This year, New Distribution conducted a small-scale sample survey showing that, affected by snack food stores, distributors' supermarket business for standard packaged snack foods declined by 10%-20% year-on-year, while bulk snack food supermarket business declined by about 30%. Currently, distributors involved in both 'snack foods' and 'supermarket channels' seem to be facing considerable operational challenges. Faced with these difficulties, many distributors choose to transition into the B2B field, although this path is not easy. Today, we introduce a typical case of a large snack food distributor primarily operating in traditional supermarket channels transitioning to B2B: Hu Xiaosheng, founder of Wuhan's 'Guoran Shifen' platform. Unlike those forced to transition due to difficulties, Hu Xiaosheng's traditional trade business had not yet declined when he started planning his B2B operations; it was still in a relatively comfortable state. With nearly 30 years of rich trade experience and a business still on the rise, Hu Xiaosheng confidently embarked on his transformation. However, reality proved far harsher than expected; his past experience not only failed to help but led him into a series of misconceptions. After a period of confusion, 'Guoran Shifen' gradually got on track. To date, 'Guoran Shifen' covers 6,600 small and medium stores, distributes for over a dozen first-tier brands including Pepsi, Master Kong, Mars, Lay's, and Mondelez, with 5,400+ SKUs, snack foods accounting for 50%, and annual turnover reaching 180 million yuan. This article will share the transformation journey of 'Guoran Shifen', hoping to provide some reference for distributors currently confused about transformation.
Planning Ahead for B2B, but Years of Experience May Not Be Effective! 'Guoran Shifen' was officially launched on November 15, 2020, just over four years ago. In 2020, Hu Xiaosheng's traditional trade business was still on the rise. Why did he decide to start a second venture and enter the B2B field? His traditional trade business covered all channels except mom-and-pop stores, with a focus on supermarkets and hypermarkets. Foreseeing that the supermarket industry was facing development bottlenecks and that customer traffic would continue to decline, in stark contrast to the growth of traditional circulation channels locally, Hu Xiaosheng, with a mindset of preparedness, began considering expanding his business channels to the most widespread local mom-and-pop stores by building his own B2B platform. 2020 was an opportune time: on one hand, due to the pandemic, people's reliance on smartphones increased, and small store owners became proficient in using smartphones, facilitating the promotion of the B2B platform. On the other hand, one of the brands he represented organized a study tour specifically on B2B transformation, providing necessary theoretical knowledge. However, entering the B2B field was not easy. Hu Xiaosheng initially expected to leverage his rich trade experience to aid his second venture, but these experiences did not all prove effective! "We initially thought we had people, products, and resources, but in the end, we found that the resources we thought we had did not match the needs of B2B," said Hu Xiaosheng.
First, human resources. Although the 'Guoran Shifen' platform was set up independently, the recruitment direction still followed the previous distributor's standard competency model. So from top to bottom, the company seemed fully staffed at a glance, but upon closer inspection, it lacked professionals who understood B2B business and the small store channel. Different channels have certain professional barriers. For example, in terms of service, supermarket service is more standardized, focusing on contract fulfillment and promotional activities, while small stores require more personalized services, including product selection, display guidance, and timely problem-solving.
Second, products. The original trade's SKUs were mainly large packages and second- and third-tier brands suitable for supermarket sales, with a limited range of products meeting small store needs. This meant that in the initial stage, the product resources from the previous distribution company did not play the expected role. Both human resources and products were misaligned with B2B needs, making it extremely difficult to develop small stores. In summary: the human resource model did not match, the underlying logic of product management and procurement needed to be rebuilt, and customer management required diversity.
Overthrowing Experience and Making a Comeback Reflecting on the various problems encountered in the early stages of B2B, Hu Xiaosheng said, "I thought too much in the early stage, basically relying on myself to explore the path, so I wasted a lot of time and took many detours." After a period of confusion, he gradually realized that relying solely on his past experience would make the B2B path very difficult. He should go out more, actively learn from benchmark distributors who have transformed to B2B nationwide, such as Jiayun Yunshi and Luoyang Hecai. Through external learning and summary and review, he found effective solutions to the challenges he faced in the three key areas of people, products, and place.
1. People After years of refinement, Hu Xiaosheng's traditional trade business had achieved standardized operations, so much so that even if he disappeared for a few days, the business would continue to run normally. In the early stages of launching the B2B business, Hu Xiaosheng considered hiring external professional managers to standardize this business, but the actual situation was far more complex than expected. Including Hu Xiaosheng himself, the company's management was still unclear about the planning and strategic layout of the B2B business, making it difficult for external hires to achieve standardization, let alone start the business. So Hu Xiaosheng decided to take charge himself. After clarifying the leader, he gradually recruited other core positions. The successful operation of a B2B platform relies on three core positions: procurement and sales, sales, and operations.
Take the sales position, for example. What kind of talent should be recruited? When recruiting sales personnel, it is important to assess whether they have experience serving C-level and D-level small stores. More specifically, those with experience in beverages and instant noodles are particularly valuable, as they interact frequently with small stores, have a deep understanding of relevant categories and display techniques, and can achieve twice the results with half the effort. The current deputy general manager of 'Guoran Shifen' comes from a management background at Mizone, with experience managing large teams and rich experience serving small stores.
2. Products In Wuhan, the share ranking of products sold in small stores is:
- Cigarettes
- Water
- Alcohol
- Betel nut
- Instant food
- Tissue
- Snack foods These products are mainly first-tier brands. Second- and third-tier food brands are 'Guoran Shifen's' area of expertise, but how to procure other categories with good quality and price is a major challenge. In the initial stage, many products were difficult to obtain direct distribution rights, so they had to purchase from wholesale markets. However, the second-tier wholesalers they encountered were either unwilling to supply or offered high prices. The core principle of 'Guoran Shifen' in product organization is "first have, then optimize", meaning first ensure you have the needed products, then gradually optimize suppliers and products. In the early days, because the company's external image was that of a major local supermarket and hypermarket distributor, wholesale market merchants were wary, wondering why a major supermarket distributor would come to them for procurement. Procurement staff needed to change their mindset, lower their pride, explain the difficulties of the current business, and continuously build relationships and help with shelf stocking. "As long as you are diligent enough, getting the goods is not a big problem; it's just that when the volume is small, you don't have a price advantage," said Hu Xiaosheng. Since then, 'Guoran Shifen's' snack food brand lineup has expanded from initially only distributing the well-known brand Lay's to now including multiple first-tier brands such as Pepsi, Master Kong, Mars, Mondelez, Hsu Fu Chi, Weilong, and Wuqiong. After solidifying the snack food category foundation, they continued to add alcohol, water, and other categories. As the platform's product range became increasingly rich, sales achieved a qualitative leap, trust in 'Guoran Shifen' within the customer circle grew daily, and suppliers gradually increased, giving them more bargaining power to obtain better prices and more suitable products, forming a virtuous cycle.
3. Place When expanding the small store channel, price is a decisive factor. However, while a price advantage can drive business, prices can always be lower. For long-term development, it is essential to avoid falling into endless price competition. Therefore, differentiated personalized services are also crucial.
Grasping customer needs To accurately grasp customer needs, Hu Xiaosheng learns about the market from multiple aspects, such as paying attention to brand owners' latest sales trends to understand which products are selling well; analyzing customer order data to identify frequently ordered products; and referring to online sales rankings. In addition, on the 'Guoran Shifen' platform, all listed products clearly mark the precise production date. If the production date of the goods received by the customer does not match the marked date, returns and exchanges are allowed.
Empowering small stores In terms of products, guide small store owners on how to select products and display them. For example, let salespeople guide small store owners on how to make shelves look more attractive and place high-profit products in prominent positions based on the specific situation of the store. In terms of online business, some O2O platforms currently issue regular subsidy policies, but many small store owners do not know how to list on O2O platforms, or their sales are too low to qualify for subsidies. 'Guoran Shifen' acts as an intermediary, assisting small store owners in listing on O2O platforms. Whenever a small store successfully sells a bag of goods, the brand owner will provide settlement and subsidies through the 'Guoran Shifen' platform.
Finally: Due to space limitations, there are many detailed aspects of 'Guoran Shifen's' business that cannot be elaborated on one by one. To this end, New Distribution will organize an in-depth study tour on December 20, visiting Wuhan's 'Guoran Shifen' to have an in-depth discussion with founder Mr. Hu Xiaosheng on the B2B transformation battle. Mr. Hu Xiaosheng will summarize the 'Pitfalls for Snack Food Distributors Doing B2B Supply Chains!' based on his personal experience. Interested friends, scan the QR code to add WeChat and inquire about registration details.