On March 26, Huabin Group's Guangzhou branch issued a notice: to maintain the stability of the market price system and protect the interests of distributors and channel customers, in accordance with the unified deployment and requirements of the Southern Market Theater, distributors are to completely stop supplying to Lingshoutong, and Red Bull distributors are not allowed to act as TP providers for Lingshoutong on the platform. Penalty measures were also issued.

While everyone speculated that brands were starting to counterattack and ban B2B platforms, the next day, March 27, Huabin Group's Fujian branch issued another notice:

Review all channel customers in the region that have cooperation or supply relationships with e-commerce, clearly requiring them to stop supplying to online platforms and only continue normal cooperation through traditional offline channels, to maintain normal market order. At the same time, Red Bull designated "Bestore" as the designated e-commerce partner, stopping other B2B online sales platforms.

Regarding the issue of brands banning certain B2B platforms, New Distribution conducted discussions with major B2B platforms and brand representatives in the "B-end E-commerce Discussion Group" and "Brand New Retail Exchange Group," and we have compiled the insights for our readers.

1 Reasons for the Ban Why do brands ban B2B?

According to Nielsen data, in 2014, Nielsen tracked 15,000 new product launches, and by 2015, only 50 were still on the market. Nielsen's latest statistics show that in 2017, the number of new products launched in China's consumer goods market reached 25,473, a 15% increase from 2015.

Liu Chunxiong believes that although the number of new product launches has increased, most of these new products have become short-cycle products, with 70% having a survival cycle of less than 18 months. Many new products that "barely" survive are just "a flash in the pan." For brands, successfully launching a new product is not easy, and with such a high mortality rate, every brand cherishes the ability to extend a product's life cycle.

Chen Siting, founder of Wanchaobang, gave an example: A leading brand with Asia's largest food research institute developed over 1,000 products in nearly 10 years since 2008, with over 600 launched for trial sales. Now, about 7-8 new products are successful, supporting over 70% of the company's profits and 50% of revenue.

Successful products require over 3 billion yuan in advertising and marketing expenses, with more than 5,000 distributors and 30,000 sales personnel nationwide, working for 3-4 years at the shortest and 7-8 years at the longest to develop new products. Such investment and effort.

Chen Siting stated: B2B should pragmatically consider where it creates value, rather than taking away what others have already made. Why should you be entitled to take the dumplings someone else made?

Xu Jiabao, founder of Caigege, believes that if platforms disrupt prices, brands really need to "cut off" them. Brands have invested heavily in products and channels, and B2B, relying on current funding, does whatever it wants, even if it's the "biological father," it's not acceptable.

Summary 1: Reasons for brands banning B2B: Price stability is the lifeline of mature brands; price chaos means product chaos, and behind a mature product is years of brand effort. Price disruption is fatal.

2 B2B's Dilemma

Gong Tao of Huijinhuo believes that if B2B does not represent brands, it lacks stable supply, but if it represents brands, it must comply with the brand's price system. Balancing this is a challenge.

Guo Huixiong of Zhangshanghongcheng stated that for B2B platforms, channel diversion is one of its basic functions. However, price chaos is relative and not caused by B2B. Maximizing inventory sharing within a region (channel diversion) is one of the value foundations of B2B.

If you don't have goods, it's better to find a distributor than a platform. B2B has orders; it's better to find a manufacturer than a distributor. Price chaos is indeed the lifeline for some products, while channel diversion is a market lubricant.

Chongqing Yishenghuo Xiangshang proposed five points of B2B's dilemma [only for strong brands with offline marketing teams and controllable sales networks]:

Dilemma 1: B2B's current market share is still small; strong brands won't focus on small issues and ignore the big picture, maintaining B2B while giving up traditional networks.

Dilemma 2: The emergence of B2B not only impacts traditional sales networks but also impacts the internal sales assessment system of brands; sales on B2B platforms are not included in the assessment of sales representatives, making it compete with the brand's own sales reps for business.

Dilemma 3: Manufacturer promotional policies, such as buy 100 get 10, are designed for traditional distributors or policies controlled by sales reps; B2B cannot enjoy the same treatment.

Dilemma 4: Traditional distributors have three major functions: "capital, warehousing, and distribution." B2B basically handles all categories with thousands of SKUs, but cannot undertake the capital (prepaid agency rights) and warehousing (manufacturer pressure to stock) functions.

Dilemma 5: The weapon to break the deadlock is price—look at the rise of all e-commerce; which one didn't rely on bloody price penetration?

As for whether manufacturers need B2B to increase volume and coverage, especially in remote areas and corners, this possibility is very small. First, the total number of B2B ground promotion teams is not even a fraction of the manufacturer's sales reps. If manufacturers can't do it, can B2B? Second, unified warehousing and distribution or centralized procurement and delivery require high-density routes and high-quality, large-order stores, which can only be in mature main battlefields. In remote corners, districts, counties, and townships, how can distribution costs be absorbed?

Summary 2: B2B's helplessness: In terms of market share, B2B is still in its infancy and expansion phase. The core goal of B2B at this stage is to gain market and terminals. How? The fastest and most effective way is to use low prices on traffic-generating products (mature products) to gain market share, but this violates traditional market order. It's impossible to satisfy all interests.

3 Brands' Perspectives

"Haoxiangni": The current state between B2B platforms and brands is similar to the early stages of e-commerce, with both contradictions and opportunities.

"Suntory": B2B is a pain point for brands. In mature regions, brands hope to deepen their presence through their own distribution personnel and do not want B2B to intervene. In immature regions, they hope to penetrate through B2B platforms, but there's no volume. If brands insist on sales volume, they will definitely disrupt the price system. Currently, sales personnel treat B2B as a new channel, but in fact, B2B should be a new distribution model. When brands need sales tasks, they want B2B platforms to generate volume, but without disrupting prices. Can they have both?

"Huiyuan": Huiyuan is constantly complained about by offline distributors. Now distributors have a new excuse for slow payments: e-commerce (B2B) prices are too low. Sometimes it's true that online prices are lower, but during expansion, it's common to use low prices to gain volume, then stabilize.

"Sanquan": Don't overestimate the current role, don't underestimate future impact. Ultimately, whoever has stronger consumer stickiness will have more say.

"Tsingtao Beer": Both sides need an open mindset and should not close the window of cooperation.

"Master Kong": We will resolutely defend our price system at all costs.

Summary 3: Brands' perspectives: They understand B2B's current stage and recognize that channel digitalization is inevitable. However, most brands haven't figured out how to adapt to the upgrade, but it's certain that the current B2B model is not what they want.

Regardless of the real reasons behind Red Bull's choice to ban Lingshoutong and embrace Bestore, Red Bull, as a leading brand in the domestic FMCG sector, reflects the industry's "embarrassing" status with its two attitudes toward B2B: Both B2B and brands are in a painful period, one side wants market share and traffic, the other wants market order and stability.

In fact, brands recognize B2B, but at this stage, B2B and brands still face several issues: first, conflict; second, B2B's current market share is still small; third, both sides lack effective communication mechanisms.

Currently, B2B platforms need to strengthen their data capabilities. Brands value B2B's data capabilities most, but at this stage, the data granularity of platforms is very limited, and data cannot serve as an effective decision-making basis for brands. When B2B lacks data capabilities, brands will define B2B as "E-wholesale." Once defined as wholesale, it leads to a result: cash on delivery, and it's hard to get the same treatment as distributors.

New Distribution's View: B2B is in its development phase, and there are more or less misunderstandings between the two sides. The exploration period is inevitable. Brands should have a more open attitude and maintain communication with B2B. B2B should understand the determination and importance of brands to maintain prices at this stage. Both sides should establish a proper dialogue mechanism, communicate more, and understand each other to achieve a win-win situation.

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