FMCG urban distribution emerged around 2016, following the digital transformation of FMCG channels, and has been widely discussed. However, in the past six months, information about it has dwindled. Despite being a trillion-yuan market, why did it once advance rapidly but now move sluggishly?
Why is urban distribution difficult? Wang Jianjiang, founder of Hailian Tianxia, told New Distribution that first, from the urban distribution market perspective, China's overall B2B delivery system has not been standardized. For example, in the traditional retail system, the receiving systems of China Resources Vanguard, Walmart, and RT-Mart are different; this is the issue of delivery standardization. Why is 2C easier? Because large platforms like Alibaba and JD.com have emerged, promoting industry standardization. But B2B has not yet achieved true platformization.
Second, data is not interconnected. China's logistics costs are actually low; truck driver costs are much lower than in the US. The main cost in Chinese logistics is the bullwhip effect caused by data disconnection, leading to waste in transportation. Of the goods transported by vehicles on the road, 50%-80% of capacity is wasted.
In Wang Jianjiang's view, precisely because urban distribution is difficult, it gives opportunities to small and medium enterprises, including regional distributors, to explore and refine their warehouse and distribution, and upgrade efficiency. If there is redundant 'capacity,' they can even spin it off to take social orders, turning warehouse and distribution into an independent business unit.
Recently, New Distribution interviewed Wang Jianjiang, founder and CEO of Shenzhen Hailian Tianxia Technology Co., Ltd. As a third-party warehouse and distribution system service provider, he has years of experience serving distributors, retailers, and supply chain enterprises. How does he think about warehouse and distribution as one of the most important functions for distributors?
1. Warehouse and distribution is a technical task
Wang Jianjiang, with an IT background, has been in the logistics industry since 1999. He was the project leader for China Resources Vanguard's Pinghu Distribution Center, the first modern distribution center in domestic retail, and has participated in logistics supply chain optimization for companies like China Resources Vanguard, Shandong Jiajiayue, Shell Unification, and P&G, with nearly 20 years of logistics experience. When asked why he founded Hailian Tianxia, he told New Distribution, "The channel changes in the industry are too fast, from B2C to O2O, then B2B, and social e-commerce, etc. Almost every few years there is a new round of change, but no matter how it changes, goods ultimately must be delivered to consumers, and logistics is a lasting matter. Moreover, in past work, I found too many enterprises with extremely low efficiency in warehouse and distribution. Based on this background, we founded Hailian Tianxia and focused on the warehouse and distribution field of consumer goods."
When profits are high, any approach works; once external market competition intensifies and profits thin, when you must "wring the towel to squeeze out water," it tests the operational efficiency of the enterprise. Therefore, Wang Jianjiang emphasized, "Currently, especially in the FMCG supply chain field, warehouse and distribution will increasingly become a technical task."
Why say this? First, look at changes in people. For example, in first-tier cities like Shenzhen, the post-90s and post-00s generation basically do not want to do warehouse work. Recently, when meeting clients, warehouse porters with a monthly salary of 6,000 yuan, including room and board, cannot be recruited. They would rather go out for delivery or sales, not stay in the warehouse, feeling like they are "in prison." Compared to warehouse workers, salespeople have free time and can look at their phones, relatively free. Hailian Tianxia once conducted a statistic: the average annual turnover rate of warehouse personnel for distributors is over 50%, which is a common phenomenon.
Additionally, the logistics manager position is basically missing in trading companies. Many FMCG distributors calculate warehouse and distribution costs, often getting results below 3%, but if you include damage, returns, and bad goods, it may exceed 3%, even 7%-8%. Distributors' profit itself is only 1%-2%, and it is very likely that warehouse and distribution turns the trading company's business from profit to loss. This is closely related to warehouse design and planning, as well as accuracy.
Frankly, in the past, due to the demographic dividend and rapid industry growth, distributors saw annual sales increases of 20-30%, and the warehouse and distribution costs could be temporarily ignored. But no market grows forever. When the existing market cake is divided, from seizing the market to competing for it, distributors' businesses experience ups and downs. At the same time, with the penetration of the internet and the impact of online e-commerce, which takes away some offline sales, distributors must consider internal operational efficiency. In terms of cost proportion, warehouse and distribution costs are the first priority.
2. How should distributors position warehouse and distribution?
I remember Mr. Nie Biquan of Shaanxi Baihui Trading said at a meeting, "Look at ten years, where is the trend; do one year, where is the point." Perhaps for current distributors, although business is not as good as before, they can still barely survive, but should they still change? Definitely, because change or transformation is never for today's business.
The past extensive management model may have been sufficient until now. But doing business is never just about today's business; you must also do tomorrow's business and meet tomorrow's challenges and opportunities. Wang Jianjiang believes that during the channel transformation period, it is undeniable that small-scale distributors will gradually disappear, regional head effects will become more obvious, and the distributor industry will become more formal and standardized, with corporate operation. This requires distributors to not only refine core business operations but also improve efficiency in warehouse and distribution.
Wang Jianjiang gave an example: a Shenzhen Mengniu distributor, also the largest Mengniu distributor nationwide. First, refine their own warehouse and distribution capabilities, improving labor efficiency and space efficiency. "The monthly labor efficiency of warehouse personnel is a basic level of 500,000 yuan; below 500,000 is low, above 500,000 is medium. Some of our clients can achieve an average monthly labor efficiency of 1 million yuan." In addition, accuracy, returns, and shelf-life management are also key points for improving warehouse and distribution efficiency. Achieving these, warehouse and distribution becomes a guarantee for distributors, helping them reduce costs and increase efficiency.
When there is redundant 'capacity,' it can be spun off into a third-party business, taking social orders, turning into a competitive advantage for distributors, and transforming the ability to reduce costs and increase efficiency into a business. The Shenzhen distributor, in addition to doing Mengniu, spun off warehouse and distribution to establish a supply chain company. Because of their own business foundation, even adding one new customer is incremental for the distributor and profitable.
Wang Jianjiang told New Distribution that during the channel transformation period, when distributors refine their own warehouse and distribution, no matter how external competition is, they can retreat to serve their own distribution business, or advance to establish a third-party urban distribution company, making it a business.
3. City-level warehouse and distribution providers will rise within 3-5 years
"In the future, warehouse and distribution will increasingly reduce dependence on people and move toward specialized division of labor. Within 3-5 years, city-level warehouse and distribution service providers will gradually rise." In Wang Jianjiang's view, some regional head distributors, in addition to expanding and deepening their product mix and coverage of small stores, will also make warehouse and distribution a core business segment. For more waist and tail distributors, especially single-product distributors, some will exit due to limited operational capabilities, while others will outsource warehouse and distribution and become marketing and promotion companies, focusing on product promotion.
Hailian Tianxia helps head regional distributors refine their warehouse and distribution capabilities. In this process, Hailian provides not just a system or tool, but a complete set of solutions. Wang Jianjiang defines Hailian as a "service-oriented company." He believes that systems are only carriers for solving warehouse and distribution efficiency; Hailian will help distributors from warehouse planning to consulting, from process design to operational guidance, providing comprehensive support. Just a SaaS system cannot fundamentally improve warehouse and distribution efficiency for distributors. From tool application to achieving cost reduction and efficiency goals, a complete service system must be equipped, combining the system with the actual business scenarios of distributor warehouse and distribution, to truly achieve the goal of cost reduction and efficiency.
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