The upgrade and transformation of convenience stores and the optimization of supply chain efficiency have become the most frequently discussed new topics in the industry in the past two years. Many B2B e-commerce platforms, including giants, have joined the fray, making the market red-hot. However, for distributors, whether a platform has sustainable profitability and a mature operational growth system remains one of the basic criteria for assessing its reliability.

The author recently visited Dianda Mall in Shanghai and had an in-depth exchange with its chairman, Rui Yun, about Dianda's model. Through the exchange, the author learned that Dianda Mall has already covered 18 cities nationwide, and more than half of its early self-operated cities have achieved sustained profitability. Among many FMCG B2B platforms, the 'Dianda Model' has proven its value with facts and gained initial market recognition.

Today, the author will discuss with you how Dianda Mall achieves sustained profitability by focusing on depth, breadth, and density.

Laying Out in the Yangtze River Delta: 'Depth, Breadth, and Density—None Can Be Missing'

When Dianda first entered the market, it did not expand aggressively across cities. 'Since Dianda's founding in 2014, our founding team unanimously decided to deeply cultivate mom-and-pop stores in third- to fifth-tier cities, not to sprinkle pepper across the country, but to focus on making the Yangtze River Delta region deep, broad, and thorough,' Rui Yun, chairman of Dianda Mall, told the author.

At that time, O2O was at its peak, and it was still more than a year before Jack Ma first proposed the new retail concept at the 2016 Yunqi Conference. But Dianda had already seen the vast market potential and room for improvement in the transformation and upgrading of traditional convenience stores. The Yangtze River Delta, in terms of both the development status of small stores and their operating hours, was an excellent choice for entering the market.

As of the first quarter of 2017, Dianda had covered 15 cities in the Yangtze River Delta, with a coverage rate of over 70% of small stores in individual cities. More than 50,000 merchants had cooperated with Dianda, demonstrating the advantages of scale effects brought by regional coverage in breadth, density, and depth.

'In 2015, Dianda successively opened warehouses in Changzhou, Suzhou, and Wuxi in Jiangsu,' Rui Yun smiled. 'It can be said that we are not a company keen on riding the wave of hot models. At that time, all of us founders felt that FMCG B2B requires meticulous operations and down-to-earth efforts, and we couldn't expand too aggressively or too quickly. Looking back now, these old self-operated cities have all achieved profitability. The entire operational system and model we polished over two years have finally received good returns and feedback.'

Three Moves to Make Money: 'Before Self-Operated Cities Became Profitable, We Did Three Things.'

The profit margins in the traditional FMCG industry are extremely low, which is almost a wall that everyone entering this field must face. Ren Xiaodong once joked: 'No matter how loud the concept is, B2B that can't make money is just hooliganism.'

Rui Yun clearly realized this early on. He said that in nearly three years, they had been exploring model innovation and profit points. Dianda mainly did three things, all related to operations.

The first thing was cost control. 'Our warehousing and distribution fulfillment costs have been optimized very well. In this regard, we are far ahead of our competitors,' Rui Yun told the author. While expanding rapidly in the Yangtze River Delta, Dianda always paid great attention to controlling costs and operational efficiency. The entire platform tracked and diagnosed operational data on an hourly basis in each city.

It is worth mentioning that Dianda's warehousing and distribution system operates in a hybrid model of central warehouses plus forward warehouses. The central warehouse can be flexibly configured as a 1-3 level warehouse based on city size, store coverage density, and coverage range, while forward warehouses are flexibly selected and matched according to the level of the central warehouse. This hybrid warehousing layout can adapt to first- to fifth-tier cities, ensuring the delivery timeliness, quality, and service capability of FMCG B2B, and maximizing the balance among user experience, warehousing efficiency, and cost.

The second thing focused on a concern of the entire industry—improving gross margin. Given the generally low profit margins in the FMCG industry, Rui Yun decided to start with SKU integration reform: reforming the sales product mix, optimizing categories and SKUs, and removing inefficient products. The screening rules and mechanisms of 'removing the false and retaining the true' began to gradually affect Dianda Mall's reputation and user stickiness.

'With a foundation of reputation and users, plus a continuously optimized supply chain system, we can gradually strengthen upstream tripartite cooperation with first-tier brand manufacturers and strategic cooperation with second-tier brand owners,' Rui Yun showed strong confidence when talking about this. 'Through upstream supply chain integration, gross margins have significantly improved, which also has important strategic significance for deepening cooperation in the future.'

Rui Yun summarized: 'In operations, we also have a principle: we must serve the manufacturers and distributors who trust us well, not arbitrarily adjust price systems, and avoid being eager for quick success. Ensuring the win-win interests of all three parties is the foundation of cooperation. Many platforms that have entered the B2B industry with capital support have, in pursuit of low-price competitiveness and short-term GMV, engaged in cross-regional selling and price disruption upstream, and burned cash on subsidies downstream, severely damaging the interests of all parties. Manufacturers and distributors have seen this and are very wary of B2B platforms, even resenting and blocking them. Dianda Mall insists on doing what is right and not doing what is wrong, and over two years, it has won their trust.'

The author learned that on May 10, Nanpu Food (Group) Co., Ltd., the chairman unit of the Yangtze River Delta FMCG Golden Distributor Alliance, signed a strategic cooperation agreement with Dianda Mall. This is the first B2B strategic cooperation signed externally by this leading FMCG enterprise in the Yangtze River Delta. The reason for choosing Dianda Mall as the first B2B partner is precisely because Dianda Mall has long clearly rejected cross-regional selling and price disruption, pursued long-term interests, and become 'the more reliable one' in the eyes of distributors and brand owners.

While improving gross margins, Dianda also actively focused on loss prevention. Also relying on a mature operational system and data tracking analysis, through scientific and reasonable management, it reduced loss rates. The rise in profit and the fall in losses brought considerable profit improvement space.

Mature operational capabilities have allowed Dianda's business chain to branch out. Now, after three years of exploration and development, Dianda has demonstrated a refined operation of a full-industry-chain B2B2C open sharing ecosystem centered on small stores. Leveraging scale effects and based on a mature profit model, it has also expanded into extended businesses such as Xiaodian Shengyi Bao (small store business treasure), finance, third-party services, brand ecosystem chain, and franchise recruitment.

'We hope to export our mature operational model and profit system to partners and serve more mom-and-pop stores across China,' Rui Yun said. 'Only valuable things are worth replicating to create more value. All Dianda people should remember where the company's value lies and stay true to our original aspiration.'

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