-01- Marketing digitalization involves four main entities: platform-led digitalization, retailer-led digitalization (new retail), brand-led digitalization, and major distributor-led digitalization. Platform and retailer-led digitalization were hot in previous years but have now entered a bottleneck period, so this article will not discuss them. In 2020, many focused on brand digitalization, unaware that distributor digital systems were also selling well. Interestingly, distributor warehousing and distribution digital systems also performed well. Major brands have digital capabilities; small brands do not. Major distributors have digital capabilities; small distributors do not. Major brands' digital systems are exclusive, but major distributors' digitalization also digitalizes small brands incidentally. Consequently, small distributors and small brands may be marginalized. Thus, digitalization also creates new channel barriers. This article focuses on major distributor digitalization. Major distributors are "major" for two reasons: large scale and special category or brand structure. Major distributors typically represent major brands, but their core capability is successfully selling second-, third-, and fourth-tier brands in their regions. This is their true strength. As long as major brands have digital systems, all distributors, regardless of size, must use them. However, most second-, third-, and fourth-tier brands lack channel digitalization capabilities. Therefore, they must rely on major distributors' digitalization to solve channel digitalization issues. It can be said that in channel digitalization, major distributors have no choice but to build their own digital systems. A major distributor's digital system includes four modules: 1. Warehousing and distribution; 2. B2b ordering; 3. Supply chain; 4. b2C. Missing any module results in a digital silo.
-02- Should distributors build warehousing and distribution modules? In previous analyses, I emphasized repeatedly: with channel modularization, logistics warehousing and distribution modules will eventually be separated from distributors. So, should distributors build warehousing and distribution modules? Small and medium distributors may not need to, but major distributors should definitely try. Although logistics warehousing separation is an inevitable trend, within warehousing platforms, there is still a role: the local "landing operator" for large warehousing platforms. Warehousing platforms need more localized "landing operators" in certain regions. Thus, major distributors can still achieve something in warehousing and distribution. Warehousing platformization means either handing warehousing to a platform or becoming part of a warehousing platform; there is no purely self-operated warehousing. Warehousing systems are efficiency systems. Now, distributors building warehousing systems must solve two problems: scale efficiency and warehousing system efficiency. Even for major distributors, scale is still limited. There are two approaches to solving distributor warehousing scale: 1. Besides representing brands, become a "super second-tier distributor" for first-tier brands; 2. Open to external orders, becoming an open warehouse. Let's focus on solving warehousing scale through the "super second-tier distributor" approach. Early regional B2B platforms often developed through the "super second-tier distributor" role. In the Chinese market, second-tier distributors have always existed. They don't burn money or lose money. Their existence solves the penetration problem of numerous small stores. So, where do their profits come from? Naturally, from brand manufacturers' channel "tiered policies." Because second-tier distributors have short-term product absorption capabilities, under frequent channel inventory pressure, they absorb products with preferential policies and then penetrate small stores. A "super second-tier distributor" becomes a second-tier distributor for many first- and second-tier brands. With access to major brand supplies, they can offer "one-stop delivery" to stores. One-stop delivery is scale efficiency. Currently, some distributors mastering the "super second-tier distributor" model are growing rapidly. Their biggest difference from past B2B platforms is that they don't burn money, don't disrupt pricing, and cause minimal market disturbance, so manufacturers and brands welcome them. According to Ren Xiaodong, a new commerce expert who participated in operating a "super second-tier distributor" B2B platform, in a city below the second tier, there are no more than three FMCG "super second-tier distributors." This is a crucial parameter. It means major distributors aiming to become regional warehousing "landing operators" still face competition metrics. This reminds distributors: if you insist on doing warehousing, you must scale up early. If distributors cannot do warehousing, they must hand it over at the right time. Warehousing consumes too much energy; better to shift focus to becoming operators.
-03- A distributor's B2B system has a short chain and is not complex to operate. The issue is whether retail stores are willing to go online. If SKU count is too low and essential brands (products) are few, the online ordering rate will be low. Therefore, the core of a distributor's B2B system is store stickiness. Store stickiness arises from two aspects: first, the essential nature of the products (brands) mentioned above; second, customer relations and visit frequency. However, B2B is not enough if it only captures store orders. If real-time store sales data can be obtained, it is very beneficial for management, advance stocking, and timely delivery. Generally, KA (key accounts) are willing to open sales data to major distributors. But for real-time data, major distributors need digital tools, such as web scraping technology. Web scraping is mature.
-04- The supply chain module for major distributors has great potential. If a major distributor's supply chain is integrated with the warehousing system, it is very important for suppliers to know the distributor's product information at any time. Some distributors fear opening data, which is not good. Only through data sharing with suppliers can suppliers provide better service. The principle is the same as distributors obtaining KA data. Another benefit of digital supply chains is establishing flexible supply chains. Many FMCG categories change rapidly, such as snack foods. Through flexible supply chains, products can be adjusted quickly. Recently, several entrepreneurial friends consulted me about this, hoping to build a supply chain platform to output products from companies that only know how to make products but not market or channel them, to distributors or stores. This could become a good business.
-05- The last module is b2C. It is actually about reaching the C-end, then integrating B and C operations. This is the core work for distributors in the digital era. As operators, doing b2C well is their duty. b2C is what I previously called "full-scenario reach," with three "super touchpoints": people (store owners, clerks, promoters), things (one product one code), and stores (stores, shelves, coolers, etc.). In the future, every touchpoint will be a node for distributors to reach users. Once user reach is done, the rest is integrated B and C operations. Previously, distributors were humbled before retail stores because they needed something from them. The core of BC integration is mobilizing the C-end online to activate the B-end.
-06- I observe a phenomenon in current major distributor digital modules: most only have the B2b module. Even if the B2b module is well done, it is still a digital silo. This is a phenomenon I particularly emphasize. The benefit of full-chain digitalization is high efficiency across all channels; partial efficiency is not without value, but it is greatly discounted. The two cores of major distributor digitalization are the B2b module and the warehousing module. These two modules easily become digital silos. Extending upward to the supply chain reaches the brand manufacturer (F-end), and extending downward reaches users (C-end), fully unleashing digital efficiency. In fact, current digitalization starts from one entity and then extends to the full chain. New retail was originally b2C, then new manufacturing emerged. New manufacturing is called C2M, but that's borrowing the name of C; it's actually b2M (or b2F). New retail + new manufacturing inevitably becomes F2b2C. That's the full chain. Brand digitalization is F2B2b2C, also the full chain. Therefore, digitalization starting from any single entity must eventually become the full chain, not a digital silo. The same applies to major distributor digitalization.
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