A few days ago, Nielsen released a report titled "NielsenIQ China Retail Measurement Channel Definition Reshaping Plan." The report shows that in the current structure of China's FMCG retail channels, offline physical retail accounts for 60%, traditional e-commerce platforms 29%, WeChat mini-program social e-commerce 7%, emerging social e-commerce and content e-commerce 2%, and the combination of online and offline, as well as emerging retail, 1-2%. Channel competition is intensifying, offline market share is shrinking, and traditional distributors are fighting more fiercely for a share of the existing market. In contrast, the proportion of online consumption in the overall consumer market continues to rise. When offline business hits a bottleneck and growth stagnates, many distributors are turning their attention online, hoping to gain new increments through e-commerce. Is there an opportunity for distributors to do e-commerce, and can they do it? The author recently talked with two distributors who have entered e-commerce and summarized some thoughts from those who have personally engaged in it, hoping to provide some inspiration and reflection for fellow distributors.

01

Traditional Distributors Face Challenges in E-commerce

But They Also Have Clear Advantages

On the surface, the threshold for e-commerce is low: open a store on Tmall, JD.com, or Pinduoduo, partner with a courier, and use existing product and warehousing resources, and the business can basically start operating.

But once they truly engage, many distributors find that the online logic is completely different from offline business, and doing it well is difficult. The first difficulty is the shift from offline store thinking to online platform thinking. Offline business is store-oriented; the two core tasks for distributors are store coverage and product distribution. In this process, distributors focus on the store, thinking more about how to serve the store well, secure more shelf space, and optimize displays. Online business is platform-oriented, targeting consumers, and the core is leveraging platform traffic to drive consumer retention and repeat purchases. At this point, operators focus on the consumer, analyzing and positioning the consumer base behind the store, and managing product procurement, product assortment, promotional activities, and consumer operations. The different operating logic online and offline means that traditional distributors entering e-commerce must shed their past store-oriented mindset and establish a consumer-centric thinking model.

The second difficulty is insufficient awareness and difficulty in building a professional team. Each store on an e-commerce platform is just a tiny part of a vast number of stores; the key is how to be chosen by consumers among the vast array of stores. From traffic acquisition, to consumer guidance, to promoting purchases, and finally converting to repeat purchases, all require professional operations talent, especially with deep insight into platform rules and algorithmic logic. Some distributors might think they can simply outsource to a professional team. But the reality is that most distributors lack prior e-commerce knowledge, are unclear about online job responsibilities and requirements, and cannot judge whether the people they hire meet the needs, making it difficult for the team to become effective. These two difficulties are common problems for many traditional distributors doing e-commerce during the exchange. Of course, traditional distributors have disadvantages in e-commerce, but they also have corresponding advantages.

Advantage in understanding FMCG industry trends. Most traditional distributors have years of deep experience in the food and beverage industry, with strong sensitivity to product development trends, and can quickly capture the dividend period of a specific sub-category. Professional e-commerce practitioners often follow the flow wherever traffic is, liking to follow trends. But distributors, with their judgment of trends, can create trends.

Advantage in supply chain products. Distributors have established cooperative relationships with many brands, have rich product resources, and have a much stronger ability to connect products than pure e-commerce entrepreneurs, and can obtain lower prices. Online stores typically need 500-1000 SKUs, and most distributors have enough SKUs on hand to meet this demand.

In essence, e-commerce is the same as offline wholesale markets; both are means of goods circulation, and distributors should not harbor a resistant attitude.

02

What Kind of Distributors Are Suitable for Online E-commerce?

"Am I suitable for e-commerce?" This is a question many distributors want to clarify. Based on the exchange content, the author summarizes several dimensions for reference.

First, the premise for traditional distributors to go online is that their offline main channel business is stable, they already have a cost-leading advantage in the local region, and they can achieve sustained and stable profitability. For most distributors, doing e-commerce is just a supplement to the original stable business. If they haven't done well in the main channel they've operated for years, why would they think they can immediately succeed in a completely new field?

Second, from a category perspective, categories like personal care, daily chemicals, and leisure snacks are suitable for e-commerce, while heavy goods like water and beer are not very suitable for distributors to operate online.

Also, there must be cognitive preparation, a basic understanding of e-commerce. Whether it's e-commerce or traditional offline, competition now is a contest of professionalism and cognition. Before starting e-commerce, basic information and awareness must be clear, such as the algorithms and rules of different e-commerce platforms, the platform's consumer groups, and organizational structure. For example, in terms of organizational structure, the overlap between traditional trading and e-commerce positions is extremely low; operations, graphic design, and customer service are roles that most traditional trading companies do not have. This means that distributors doing e-commerce must first know what positions are needed and what the corresponding job responsibilities are, in order to build a team.

Finally, there must be financial preparation and a willingness to accept a 1-2 year trial-and-error period. Any entrepreneurial action inevitably has trial-and-error costs; the key is for distributors to do cost calculations in advance, estimating the projected loss for 1-2 years and whether it is within their existing capacity. The core costs during the preparation period include system upgrades for front-end and back-end, and team building; the core costs during the operation period include courier costs and packaging material costs. Before starting e-commerce, distributors should calculate the high-cost items, find the break-even point, and determine whether they can bear the losses during the trial period. Whether distributors do e-commerce themselves or hire professional managers, these three points need to be thought through clearly.

One additional point: if distributors hire professional managers, they must fully delegate authority. Within the estimated trial cost range, let the professional manager operate freely.

03

For Distributors Doing E-commerce

Product Selection and Pricing Are Key

To do e-commerce well, or to achieve profitability, it's hard to have real profits without reaching sales of over ten million. Therefore, for distributors, doing e-commerce must inevitably form standardization and scale to succeed. In this process, product selection and pricing should be the focus, because these two items also existed offline, and distributors need to set aside their past offline thinking.

1. How to control product selection? In the early stage of operation, distributors will definitely rely mainly on their own agency products, but it's best to differentiate the specifications and flavors of online products from mainstream single items. This is because mainstream single items are often promoted by most online stores, and as a new entrant, it's hard to gain corresponding traffic weight. After accumulating a certain consumer base, distributors should start targeted product procurement. This involves two key steps: first, analyze the consumer group behind the store, and second, calculate product costs.

First is consumer analysis, classifying and analyzing based on the consumer profile. For example, if there are many young people, you can appropriately add some novel and unique products or new consumer products; if there are many middle-aged and elderly people, you can add health and wellness products, etc.

Second, for planned procurement products, do product cost calculations. Online single purchase amounts and purchase frequency are relatively low; if product profits cannot support costs, it's hard to sustain. E-commerce costs generally include product cost, courier cost, packaging material cost, labor cost, warehousing cost, platform commission, and some daily operating costs. When selecting products, distributors should calculate the product cost, sort out whether it makes money, and then judge whether to match and list it.

2. How to set prices? Traditional distributors have operated offline businesses, targeting stores, while e-commerce is an online business targeting consumers. According to offline logic, there is a shipment price and a retail price, which are completely different concepts. In the early stage, distributors may not have awareness of product pricing; they can refer to the pricing of official flagship stores and competing stores. The strategy is to be slightly lower than the official flagship store price, and flat or slightly higher than competing stores. This is the initial strategy. Once distributors have consumer data, the core strategy is product bundling and product gifts.

Based on consumers' purchasing habits in the store, bundle or gift high-frequency purchased products to increase the average order value. The purpose is twofold: one is to reduce price transparency, and the other is that higher average order value can reduce courier costs, because if consumers buy separately each time, courier costs are very high.

In conclusion: "Do you think traditional distributors still have a chance in e-commerce?" One distributor's answer was that it's not about whether there's a chance, but that market changes are forcing distributors to find more ways to survive.

In the past, offline business was incremental, and distributors who focused on offline did enjoy the dividends, but now it's a stock market. When the market structure stabilizes, where will distributors' increments come from? They need to look at incremental channels, whether it's B2B or e-commerce.

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