---
title: "Dialectics | Why Do Distributors Have More Opportunities in B2B than Big Platforms?"
description: "The channel transformation in FMCG has entered its fourth year. Despite the entry of e-commerce giants with capital and information technology, traditional channels have not conceded. The market is vast and complex, and local distributors still have significant opportunities to build localized platforms during this transition period."
author: "赵波、袁来"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-02-27"
language: "en"
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# Dialectics | Why Do Distributors Have More Opportunities in B2B than Big Platforms?

> The channel transformation in FMCG has entered its fourth year. Despite the entry of e-commerce giants with capital and information technology, traditional channels have not conceded. The market is vast and complex, and local distributors still have significant opportunities to build localized platforms during this transition period.

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The channel transformation in FMCG has entered its fourth year. Logically, the intervention of e-commerce giants, armed with capital and information technology, should have led to a quick victory and captured traditional market share. However, judging from current market performance, traditional channels seem to have not "conceded."

On one hand, the market size of China's FMCG industry is large enough that even e-commerce giants cannot easily move it in a short time. On the other hand, the market is sufficiently complex. Not to mention the diversity of terminal formats, just looking at the number of links in the chain, e-commerce platforms need to address and streamline at least four types of business entities: brand owners, distributors, secondary wholesalers, and retailers. How to balance and choose in the "disintermediation" process of B2B e-commerce are key issues for e-commerce platforms.

E-commerce platforms aiming to rapidly transform traditional channels and reconstruct the commercial distribution order are destined for a long process. During this long window of opportunity, traditional distributors in various regions still have great chances to build localized platforms.

01
**Retail small stores and ordinary consumers have different needs and business formats**

Frankly, in the past, e-commerce platforms specialized in C-end (consumer) business, but now the users are B-end (retail small stores), and the two have distinctly different needs.

Ordinary consumers have diverse needs. The scale of the platform can bring together upstream brand owners, and a large number of long-tail products can meet different consumer needs. At the same time, scale can bring brand trust, completing transactions, payments, and after-sales. The larger the platform, the stronger the supply chain, and the higher the consumer stickiness, creating a strong Matthew effect.

Retail small stores have fixed needs for products (continuous high-frequency repurchase), are professional and rational, and are extremely price-sensitive. Large platforms have the ability to organize long-tail products, but they cannot form a significant competitive advantage for retail small stores. In addition, periodic promotions (burning money, subsidies) aim to increase stickiness of retail small stores, but in fact, for "professional consumers," this cannot bring sustained stickiness, let alone cultivate loyalty.

Localized platforms, especially those led by multiple distributors, allow local distributors to join. Their products are high-frequency categories, and moving existing stock online can better meet the daily operational needs of small stores. For small stores, this is a "rigid demand."

At the same time, objective regional protection and exclusive agency systems prevent local products from circulating across regions. The local market stock is actually a huge resource for localized platforms.

02
**The shorter the delivery radius and the higher the density, the higher the delivery efficiency and the lower the delivery cost**

Due to the natural low-value logistics attribute of FMCG, FMCG must emphasize delivery density. Therefore, localized platforms have natural advantages in delivery radius and terminal density when deeply cultivating the market.

In contrast, e-commerce platforms, although most have set up three-level warehouses (central warehouse, city warehouse, and front warehouse/service station), how to balance category turnover? How to plan each warehouse for high-frequency, low-frequency, first-line, seasonal products, and even low-temperature and short-shelf-life products? How to allocate and use the three warehouses most efficiently? E-commerce platforms, especially national giants, need considerable time to solve these issues.

03
**Brand owners: Not only solve existing stock and increase coverage, but also solve incremental issues**

With the rise of the middle class, the post-90s and post-00s generations have become the mainstream consumers, and diversified and personalized consumption is an inevitable trend. Mainstream shifting, product upgrades, and cultivating new products will no longer be periodic or cyclical work for brand owners, but work that needs to be done at all times.

Brand owners can use platforms to increase product coverage at terminals, but the key issue is that platforms cannot solve the incremental growth for brand owners. Even with promotional staff, such as Alibaba's city partners and JD's ground teams, in the short term, they mainly focus on promotional recommendations of mainstream product portfolios (monetizing existing stock) to educate and cultivate retail small stores. In the long term, even if they do new product promotions, they only serve a few brands.

The limitations of ground promotion scale (high personnel and management costs) limit the number of brands that can be promoted; the exclusivity of some major brand channels prevents platforms from becoming strategic partners for all brand owners.

Frankly, when distributors engage in B2B and do matchmaking models, they can leverage the local distributor network to attract other distributors to join. Distributors help brand owners with channel customer relations and new product promotions. Localized B2B platforms improve information efficiency, and unified warehousing and distribution can reduce distributor costs. Distributors help brand owners with market promotion and maintenance. This division of labor is also what brand owners are willing to see and support.

Highly fragmented retail small stores, continuous high-frequency repurchase, and the regional agency system of upstream brand owners mean that each regional market is fragmented. Even if models, tools, and technology can be standardized, for national platforms, the development of each regional market will be vastly different.

Channel transformation is already on the verge. China's channel digital transformation is destined not to be a winner-take-all track. Large platforms will continue to integrate with local players, cooperate with traditional distributors in regional markets, and work intensively. Meanwhile, more and more distributor alliances will emerge in local areas to transform into B2B.

**In the past, the offline channel for FMCG was singular, and traditional distributors, as the only operating entity, did everything, being "all-around" distributors. In the future, it will be diversified with specialized division of labor: B2B for efficiency, same-city logistics for cost reduction, and distributors for incremental growth. The three will integrate with each other and also be independent of each other.**


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