chain procurement e-commerce, with online ordering and offline centralized distribution. On the surface, they seem like logistics distributors in internet clothing, but once they achieve nationwide coverage, manufacturers will use these APPs to bypass distributors and secondary wholesalers, letting terminals order directly, and then deliver through local DC logistics providers.

**Impact of This Model on Distributors:**
The Chinese market has severe product homogenization, and product sales basically rely on marketing + channel models. Distributors bear many functions that manufacturers cannot fulfill in the distribution system. However, it must be noted that social development is driven by social division of labor, which improves overall efficiency. The core issue mentioned above is still high logistics costs.

For example:
In a county in Shandong with a population of 800,000, the local trading companies have over 240 delivery vehicles. The goods actually sold by these 240 vehicles daily could be fully delivered by about 50 vehicles, meaning 80% of delivery resources are wasted!

This is just a microcosm of distributor delivery efficiency in China!

As a distributor, you might say this disruption is unscientific! Because distributors' functions in the product marketing system are not just logistics; there are many irreplaceable roles, such as the reservoir function: the Chinese market is too large, and no manufacturer can directly supply terminals because it requires huge inventory reserves as a buffer for market turnover. For example, the beverage industry's 'water head' at the beginning of each year is a typical reservoir model, avoiding idle production lines in off-season and product shortages in peak season. Manufacturers also cannot afford to tie up such large capital in buffer inventory.

There are many other functions: new product launch promotion, promotion execution, price management, defective product exchange, equipment management, and execution of exclusive or display agreements. Without distributors, who will do these jobs?

Another example: beer sales mainly target restaurants: if ordered in the morning, delivery must be made before noon. Can your 1688 service provider handle that?

The above issues do exist, but they are not unsolvable. Once manufacturers accept this marketing model, they will quickly adjust their distribution models according to product characteristics. Simply put:

Buffer inventory can be solved through capital. Ground promotion at the marketing level can be handled by manufacturers sending salespeople directly to terminals, solving 90% of the problems. The remaining issues can be solved by small secondary wholesalers.

Some manufacturers might find direct terminal management too troublesome, so they can set up joint venture sales companies, transforming distributors' functions from warehousing, logistics, and sales services to purely sales.

See? These models mean the existing supply and distribution system will be completely overturned. Terminal retail purchasing no longer needs local agents; they can directly order from manufacturers via APPs with higher efficiency!

**Where Is the Future Direction for Distributors?**

**Teacher Wei Qing's Comments:**
The weakness of APPs is passive sales; who will do active marketing?
* Who will take a truck of goods along the streets to actively distribute and increase product variety?
* Who will do merchandising?
* Who will manage abnormal prices in stores?
* Who will execute terminal promotions?
* Who will manage defective products and out-of-stock situations in stores?
* Who will manage the proper use of equipment like refrigerators provided by manufacturers?
* Who will maintain the execution of exclusive, display, and exclusivity agreements?

Manufacturers cannot hire that many people; they still rely on distributors. Local distributors and manufacturer sales teams must work together.

Among the five elements of terminal management, logistics is not the competitive focus.

At most, it can replace part of the logistics cost, forcing distributors to transform into service providers. It's about logistics providers integrating, service providers upgrading. The days when salespeople work five days a week and have weekends off are not far off.

China is a country with very high logistics costs, and retail outlets are very scattered, requiring many people for ground maintenance. Relying solely on manufacturers is definitely not enough. This is the future outlet and direction for distributors. Moreover, the integration of brands and large logistics providers will take considerable time, giving distributors enough time to adjust. According to the trade aggregation effect, new entry fees may arise. Small logistics providers will merge into large local logistics providers. Thousands of salespeople will become terminal service personnel, doing refined product variety management, display management, price management, promotion execution, defective product management, and maintenance of various terminal agreements. Small brands cannot enter this game, but small and beautiful brand distributors will still exist.

While others study what the internet can do, you should study what the internet cannot do. Danger will turn into opportunity.

The development of the world has basic laws. The integration of big eating small will occur, but total monopoly will not. Jack Ma also has things he cannot do. Competition in FMCG is absolutely not just about logistics.

Poll: Do you think Alibaba and those APPs will overturn the existing distributor distribution pattern?

If you have different opinions or ideas, feel free to leave a message at the bottom to share and exchange with everyone!

**●****●****●**********

Thanks to 'Teacher Wei Qing'

Welcome to follow Teacher Wei Qing's subscription account: weiqinglaoshigongsi

**-END-**

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