During the 2017 Double 11 shopping festival, Retail Link's daily transaction volume surged 177 times compared to the same period last year. Behind this massive transaction volume lies a need for massive product supply. In addition to some regional offline distributors, there is also a group of low-key, invisible online distributors who rely on the Retail Link platform, creating one sales miracle after another. They are Retail Link's TP merchants, commonly known as E-distributors. Recently, New Distribution interviewed Wukong (nickname), CEO of Shanghai Yulu Ren Industrial Co., Ltd., one of the top five TP merchants on Alibaba's Retail Link, to see how this internet-based distributor leverages the platform to play the FMCG agency business, and how he understands the differences between internet-based distributors and traditional offline distributors.
01 Brand consulting background, first to sense market changes Before 2016, Wukong had been engaged in brand consulting. He told New Distribution, "Before this, I never thought about starting a business, let alone that my entrepreneurial project would be as an FMCG distributor. Because I was doing brand consulting, I was sensitive to changes in the market environment. At the beginning of 2016, we saw in AC Nielsen data that sales in KA stores had been declining in recent years, and news of store closures was everywhere. On the other hand, sales in convenience stores and mom-and-pop shops were growing. At that time, FMCG B2B was in its infancy, and some B2B platforms had emerged, including internet companies with capital. I felt this was a giant opportunity." In the first half of 2016, Wukong started his entrepreneurial journey. He told New Distribution that because entrepreneurship is like going to the West to obtain Buddhist scriptures, a difficult journey requiring 81 tribulations to succeed, he gave himself the name Wukong. Wukong recalled that at that time, Retail Link's share was still very small, not as dazzling as it is today. Besides Retail Link, we also laid out other platforms. It wasn't until Lin Xiaohai (current Alibaba VP and General Manager of Retail Link Division) took office that Alibaba began strategic layout. After that, around October 2016, we made a strategic adjustment to focus on Retail Link TP operations. Wukong said, "Although in hindsight our decision was correct, at the time we were very conflicted; if we chose the wrong side, it would mean no harvest." As one of Retail Link's earliest TP merchants, Wukong initially was just a second-tier distributor. Wukong told New Distribution, "The first brand we worked with was Qingfeng paper. At that time, brand owners hadn't paid attention to B2B, so they wouldn't directly cooperate with you. We had to source from offline wholesale markets and then sell on the Retail Link platform. After nearly a year as a second-tier distributor, we gradually got noticed by Qingfeng Company. In February 2017, we formally established a strategic partnership with Qingfeng, becoming a true distributor." Currently, Wukong represents well-known domestic and international first-tier brands such as Qingfeng, Kotex, Jieyun, and Huggies. In 2017, sales reached 40 million yuan. As of now in 2018, we have already completed the full-year sales of 2017, and it is expected that annual sales will reach 200 million yuan, achieving a 5-fold growth.
02 Selling out brand's 60-day inventory in 10 minutes, setting a new record Every March is a lucky month for Wukong. According to him, in March 2017, the brand, the Retail Link platform, and our distributor cooperated for the first time to try the "Big Brand Arrival" themed activity. In just one morning, we sold out all the Qingfeng product inventory in Retail Link's various regions. It was the first brand on Retail Link to break one million, and it also popularized the "Big Brand Arrival" promotional column, which is the only promotional theme that Retail Link has retained from the beginning to this day. Wukong told New Distribution, "In March this year, we tried a new play with Kotex—brand live streaming activity—which broke Retail Link's sales record, selling out more than 60 days of inventory in 10 minutes, nearly 700,000 yuan in sales. It also broke Retail Link's live streaming viewing record, with 28,000 online viewers (shop owners) and 50,000 replays." Wukong recalled that although the live streaming activity was supposed to last 1 hour, in the last 50 minutes, we and Retail Link were calming users and contacting the brand for replenishment and transfer, and ultimately had to extend the activity for 5 days. In addition, in the first month of cooperation with Kotex, sales grew from only 80,000 yuan to 800,000 yuan, achieving a 10-fold increase. Wukong said that these two events—10-fold growth in the first month and selling out inventory in 10 minutes—"shocked" the senior management of Kimberly-Clark. Now, the CEO of Kimberly-Clark China participates in the online B2B channel marketing plan meeting every month, actively promoting strategic cooperation with B2B. In May, Kotex completed sales of 10.5 million yuan this month. Today, Kotex participated in Retail Link's "Big Brand Ordering Live" activity, expecting to complete 10 million yuan in sales in a single day. Such exponential sales growth may be unimaginable for offline distributors. Internet-based distributors, backed by the platform, break through geographical restrictions and face millions of terminal outlets. What are the differences between them and traditional offline distributors in business thinking and management?
03 No difference in core functions from offline distributors Many people say that internet-based distributors like us, backed by the platform, have very different functions from traditional offline distributors, and even that we just need to pay and ship. Regarding this, Wukong told New Distribution, "Actually, that's not the case. Compared to traditional offline distributors, we just strip away some non-core functions, such as warehousing and logistics. Other functions like outlet sales and negotiation with upstream brand owners are no different from traditional distributors, though the way we express them may be different." Wukong said that traditional offline distributors often focus on several indicators in daily management: visit volume, number of outlets, conversion rate, sales amount, etc. In our language, these translate to clicks, user count, conversion rate, GMV (sales). For example, if sales decrease this month, we will also hold meetings like traditional distributors to discuss whether clicks (visits) have decreased, or whether the number of ordering users (outlets) has decreased. If visits are fine, is it because the average order value has decreased, etc. "Essentially, there is no difference in business methods between us and traditional offline distributors. The only difference may be that in daily management, we rely more on data to provide decision-making basis, while offline distributors have no data and rely more on decades of business experience to make decisions," Wukong said. Besides daily management, the standards for upstream manufacturers' recruitment are also similar. Wukong told New Distribution that when brand owners select offline distributors, they usually look at several points: business performance, personnel and vehicle configuration, brands represented, outlet relationships, etc. Similarly, online, brand owners will look at your past represented brands, business performance, your familiarity with the platform, and whether you have strength. Wukong believes that many people may think internet-based distributors are relatively advanced because they rely on the internet, while offline distributors use old methods and are relatively backward. But in my view, there is no distinction between high and low; it's just that the business segments are different. Offline distributors face regional competition, and poor management leads to replacement. The same applies online: if you don't do well with a brand, you won't have opportunities either.
04 Will not eliminate traditional distributors, only complement each other It is undeniable that internet-based distributors have certain advantages, but these advantages are only reflected in business thinking and operational efficiency. Wukong told New Distribution that in terms of business thinking, we always focus on product operation. How to get outlets to open our product page, how to make outlets interested in our promotions, how to trigger outlets to place orders—we use the product as a carrier to run the business. Offline distributors, on the other hand, often have to think about many things: warehousing, distribution, marketing, etc. The stacking of multiple operational elements makes the offline distributor business complex. In terms of operational efficiency, for example, organizing a promotional activity: offline distributors need 1-2 months from planning to preparation to execution, but for internet-based distributors, this series of work may be completed in 1-2 weeks. Information is conveyed through platform text, and promotional forms are completed through platform buttons. Wukong emphasized that offline distributors are not inefficient; they just didn't pursue efficiency from the start. In the past, the FMCG channel distribution system has never changed, and distributors never wanted to change. He believes that in the future, offline distributors will definitely be as efficient as online ones. With social division of labor, professionals doing professional things, China's FMCG channels are in a period of change. In the future, distributors' business content will be more focused and specialized. Internet-based distributors and traditional offline distributors do not eliminate each other. Wukong told New Distribution that compared to offline, we also have shortcomings. Although we can convey information 1-to-many, it is limited to the internet and can only achieve breadth, not the detail that offline distributors can achieve, optimizing user experience and providing timely feedback and adjustments. Also, in terms of customer relationships, online distributors don't have this concept. Without customer relationships, there is no service. The market cares about these things, and we cannot provide them, so we need to cooperate with offline distributors to complete them. Wukong believes that whether from the perspective of social division of labor or upstream brand owners, internet-based distributors and offline distributors both have value. It is not because of the emergence of TP merchants that offline distributors will be replaced. The past channel distribution system has developed for decades and has its value and function; it will not be eliminated just because new channels and new models appear. During the channel transformation period, the market will be reshaped. Different types of distributors will still exist, but distributors must follow the development of the times, find their own positioning, and find their irreplaceable shining points. If an offline distributor disappears or cannot continue in this era, it is definitely not caused by online distributors, but by surrounding distributors who are stronger, more professional, and more efficient, PK-ing them down.
Written at the end Internet-based distributors are a new role evolved with the birth and development of FMCG B2B platforms. This new role is well-equipped, carrying advanced tools, and backed by the platform. Whether in terms of exponential sales growth or specific daily business thinking and operational efficiency, existing traditional distributors cannot compare. In the view of New Distribution, the advantage of internet-based distributors lies in focus and specialization, always around product operation, using data for analysis and decision-making. The advantage of traditional offline distributors lies in localized location, one-on-one customer relationships, and on-the-ground services. If traditional distributors want to remain invincible during the channel transformation period, they must learn from each other's strengths, use internet-based tools, reposition themselves, and reshape their value.
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