Baihui Trading: What We Do Baihui Trading's mission is to become China's most professional category supply chain, and we have been working towards this goal. Our vision is to provide Chinese families with better, healthier, and more environmentally friendly products. Our values are to be honest in our dealings and to work steadily. From 2018 to 2022, we maintained double-digit growth, and we expect to exceed double digits in 2023. This is thanks to our annual reflection on what the next three years will look like, allowing us to plan and act in advance. We have an omni-channel layout with a focus on categories. We serve customers offline and interact with consumers online, gaining a deeper understanding of their shopping psychology and behavior. We activate our team with comprehensive digital empowerment.

Navigating Cycles, Resilient Growth If you ask any distributor anywhere if business is good today, few will say yes. So instead of worrying, it's better to think. Uncertainty is normal and an inevitable part of economic growth. In 2023, the top ten internal concerns are: rising operating costs, stagnant terminal prices, difficulty in hiring, low professionalism, outdated operations management, high capital pressure, channel diversification, rapid channel changes, severe involution, and a sharp decline in profits. With increasing receivables, growing inventory pressure, and various manufacturer tasks, how should we think and face these difficulties? To survive this cycle longer, distributor bosses should improve their overall quality. We have the following thoughts:

First, no matter which industry you are in, you should have insights and a deep understanding of the industry and the world, and act according to the trend. If everyone knows business is hard today, it's a general trend; you just need to think about how to do well. Second, you need effective and rapid action. The changes of today's era force us to act effectively and faster. Third, long-termism. Baihui Trading has always believed in rooting in this industry with a long-term perspective. Sustainable development is our standard for judging everything. If something makes a lot of money in the short term but is not sustainable, it should be ranked second or third. Fourth, whether we have opportunities to regularly apply these insights, actions, and norms, and whether we only shine at work. In the era of thin margins, not only distributors but all industries are facing difficulties. After the era of huge profits, where any business made money, we entered the era of thin margins, with average income and high costs. Next, we will enter the era of no profits, with low income, high costs, and no profit. This is the current reality that distributor bosses cannot avoid. My advice is to lower expectations and face challenges head-on. In the future, as development reaches a certain point, I believe profits will be only 1-2 percentage points. Some bosses may currently achieve 5 or 6 points, but that's because we haven't fully entered the no-profit era. In the thin-margin and no-profit era, product profits cannot support enterprise development. The only way is to reduce profit expectations, manage cash flow, and seek new opportunities while surviving. The gold rush era is over; the future is the alchemy era. Only operations can drive growth, and operations are a condition for future survival. Profit is designed.

Today, with e-commerce, community group buying, KA, and various channels, we need to decide what money we want to make. When creating a product, have you planned and designed it in advance? Goals are planned, and profits are designed. Compared to excellent technology with mediocre business, I prefer a suitable business model. For example, have you fully combined your 10 single products, imposed strict limits, and designed the internal product mix and proportions? This is essential for future growth. To reignite hope for business growth, we believe there are three suggestions for growth and marketing: First, return to the original intention and long-termism. Business must provide value. What value do you provide to customers and consumers? Many voices talk about "de-intermediation," but I believe what is removed are customers without value and distributors without value. If you have value, you will surely leave your mark in the process of survival of the fittest. Don't always think about promotions and traffic; focus on your own development. Second, focus on categories. If you haven't done well in a single category, how can you build a platform? How can you withstand storms? Do well in categories, then upgrade and innovate, and then move to platforms. Sustainable development is core. Similarly, do you have keen insights? In your region, do you have deep insight into your category, allowing you to lead by a year or two? This is also the foundation for survival. Third, focus on changes in consumer behavior and psychology to avoid ineffective investments. I think consumers from the 60s, 70s, 80s, 90s, 00s, and 10s are different. The simplest is that today's consumers may prefer good-looking and fun products. Consumers from different eras are different, so our promotional activities need different approaches.

Omni-channel Operations

  1. Core Competitiveness: How to operate and respond. Sustainable competitiveness should be placed on brand trade marketing. The best design model is at both ends, doing well on the marketing side. Our desired model is for manufacturers to handle production and brand tone, while Baihui Trading handles all marketing implementation services.
  2. Omni-channel Layout, Focus on Core Customers, and Deepen Supply Chain Value: When a new thing appears, can you judge if it's good or bad? In 2010 and 2013, doing Tmall and Taobao made money if you did it, but many didn't know, so they missed out. In the past three years, doing Douyin, some missed out and some lost money. But my suggestion is to lay out the layout, focus on your base, and find the magic weapon for survival through continuous development and trial and error. Finally, deepen the value of the supply chain, from townships, small shops, KA, single large stores, retail convenience, flash warehouses, O2O, traditional e-commerce, interest e-commerce, B2b—this is our overall thinking.
  3. Product Selection: We attach great importance to product selection, following six logics:

First, customers: time moves on, customers change, consumers change; second, exploration of marketing strategies; third, competition determines the brand and product architecture, with a dedicated pricing committee for pricing; fourth, determine the product structure according to channel scenarios: what is the product structure for small shops, large stores, and e-commerce; fifth, plan the profit structure according to category trends: each stage has a different structural model, and I think the results will be different; sixth, determine the business direction according to market trends. I suggest bosses spend more time on product selection. For example, if a single product accounts for 40-50% of your sales but only contributes 3-5 percentage points of gross profit, I suggest limiting it to only 10% of the mix. 4) Structure Generates Efficiency: Baihui Trading's structure: best-selling products with their own traffic account for 40%, new category trends account for 30%, customer segment differentiation accounts for 20%, and some private label, high-margin products account for 10% of eliminated products. Our idea is to constantly innovate. Today's consumers are "fickle," but I won't elaborate here. The key is precision; structure is precision, and we need to adjust our internal structure well. 5) Operational Thinking: Focus, Focus, Focus Focus on core single products to reduce inventory; Focus on changes in consumer behavior to reduce ineffective investments; Focus on core channels with saturation attacks; Focus on core assets. From products, operations, categories, marketing, and talent, each segment requires time.

Organizational Support In terms of talent and organizational support, the most important thing is that distributors cannot relax on two things: products and teams. First, organizational change. I think by 2023, we have reached partner version 3.0, including team assessments, which are constantly being upgraded and iterated. I once saw a saying: "Times have changed, organizational structures must change, organizational reforms must change, and organizational assessments must change." Your organization must match the times. My suggestion is to incentivize people. Second, platformization and third-party logistics. In Xi'an, third-party logistics is common, and in Ankang, it's also third-party. We spin off logistics companies independently. We believe the future must be the most professional division of labor, which gives us more energy for marketing. Third, internal organizational fission. For all new projects, there are two models: one is internal partners, and the other is advanced partners co-investing. Baihui Trading's idea is that everyone runs forward together; no one can run alone. Fourth, personnel motivation and training. Baihui Trading has its own business school with phased training. There are courses and exams for promotion to supervisor or partner. Fifth, operator professionalism and planning. I once talked to a friend who does bank loans. The best way is to break out of the circle. I think bosses and operators should be more professional, and just keep following New Distribution. In recent years, I haven't missed a single New Distribution event and study seriously every time. Sixth, strengthen internal supply chain competitiveness. Baihui Trading always thinks about competitiveness: who we are, what we can do. We continuously strengthen our presence in a prefecture-level city or a provincial market, and we firmly believe that in three to five years, we will still meet here.

[This article is based on Mr. Nie Biquan's sharing at the 5th China FMCG Conference, organized by New Distribution for readers (with some deletions and modifications)].