---
title: "Differentiation and Restructuring: How Can Distributors Fight Back?"
description: "At the 9th China FMCG Innovation Conference held in Chengdu from March 14-16, Zheng Guangxian, Chairman of 1919 Digital Business Group, delivered a keynote speech titled \"Differentiation and Restructuring: How Can Distributors Fight Back?\" He emphasized that true digitalization must move from inventory management to integrating people, goods, and scenes, and advocated for transforming existing channels and stock rather than rebuilding, using platforms like 1919 Kuaihe to empower terminal stores."
author: "郑广先"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2024-03-27"
language: "en"
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# Differentiation and Restructuring: How Can Distributors Fight Back?

> At the 9th China FMCG Innovation Conference held in Chengdu from March 14-16, Zheng Guangxian, Chairman of 1919 Digital Business Group, delivered a keynote speech titled "Differentiation and Restructuring: How Can Distributors Fight Back?" He emphasized that true digitalization must move from inventory management to integrating people, goods, and scenes, and advocated for transforming existing channels and stock rather than rebuilding, using platforms like 1919 Kuaihe to empower terminal stores.

From March 14 to 16, the 9th China FMCG Innovation Conference, along with the 2nd China FMCG Hard Discount Conference and the 2nd China FMCG Distributor Conference, was held in Chengdu under the theme "Supply Chain Revolution."
**Zheng Guangxian, Chairman of 1919 Digital Business Group**, attended as a guest speaker and delivered a keynote speech titled **"Differentiation and Restructuring: How Can Distributors Fight Back?"** to over 2,000 manufacturer and FMCG representatives from across the country.
"New Distribution" has compiled the essence of Mr. Zheng's speech for our readers.
Currently, distributors' business is mostly confined to a single city. Against the backdrop of industry contraction and intense competition, how can they achieve a counterattack?
**Digitalization Enters People, Goods, and Scenes**
The typical characteristic of current business can be summarized in one keyword: "involution." **The essence of involution is industrial overcapacity and homogeneous competition.** All peers are competing using the same methods. How can one carve out an independent path in this process?
Many speakers have mentioned a remedy: **"digitalization."** But what exactly is digitalization? Currently, China's digitalization exists from manufacturers to distributors to terminals, a track known as F2B2C. Essentially, all digitalization focuses on inventory management, which is why it is effective for manufacturers but ineffective for terminals. That is, everyone passively accepts digitalization, with only orders, promotions, and business visits being online, while terminal empowerment and consumers are not included.
So I have always held the view that **true digitalization must move from inventory management to people, goods, and scenes to be meaningful.** This is precisely the hardest part. How to empower terminals to acquire consumers and orders? How to help terminals sell products, turning unprofitable products into traffic and profitable products into bestsellers? This is what all distributors need to focus on to succeed in a city's business.
In November last year, the 1919 Kuaihe platform launched a comprehensive solution. We believe that what works in the liquor industry will also work in the FMCG industry.
Currently, many single stores on the 1919 Kuaihe platform can handle 600 or even 1,000 orders a day. Many people ask how we achieve this. Some of these sales come from instant retail, some from community group buying, and some from content-driven traffic. Once traffic is generated, industrial brands can be incubated, and with industrial brands, the B2B business dream can naturally be realized.
**Integrate Existing Channels and Stock**
Given the current social environment, whether it's discount warehouses, retail stores, or local long-tail or short-tail businesses, rebuilding any business is a waste. **The best approach is to transform the existing social stock market.**
For example, during the pandemic, several rapidly developing projects emerged in Chengdu. One industrial brand successfully covered 30,000 terminals within a year during the pandemic, without relying on any salespeople to expand terminals. This is a Chengdu brand called "Kung Fu Shoulder and Neck." It leveraged the traffic dividend of Douyin's local services to quickly build its own super traffic hub and then began franchising thousands of stores.
In Luohe, Henan, there is a brand called Xiaotaomi Hair Care, which now has thousands of stores nationwide, also completed within a year. They quickly gathered all terminals with service capabilities, provided traffic generation and empowerment. We believe this approach has potential.
Take Meituan Flash Purchase as an example. Despite its beer, baijiu, and foreign liquor sales achieving astonishing growth in 2023, the company faces a shortage of effective supply. There are about 400,000 social scattered stores on Meituan Flash Purchase. However, most of these stores lack operational staff, operational logic, and promotional capabilities, making them so-called "zombie stores."
The 1919 Kuaihe platform will also strategically cooperate with well-known flash purchase platforms in China, combining all social scattered stores and using unified operational methods to empower terminal stores. During this empowerment process, we will launch our own high-cost-performance industrial brands. This industrial internet approach is more suited to the current market environment.
Previously, 1919 was known for standard offline liquor store outlets, with each store requiring an investment of over a million yuan. Now, 1919's digital business does not require opening stores. The current model is that as long as a terminal store's computer and phone are connected to the 1919 Kuaihe platform system, it can appear online under the 1919 Kuaihe brand. **1919 Kuaihe will handle all consumer public domain, private domain, retail, group buying, online and offline operations for distributors.**
At the same time, to better serve distributors, we have assisted them in establishing warehouse-type discount warehouses. This operating model stems from my early experience after selling my company to Yiyatong. We turned warehouses into high-rack shelves, initially used to handle near-expiry beer and milk products. These near-expiry products were sold at the lowest prices to drive traffic. By offering targeted discounts, such as first box free and second box half price, we achieved excellent results.
Through this method, we also helped milk distributors handle near-expiry products. Of course, we also see huge opportunities in platformization and instant retail. But these opportunities lie not in rebuilding new channels, but in integrating existing channels and stock.
**Basic Logic**
**Re-do It with the "Heaven, Earth, and Human Network"**
We hope 1919 Kuaihe can follow the logic of "SHEIN + Beike" in the FMCG track. Beike has no stores, but it empowers ten thousand stores. Its parent brand is Lianjia, and its competitors include Centaline, Woaiwojia, and Deyou, but they all share housing listings. In 2023, Beike's annual net revenue was 77.8 billion yuan, up 28.2% year-on-year, with net profit of 5.89 billion yuan, turning around from a loss, and adjusted net profit of 9.798 billion yuan, up 244.7% year-on-year, far exceeding other real estate platforms. This is the power of cross-border symbiosis and co-construction. SHEIN has a high market valuation; it has no factories, brands, or channels of its own, but it has its own traffic and industry rules.
Pinduoduo's overseas version, Temu, has attracted widespread attention since its launch. In Hangzhou and other places, many young people have seen the business opportunities brought by Temu, integrating traditional factory resources for cross-border e-commerce and achieving profits through collective ordering. For example, collecting 100,000 or 50,000 orders at a unified price and shipping them to Guangzhou port directly generates profits. This is reverse logic. We also hope the 1919 Kuaihe platform can adopt this logic: **All terminals are not mine, but they can be used by me. Although they do not hang my commercial sign, I can provide super empowerment.**
The business practice of 1919 Kuaihe is to encourage everyone in a city to not only do inventory management but also boldly do the "Heaven, Earth, and Human Network," which is based on the logic of people, goods, and scenes.
The Heaven Network covers the entire city's e-commerce from long-tail, mid-tail, short-tail, to on-site e-commerce, helping stores capture all traffic and assist in empowerment.
The Human Network, after acquiring customers, helps stores with customer retention and repurchase through distributed social tools, which is private domain e-commerce based on stores. The Earth Network transforms the original distribution network into front-end warehouse fulfillment points.
Why can 1919 Kuaihe do this? People say it's simple, so why haven't many done it? First, 1919 Kuaihe has C-end marketing capabilities. 1919 is almost the largest player in the liquor sector across all e-commerce platforms, with about 100 million orders in 2023 and a total platform transaction volume of over 6.6 billion yuan, ranking first in all tracks and scenarios.
Why was it so inefficient before? Because a single store cannot do it alone: Meituan's commission is too high, and Douyin requires qualifications and authorization. But if done as a nationwide network, it is relatively easier. Besides e-commerce in five scenarios, 1919 Kuaihe also does content. How is content generated? For a single store, using AIGC, the owner only needs to appear to build a personal IP, and the rest is done by robot editing and local publishing.
**Business Practice of 1919 Kuaihe**
Since its official launch in November 2023, 1919 Kuaihe has expanded to over 400 cities nationwide, adding more than 100 cities each month. The main clients are those with existing business teams, terminal channel relationships, and their own warehouses and delivery teams. This allows them to achieve new business without adding manpower, not simply by doing SaaS, nor by accompanying or servicing, but through a process of industrial internet reengineering.
From the name, one might think 1919 Kuaihe only does instant retail, but that's not the case. Since instant retail is the easiest traffic for terminal stores to capture, **we have singled out instant retail as its commercial empowerment brand. In reality, it is an industrial internet upgrade project.**
The physical store solution is to not open stores ourselves but to upgrade all terminal stores in place. What does that mean? Previously, a computer connection was needed; now it's not. The owner only needs to use a mobile phone to inventory the store's stock to the platform, and the phone connection completes the upgrade. POS systems are Bluetooth POS, requiring no new equipment. Also, one warehouse serves nine stores: all original stores become front-end warehouses, and we help them create Meituan stores, Ele.me stores, JD Daojia stores, community group buying stores, Douyin stores, Kuaishou stores, mini-program stores, and private domain stores. The single store only needs to handle purchasing, stocking, and major customer maintenance; all other operations are handled by the backend.
At the same time, all store subsidies and negative gross margins are covered by us. This is why 1919 Kuaihe has cultivated many stores with ten thousand orders. Previously, a store doing 20,000 orders a year was already good. But now, we have stores doing 20,000 to 30,000 orders a month.
Regarding brand empowerment, online brand exposure can be done under the KA name, and online orders are operated by the platform. Unified free information empowerment is provided, all SaaS is free, and operational negative gross margins are borne by the platform. So how do we profit? We must have our own super brands. The first half of the internet was consumer internet; the second half is industrial internet. If we use the internet as a channel without our own product incubation capabilities, it will be difficult to succeed.
In channel construction, we fully leverage the advantages of financial professionals. Taking the Lhasa region as an example, through cooperative banks, we provide all social terminals with a 500,000 yuan purchasing fund at an annual rate of 1.85%, with all interest borne by the platform. Unsold products can be returned or exchanged, but they must purchase our designated products through 1919 Kuaihe. This ensures we have sufficient profit margins and complete the distribution of all new products.
So how do we break through the market? We have adopted several extreme measures.
> **1. Let stores join at zero cost.**
>
> **2. Promise that all liquor circulation products will always be 1% cheaper than the market's lowest price.** If you can find a cheaper price than our platform, we will subsidize an additional 1%, ensuring all supply can be listed on the platform. Of course, this supply is not directly provided by us; we select the lowest-priced products already on the market and provide reverse subsidies.
>
> **3. All negative gross margin orders from online traffic are borne by the platform.**
>
> **4. Regardless of the store's location, we promise at least 5,000 orders in sales, and in some cities at least 10,000 orders.** If the order volume does not meet the promised standard, we will provide corresponding compensation. In addition, we have our own products and promise to provide stores with a gross margin of over 50%. Only by combining these measures can stores be both praised and profitable.
At the same time, the 1919 Kuaihe platform also needs distributor teams because they have personnel, customer relationships, and warehousing, enabling rapid implementation. **We hope to jointly transform digitalization from theory to practice, turning inventory management into the "Heaven, Earth, and Human Network" and achieving "people, goods, and scenes."** Together, we can explore new business models, transforming from brand service providers, logistics distributors, local merchants, and visiting salespeople into true local digital platform operators and industrial brand operators. This is the common way out for all of us!
_PS: For those interested in the on-site speech content, please follow the recent posts on the "New Distribution" WeChat official account. We will compile and publish all speakers' speeches for our readers._
_Click **Read Original** to see more about the 9th China FMCG Innovation Conference and the 2nd China FMCG Hard Discount Conference & 2nd China FMCG Distributor Conference..._


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