---
title: "How Are FMCG Distributors Being Killed by B2B?"
description: "This article discusses how B2B platforms are disrupting traditional FMCG distribution by using strategies like price parity, value-added services, and eventually taking over small retailers, leading to the demise of traditional distributors. It outlines a four-stage process and warns that distributors must adapt or be eliminated."
author: "赵波"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-06-13"
language: "en"
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# How Are FMCG Distributors Being Killed by B2B?

> This article discusses how B2B platforms are disrupting traditional FMCG distribution by using strategies like price parity, value-added services, and eventually taking over small retailers, leading to the demise of traditional distributors. It outlines a four-stage process and warns that distributors must adapt or be eliminated.

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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 taken extreme measures, such as blocking the doors of Yijiupi, Niulanshan distributors complaining to the manufacturer, and the manufacturer issuing statements. On the surface, it seems that B2B platforms are breaking the rules and disrupting the market, but few distributors can see through the phenomenon to the essence: **In the future, more and more B2B platforms will join the cross-regional selling army. Cross-regional distribution will gradually become the norm in B2B operations. Manufacturers' regional agency protection will become increasingly weak, the market price system will be destroyed, and the survival environment for distributors will become increasingly difficult!**
Most distributors will think it's impossible and will raise some questions:
1. I have been deeply rooted in the local area for many years. With my local influence, they can't even get a foot in the door of my market!
2. Many small supermarket owners are still using basic phones. Are you kidding me by asking them to order and pay on their phones?
3. In the FMCG industry, distributor profits are already as thin as paper. I'm losing money. How can they make money with higher costs than mine?
4. We are also doing reforms ourselves. We have implemented unified warehousing, unified distribution, and visit order taking. If they come in, their efficiency may not be higher than ours.
All the above questions are valid. At this stage, few B2B platforms can succeed through cross-regional selling alone. The purpose of this article is to make distributors understand that over time, the trend of traditional FMCG industry transforming to the internet is pointing towards improving efficiency and saving links. 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 need local distributors to help distribute, get products on shelves to compete with competitors, and finally gain sales. To ensure distributors work hard to sell their products, manufacturers need to protect distributors' interests.
But when a future B2B platform says it has hundreds of thousands of terminal stores ordering on its platform every day, and it doesn't need the 30% product profit margin that manufacturers give to distributors, it can quickly help distribute products nationwide. Wouldn't manufacturers be tempted? Wouldn't they be willing to try new products?
**Conclusion: The function of distributors is not irreplaceable; it is just the optimal solution under the current market environment.**
**What money does B2B make?**
One fact to recognize is 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 a connection with small stores and consumers. Once this transaction relationship exists, there will be unlimited imagination for future profit methods.
Relying on price differences to make profits may be the most primitive and lowest level. 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? The two apps, backed by Tencent and Alibaba, spent billions of yuan to grab consumers. They subsidized consumers to order online, and Didi helped call taxis. When consumers gradually got used to ordering online, Didi launched express cars, gave high subsidies for express rides, and stopped subsidizing taxis. Since Didi had the order distribution power and huge subsidies, fickle consumers quickly fell in love with the better service and lower price of express cars.
The result is known to all: when taxi drivers nationwide were almost out of business, **Didi became China's largest taxi company.**
**Does Didi own a single car?**
**No!**
**How does it make money?**
**Just by sharing revenue with express cars?**
**Far more than that.**
The initial transformation of the FMCG industry by B2B follows this basic logic: **Move existing stock online → Create increment → Destroy stock → Provide value-added services**
Simply put:
**Forced demolition and relocation**
If you understand the above, let's go deeper and discuss the specific path of how FMCG B2B kills distributors:
Phase 1: Establish connection 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 through online sales of best-selling products. When the transaction volume reaches a certain scale and break-even, 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 a large market share.
Since online transactions can capture data on the quantity, frequency, and product structure of small store purchases, this data can be used to analyze the store's operating and financial status, evaluate the store's value, and create a complete profile.
Some may say that small stores are different from consumers and won't be bought by subsidies. That's true, but it doesn't matter. As long as B2B eliminates the supply and marketing price difference for best-selling products, distributors will find it hard to survive.
Phase 2: Provide value-added and incremental services to small stores, destroy stock
Path: **Provide value-added services to small stores → Create increment → Destroy stock → Supply chain finance**
When the platform eliminates the price difference for best-selling products and further consolidates its relationship with small stores, it will help small stores increase their turnover and profits. Methods include providing value-added services such as selling lottery tickets, phone top-ups, laundry services, and express delivery. It can also assess the store's credit status based on transaction flow and provide corresponding financial services.
This tactic has already been played out in the home appliance industry. When LeEco TV attacked traditional home appliance companies, it sold products at zero profit, acquired a massive user base with extremely low prices, and 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 make money by eliminating price differences to bring traffic and providing value-added services to small stores. How can distributors compete with that?
The rules of the internet game are cross-border robbery, where wool comes from dogs and pigs pay for it.
And who pays for your business?
Phase 3: Control order distribution rights
Path: **→ Absorb small stores →**
B2B platforms use a comprehensive evaluation system that includes transaction data to assess the commercial value of small stores. Then they start absorbing these mom-and-pop stores. They will talk to the stores about overall image renovation, embedding POS systems, management output, unified procurement, and other benefits to persuade them to join, even paying a premium to acquire them as franchise stores. Once small stores are absorbed, the B2B platform controls the purchase orders. Imagine if a platform has 20,000 franchise stores itself. Wouldn't that be attractive to manufacturers?
Do you see it now? B2B platforms are not revolutionizing distributors by bypassing them to directly reach terminals, but by 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 small 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, provide corresponding value-added services, and offer financial services based on consumer consumption records.
The 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 to small stores → Create increment → Destroy 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 clueless or 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 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 stock business, using internet tools to arm themselves. This is traditional industry + internet. The premise of this logic is that they cannot revolutionize themselves.
JD.com is based on Internet + traditional industry, with no stock, so it can break existing rules without scruples, 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, there will be too many people in this world with no baggage to do Internet+, break the rules, and then rob you.**
Answer the questions at the beginning:
1. Is supply a problem for national B2B platforms?
2. If you feel a crisis, don't you think small stores do too? Why don't small stores want Internet+?
3. Facing a B2B that doesn't rely on price differences to make money, how can you compete?
4. Look at the beer industry. Can local brands beat national companies?
Summary of B2B platforms' three killer moves:
1. Unified warehousing and distribution to reduce logistics costs and improve competitiveness;
2. Eliminate price differences, further compress distributor space;
3. Through franchising and value-added services, cut off the connection between small stores and distributors;
4. Finally, establish deep connections with consumers to perfect the entire supply chain ecosystem.
**And distributors are killed in the process of B2B platforms transforming the supply chain.**
**How long will these transformations take? I don't know. I only know that this is the future, this is the trend......**
-END-
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