An Era Without a Safe Zone Whether you like it or not, the internet is taking over China's economy. Every epoch-making industrial transformation brings the rise of new industrial elites and the fall of one or more established classes. Once upon a time, the print media industry was the trendsetter; bookstores were a standard feature in every city's core business district; typists were a respectable profession... In this era where the internet disrupts traditional commerce, no manufacturer, distributor, or retailer wants to be a victim of the times. Thus, traditional enterprises have begun their internet transformation. JD.com, Tmall, Taobao, Suning.com... all try to get a share of the e-commerce dividend. However, as annual financial reports are released, it becomes clear that although e-commerce brings huge sales volumes, profits are razor-thin, or even insufficient to cover costs. What matters most in e-commerce? Traffic! How to get traffic? One way is to participate in activities like "Juhuasuan" or "Dajuhui"—but rest assured, the stringent conditions will ensure you don't make money. Another way is to burn cash to buy entry points. Profitable? We said burning cash, so why ask? Where's the money? Look at Alibaba's net profit margin of over 40%, and Baidu's over 20% from pay-per-click advertising. Overnight, traditional industry practitioners seem to understand something. The internet dictates the direction of the times, and traditional industries are not so much participating as being swept along. Joining e-commerce means no profit; not joining means no sales at all. Hence, some say that traditional enterprises not doing e-commerce are waiting to die, while doing e-commerce is seeking death. Therefore, many traditional manufacturers and distributors adopt a token presence online, losing money for publicity, and rely on offline sales for profits. But in an era where capital and user resources decide everything, and business giants cross boundaries, where is a safe zone for traditional industries? Even the circulation sector, which distributors regard as their lifeline, is about to be conquered by e-commerce. Circulation E-commerce: A Tsunami Below the Surface Unlike B2C e-commerce, circulation e-commerce (B2B) has less direct impact on outsiders. For the retail industry as a whole, B2C e-commerce is just the tip of the iceberg, while circulation e-commerce is the lifeline of the entire industry. It must be mentioned that China's rapid commercial development is largely built on businesses' bold tax evasion. In terms of paying taxes according to law, the law cannot punish the masses, and Chinese businesses almost universally violate tax laws, leaving enforcement agencies with selective enforcement. Although tax authorities and businesses share an unspoken understanding, the illegality remains a Sword of Damocles. E-commerce, however, can legitimately save a large amount of tax under the current system, giving low-value-added consumer goods manufacturers and channel distributors an obvious policy advantage. Fewer sales layers mean each link in the chain gains more profit, which is the explicit advantage of circulation e-commerce. Despite giants like Alibaba, Baidu, and JD.com vowing to bring e-commerce to every corner of China, as long as the circulation sector remains in the hands of traditional distributors, e-commerce won't truly dominate. Such confidence is justified. Traditional e-commerce giants, represented by Alibaba, once ambitiously targeted China's rural market, but the results were messy. In the process of e-commerce penetrating downward, three major challenges emerged: internet penetration, the last mile, and immediate consumption. Internet Penetration E-commerce's rapid growth in recent years relies on a significant increase in internet penetration. The lower the city tier, the lower the penetration. Rural China's internet penetration is only 27%. This not only means rural e-commerce is naturally smaller in scale but also that rural areas are far from the tipping point for e-commerce adoption. The Last Mile If the first issue can be solved over time, the second is nearly unsolvable. The last-mile problem is not a functional issue but a cost issue. Despite advanced logistics, B2C e-commerce's door-to-door delivery is a high-cost solution. In regional hub cities, e-commerce can use existing logistics networks, but as operations expand to second- and third-tier cities, revenue grows linearly, but delivery costs grow geometrically due to scale, frequency, and average order value, making e-commerce uncompetitive with traditional models when logistics costs are included. After the O2O subsidy wars, many realize that algorithm upgrades and scientific management cannot solve the original sin of high logistics costs; user groups formed by subsidies lack loyalty. The only way to offset logistics costs is with sufficient added value—a return to common sense that led to the collapse of many O2O companies. Immediate Consumption The third issue is fundamentally unsolvable. E-commerce's speed is relative to process. From weeks to days to hours, delivery efficiency has improved, but it still suits planned consumption. You can buy groceries for the coming year online, but not solve dinner ten minutes from now; you can order 999 roses for Valentine's Day, but not satisfy the impulse to buy a flower for a loved one right now; you can buy various imported beers, but not quench your thirst at this moment. In FMCG, immediate consumption accounts for a huge share, which is e-commerce's Achilles' heel and the last bastion of traditional business models. In 2014, e-commerce accounted for 11% of total retail sales, showing its influence hasn't caught up with the attention it attracts. Retail e-commerce grows fast, but its ceiling is limited. Centralized Circulation E-commerce: Grand Ambitions In 2015, Alibaba established 1688.com, opening the internet giants' foray into circulation e-commerce. 1688 focuses on cross-border e-commerce, leveraging zero tariffs from free trade to reduce import costs, and uses Cainiao Network for low-cost delivery. Half of 1688's users are online, half offline, meaning not only Tmall and Taobao users but also many offline stores source from 1688. In the nascent imported goods market, as a high-profile latecomer, it's easy to tear open a gap and use cross-border e-commerce as a springboard to enter domestic circulation e-commerce. For distributors, if Alibaba's 1688 is a distant concern, JD.com's New Channel is an immediate worry. New Channel has released limited information, but it's clear it targets small retail stores in third-tier cities and below, and rural areas, with a large ground team. The intention is obvious: to completely replace distributors and secondary wholesalers, becoming the sole intermediary between manufacturers and retail stores. At New Channel's launch, JD.com spoke only of manufacturers and retailers, conspicuously omitting distributors, revealing its purpose. If 1688 reflects Ma Yun's pragmatism and wisdom, New Channel reflects Liu Qiangdong's ambition and gambling nature. Compared to 1688's gradual encroachment, New Channel aims to fully realize "de-intermediation" from the start—a wholesale swallow. If New Channel succeeds in changing China's business model, it's both an opportunity and a challenge for manufacturers. The opportunity: a consolidated new sales network allows products to compete in non-core markets, drastically reducing market development costs. The challenge: existing well-developed markets will face new entrants. For retailers, New Channel won't have a major impact because their market capacity is fixed; more categories won't dramatically increase sales, and the profit from eliminating middlemen will soon be competed away. But for distributors, if New Channel's "de-intermediation" model is realized, it will undoubtedly be a catastrophe. In 2016, a tsunami is about to hit circulation e-commerce—a field below the surface that ordinary people don't notice. Every has its strengths: Alibaba's 1688 is a product with good innate qualities and fine-tuning. However, New Channel's chances of success are debatable. Let's look at New Channel's advantages: Advantage 1: Combination of Scale and System As a giant in e-commerce, JD.com has immense scale and brand recognition, ensuring low-cost awareness campaigns for New Channel. In first- and second-tier cities, JD.com can leverage its more efficient and better-experienced logistics network than Alibaba's, enabling delivery to retail stores without significantly increasing costs. Advantage 2: Bargaining Power with Manufacturers As a major platform cooperating with many manufacturers, JD.com shares common interests with them. In negotiations, JD.com has ample resources to trade, enhancing its appeal. As a leader in internet commerce, JD.com has an edge in educating manufacturers who are unfamiliar with the internet. More importantly, in China's FMCG sector, brand manufacturers have multiple offline sales layers; when launching new products or policies, they can't quickly and accurately reach terminal retailers due to middle layers, and uncontrollable channels weaken their bargaining power. New Channel's reduction of layers and information symmetry appeals to manufacturers. Advantage 3: Ease of Allying with Retailers For retailers, cooperating with JD.com requires little cost. With strong financial backing, New Channel can offer favorable policies to quickly secure territory. Every has its shortcomings: New Channel also has disadvantages: Disadvantage 1: Missing Links Require Time and Money Compared to traditional distributors, New Channel's biggest issue is that distributor-retailer relationships are strong ties, while New Channel must upgrade from no connection to weak ties to strong ties—and strong ties may never be achieved. User development and relationship maintenance are underdeveloped, a missing link. Even with JD.com's scale to reduce development costs, the overall cost is astronomical due to its huge appetite, including time and money. Even ignoring funding, building a ground team takes time, and in the fast-changing internet era, tying up massive funds in a relatively unfamiliar field is risky. Integrating distributors is like asking a tiger for its skin, given New Channel's "de-intermediation" philosophy. Disadvantage 2: High Dependence on Ground Promotion in China's FMCG Market Chinese retailers' acceptance of products often depends on manufacturers' promotion efforts. Brands like Coca-Cola may not rely on ground promotion, but even popular brands like Master Kong and Uni-President need regular promotions and in-store demonstrations. Smaller manufacturers with limited brand influence need meticulous market cultivation, which traditional distributors excel at, but newcomers like New Channel lack resources. Even if they acquire such resources, high management costs would affect final store prices. In other words, serving manufacturers is not a strength of centralized e-commerce like New Channel, making manufacturers hesitant to risk alienating distributors. Disadvantage 3: Supporting Systems Depend on Capital Investment JD.com's self-owned logistics is an advantage, but in third-tier cities and below, including rural areas, this advantage is less clear. New Channel will face the same delivery challenges as rural e-commerce. With sufficient funding, these are solvable, but sufficient funding is itself a problem. Does JD.com have enough capital to build such a system? Enough to handle surging management costs? Alibaba's cautious approach may serve as a reference. Ultimately, lack of service functions and not being grounded are the fatal weaknesses of centralized circulation e-commerce like New Channel. Distributed Circulation E-commerce: Springing Up Like Bamboo Shoots In fact, before centralized circulation e-commerce emerged, China's distributed circulation e-commerce was already well underway. The essence of distributed e-commerce is "distributor + internet." Unlike centralized, they have absolute influence and control over resources in a limited area, but outside that area, influence and control rapidly diminish due to capital and connections. Such platforms share common interests with large distributors, aiming to eliminate the secondary wholesaler tier. That is, by persuading terminal stores to install apps, they can purchase all products on the platform. If centralized circulation e-commerce addresses whether middle layers exist, distributed addresses how many layers exist. Distributed circulation e-commerce has a symbiotic relationship with large distributors; within its framework, distributors must transform their roles from traditional one-stop operations to focusing on leveraging their resource advantages and providing services. The cost is essentially giving up development space in F2B and F2C. What specific benefits can distributed e-commerce bring to distributors? Well-known self-media expert Teacher Zhao Bo summarized six points:

  1. Incremental coverage of channel outlets;
  2. Efficiency gains and cost reductions from centralized distribution;
  3. Shifting business functions to focus on consumer pull;
  4. Truly achieving data-driven management of terminal information;
  5. Reducing losses from blind distribution;
  6. Opportunities for horizontal growth through multi-brand operations. Distributed circulation e-commerce allows large distributors to share platforms and achieve refined market data management. Some also offer unified warehousing and logistics, reducing costs. Of course, there's no free lunch: sharing platforms means price transparency and intensified competition, squeezing profit margins while expanding networks and reducing logistics costs. But as more retailers join, distributors who don't join lose both convenience and profit margins. Currently, distributed circulation e-commerce has several models: Self-built Warehousing and Logistics, Top-down Tight Cooperation Represented by "Wanshanggou." Distributors join the platform, which provides unified warehousing and delivery, delivering goods from different distributors to different stores in one trip, optimizing routes, improving efficiency, increasing load rates, and saving logistics costs. This structure offers visible benefits, making cooperation easier, and distributors become promoters, spreading the platform to stores. This model's advantage is mobilizing distributor enthusiasm, low promotion costs, closer cooperation, and forming win-win alliances. However, it requires significant capital for logistics infrastructure, has high barriers, and often needs local government support. Also, tight cooperation ties it to the locality, making replication difficult. Riding on Existing Monopoly Channels Represented by China Tobacco. With strong influence over all terminal stores, China Tobacco naturally develops non-tobacco product circulation e-commerce. Another advantage is its existing delivery system supports this model with low logistics costs. The disadvantage is limited service to manufacturers, lacking willingness and capability for distribution, shelf management, demonstrations, and promotions, and whether institutional inertia affects vitality is debatable. Integrating Terminal Stores, Bottom-up Loose Cooperation Represented by "Yubianli." With weaker unified warehousing and logistics, it's less attractive to manufacturers and distributors than Wanshanggou, but it implements some O2O functions like online ordering with store delivery or pickup, creating new profit points for stores. Its value-added services are comprehensive, making it easier to recruit stores. By integrating stores and expanding scale, it uses the large store base as bargaining power with manufacturers and distributors. The advantage is theoretically unlimited network expansion without being confined to a small area. The disadvantage is that bottom-up cooperation requires promotion costs to recruit stores. Focus on Data Platforms Represented by "Dianshang Hulian." This is the loosest cooperation model. It builds a B2B platform by offering free apps to stores, including "Dinghuobao" for upstream ordering, "Dianfubao" for card payment and credit services, and "Wuyou Mayi" for logistics. This model is like a mini centralized circulation e-commerce, with low transaction involvement, focusing on data acquisition and user locking, earning returns in capital markets and developing through partnerships. Similar platforms include "Zhanghe Tianxia" and "Zhongshang Huimin." The advantage is low ambition, light weight, and alignment with internet trends. The disadvantage is obvious: loose user relationships, high substitutability, no competitiveness or loyalty, likely educating users for stronger entrants, and lacking ability to resist if a powerful player enters. In summary, the key points are: The development of circulation e-commerce is an inevitable trend; reducing intermediate costs and using big data to expand sales networks are necessary for the times. Both centralized and distributed circulation e-commerce have strong "de-intermediation" tendencies, differing only in degree. As B2C matures and profit margins shrink, B2B presents an opportunity for FMCG practitioners. Centralized circulation e-commerce has the highest efficiency but is a systemic project; full realization depends on both its own construction and market maturity, not an overnight task. Different roles face different choices in this transformation. If you're a well-known brand with no sales worries, you can cut all middle layers and adopt the simplest structure: manufacturer-platform-store. If you're a regular manufacturer needing to launch new products and rely on ground promotion, breaking with distributors may not be wise. If you're a first-tier distributor, you need to figure out how to participate in distributed circulation e-commerce to counter centralized, while improving service capabilities. If you're a store operator, enjoy the convenience. If you're a secondary wholesaler, either move up a level or prepare for a second startup. Circulation e-commerce expert Teacher Liu Chunxiong proposed the Four No Principles for circulation e-commerce, which I endorse: No burning money, no price chaos, no subsidies, no robbery. Why no burning money? Because the B-side is too large; burning money is a bottomless pit. Why no price chaos? Because it can't force cooperation; it harms yourself. Why no subsidies? Because they only bring short-term traffic, not loyalty. Why no robbery? Because platforms are co-built by distributors; robbers can't build platforms—that logic is wrong! Bold Vision: Manufacturer Alliance-Led Large B-End Full Industry Chain Model We've discussed intermediary-led circulation e-commerce. Can manufacturers lead? In the past, it was impossible due to information asymmetry and channel blockages. But the internet era suggests it's feasible. Unlike centralized circulation e-commerce, manufacturer-led circulation e-commerce, or the large B-end, is not about de-intermediation. Manufacturers can integrate production, sales, and logistics, cooperating with distributors and logistics to optimize resource allocation and achieve lowest-cost delivery. In this model, manufacturers and distributors form interest alliances through equity cooperation, unlike centralized models that exclude distributors—not asking a tiger for its skin. This preserves distributor service functions and changes the adversarial, self-interested dynamics. Thus, a new model emerges: B2b, where the large B-end (manufacturers and distributors) transacts with the small b-end (terminal stores). Eliminating information barriers brings opportunities to every link. As markets mature, demand release slows, and creating demand becomes the main opportunity. How to create demand? First, manufacturers must understand consumers. But in traditional channels, this is impossible because manufacturers are disconnected from consumers and even terminal stores. Some might ask: can't distributors provide feedback layer by layer? This involves survivorship bias. A classic example: people recommend a fortune teller as accurate, but only those who found him accurate mention him; those who didn't are silent data. Similarly, magazines use surveys to gauge column popularity, but respondents are a specific type, so surveys only capture their preferences; others are silent data. In distribution, if a retailer says a product sells well, could it be due to better shelf placement? Could the word-of-mouth from that claim cause other retailers to stock more, creating a Matthew effect? Therefore, modern science uses "randomized, double-blind, large-sample" statistics to avoid survivorship bias, and internet-era big data provides manufacturers with such samples. From consumer purchase records, data mining reveals preferences, identifies blind spots in existing products, and enables product innovation. Simultaneously, mining personal data enables customized, personalized high-value-added products, making revolutionary products a norm again. Distributors then have opportunities for rapid growth through such products. On a small scale, this is an opportunity for everyone in the chain; on a large scale, it could transform China's economy. Logistics network development can foster the large B-end. Currently, China's logistics, especially rural, is underdeveloped because third-party logistics companies have narrow business scopes, designing networks solely on cost-effectiveness, ignoring remote areas. However, local distributors and manufacturers have sufficient interests to integrate local logistics. Furthermore, through overlapping logistics and channels, different manufacturers can form cross-industry alliances, enabling multi-to-multi alliance circulation e-commerce, sharing cross-border dividends. Thus, China's circulation sector will undergo radical changes, shifting from profiting from information asymmetry and channel blockages to profiting from information symmetry and smooth channels. The resulting innovation explosion will be key to traditional industries' second spring. Of course, many issues remain. A single manufacturer-led large B-end lacks category diversity to form a powerful supply platform, requiring manufacturer alliances. Such alliances can only exist among non-competing manufacturers, as same-category products are exclusive, forming camps. Success depends not only on manufacturers' strength but also on choosing the right side. Forming alliances requires basic participation awareness from all members and strong lobbying from leaders, creating high barriers. Currently, no manufacturer has made substantial progress. But remember, everything we experience today seemed unattainable just over twenty years ago. In an era of explosive innovation in models, systems, management, and technology, we must respect seemingly distant visions, because in a few years, they may become reality and change your life. Conclusion As an inevitable product of the internet era, like the internet itself, whether you like it or not, it will come, changing everything around you—possibly elevating you from obscurity to fame or dropping you from the peak to the valley. For an inevitable trend, all we can do is accept it, understand it, and try to harness it. Opportunities belong only to those who are prepared. I wrote this article to tell everyone that I, Sister Miaosi, am interested in participating in circulation e-commerce, with flexible cooperation forms. Now for the advertisement: Meisi Meiyu Management Consulting Co., Ltd. is committed to providing effective internet solutions for China's FMCG industry. Here, you won't see magic tricks or promises of overnight wealth. What we have is decades of practical experience in FMCG planning and marketing, and professional dedication. We are willing to work with you, using common-sense thinking and market-tested methods, to diagnose your enterprise and products, helping you reap the dividends of consumption upgrades, communication upgrades, and channel upgrades. -END- The best FMCG distributor learning platform in China Focusing on providing professional, practical, and actionable tutorials for enterprises and distributors Committed to helping Chinese FMCG distributors grow rapidly The most professional and practical knowledge base in the FMCG industry Reply with the red number below to get corresponding content Reply with number 1 to view the complete knowledge base | 001 Excellent article selection | 002 Distributor market operations | 003 Terminal visit management | 004 Sales supervisor skills | 005 Sales improvement techniques | 006 Channel expansion | 007 Managing distributors | 008 Distributor development | 009 Distributor internal operations | 010 Team management | 011 Efficient distribution techniques | 012 Sales manager's eighteen skills | 013 KA operation strategies | 014 First lesson for new salespeople | 015 Internet, brand | 016 Distributor B2B transformation | [Long press QR code to follow]