Introduction: On March 18, 2018, during the Chengdu Spring Sugar and Wine Fair, the 2018 4th China FMCG + Internet Conference hosted by New Distribution released the 2018 China FMCG Industry Urban Distribution Logistics Development Blue Book. The report is based on online questionnaires from 3,000 distributors nationwide and offline field visits, combined with several well-known FMCG same-city logistics companies, to deeply explore the current status and trends of urban distribution logistics in the FMCG industry. The report points out that although most brand owners have long focused on modern circulation and e-commerce channels, traditional channels remain the largest in China's FMCG circulation. In 2016, modern circulation channels accounted for 41.6% of FMCG shipments, online channels 9.1%, and traditional distribution channels (traditional channels) as high as 49.3%. From the perspective of brand owners, more than half of FMCG companies have traditional channel sales accounting for over 60% of their total sales. Among them, food, beverage, and alcohol companies rely most on traditional channels: 40% of such companies have traditional channel sales exceeding 80% of total sales, and 57.1% have traditional channel sales exceeding 60%. The following is an excerpt from the report on warehouse and logistics analysis of FMCG distributors 01 Analysis of the Characteristics of FMCG Distributor Warehouses 1) Warehouse Ownership The ownership of FMCG distributor warehouses can be roughly divided into three categories:

  1. Self-owned: self-built warehouses or purchased warehouses with property rights
  2. Leased ordinary warehouses: renovated old factories, individual non-standard warehouses
  3. Leased professional warehouses: logistics parks, professional warehousing companies According to the survey data from New Distribution, FMCG distributors in China mainly lease ordinary warehouses, accounting for about 67%, self-owned warehouses about 21%, and distributors leasing logistics center warehouses about 12%. 2) Warehouse Area Warehouse area is relatively balanced in terms of distributor numbers, except that 34% of distributors use between 500 and 1,000 square meters, other area ranges each account for 22% of distributors. Warehouse area is significantly related to the sales scale of distributors. The larger the sales scale, the larger the warehouse area generally. Distributors with annual sales below 10 million yuan mostly use areas below 500 square meters. Those with sales between 10 million and 50 million yuan mainly use areas between 500 and 2,000 square meters, depending on the category attributes. 3) Warehouse Rental Costs Due to different regions, locations, and warehouse facilities, costs vary. According to the questionnaire feedback from New Distribution: 5 yuan/m2-10 yuan/m2 per month is the mainstream warehouse rental cost for distributors, accounting for about 37%, and about 19% of distributors have monthly warehouse costs exceeding 15 yuan/m2. Excluding the variable of warehouse rent, according to normal logic, the larger the sales scale, the larger the area, and the lower the warehouse rent cost. However, actual data shows the opposite trend: larger sales scale, higher warehouse rent costs. Combined with field research, distributors with smaller sales scales pursue cost-effectiveness, with simple environments and facilities, so warehouse rent costs are relatively low. Distributors with larger sales scales, with multiple SKUs and categories, pursue better facilities, so warehouse rent costs are relatively high. 4) Warehouse Management System Current status of warehouse informatization for FMCG distributors: 65% use general financial inventory software; 20% use professional ERP software; 10% do not use any system; only 5% use professional WMS systems. FMCG distributors generally invest insufficiently in informatization. Analysis of reasons: many distributors operate single brands with fewer SKUs, which are easier to manage; also limited by sales scale, informatization is a burden for smaller distributors. 5) Warehouse Configuration From the questionnaire data, 38% of distributors do not have fire protection facilities. Through field visits by New Distribution, FMCG distributors have weak safety awareness, and many do not have relevant fire protection configurations. In terms of warehouse tools, 66% of warehouses do not have auxiliary tools, or only have simple pallets and pallet jacks. For large workloads such as product inbound, distributors generally hire temporary loaders. For frequent but small outbound orders, salesmen or drivers complete them themselves. 6) Warehouse Cost as a Percentage of Transaction Value 75% of distributors have warehouse costs below 3% of total transaction value, with the highest proportion at 1%-2%. However, 13% have warehouse costs at 3%-5%; 8% at 5%-7%; and 4% above 7%. Overall, the higher the sales scale, the lower the warehouse cost as a percentage of transaction value. By category, household/personal care distributors have relatively higher values, mainly due to the offline market capacity of the category. Other categories have differences but mainly concentrate in 1-3%. 7) Inventory Turnover Inventory turnover reflects the efficiency of capital use; the faster the turnover, the higher the liquidity and capital efficiency. Inventory turnover for FMCG distributors: 74% have turnover of half a month to one month; 14% have turnover of one quarter; 9% have turnover of one week; 3% have turnover of more than one quarter. Additionally, one data point is worth noting: although this survey did not involve managed third-party warehousing and logistics companies, from the development trend of the past two years, the proportion of using third-party warehouses is increasing year by year. Reasons: first, warehouse rental costs are rising year by year, and third-party warehousing, due to reasonable combination of warehousing and distribution, has relatively lower costs, and the allocation of peak and off-peak seasons allows distributors to flexibly adjust warehouse size; second, warehousing management costs are saved by directly reducing warehouse staff; third, peace of mind, without worrying too much about warehouse operations and safety. In addition, third-party leasing facilitates quick financing through warehouse receipt pledge, which is also a major factor for distributors choosing third-party leased warehousing. 02 Analysis of the Characteristics of FMCG Distributor Delivery 1) Delivery Forms The warehousing and distribution methods of FMCG distributors: mixed mode of order-taking and vehicle sales (each has advantages, e.g., vehicle sales in township markets, order-taking in urban areas) accounts for 41%; order-taking mode accounts for 41%; vehicle sales mode, where drivers also handle business and delivery, accounts for 18%. Advantages of vehicle sales and order-taking: Vehicle sales:
  4. Delivery radius: areas far from the warehouse and with inconvenient transportation, such as townships and rural areas, must use vehicle sales;
  5. New product promotion period: on-site promotion and sales, higher experience;
  6. Category competition: the more intense the competition, the more business relationships are used to place orders on-site, display products on-site, seize sales points, and increase product exposure. Order-taking:
  7. Salesmen focus on service and expansion of terminal outlets, serving terminals;
  8. Intensive distribution improves visit efficiency and reduces delivery costs. From the perspective of sales scale, the higher the sales scale, the lower the proportion of vehicle sales; the smaller the sales scale, the higher the proportion of vehicle sales. The mixed mode has the highest proportion among distributors with annual sales of about 30-50 million yuan, and the highest proportion of vehicle sales is among distributors with sales below 10 million yuan. By category, household/personal care has the smallest proportion of vehicle sales, mainly because the brand concentration is high and sales are mainly in supermarkets and hypermarkets. Alcohol has a vehicle sales proportion 20.45% higher than other categories, as vehicle sales increase selling opportunities. Also, alcohol has high value, making it easier to cover the personnel and vehicle costs of vehicle sales. 2) Delivery Tools Delivery tools for FMCG distributors: 4.2-meter box trucks account for the highest proportion at 38%; followed by 28% micro vans; 15% electric tricycles; 13% Jinbei vans; 6% Iveco vans. The choice of transport tool depends on three factors: first, category differences; second, geographical location of the delivery radius; third, the straight-line distance between the warehouse and covered outlets. These three factors affect the choice of transport tool, but not significantly related to sales scale. 03 Analysis of the Characteristics of FMCG Distributor Warehousing and Distribution Outsourcing Regarding whether there are third-party warehousing and logistics companies providing delivery services for FMCG distributors in the local market, 48% of distributors confirmed that there are no third-party warehousing and distribution logistics companies in the region; 37% have them; 15% are uncertain. Although third-party urban delivery is very hot, the overall penetration rate in the FMCG industry is still at a low level. If there are third-party warehousing and logistics companies locally, 80% of distributors are willing to try and are interested, while only 20% are not interested or unwilling to try. From a psychological perspective, the vast majority of distributors recognize third-party warehousing and logistics companies and are willing to try and communicate. Scan the QR code below to follow New Distribution Open Class Limited time free access to the full version of the warehousing and distribution report -END-