Since 2018, voices predicting the decline of FMCG B2B have grown louder. Admittedly, the entire development process of the FMCG B2B industry has had more or less problems, but at the end of the day, the doubts are about whether it can truly improve the efficiency of commodity circulation in the FMCG supply chain and whether platforms can truly achieve profitability. Business models that do not aim for profitability are nothing but hooliganism. Setting aside efficiency issues, let's look at whether the FMCG B2B track can work from the perspective of whether platforms can achieve profitability. 1 FMCG B2B Hard to Profit? Since emerging as a new species in 2013, FMCG B2B has attracted attention from the entire industry chain, from brand owners to traditional retail stores. According to the New Distribution "2017 China FMCG B2B Competitiveness White Paper," in 22 mainstream cities nationwide, B2B coverage has reached over 60%, and nearly 50% of stores place orders on B2B platforms weekly. Brand owners' attitudes toward B2B have also shifted from rejection to acceptance, and then to actively embracing cooperation. The rapid development of FMCG B2B cannot be separated from the push of capital. According to incomplete statistics, from 2013 to the first half of 2017, dozens of B2B platforms received huge financing, with Zhongshang Huimin receiving the largest single investment and Yijiupi having the most funding rounds. The rapid development of the industry also attracted internet giants. In 2015, JD.com formally established the New Channel Business Unit targeting traditional grocery stores, and in January of the following year, New Channel officially undertook JD's "Locomotive No. 1" project. Meanwhile, Alibaba also launched the Retail Link project targeting small retail stores. The influx of huge capital drove the industry to run recklessly, while also hiding many problems in the development process. The other side of the coin is that some B2B platforms, driven by capital, blindly pursued market coverage while neglecting the control of regional coverage quality. An executive of a B2B platform even claimed after receiving financing that they would "finish the battle within one year," but he ignored that changes in FMCG channels take a decade or even longer. Water can carry a boat, but it can also overturn it. After the early barbaric growth, investors began to view B2B more rationally. When the capital tide receded, we finally saw who was swimming naked.
At the end of 2017, Bang Xiaodian, founded in 2016, completely ceased operations;
In April this year, the leading B2B platform Dianshang Hulian was exposed for owing employees several months of wages, and an employee committed suicide;
In July, Yang Dingping, founder of Yatang Xiaochao, which had franchised 50,000 stores in one year, surrendered himself, and the platform ceased operations;
...... Analyzing the reasons for the successive shutdowns of the above platforms, they all got early development under the promotion of capital. However, after lacking continuous capital supply, the platforms themselves never formed the ability to generate their own cash flow. This also makes us question: Can FMCG B2B really work? Can B2B really achieve profitability? 2 It's Just Your B2B That's Hard to Profit! The essence of FMCG B2B is still to be based on the FMCG industry, and the circulation of FMCG has strong regional characteristics, pursuing the efficiency of commodity circulation and the density of terminal coverage. The greater the terminal coverage density, the higher the efficiency of commodity circulation naturally. Admittedly, national B2B platforms represented by Alibaba and JD.com have strong capital strength, which can help them quickly establish scale advantages nationwide. However, the characteristics of FMCG determine that this scale advantage may not necessarily translate into cost advantages in the FMCG industry. So we see national FMCG B2B platforms continuously making strategic adjustments to improve their revenue situations. In sharp contrast, regional platforms have developed and risen rapidly, with the typical representative being New High Bridge in Hunan. As of now, New High Bridge has more than 15,000 franchised stores. As a FMCG B2B platform deeply rooted in the Hunan region, New High Bridge has already achieved profitability. In the first half of this year, New High Bridge achieved a profit of 10 million yuan. According to New High Bridge founder Tang Guangliang, the profit mainly comes from three aspects: brand franchising, product price differences, and new product promotion. New Distribution's analysis of the reasons for New High Bridge's profitability mainly includes the following three aspects: 1. Convenience Store + B2B Business Model Based on the origin of B2B platforms, New Distribution divides the current industry B2B platforms into three categories: Native B2B platforms, such as Zhongshang Huimin, Dianda, Xian Shiji, etc.;
Retail-type B2B platforms, such as New High Bridge, RT-Mart e-Lufa, Meitianbang Bianli, etc.;
Distributor-type B2B platforms, such as Tao Daqing, Hui Jinhuo, Rongcheng Yigou, etc. Among these three types of B2B platforms, retail-type B2B platforms, because they previously engaged in traditional retail business, have relatively complete warehousing and distribution systems and relatively reasonable product structures, making them the easiest to achieve profitability. The case of New High Bridge's full profitability in the first half of the year precisely proves this point. 2. Adhering to Loose Franchising In a situation where the industry generally believes that loose franchising is "connected but not locked," New High Bridge has always adhered to a loose franchising policy for stores. Tang Guangliang told New Distribution that loose franchising has lower requirements for store selection, which is conducive to seizing advantageous locations and forming a rapid network layout. From the perspective of brand owners, the more outlets covered, the stronger the platform's bargaining power with upstream suppliers. At the same time, stores under loose franchising are mostly distributed around communities, with stable transaction relationships, which provides more imagination space for B2B platforms in the C-end layout. In addition, because loose franchising does not involve training store personnel, daily operation management, and product control, the investment is relatively small, making it easier for the platform to achieve profitability. 3. Focusing on Regions, Not Blindly Expanding As a representative of regional B2B, New High Bridge's profitability is closely related to its focus on the Hunan region and not blindly expanding outward. Compared with national B2B platforms, regional platforms have a stronger ability to break into a single market in the early stages of development, with relatively smaller upfront investments, and are more likely to form a good reputation and bargaining power with upstream suppliers. More importantly, regional platforms, by investing all resources in a local market, are more likely to form regional density advantages, reduce order fulfillment costs, and form scale advantages within the region. "If you do matchmaking, you should go national; if you are very heavy on direct operation, be the king of the region; if you are a single category, like Yijiupi, you can also try national; if you are multi-category and direct-operated, can you first be the king of the region? There is a 'first' in 'first be the king of the region,' meaning it's not that you won't develop nationally in the future. " And New High Bridge's profitability has proven the value of regional platforms to the outside world, while also injecting a shot in the arm for the development of the entire industry. 3 FMCG B2B Will Usher in a New Development Window From an industry perspective, New Distribution believes that the development of FMCG B2B must go through three stages: 1. A large number of platforms emerge, investment and financing events continue, and the industry is in a state of contention and division According to incomplete statistics from New Distribution, as of now, the number of FMCG B2B platforms in China has reached 239. Among them are native internet platforms such as Zhongshang Huimin and Yijiupi, as well as B2B platforms transformed from distributors such as Hui Jinhuo, Sanxing Liangou, and Rongcheng Yigou. The rapid development of the industry has also attracted more and more capital attention. Relevant data shows that in 2016 alone, dozens of B2B platforms received huge investments totaling over 5 billion yuan. 2. The Matthew effect begins to show within the industry, and some B2B platforms begin to fall behind With the entry of chain retail enterprises such as RT-Mart, Meitianbang, and Dongguan Meiyijia, the boundaries between upstream and downstream enterprises in the entire supply chain have gradually become blurred, and competition has become increasingly fierce. In this situation, some platforms with sufficient capital reserves, such as JD New Channel and Yijiupi, have completed their national market layouts. Some B2B platforms lacking continuous capital supply have gradually fallen behind and ceased operations. At this stage, refined operations and precise marketing capabilities constitute the core competitiveness of each platform, and whether they have the ability to generate cash flow has become the only indicator for whether a B2B platform can survive. 3. High industry consolidation, with a multi-oligopoly situation emerging The development of the industry has gradually expanded the scope of competition, extending from B2B to the entire industry chain. In this situation, alliances and mergers between platforms have emerged, the industry has begun to consolidate and integrate highly, and only a few platforms will remain, forming a multi-oligopoly pattern. From the current development status, it is clear that FMCG B2B has entered the second stage. In this process, national B2B platforms have basically completed their national layouts and begun strategic adjustments toward refined operations, with development quality increasingly becoming their focus. At the same time, capital's attitude toward B2B has also changed significantly. Some B2B platforms that focus on market cultivation and truly help improve the efficiency of FMCG circulation have begun to attract capital attention again. As Tang Guangliang said, in the next two years, FMCG B2B will surely usher in a new round of opportunities. -END-