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After starting businesses three times, why did he finally choose B2B?
When most self-operated B2B platforms were becoming heavier, why did he make B2B lighter?
Expanding to three cities in three years with sales reaching 600 million, what makes Kuailai Zhanggui stand out? As the most populous city in China, Shanghai has undoubtedly become a natural experimental ground for various retail formats. At the same time, Shanghai is also the city with the most developed convenience store sector in China, with the three major foreign convenience store brands all gathered here, which is also considered to provide excellent soil for the survival of FMCG B2B. Recently, Kuailai Zhanggui, a B2B platform founded in Shanghai, completed a Series B financing of over 100 million yuan, and after the financing, the market valuation of Kuailai Zhanggui reached 400 million yuan. Under the capital winter, being able to continuously obtain huge financing, what are the exceptional qualities of Kuailai Zhanggui? 1 Starting a business for the third time, founding Kuailai Zhanggui In 1995, Zheng Lei entered China Unicom, which had just established a Shanghai branch, handling data-related business for large banks and securities companies. Although he later left China Unicom to start his own business, his entrepreneurial focus remained in the communications field where he was skilled. It was this experience that made him see people's demand for data and the huge value hidden behind it. The turning point came in 2009. At that time, 3G networks began to prevail in China, industry barriers were weakening, and more and more entrepreneurs entered the communications equipment field. "For example, today a digital camera manual is thicker than a manual for a huge program-controlled device. The simpler the human-machine interaction, the simpler the operation of large equipment," Zheng Lei described the difficulties the entire industry faced at that time. The more people share the same cake, the less each person gets. Facing the shrinking market share, Zheng Lei thought about transformation. By chance, Zheng Lei came into contact with the milk industry, which gave him a new direction for entrepreneurship. "High frequency and rigid demand, with GDP growth, milk sales have also been growing." Although he knew nothing about the FMCG industry before, Zheng Lei, who likes to take risks, chose to go for it. In 2009, he took over the distribution of Bright, Mengniu, Yili, and a dairy brand with the largest market share in Ireland, starting his second business, and began building his own cold storage, cold chain logistics, and opening offline chain stores. At its peak, Zheng Lei had 61 self-operated stores in Shanghai, with monthly sales of over 150,000 yuan per store, annual sales exceeding 300 million yuan, and more than 400 employees alone. As his understanding of the FMCG industry deepened, the drawbacks of this heavy model began to be amplified with the expansion of transaction scale. Heavy investment, low personnel efficiency, and deviation from the internet made the business model increasingly traditional. The idea of using the internet to reconstruct traditional channels began to sprout in Zheng Lei's mind, laying the groundwork for the establishment of Kuailai Zhanggui. Brand collection posted at the entrance of Kuailai Zhanggui's office Finally, Zheng Lei stopped the dairy distribution business at the end of 2014 and gave all the stores to his employees. The following year, Kuailai Zhanggui was officially established. 2 Light warehousing and distribution, heavy systems Kuailai Zhanggui was officially launched on November 10, 2015, one day before Double 11 that year. When asked why he chose this time to launch, Zheng Lei told New Distribution, "We hope that one day November 10 can become a shopping festival for the B2B industry." After learning from the failure of the previous heavy model, Zheng Lei, on his third entrepreneurial venture, abandoned the practice of building self-operated warehousing and logistics that most self-operated B2B platforms insisted on. At that time, the common perception in the domestic industry was "the heavier the model, the higher the competitive barrier," but Zheng Lei disagreed. "Our warehouses and delivery vehicles and drivers come from third parties, but that doesn't mean we don't attach importance to warehousing and distribution." Zheng Lei emphasized to New Distribution that for the warehousing and distribution link, Kuailai Zhanggui developed a dedicated backend system to grasp the work efficiency of each driver and picker, implement strict control, effectively reduce backend costs, and improve the work efficiency of warehousing and distribution personnel, maximizing the efficiency of the entire backend system. When asked why the backend system was not outsourced to a third party, Zheng Lei frankly told New Distribution: "We have looked at many TMS and WMS systems in the industry, but they are not very suitable for startups that emphasize efficiency optimization. So we started to develop a system suitable for ourselves according to our own business processes. We believe that software should be two steps ahead of business processes, so that we can predict and change in advance." At the market level, Kuailai Zhanggui uses a field service software system to monitor the work trajectories of sales personnel in real time, ensuring their work efficiency. For example, the backend system can calculate the visit efficiency of sales personnel based on the time from photo location to the user's first order. The shorter the time to close a deal, the higher the visit efficiency, and vice versa. After placing an order, users can see the order status in real time on the APP, from picking to shipping to delivery, so they know when the order will be delivered. "Many users in B2B ordering are most worried about when the goods will be delivered. When we clarify all processes, the complaint rate naturally decreases." At the application level, Kuailai Zhanggui can dispatch more than 2,000 orders within half an hour, complete the matching of orders and vehicles, and achieve a loading rate of over 95%. In terms of product sorting, Kuailai Zhanggui has basically achieved paperless sorting of orders and tracks the work efficiency of each picker, allowing for timely identification and retraining of less efficient employees. 3 Full-process online, efficiency is the core After more than two years of development, Kuailai Zhanggui has covered nearly 40,000 stores in East China, including over 30,000 in Shanghai, 7,000 in Suzhou, and over 2,000 in Taizhou. In 2017, the platform's transaction volume reached 250 million yuan, and in 2018, it is expected to achieve 600 million yuan. In terms of penetration rate, Zheng Lei revealed to New Distribution that users place orders on Kuailai Zhanggui 6.2 times per month, far higher than most B2B platforms in the industry. The time when users place orders is also a criterion for measuring the penetration rate of B2B platforms. In the traditional model, salespeople visit stores during the day, and most store orders are concentrated during that time; but the difference between daytime and nighttime orders on Kuailai Zhanggui is relatively small, and even sometimes, users continue to place orders between midnight and 4 a.m. Analyzing the reasons why Kuailai Zhanggui can achieve such a high penetration rate, New Distribution believes the main points are as follows: 1. From inside out, gradual penetration Unlike other B2B platforms that choose rapid expansion, Kuailai Zhanggui has chosen a "from inside out" development approach since its establishment, that is, gradually expanding outward from central areas with high store density. "The higher the store density, the lower the distribution cost, and the higher the order fulfillment efficiency." When competitors' logistics costs are still hovering between 5% and 6%, Kuailai Zhanggui has controlled it within 3.5%. 2. Online payment Since its establishment, Kuailai Zhanggui has required all orders to be paid online. "After a user places an order, if payment is not made within 10 minutes, the order is automatically cancelled," Zheng Lei told New Distribution. The benefits are obvious: online payment avoids the phenomenon of a large number of offline accounts receivable, all accounts are clear and traceable, optimizes the product delivery process, saves delivery time, and reduces the investment in financial personnel. On the surface, the cost of educating users is high, but in reality, the marginal cost will become lower and lower. For customers who cannot pay online due to age or other reasons, Kuailai Zhanggui simply abandons them. Zheng Lei believes that some customers need careful service, but serving some customers consumes a lot of time, manpower, and material costs, slowing down the efficiency of the entire supply chain. The cost of serving such customers is even greater than the benefits they bring. In this case, it is better to abandon them directly than to provide services. 3. Optimize service processes Handle after-sales issues online and optimize service processes. Many companies have set up dedicated service centers, but because many links are involved, cross-departmental collaboration is often required, resulting in low efficiency. Moreover, a large proportion of customers, when communicating with customer service personnel, are not actually solving problems but complaining about the platform's service. Kuailai Zhanggui's approach is to guide customers' issues to online resolution. "This way, users spend less time complaining to the platform through text and images; at the same time, because complaints and after-sales issues are digitized, we can also make targeted adjustments and optimizations, so we only have 4 online after-sales service personnel." 4. Field sales personnel are mainly assessed based on the number of new stores opened Kuailai Zhanggui's efficiency is also reflected in the KPIs of field sales personnel. Currently, the KPIs of field sales personnel in most FMCG B2B platforms are still linked to GMV. Although this can bring overall GMV growth, it is common for sales personnel to visit large stores rather than small ones, or only sell to secondary wholesalers. In contrast, the KPIs of Kuailai Zhanggui's field sales personnel are only linked to the number of new stores opened. This is why Kuailai Zhanggui can maintain an increase of more than 1,000 new stores per month with only 28 field sales personnel in Shanghai. "The main task of sales personnel is to develop new stores, but this does not mean that they don't take care of developed customers," Zheng Lei told New Distribution. Store maintenance still takes up 10%-20% of field sales personnel's time. Big data tells sales personnel which stores to visit and which not to visit. For example, if a store places orders on the platform every week, it means the store is relatively mature. If the store suddenly stops ordering for several consecutive weeks, it may mean that the store is sourcing from other channels, which requires sales personnel to visit and provide feedback, and formulate corresponding strategies to reactivate the store. Another situation is when the order frequency and order volume of a store suddenly surge, which also requires platform vigilance. As B2B gradually moves towards deeper development, its role will inevitably undergo significant changes. When discussing future development, Zheng Lei believes that channel reform is ostensibly a redefinition of the roles of various participants, but in reality, it is a redistribution of interests among levels. In this process, B2B should define itself as a service provider, not a simple trader, and serve the market and brand owners solidly, and naturally there will be room for survival in the market. The greatest value of B2B lies in achieving a deeper connection with the C-end consumers behind retail stores, which undoubtedly offers even greater imagination space. On October 21-22, during the Autumn Sugar and Wine Fair, New Distribution will host the '2018 FMCG City Distribution Logistics Conference'. At that time, we will invite industry experts, FMCG warehousing and distribution specialists, and distributors who have transformed into unified warehousing and distribution platforms to discuss and answer questions about the future development trends of FMCG city distribution logistics and practical cases of distributor transformation to unified warehousing and distribution, under the theme 'New Distribution, New City Distribution'. We hope to bring you different inspiration and thinking! Conference Time October 21-22, 2018 Conference Location Hunan · Changsha Gaoqiao International Commodity Exhibition and Trade Center Conference Content 10.21 Day 1 Sub-venue: "2018 Changsha · Regional King Development Alliance Conference" 8:00-17:00 Focus on sharing resources of regional major distributors, leading the new S2B2C business era 10.21 Day 1 Evening 18:30—21:00 Private board closed-door exchange dinner (VIP) 10.22 Day 2 Morning Main Venue: "2018 China FMCG City Distribution Logistics Conference" 9:00-9:20 Ren Xiaodong, Secretary-General of FMCG Association and Partner of New Distribution: Launch and speech of China FMCG City Distribution Alliance project 9:30-9:50 Zhao Bo, Founder of New Distribution: Same-city logistics: the most effective transformation and upgrading path for distributors 9:55-10:15 Wang Qi, CEO of Weijie City Distribution: "Follow the rhythm of commercial flow changes, focus on platform construction" 10:20-10:40 Chen Siting, CEO of Wanchaobang: "New city distribution is a key link in supply-side reform" 10:45-11:05 Xu Yonggang, CEO of Maidelin: "Differences between traditional warehousing and distribution and digital warehousing and distribution" 11:10-11:30 Mu Weiwei, CTO of Zhoupu Software: "Technology-driven efficiency improvement in unified warehousing and distribution" 11:35-12:05 Roundtable forum: City distribution, what exactly should we earn from? (Yishang Logistics, Gongwu Logistics, Kaidongyuan, Yuncangpei, Chengpu Logistics) 10.22 Day 2 Afternoon Main Venue: 14:00-14:20 Sheng Yan, Yijia Logistics 14:25-14:45 Wang Jianjiang, CEO of Hailian Tianxia 14:50-15:10 He Yan, Fengwang 15:15-15:35 Zhong Shuo, CEO of Wangcang 15:40-16:00 Rong Jun, Jiangsu Huashang City Distribution 16:05-16:25 Lu Lixin, Gongwu Logistics 16:30-16:50 Roundtable forum: Distributors in the same industry don't enter the warehouse, how to break through? Representatives of distributor transformation to warehousing and distribution: Yunbang Logistics, Jingmen Pengdun Meiyitian, Sanxian Lianggou, Jiangsu Huashang City Distribution, Jingwei Logistics List of Participating Companies In no particular order Hunan Zonglan Diandan Network Technology Co., Ltd. Jingbang (Wuhan) International Freight Forwarding Co., Ltd. Mengniu Dairy Qinghai Hanxiang E-commerce Co., Ltd. Unilever Service (Hefei) Co., Ltd. Shanghai Branch Huicong Hunan Xuan'ang Food Co., Ltd. Guangzhou Tongdaoren Information Technology Co., Ltd. Qingdao 888 Trading Co., Ltd. Uni-President Enterprises (China) Investment Co., Ltd. Hunan Province Zhongxiang Gongpei Logistics Co., Ltd. Shenglong Ingredients COSCO Shipping Logistics Warehousing and Distribution Co., Ltd. Guangxi Yongpai Wine Industry Co., Ltd. Shangqiu Kangrong Trading Co., Ltd. Jinan Dingzhong Trade Co., Ltd. Liaoning Bimai Agricultural Technology Co., Ltd. Kunming Xiongjia Trading Co., Ltd. Shaanxi Houheng Trading Co., Ltd. Guangzhou Dingwo Enterprise Information Consulting Co., Ltd. Shaodong Jiajiale Commercial Firm Boda Trading Industrial Bank Changsha Branch Wuhan Muchen Convenience Store Chain Co., Ltd. Fujian Fuxing Yuncang Logistics Co., Ltd. Guizhou Yilimi E-commerce Co., Ltd. Jiangxi Xiao Laoer E-commerce Co., Ltd. Jinshan Koufu Shanxi Taihang Yuanjing Supply Chain Management Co., Ltd. Shanxi Dezhun Supply Chain Management Co., Ltd. Shaoyang Tongdeli Trading (Xiangbang Logistics) Huanfu Tongda Express City Distribution Beijing Xinjingxiang Food Co., Ltd. Wuhan Huizhong Tianhong Wine Industry Co., Ltd. Changsha Paide Biotechnology Co., Ltd. Chaoan Tuqiang Guizhou Yihe Bopin Supply Chain Management Co., Ltd. Jiangxi Kang'en Industrial Development Co., Ltd. Xiangtan County Yisuhe Town Yuhua Paper Store Luoyang Yuanlang Trading Co., Ltd. Tongchuan Yaozhou District Huayuan Supermarket Co., Ltd. Hunan Yongfu Jiujiu Trading Co., Ltd. Zhejiang Chengchengtong Logistics Co., Ltd. Chongqing Kaiguo Materials Trading Co., Ltd. Beijing Xianmaixianmai Data Technology Co., Ltd. Hanchuan Qixing Trading Co., Ltd. Tongxin Jiuzhi Trading Co., Ltd. Guizhou Meiguo Guoguo Network Technology Co., Ltd. ...... Representatives of Distributor Transformation (Proposed) In no particular order Rong Jun, Chairman of Jiangsu Huashang City Distribution Network Co., Ltd. Wang Bo, Chairman of Hubei Yijiaren Logistics Co., Ltd. Jiang Shuming, General Manager of Sichuan Chengdu Xingrenxing Trading Co., Ltd. Liu Jichen, Chairman of Shandong Yunbang Warehousing and Logistics Co., Ltd. Tu Mingyu, Chairman of Chongqing Lingyu Consumer Goods Supply Chain Management Co., Ltd. Yang Su, Chairman of Guangzhou Zhongshan Wanrong Marketing Co., Ltd. Yuan Xia, Chairman of Sichuan Bajie Supply Chain Management Co., Ltd. Li Qiangyun, Co-founder of Hubei Pengdun Meiyitian Supply Chain Management Co., Ltd. Zhang Jianyong, Chairman of Henan Xuchang Jiulegou E-commerce Co., Ltd. Ma Haichao, Founder of Hebei Changyi Logistics Co., Ltd. Meng Yucun, General Manager of Hebei (Chengde) Wulian Yuncang Co., Ltd. Zhang Xun, Chairman of Xinjiang Urumqi Su'an Jinchi Logistics Co., Ltd. Zhang Hailing, Chairman of Jilin Sanxian Lianggou Qiang Huitao, Founder of Hebei Dunjie Supply Chain Management Co., Ltd. Liao Lei, General Manager of Hunan Damei Supply Chain Management Co., Ltd. ...... 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