On December 18 last year, Dinghuobao announced in Beijing that it had completed a 1.5 billion yuan Series B financing round led by China Digital. As the first SaaS-based internet channel distribution management platform in China, Dinghuobao has taken enterprise commercial circulation management as a breakthrough, using an internet + channel distribution model to build exclusive B2B marketing platforms for enterprises, thereby driving transformation in traditional industry channel models. Recently, New Distribution interviewed Dinghuobao founder Jiang Tao, hoping his views and opinions on the industry can bring some food for thought to readers.

01 Opportunities for Regional Distributors

In recent years, with rising operational costs in labor, materials, warehousing, and distribution, traditional distributors' profit margins have been further squeezed, placing higher demands on their daily operations management. Especially after internet companies like Alibaba and JD.com entered the FMCG distribution field, refined operations and digital transformation have been put on the agenda by more and more distributors.

"The FMCG industry is still relatively regional. Whether to rapidly expand across the country like Alibaba and JD.com and establish scale advantages is actually not that important for the FMCG industry," Jiang Tao told New Distribution. "The Chinese market is very large, and not all enterprises are willing to hand over their lifelines in channels and supply chains to a few giants. Just like in the B2C field, besides JD and Taobao, there are many specialized B2C platforms that have also achieved good development, not to mention the B2B field, which is even more vertical and segmented. Enterprises themselves, especially Chinese enterprises, have the need to operate their own users and manage their own supply chains. Take the distributor group as an example: those who do regional deep cultivation and can continuously improve through internet information tools are still in good shape. Especially those who build their own logistics and warehousing systems and deeply cultivate regional markets—I believe they will never be eliminated. On the contrary, those wholesalers in wholesale markets who wait for small shop owners to come and place orders are destined to be gradually marginalized."

When talking about a customer case he once served, Jiang Tao said, "One of our customers originally had a business scale of about 80 to 90 million yuan a year, and now they can basically achieve sales of around 200 million yuan. In this situation, platforms like Alibaba's Lingshoutong and JD's Xintonglu find it hard to compete with him in the regional market. Because such distributors have customer relationships, services, and some agency brand products as a link to small shops. And after some distributors transform to B2B, they are actually more competitive than national internet platforms."

02 Three Ways and One Key Point

With the continuous development of the industry, channel digitalization has become a consensus across the industry. However, at present, many distributors have taken many detours in the transformation process.

Jiang Tao believes that there are mainly three ways for distributors to transform:

1. Join and franchise large platforms. For the current distributor group, cooperating with some large internet platforms is like asking a tiger for its skin; it's equivalent to handing over their lifeline to others. For large platforms, their purpose is actually to control small shops from the top down. When they have a certain network base, they can have greater say over upstream brand manufacturers and can earn the most lucrative profits in the middle.

2. Build a boat to go to sea: self-develop and self-build platforms. There are also many distributors who build their own R&D teams and develop systems. But often they put in effort without gaining favor. A case in Chengdu: a real estate developer doing a commercial food city wanted to bring offline merchants online to form a platform, creating an online B2B platform. They spent about 13 million yuan to develop the platform, taking nearly two years, but ultimately failed. This example vividly tells us that if we build our own platform from scratch, the price we pay is very heavy. At that time, their chairman told me a sentence that left a deep impression on me. He said, "I just wanted to buy a Mercedes-Benz, but I ended up building a Mercedes-Benz production line."

3. Borrow a boat to go to sea. The division of labor in society is becoming clearer, and professionals doing professional things is definitely a social trend. For traditional distributors to transform to the internet, the most basic infrastructure is your internet platform and your IT tools. And these things already have very professional teams and very professional products that have been polished very well. For many distributors who are not particularly large in scale but want to complete internet transformation, this is actually the most suitable way.

For many distributors, the difficulty of transformation is not actually in the choice of tools, but in online operations. How to effectively help distributors improve operational efficiency through internet methods is the most core part.

"For distributors, the transformation of the business team's identity and role sometimes directly determines whether they can successfully transform," Jiang Tao told New Distribution. Originally, the daily work of business personnel was nothing more than going to small shops to promote their products and copy orders. Now, with information tools, business personnel need to transform into store operation personnel. Their responsibilities become guiding small shop owners on how to use information tools to complete daily procurement, promotions, interactions, returns and exchanges, etc., and enhancing small shop owners' stickiness to the platform through sharing and incentives. The benefit of this is, on one hand, improving the work efficiency of the business team. Originally, one salesperson might only serve 150 small shops, but now they can serve 200 or more small shops through smarter methods. On the other hand, it can also effectively reduce customer loss and business impact caused by employee turnover.

03 Transformation Trilogy

For many distributors, the first reaction to transformation is to develop all categories and operate as a platform, which is actually a serious misconception for small and medium-sized ones with insufficient capital reserves.

Many distributors often think at the early stage of transformation whether they should focus on one category to do it deeply and thoroughly, or broaden categories for platform operation. Jiang Tao believes that distributor transformation should go through three stages: self-operation, joint operation, and platform.

Self-operation stage: Distributors must have a fist category as an entry point to occupy users' minds and win the recognition of small shop owners. Only in this way can they quickly increase the number of users and form scale effects.

Joint operation stage: After the user scale grows, expand categories through joint operation with distributors of other category products. Multi-category operation through self-operation is a big challenge for many distributors, especially without understanding cross-category products. Blindly expanding categories tests the distributor's management capabilities and financial strength. On the other hand, because small shops have diverse needs, they cannot only sell one product or category. This requires distributors to expand categories to gain advantages in competition with other platforms. So joint operation is actually a good way for distributors.

Platform stage: When the number of users and GMV reach a certain scale, the platform will have greater say over upstream distributors and brand manufacturers. At this time, consider opening the platform to attract more distributors and even brand manufacturers to directly join, achieving empowerment of the supply chain.

Distributors' internet transformation needs to follow certain methods and paths. Without full preparation, any upgrade or evolution cannot be achieved overnight. Under the new retail background, the traditional relationship of people, goods, and places is constantly being reconstructed. For traditional distributors, how to face the sudden changes in the industry and correctly grasp the methods and pace of transformation to ensure they are not eliminated in this digital wave is crucial.

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