On May 6, a dealer surnamed Zhang from a certain place in East China suddenly called me, asking, "Can unified warehousing and distribution still be done?" At the time, I was a bit puzzled—was it no longer viable? He told me, "Previously, dealers were quite enthusiastic about unified warehousing and distribution, but recently it seems to have gone quiet. What's the reason? Have they all died?" After chatting with Mr. Zhang for nearly half an hour, hanging up made me ponder his doubts. Indeed, compared to the previous heat, unified warehousing and distribution now seems a bit cold. Two years ago, unified warehousing and distribution was hot Reflect on the past, see the present clearly, and grasp the future. The concept of "unified warehousing and distribution" became well-known in the industry around 2016, when internet giants like JD.com and Alibaba moved offline, with the slogan of restructuring and transforming the FMCG distribution chain. At that time, traditional distributors were in an uproar. Facing cross-border attacks from giants and entrepreneurs with internet thinking, traditional businesspeople began to seek "life-saving" solutions. Frankly, in the past, thanks to China's demographic dividend and growing consumer demand, dealers could achieve annual sales growth of 20%-30% as normal, routine operations. But after 2013, as incremental growth turned to stock, competition became fierce. Adding insult to injury, rising labor costs began to spread anxiety among dealers. The entry of JD.com, Alibaba, and many entrepreneurs fully ignited that anxiety. It's like only thinking about seeing a doctor and maintaining health after getting sick; dealers are the same. With tough times and barbarians at the gate, many dealers considered transformation. Where to turn? The easiest thought was "alliance." They could unite with neighboring dealers, share a warehouse, share a vehicle, reduce costs, share resources, and band together to resist external threats. At that time, the sharing economy happened to be at its peak. As more dealers transformed into warehousing and distribution, the industry's trend took shape, and unified warehousing and distribution emerged. Dealers calculated: "Originally, 10 vehicles delivered to one store; after unified distribution, one vehicle could handle it. Originally, 10 dealers had 10 warehouses, with obvious off-peak seasons and severe waste; after unified warehousing, it becomes one warehouse, with cross-use of warehouse space, both uniting and reducing costs." At this time, B2B was also advancing rapidly, whether for empowerment or efficiency, everything seemed harmonious. On the other hand, capital was continuously increasing investment in B2B, and entrepreneurs based on same-city logistics were also enjoying dividends. In December 2017, warehousing and distribution service platform Wanchaobang completed a Pre-A round of financing of tens of millions of yuan; in January 2018, warehousing and logistics platform Kai Dongyuan Logistics received 110 million yuan in funding from GLP Finance; in June 2018, city distribution platform Weijie City Distribution announced a B round of financing of 116 million yuan. Meanwhile, JD.com and Alibaba launched joint warehouse and front warehouse projects respectively. Behind the heat, there must be opportunities. Although in terms of dealer numbers, the FMCG industry absolutely leads compared to other industries, quantity is useless because dealers lack corresponding organizations, the industry is highly fragmented, and warehousing and logistics configurations are highly repetitive. Moreover, goods go from factory to dealer to second-tier wholesaler to retail store, with multiple links, multiple turnovers, and multiple deliveries, wasting a large amount of social resources. There are nearly 800,000 dealers/second-tier wholesalers nationwide, meaning 800,000 warehouses nationwide. According to Chen Siting, founder of Wanchaobang, the waste in warehousing and logistics behind FMCG products is on a scale of tens of billions. The history of commerce is the history of operational efficiency upgrades; inefficiency and waste must be broken. On the other hand, the external environment is also driving changes in warehousing. With the further advancement of large-scale urbanization in China, economic laws are pushing dealers out of cities because land in urban areas is becoming more expensive, and warehouses are unaffordable. This is the reason why many dealers, warehousing and distribution entrepreneurs, and venture capital institutions are flooding into the warehousing and distribution track, seeing the opportunity for efficient integrated warehousing and distribution, as well as the value of data, finance, and resources behind it. But behind opportunities often lie challenges; ideals are plump, but reality is skinny. Today's unified warehousing and distribution is a bit cold Unified warehousing and distribution is a business, but perhaps not a good one. A Mr. Wang Bo from a logistics company in Hubei made a remark that left a deep impression on me: "If there is an industry where you earn negligible money while worrying like you're selling drugs, then transforming into unified warehousing and distribution must be one of them." After practical work in 2017 and 2018, looking back, it seems that unified warehousing and distribution was not as beautiful as initially imagined. The theoretical logic is reasonable, but reality hits you hard! Unified warehousing and unified distribution simply don't save money. On the contrary, costs are higher, and there are diseconomies of scale. Pallets, forklifts, pallet jacks, system support, high-level shelving, automatic sorting lines—these "high-tech" hardware investments, as well as software talent requirements, cause costs to rise sharply. Not only that, but internal management coordination and recruiting dealers to enter the warehouse are not easy tasks. Therefore, a consensus has gradually formed in the industry: "You can't make money from dealers, and you can't earn dealers' money either." Why? In the traditional distribution chain, there is no room to compress profit distribution. Taking companies with heavy deep distribution as an example, dealers of Unilever and Master Kong basically earn only warehousing and distribution profits; you can't share in that. Originally meant to serve dealers, but unable to collect fees, the business looks prosperous—warehouses full, vehicles coming and going—yet it hovers around slight losses or breakeven. This is the awkward situation facing dealers transforming into unified warehousing and distribution today. Is it an opportunity or a trap? Warehousing and distribution for FMCG is like e-commerce for express delivery. Looking back at the rise of express delivery, it was a process from 0 to 1; express delivery gradually became popular with the rise of e-commerce. Warehousing and distribution, on the other hand, has been accompanying commodity circulation since the market economy, when the supply and marketing cooperative system shifted to individual dealerships. To achieve integrated and intensive warehousing and distribution, unified warehousing and distribution is like a process from 1 to 0 and then to 1. Only by first breaking the inherent traditional warehousing and distribution can new warehousing and distribution be reconstructed. This process faces many challenges. It's easy to build high-rise buildings on ruins, but extremely difficult to rebuild a forest of high-rises on flat land; many "nail households" will stand in your way. Since you can't make money from dealers, some suggest empowering dealers by providing finance and systems, but dealers don't seem to buy it. If you talk about empowerment too much, you're easily seen as a fraud. Dealers have been in this business for years; first, they have a cost mindset. When manufacturers ask dealers to add people and vehicles, the first thing they think of is how much costs will rise. In my view, cooling down now is actually a good thing. Only by looking at it rationally, not blindly following trends, thinking rigorously, and advancing pragmatically can we see clearly how to move forward. Where is the path for unified warehousing and distribution? Endurance is the basic strategy, especially for old city renovation. Everything takes time from birth to growth; in the early stages, you won't see much effect, but once it develops, it may be fatal to traditional industries. The current lack of success and the current coldness do not mean that new things cannot adapt or do not conform to business laws. At the 2018 FMCG City Distribution Logistics Conference organized by New Distribution, the host asked several dealers who were trying to transform into unified warehousing and distribution, some with slight losses and some profitable. When asked, "Since city distribution is so difficult, if time could go back a year and you could start over, would you still do it?" The dealers firmly answered that they would persist. Why? Because they know that transformation is never about surviving today, but about whether they can survive tomorrow and live better in the face of a changing environment! To describe more objectively the business format of dealers transforming into unified warehousing and distribution, I also called several dealers that New Distribution had previously focused on. After shedding the fantasies of past passion, they admitted that although the transformation process was full of ups and downs, they have now stabilized. Warehousing and distribution services are not simply unified warehousing and unified distribution; compared to the past extensive management of trade, doing warehousing and distribution services requires more patience, step by step, down-to-earth. Unified warehousing and distribution is only the first step; there are several more steps ahead. In New Distribution's view, unified warehousing and distribution is just a business form, not a business model. Each dealer transforming into warehousing and distribution, due to different resource backgrounds and thinking dimensions, forms different business models based on warehousing and distribution services. In summary, they can be divided into three categories: First, FMCG warehousing and distribution service providers. They solely provide warehousing and distribution services to dealers, generating revenue through services. This is the common form of transformation into unified warehousing and distribution. For such dealers to be profitable, the key lies in refined financial control and planning of warehoused items. Financial control simply means that in the mid-to-late stages, each dealer entering the warehouse must be considered for profitability. In the early stage, strategic losses are acceptable, but in the mid-to-late stages, strict control is necessary. For warehoused items, if there is no significant cost advantage in basic warehousing and distribution services, other services must be considered, such as split-picking operations. Therefore, in the structure of warehoused items, the proportion of snacks, daily chemicals, and general merchandise should be greater than that of beverages, especially high-frequency, low-margin items like Master Kong, Unilever, and Coca-Cola. Second, local warehousing and distribution service providers. In addition to providing warehousing and distribution for the FMCG industry, they incorporate more diverse business scenarios, such as hardware, maternal and child products, catering, agricultural products, and even provide landing distribution services for national e-commerce platforms. Of course, there is also the recent hot project: community group buying, providing warehousing and distribution for community group buying companies. With the local area as the business radius, they integrate fragmented local warehousing and distribution businesses. Third, FMCG warehousing and distribution platform operators. Based on warehousing and distribution, they may incur strategic losses in the early stage or break even. There are two types of profit directions: First, connect with upstream manufacturers, choose differentiated items, jointly operate with warehoused dealers through joint ventures, with the platform holding hidden equity. Relying on warehousing and distribution, they expand commercial flow; second, connect with downstream small stores to extend diverse business opportunities, such as community group buying and B2B businesses. The cooling down does not mean this path is impassable; on the contrary, because of the calm, dealers become more rational and pragmatic. The road of unified warehousing and distribution is just beginning... No matter how the FMCG supply chain upgrades or transforms, one thing remains unavoidable: goods must pass through warehouses and distribution to reach stores. Warehousing and distribution is the throat of the FMCG supply chain; if you endure, you can see the dawn of victory! As for how to endure, my suggestion is that the first priority is to do financial control well and ensure breakeven. Regardless of the business model, first treat warehousing and distribution services as a business, and a business must make money. For example, gradually eliminate dealers who don't bring profit; second, increase more revenue sources, such as accessing supply chain financial services and providing warehousing and distribution for matchmaking B2B platforms; third, if there's an opportunity, join a larger city distribution network to take orders from national to local levels. 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