Recently, New Distribution reported on a series of industry cases practicing bC integration. These cases all involve brands building their own systems to connect with retail stores and reach consumers.

Do you have this question:

If every brand builds its own system, would small store owners be overwhelmed logging into dozens or even hundreds of systems daily to verify consumer redemptions? Would they be willing to cooperate?

Ren Wenqing (left) and Zheng Yunfan (right)

Recently, my exchange with Zheng Yunfan, founder of Huihe Technology, gave me great inspiration.

Whether it's their practice or Mr. Zheng's own views, I think they are worth sharing.

Today, I plan to write an article to share our exchange—bringing you more perspectives and thoughts on bC integration.

What do you do?

First, I asked Mr. Zheng: Can you explain in one sentence what your business really is?

Mr. Zheng said, We are a digital marketing platform that connects brands and traditional stores.

Sounds a bit abstract; could you elaborate?

Mr. Zheng continued.

In China, the FMCG industry invests marketing expenses in traditional channels every year. On average, each brand spends about 8-15 percentage points of its transaction value.

Such a huge number—how is it spent? What are the results?

Actually, brand owners are not very clear.

Why?

The middle chain is too long.

From brand to distributor, then to store, and then to consumer, the communication, execution, and expense settlement of marketing activities have losses at each level.

Can this problem be solved through digitalization?

There are about 6 million small retail stores in China, most of which are mom-and-pop stores. Digitalization seems like an impossible task.

But actually, we found that these small stores have a digital foundation.

Because in today's China, even mom-and-pop stores in remote areas have digital devices.

What is it?

The store owner's smartphone!

Can we build a platform that connects to these stores, where brand activities are initiated, execution feedback is given, and expense settlement is done on the platform?

For example.

A brand posts a task on my platform: they want the 3rd and 4th layers of the store's freezer to display their beverages, and they pay 50 yuan per week for freezer display fees. The store owner sees this activity, accepts the task, and after completing it, takes a photo or video and uploads it for verification.

In the traditional way, sales reps communicate with stores, which is labor-intensive, inefficient, and the expense payment cycle is long and opaque.

After listening to Mr. Zheng, I asked: It sounds great! Is this your idea, or is it something you are already doing?

Mr. Zheng said, This is what we are doing.

Just some small-scale pilots, not large-scale, right?

The platform went online in 2017. Up to now, out of 6 million small stores nationwide, 1.5 million are our members.

Currently, there are over 800,000 active stores per month, and the payment flow is in the hundreds of millions. We cooperate with over 100 brands, and basically all are leading brands.

Hearing these numbers, I was quite surprised!

So, how did you achieve this? Could you introduce it in detail?

How did you do it?

Covering so many small stores is actually the result of cross-penetration.

Mr. Zheng continued.

When we started in 2017, we wanted to help brands solve the problem of terminal marketing expense accounting.

At that time, brands came to cooperate with us, which pushed us to connect with the initial batch of small stores. With store resources, new brands came to us.

Cooperating with one brand has limited effect, but as brands increased, each brand brought us some stores, and through cross-penetration, the number of stores covered grew.

We have an APP, but it's more based on WeChat mini-programs. Store owners register as members and can see marketing tasks posted by different brands.

How are these activities initiated? How do stores execute them? What is the relationship with consumers?

I'll explain from the three parties: brand, store, and consumer. Mr. Zheng said.

First, brand initiates activities.

Those who connect with us are basically the marketing departments of major brand headquarters, and of course, some are regional marketing departments.

For example, scan-to-open-box is now a common method in the industry.

In fact, we were one of the earliest to do this. We helped many brands penetrate stores through scan-to-open-box.

In the past two years, we have accumulated a lot of data. Through algorithms, we can tell brands what discount levels different stores in different regions need to meet their price requirements. I can also tell brands what the reasonable stocking target for this store in August is. Through data and algorithms, we can achieve store-specific strategies.

Second, store execution.

After the product arrives at the store, how should it be displayed?

Store owners can complete actions 1, 2, 3, 4 according to the task list, such as putting the product in the freezer, placing it on the shelf, or posting posters, and then they upload a video or photo.

The system uses AI algorithms to automatically determine if the task is completed, and the owner can settle the fee next week.

Brands know exactly how many stores nationwide actually participated in the activity and how each store performed.

Third, consumer purchase.

Marketing activities ultimately aim to influence consumer purchases, and there are many ways.

For example, scanning a code to get a red packet, or a "buy one get one free" activity, can be verified at the store through our mini-program.

Another example: when a consumer is in a store, say buying a drink, often they are not sure which brand to choose. A coupon activity posted on the freezer, or the owner directly telling the consumer, is helping the brand make the final push.

In chain convenience stores, it's easier, but mom-and-pop stores don't have it because brands cannot verify with the store.

Today, we have opened up the verification system, so we can help brands make that final push in these stores.

Why do you do it this way?

Interesting! Interesting!

So, how did you come up with this marketing platform for small stores?

Let me share my thought process, Mr. Zheng said.

As early as 2010, brands had actions in the digital direction, but at that time it was more about building internal data systems, such as SFA for sales reps, DMS for distributors, etc.

By 2013-2014, brands wanted to extend to the retail end, even to consumers. But whether it's small stores or consumers, they come into contact with countless brands, and it's hard for them to use a specific platform for one brand.

So at that time, everyone thought about how to connect brands and stores, and B2B trading platforms emerged.

But frankly speaking, except for some regional B2B platforms, the others are not very successful.

Why?

A basic logic of the internet is to solve information asymmetry. Does B2B solve this problem on this dimension?

In my observation, it doesn't.

Store owners don't have the problem of not being able to stock goods; they consider who gives me cheaper goods.

True digitalization requires multi-terminal interconnection, verifying the authenticity of data, and making strategic adjustments and implementations based on data.

In the process, there are only four roles: brand, distributor, store, and consumer.

In 2017, we rethought how to build a four-party online digital platform.

In the flow of goods, three things run through it: transaction, logistics, and marketing.

In the end, we decided to only do marketing.

Why?

If we touch transactions, it would disrupt the brand's existing distribution channels.

Logistics is too heavy, requiring too many resources, and it's hard to find a common way to fulfill all categories.

What about marketing?

Brands market to distributors, to stores, and to consumers; stores also market to consumers.

Marketing is our leverage point.

Help brands build a platform-based direct system for information transmission and fund settlement.

That's what we do today.

How do you view bC integration?

Let brands connect with store b and reach consumer C.

It sounds like it falls under bC integration, but now many brands build their own systems, incorporating transactions, logistics, and marketing.

Do you think what you do is bC integration? How do you view the difference between the two? I asked Mr. Zheng.

I think what we do is bC integration.

These two are not in conflict.

Mr. Zheng continued.

What we do is let brands connect with store b and reach consumer C.

The data we accumulate can help brands make decisions and promote sales. The consumers attracted by activities are all deposited in the brand's private domain.

Of course, among our cooperating clients, 50% are also trying to build their own systems.

In fact, when we communicate with clients, we suggest that if possible, they do both.

Why?

We are all exploring; we are not sure which model will be the future.

So, what will bC integration eventually become?

I want to know Mr. Zheng's view.

Mr. Zheng said, bC integration should be a transitional term. In the end, what we want to achieve is four-party online, that is, the data of brands, distributors, stores, and consumers being online.

For brands to ultimately achieve four-party data online, platforms like ours may be indispensable.

Because for a leading brand, an independent system might be an option.

But what about other brands?

It should be the result of the brand's own system connecting with different functional platform modules and data matching.

I think a comprehensive marketing platform should be part of it.

Of course, whether it's us in the end is not certain.

We are willing to participate and wait and see!

Final thoughts:

At the end of the article, let me share my thoughts.

To digitalize the FMCG industry, the 6 million terminal small stores scattered on streets and rural paths are positions that must be captured.

How to connect them and reach the final consumer?

A few leading brands may have the opportunity to build their own independent digital systems, incorporating transactions, logistics, and marketing.

But what about the vast number of small and medium brands?

Is bC integration a trend for a few brands, or a trend for the entire industry?

From the perspective of small store owners, if every brand builds its own system, how can they cope?

The answer is uncertain, but one thing is certain: multi-party online and data integration is the direction.

The logic can be simple, but the real world will definitely be more complex and interesting than logic.

For a leading brand, building an independent system might be feasible.

But for the entire industry, is it more practical to have multi-party participation, different system connections, and multi-source data matching and integration, ultimately presenting a rich and diverse form?

Everything is still evolving.

The characteristic of evolution is that you can guess its general direction, but you cannot imagine its final true form. What are your thoughts on this? Feel free to leave a comment to discuss.