The 7th China FMCG Channel Innovation Conference, hosted by New Distribution, a professional new media platform for FMCG, was successfully held in Chengdu from November 3 to 5, 2022.
This article is based on the keynote speech titled "Cooperation Opportunities between Channels and FMCG Brands from the Perspective of Convenience Stores" delivered by Mr. Yao Xuhong, Vice President of Dongguan Sugar & Wine Group and General Manager of Caihua Trading (Yueheji), at the main forum of the conference. It has been organized and published with authorization.
/Over the past 20 years of my career, I have been working around convenience stores and related industries. Therefore, today I will discuss channel and brand cooperation from the perspective of convenience stores. My sharing today is divided into three parts: first, observing the market; second, examining ourselves; third, looking to the future. 01 Observing the Market First, the industry-recognized figure of 6 million convenience stores is composed of leading branded chain stores and 5.8 million mom-and-pop stores. These convenience stores are an important part of meeting consumers' convenience needs. However, the overall distribution of convenience stores is wide and scattered. Over 86% of small stores are located in third- and fourth-tier cities and below, and they serve 74% of consumers. Image source: Panoramic Vision. Facing intense competition and changes in consumption habits, the need for operational improvement among small stores is increasingly evident. But because they are individually operated, these small stores are essentially fighting alone. In the face of external environmental changes, small stores are largely powerless to respond to consumer demand. They encounter difficulties in grasping market trends, understanding consumer needs, product marketing, and store management. At the same time, small store owners also have needs for social interaction and organizational belonging. Looking back, the distributors, wholesalers, and various platforms serving these more than 5 million small stores have diverse models, each with its own advantages and disadvantages, and they also face challenges of varying degrees. Looking closely at these organizations, FMCG B2B platforms now account for an increasing share of sales because their high level of digitalization facilitates overall efficiency improvement and maximizes channel value. We also see more and more distributors and wholesalers transforming and upgrading towards B2B, joining the B2B ranks and continuing to serve as an important force in serving small stores. These are our observations and summaries of the small store end and the distribution end behind them. 02 Examining Ourselves With a clear understanding of market changes, let us look at ourselves. Yueheji originated from Meiyijia. We have distilled Meiyijia's experience in serving the B-end and built our overall service system around the core needs of small stores. Through the development of Yueheji over the past 10 years, our overall sales scale and customer base have been growing steadily. In 2022, we estimate sales will exceed 2 billion yuan, with over 20,000 monthly active customers. Currently, our industry scale and influence are in the third tier, and our competitiveness in the sinking market ranks fifth. Within the internal group, we will continuously elevate the strategic position of B2B, increase investment in Caihua Trading, optimize and upgrade the service system, deepen our presence in Guangdong, and gradually expand to multiple regions. We hope to connect brand owners, service providers, sales representatives, and other roles through Yueheji, working together to empower small stores and address their product needs, operational needs, and social needs for organizational belonging. Therefore, we have built a comprehensive service system of Yueheji + Yuexiaopu + Yuehuitong + Yuexianghui, becoming a comprehensive service provider for retail terminals. Through Yueheji, we provide small stores with an integrated service platform that includes ordering, logistics, marketing, and empowerment value-added services, offering suitable product assortments and selected marketing activities to achieve refined store management. Embedded in the Yueheji APP is the tool Yuexiaopu, which provides small stores with an integrated procurement and sales marketing platform, opening up the "purchase-sales-inventory" link for store products and providing a complete closed loop for brands' C-end marketing activities in the traditional small store channel. The third tool, Yuehuitong, is an online sales tool for sales representatives, which improves the efficiency of digital service output and ensures the implementation of product activities through store coverage and scenario prediction. The fourth tool, Yuexianghui, is an offline interactive space designed to connect small stores and brands, breaking down communication barriers to let brand concepts reach small stores and allow small stores to gain more authentic and higher-level industry exchange experience. As our operations deepen, we increasingly appreciate the professionalism of brand manufacturers, such as their research breadth and depth in consumer trends, brand strategy, market strategy, marketing strategy, and category management. Therefore, we will continuously understand brand owners' marketing and brand strategies, communicate the characteristics of the convenience store channel, and collaborate with brand owners to serve consumers through small stores, providing value to both consumers and small stores. In our past operations, we have categorized brands into three types: first, private brands, specifically created for the convenience store channel; second, co-created brands, hoping to cooperate with more manufacturers for exclusive, customized, and joint products; and third, mainstream market brands. Our ultimate goal is to achieve a sales mix of 10%, 20%, and 70%. Centered on the Meiyijia convenience store system, the small stores served by Yueheji, and third-party platforms, we will jointly deepen the convenience store channel. 03 Looking to the Future Finally, looking to the future, in response to market changes and consumer demands, we believe that small stores will continue to exist and play an important role in meeting consumers' convenience needs. Therefore, to empower small stores to improve operations and to create small stores for brand owners to connect with, FMCG B2B will continue to play an important role. We believe that matching supply and demand, high efficiency, and low cost remain key development goals, while focused objectives, complementary advantages, division of labor and cooperation, and coordinated development are key to sustainability. Centered on brand owners, distributors, regional B2B platforms, and service providers, Caihua Trading Yueheji is more open to cooperating with service providers of various industries and types. Adhering to the principle of co-construction, co-creation, and sharing, we will cooperate and coordinate with all parties to provide professional solutions for small stores+. Of course, we also know that we cannot serve so many small stores; we focus more on waist small stores as service targets, providing them with in-depth services and contributing modestly to the FMCG B2B industry. Author Introduction: Yao Xuhong, Vice President of Dongguan Sugar & Wine Group and General Manager of Caihua Trading (Yueheji), focuses on chain convenience stores and commercial circulation, specializing in procurement and supply chain, digital operations, and omni-channel marketing. He is a practitioner in retail distribution, an outstanding manager of convenience stores at the China Chain Store & Franchise Association, a member of the New Retail Committee, and a member of the Young Leaders Roundtable.