---
title: "[Community Lecture] Fang Gang: How Traditional FMCG Companies Can Master Online and Offline (Transcript)"
description: "This lecture discusses how traditional FMCG companies can navigate the shift from offline to online sales. It contrasts traditional marketing logic (terminal-centric) with new online logic (consumer-centric), and suggests that companies need both a 'Red Army' for existing sales and a 'Blue Army' for future growth."
author: "方刚"
publisher: "New Distribution"
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published: "2016-10-29"
language: "en"
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# [Community Lecture] Fang Gang: How Traditional FMCG Companies Can Master Online and Offline (Transcript)

> This lecture discusses how traditional FMCG companies can navigate the shift from offline to online sales. It contrasts traditional marketing logic (terminal-centric) with new online logic (consumer-centric), and suggests that companies need both a 'Red Army' for existing sales and a 'Blue Army' for future growth.

Dear group friends, good evening! Tonight I will share with you the topic "How Traditional FMCG Companies Can Master Online and Offline".

Traditional FMCG companies can be understood as existing stock companies, not representing newly established enterprises in the information civilization era.

What are FMCG? The concept of FMCG originates from the term 'instant decision' (you can Baidu it), meaning low-cost, random, unplanned purchases driven by demand!

In traditional marketing, FMCG tactics are basically based on being ubiquitous and convenient to buy, such as high distribution rate plus vivid display! Based on this logic, the FMCG approach we emphasize in traditional marketing is basically: product - distributor - terminal - consumer! In this path: demand is fixed, as long as you target the demand, follow the procedures of production organization, channel recruitment, distribution and promotion, you will eventually get good results!

In habitual thinking, online consumption habits are different from offline! Online shopping is mostly planned, and ineffective for unplanned consumer goods! For example, in traditional cognition, consumers think of drinking water when thirsty, and then buy randomly! But in the context of the internet, although water cannot satisfy random demand, it fulfills the function of unplanned consumer goods in planned purchases!

It is these changes that have led FMCG online marketing to start plundering offline traffic with a 'robbery' approach: starting with categories with low logistics costs and high added value, gradually eroding!

When it comes to online marketing, many people sneer or get annoyed: How much can you sell online? Prices are slashed so low!

The so-called online robbery sales often use offline as a reference, using price rigidity to attract traffic to online transactions!

Note the essence of e-commerce: If e-commerce did not have the ability to provide high cost-performance products, or could not provide low-priced products, it might have ceased to exist long ago!

Offline channel traffic is inherent, while online traffic is pulled in. Both types of traffic cost the company money.

But in the early days of e-commerce, communication costs were low, and some even had communication privileges (low cost, even free); in the future, this cost will become higher and higher! Offline terminals were not that expensive initially either.

So, when e-commerce costs rise, online and offline costs tend to balance, and even offline costs become lower than online.

In the traditional marketing context, terminals bring their own traffic. As long as the location is good and service is available, consumers coming and going bring traffic! The keyword for traffic is attention, which is sales opportunity!

The two major dividends of online: market dividend, sales dividend! Or communication dividend, channel dividend! The communication dividend comes from the internet, and the channel dividend comes from e-commerce! Traditional marketers often get confused here, mixing up the internet and e-commerce!

Marketing departments focus on the internet, sales departments focus on e-commerce!

The three magic weapons of traditional FMCG: distribution rate, vivid display, advertising and promotion; in e-commerce logic, these are transformed into: traffic, scenario, interaction.

Five years ago, manufacturers could casually throw a beverage into the channel and it would sell; today, sell-through has become a big problem...

In the past, traditional distributors lived a comfortable life relying on "brand territory". As long as they had a good brand and good territory, they could make money lying down! Because in the past, demand continued to rise, like a snake game, just close your eyes and provide satisfaction!

Today, traditional distributors have to face a reality: surplus! Oversupply!!

At this time, online distributors adopt a plundering approach without territory, or armed with new media and new technology, using internet discourse to show off success everywhere. Traditional distributors are confused about the uncertainty of the future, still nostalgic for the dividends of the lying-down money era, hesitant about transformation or even transfer... inevitably anxious!

From current data, online sales in the FMCG industry account for no more than 10%, some industries even lower, even less than 1%. Moreover, this 1% of sales is unevenly distributed, invisible, intangible, and seems unrelated to region!

In traditional marketing logic, the basic logic of FMCG sales = number of terminals * sell-through rate! Terminal (channel) is primary; note: terminal (channel) brings its own traffic! Sales opportunities arise from opportunistic purchases by people entering the store!

Different consumption levels lead to different terminal grades. Different consumer groups enter matching terminals for consumption. Under the premise of stable terminals, matching sales naturally form brands at certain price points. This creates price-band brands and territory-based brands!

Sales generated by this logic are closely related to the quantity and quality of terminals, market territory size/wealth! This has led to many FMCG brands using deep distribution (co-distribution) as a tool for urban intensive cultivation, and then sinking to rural vehicle sales visits for intensive cultivation!

In the traditional sales layout logic, to chase more sales, the sales system or team will lay out more outlets and territories. When expansion reaches a limit, sinking to the edge, and no territory to expand, not only does sales pressure come, but suddenly they find: they are being robbed from behind!

Today, the structure of urban and rural terminals has changed greatly: new types of terminals emerge in various forms. Traditional small and medium terminals represented by mom-and-pop stores have been gradually eroded by new modern terminals such as KA, chain specialty stores, CVS, community terminals, e-commerce, micro-commerce, O2O, especially in urban markets!

Note: The channel evolution between urban and rural areas is progressive!

The basic logic of FMCG online sales is = number of fans (traffic) * activity rate! In the new world sales logic, fans (traffic) is primary! In this logic, there is no place for terminals (channels).

This approach, which penetrates and bypasses terminals to go directly to consumers, sucks away traditional terminal sales while using youthful, cute, fashionable communication methods to differentiate from old world brands! Many shout online slogans but do offline channels! They use the internet vest to distinguish themselves from traditional FMCG brands.

The two formulas clearly show: one is terminal king, the other is consumer king! This creates two different logics online and offline!

In the current era, three types of brands will emerge: The first is internet original brands, characterized by shouting online and selling online! The second is internet composite brands, characterized by shouting online (also doing) and doing offline! The third is internet outsider brands, shouting offline and doing offline!

The first: Three Squirrels; the second: Jiang Xiaobai, Xiao Ming Tong Xue; the third: exist in large numbers.

Currently, the windfall for purely online enterprises (shouting online and doing online) is gone. Instead, composite brands that shout online and do offline are strong now. The future belongs to traditional enterprises that successfully combine with the internet...

That is, enterprises that clearly understand the division of labor between online and offline, such as Jiang Xiaobai's skilled use of online internet communication tools, offline standard deep distribution system, sales reps visiting to take orders and maintain, distributors delivering! Online communication and consumer interaction, offline solid terminal work! In fact, the real sales contribution may not come from e-commerce channels!

The keyword for traffic is attention, which is sales opportunity! So, traditional FMCG marketing emphasizes terminals as traffic entry and sales exit, standing ready, even heavily guarded, not missing any traffic opportunity! Customer relations, location, vivid display... all these actions revolve around offline, including brand communication relying on POP, flyers, storefronts, TV, billboards... In fact, offline communication costs are not low, and there is no degree to grasp, especially when offline communication is crowded, the cost is quite high!

For example: repeated use and coverage of POP, business reps tearing and covering... The emergence of new media has created a batch of dividend brands: cleverly and at low cost utilizing this dividend, releasing their voice, grabbing traffic, traditional traffic begins to leak! Among traditional brands, more than 90% of resources and manpower belong to the sales department. Few enterprises have a decent marketing department! The sales department's responsibility is to make sales data better, nothing else. In their eyes, there are only channels and business, no consumers!

Enterprises that grabbed the new media internet, on the contrary, have strong marketing departments (or similar), and expenses focus on pulling consumer traffic!

Many traditional marketers are stuck because: How much sales can the internet help me achieve? Just a little, not even enough to fill my teeth!

The main reason traditional FMCG companies fail is that their organizational structure can no longer well understand and meet consumer needs. The future company structure should be a flexible structure that stimulates core consumer groups, reflects consumer needs in products, and spontaneously promotes them.

The core competitiveness of excellent companies should be the ability to operate products and consumers.

The reality is that many internet brands, wearing the internet vest, have almost zero sales on Taobao, Tmall (all online platforms)! Internet native brands are characterized by shouting online and doing online, typical cases are Xiaomi, Three Squirrels... Strong online discourse traction, using pretentiousness, hot topics, chopping hand cases to attract traffic, using e-commerce platform professional power for sales conversion!

Internet composite brands are the fusion of online and offline brands, shouting online to attract traffic, offline terminal channels fighting street battles, even deep distribution is indispensable!

Internet traditional brands exist in large numbers, no need to list them one by one!

In the past few decades, we have been gobbling up sales. The closure and concentration of traffic were very obvious. Channel terminals carried the integration of logistics, capital flow, and information flow. But today it has changed!

The period of online-offline separation will give birth to two armies! The two armies refer to the Red Army guarding existing stock and the Blue Army seizing incremental stock! For the FMCG industry, the Red Army's operations will still be traditional channel terminal operations, while the incremental Blue Army should be equipped with new systems, fight independently, and fight on two fronts with the Red Army! The birth of the Blue Army must not be selected from the Red Army. Better to cross industries than to let people with stock thinking do incremental work!

Bosses should have an angel investor mentality towards the incremental force: identify the project and choose the right person!

Once the boss has a scale mindset to do incremental value, the Blue Army will definitely fail. Therefore, the incremental force must be fundamentally different from the Red Army. The boss would rather believe in defeating himself, Blue Army KO Red Army, than allow enemies to kill himself! Traditional Red Army thinking often treats demand as fixed and dominant. As long as production and channels are straightened out, terminal traffic is inherent, just take it! Channels (including terminals) bear the integration of logistics, capital flow, and information flow!

To test whether an enterprise's incremental force is qualified, benchmark from the three flows: Has logistics changed? Has capital flow changed? Has information flow changed? If the three flows still overlap with the Red Army, then the increment is still a reform at the same latitude, changing the soup but not the medicine!

Traditional FMCG success is mostly built on deep distribution or deep co-distribution models of channel terminal teams. For big brands, this team is often tens of thousands or even hundreds of thousands, guarding mainstream sales! The transformation of this group is a huge project. Directly transferring to the new world's incremental competition is extremely difficult! For traditional FMCG companies, a more stable approach is to have two teams to conquer the world: one to capture mainstream sales (Red Army), one to layout future trend brands (Blue Army)!

One team uses human wave tactics in channel terminals; one team is a special force of fans and mouse!

From the brand perspective, the marketing department has a team to guide online aggregation of fans. From the sales department perspective, one team captures mainstream sales, one team captures trend sales! From the channel layout perspective, incremental brands (varieties) re-layout distributors!

Online aggregate fans, offline capture terminals (channels)! Online can shout, offline can do! Trends attract eyeballs, mainstream repairs the earth! Update your channel classification standards, offline sweep streets, online sweep networks! Offline terminals still rely on deep distribution (co-distribution) iron army sweeping streets; online terminals establish supplementary networks, platform e-commerce, urban distributed e-commerce, community e-commerce and other new terminals are handled by another team!

Many FMCG companies, when laying out products, based on the attributes of FMCG, the marketing system in the deep distribution system deploys almost all infantry for street battles. There is almost no awareness or deployment of artillery units supporting mid-to-high-end, or missile units supporting ultra-high-end, leading to a single tactic during consumption upgrade shifts!

Regarding the transformation and upgrade of traditional FMCG companies, it is a topic with many discussions and uncertainties. But one thing is certain: future marketing methods will be diversified and fragmented. No single model will dominate. True transformation may only mean giving up to be reborn. I do not favor any patch-up transformation!

At the end of the sharing, I will quote a passage from Teacher He Zuqi for your consideration: 1. Stock cannot be defended or activated; it must be reconstructed through increment; 2. Increment must change the main course, change the track, change the posture, change the gear; 3. Whether online or offline, every industry, every enterprise, every marketer has the opportunity to do it again. BY He Zuqi.

Note: This is the transcript of the lecture by Fang Gang, Chief Marketing Expert of China Wine Industry Forum and nationally renowned marketing expert, on the evening of October 28, in the China Wine Industry Forum community matrix (50 groups), unabridged.


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