The FMCG B2B sector has grown rapidly in recent years despite little media coverage. While many early B2B players are profitable, a number of distributors in regional markets have transitioned to B2B and are already profitable, with their businesses performing very successfully in their local markets. Analyzing the reasons, on one hand, the maturity of software application technology means that many distributors now have far more options for B2B systems than before, with much less trial and error. On the other hand, the experience accumulated by early B2B players and the positive feedback from the track have made distributors no longer hesitant; they will firmly continue when encountering difficulties. In a sense, this has also accelerated the pace of distributor transformation in regional markets. Inventory of Existing B2B Platforms in China Recently, commissioned by PepsiCo Foods, New Distribution conducted a systematic inventory of registered B2B platforms nationwide. This inventory mainly counted the number of B2B platforms with a certain scale in China. According to incomplete statistics, there are currently over 60 FMCG B2B platforms operating normally in China, with 11 platforms having a scale of over 1 billion yuan. They are: Meicai (30 billion), 59pi (5.9 billion), Zhongshang Huimin (4 billion), Xintonglu (10 billion, including joint warehouses), Lingshoutong (4 billion, excluding joint warehouses), Kuailai Zhanggui (1.5 billion), Jiayun Yunshi (1 billion), Weiran Jinhe (1.2 billion), Caihua Commerce (3 billion), Wanquan Speed Distribution (4 billion), and Pinbianyi (10 billion). Among these 11, except for Lingshoutong and Pinbianyi which are matching models, and JD which is a hybrid model, most are self-operated B2B. Of course, today's B2B rarely has pure self-operated or pure matching models. Self-operated B2B platforms often have some POP model, relying on their own traffic attributes to provide trading platforms for low-temperature and frozen products, helping these customers achieve channel coverage for special delivery or long-tail products such as refrigerated or frozen food and groceries. Moreover, in terms of cooperation models with upstream suppliers, besides purchasing, sales, and distribution, many platforms have also done some category agency in regional markets. Some platforms have even done OEM or ODM products. Especially in low-attention categories, almost all platforms above the 1 billion scale have started such businesses. These platforms not only extend their business to agency, but many have also extended downstream to open their own branded chain stores, ranging from dozens to hundreds, becoming influential regional chain brands locally. Some have even cooperated with Meituan Flash Purchase, supplying to flash warehouses while also operating some flash warehouses themselves to seize online O2O traffic business. There are about fifty or more regional distributor-transformed B2B platforms, too many to list individually. In terms of transaction volume, most of these regional platforms have already reached a GMV of over 100 million yuan in a single city, with a few approaching 1 billion, such as Changsha's New Gaoqiao and Chengdu's Rongcheng Yigou. One advantage of such platforms is that they are generally in a relatively closed market environment with limited total retail traffic. Once a platform succeeds, it quickly lowers the minimum order quantity, making it very difficult for latecomers to enter. Therefore, in general, below a provincial capital city, a prefecture-level city can accommodate at most one or two B2B platforms. Basically, whoever does it first will leave less and less room for later distributors. **** These figures do not include platforms that distributors have transformed and built themselves but have not disclosed, which New Distribution did not find. Conservatively estimated, there are at least 20-30 more platforms not counted. Currently, the total GMV of normally distributed B2B in China should exceed 120 billion yuan in 2023, and it is still growing rapidly. Why is it an inevitable trend for distributors to transform into B2B? Since New Distribution began reporting on B2B in 2015, we have firmly believed that the B2B model is the inevitable direction for distributor transformation. To put it another way, the supply chain transformation of distributors is an effective solution for them to grow stronger in regional markets, avoid being squeezed by upstream and downstream customers, and not be eroded by high costs. Why do we say this? At the beginning of the year, when New Distribution visited the market, we found that the trend of retail chainization is already very obvious. Once convenience stores reach a certain scale, especially in regional markets, building their own supply chain is an inevitable trend. The value that distributors carry within the chain system is merely that of a supplier. However, chain convenience stores have very high requirements for capital payment terms and gross margins. This requires distributors to cooperate with chain stores with larger capital scale and tolerate lower gross margins. But this is just the beginning. Retail is not only chainized and fragmented, but the trend of omni-channelization is also very obvious. The problems brought by chainization, fragmentation, and omni-channelization are: the urban channel model has upgraded from one-dimensional to three-dimensional. Not only are physical stores automatically going online, but a large number of non-physical retail channels such as front warehouses, community group buying, social e-commerce, and live streaming short videos are constantly cutting into the natural traffic of FMCG in a city. This makes distributors very troubled. They want to supply goods but cannot even find the channels. Even if they supply, the price requirements are unbearable for many distributors. These fragmented retail channels have several characteristics: first, the supply chain is diversified, and distributors have no idea where these platforms source their goods, and the prices are very cheap; second, transactions are hidden, and many sales are digested invisibly. These two points bring a serious problem: there are too many channels, and distributors' business capabilities are very single, making it impossible to cover such diverse channel types. The transformation of retail today not only poses new capability requirements for distributors, but more importantly, manufacturers must reconstruct their channel logic based on today's market characteristics. Once reconstruction is proposed, the existing business model of distributors must inevitably be rewritten. Distributors, think carefully: what is your value in a city? Is it to help manufacturers operate the natural traffic of the local market? This traffic includes channels such as local KA, CVS, mom-and-pop stores, group buying, and special channels. In these channels, you bear the responsibilities of capital advance, sales communication, warehousing and distribution, and customer relations and complaints. However, the problem is that the change in channel structure, on one hand, greatly reduces your ability and opportunities to dialogue with these retail channels; on the other hand, new channels place higher demands on distributors' capabilities, requiring not just the functions mentioned above, but a series of new tasks such as operations, communication, reach, experience, and efficiency. Recently, I chatted with an executive from a certain brand about the current situation of their distributors' business. He said that their distributors' gross margins are very poor, and if there is any disturbance in the market, the collapse of the distributor network is only a matter of time. But the problem is, why do the regional managers of the manufacturer tolerate this situation when they clearly know it? Performance! Growth! The boss demands growth. Without growth, a company is like a boat sailing against the current; if it doesn't advance, it retreats. So now manufacturers can only drink poison to quench thirst, pressing distributors to stock up desperately. Therefore, if some distributors are smart, they should not wait for retail to squeeze them, not wait for their operating margins to be squeezed dry, and not wait for manufacturers to come and talk about adjustments. Instead, they should transform and adjust as soon as possible, adapting their business models to today's market changes. Find a business model that suits them as soon as possible. Supply chain transformation is an unavoidable choice Of course, I say B2B is the best choice for distributor transformation, but not the only choice. From the perspectives of business path, business capability, and resource endowment, distributors doing B2B is, in a sense, a natural progression. There is an internal logic here: when the market develops to a certain stage, the concentration of brands and retail is an inevitable trend. In the future, retail channels will become more and more concentrated. By concentration, I mean the brand concentration of a single channel type. For example, in convenience stores, in the past few decades, the main players were mom-and-pop stores fighting independently. In the future, it will definitely be brand chainization, with at most two or three in a market. Another example is community group buying; in a market, at most two or three is good. For Douyin local e-commerce, Meituan Flash Purchase, etc., you can see that in a single channel type, there are rarely multiple brands. Let's look at the upstream; it's the same. The trend of product branding is also very obvious. In the past, white-label and miscellaneous brands are decreasing, replaced by nationally known brands, especially those with strong innovation capabilities. Of course, this doesn't mean white-label products can't be sold, but they are being absorbed by chain snack stores and specialty stores. Look at the discount snack stores like Ai Lingshi and Lingshi Youming that have been opening everywhere since last year. Their future is to continuously absorb upstream white-label OEM companies, aggregate snacks, and turn them into retail channel brands. When both upstream and downstream are continuously integrating, the supply chain transformation of distributors is also an inevitable result. On one hand, the scale of the supply chain, multi-brand agency and distribution, can improve efficiency and reduce costs; on the other hand, it can also increase the bargaining power with upstream and downstream. Most importantly, the conditions and timing are ripe. Small stores have accepted online ordering, manufacturers have accepted and are more willing to cooperate with supply chain companies like B2B, and the cost of software, technology, and talent supply in the industry has significantly decreased compared to before. In a regional market, as I said before, if you don't do it, someone else will. Some distributors might say, I am in a very closed regional market, I have no place to source goods, how can I do it? I think the core of the problem is not that there is no place to source goods, but that the mindset is not open. New Distribution previously reported on a wholesaler named Boss Dai in Jiangbei, Nanjing. He used Xintonglu's software to do his wholesale business. Originally, his annual wholesale business was over 20 million yuan. This Spring Festival, I heard from a customer that he has achieved over 100 million yuan, becoming the largest B2B platform in Jiangbei, Nanjing. The question is, where did his goods come from? Actually, it's very simple. As long as you have traffic and your channel coverage is wide enough, you don't need to worry about whether they will give you goods. Distributors' labor costs are so high now. If someone can help distributors sell goods at a lower cost, why wouldn't distributors be willing? And they are even willing to give you payment terms. Take a serious look. Among the B2B platforms in China that have reached a certain scale, which manufacturer doesn't give credit, and which distributor doesn't have payment terms? The core of the problem is not the source of goods, but your coverage of terminals and your ability to control terminal services! So you don't need to worry about supply; you need to worry about who did B2B before you, and whether you still have the opportunity to achieve full coverage in the future market. The Endgame of B2B Here we need to make some assumptions. In a prefecture-level city, there can be at most one or two B2B platforms. With 150 prefecture-level cities and over 2,800 counties in China, we believe that no more than 500 platforms can basically cover the whole country. This is a scarce business. You might say, can so few B2B platforms handle the trillions of yuan in distributor business? I didn't say all distributors will die, but the evolution of distributors is inevitable. Some distributors may move upstream, some may move downstream, but those who remain in the middle will not have an easy time, especially in food and beverage. In terms of B2B business models, we believe there are several major trends in the future: First, full-category operation; Second, scale and supply chain transformation; Third, diversification of business models. Upstream, they do ODM and OEM; in the middle, warehousing and logistics become independent third-party city distribution. Of course, while doing wholesale, B2B will also do agency business. Downstream, they do chain franchising, and the types of chains are not only convenience stores, but also discount stores, snack stores, and even some flash warehouses, front warehouses, and community group buying. B2B will gradually get involved in all supply chain-related businesses. This is not a wild guess, but some platforms with over 1 billion in single entity have already started doing this. Mr. Qin Xian from Rongcheng Yigou once made a bold statement that within three to five years, they would surpass Chengdu's local Hongqi Chain in the regional market. If he didn't have some confidence, how could he have such courage? So, once the supply chain reaches a certain critical point, there is no doubt about their ability to restructure and influence the local market. These things are just a matter of time. On April 8, at the 8th China FMCG Innovation Conference, a forum titled "Regional B2B Rise Special Session" was held, inviting seven guests: Yao Xuhong, General Manager of Caihua Commerce (Yueheji); Chen Shengqiang, Co-founder and COO of 59pi; Wang Shenbing, Founder of Zhongke Shangruan; Zhang Jianli, Founder and CEO of Huanyu Yigou; Liu Lixi, Planning Director of Wanquan Network Technology; Yang Qiming, CEO and Founding Partner of Kuailai Zhanggui; Shang Puhe, Deputy General Manager of Jiayun Yunshi.