---
title: "Hecai Trading's Second Growth Curve - Shendu Yigou"
description: "At the 9th China FMCG Innovation Conference and the 2nd China FMCG Hard Discount Conference & 2nd China FMCG Distributor Conference, Mr. Luo Kai, founder and general manager of Luoyang Hecai Trading Co., Ltd., shared his insights on building a local B2B platform, Shendu Yigou, as a second growth curve. He discussed the reasons, stages, measures, and challenges of self-building a local B2B platform, emphasizing the importance of retail thinking and data-driven operations."
author: "罗凯"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2024-04-12"
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# Hecai Trading's Second Growth Curve - Shendu Yigou

> At the 9th China FMCG Innovation Conference and the 2nd China FMCG Hard Discount Conference & 2nd China FMCG Distributor Conference, Mr. Luo Kai, founder and general manager of Luoyang Hecai Trading Co., Ltd., shared his insights on building a local B2B platform, Shendu Yigou, as a second growth curve. He discussed the reasons, stages, measures, and challenges of self-building a local B2B platform, emphasizing the importance of retail thinking and data-driven operations.

The 9th China FMCG Innovation Conference and the 2nd China FMCG Hard Discount Conference & 2nd China FMCG Distributor Conference concluded successfully in Chengdu!
At the 2nd China FMCG Distributor Conference, more than 20 guests discussed the development of the distributor industry. Among them, **Mr. Luo Kai, founder and general manager of Luoyang Hecai Trading Co., Ltd.**, delivered a significant presentation titled **"Hecai Trading's Second Growth Curve - Building the B2B Platform Shendu Yigou"**, which sparked lively discussions among many practitioners.
"New Distribution" specially reports on its essence for our readers.
Founded in 2006, Hecai Trading represents over 60 brands including Strong and Lays, with more than 2,000 SKUs. It covers over 5,000 large, medium, and small supermarkets locally, making it a leading enterprise in Luoyang and surrounding areas.
As shown in the diagram, Hecai Trading's current organizational structure consists of two major centers and five business divisions, each operating with independent accounting.
Many distributor friends ask: Should trading and B2B be done together or separately?
So far, Hecai Trading operates them separately. The original trading team remains unchanged, while a new team is formed for B2B, covering procurement, operations, finance, sales, warehousing, and logistics. Hecai Trading is one of the suppliers to the B2B platform Shendu Yigou.
Based on Hecai Trading's experience, I will share from the following four sections:
**1. Introduction to Hecai Trading's Second Growth Curve**
**2. Reasons and Thoughts for Self-building a Local B2B**
**3. Stages and Measures for Self-building a Local B2B**
**4. Prospects and Challenges of Self-building a Local B2B**
**Introduction to Hecai Trading's Second Growth Curve**
First, let me state a viewpoint: **Cross-category brand representation is not the second curve for distributors.**
B2B competitors are not necessarily the ones we can see. Most distributors focus on distributors in the same category, but B2B often emerges across categories, and some come from retail industry crossovers.
Shendu Yigou's label is: **Prefecture-level city trading version B2B.**
Before 2021, Hecai used traditional distributor methods for small stores, forming a small store team to serve C and D class stores. With many products, one big brand led several small brands. As a snack food distributor, it could cover only about 1,000 outlets, with 600-800 monthly active stores. Small supermarkets were covered by secondary wholesalers.
After implementing B2B, Hecai Trading's B2B (Shendu Yigou platform) has 3,200+ monthly active customers, 4,200+ SKUs, and has established a one-stop procurement platform, surpassing snack food to achieve beverage-level coverage.
In summary, it is independent of Hecai but leverages Hecai's resources. Internally, it has three major departments: **Procurement and Sales Department, Operations Department, and Sales Department.**
**Reasons and Thoughts for Self-building a Local B2B**
Why did Luoyang Hecai Trading self-build a B2B supply chain platform?
**I. Internal business ceiling.**
Hecai Trading started white liquor and beverage business in 2015, aiming to grow through cross-category expansion. But after a year, accounting revealed: **Horizontal brand additions led to visible business growth, but personnel increased proportionally.** Moreover, each field has veterans with 20 years of experience; entering a new category makes you a student without resources or experience. By 2020, Hecai Trading had achieved a certain sales scale, but managing multiple brands became difficult. Although taking on new brands initially brought growth, the core issue was management difficulty. Hecai Trading concluded: **If you only expand business by adding new brand agencies, you cannot fundamentally solve the contradiction between output and input.**
**II. External environment challenges.**
**1. In the early days of the company, representing a big brand could increase revenue by 10 million yuan.** When reaching 100 million, there are not many brands to represent, and even a brand with tens of millions in revenue only grows by 10%. If a company grows only 10% for three consecutive years, it is a mature company. **At this point, the entire organization and personnel become lazy, and the company lacks innovation.**
**2. The cost of serving small stores is too high, and per capita efficiency is too low.** One person serving small stores, selling 50,000 to 100,000 yuan is the ceiling. The input-output ratio of adding brands and small store personnel is the biggest headache.
**3. Facing economic cycles and the impact of online e-commerce**, local chain stores' core strategy in procurement is to reduce supply costs and cooperate directly with brand owners. Regarding the "de-intermediation" risk of brand direct operation for local chain supermarkets, local distributors must not only continue cooperation and enhance professional promotion capabilities in their categories but also broaden local market channels to spread risk.
In summary, Hecai Trading ultimately chose the B2B platform distribution model, using digital tools to open a second growth curve for business.
**Stages and Measures for Self-building a Local B2B**
2020 was the preparation and investment year. Initially, 2,000m2 of warehousing was prepared, with three-dimensional shelves, OMS, ERP, WMS, PDA terminals/electronic labels basically equipped. In 2021, it officially launched, covering 2,000+ stores in half a year. In the second half of the year, SKUs were sorted, with frontline salespeople continuously organizing store demands for products and purchase prices, and the backend procurement and sales team finding sources. By 2022, there was enough volume to operate, so the focus shifted to "organizational building." 2023 was the year of operational stability. The first two years sorted out the model framework, business processes, organizational management, and procurement and sales operations. This year was about continuous deep cultivation based on the original foundation.
**Regarding the difficulties and key measures at the start of the company.**
**In the 1-6 month period**, the focus was on customer registration and order placement, while also doing procurement, product optimization, and organizational building. Later, through B2B business, not only did first-line brands increase output, but it also attracted cooperation with more quality brands, such as Haitian, C&S, Yili, and Weilong, which are top brands in various categories, thereby achieving cross-category operations and better service to small stores.
**Prospects and Challenges of Self-building a Local B2B**
After three years of B2B business, I have two overall feelings:
**1. B2B business is a higher-dimensional, higher-level distribution business.**
**2. Although it is a supply chain business, the core is to serve downstream retail customers well, and you must have retail operation thinking.**
**B2B business is a higher-dimensional, higher-level distribution business.** With 4,200 SKUs, hundreds of brands, and 4,500 store partners, to achieve automatic operation, you must have professional positions and personnel capabilities to match, and you must have retail operation thinking. I often say that the more I do B2B, the more reverence I have for retail, because retail business is much more complex than distribution. Our internal discourse is gradually changing to include metrics like sales per square meter, per capita efficiency, and product efficiency. For example, in product strategy, we focus on one key indicator: **penetration rate.** What are the penetration rates for first, second, third, and fourth-level categories? Taking the first-level category of condiments as an example, our current penetration rate is 45%, meaning 2,025 of 4,500 stores carry condiments. In 2024, we plan to increase condiment penetration from 45% to 70%. The first-level category of snack foods has a 95% penetration rate, but the third-level category of preserved fruits and dried fruits has only 30%. Why haven't stores stocked them? What are the reasons? What strategies to increase penetration? These are the questions our three core departments—procurement and sales, operations, and sales—need to consider daily.
**How to cooperate closely with brands?** Brands are also a type of customer for Hecai Trading. This type of customer needs product distribution and sell-through. What types of stores to distribute to? How to be precise? What are the steps for sell-through? Main displays, visual merchandising, hanging nets and strips, etc. With real and fully online data, cooperation with brand owners is more pleasant, and we receive more support and investment from them, enabling quick execution of promotions like full-offer discounts and brand discounts, truly achieving dual-driven growth of brand and channel.
**Solving customer pain points and bringing value to customers is the foundation of survival.**
**In conclusion**
What is the first curve and what is the second curve? For Hecai Trading, previously we thought cross-category expansion into alcoholic beverages was the second curve. Now we understand that B2B and new business models are the true second curve. Hecai Trading will remain in a high-speed development period for the next 2-3 years, with many categories not yet fully developed. The penetration rate for first-level categories is over 80%, but the just-started bulk goods penetration is only 9%, leaving 80% to be done. Therefore, establishing professional positions and standard processes will be a future challenge, and there is much more Hecai Trading can do in the future.


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