As we meet in this letter, I am Yuan Lai from New Distribution.

I've been on the front lines recently, meeting distributor bosses across regions, and one clear trend stands out: more and more distributors are moving toward local B2B supply chain platforms, opening up new business opportunities. I've even seen major daily chemical distributors launch B2B platforms, positioning them as a "second startup" or "second growth curve." I think this is a good thing—indeed, building a local B2B supply chain platform is one of the few new directions and models for business growth, and it can establish a local channel moat in the future. However, during exchanges with distributor bosses, I've also noticed many practical problems and confusions. This article shares these on-the-ground issues and my reflections, aimed at distributor bosses who are about to start or have just begun their B2B supply chain platforms.

Simply Pursuing Registered Store Counts Is Meaningless In the early stages of store expansion, don't blindly chase "registered store counts." Registering stores without actual transactions is meaningless—it's the same as distributing goods on credit. A store is only truly developed when it registers and completes its first order. I once met a dairy distributor who launched a local B2B supply chain platform. Leveraging the existing frontline sales team, they registered 1,000 stores in the first month, but fewer than 100 actually placed orders. When starting a B2B platform, don't be too impatient. Don't set overly high targets, like 1,000 outlets in the first month, 3,000 in six months, or 5,000 stores in a year.

In today's environment, all distributors must do real business. You can't just show a lot of registered stores and SKUs without substantive transactions.

The core metrics for the early B2B phase are: number of first-order stores, average order value per store, and monthly active stores.

Continuously Iterate and Optimize Front, Middle, and Back Office Operations In the early B2B phase, when you don't have much money or resources, first serve 500 or 800 stores well. Through these 500 or 800 stores, continuously optimize the product mix, warehousing and delivery, and store sales across the front, middle, and back offices. No platform can guarantee that all 2,000 SKUs are correct from the start. Continuous optimization and iteration are crucial business strategies. If a SKU hasn't shipped in a month, consider replacing it. If a SKU has been distributed to stores but hasn't turned over in two or three months, consider replacing it. A B2B supply chain platform is a turnover business; without turnover and repeat purchases, it won't work.

The "relatively successful" B2B supply chain platforms we see today—covering 6,000 stores, with 3,000 SKUs and monthly revenues of 10-20 million—are the result of three years of operation, not something you start with 3,000 SKUs from day one. If others succeeded with 3,000 SKUs, you can't just start with 3,000 SKUs and expect success. They spent three years exploring; why should you succeed in just six months? That's unreasonable. You must respect the laws of market operation. In the early phase, start with 500 SKUs for snacks, 500 for beverages, and 200 for daily chemicals and condiments. How do you choose SKUs? Pick the top-selling items in each category. Continuously familiarize yourself with the lowest prices in wholesale markets and from distributors for each item. Even if you can't get the lowest price initially, keep optimizing to get closer to it.

Commodity Procurement Management Is the Most Important When starting a B2B supply chain platform, the distributor boss should focus most on "commodity procurement" because it's the weakest capability in their past experience. Distributors have typically been sales and finance experts, but few are experts in product organization and management. In the past, the business logic revolved around the products given by manufacturers; distributors thought about how to sell them, from distribution to sell-through. But the product selection logic for a B2B supply chain platform is based on the perspective of mom-and-pop stores: what the store needs, I provide. It's not about "I think this product will sell well, it looks good, or it's cost-effective." In the early phase, organize products based on what stores need. Only when the platform matures and stabilizes can you consider promoting a specific product.

Doing B2B Is to Build a Local Channel Moat The purpose of doing B2B is to serve mom-and-pop stores as a local one-stop supply chain platform. You hope to grow the business to 300 million, 500 million, or even 1 billion, deepening the channel moat.

But sometimes, after organizing a range of products, distributors find that supplying wholesale stalls, small wholesalers, or special channels brings in truckloads of orders quickly, and their mindset gradually changes. Remember! Doing B2B is to build a local channel moat—that's the strategy. Supply to other channels can only be one-off, occasional business. It's not that you shouldn't do it; once the platform is running, you can, but you must never invest your main effort there.

Don't Rush, Don't Overdo It with B2B The models of successful B2B supply chain platforms (product mix, store coverage, business management) are the results of maturity, accumulated over time. They are definitely not how you start. Although a B2B supply chain platform is the best path for distributors to build a local channel moat, it absolutely doesn't mean you should go all out from the start. Slow down, be steady, and give yourself three years to launch. That's a reasonable amount of patience. Finally, I want to emphasize that the biggest difference between a B2B supply chain platform business and the traditional distribution agency business is: In the distribution agency business, if a product doesn't sell or a store can't be won over, the upstream manufacturer will teach you, help you, and even push you. Of course, they also set various unreasonable targets. But with a B2B supply chain platform, the good thing is that it's a business you can fully control; you call the shots, with no manufacturer pressure. The downside is that no one pushes you, no one puts pressure on you, and no one gives you a proven playbook. There's only a successful direction and model, not a fully standardized set of operational details. Especially since each distributor has different resources and strengths, and local retail formats and distribution networks vary. There's no one-size-fits-all method; you need to keep exploring, optimizing, and iterating!

From August 20-22, 2024, the "2024 6th China FMCG Conference" with the theme "Navigating the Shrinking Era" will be held grandly in Shanghai.

Concurrently, the "3rd China FMCG Distributor Conference" will take place, where the "FMCG Industry Distributor B2B Platform Strategy Guidance Report" and the "2024 FMCG Distributor Business Status Survey Report" will be released. Additionally, a "Regional B2B x Brand" Breakthrough Workshop will be held, inviting 30+ regional leading B2B platforms and 20+ brand sales directors to interpret the key paths and methods for distributors to do regional B2B from multiple dimensions, while helping regional B2B and brands achieve precise demand matching and co-create growth.

Interested friends are welcome to scan the QR code to inquire about the conference details!

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