From August to October 2017, New Distribution organized a survey of 22 major cities across China, systematically investigating the coverage, penetration, supply chain organization, platform operations, delivery capabilities, and service visits of various FMCG B2B platforms in different regions. In the Chongqing market, besides national platforms like JD.com, Alibaba, and Zhongshang Huimin, local FMCG B2B platforms also showed impressive data. The local platform Yishenghuo even outperformed national giants like JD.com and Alibaba in multiple dimensions such as penetration and coverage, achieving the top competitiveness in Chongqing's FMCG B2B market, making it a well-deserved regional king. Covering over 40,000 stores, with 4,000+ active users, and an average purchase of over 7,000 yuan per store. How did Yishenghuo's path to becoming the regional king come about?

  1. From O2O to B2B According to relevant information, Yishenghuo was established in June 2013. Before starting B2B, Yishenghuo had also taken many detours. "When our company was first established, we helped small stores with O2O business. At that time, we made a client that mainly helped small stores with daily bill payments such as water, electricity, and gas, and also involved housekeeping services, purchasing agents, overseas shopping, and other businesses. Later, because the business scope was too broad and the chain was too long, the O2O business did not go well," said Xiang Shang, founder of Yishenghuo. Before founding Yishenghuo, Xiang Shang had worked for a well-known domestic FMCG company for many years. His rich industry experience gave him unique insights and understanding of the FMCG industry and the local Chongqing market. "No one can succeed in a business without boundaries." Recalling his entrepreneurial experience, Xiang Shang told us, "Entrepreneurship must integrate into the industry's major trends. You need to know who your users are, where the scenarios are, and from whom you make money. Do it point, line, surface, and body, so that one gives birth to two, two to three, and three to all things." China's traditional mom-and-pop stores are numerous, with generally low operational levels and low informatization. Store owners usually have to contact dozens of suppliers for goods, and it is common to go to wholesale markets when they need goods urgently. It was precisely seeing the obvious pain points of traditional mom-and-pop stores that Yishenghuo began transitioning to B2B in August 2014, supplying goods to small stores. Xiang Shang told us, "Traditional distributors are currently a cluster of sampans. In this supply group, what you have, he also has, but they lack information tools and ideas, and also lack the ability to coordinate." So at the beginning of supplying goods to small stores, Yishenghuo adopted a pure matching model, which put some local distributor products online, and after orders were placed, each distributor would deliver separately. Later, Yishenghuo gradually introduced the concept of cloud warehouses, integrating traditional suppliers, dynamically allocating orders, and achieving intelligent adaptation to individual store orders. Xiang Shang called it the locomotive model: "Several distributors deliver goods to a locomotive (distributor) regional warehouse, and then this locomotive delivers together." However, due to the low informatization level of each distributor, data still could not be fully integrated, and a series of problems arose in allocation and delivery. On July 1, 2016, Yishenghuo's direct operation model went live, and it established Chongqing's largest modern logistics center with a warehouse area of 11,000 square meters. At the same time, it introduced a central warehouse, enriched product lines, and increased the supply of fresh food, bread, frozen products, and more. Regarding the high operating costs of self-operated B2B platforms, Xiang Shang believes the reasons are that store orders are uncontrolled, orders are fragmented, too much split-picking, and delivery costs are too high.
  2. Regional Dominance Since 2013, the FMCG B2B industry has developed rapidly. Relying on the power of capital, many B2B platforms have been able to achieve rapid expansion nationwide in a very short time. Although they can seize terminals to a certain extent and gain first-mover advantages, they also bring problems such as weak terminal stickiness and low loyalty. "If a business model hasn't been proven in one region, then rashly expanding to other markets and quickly replicating it still won't work well." Xiang Shang, founder of Yishenghuo, said, "B2B is ultimately a platform business that emphasizes density, and terminals pursue service. If service is not done well, even if other regions do well, it has nothing to do with the Chongqing market." The integration of online and offline is considered a future trend. Convenience stores have small space and are close to consumers, while e-commerce platforms have unlimited space and are far from consumers; the two complement each other. In 2017, JD.com and Alibaba successively proposed plans for millions of convenience stores, further intensifying the competition for small stores. "The biggest benefit of giants like JD.com and Alibaba is that they changed upstream brand owners' perception of B2B and cultivated the habit of small stores ordering online." When talking about competitors, Xiang Shang said, "To empower small stores, relying solely on price wars is not enough. The core is supply chain capability. If you can achieve the ultimate supply chain, that is already very good."
  3. Chain Convenience Stores Traditional mom-and-pop stores can be divided into various types by business format, such as tobacco and alcohol stores, grocery stores, convenience stores, and grid stores; by location, they can be divided into street, business district, community, and hub stores. Different types of retail stores have different operational capabilities and sell different products. For example, the product categories sold in retail stores near primary schools, middle schools, and universities are completely different. However, many B2B platforms currently supply all types of stores for GMV and transaction data, which actually makes it impossible to provide deep service. "If B2B is to VC, none can succeed," Xiang Shang said. "If you don't precisely define a type, you can't control the boundaries of operations." So from the beginning of supplying stores, Yishenghuo classified the stores it serves, targeting only one type of customer and providing professional services. In addition to supplying small stores, Yishenghuo has also ventured into franchised chain convenience stores to further enhance stickiness with small stores. According to relevant information, Yishenghuo has over 400 franchised stores in Chongqing, all in the form of loose franchising. "Chain, as the name implies, is both connected and locked. Connection is the phenomenon, and locking is the control. Loose franchising and rebranding only connect small stores, but Yishenghuo's purpose is to lock, through supply chain capability, ultimately achieve store control and do platform-level business, not to be a chain convenience store management company," Xiang Shang said. Based on regional focus, targeting specific customer groups, and deeply cultivating the supply chain, this may be the reason for Yishenghuo's rapid development and growth into the regional king of the Chongqing market. We hope Yishenghuo's development path can provide some reference for distributors willing to transform.