Introduction "The basic requirement for future enterprise development and survival is meticulous management. The era of trying to be an absentee boss and relying on extensive management for a long time is gone forever; that will only lead to being eliminated by the times. I hope all managers will learn to do meticulous work, find the internal logical connections in work, manage the trivial people and things around them, and start from small things to achieve long-term careers and reflect their own work value. Please all employees and managers seriously appreciate this, compare it with your daily work, think carefully, and implement the style of doing meticulous things into daily work." —Excerpt from Tu Mingyu's speech in Lingyu's internal employee communication group
Chongqing Lingyu Consumer Goods Supply Chain Co., Ltd., established in 1995, has 8 subsidiary companies including Lingyu Chongqing, Lingyu Chengdu, Lingyu Guiyang, Lingyu Luzhou, and Lingyu Logistics Branch, with annual sales of 1.6 billion yuan. It represents dozens of categories including daily chemicals, paper products, food, and cold chain, with over 30 first-tier well-known brands and tens of thousands of SKUs. It employs over 1,000 people. At the same time, Lingyu is also Alibaba's first chosen distributor for new retail warehousing and distribution integration partnership nationwide, and has now formed a B2B supply chain platform that solves the last mile in central cities, directly supplying tens of thousands of B-end customers and also serving C-end.
Recently, New Distribution exclusively interviewed Tu Mingyu, Chairman of Chongqing Lingyu Consumer Goods Supply Chain Co., Ltd., to see how he developed from an initial traditional wholesaler to become the largest FMCG distributor in Southwest China. He said that "meticulous management" is the key business philosophy that has enabled Lingyu to develop to this day, and he explained how he practices it.
01 From Initial Wholesaler to L'Oréal Agent, Entering the Billion-Yuan Distributor Ranks In 1995, Lingyu was still a traditional small wholesaler, buying and selling various goods and distributing them to outlets in various districts and counties. At that time, the scale was very small, with annual business of only 3 to 4 million yuan.
This wholesale distribution business continued until 1999. At that time, Lingyu's annual sales reached 10 million yuan. While Lingyu was growing, it also sensed a crisis: the promotional prices of terminal hypermarkets (such as Carrefour) were already lower than wholesale purchase prices.
Tu Mingyu recalled that if they continued the traditional wholesale business, Lingyu would have no future. By 2000, Lingyu began its agency path, entering the distribution ranks, and took on its first brand: the German hair dye brand Henkel's "Bright" (光明).
One year later, Lingyu secured the agency for L'Oréal. Tu Mingyu told New Distribution that at that time, Lingyu had limited capabilities, and taking on an international brand was a huge pressure. At that time, L'Oréal in Chongqing had several million yuan in inventory, with monthly sales of only 280,000 yuan. L'Oréal even planned to give up the Chongqing market. It can be imagined that Lingyu faced not only capital pressure and inventory risk, but most importantly, the market prospects were not optimistic. This was a huge "risky move."
Having taken a risky move, to win, they had to have a risky strategy. After obtaining the agency, Lingyu first improved the display position of the counters, and soon made a bold decision: to do a "counter takeover" at the best store of Chongqing New Century Chain Department Store. The competing products in the mall included Aupres and Olay brands, with very large sales, reaching 350,000 yuan per month. To convince the mall to provide the best location, Lingyu negotiated with the mall to do a "counter takeover," committing to 350,000 yuan per month for L'Oréal. If sales were not achieved, Lingyu would pay the difference, but with one requirement: to be right next to the Aupres counter.
Such a bold move allowed L'Oréal to gradually gain a foothold in the mall, and soon other department stores followed suit. At the same time, L'Oréal saw the market effect and increased investment. From 2003 to 2005, L'Oréal's sales in Chongqing increased by nearly 50-60% annually. In 2008, it surged, growing by nearly 100%.
In hindsight, Lingyu helped L'Oréal achieve a "rebirth" in Chongqing. Of course, in this process, Lingyu also learned many advanced management experiences from L'Oréal. To date, Lingyu has become one of the top three distributors of the L'Oréal Group nationwide. To this day, Chongqing's department store channel sales and growth remain among the top in the country.
From 2001 to 2003, Lingyu experienced three years of rapid development, expanding brands and establishing a foothold in department stores and chain supermarkets. Around 2003, Lingyu also completed its first 100 million yuan, entering the billion-yuan distributor ranks.
Entering the billion-yuan distributor ranks meant that Lingyu was no longer a trading entity or a "workshop-style" distributor. Lingyu began to enter the stage of corporate operation. In 2003, Lingyu introduced an ERP system to strengthen supply chain and financial management. In internal business management, Lingyu established a 12-character business policy: vigorous and resolute, perseverant, and detail-oriented.
If vigorous and resolute and perseverant are the work style and philosophy that Lingyu upheld in its early entrepreneurial days and has passed down to this day, then the pursuit of detail is reflected in every aspect of Lingyu's internal management, down to every detail of warehousing and distribution management.
02 Meticulous Warehousing and Distribution Management, Partnering with Alibaba Retail Link's Real Warehouse In 2005, Tu Mingyu attended L'Oréal's national top 20 distributor conference and visited a warehouse in Suzhou. The three-dimensional warehouse, forklifts, pallets, and hydraulic trucks shocked Tu Mingyu: so this is what a good warehouse looks like. On the spot, Tu Mingyu set a goal for himself: to build a warehouse like this. Soon, in 2008, Tu Mingyu put it into practice. He told New Distribution, "I remember very clearly, that day was exactly May 12, the big earthquake. The earthquake was at noon, and in the afternoon I signed the contract to buy 30 mu of land."
A 32,000 square meter warehouse, in 2010, for a distributor, was not easy to manage well and smoothly. Since he had bought the land and built the warehouse, and wanted to grow the trading business, Tu Mingyu proposed the concept of "meticulous management" at that time.
Implementing this concept started with the warehouse goods management at the back end. In 2012, Lingyu implemented a WMS system in the warehouse. It officially transformed from the past "people-dependent" experience management to systematic meticulous management. Tu Mingyu told New Distribution that in the past, managing goods by people relied entirely on experience. The cosmetics category is different from other categories; for example, a lipstick has more than 10 color specifications. In addition, there are gifts, trial sizes, and various promotional posters and materials. In the past, the warehouse relied entirely on people, with low efficiency and high error rates. Goods handover often took two to three hours, but now it has turned to system management, taking only a few minutes. From warehouse scanning, inspection, and sealing boxes directly to counter delivery, there is no need for a second count.
Tu Mingyu said, "I have obsessive-compulsive disorder; I like working in an orderly state, and I don't like chaos. When it's chaotic, everyone is busy, but busy without any efficiency, busy failing, which I absolutely cannot accept."
It is this "obsessive-compulsive disorder" that has led Lingyu to continuously improve in warehousing and distribution management. While implementing the WMS system, they also implemented the DPS (Digital Picking System) light picking system and the TMS (Transportation Management System) delivery management system. These series of measures have reduced the error rate of goods management in the warehouse to nearly zero.
From 2010 to 2014, Lingyu simply wanted to manage its own business well and manage goods well. But this original intention, unintentionally, made Lingyu a benchmark for distributor warehousing and distribution management. The L'Oréal Group organized distributors to visit twice to see Lingyu's warehouse and promoted it nationwide. In this process, Lingyu also discovered its own warehousing and distribution advantages. Lingyu simply separated its trading and warehousing operations, independently establishing a logistics branch company, developing towards a professional and standardized warehousing and distribution service provider.
Tu Mingyu told New Distribution, "My idea is very simple: to do the warehousing and distribution integration well, meticulously, and thoroughly. Isn't there a saying: 'I'm not afraid of a person practicing ten thousand moves, but I'm afraid of practicing one move ten thousand times.' I want to practice the supply chain warehousing and distribution integration ten thousand times, to achieve what others cannot."
In May 2017, Alibaba Retail Link came to Chongqing to do "new retail." After researching the Chongqing market, they found that Chongqing has many mountains, narrow roads, and steep slopes everywhere. In such a harsh environment, logistics costs are very high. After screening countless distributors in Chongqing, Alibaba proactively found Lingyu. After visiting Lingyu's warehouse, they hit it off: Lingyu and Alibaba Retail Link reached a strategic cooperation, becoming Alibaba's first choice nationwide for the first distributor cooperation in warehousing and distribution integration B2B partnership.
Lingyu set up a dedicated 10,000 square meter warehouse for Retail Link. Now this warehouse has been upgraded from a city warehouse to a regional warehouse, covering Chongqing and part of the Southwest region.
In addition to meticulous management of warehousing and distribution integration, Lingyu's internal standardization, process orientation, and systematic management are also worth mentioning. Tu Mingyu told New Distribution that in 2010, Lingyu launched an OA office automation system and an HR human resources management system. The company's internal operations and management are driven and realized by systems. The company's reasonable organizational structure system has shown strong vitality and strong synergy.
03 Over 1,000 Promotional Staff Providing Retail Management and Marketing Support Services for Brand Owners In addition to the meticulous back-end operations, Lingyu also has its own approach at the business front end.
Tu Mingyu told New Distribution that many small brands lack operational capabilities and have weak product development. Lingyu usually does not touch such brands. In addition, brands that are built by throwing money at them may be short-lived, catching a temporary dividend; Lingyu will not touch these brands either. Lingyu does not put too much thought into finding high-margin products, but focuses more on providing quality services. The brands Lingyu represents are almost all big brands, relatively large in their categories, not high-margin products, but these products have a longer life in the market.
It is precisely the agency of these well-known brands that has facilitated Lingyu's commercial flow in KA stores and chain supermarkets. The aggregation of this commercial flow has given Lingyu over 1,000 stable promotional staff in the Chongqing market alone.
In January 2018, without an agency contract, Colgate signed a cooperation agreement with Lingyu for in-store promotional support services, providing marketing services for Colgate in chain KA stores such as Yonghui. While promoting cosmetics, Lingyu's promotional staff helped Colgate do POS retail, charging based on traffic.
Looking back at Lingyu's development history, there are two core points: warehousing and distribution, and promotion. In the early stage, they widely brought in first-tier well-known brands, aggregated commercial flow, and the support of commercial flow promoted the development of logistics. Meticulous warehousing and distribution management, combined with the massive frontline sales promotion, supports the expansion of commercial flow. The organic combination of the two, coupled with the business philosophy of "pursuing details," and efficient linkage, has created today's Lingyu.
04 Distributor Transformation Should Start with the Simplest Accounts Receivable and Goods Management Tu Mingyu told New Distribution that in the past, the threshold for being a distributor was low, and there were many practitioners, but it was often difficult to grow big. Why? Because when there are many product agencies, it is easy to become chaotic, and chaos restricts development. For distributors to transform and upgrade, they should first think about whether their accounts receivable are chaotic, whether their goods management is chaotic, and whether internal business processes have formed systematic and standardized management. If their own management and operations are a mess, how can they talk about future transformation, upgrading, and development?
For example, when products do activities in major stores, what is the deduction point, what is the cost, how much does the brand owner bear, how much does the store bear, and how much does the distributor bear? Handling one activity is simple, but when handling 100 activities in a month, the financial data involved is massive. If the enterprise has not formed systematic and standardized management norms, it is impossible to manage these promotional activities well. If not managed well, the distributor cannot know whether the activities are profitable.
As an intermediate link connecting upstream and downstream, it is essentially providing services. Tu Mingyu believes that many distributors cannot continue with traditional distribution models and cannot adapt to new business models. The essence is that they lack the ability to do the intermediary service well. In the future, distributors in every region will exist, but whether it is you remains to be seen.
Distributors doing business in the market is like high jumping. In the past, the bar was one meter high, and everyone could jump over it, making it hard to distinguish who was strong and who was weak. It was a mixed bag, and some could pretend to be what they were not. Now the market has changed, and the bar has risen to two meters. Victory and defeat are immediately clear. When the tide goes out, the true face is revealed.
In the current market transformation period, every distributor should leverage their strengths. If you are strong in downstream terminal operations, have good relationships with terminals, and manage frontline business in an orderly manner, strengthen this capability. If you have capabilities in warehousing and distribution, develop in that direction.
Tu Mingyu told New Distribution that in the past, many brand owners wanted to find small distributors because small distributors were obedient. If you told the boss, things would be done quickly, and efficiency was high. But when the market changed and stores' requirements for distributors became higher, small distributors could not adapt because the market is now multi-dimensional and three-dimensional, requiring distributors to have multi-dimensional and three-dimensional thinking. The "obedient" small distributors were clearly unable to cope. In the end, they found that although they were obedient, they lacked capability. Now more and more brand owners are changing their thinking and seeking large distributors. Although they may not be very obedient, they have ideas, resources, and strong capabilities. As long as communication is clear and strategies are aligned, execution is very strong. Brand owners need large distributors, and downstream terminals also need large distributors. The trend of distributor consolidation is unstoppable.
Final Thoughts 1. On multiple distributors jointly doing warehousing and distribution. When it's cold, distributors like to huddle together for warmth, especially during industry transformation. Many distributors think about huddling together to resist the cold while also hoping to seize the dividends of change, such as joint warehousing and distribution. But in fact, multiple distributors joining forces often does not go well because behind the alliance is "temporary makeshift, temporary team formation," not a complete organization. What is an organization? An organization first needs a Leader, needs shared values and cultural concepts. Unfortunately, in many distributor alliances, even the most basic Leader role cannot be accurately defined. Huddling together is just a temporary gathering to cheer each other up, with no vitality.
2. On how warehousing and distribution service providers can replicate. From New Distribution's perspective, for distributors like Lingyu that have accumulated decades of warehousing and distribution experience, they can consider replicating to surrounding regions. But when replicating successful experience, two key points must be grasped: First, it cannot simply replicate and promote warehousing and distribution experience; it still needs to consider heavy assets. Second, it cannot rely entirely on one person.
The capabilities and experience of a distributor in the local market are the result of more than 20 years of accumulation, with the background of the business environment and the resource base of the local market. If expanding to another market, it is like starting from scratch, with no foundation. The current market transformation period will not give distributors 5 or 10 years to settle. So at this time, they must leverage the power of local market distributors (preferably large distributors), jointly invest in building warehouses, and do warehousing and distribution. Through the commercial flow laid by local distributors, ensure the basic operation of warehousing and distribution (the decision cycle for regional distributors to enter the warehouse is long), and understand market characteristics during operation. At the same time, the role of local large distributors in the warehousing and distribution company should change, becoming "investment promotion managers" and becoming "invisible lobbyists" to promote other distributors to enter the warehouse.
3. On distributors transforming into marketing service providers. In Lingyu's case, it can be seen that brand owners have begun to try to let distributors provide marketing support services without taking goods. With the rise in labor costs and the reconstruction of channel pathways, more and more brand owners will cut their own huge frontline business systems in the future, leveraging the power of local large distributors to achieve deep distribution and sales promotion. Brand owner layoffs are an opportunity for local large distributors. When others are laying off, it is precisely the time for distributors to increase staff. Do a good job of standardized and normalized business operation processes, go deep into the frontline, and do a good job of service.
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