---
title: "Founded 6 Years, Annual Transaction Volume Over 1 Billion: Why Can This Trading Company Profit from B2B?"
description: "This article explores why intermediaries will not disappear even if distributors might, and how Caihua Commerce has maintained rapid growth despite competition from Alibaba's Retail Link. It details Caihua's strategies, including product selection and customer tiering, which have enabled profitability."
author: "新经销刘少德"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-01-17"
language: "en"
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# Founded 6 Years, Annual Transaction Volume Over 1 Billion: Why Can This Trading Company Profit from B2B?

> This article explores why intermediaries will not disappear even if distributors might, and how Caihua Commerce has maintained rapid growth despite competition from Alibaba's Retail Link. It details Caihua's strategies, including product selection and customer tiering, which have enabled profitability.

Click image for details
> **Core Guide:**
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> 1. Why might distributors disappear, but intermediaries will never disappear?
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> 2. What changes have occurred in the survival environment of traditional retail stores?
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> 3. Under Alibaba Retail Link's heavy investment to seize the market, why can Caihua Commerce maintain rapid growth year after year?
Caihua Commerce was formally established in Dongguan, Guangdong in 2012, and now covers dozens of cities in Guangdong and Hunan. Since its inception, Caihua Commerce has positioned itself to serve traditional retail stores, providing a complete retail solution.
Among the more than 200 chain convenience store enterprises registered with the Chain Management Association, over 100 convenience store brands are located in Guangdong Province, showing the prevalence of chain operations. Especially as more chain B2B enterprises begin to penetrate the entire industry chain and accelerate the layout of offline chain stores, why does Caihua Commerce, with its complete supply chain system, choose to serve traditional retail stores rather than build its own convenience stores? How does Caihua Commerce view this small and fragmented retail format?
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Distributors may disappear, but intermediaries will never disappear
Both distributors and traditional retail stores are essentially intermediaries between manufacturers and consumers. Intermediaries will not disappear, but with the emergence and deepening of specialized division of labor, non-core functions such as capital advances and warehousing and distribution will gradually be stripped away by third-party service providers, and the functions and identity of the "distributor" group may undergo fundamental changes. **Will it be possible for brand owners to bypass intermediaries and directly serve consumers in the future?**
Wu Jinghe, Deputy General Manager of Caihua Commerce, gave a negative answer. In his view, the development of the FMCG industry in Taiwan and even Japan and South Korea has great reference significance for the domestic market, and now both Taiwan and Japan and South Korea still have very rich retail formats; even in the domestic market, in the Jiangsu, Zhejiang, Shanghai and southern coastal areas, small retail convenience store formats are also very developed.
Returning to the domestic market, the traditional chain retail format is very developed in Jiangsu, Zhejiang, and Shanghai; while in several cities with better economic development in Guangdong, there are still a large number of large merchants with annual sales exceeding 1 billion. Existence is reasonable, which also shows that **intermediaries will still have value in the FMCG distribution chain and will not die out, but this does not mean that traditional distributors will always exist**.
In addition, the vastness of the Chinese market determines that brand owners cannot rely entirely on their own strength to achieve full coverage of all consumers, nor can they directly serve all consumers. There will always be intermediaries and fragmented retail stores to serve the most end consumers in China.
"When Caihua Commerce was just established in 2012, we predicted that **China's demographic dividend would gradually disappear, and the costs of human and material resources such as face-to-face sales and ground promotion would become higher and higher**. Based on this judgment, we positioned ourselves as an intermediary different from traditional distributors, and officially launched the PC online ordering system, which has been in use ever since. Currently, 80% of our orders still come from the PC platform," Wu Jinghe told New Distribution.
Unlike traditional distributors who sell the brands they represent to retail stores, Caihua Commerce has, since 2014, only purchased goods based on the needs of small stores. Whatever the store needs, they organize the corresponding product capabilities upstream. **Traditional distributors sell goods from top to bottom, while Caihua Commerce purchases goods from bottom to top**. These two different methods reflect two completely different market operation paths, which is also an important reason why Caihua Commerce has been able to achieve rapid development in just a few years.
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Why target traditional retail stores?
If intermediaries will not disappear, why did Caihua Commerce focus its development on traditional retail stores rather than building its own chain brand?
New Distribution believes that, apart from the obvious differences in the purpose and nature of opening stores between some convenience store franchisees and retail store owners, the deeper reason is that the market space of 6 million retail stores itself is large enough, and the age structure and business philosophy of current store owners are very different from those of the older generation. **Analyzing the widely existing retail store groups, Wu Jinghe believes they mainly have the following characteristics:**
> 1. **Small format**, a supplement to traditional supermarkets and hypermarkets;
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> 2. **Fragmented data**, lacking effective tools and awareness to record store sales data;
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> 3. **Huge quantity**, there are more than 6 million retail stores nationwide, of which Guangdong Province alone has over 300,000. Among them, except for chain convenience stores, the number of traditional mom-and-pop stores exceeds 280,000, which is precisely the main battlefield for brand owners such as alcohol and beverage companies to sell their products;
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> 4. **Average profitability**, only able to meet consumers' basic needs for convenience, with weak ability to meet personalized needs. This also causes a large gap between Chinese convenience store enterprises and those in Japan, Taiwan, and other regions. Even convenience store companies like 7-11 generally have weak profitability in China;
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> 5. **Close to consumers**, most retail stores that have been operating in a location for a year or more have established good customer relationships with surrounding users, giving them a clear advantage over chain convenience stores;
Wu Jinghe believes that compared with the older generation of store owners, currently more than 60% of store owners in Guangdong are entrepreneurs born in the 1980s and 1990s, and the survival environment has undergone major changes. Specifically: consumers have higher requirements, choose from more channels, and are more sensitive to value, which places higher demands on store management; at the product level, the product structure of small stores needs to match the customer structure; clearly understand consumers, and then adjust product selection, service content, and business methods; at the store operation level, small stores need to continuously improve store image, and continuously improve store operations through promotion management, product display, and customer flow.
In response to these various needs, relying solely on the store's own capabilities is difficult to complete store upgrades and improve operational efficiency. Currently, there are two main forces providing services and empowerment to small stores: **traditional wholesalers and e-commerce companies represented by Alibaba Retail Link**. Distributors serve brand owners, while secondary wholesalers are essentially shared warehouses for small stores. Although they can quickly fulfill purchase orders, they cannot provide terminal vividness services for stores; while B2B platforms can solve the one-stop procurement problem to a certain extent, they cannot truly help small stores improve daily operations and management.
**So, is there a third force to empower millions of retail stores?**
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Under the subsidy of giants, why can Caihua Commerce profit?
To this end, in January 2018, Caihua Commerce officially upgraded its original convenience store procurement and operation service platform to the Yueheji Convenience Store Free Alliance. Based on the demands of small stores and leveraging years of accumulated store operation and supply chain management experience, Yueheji not only empowers traditional retail stores but also provides one-stop services such as supply chain and store operation guidance to convenience store brands that lack complete supply chain capabilities.
Up to now, Caihua Commerce has covered five provinces in South China, and in three years has covered more than 10,000 stores in Guangdong Province, serving more than 40 convenience store brands. In 2018, the annual GMV was 1.2 billion yuan, which is undoubtedly equivalent to recreating a chain convenience store brand. Caihua Commerce has also become one of the few convenience store enterprises in the entire B2B industry that can achieve profitability without financing and relying on itself.
**So what is the core capability that enables Caihua Commerce to achieve profitability?**
**1. Product selection capability**
"An important reason why Caihua Commerce can maintain rapid growth even under the red envelope subsidies of B2B platforms like Alibaba Retail Link is our own **product selection capability, which constitutes Caihua's core competitiveness**," Wu Jinghe told New Distribution. "Product selection capability does not mean the more SKUs the better, but rather being able to meet the needs of most consumers with limited SKUs and create the greatest value for stores. This year, we aim to streamline the SKU count in some warehouses to 1,800, and it must include all categories except tobacco, including normal temperature and cold chain. Among them, 800 SKUs are fixed, and the other 1,000 SKUs need to maintain a certain update rate."
**2. Customer tiered management**
The vast market determines that not all small stores will accept standardized and formalized operations management, so Caihua Commerce has implemented tiered customer management since its launch.
Chinese traditional retail stores have different operating conditions and different demands for products, which means that if we serve all customers, the proportion of long-tail products will greatly increase, and higher requirements will be placed on the fulfillment method and timeliness. Through tiered customer management, on the one hand, it ensures the streamlining of product SKU quantity, maximizing the efficiency of the backend warehousing and distribution supply chain; on the other hand, it ensures Caihua Commerce's focus on existing service customers, thereby ensuring service quality through standardized operations.
Product selection capability ensures that Caihua Commerce has a reasonable profit structure in the process of serving stores, while tiered customer management helps Caihua Commerce keep the operating costs of backend warehousing and distribution from being too high. This has also become the foundation for Caihua Commerce to achieve sustainable profitability and continue to expand outward.
From the development case of Caihua Commerce, we may also be able to glimpse the current development status of the entire B2B industry. The original B2B platforms that relied on capital to aggressively expand finally entered deep water in 2018. The lack of understanding of the retail industry, supply chain warehousing and distribution, and product selection became a lesson that had to be learned on the road to self-sustaining profitability. In contrast, retail-oriented B2B platforms such as RT-Mart e-Lufa and Caihua Commerce, relying on their inherent product selection capabilities and supply chain organization capabilities, have become dark horses in the development of the entire B2B industry, achieving profitability soon after a brief adjustment period. The huge contrast is not only due to the platform's own genes, but more importantly, the lack of the most basic respect for the industry may be the fundamental reason why many B2B platforms have transformed or even closed down.
New Distribution will hold the **2019 (5th) FMCG + Internet Conference** during the Chengdu Spring Sugar and Wine Fair from March 16 to March 18. This conference will focus on the topic of **"Breaking the Game"** and conduct in-depth discussions with many brand owners, supply chain service providers, distributors, retailers, etc.
Compared with previous conferences, this summit will be fully upgraded. In addition to the original topics such as **channel innovation, city distribution logistics, and distributor transformation**, it has added **new marketing cases, IP + FMCG empowerment, community group buying, innovative retail, and other** parallel forums. Through three days of ten high-density, high-quality expert sharing and exchanges, we believe that every brand owner and distributor can learn the latest business models, expert opinions, and implementation methods, find new tools and methods for their own breakthrough in 2019, and return to the track of rapid growth.
**Conference Time: March 16-18, 2019** **Conference Venue: Longfeng Hall, Chengdu Longemont Hotel**
Conference Topics
**2019 5th FMCG + Internet Conference**
Date| Time
| Venue| Topic
3.16
| All day| Main Forum| Breaking the Game - 2019 (5th) FMCG + Internet Conference
3.17| Morning| Parallel Forum 1| New Logistics, New City Distribution
Parallel Forum 2| How Can Distributors Achieve Iterative Upgrades?
Afternoon| Parallel Forum 3| IP Empowerment, Boosting Brand Growth
Parallel Forum 4| How Can Community Group Buying Reconstruct the Value Chain?
3.18| Morning| Parallel Forum 1| Retail Scenario Innovation
Parallel Forum 2| New Product Sales Public Course
Afternoon
| Parallel Forum 3| Social E-commerce
Parallel Forum 4| New Marketing Public Course
Invited Guests (tentative)
Chen Qiwei, Chairman of Coca-Cola (China) Investment Co., Ltd.
Zhao Shuanglian, Chairman of COFCO Group Co., Ltd.
Lin Bibao, Chairman of PepsiCo Greater China
Wang Chaocheng, Founder of Yijiupai
Su Xiaoxin, Executive President of Zhongshang Huimin
Zong Fuli, Chairman of Hangzhou Wahaha Group Co., Ltd.
Chen Duye, General Manager of Toutiao Marketing Center
Lin Xiaohai, General Manager of Alibaba Retail Link
Yang Qianhui, Chairman of Ting Hsin (Cayman Islands) Holding Corp. China Region
Chen Xiaodong, Senior Vice President of Nestlé Greater China
Zhang Nan, General Manager of Douyin Short Video
Tao Shiquan, Founder of Jiangxiaobai
Mao Wenchao, CEO of Xiaohongshu
Cui Zhen, Founder of Hui Xiadan
Huang Zheng, Founder of Pinduoduo
Liu Bo, Vice President of Best Inc., General Manager of Best Dianjia
Ye Maozhong, Famous Marketing Expert
Li Jiaoshou, Famous Marketing Expert
Xiao Masong, Independent Strategic Marketing Consultant
Liu Chunxiong, Founder of New Marketing Theory
Fang Gang, Famous Marketing Expert
Bai Ya, Founder of Youzan
Li Qian, Founder of Youqingxu
Liu Zhao, Founder of Waiqin 365
Xu Yonggang, Founder of Maidelin
Niu Enkun, Famous Marketing Expert
Wang Qi, Founder of Weijie City Distribution
Wang Shenbing, Founder of Zhongke Shangruan
Chen Siting, Founder of Wanchaobang
Rui Yun, Founder & Chairman of Dianda
Huang Wei, General Manager of Uni-President Group's Life Food Division
Liu Peng, Vice President of Chongqing Jiangxiaobai Liquor Co., Ltd.
Chen Lei, Founder of Maolaile
Ma Xiaolong, Marketing Director of Taishan Beer
Wu Jinghe, Deputy General Manager of Caihua Commerce
Tang Xiangyang, General Manager of Lidu Liquor Industry
Guo Guangyu, General Manager of Squirrel Small Store
Wang Jun, Famous New Retail Industry Expert
Liu Xiaoting, Famous New Retail Industry Expert
Wang Jinghua, CEO of Miduo Big Data Engine
Lin Feng, Chairman of Beijing Jundu Excellent Consulting Co., Ltd.
Chen Ruifen, General Manager of Uni-President Enterprises Tea Business Group
Gu Tiefeng, CEO of Answer Tea
Zhu Zhentao, CEO and Chief Product Officer of Jumi Intelligent
Zhuang Jianzhong, CEO of Meinian Changxiao
Miao Qingxian, Chief Consultant of Shanghai Yihe Marketing Institution
Ding Ding, Founder of Fans Workshop
Liao Chuan, CEO of Fresh Century
Zheng Yubin, CEO of Palm Quick Sale
More guests are being invited...
**Previous Participating Companies**
**Brand Owners**
Coca-Cola, Mengniu, P&G, Mengniu, Lays, Master Kong, Uni-President, Yili, Bright Dairy, Wahaha, Mondelez, China Resources, Jiangxiaobai, APP, Daliyuan, Haojiayi, Xiaoshile, Youbulao, Xipin Tiancheng, Tsingtao Beer, Budweiser, Youqingxu Snacks, Ximai, Six Walnuts, Mingren Soda Water, Deqingyuan, Blue Moon, Haoxiangni, Wyeth, Hengan, Bright Dairy, Sanquan Foods, Daohuaxiang, Zhujiang Beer, Suntory, Kraft Heinz, Unilever, Qiaqia, Jinluo, Johnson & Johnson, Colgate, Bacardi, Laiyifen, RIO, Zhonglv Coarse Grain King, Beibingyang, Mars Wrigley, Zhongjing Mushroom Sauce, Liby, Hengshun Vinegar, Totole, Oreo, Liuliumei, Baicaowei, Baiya Group...
**Supply Chain Platforms**
Alibaba Retail Link, JD New Channel, Yijiupai, Zhongshang Huimin, Best Dianjia, Hui Xiadan, RT-Mart E-Lufa, Caihua Commerce (Yueheji), 1 Life, Xingaoqiao, Fresh Century, Palm Quick Sale, Dianda, Rongcheng Yigou, Waiqin 365, Qianmi Network, Zhongke Shangruan, Youshang Software, Weijie City Distribution, Wanchaobang, Tao Daqing, Dinghuobao, Huoquanquan, Hailian Tianxia, Shenzhou Liangpin, Guanjiapo, Fengwang, Yishenghuo, EAS, Yun Niao, Dianxiaohuo, Xin Shangmeng, Yuncangpei, Wuqianjia, Bianlibao, Lianpin, Jingxiaoyi, Yibao Payment...
**Internet Platforms**
Alibaba, JD.com, Suning, Pinduoduo, Xiaohongshu, Youhaohuo, Dalianjia, Yunji, Sibu Group, Weixuan, Youzan, NetEase Yanxuan, Weimob...
**Unmanned Retail**
Shenlan Technology, Bingo Box, Xingbianli, Xiaomaigui, Youbo, Meiri Youxian, Haha Convenience...
**IP Commercialization**
Tencent Video, iQiyi, Youku, Palace Museum, Tencent Animation, Wanda Pictures, AC Nielsen, Alibaba Fish, Miduo, Jiangxiaobai, Peppa Pig, Xiaoming Classmate, Lawson, Three Squirrels, Luckin Coffee...
**Community Group Buying**
Chongma Neighborhood, Kaola Selection, Linlinyi, Tianxianpei, Meiri Yitao, Yipin Fresh, Dailebu, Shixianghui, Shihuituan, Niwannin, Xingsheng Youxuan, Linzhanggui, Haoxiangtuan, Xianlepin, Youjia Puzi, Huigou GO, Qian Dama, Meijia Youxiang, Keke Selection, Rongcheng Youpin, Squirrel Pinpin, Xiaoqule, 1 Life, Dingdantu, Shudongpo...
Ticket Information
Type| Price| Early Bird Price| Benefits
Regular Ticket| 599
| 399| 1. Participate in the full-day conference and all forum activities;
2. Receive conference guide, agenda, and other meeting materials;
3. One copy of the "2018 China FMCG B2B Competitiveness Research Report";
4. Early bird discount limited to 200 tickets, first come first served.
VIP Ticket| 1999| 1299| 1. Reserved front-row VIP seats in the main venue;
2. Dinner voucher for the closed-door banquet on the evening of the 16th;
3. Receive conference guide, agenda, and authorized speaker PPTs and other meeting materials;
4. Participate in the full-day conference and all forum activities;
5. One copy of the "2018 China FMCG B2B Competitiveness Research Report";
6. Early bird discount limited to 50 tickets, first come first served.
Registration Method
**Registration channel is now open. Long press the QR code below** **or click "Read Original" to register. 66% off early bird** special **tickets limited to 200, grab them now...!**
Add the conference team staff to register
Previous Conference Review
Click the link below to review the highlights of the 1st, 2nd, 3rd, and 4th FMCG + Internet Conferences:
**-END-**


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