30+ industry experts, 100+ B2B platform founders, 800+ manufacturer and distributor friends, gathering in Fuzhou to discuss the path of Internet transformation for the FMCG industry. At several recent private board meetings, I was asked by a few distribution and retail companies about the current investment environment and economic situation, and I could read a strong sense of pessimism between the lines of our exchanges. One large distributor with annual sales exceeding 1 billion yuan, who is struggling with transformation, frankly admitted that the current business society and environment make him feel like everyone has stopped playing with him. This is an entrepreneur I deeply admire. He has hired consulting firms to sort out his company's strategy and management system, launched internal entrepreneurship projects with real money investment a few years ago, established a group business school, made industrial chain investments in both front-end and back-end around channels, and recently learned from young people about WeChat business operations. Yet he still feels his company's prospects are bleak. When talking about the bankruptcy and transformation of chamber of commerce member companies in the past two years, he felt that the entire business ecosystem and game rules have already changed... Examples like this began to show signs two years ago, and this year they have become more intense. Suning has undergone a radical reinvention; retail giant Walmart is suffering losses and restarting changes in its global stores and systems; Mengniu Group is undergoing channel reform, starting to adopt the Coca-Cola model and changing intermediate links; large community chain supermarkets are transforming, rushing to go public, or going bankrupt; rumors that e-commerce giants are reshuffling the FMCG market are rampant; and a large number of middlemen who need to advance funds for operations are beginning to transform or go bankrupt... Tracing the root cause, this actually stems from the transformation and upgrading of China's economic ecosystem, and the map of the old world can no longer provide direction for the new world. 1. Under the traditional economic system, "production, sales, and consumption" were the three main entities, each with its own system but closely interlinked. However, with the continuous improvement of social productivity and the great abundance of social material, consumers' consumption habits and purchasing power have increased, and their choices have multiplied; with the rise of online shopping habits, e-commerce platforms, offline delivery, and same-city logistics, and the influx of a large number of overseas products, the important ways for merchants to make profits (information asymmetry, opaque channels, non-transparent prices, high delivery costs, etc.) have been cut off one by one; the initiative has shifted from merchants to consumers, and business rules have also changed: consumers are invited to participate in product design and production supervision, their role has changed from passive acceptance to active creation, and the development mindset of enterprises has shifted from "customer thinking" to "user thinking." The opinions of the consuming entity are fully adopted, and the promise of "the customer is God" has been realized—consumers have begun to penetrate into the producer side. Participatory design, private customization, customer experience, user subsidies, and online-offline closed loops have become the standard for the new economy! 2. The wave of mobile Internet and the Internet of Things is refreshing people's past lifestyles at an unconventional speed: Driven by consumers' consumption habits and purchasing power, Chinese enterprises have evolved from production determining consumption at the beginning, to channel dominance, and now to consumer dominance. The ultimate dream of original distributors—to escape being controlled by both ends, build their own brands, invest in factories, and have their own channels—has been realized by some through accumulation and continuous transformation, while more are still advancing on this path. But today, they suddenly find that the factories, brands, and channels they envied are now in an awkward position under the wave of mobile Internet; they have become the traditional economy, while the new economy is running ahead. In the new business world, traditional production methods and marketing models have also undergone earth-shaking changes: being eliminated has nothing to do with you; the era of the Three-Body Problem has arrived! With the reshaping of national political and economic relations and the rise of the new economy wave, how distribution enterprises can break through their difficulties has become a new critical issue for commercial enterprises. Combining surrounding business cases, I would like to share the following: In July this year, a friend from the investment circle introduced an early-stage project from Shandong, and I exchanged ideas with its team for over three hours in the afternoon. The founder, aged 50, came from a background in alcohol distribution and is currently investing in and supporting a few recent college graduates to start a new O2O project. When asked about his entrepreneurial motivation, the founder was emotional: his original distribution business was smooth sailing, but in recent years it has been declining, funds have been tightening, and he feels as if his more than 10 years of accumulation is about to be given back. After traveling to many large cities in China, he felt that the O2O direction is an important gateway for future regional economic breakthroughs, so he set out to start anew. However, apart from business rules, insight into human nature, and connections, he was severely lacking in mobile Internet technology, products, operations, promotion, and financing, so he reorganized his team, re-established his career, and after testing the market, began to connect with venture capital, stumbling along the way. Another is a community O2O project we incubated two years ago , focusing on the home kitchen (rice, flour, oil, eggs, milk, etc.) series, with online payment and offline free home delivery. This is different from the above case. The company wavered between choosing to incubate the project or operate the old distribution business, and it chose the currently profitable distribution system, slowing down investment and promotion of the new project. As a result, in this year's channel reform by manufacturers, the distribution business was eliminated, and the new venture, due to its previous halt, missed the best opportunity for development and financing, and is now struggling painfully. Another comes from a share by an investment colleague : a regional community chain enterprise they had been following, due to the economic situation of the past two years, previous blind store expansion, and pressure from online channels, has now basically stalled its performance sprint before going public. Under heavy pressure, its valuation has been repeatedly lowered, and institutions have basically given up following it; its IPO is far off. Of course, there are also successful transformations. One company doing community maternal and infant O2O, originally a maternal and infant chain, now leverages its original industry foundation to expand into door-to-door services such as children's photography, postpartum lactation counseling, and body shaping. Relying on community O2O experience stores, it has carried out a series of business transformations including training, consulting, sales, and door-to-door services, increasing gross profit from 35% to 70%, and is currently preparing for listing on the New Third Board. Another distributor took advantage of the O2O craze to directly transform into a same-city delivery company, providing same-city delivery for O2O enterprises. In the second half of the year, brand cooperation with major companies like 58, Ele.me, and Meituan has brought sweet rewards, and it has already obtained financing and is replicating regionally. Looking at the gains and losses of transforming companies, there are several breakthrough paths that commercial enterprises can explore: 1. Embrace the new economy, learn new thinking and technical means Starting from optimizing experience and improving efficiency, re-examine the company's resources and advantages, use regional characteristics and consumption habits to find a suitable business model and competitive advantage. Among them, O2O and same-city delivery are optional paths for enterprises. Of course, it is not recommended for enterprises to build their own O2O platforms, as it is time-consuming, labor-intensive, and costly, and it is difficult to see results and profits in a short time. They also lack Internet talent and organizational genes, and it may end up as a mishmash. Moreover, O2O models in second- and third-tier cities are not favored by capital. Therefore, when building, they can ally or co-invest with enterprises that are expanding nationally or have regional characteristics, borrowing each other's resources, funds, channels, customer relationships, delivery, and personnel to achieve online-offline integration. Same-city delivery is also a path for local distribution enterprises to transform. Unlike the simple delivery and basic services of the distributor model, they must actively adapt to new business rules and achieve organizational transformation in upstream docking, business processes, customer experience, full-process supervision, and benefit distribution. At the same time, during transformation and expansion, they should continuously use diversified financing methods and channels such as product crowdfunding, store crowdfunding, equity crowdfunding, and venture capital to match strategic optimization, cross-border integration, and business transformation. 2. Relearn the business bible, transform enterprise management methods According to McKinsey's latest China innovation report, China's strengths in innovation are in business models and optimizing efficiency, which are exactly the reasons for the rapid progress of de-intermediation in China's current business ecosystem. Commercial enterprises must fundamentally achieve a "zero-based mindset, second entrepreneurship." Systematically review the external environment, their own resources and advantages, reposition themselves, carry out disruptive business model transformation, and graft and transform in business models, cost optimization, and efficiency improvement. If they step into the wave of mobile Internet and the Internet of Things, they should boldly delegate authority to teams that understand social networking, tools, and mobile Internet; technical teams can absorb technical talents returning from Beijing, or try to connect with Beijing's talent base, starting with part-time external hires, and after a certain stage of operation, product, promotion, and operations can be built up. Equity incentives and option pools, which were previously avoided, are now standard for startups; companies that were once one-man shows are now in the era of co-founders, boards of directors, and corporate governance; with the entry of mobile Internet and post-90s new employees, the original talent selection, training, evaluation, and development mechanisms must be upgraded. Human resources, as a key capital element of the enterprise, has been put on the agenda. At this point, four steps have become one, and the concept of human capital advocated by the management community has been realized overnight. How to price excellent employees and partners, how to design entry and exit mechanisms, how to stimulate organizational vitality, cultivate innovative and learning organizations, and enable enterprise personnel to achieve breakthroughs in management talent, and then become innovators and entrepreneurs—makers—has become a new application topic. 3. Accept channel transformation, become shareholders, become delivery providers Actively accept manufacturers' channel reforms, use local advantages in funds, channels, vehicles, personnel, and customer relationships to systematically package or modularly load into the manufacturer's joint-stock company, becoming the manufacturer's delivery provider and achieving role transformation. 4. Completely transform, sell to the manufacturer or management, and start anew Many business founders are over half a century old, already well-off, but lack the energy for business transformation and reinvention, and the second generation is unwilling to take over. They can consider selling the company as a package to upstream manufacturers or internal management. Contract the front line, transform into angel investors, or establish funds or become LPs, providing assistance to new ventures in resources, funds, experience, and other areas. I have come into contact with a 30-year-old county-level commercial enterprise with a scale of several hundred million yuan. It started with the first-generation founder as a peddler, selling products door-to-door, and later, with reform and opening up, became a large enterprise group with assets exceeding 100 million yuan, covering production, distribution, retail, and foreign trade. After undergoing internal restructuring and the pain of family business succession, the second-generation successor, in the wave of the new economy over the past two years, has been proactive. In addition to the original base, they have created new product brands, developed their own e-commerce platform, implemented management shareholding and business partner systems, established internal innovation funds and project incubation platforms, and promoted the company's gorgeous turn! We also hope that more small and medium-sized commercial enterprises will more actively embrace this great entrepreneurial era and achieve another leap for their enterprises! Xiaojia has something to say: Distributors in the FMCG industry have never been as indecisive as they are today: seemingly with a variety of management methods, yet the development direction is particularly vague. Taking the condiment industry as an example, distribution bosses may face the following choices: Difficulty in product selection: Because there are many sub-categories, choosing brands/products with business potential requires special caution; Difficulty in terminal control: For most small bosses who still have a "sitting merchant" mentality, there is almost a lack of necessary database support for the size of the regional market and terminal business formats, making it difficult to understand terminal inventory and sales trends, coupled with complex product SKU management, constantly challenging the intelligence of small bosses; Difficulty in cost control: Because they don't know the profit points in operations, cost allocation becomes a game of "truth or dare," and often they can only be coerced by stores or their own employees. Once cost allocation goes wrong, it forms a "once bitten, twice shy" dilemma; Difficulty in market operations: Operators who grew up carrying goods on their shoulders still hold the old idea of making money from price differences. This is also why the current distributor B2B procurement platforms can impress small bosses: they think that if the purchase price is a bit cheaper, it can solve the pain point of small profits. These pain points and difficulties are hard to dissipate through a so-called technological revolution. When the market is booming, there are failed businessmen; when the market is sluggish, there are also plenty of businessmen making a fortune. For the vast majority of distributors, the profitability of "money in the bag" is built on the basis of real transactions with consumers. This also determines that distributors must understand consumers' purchasing behavior, and use this to consider terminal store tactical combinations, output expectations for cost allocation, reasonable control of inventory turnover rhythm, and key assessment indicators for personnel management. For example, study the strategic source of product promotion according to local and seasonal conditions: in summer when appetite is poor, focus on rice and noodle sauces; when it's hot and people don't want to cook, promote 5-minute quick cooking kits that don't require a wok; before holidays, study the popular dishes in restaurants and bundle semi-finished clean vegetables for joint promotions. Only by mastering consumers' appetite can the dazzling array of condiments become the core driving force for cooking! Once you find the core driving force, the remaining network distribution, product selection, channel costs, and personnel performance management will have a common goal and direction. Keep your mind spinning, and business will never be hard! Source: Entrepreneur Bang, author Sun Songting, partner of Haiyuan Capital, reprinted from Sales Jia New Food Era · New Distribution —— 2016 China "FMCG + Internet" Summit Forum —— This is a grand event focused on how the FMCG industry channels should transform under the general trend of Internet+ transformation Conference Agenda 09:00-09:30 Registration 09:30-09:35 Host opening 09:35-10:05 2016 China FMCG Industry Trend Analysis Report - Zhao Bo 10:05-10:25 FMCG Enterprise Transformation Strategy and Path - Liu Chunxiong 10:25-10:45 Opportunities and Challenges Brought by FMCG Channel Reform - Field 365 CEO Liu Zhao 10:45-11:25 Alibaba Retail Link All-round Empowerment - Alibaba Retail Link Guo Kunkun 11:25-12:00 Roundtable Forum - Brand Transformation, Improvement vs Reconstruction? (Guests TBD) 12:00-13:30 Lunch 13:30-14:00 Distributor Transformation and City Distribution Trends - Weijie City Distribution CEO Wang Qi 14:00-14:30 Roundtable Forum - Why Should Distributors Do Logistics in Transformation? 14:30-15:00 Detailed Explanation of Zhongshang Huimin's One Machine, Two Wings Strategy - Zhongshang Huimin Vice President Su Xiaoxin 15:00-15:30 Detailed Explanation of Zhanghe Cloud Factory Strategy - Zhanghe Tianxia Yang Lixiang (Speech content TBD) 15:30-16:00 Supply Chain Finance as a Lubricant for B2B to Drive Traditional Business - 51 Order CEO Chen Xian 16:00-16:30 2B Investment Principles and Ideas - ZhenFund Founder Xu Xiaoping (Guest TBD) 16:30-17:00 Small Retail, Big Business Opportunities, China's Retail Transformation and Upgrading - Yurun Group E-commerce Division General Manager Wang Jianfeng 17:00-17:30 Roundtable Forum - Who is the King of FMCG B2B Models (Guests TBD) 18:00-20:00 Dinner For manufacturer and distributor friends who want to transform, this grand event is not to be missed. Interested friends can long-press the QR code below or click "Read Original" to register. Registration Method: Long-press the QR code below or click "Read Original" ↓↓↓ Click "Read Original" [Register]