No.1 Life Founder Tan Xiaoping This is the fourth year that No.1 Life has been doing B2B. We set a hard target: not to leave Guangdong Province until we reach 10 billion yuan in annual revenue. Currently, we do over 200 million yuan a month, which is very small for FMCG in Guangdong. So how do we do it? Survival No.1 Life is the first company in China to do pure direct operation in B2B. To survive, we set two indicators: 1) Deliver orders to stores within 12 hours; 2) 90% of products available for one-stop procurement. These are the demands of all terminals. 1. 12-Hour Delivery to Stores Guangzhou is different from other places. For example, in Guangzhou, a convenience store's average daily transaction is 3,500-4,000 yuan, with 80% from beverages and water. These categories are not viable for B2B companies. Why does Coca-Cola do so well in Guangdong? The reason is simple: their warehouses are in the city center. The regional characteristic of Guangzhou market is that all revenue of convenience stores comes from "efficiency per square meter." The average rent for convenience stores in Guangzhou is 150 yuan/sq m for the worst, 350 yuan/sq m for medium, and up to 1,200-1,300 yuan/sq m for higher-end ones like 7-11. High rents force stores to sell quickly and not use space for storage. No.1 Life made "speed" the first priority. From day one, we promised merchants: orders will arrive within 12 hours. In fact, delivery often takes less than 12 hours. We have 60 warehouses in Guangzhou and over 700 vehicles. We are a heavy-investment, heavy-asset model. 2. 90% One-Stop Procurement Example: A convenience store in Guangzhou has at least four-door refrigerators, with at least 200 products per fridge. Why? Because there's no storage space, so they need daily restocking. When no one (channel partners, brand owners) supported us, only Coca-Cola did. At that time, over 200 people sold only Coca-Cola, covering all 80+ SKUs of Coca-Cola. In the first year, No.1 Life sold beverages, reaching 300 SKUs; the second year, alcohol; the third year, rice, flour, oil, snacks, and non-staple foods. Currently, No.1 Life has 5,500 SKUs. Our single warehouse is 10,000 square meters. A convenience store's monthly purchase from No.1 Life reaches 60,000 yuan. We don't aim for national expansion, nor do we think about hundreds of billions. One hundred billion is my goal. With complete categories, we first establish ourselves in this region, expanding from 100 to 5,500 SKUs. Scaling Many B2B platforms talk about national efficiency, but in a specific region, why don't manufacturers support you? Take Coca-Cola as an example: if you order 400,000 yuan a month from the Guangzhou branch, how can Coca-Cola support you? A single Tianhe district can sell 8 million yuan, while you sell only 400,000 yuan across all of Guangzhou. You ask for support and even start a price war. Simply put, without volume, you have no bargaining power with brand owners. No.1 Life's principle: Build regional volume before expanding. Currently, each new warehouse of No.1 Life sells 40,000 cases of Coca-Cola, 80,000 cases of Master Kong, and 100,000 cases of bottled water. The total storage area in Guangdong is 182,000 square meters, with 82 warehouses. Example: In 2017, No.1 Life sold 2.3 million cases of Harbin Beer and 1.4 million cases of Budweiser in Guangdong. Why can't other platforms do beer? Because they can't collect bottles. We can collect bottles because we have a huge warehousing system and a professional self-operated team. Since last year, No.1 Life has been selling ice cream. Many B2B companies can't do it because they lack cold chain systems. We built cold chain warehousing and cold chain vehicles. Last year, we sold over 20 million yuan. In 2018, our target is 200 million yuan, and we will increase to 100 cold chain vehicles. Why build a cold chain system? When other platforms come to compete in your region, what do you use to compete? Warehousing, self-operated teams, and vehicles are your competitive barriers. To put it bluntly, brand owners work with whoever has the largest volume. No.1 Life has only one principle: help brand owners sell goods, and sell the largest volume. Infrastructure Currently, each No.1 Life warehouse is over 5,000 square meters. Guangzhou has 62 warehouses with a total area of over 130,000 square meters; Shenzhen has 10 warehouses, plus Foshan, Dongguan, Huizhou, Meizhou, etc. By May 31 this year, No.1 Life will cover 21 cities in Guangdong. The direct-operated warehousing area in Guangdong Province reaches 140,000 square meters. No.1 Life cares about whether the regional foundation is solid. Once infrastructure is built, we don't fear competition from other platforms. Guangzhou and Shenzhen have 75 warehouses, covering over 15,000 terminal outlets, with each warehouse turning over 5 times per month. The warehouses are flat warehouses, not shelf warehouses. Why? For example, with Coca-Cola, six trucks deliver to each of our warehouses daily. We don't stockpile; we invest 3,000 cases when we sell 3,000 cases. We are a warehousing and distribution center, only distributing, not storing. To reduce warehousing, we submit quarterly plans to suppliers and have daily deliveries. By the end of May 2018, all cities will have 60 warehouses, each over 3,000 square meters, with an investment of over 10 million yuan per warehouse. Why does No.1 Life invest in such "heavy" infrastructure? I absolutely don't believe that in the FMCG field, you can become the leader without building up your warehousing area. Without warehouses and logistics, it's basically nonsense. We got C-round financing but didn't do PR. Many people don't know us, but within a 10-kilometer radius of our warehouses, all shops—convenience stores, cake shops, tobacco and alcohol stores, hotels, internet cafes, and restaurants of all sizes—have stocked No.1 Life products. Our full-time sales representatives in Guangzhou number over 700, with one employee managing 50 stores in a grid management system. No.1 Life is a model of heavy personnel, heavy warehousing, and heavy logistics. Doing Convenience Stores Why do convenience stores? Opening stores can increase category richness and full-category supply, ensuring core competitiveness in the region and building competitive barriers. All B2B ideas are beautiful. Many say B2B can only do 500 SKUs. In fact, it's not that B2B can only do 500, but that platforms can't supply more. No.1 Life does convenience stores, expanding from 300 SKUs to 1,000, then to 2,000 and 5,000 SKUs. Through the convenience store supply chain, we grasp category demand and meet the long-tail needs of convenience stores. In 2017, No.1 Life's franchise stores reached 3,000, just in Guangzhou. If we can't increase category richness, we can only fight price wars with other B2B companies. Only with complete categories can we survive. After surviving, we have the opportunity to develop. If you can't survive in this region, your dream is just a dream. Becoming the Largest City Distribution Company Today, all B2B companies are fighting in Guangzhou; none can avoid it. But why does No.1 Life survive best? The reason is simple: the most convenient mode of transport in Guangzhou is the tricycle. We have over 500 tricycles for delivery in Guangzhou. Why not use cars? In Guangzhou city, cars can't run; the roads are narrow. Even Coca-Cola uses handcarts for final delivery—it's extremely difficult. We have three types of vehicles: tricycles, small box trucks, and large box trucks. This year, we bought 1,000 electric vehicles (charging energy vehicles). With 300 warehouses in Guangdong, we need 1,500 vehicles. Now No.1 Life is buying vehicles in large numbers to build absolute network efficiency in the region. By the end of 2018, we will be the largest city distribution company in Guangdong. Currently, we dispatch every hour, with fixed routes and fixed departure times. Our vehicles are not allowed to travel more than 8-10 kilometers; the farthest distance is 10 kilometers, and the nearest is 2 kilometers. So our efficiency is high and delivery distance is short, not because of low prices. We have built strong city distribution and strong warehousing, so we call ourselves the No.1 supply chain brand for supermarkets in South China, focusing on one-stop procurement for supermarkets. No.1 Life has never thought about "conquering" the whole country. We just do South China, aiming for 20-30 billion. Finally, I want to say: regional markets are doable. Do it quickly. Don't care about how national bigwigs boast. If they boast too much and can't pay salaries, they'll collapse like a mountain. In Guangdong, we owe no money to suppliers or distributors. In the next three years (2018, 2019, 2020), we will do only one thing: expand our warehouses to 1,000. We will definitely expand! Note: The above content is excerpted from Mr. Tan Xiaoping's speech at the 4th FMCG + Internet Conference, organized by New Distribution for readers. Click Read Original to see more highlights of the 4th FMCG + Internet Conference... -END-