Introduction: Why haven't you made a profit after doing B2B e-commerce for so long? China's FMCG B2B sector began exploring business models from late 2014 to early 2015, reaching explosive growth by 2016, showcasing the astonishing speed of internet business models. In this turf war, over 2,000 B2B companies are dividing the market, with more than 8,000 urban sites (including direct, franchise, and joint operations). In first-tier cities like Beijing, Shanghai, Guangzhou, and Shenzhen, hundreds or even thousands of B2B projects operate simultaneously, including numerous fresh food, beverage, and urban distribution ventures, with countless self-operated and matching models. The reason for this boom is riding the wave of commodity business model transformation. Almost all FMCG distributors nationwide see the internet's strength, and its penetration into their traditional domain is only a matter of time. Some distributors already feel a chill. Under the severe impact of internet disruption, economic downturn, rising operating costs, product homogenization, and disorderly competition, FMCG distributors almost all feel the urgency to transform. Some have already transformed or are in the process: some into manufacturers with their own factories, some into brand operators with authorized OEM, some into e-commerce with their own internet platforms, and some have joined the B2B e-commerce army. With the rise of the internet and the impact of e-commerce, the flow of goods and capital will inevitably change direction according to changes in consumer habits. Today, you can scan to pay at breakfast stalls, small shops, and even mobile fruit vendors at community gates. Did you see this scene two years ago? We can't remember the exact day small vendors started accepting scan payments, but we must recognize that a new era of commodity business models has begun! The transformation of traditional business models is urgent. Against this backdrop, distributors of department stores and FMCG, most severely impacted by the internet, are moving online with reverence and aspiration. Without the "diamond drill," do you dare take on the B2B porcelain job? As mentioned earlier, there are over 8,000 urban operating entities nationwide, of which more than 90% are FMCG distributors joining through cooperation. How are these distributors performing after joining B2B? What is their current profitability? Due to work needs, the editor visited over 80 franchisees across the country who are striving in B2B projects. During the visits, I gained deep insights into the development and operational issues of B-end e-commerce. Optimists feel they are striding on the road to profitability, confident despite not yet being profitable; pessimists feel profitability is far away and begin to doubt "life." The editor believes that the market demand for procurement, supply, and sales has always existed and is rising year by year. B-end e-commerce merely migrates offline procurement, supply, and sales online, leveraging the internet's economy, convenience, cost reduction, and customer pain points. Since demand exists, the basic B2B model is not a false need. Whether optimistic or pessimistic, this is only subjective judgment. Returning to reality, how many friends who joined B2B cooperation nationwide are truly profitable? The answer is: very few... Most are even losing heavily. Is it missing the "diamond drill"? After the visits, the editor summarized that franchisees of B2B projects give a host of reasons, such as insufficient headquarters support, uncooperative end customers, uncooperative suppliers, low profits, and the need to slowly cultivate the market. The editor believes these reasons are not the cause of B2B franchisees' lack of profitability but rather excuses to cover poor operations. Consider: if headquarters sends manpower and financial support, why not run direct operations? Why cooperate with you? End customers and suppliers are uncooperative due to concerns; you need to address the root causes. Effort may not bring results, but no effort brings no good results! Low profits? B2B exists to reduce channel costs; its core profit is not product markup! Need to slowly cultivate the market? By the time you cultivate it, the market will have nothing to do with you! Looking from another angle, if these reasons were satisfied, would you definitely succeed and profit? Not necessarily! I think the main reason for lack of profitability is that you haven't transformed internally. Distributors transforming to B2B is not just talk. Even if you dominate the traditional industry, rule a region, and hold first- and second-tier brands, that doesn't mean you won't need the internet in the future, nor that you can resist its impact, nor that you don't need the "diamond drill" to operate B2B! At this point, I must mention a small but representative group of FMCG distributors who transformed to e-commerce by developing their own WeChat malls or mobile apps for online sales, jumping in without understanding what they were doing. They didn't know if they were doing e-commerce for its own sake or imitating the trend. But this group either lost heavily, suffered major setbacks, or both, and some even closed before officially opening, never understanding why they failed. Is using the internet for sales e-commerce? E-commerce, short for electronic commerce, is not a sales tool but a business model; the internet platform carrying the business model is the tool. Can you go far with only a tool without a model, thought, or soul? A simple example: give you a truck, can you profit without goods? Give you goods, can you profit without knowing how to operate? The B2B platform is that truck! Where is the "diamond drill"? Since transforming to B2B is not just talk, what should you do? Perhaps your traditional business urgently needs to join B2B to resist external shocks, or you've already joined a B2B platform and are mired in losses, or your outsourced WeChat mall or mobile app continues to invest with no profitability in sight... Only turning losses into profits is the sole option for survival. Based on personal experience, the editor summarizes nine thresholds that must be crossed to obtain your diamond drill. With the drill, why fear the porcelain job? First Threshold: Full Category Expansion Complete Products, One-Stop Shopping With industrialization, the consumer market is booming, and a rich variety of goods floods the consumer market, especially colorful FMCG products filling retail shelves to the brim. New products launch with a bang, old products get a new look to join the fray. Competition in FMCG sales has shifted from service to price wars. After several rounds of price wars, channel profits have been redefined, promotion costs keep rising, and distributors have to subsidize promotions from their meager profits. Round after round of promotions boost sales but eat into profits, eventually "cultivating" a market habit of no promotion, no sales. Industry-wide profit margins are declining, and distributors lament that sales grow but profits fall or even decline. No profit growth signals loss risk; labor costs, social insurance funds, CPI, and other expenses rise yearly, and higher sales volume leads to relatively higher financial costs. Under competitive pressure, FMCG distributors begin to change their approach, from representing one factory's products to multiple factories, from single category to multi-category—a positive leap. Distributors of subsidiary foods start representing alcoholic beverages; those in snacks also represent washing and chemical products. This leap is successful: selling more categories through the same channel not only increases customer attention and stickiness but, more importantly, spreads delivery costs and increases profits without adding extra operating costs. This approach is also necessary for today's B-end e-commerce. The richer the B2B platform's categories, the more attention and logins, and the more purchase opportunities. A B2B platform should be an internet-based large comprehensive wholesale market, meeting the needs of terminal customers at all levels and channels, allowing comparison and choice, and enabling one-stop shopping to solve terminal procurement pain points! B2B supply chains distinguish between professional supply chains and comprehensive supply chains, but both must possess professional operational service. Professional supply chains emphasize complete and precise product specifications within their specialty; comprehensive B2B supply chains emphasize broad and complete categories. For example, a professional alcoholic beverage B2B supply chain would segment by regional consumption differences, including liquor aroma type, alcohol content, price, brand, and specification, meeting terminal procurement needs, while also selling related peripheral products. A comprehensive B2B supply chain must strengthen multi-category, multi-specification, and multi-brand offerings. For instance, a comprehensive B2B supply chain's category distribution includes: snacks, dairy, candy, beverages, alcoholic drinks, grain and oil, subsidiary foods, meat products, fresh produce, seasonings, washing and daily chemicals, household paper, stationery, home goods, general merchandise, etc., covering all aspects of daily life. Although traditional distributors have begun expanding product categories, it's far from enough. Imagine: if you go shopping at a supermarket, would you choose a large hypermarket with a wide range or an ordinary convenience store? The answer is surely the former, right? In the B2B field, broad categories, complete specifications, and many brands are core to enhancing platform competitiveness. Traditional distributors transforming to B2B primarily offer their own represented products, and no matter how many brands they represent, they cannot meet customers' one-stop procurement needs. Rich SKUs are the most basic and unavoidable condition for a B2B platform to increase visit and order rates. Second Threshold: Organizational Support Clear Division of Labor, Seamless Coordination A B2B platform with rich categories is clearly not enough; it also requires a dedicated team to operate it carefully. Current distributors have jumped from individual businesses to trading companies, but their corporatization hasn't improved just because they entered the company ranks; they still operate with an individual business mindset and system. The company has grown, but team building hasn't reached the corresponding level. Department setup and staffing remain almost unchanged, still inheriting the individual business era's basic departments like internal affairs, finance, and sales, completely following the boss's or boss's wife's orders. Apart from attendance and penalty systems, there are no other company rules, let alone departmental regulations or standard work processes. Personnel lack positioning, positions lack responsibilities, and one person holds multiple roles without clear authority—how can efficiency be achieved? In modern enterprise management, there is a complete management system evolved from the post-target responsibility system of previous years. E-commerce enterprises have upgraded and repositioned this system. Targets are digitized, accountability is enforced, positions, responsibilities, and salaries are defined, and dual KBI and KPI assessments are used, balancing performance with employees' psychological and behavioral growth. This not only leverages the fair rule of managing people by system but also prevents inter-departmental and inter-positional buck-passing, effectively improving operational efficiency. B2B e-commerce is an industry requiring fine division of labor, standardization, and professional operations, with department setups completely different from traditional trading companies. Each department connects digitally, each managing an independent business module, and each module is an indispensable part of the overall workflow. Departments (or positions) essential in B2B development:

  • Ground Promotion Department: responsible for ground promotion to clients, terminal maintenance, and execution of sales strategies.
  • Customer Service Department: the channel for customer-company communication, resolving complaints and answering questions.
  • Procurement and Sales Department: responsible for supply assurance, product pricing, and macro marketing strategy formulation and execution.
  • Operations Department: responsible for micro marketing strategy formulation and supervision.
  • Warehouse and Logistics Department: responsible for goods in/out, sorting, and delivery services.
  • Basic departments like HR, administration, and finance coordinate work but are not directly involved in business; no need to elaborate. Forming a dedicated team and standard department setup is the guarantee for improving B2B e-commerce professional operations and service levels. This threshold is also difficult for traditional distributors to cross due to traditional thinking and models. If not crossed, the road ahead becomes harder, eventually cornering you or even causing failure along the way. Third Threshold: Lightning-Fast Advancement Rapid Deployment, Racing Against Time Internet technology develops rapidly, and e-commerce built on it inherits this speed; it's no exaggeration to call it meteoric. Although many see the internet's speed, from understanding the platform to penetrating customers on every street takes just days or weeks, they don't observe why the internet is fast. Below we compare the development speed of traditional and internet models. First, the traditional model: FMCG distributors, to save labor costs, compress sales staff, preferring slow market development with cost orientation, calling it "slow work yields fine products," slowly pushing and cultivating the market. But this slowness harms market expansion. Why take two days for a market development that can be done in one? The longer the promotion period, the longer your capital turnover, goods turnover, and profit cycle. If a competitor enters during this time, catching you off guard, you will surely fail. Long promotion periods also kill promoters' enthusiasm and investors' confidence. Now the internet model: it's fast because it values time ratio rather than the traditional distributor's input-output ratio. This is the essential difference. To achieve the same regional promotion, traditional distributors take 3 to 6 months, but e-commerce takes 1 month or even less. Why so fast? A simple calculation: for the same region, the traditional model uses 5 salespeople over 3 months, totaling 15 person-months; e-commerce uses 15 people in 1 month, also 15 person-months. Costs are the same, but results may differ. If the region is developed in one month, from the next month it enters full operation and maintenance; in the traditional model, months 1 to 6 remain in development, with salespeople continuously developing new clients and having no energy to maintain early clients, leading to loss or zombie customers due to lack of service. This wastes development costs and gives customers a poor experience. Some will calculate: the traditional model uses 5 people, e-commerce uses 15, so labor costs are double. Actually, no: the traditional model uses 5 for development and basically the same 5 for maintenance; e-commerce uses 15 for development, but due to the platform's unique self-ordering and self-selection features, only 3 are needed for maintenance, with the rest reassigned to other departments. From team formation, this plan should exist: initially almost all personnel go to the front line to develop the market, speeding up layout and allowing non-sales staff to experience ground promotion processes, better coordinating terminal customer service. E-commerce's speed isn't due to extraordinary ability but to greater emphasis on efficiency, service, and time awareness than traditional distributors! This is the traditional thinking that must be abandoned after transforming to B2B. Fourth Threshold: Procurement and Sales as King Procurement Determines Sales, Sales Determines Procurement During my nationwide visits, when communicating with over a dozen B2B platform franchisees, the most common question was about product layout. What products should be procured? What products can grow my platform? How to improve platform competitiveness? What products maximize profit? What if procurement overstocks inventory? Now, I'll tell you: first, you need a procurement and sales department. What is procurement and sales? Literally, it's "procurement + sales"—a department that can both procure and sell. The procurement and sales manager, based on the B2B project's scale, may be subdivided into category managers. This category manager must be familiar with product attributes, uses, price trends, target customer groups, and have experience in procurement negotiation and marketing strategy. If you consolidate procurement, marketing, and pricing authority into the procurement and sales manager, implementing sales-determined procurement and procurement-determined sales, with the manager autonomously procuring and introducing new products, formulating and executing reasonable sales strategies based on sales performance, and reasonably arranging inventory while gradually increasing category richness, with multi-dimensional performance assessments like SKU count, sales, profit, and inventory ratio (capital ratio), can you effectively achieve the goals of rich categories, increased sales, higher profit returns, and low inventory backlog (capital occupation)? Why do this? Because in the past, procurement managers focused on procurement, though linked to sales, they had no authority over sales execution. Procurement managers often stocked bestsellers based on experience, leading to inventory backlogs. Sales authority, policies, and pricing were in the sales department, whose strategies and operations couldn't fully align with procurement's intentions. The sales department's desired products might not be procured as expected, and even if procurement followed the plan, factors like price, date, specification, origin, and procurement timeliness caused information gaps, leading to procurement-sales asymmetry. Ultimately, inventory backlogs and near-expiry products became the focus of blame between departments. With integrated procurement and sales, giving the department the highest operational authority, its efficiency and quality determine the entire project's profit and loss and development. Calling it "procurement and sales as king" is not an exaggeration! Fifth Threshold: Crowdsourced Delivery Minimize Logistics and Delivery Costs Whether traditional distributors or transformed B2B e-commerce, delivery service is the end link of sales and service, but high delivery costs are the hardest threshold for B2B e-commerce. In modern urban logistics, the benchmark for last-mile delivery (urban distribution) is set at 3%. Traditional distributors using their own vehicles and personnel have delivery costs around 6%-7% of turnover or even higher; only a few large distributors have costs below 6%. B2B e-commerce aims to reduce channel costs and increase goods turnover. If B-end e-commerce adopts traditional delivery methods, delivery costs will become the largest cost item in the supply chain. The solution: Outsourcing delivery services completely is a strong first choice for cost control. Internet commerce has spawned many crowdsourced urban distribution logistics companies. Today, we won't discuss crowdsourced logistics models but will detail the pros and cons of crowdsourced versus traditional logistics. If B-end e-commerce builds its own delivery system, it requires fixed asset investments like vehicles and sites, personnel like drivers and mechanics, and other costs: vehicle insurance, regular maintenance, wear and tear, fuel, violations, and a series of management and operational costs. These costs must be supported by stable and sufficiently high operating profits. This is a key reason B-end e-commerce struggles to profit! Even with turnover, profits shrink with competition, and if logistics costs eat another chunk, net profit is minimal or negative. With crowdsourced logistics, you don't need to buy vehicles, sites, maintenance, personnel, management fees, wear and tear, fuel, or violations. It's almost plug-and-play, and you can choose the number of vehicles, types, and even drivers based on daily orders. Delivery fees can be paid by product quantity, tonnage, mileage, etc. Crowdsourced models can take three forms: First, cooperate with urban distribution logistics companies by signing agreements; this is well-known, so no need to elaborate. Second, integrate social resources by affiliating them to your company. Many drivers have vehicles but no resources; you can recruit drivers with vehicles, sign a "Delivery Service Agreement" specifying service standards, and package the entire delivery service to them. After delivery, they're done. When recruiting, base the number and vehicle types on order volume, and adjust as needed. This can be understood as each driver being an independent small logistics company or a long-term part-time delivery driver. B-end e-commerce only pays delivery fees based on volume; other costs like fuel, wear, and violations are borne by the driver. Of course, not every city has mature third-party urban distribution companies or conditions to integrate idle social logistics resources. In such cases, B-end e-commerce can build its own third-party urban distribution company, filling the gap. This self-built third-party logistics differs from traditional distributors' own logistics (delivery vehicles) or B2B e-commerce's self-built logistics. Distributors' own logistics and B2B's self-built logistics exist to meet their own delivery needs. Self-built third-party logistics, as the name implies, operates independently of the B2B project, not only meeting the B2B company's delivery needs but also undertaking social delivery business. Self-built third-party urban distribution is established to meet its own needs but exists to serve the public. Smooth and punctual delivery enhances service and is the most perceptible service for customers. Sixth Threshold: Warehouse Repositioning Warehousing Centered on Sorting Goods require warehousing; warehouses are storage and transit bases, as well as the guarantee base for continuous supply in the supply chain. Open the door of a traditional distributor's warehouse, and it's packed to the brim. This is either to gain larger factory promotions or to chase sales progress, leading to high inventory. High inventory brings high risks, such as near-expiry goods, floods, fires, and capital occupation. Internet e-commerce emphasizes inventory-sales balance, reasonably arranging inventory to avoid backlog, such as 3-day, 7-day, or max 15-day inventory, traveling light. E-commerce won't increase inventory just for a small promotion. First, e-commerce values capital contribution rate; although stocking up for promotions increases financial costs and reduces liquidity, raising costs indirectly. Second, the core purpose of e-commerce warehouses is not storage but distribution and sorting. Sorting-centered e-commerce warehouses de-emphasize storage, so inventory isn't large. This explains 3-day and 7-day inventory, which seems incredible to traditional distributors. 3-day, 7-day, and 15-day inventory are distinguished by product attributes, but regardless of days, they feature current procurement and current sales, ensuring low inventory, fast turnover, high capital utilization, fresh product dates, and fast sorting. Seventh Threshold: Connect Far and Near Connect with Distant Partners, Maintain Contact with Nearby Ones After over two years of B2B baptism, every distributor who joined a B2B platform is still anxious about integrating procurement products. Procurement has always constrained franchisees' development. B2B platforms need rich product categories, which determine attractiveness and competitiveness. But franchisees' own represented categories are limited. To continue, they must organize and integrate more categories onto the platform. Doing B2B requires product integration capability, actively building relationships with distributors in neighboring cities and maintaining cooperation. Only with sufficient supply connections can you support the platform's future development. Franchisees are anxious because local inter-industry product transfers are hard to request, and often face rejection. The editor analyzes two main reasons for rejection: First, influenced by e-commerce, they worry low-price sales will disrupt the price system; second, they worry about losing market share. To address these, you must clearly explain your business philosophy when negotiating. B-end e-commerce also needs profits; low-price sales won't work. You should express willingness to jointly maintain the price system, alleviating their concerns. If they worry about market share, invite them to join your team, and share e-commerce industry developments, making them realize that even if you don't take their market, others will. They can reject you, but they can't stop e-commerce's development and penetration. If local distributors don't cooperate, cooperate with out-of-town distributors; local ones will gain nothing. To ensure procurement supply, maintain regular contact with out-of-town distributors regardless of local cooperation, building a multi-region, multi-brand distributor network to guarantee ample supply. Eighth Threshold: Focus on Small, Not Neglecting Large Prioritize Small Customers, Don't Forget Large Ones We all know the 80/20 principle in economics; it applies to FMCG as well. In FMCG marketing, 20% are large customers, 80% are small and medium customers. Traditional distribution models favor large customers because they account for high sales volume; maintaining good relations with them is basically enough. But distributors invest more in large customers because almost all competitors target them, giving them more choices. After special "care," these large customers become hard nuts to crack, and distributors complain they're hard to "serve." The 80/20 principle also applies to B2B. B2B models focus on effective coverage area, goods flow, data flow, and registered customer numbers when developing terminal customers, because if these characteristics are met, transaction volume will inevitably rise under the same conditions. Clearly, B2B must prioritize the 80% small and medium customers during early promotion. These customers cover streets, communities, and villages, facing large consumer groups and diverse purchase needs. Although average order value is low, purchase frequency is high. Relationships with small and medium customers are easier to build and cultivate, quickly forming goods and data flows that bring substantial profits. Thus, B2B's goods and data flows mainly come from numerous small and medium customers. It must be clarified: this doesn't mean abandoning large customers; it's about first tackling easier small and medium customers, then pursuing large ones. This follows the principle of easy first, difficult later. However, some distributors transforming to B-end e-commerce use traditional thinking, making large customers the first breakthrough point, vowing to secure them first before expanding. In the end, they hit a wall, waste precious promotion time, give competitors a development window, exhaust their passion and confidence, lose faith in the B-end project, and eventually let it die. Ninth Threshold: Three Disciplines Basic Principles Cannot Be Crossed Traditional distributors transforming to e-commerce must endure "loneliness." Transformation isn't just for yourself; it's also guiding terminals to transform under your leadership. It starts with your persistence and relentless effort. Based on two years of follow-up with B2B clients, three disciplines are summarized as the final threshold to profitability. Discipline 1: Guarantee 100% Online Orders B-end e-commerce must resist the temptation of phone orders from terminals, resolutely enforcing platform orders. From the first time, eliminate phone orders; all orders must come from the online platform. Dare to tell terminals and dare to refuse delivery if orders aren't placed on the platform! If you accept phone orders due to good relationships, large sales, or fear of offending big customers, you start making a fatal mistake, proving your platform is hard to build. From the first phone order you deliver, you enter a dilemma. First, delivering phone orders pleases the customer but shows you lack principles. Second, if the customer calls again, will you deliver? If yes, don't run a platform, because they'll always use phone orders, and you can't stop. If no, you truly offend them because you delivered before, and they think you're deliberately refusing. Is there any room to maneuver? The more you try to plug this hole, the bigger it gets until the dam breaks! Discipline 2: Guarantee 100% Fulfillment Online orders are contracts; once placed, the contract is effective. You must not refuse delivery for any reason or deliver beyond promised or specified times. To fulfill, your company's software and hardware must be solid, with stable inventory or emergency procurement capability, backup delivery vehicles, and substitute sorting personnel. These are the most common points of failure in daily operations. Discipline 3: Guarantee 100% Standardized Service To consistently ensure online orders, fulfillment, and service quality, a set of standardized processes is needed to regulate and constrain. Establish and improve standardized workflows for every position: procurement and sales standardization, ground promotion standardization, warehousing standardization, sorting standardization, delivery standardization, customer complaint handling standardization, etc. The procurement and sales department ensures procured goods are in stock and not unsold; the ground promotion department uses unified scripts, development process standards, and uniform appearance; the warehousing department provides reasonable warnings, shelf-life management, and prevents fire, water, and pests; the sorting department arranges sorting time based on order volume; the delivery department double-checks product quantity, specification, and grade during loading to prevent errors; the customer service department implements a first-response system, etc. Even employees' words and actions at every position must be standardized! Conclusion: Only after crossing these nine thresholds can you sail smoothly! Without needing to be a pawn, you can still win half the game against heaven! B2B e-commerce is moving quickly toward profitability. Are you ready? The 3rd (CFIC) China FMCG + Internet Conference will be held in Chongqing in November 2017. Centered on the theme "New Forces, New Ecosystem," the conference will invite 1,000+ distributors, 500+ brand owners, 200+ B2B platform founders, and 100+ investment and financing institutions to explore a new chapter of cross-industry integration! Core Topics of This Conference:

  • How can the FMCG industry leverage B2B for new growth opportunities?

  • How should the new supply chain behind new retail be built?

  • How can same-city logistics help B2B achieve leapfrog development?

Highlights of This Conference:

  • The industry's first "2017 China FMCG B2B Industry Competitiveness White Paper"

  • Case sharing of excellent transforming distributors

  • Conference + exhibition upgrade: Hall 6 Internet Technology Exhibition strengthens matchmaking

  • Alibaba Retail Link, GLP Finance, Eternal Asia Supply Chain, Best Store Plus, Yijiupi, Hdware: leaders from various fields will deliver keynote speeches and share pioneering insights.

Registration is now open. Long-press the QR code below or click "Read Original" to register. Early bird tickets before September 17 enjoy a 30% discount! Add friend with note "Conference Registration" Click the links below to review the highlights of the 1st and 2nd FMCG + Internet Conferences: 2016 "FMCG + Internet" Summit Forum 2017 (2nd) China FMCG + Internet Conference Click the links below to review the highlights of the 1st and 2nd FMCG + Internet Conferences: 2016 "FMCG + Internet" Summit Forum -END-