The following is the speech content of Mr. Rui Yun, founder of Dianda Mall, at the 5th FMCG + Internet Conference hosted by New Distribution, organized and published for readers. Today, my sharing topic is: Deeply cultivating the upstream supply chain to build brand density. FMCG B2B has developed from 2014 to now, experiencing two rounds of reshuffling. From 2015 to 2018, without efficiency and supply chain depth, it is hard to survive. This time, I will focus on how Dianda deeply cultivates the supply chain. First, over the past four years, Dianda has built a digital, flat, and transparent efficient distribution network from factory to end. Second, it has formed the preferred platform for secondary explosion of new products. We can see cases like Jinmailang, which are very successful. Third, continuously improve three core capabilities to build brand density, because ultimately when you serve small stores, the core still comes down to your products. What is the product? The core is the supply chain. Do you have advantages in your own products? Can you make profits from the supply chain? This depends on your core operational efficiency, ultimately reflected in making money. Because the core of making money is cost and profit. If you only solve cost but not gross margin, you still cannot make money, or the pressure to make money is still very high. In terms of data, our overall terminal scale now covers nearly 20 cities and 100,000 terminals. The efficient brand highway is reflected in two points: First, the cost from factory to end is controlled within 5 percentage points; second, the comprehensive gross margin can reach 9 percentage points. Three core capabilities for deep cultivation The first is the system capability of the FMCG distribution network Dianda's system is self-developed, with nearly 18 subsystems, focusing on three dimensions: 1. Terminal management capability, including CRM management for salespeople and digital analysis of terminal forms; 2. B2B2C marketing capability, how to empower upstream brand owners, help them quickly reach terminals within our channel system, and help new products directly reach stores online and offline, mastering brand distribution data and display data. If you have any promotional activities, I can analyze in the first time which stores are suitable and invest in appropriate stores, and different SKUs suit different store needs, with real-time accurate feedback analysis, thereby empowering brands to efficiently reach terminals and cover consumers through terminals; 3. Big data analysis capability, we have the Dolphin data platform, and also procurement data analysis for terminals, including 360-degree unlocking of operational advantages, such as daily operation reports, gross margin reports, net profit data, etc. This must be clear at a glance. I believe this is one of the most basic capabilities in building our three core capabilities. The second is terminal fulfillment capability Efficiency is our lifeline. If efficiency does not reach the basic level, such as within 5 percentage points, you will quickly exit this track. This is the basic lifeline for survival in this industry. This does not mean that if you do well in efficiency, you will live well, but if you cannot improve efficiency, you do not even have the chance to survive. From warehouse rent, warehouse sorting costs, and logistics distribution costs, all fulfillment costs are controlled at around 5 percentage points, and last year we controlled it within 5 percentage points. You see, rent costs are rising every year, and this rigid cost cannot be avoided. Other sorting and logistics costs are declining, relying on daily refined operations, including optimization of order density, data-driven optimization of best capacity matching, and self-operated asset-light logistics crowdsourcing model, SKU full load rate, etc. Through data-driven optimization of your full load rate, order coverage rate, and fulfillment paths. The third is brand promotion capability How to empower upstream brand owners? In fact, our sponsors are still upstream, but if you want to earn money from upstream, you must make upstream brand owners willingly give you their profits. That is to say, can you truly empower them? Can you create real value for them? In the past three years, Dianda has accumulated good experience in brand promotion. For example, Jinmailang, before 2016, its market was mostly in the north, especially for beverages. South of the Huai River, there was almost no market before 2016. In 2016, they found Dianda and hoped for comprehensive cooperation. At that time, in about three months in 2016, we helped them reach more than 10,000 stores. That year, Jinmailang's first new product, lemon water, helped them achieve 15 million. This relies on our online data analysis capability and offline promotion capability, quickly distributing new products to our terminal stores. Only online exposure on virtual shelves cannot make more than 10,000 terminal stores actively order. It must combine offline promotion capabilities, including store customer relations and face-to-face sales capabilities of salespeople, requiring online and offline joint empowerment for brands. Last year, Jinmailang was the fastest-growing beverage company. The rapid development in the East China market in the past two years has been an important contribution to its growth. Through Dianda, terminals in nearly ten cities in Jiangsu are everywhere, with product market visibility. The secondary explosion was done well, and with local product influence, it is very helpful for manufacturers to recruit agents later. Another cooperation is with Jiangxiaobai, not only doing terminal channel display and distribution, but also consumer interaction. This is also a core capability we have accumulated in the past three years. Also, with Coca-Cola, we tried online brand week activities, including refined SKU data analysis and promotion. This is the most obvious manifestation of Coca-Cola listing us as the first strategic cooperative brand in Jiangsu. In summary, relying on these three core basic capabilities to deeply cultivate upstream, the key is to build three methodologies for brand density: First, from passive low-price sales and uniform distribution to controlled sales for different brands, because many times we are kidnapped by sales targets. To increase sales, you definitely find first-line best-selling brands to reduce prices, but there may be no profit. If you raise prices, you may not have sales. This is a paradox. We treat first-line brands differently according to their strategic positions. Which are our strategic key brands, which are strategic restricted brands. For example, among colas, there are Pepsi and Coca-Cola. For instance, Coca-Cola is my strategic key brand, so I want to increase its sales. I may do 50 million for the cola series each year, but I hope Coca-Cola reaches 40 million. For Pepsi, I do strategic restriction, because cooperating with Coca-Cola gives me higher profits, achieving a brand density curve with double growth in sales and gross margin. Conversely, some best-selling brands with low gross margin should be strategically restricted, even through some reverse logistics to increase profits. Second, from comparative thinking to optimize SKUs, transform to thinking from first principles about the brand's position in the category. Last year's gross margin was 5 percentage points, this year 5.5 percentage points is optimization. Not really. You need to truly think from the brand essence: which categories, how much gross margin do I need to achieve? Because each brand's position in the category is different. Some categories may have categories but no brands, some categories are completely occupied by first-line brands, like carbonated drinks, only Coca-Cola and Pepsi dominate. But some categories, like lemon water and salt soda, actually have categories but no strong brands, and are channel-driven products. You need to think about which brands you need to operate in such categories, how many brands you need to operate. These are the essential issues you need to think about regarding the brand's position in the category, not just saying this year achieve 5.5 percentage points, next year optimize to 6 percentage points. This will never solve the essential problem, and you still do not make money. Third, use capital return rate to analyze each SKU in the brand. You need to look at its turnover. If turnover is slow, even if the net profit margin is a bit higher, it is not what we blindly pursue; capital efficiency may not be high. If your net profit margin is good, but you need to prepay upstream, you cannot use supplier leverage, and your capital return rate may not be high. This is what we need to think about from comprehensive capital efficiency, to think about how each SKU should be done. Let's look at a set of data. We took two actual brand cases for comparison. Through cooperation with upstream and deep cultivation over the past three years, we have established a replicable upstream brand density methodology. Brand owners do not care about your entire platform sales or the sales of its competitors, but only how much you can sell for them. For example, Coca-Cola cooperating with us cares whether Coca-Cola sells 30 million or 50 million a year on this platform, not how many SKUs the platform operates or the sales of other SKUs. From the operational data of these two brands, we can see that through upstreamization, the sales of our cooperative brands are rising, and gross margins are doubling. This is a good win-win situation for both parties. If in this industry, you only consider your own interests, it cannot last long. Maybe this year you can do business with this B2B platform, but next year you cannot, because it does not make money. If you exploit it completely, the platform will eventually die. The most ideal situation is that B2B platforms and brand owners can achieve a win-win state, where everyone can cooperate and make money together on this platform, so that everyone can survive for a long time and live better. It should be said that in the beverage category, we have formed an absolute advantage. 80% of beverage categories are directly cooperated with manufacturers, requiring 100% invoicing upstream. That is to say, on the basis of compliant tax payment, the beverage category can achieve profitability. This is a comparison of our three-year supply chain core data. It can be seen that in 18 years, the overall gross margin reached nearly 9 percentage points, which can completely cover all warehousing and distribution costs. The main growth in gross margin comes from the growth of backend gross margin. What does this represent? Because only by cooperating with brand owners can you have backend gross margin. Everyone knows that the hypermarket channel has developed for ten or twenty years. Why does it make money? Backend gross margin accounts for nearly half of the overall gross margin. Brand owners have regarded it as an important channel and invested marketing expenses. In addition, the depth of the supply chain is also reflected in our cash flow advantage, that is, the optimization of supplier payment terms, truly achieving a two-way empowerment result with brand owners! Note: Click "Read Original" to receive the "2018-2019 FMCG B2B Industry Trend Report" -END-