Introduction Over the past period, B2B e-commerce has become one of the hottest topics in the FMCG industry. Just yesterday, the brand strategy cooperation meeting held by JD New Channel Division once again sparked industry discussions on B2B e-commerce models. So, between the centralized e-commerce represented by JD and the distributed e-commerce represented by Piduoduo, which one represents the trend and future of B2B e-commerce?
JD-style E-commerce: Thorough "De-intermediation" On March 4, JD New Channel Division held a brand strategy cooperation meeting. At the meeting, JD clearly and firmly released a signal: JD is pursuing an F2R e-commerce model, which bypasses distributors and cooperates directly with brand manufacturers, relying on its own service team to directly control terminals. As the literal meaning of "New Channel" suggests, JD aims to build its own sales channel from brand manufacturers to retail terminals, becoming a national general agent.
In summary, the JD-style e-commerce model includes the following characteristics:
Target market: 3rd-6th tier cities and rural markets (initially launching in Shandong, Hebei, Henan, and Sichuan).
Cooperation partners: First- and second-tier brand manufacturers, with offline sales authorization and dedicated liaison teams.
Self-built warehousing: 8 major warehouses nationwide (with additional sub-warehouses likely built or planned).
Self-built logistics: Leveraging JD's existing logistics system to cover 2,429 districts and counties nationwide.
Self-built team: Recruiting and building a full-time "ground service" team.
From the above characteristics, JD-style e-commerce can be seen as the ultimate version of centralized B2B e-commerce, thoroughly "de-intermediating" and attempting to take over all functions of traditional channel intermediaries.
Distributed E-commerce: Distributors as the Operating Entity Unlike JD-style e-commerce, distributed e-commerce emphasizes that distributors are the main operators of B2B e-commerce, though there has been significant divergence in specific operating models. As a representative of distributed e-commerce, Piduoduo has its own understanding of FMCG B2B e-commerce:
First, not disruption, but integration. It does not disrupt the existing distribution pattern of the FMCG industry; distributors are not the target of "de-intermediation" but rather the main operators of the platform. By integrating upstream and downstream supply chain resources and optimizing channel structure, it aims to reduce costs and improve efficiency.
Second, not monopoly, but sharing. It does not adopt a model of self-built warehousing, logistics, and teams to pursue channel monopoly. By applying the concept of the sharing economy, it enhances the professional service level of channel intermediaries, optimizes the allocation of channel resources, and creates an Uber model for the FMCG supply chain.
Third, not replacement, but symbiosis. It does not advocate survival of the fittest under vicious competition but adopts a collaborative approach to build an ecosystem for the FMCG supply chain, achieving mutual benefit and value sharing among channel value chain members, thereby promoting the sustainable development of the FMCG industry.
Thus, although both JD-style e-commerce and distributed e-commerce are called B2B e-commerce, they differ vastly in operational philosophy and model. So, which one will become the trend and future of B2B e-commerce?
JD-style E-commerce vs. Distributed E-commerce To clarify this issue, let's compare the advantages and disadvantages of JD-style e-commerce and distributed e-commerce.
The operating entity of distributed e-commerce is the distributor, converting existing offline stock into online traffic; JD-style e-commerce builds its own channel, inevitably dividing the existing stock of traditional channels, just a matter of how much. Therefore, JD-style e-commerce vs. distributed e-commerce is first a battle for existing stock. As for offline operations, both distributed and JD-style e-commerce cannot escape the six elements of the distribution model: people, money, goods, vehicles, warehouses, and networks.
People - Team. Distributors already have teams, but their functions need to shift from sales personnel to ground promotion and marketing personnel; JD is also recruiting personnel from the FMCG industry or distribution systems to build its ground service team.
Money - Capital. Distributors have the function of channel financing; part of their funds comes from terminal payments, part from secondary wholesalers; JD is a listed company with large capital, financially strong.
Goods - Products. Distributors themselves do brand agency, have products on hand, and have offline stock; JD aims to be the national general agent for brand products, but how many brands and items it can secure offline remains unknown.
Vehicles - Logistics. Distributors generally have delivery teams and can jointly form logistics companies or subcontract to secondary wholesalers; JD has its own logistics system, but its advantage is not obvious in 3rd-6th tier cities and rural areas.
Warehouses - Storage. Distributors have ready-made warehousing, and centralized or partially centralized storage is achievable; JD needs to lay out warehousing systems in 3rd-6th tier cities and rural areas, and will inevitably build sub-warehouses beyond the 8 major warehouses.
Networks - Terminals. Distributors have a clear advantage in building and maintaining terminal networks because they already have cooperative relationships with terminal customers; JD lacks customer relationship advantages but will seek price advantages through subsidies.
So, what does the competition between distributed e-commerce and JD-style e-commerce hinge on? Mainly terminal experience, operational costs, and operational efficiency. Next, we will compare distributed e-commerce and JD-style e-commerce based on the six distribution elements and the three competitive dimensions to see who has the advantage.
First, terminal experience refers to the products, prices, delivery, after-sales, and payment terms that can be provided to terminals.
In terms of products, the need to meet one-stop shopping needs of terminals. For this, distributed e-commerce needs to integrate local supplier resources to ensure sufficient product brands and items; JD needs to integrate brand manufacturer resources or develop OEM products.
Whether integration can be achieved and to what extent depends on the value provided to suppliers. Distributed e-commerce can provide suppliers with orders and extended delivery and after-sales services, enabling suppliers to reduce costs and increase profits; JD aims to put brand products on the shelves of small and medium terminals in 3rd-6th tier cities, saving channel development costs and improving product placement rates.
It can be said that both sides have grasped some pain points of suppliers. The difference is that distributed e-commerce only requires suppliers to join the platform, while JD wants to obtain offline agency rights from brand manufacturers. In other words, distributed e-commerce will not change the existing distribution system of brand manufacturers, while JD may impact the existing channels of brand manufacturers. Therefore, will brand manufacturers let JD become a national agent? Will they hand over all or part of their items to JD? Or adopt a special sales product cooperation model? All remain unknown. In contrast, distributed e-commerce can gather quality suppliers onto the platform through equity or alliance forms.
In terms of price, low price is a terminal killer, and there is no doubt about that. The business logic of distributed e-commerce is to have the same price online and offline because it is the distributor's own business. JD, on the other hand, needs to use price to pry open the market to divide offline sales. Although JD claims to "highly respect the price system of brand partners," JD will certainly leverage its bulk advantage to lower factory prices. Even if manufacturers do not comply, JD has the ability to achieve low prices through subsidies.
Will distributed e-commerce compete with JD on price? Certainly not, because it cannot win, and there is no need. Facts have proven that burning money cannot cultivate terminal loyalty; it can only train the skills and habits of using e-commerce platforms. If JD cannot burn money forever on all items, the final result is only a temporary victory. Once it stops burning money, distributed e-commerce will have the opportunity to take over.
In terms of delivery, timeliness is key. JD claims that over 85% of orders can be delivered on the same day or the next day. Whether it can ultimately achieve this, for distributed e-commerce, it is entirely achievable by integrating vehicles and planning routes.
In terms of after-sales, frequent visit cycles and return/exchange support are required. Both distributed e-commerce and JD will put effort into service; whether it is done well depends more on team execution. It is said that JD does not handle returns or exchanges for slow-moving and near-expiry products at terminals because of high labor and logistics costs. In this regard, distributed e-commerce may have an advantage.
In terms of payment terms, the longer the better. JD adopts online prepayment or JD Baitiao (JD's credit service), and it is said that credit sales are possible with an interest-free period of up to 30 days. Although many believe JD is financially strong, operating a nationwide terminal market, coupled with the pressure of brand manufacturers' payments (JD will set payment terms for brand manufacturers, but not every manufacturer will accept), capital return is more important than imagined. Distributed e-commerce can also develop financial service models to provide certain payment terms to terminals as much as possible.
Thus, in terms of terminal experience, distributed e-commerce and JD-style e-commerce each have their own advantages and disadvantages, and in a single region, the local advantages of distributed e-commerce may even be more obvious.
Second, operational costs involve capital investment, labor costs, storage and transportation costs, and corresponding management costs.
The original intention of distributed e-commerce is to gradually achieve centralized procurement, unified storage, unified transportation, and even unified shelf management, after-sales, and promotion for regional distributors through the +internet model, thereby solving the high labor, storage, transportation, and management costs under traditional vehicle sales and visit sales models. Moreover, during operation, no major capital investment is needed.
In contrast, JD's existing logistics and warehousing facilities are clearly insufficient to support future nationwide operations. It will inevitably increase investment to build super-scale logistics and warehousing systems and a huge ground service team. However, when brand manufacturers deliver products from the factory to JD's warehouse in full truckloads at the most economical load tonnage, the cost is the same as delivering to a distributor's warehouse, and distributors can easily reach a delivery unit. Similarly, the cost of JD's delivery vehicles delivering to each terminal is the same as that of distributors. Therefore, the super-scale built by JD with large capital not only fails to bring low-cost advantages but also generates incomparable management costs.
Finally, operational efficiency is reflected in distribution efficiency and team work efficiency.
Improving distribution efficiency focuses on achieving short-radius delivery, full loads, and increasing effective order rates. Under the "centralized procurement, unified storage, unified transportation" model, distributed e-commerce can achieve these. JD, without offline stock and network foundation, cannot form scale advantages in sales in the short term, let alone improve distribution efficiency.
In terms of team efficiency, many distributors, including secondary wholesalers, are entrepreneurial, with small teams that are easy to manage. Employees work 16 hours a day, without weekends or holidays, and can maintain high work intensity. JD's team is large, and the more management levels, the lower execution efficiency. Of course, work efficiency has many subjective factors, so we will not elaborate further.
In summary, if distributors use internet tools to build a distributed e-commerce platform, also implementing "centralized procurement," "unified storage," and "unified distribution," and adopt a "platform + entrepreneurial boss" operating model, they can achieve lower costs and higher efficiency than JD.
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