In 2017, New Distribution organized a survey across 22 major cities nationwide, systematically investigating the coverage, penetration, supply chain organization, platform operations, delivery capabilities, and service visits of various FMCG B2B platforms in different market areas. In Guangdong, besides national B2B platforms like Alibaba Retail Link and Zhongshang Huimin, local B2B platforms also showed impressive performance, and Caihua Trading is one such representative. Recently, the author visited Wu Jinghe, deputy general manager of Caihua Trading, in Dongguan, hoping that Caihua Trading's business model and development path could provide some reference for everyone. Founded in 2012, Caihua Trading has covered dozens of cities in Guangdong and Hunan, serving nearly 10,000 stores, with an average order value exceeding 1,000 RMB and an annual transaction scale reaching 1 billion RMB! Moreover, with invoiced delivery, Caihua Trading has already achieved profitability, making it a true regional champion. So, what aspects of Caihua Trading's development model are worth learning from? 1 Model In terms of business model, Caihua Trading adopts a typical integrated supply chain model. For products, in addition to establishing direct agency supply relationships with numerous domestic and international first-tier brands such as Coca-Cola, Uni-President, and Haitian, and providing services like new product promotion, terminal coverage, and service, Caihua Trading has also built a professional team dedicated to developing private label products, covering categories such as beverages, alcohol, and leisure snacks. Through the development of private label products, on one hand, Caihua Trading can reduce its dependence on first-tier brand manufacturers; on the other hand, it can increase overall product gross margins and gain greater profit space. By integrating supply chain management, Caihua Trading outputs products and business models, thereby achieving full-chain supply chain services. In terms of warehousing and distribution, Caihua Trading implements a central warehouse + front warehouse model. In regional markets, Caihua Trading establishes cooperative relationships with distributors, using their warehouses as urban front warehouses, thereby enhancing the distributors' coverage and product assortment capabilities. At the same time, distributors can jointly operate a regional market with other regional front warehouses, sharing resources to maximize channel value. Through this model, Caihua Trading achieves multi-city coverage across different regions. Additionally, by combining the long-tail product assortment of central warehouses with the delivery efficiency of front warehouses, Caihua Trading can effectively improve overall supply chain efficiency. Furthermore, relying on dense network distribution and a strong supply chain, Caihua Trading can meet the needs of small stores for both ambient and cold chain products in one stop, which constitutes its unique competitiveness compared to other B2B platforms. In terms of store franchise strategy, Caihua Trading implements a multi-brand free alliance. The purpose is twofold: first, by rebranding, it can lock in certain mom-and-pop stores; second, the free alliance helps Caihua Trading achieve maximum coverage of small stores, thereby quickly enhancing the store image of individual small stores, creating marketing scenarios, and attracting more consumers to enter the stores. 2 Yueheji In January 2018, Caihua Trading officially proposed and established the Yueheji Convenience Store Free Alliance, a free alliance composed of multiple convenience store brands. Relying on Caihua Trading's rich product offerings and complete supply chain infrastructure, Yueheji can break through brand limitations, providing alliance convenience store brand outlets with high-quality products and technical services, helping small stores achieve sound operations, thereby gaining greater profit space and achieving healthy business operations. At the product level, Yueheji relies on Caihua Trading's accumulated rich store management experience to provide stores with rich, high-quality, and reasonable product assortments, further aggregating marketing resources from various brands to help stores attract more consumers, thereby empowering stores. In addition to outputting supply chain services to traditional retail stores, Yueheji also provides a complete set of management training and system technical support, such as store decoration, staff training, cloud POS, and mini-programs, forming a combination of online and offline stores to help small stores break through spatial limitations and reach consumers more broadly. At the same time, through the Yueheji platform, stores can also gain access to additional cross-industry resources, thereby creating new business sources and driving overall sales growth. 3 Why Output the Supply Chain Externally? With both rich convenience store management experience and a complete supply chain management system, why did Caihua Trading choose to output its supply chain externally rather than adopt a multi-brand strategy to develop convenience stores? "There are over 30,000 retail stores in Dongguan, and even with such strong convenience stores, there are only a few thousand. In the most mature market, Meiyijia has over 3,000 stores, accounting for only 10% of the market share in terms of store count. Even adding foreign chain convenience store brands like 7-Eleven, the total store count will not exceed 15%, which means that in Dongguan, 85% of small stores are still traditional mom-and-pop stores. Among these, 20%-30% are located in prime locations. Because of their good locations and high foot traffic, these stores are unwilling to join any convenience store system. The significance of Caihua Trading's existence is to provide supply chain services to these small stores," Wu Jinghe told New Distribution. "Not only in Dongguan, but across Guangdong Province, there are about 300,000 retail stores, while chain convenience stores have not yet exceeded 30,000, meaning there is still significant room for growth in this market." 4 A B2B Platform Without an APP With the development of mobile internet, mobile apps have increasingly become a window for users to connect externally. In the FMCG B2B industry, major B2B platforms mostly develop APP online malls to meet the increasingly diverse ordering needs of small stores. However, Caihua Trading does not have a mobile APP; currently, 80% of Caihua Trading's orders come from the PC-based online mall. Caihua Trading's sales representatives are only responsible for promoting new products and helping small stores without computers place orders on their behalf. To date, 90% of small store owners have achieved self-ordering of daily products. In Wu Jinghe's view, due to limited store space, the total SKU count of daily operating products is generally not too high. Among these, 700-800 are bestsellers that do not change easily, while the remaining 500-600 products are continuously replaced based on consumer habits. "Using a mobile APP to place orders is a typical traffic-thinking model. Currently, most B2B platforms display a large amount of promotional content on their homepage, which causes small store owners to focus only on promotional content after entering the mall. Promotional products are generally bestsellers. If you continuously run promotions on price-sensitive bestsellers, it will lead small store owners to focus only on price and think about how to take advantage," Wu Jinghe told New Distribution. "Because for head brand products like Red Bull and Coca-Cola, most small store owners only look at the price and place orders where it is cheaper, making it difficult to form platform loyalty. In this case, small store owners only pay attention to promotions; if there are no promotions, they will no longer purchase on the platform. As soon as promotional activities stop, the platform's monthly active rate will drop significantly. Relying solely on logistics fees makes it difficult for the platform to achieve profitability. Therefore, Caihua Trading hopes to give small stores a correct, market-tested product assortment, and these products have all been tested in the market. Small store owners no longer need to trial and error; this is what differentiates Caihua Trading from other B2B platforms. The core of B2B is still products; our value is to help small stores select high-quality core products." Caihua Trading, based on its existing supply chain system, has incomparable cost advantages over native B2B platforms. Moreover, because it has been engaged in chain convenience store business, Caihua Trading has rich operational experience and sufficient talent reserves in category management and store management. Caihua Trading's model also proves to the industry that doing B2B business solidly can achieve profitability. In the past two years, regional chain retail enterprises have successively entered the B2B business, such as RT-Mart e-Lufa, Hebei 36524, Xi'an Every Day Help Convenience, and Putian Huiben Supply Chain, all following this model. This type of model typically features leveraging their own complete warehousing, logistics, and supply chain capabilities to output and penetrate small stores outside the system, and once the time is ripe, they are absorbed. For internet giants with nearly exhausted online traffic, mom-and-pop stores are not just business; they are a super terrifying traffic entrance. Moreover, this traffic brings not only high-frequency customer flow and business but also payment, finance, and unlimited imagination space. For any internet giant, this is a market that cannot be given up. New Distribution has also calculated that there are currently about 10,000 hypermarkets in China, about 100,000 chain convenience stores, and 5.6 million mom-and-pop stores. Of course, the expansion of chain convenience stores in the past two years has indeed led some mom-and-pop stores to switch to franchise convenience stores due to operational pressure, but this portion will not exceed 10%-20% of the total retail store count. However, a considerable portion of mom-and-pop stores are still unwilling to accept the control of chain systems and hope to operate independently with more freedom, but they are willing to hang a unified signboard and accept some system tools and product resources. The 80/20 rule in the retail industry will always exist. With the current expansion speed of chain stores, fully penetrating this market is a long and arduous task. It can be said that B2B still has broad market space. -END-