Click to read the original article for details Recently, many media outlets have reported on B2B platforms engaging in cross-regional selling (channel stuffing), which has disrupted the normal sales of local distributors' products. Some distributors have resorted to extreme measures, such as blocking the doors of Yijiupi (a B2B platform), or Niulanshan distributors complaining to the manufacturer, leading to official statements from the manufacturer. On the surface, it seems that B2B platforms are breaking the rules and disrupting the market, but few distributors see the underlying truth: In the future, more and more B2B platforms will join the cross-regional selling trend. Cross-regional distribution will gradually become the norm for B2B operations. Manufacturers' regional agency protections will weaken, market price systems will collapse, and distributors' survival environment will become increasingly difficult!
Most distributors will think this is impossible and raise questions like:
- I have deep roots in my local market; with my influence, they can't even get a foot in the door!
- Many small supermarket owners still use basic phones; asking them to order and pay via mobile? Are you kidding me?
- In the FMCG industry, distributor margins are already razor-thin; I'm losing money. How can they make a profit with higher costs?
- We are also reforming ourselves; we've implemented unified warehousing, distribution, and visit order systems. If they come in, they won't necessarily be more efficient than us.
All these questions are valid, and currently few B2B platforms have succeeded through cross-regional selling. This article aims to make distributors understand that over time, the traditional FMCG industry's transformation towards the internet is pointing towards improving efficiency and saving costs. As the link between upstream and downstream, distributors and secondary wholesalers are the core targets of B2B platform transformation.
Distributors Are Not Irreplaceable Manufacturers cannot quickly distribute their products to China's 6.5 million retail terminals on their own. They rely on local distributors to help distribute, get products on shelves, compete with rivals, and ultimately generate sales. To ensure distributors work hard to sell their products, manufacturers need to protect distributors' interests.
But what if a B2B platform says it has hundreds of thousands of terminal stores ordering from its platform daily, and it doesn't need the manufacturer's 30% product profit margin to quickly distribute products nationwide? Wouldn't manufacturers be tempted? Wouldn't they be willing to try new products with such a platform?
Conclusion: Distributors' functions are not irreplaceable; they are just the best solution under the current market environment.
What Money Does B2B Make? It's important to recognize that B2B platforms engaging in cross-regional selling are not relying on selling these marked-up goods to make money. For the platform, by selling best-selling products, they establish connections with small stores and consumers. Once this transactional relationship exists, the future ways to make money are limitless.
Relying on price differences for profit is the most primitive and low-level approach. Now we need to consider how B2B establishes connections with stores and consumers. What is their business logic?
Remember the battle between Didi and Kuaidi? Both apps, backed by Tencent and Alibaba, poured billions into the market to grab consumers. They subsidized consumers to order online, and Didi helped call taxis. As consumers gradually got used to online ordering, Didi launched express car services with high subsidies while stopping taxi subsidies. Since Didi controlled order allocation and had huge subsidies, consumers quickly switched to the better service and lower-priced express cars.
The result is well-known: when taxi drivers nationwide were struggling, Didi became China's largest taxi company.
Does Didi own any cars? No! How does it make money? Just by sharing revenue with express cars? Far from it.
The initial transformation of the FMCG industry by B2B follows the same basic logic: Move existing stock online → Create increment → Eliminate existing stock → Provide value-added services
In simple terms: Forced demolition, rebuild elsewhere
Now that you understand the above, let's delve deeper into the specific path of how FMCG B2B kills distributors:
Phase 1: Establish connections with small stores through best-selling products Path: Move existing best-selling product transactions online → Eliminate price differences → Control purchase transactions → Control purchase transaction data
B2B platforms establish relationships with small stores by selling best-selling products online. When transaction volume reaches a certain scale and break-even is achieved, the benefits of unified warehousing and distribution become apparent. At this point, they only need to buy and sell at the same price, eliminating price differences, to quickly gain significant market share.
Since online transactions allow the platform to capture data on product quantities, frequency, and product mix, they can analyze the store's operating conditions and financial status. This enables them to assess the store's value and create a complete profile.
Some may say small stores are different from consumers; they won't be bought by subsidies. That's true, but it doesn't matter. As long as B2B eliminates the price difference on best-selling products, distributors will find it hard to survive.
Phase 2: Provide value-added services and increment for small stores, eliminate existing stock Path: Provide value-added services for small stores → Create increment → Eliminate existing stock → Supply chain finance
When the platform eliminates price differences on best-selling products and further consolidates its relationship with small stores, it will help them increase store revenue and profit. Methods include offering value-added services like lottery sales, phone top-ups, laundry services, and express delivery. They can also assess the store's creditworthiness based on transaction history and provide corresponding financial services.
This strategy has already been seen in the home appliance industry. When LeEco TV attacked traditional home appliance companies, it sold products at zero profit, acquiring a massive user base with extremely low prices, then made profits by providing value-added services to these users.
FMCG distributors still rely on product price differences to make money, but B2B platforms use price parity to drive traffic and make money through value-added services for small stores. How can distributors compete with that?
The rules of the internet game are cross-industry disruption, where wool comes from dogs and pigs pay the bill.
And who pays for your business?
Phase 3: Control order allocation Path: → Absorb small stores →
B2B platforms, using a comprehensive evaluation system that includes transaction data, will assess the commercial value of small stores and begin to absorb these mom-and-pop stores. They will persuade stores to join by offering store image renovation, POS system integration, management output, and unified procurement. They may even acquire them at a premium to make them franchise stores. Once stores are absorbed, the B2B platform controls purchase orders. Imagine if a platform has 20,000 franchise stores; wouldn't that be attractive to manufacturers?
Do you see it now? B2B platforms are not revolutionizing distributors by bypassing them to reach end terminals; they are transforming small stores, leaving distributors with no terminals to serve!
Phase 4: Consumer value-added services and finance Path: Control store transactions → Move consumer transactions online → Consumer value-added services → Consumer finance
After controlling store transactions, B2B platforms will use the stores to promote their apps or membership services. Through these services, they establish deep connections with consumers via online information and offline store consumption content, providing value-added services and financial services based on consumer purchase records.
Above is the business logic of FMCG B2B platforms. Let's string it together:
Move existing best-selling product transactions online → Eliminate price differences → Control purchase transactions → Control purchase transaction data → Provide value-added services for small stores → Create increment → Eliminate existing stock → Supply chain finance → Absorb small stores → Control store transactions → Move consumer transactions online → Consumer value-added services → Consumer finance
How many FMCG B2B platforms do you think will do this?
The answer is all.
Platforms that don't do this are either:
- They haven't figured it out, or
- They are just fooling you.
Distributor friends, look at the community supermarket downstairs. Has anyone come to renovate it recently?
Can Distributors Do Internet+ Themselves? There is a fundamental difference between Internet+ and +Internet. Gome and Suning started their internet e-commerce not much later than JD.com, but why haven't they done as well as JD.com?
Gome and Suning's starting point is based on existing business, using internet tools to arm themselves. This is traditional industry + internet, and the premise is that they cannot revolutionize themselves.
JD.com, on the other hand, is based on internet + traditional industry. With no existing business, it can break existing rules without hesitation, breaking the price systems of Gome and Suning. So, JD.com can succeed, but Gome and Suning cannot.
Traditional distributors are the same. If you only plan to use internet thinking to arm your business, sorry, but there will be too many people with no baggage who will come to internet+ and break the rules, then rob you.
Answering the initial questions:
- For national B2B platforms, is supply a problem?
- If you feel a crisis, don't you think small stores do too? Why don't small stores embrace internet+?
- Facing a B2B that doesn't rely on price differences to make money, how can you compete?
- Look at the beer industry; can local brands beat national companies?
Summary of B2B platforms' three killer moves:
- Unified warehousing and distribution to reduce logistics costs and improve competitiveness;
- Eliminating price differences to further compress distributors' space;
- Through franchising and value-added services, cutting off connections between small stores and distributors; Finally, establish deep connections with consumers to complete the entire supply chain ecosystem.
And distributors are killed during the B2B platform's supply chain transformation.
How long will this transformation take? I don't know. I only know this is the future, the trend...
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