---
title: "Chen Xian of 51订货网: 51订货 Achieves Overall Profitability, Accelerating the Construction of a Vertically Integrated B2B Ecosystem in County and Town Markets"
description: "At the 'New Food Era · New Distribution 2016 FMCG + Internet Summit' held on October 16, Chen Xian, founder and CEO of 51订货网, delivered a keynote speech. He shared insights on why starting with a single category is more viable for B2B platforms, detailed his company's profitable model through financial services and operational efficiency, and outlined plans to expand into adjacent categories while maintaining a focus on county and town markets."
author: "陈献"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-10-17"
categories: "Supply Chain & B2B"
language: "en"
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markdown: "https://xinjignxiao.com/en/articles/chen-xian-of-51-51-achieves-overall-profitability-accelerating-the-const-8da14d2c.md"
original_source: "https://mp.weixin.qq.com/s/CZGkuGoAjANya-Nn9A4-zg"
translation: "https://xinjignxiao.com/zh/articles/51%E8%AE%A2%E8%B4%A7%E7%BD%91%E9%99%88%E7%8C%AE-51%E8%AE%A2%E8%B4%A7%E6%95%B4%E4%BD%93%E5%AE%9E%E7%8E%B0%E7%9B%88%E5%88%A9-%E5%8A%A0%E5%BF%AB%E6%9E%84%E5%BB%BA%E5%8E%BF%E9%95%87%E5%B8%82%E5%9C%BA%E5%9E%82%E7%9B%B4%E4%B8%80%E4%BD%93%E5%8C%96%E7%9A%84b2b%E7%94%9F%E6%80%81-8da14d2c.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/chen-xian-of-51-51-achieves-overall-profitability-accelerating-the-const-8da14d2c/"
citation: "陈献. “Chen Xian of 51订货网: 51订货 Achieves Overall Profitability, Accelerating the Construction of a Vertically Integrated B2B Ecosystem in County and Town Markets.” New Distribution, 2016-10-17. https://xinjignxiao.com/en/articles/chen-xian-of-51-51-achieves-overall-profitability-accelerating-the-const-8da14d2c/"
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---

# Chen Xian of 51订货网: 51订货 Achieves Overall Profitability, Accelerating the Construction of a Vertically Integrated B2B Ecosystem in County and Town Markets

> At the 'New Food Era · New Distribution 2016 FMCG + Internet Summit' held on October 16, Chen Xian, founder and CEO of 51订货网, delivered a keynote speech. He shared insights on why starting with a single category is more viable for B2B platforms, detailed his company's profitable model through financial services and operational efficiency, and outlined plans to expand into adjacent categories while maintaining a focus on county and town markets.

The following is the core content of the speech delivered by Mr. Chen Xian, founder and CEO of 51订货网, at the 'New Food Era · New Distribution 2016 FMCG + Internet Summit' held on October 16. New Distribution has organized the key points as follows:

Speaking after President Wang is quite stressful. This morning, Zhao Bo's report categorized the B2B industry and companies into about six types, placing me under single-category. Coincidentally, I sat with President Wang and listened to his report. I support many of his views, though not all. **The first view I support is that entering B2B from a vertical category is more feasible and valuable than starting with all categories.** Let me hypothesize a scenario: before B2B, when small shops stocked goods, they typically had a glass countertop with 10 or 20 business cards. The shop owner knew exactly which card was for alcohol, which for other goods, and which phone number to call for a particular category. Turning all those cards into one is extremely difficult from both supply chain and operational perspectives. So a single category is the easiest entry point, whether in terms of supply chain depth or operational efficiency. How to choose this category? President Wang just explained it theoretically; let me explain from our case why starting with a single category is possible.

Let me introduce myself. Although I work in telecommunications, I am actually a veteran in the FMCG industry. As early as 1998, I worked at Master Kong, where I participated in a project with McKinsey. The thick report concluded with eight characters: 'Shorten channels, open warehouses and set up offices.' That was a major transformation at the time, cutting out distributors and moving toward intensive channel management. This morning, we all saw the advantages and results of years of intensive channel management by FMCG manufacturers like Coca-Cola and Master Kong. But back then, telecommunications was an emerging industry. Now, mobile phones have become FMCG; everyone has one. The industry logic is no different from FMCG, but due to operators and Moore's Law, the distribution channels for phones are more complex. In 2014, after being a distributor for over a decade like President Wang, I transitioned to building the 51订货 platform.

This is a strategic map I often show. We serve mom-and-pop shops at the county and town level, offering three things that may differ from other B2B platforms: **first, supply chain products; second, financial services; third, value-added services.** The scale and proportion are quite significant. The middle part is the channel we build; improving efficiency and gross margin is our most important task. This is about changing the traditional multi-tier distribution model in county, town, and rural markets, where delivery and service are separated. To accomplish such a great feat, we must start with one category. I chose mobile phone stores—those with China Telecom, China Unicom, or China Mobile signs, the cooperative stores you see everywhere. God is fair; every category has its lovable and hateful aspects. The hateful part is that selling phones has very low gross margins. But the lovable aspects are many. First, there are many stores—500,000 independent stores nationwide, with a market size exceeding one trillion. Also, the unit price is high, and the volume is small. Our average order value is 4,000 to 5,000 yuan, so logistics costs are always reasonable. President Wang mentioned that some categories have a high B2C penetration; actually, phones already have a high B2C penetration, but it's only a bit over 20%, less than 30%. This year, in the telecom industry, the rise and counterattack of offline stores are very obvious. In the trillion-yuan market, physical stores still account for the majority, so it's still very large. Additionally, there is a rich derivative demand: financial services.

First, we need to study the needs of these phone stores and their single-store business model. When we dissect a phone store, we find its profitability is diversified. Unlike supermarkets, which mainly rely on purchase-sale price differences, in phone stores, the profit from phone price differences accounts for only 40%, while other sales and service income accounts for 60%, such as operator packages, accessories, and consumer installment plans. Consumer installment for phones is an important revenue source, accounting for 20% of a phone store's gross profit, and that's not even high; it could be lower. My starting point is how to improve a store's profitability and what value I bring to it. This determines that the services we provide should not only be supply chain products but a series of products. On the right, I list several products we offer to stores, including smartphones, accessories, and also PCs, small appliances, and consumer finance. Our more than ten business departments all study the product needs of phone stores. Then we use a four-quadrant model—gross margin and difficulty—to classify products and decide which to promote and which to use for traffic. After analyzing phone stores, we realized that purchase-sale price difference is only a part. In our transaction flow, financial transactions alone reached 300 million yuan last month. **So for the B2B industry, each type of B-end store is different, and we need to deeply research and explore each category. In B2B, pure purchase-sale price difference is very hard to achieve, especially when the business scale is small; we need to race against time to increase the price difference.**

**Financial services and B2B platforms are like fish and water.** Let me briefly list our financial services. We have two types: first, B-end services, such as for large B-end suppliers, i.e., supply chain finance. Many have done or will do this. Supply chain finance accounts for a significant proportion, exceeding 100 million yuan per month. The telecom category has high product value and high turnover, so its capital demand is far greater than other categories. Small stores, due to the iPhone 7 launch, temporarily lack funds, so we provide credit lines for them to order goods. Second, C-end financial services, through small stores' 2C consumer finance. We cooperate with professional consumer finance companies; our businesses are highly complementary. Currently, consumer installment covers only about 15% of stores on our platform, but the GMV from these 15% stores exceeds 200 million yuan this month. This is a very, very large market. In financial business, because the phone category has strong financial attributes, we have invested heavily and developed many products, achieving certain results.

After doing finance and other efforts, we have achieved overall profitability on a monthly basis. We can proudly announce that we are not burning money. How do we make money? By selling financial products, creating hit products, and doing self-operated business. These are the things I've been doing recently. Through this, you can see our gross margin is growing very fast. The logic may differ from ordinary products. For example, 易酒批 calculates cost per vehicle; I calculate total costs including logistics and personnel, but also how much revenue we can extract from stores and how much income we can increase for them. This income is diversified, not just purchase-sale price difference. Once we break through a single category and make it profitable, I stop worrying. **I continuously expand scale; every order is profitable, and almost every new store is profitable. Whether in finance or supply chain, we can further improve efficiency and reduce costs.**

**On this basis, we need to consider expanding categories.** I don't expand into just any category; I have one in my mouth, one in sight, and one in hand. On our platform, we've been doing mother-and-baby stores for six months, with about 5,000 active stores. We've been doing stationery and sports stores for one or two months, and growth is very fast, plus other stores. There are many single stores on commercial streets. The only ones I'm not focusing on are convenience stores, but many products in convenience stores are my customers and are provided by me. For example, 惠民网 has stationery; I also have stationery, and I do it very deeply and thoroughly. Small stores can buy stationery, small appliances, and phones from me. Maybe they don't sell phones, maybe they buy alcohol from 易酒批, but they don't need other things from me. Because there are categories we can't do, and there are categories where we are definitely not as good as distributed distributors; our efficiency is higher, but our cost is not necessarily lower. For water, unless it's for traffic, doing something like water will lose money on every item and every store. From our perspective, once I've built the platform with phones, I can reuse many things for other categories: ground promotion, logistics, and technology can all be reused. The only requirement for me is **vertical depth in a category**. I've worked in FMCG and know each category. Each category is like a different mountain; there are many pitfalls to overcome and knowledge to acquire. For me, I only choose two or three, not many; maybe that's enough.

In providing supply chain services to multi-category stores, we discovered that as competition intensifies, many industries are consolidating. But small stores, or end-to-end competition from product to retail, has become a trend. During our discussion last night, we talked about how if your B2B platform always runs standard products, always runs so-called commodities, you'll never make money, and small stores won't make money either. All small stores need not only first-tier products but also second- and third-tier products. Second- and third-tier manufacturers also have this need. As a platform, bringing second- and third-tier products to them is not enough; you need to help them and teach them how to sell. Otherwise, just selling the products to them won't work. First-tier products can be brought to small stores without a first-tier platform. A B2B platform brings them no gross margin and no profit, and small stores don't lack demand. My demand is whether you can bring products that are both easy to sell and profitable, and as a platform, you must teach me how to sell. **Moving from supply chain services to brand store operation services is our trend.** In the photo, these are some of our systems. This is a phone store in Hubei with very little inventory. This TV has tens of thousands of products; any brand, expensive or cheap phone is available. Consumers can click here; if in stock, it's available immediately; if not, it will be delivered tomorrow. This solves the problem of small stores using minimal inventory to sell all products. A few days ago, everyone heard Ma Yun's 'New Retail,' which is the combination of online and offline. This is the trend. Especially for small stores, although their costs are low, their gross margin requirements are not lower than large stores. We must teach them how to sell high-margin products; only then does your B2B platform have value. If your platform is full of commodities and you can't make money, then other vertical industries will sell high-margin products, and you'll never make money.

To summarize, 51订货 has three key points: **First, I only do county and town markets, only mom-and-pop shops in county and town markets. I only start with a single category.** This category is one I've worked in for over ten or twenty years. I entered it and became the number one in the industry; the second place is almost invisible. Third, after completing this, I **expand categories, increasing channel efficiency on the basis of single-category paving.** In this way, we gradually complete a vertically integrated ecosystem.

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## Citation metadata

- Publisher: New Distribution
- Author: 陈献
- Published: 2016-10-17
- Canonical: https://xinjignxiao.com/en/articles/chen-xian-of-51-51-achieves-overall-profitability-accelerating-the-const-8da14d2c/
- Original source: https://mp.weixin.qq.com/s/CZGkuGoAjANya-Nn9A4-zg

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