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After nearly four decades of development, China's FMCG distribution has basically formed a pattern with offline channels as the main body and online channels developing rapidly.
Established at the beginning of reform and opening up, based on breaking the original state-owned commodity circulation system, China's FMCG distribution system has, after nearly four decades of development, shown serious problems of incompatibility with the scale development of manufacturers, the transformation of retailers, and the upgrading of consumer demand. It urgently needs reform.
FMCG covers a very wide range of commodities. This article only analyzes popular FMCG categories such as food, groceries, and mass clothing that are closely related to supermarket terminals, using popular FMCG as a representative.
I. Current Status of China's FMCG Distribution Channels
After nearly four decades of development, China's FMCG distribution has basically formed a pattern with offline channels as the main body and online channels developing rapidly. Currently, online channels account for about 12%-15% of total retail sales of consumer goods.
Currently, offline channels are the main distribution channel for FMCG, accounting for more than 85% of total retail sales of consumer goods. Of course, there are significant differences across categories, manufacturers, and regions.
Analysis of offline channels mainly includes the following models:
- Manufacturer - Distributor - KA (key account chain enterprise system) - Small Stores - Consumer circulation system: That is, manufacturer goods pass through distributors, enter chain enterprises and small stores, and then are sold to consumers.
Currently, most manufacturers adopt this model. In practice, it can be subdivided into two operational forms:
Manufacturer-led market operation: The manufacturer establishes a complete business team, directly controls the terminal market network, and the manufacturer's business team directly operates the terminal market. Examples include large companies like Coca-Cola and Procter & Gamble. The distributor's role is mainly logistics and delivery.
In this model, the manufacturer basically controls the circulation link and has direct contact with terminals. The key factor determining the market is the manufacturer's business team's ability to operate the market, as well as the distributor's internal operation management capability, and the cooperation among manufacturer, distributor, and terminal. The main problems are that the manufacturer bears high labor costs, and distributors have thin profits and low enthusiasm.
Distributor-led market operation: The manufacturer completely hands over the product to the distributor for market operation. The manufacturer only manages the distributor, not the terminals. The distributor's role is very critical, responsible for market development, maintenance and operation of the market, logistics delivery, and capital guarantee.
In this model, large brand manufacturers provide strong air support—advertising—and promotional support for distributors. In this model, the manufacturer is completely separated from the terminal market. The key factors determining the market are the distributor's ability to operate the market and the brand's market pull. For large brands and manufacturers wanting to maintain rapid growth, market development and maintenance are completely constrained by the distributor's awareness, ability, and cooperation.
In recent years, in response to the rapid development of international KAs and domestic regional KAs, many manufacturers have implemented direct operation or market separation for KA enterprises, such as P&G, Hengan, etc., either operated directly by the manufacturer or jointly with distributors, to strengthen control over KA channel stores.
Manufacturer - KA, Small Stores - Consumer circulation model: The manufacturer establishes direct sales institutions, such as Want Want's operation of KA channels, which is directly operated by Want Want sales offices set up in various places. This model is relatively efficient, has strong execution, and fast communication. The problem is that the manufacturer bears corresponding channel circulation costs. It is suitable for manufacturers with high brand awareness, cross-category products, and many varieties.
Manufacturer - Consumer: Manufacturer products directly to consumers: Currently active mainly in direct sales and direct purchase models. Up to now, the Ministry of Commerce has issued direct sales licenses to 75 enterprises. The involved product categories mainly focus on cleaning and care products, health foods, health and environmental products, etc. This model mainly uses community as the development method and interest locking as the main means. Currently, it shows a trend of rapid multiplication.
Only Amway's sales in China reached 30 billion yuan, Melaleuca China reached 6 billion yuan. Melaleuca China, only developing in some provinces (not yet nationwide), has locked in 650,000 family members. Moreover, this direct sales and direct purchase model locks in members in a long-term and exclusive sense. Once members are locked, they generally do not get involved with other brands.
- Manufacturer - Wholesale Market - Small Stores - Consumer circulation model: The wholesale market is a special FMCG channel form. Currently, it occupies a very large proportion in the sales of many categories and many manufacturers. Some small manufacturers mainly rely on wholesale markets for product sales, and even some large manufacturers have a certain proportion of sales through wholesale markets.
In categories such as washing and chemical products, snacks, stationery, and groceries, the wholesale market is still the main circulation channel to a certain extent. Examples include the world-famous Yiwu Small Commodity Market and Linyi Wholesale Market in Shandong. The wholesale market is also an important procurement choice for some small chain enterprises and individual stores when organizing goods.
Overall analysis of current offline channels reveals the following problems:
High channel construction costs and high maintenance costs: Manufacturers invest heavily in building distribution channels, and maintenance costs are extremely high. Medium-sized enterprises alone have business teams of thousands or even several thousand people, and daily channel maintenance costs are enormous.
Many circulation links and low efficiency: The current FMCG circulation involves multiple links such as manufacturers, distributors, and terminals, which also brings low efficiency. Even the execution of a business decision requires transmission and circulation within multiple links inside the manufacturer, distributor, and terminal. Such decision execution makes it difficult to guarantee the quality and efficiency of results.
At the same time, because manufacturers, distributors, and terminals belong to different interest groups, each calculates their own accounts, and in essence, it is difficult to form a true market synergy.
Poor channel stability, fragile relationships among manufacturers, distributors, and terminals: Since the three belong to different interest relationships, they may cooperate well when the market is rising. Once market downturn occurs or enterprises have problems, they immediately scatter like monkeys when the tree falls. The relationship among the three is standard: good friends at the dinner table, but kicking each other under the table.
From the recent market adjustment, where large brands like Nongfu Spring want to cut distributors, it fully demonstrates the fragility of these relationships. Of course, there are also individual manufacturers, such as Oishi, who "risk their lives" to maintain channel relationships, preferring not to do business rather than abandon distributors. But such cases are rare. Currently, the distributor group is a mixed bag, with few large-scale enterprises, many mom-and-pop shops, and many front-store-back-warehouse models.
Such a market model, such customer structure, and such customer relationships are very unfavorable for the long-term healthy development of manufacturers, distributors, and terminal enterprises. Especially for some large-scale production enterprises, development based on such channels is very frightening. Because cooperation based on such relationships means no one considers the long term.
Prominent interest disputes: Due to belonging to different interest entities, the interest disputes among the three are currently very serious, and all are suffering. Prominent manifestations include: manufacturers pressuring distributors to stock up; distributors arbitrarily raising prices to terminals; terminal chain enterprises charging distributors various fees such as barcode fees, new product fees, festival fees, and even unreasonable deductions. This chaotic interest dispute is difficult to resolve.
Greatly constrained by terminals: Given the value and role of terminals, they greatly constrain manufacturers and distributors. Product sales depend on product performance at terminals such as store coverage rate and display space. Under such circumstances, especially some large KAs, coupled with the guidance of some wrong business concepts, use this as a means to propose various conditions and squeeze upstream suppliers, causing a vicious cycle in the entire FMCG distribution industry chain. Ultimately, all three are trapped in downturn.
Affected by the rapid development of the Internet, the demonstration effect of Alibaba and JD.com, plus capital drivers, FMCG online distribution channels have developed rapidly in recent years.
Overall analysis of current online channels includes the following models:
- F2C model: That is, the manufacturer's products directly to consumers. Representative enterprises include e-commerce companies like Handu Yishe and Three Squirrels. Currently, some enterprises, including large brand companies, are also actively expanding online channels and developing online malls, such as Tsingtao Beer, Hengan, and Liby building their own online malls and WeChat malls. Although still in the exploratory stage, the promotion efforts show traditional enterprises actively transforming.
Combining recent data analysis, offline brand enterprises developing e-commerce rely on their years of category accumulation and have obvious advantages. Pure e-commerce enterprises are affected by consumers' low-price image of online shopping, and their growth is slowing.
During the 2016 Double 11 clothing performance, Handu Yishe Group increased 28.6% year-on-year; Yipin Tiancheng Group increased 22.3%, while Semir Group increased 64% year-on-year, and Peacebird Group increased 60.57% compared to last year.
At the same time, in a more competitive environment for online enterprises, e-commerce companies also face enormous pressure from rapidly rising operating costs. It is understood that currently, top-ranked e-commerce brands spend hundreds of thousands of yuan daily on store maintenance, with huge costs.
- F2B2R2C model: Manufacturer products to distributors, then to terminals, then to consumers. Currently, some e-commerce wholesale enterprises are actively trying this model, intending to open up the entire FMCG channel chain through online transactions. From the current operation mode, it distinguishes between platform model and self-operated model.
Understanding most enterprises currently operating this model basically digitize offline processes. That is, they intend to move the original business connections among manufacturers, distributors, and terminals online. Including those operating open platforms, they try to bring multiple brands onto the platform to serve large B (terminal enterprises) and small B.
Currently, this field has entered a period of intense competition. Alibaba Retail Link, JD.com, Zhanghe Tianxia, Zhongshang Huimin, Yijiupi, Jiuxian.com, Piduoduo, etc., are all competing in this field.
Analyzing the current starting point of this model, it is to integrate manufacturer product resources and focus on serving terminal KAs and small stores across urban and rural areas. Currently, the serious flaw of this model is that it severely ignores the evaluation of the current distributor situation. This model attempts to make an online large distributor or provide a trading service platform for distributors. However, distributors lacking close ties with manufacturers and lacking actual control over terminals are a very awkward class.
Currently, offline distributors have shown the severity of this flaw, being squeezed on both sides and facing the danger of being abandoned by manufacturers or terminals at any time. Online distributors face the same problem. Based on this analysis, such online models have no development value and no market existence value.
F2B2R model: Mainly opens up the model from manufacturer to distributor to terminal.
R2C model or O2O model: Mainly opens up the model from terminal to consumer. Main representatives include Taobao Convenience Stores, Meituan Home Delivery, JD Daojia, etc.
Analyzing these two models, the biggest problem is the lack of effective connection with enterprises and small stores entering the platform, failing to form a close cooperative relationship. That is, in operation, there is a lack of effective means to stick these enterprises or small stores. This keeps them in an unstable operation. For example, the recent exposure of Meituan's merchant loss due to additional fees shows the instability of this relationship.
- C2F model: Consumer to manufacturer model, or consumer customization model. Representative enterprise: Red Collar Clothing.
Analyzing this model, it indeed adapts to consumers' personalized consumption demands. With its high efficiency, precise service, and zero inventory operation, it reflects very high commercial value. It is believed that this model will have huge development space in categories such as clothing, electronics, and electrical appliances.
Overall analysis of online channels reveals the following problems:
The technology dividend period has passed, and operating costs have increased: The technology dividend period for pure e-commerce enterprises has passed, and maintenance and operating costs have significantly increased. Lack of brand accumulation faces further market tests.
Not controlling terminals: The e-commerce wholesale model or distributor model simply digitizes the offline model. Not controlling terminals is its serious weakness, and the development of this model is severely limited.
Exaggerating the value of technology and promotion, ignoring research on products and retail technology: E-commerce enterprises, influenced by their genes, exaggerate the role of technology and promotion, seriously ignoring the study of retail technology and the core of operation—products, resulting in serious operational defects.
II. Analysis of Six Key Elements in Current FMCG Distribution Channels:
Products: Whether online or offline retail enterprises, products must be the core element in operation. Grasping the value of products to consumers and the attributes of products to consumers is an important foundation for retail operations; shaping product brands and building retail enterprise brands will inevitably be important means of retail competition.
Whether online or offline channels, studying products is the foundation for business operations. It is necessary to conduct product analysis, research, and trend grasping based on accurate understanding of changes in consumer demand. This is the fundamental way to do business well.
Manufacturers: Manufacturers play a very important role in the development and prosperity of the FMCG market. Currently, China has numerous FMCG production enterprises. In terms of scale, there are enterprises with annual sales of tens of billions or hundreds of billions, as well as many small and medium-sized enterprises.
From an objective analysis, it is difficult to understand that an enterprise with annual sales of tens of billions or hundreds of billions entrusts the most influential sales problem in its business operation to others (distributors), even mom-and-pop shops. Even being constrained by terminals everywhere is a serious defect and deficiency for a large-scale enterprise.
To achieve healthy development, large-scale enterprises must completely control the core links and key areas of their operations. Being constrained by others everywhere will seriously affect the healthy development of the enterprise. Large-scale production enterprises must pay more attention to investment in market channels while investing in R&D and production. They should be able to establish market channels, circulation systems, and terminal systems that they fully control, ensuring that new product development and business decisions are executed efficiently.
Under current capital environment and technical conditions, it is entirely feasible for enterprises to establish their own channel systems. The key is to dare to innovate and break the existing system under the current circulation channel system. Or establish a new circulation channel system based on online platforms, or establish more capital connections with terminal enterprises to seek more efficient and stable distribution channels.
Small-scale production enterprises should also actively seek breakthroughs in channel construction under new environments and new technologies. Continuing to rely on the distributor model, making their sales controlled by others, will inevitably seriously affect enterprise development.
Distributors: The current distributor class is very awkward. Neither manufacturers nor terminals have the final say on resources, but they still bear very important product sales responsibilities. The manufacturer's sales pressure is transferred to distributors, and the performance pressure of terminal enterprises is also transferred to distributors.
Distributors must seek transformation and development. The best choice is to shift toward terminals, using their product advantages to develop retail terminals. They should also grasp the development trend of e-commerce wholesale in a timely manner.
From the development direction, the vertical construction of channels for large brands and the online sales model for small brands will be the basic development trends. Therefore, distributors should grasp these changes in advance, combine their channel and team advantages, and can shift to a service-oriented transformation with closer cooperation with manufacturers and online platforms.
E-commerce: The integration of offline and online will inevitably be the choice for retail development. From the current development trend, offline enterprises, with their product advantages, brand advantages, terminal advantages, and enterprise management advantages, will have more obvious advantages in integrating online.
As online operation models become more tool-based, transparent, and mature, more production enterprises, distributor enterprises, and terminal enterprises will rapidly expand online business and achieve better development.
E-commerce wholesale or online distributor models will also develop better due to higher efficiency and lower costs. But in an increasingly competitive environment, wholesale e-commerce will become more vertical, either vertical according to the service target terminals or vertical according to the product category.
The market will be more segmented, and goals will be clearer. But the core issue is that they must control certain resources, either product resources or terminal resources. Platform enterprises that do not control either resource will have no survival space.
Terminals: Terminal retail enterprises, considering both market needs and their own transformation needs, must currently change the channels for product organization. They should actively adapt to product organization from more channels; actively break the previous cooperation model with manufacturers and distributors, and quickly cancel the product marketing model based on back-end fees; through changing product organization channels, make their store products richer, more distinctive, and more personalized, making enterprise operations more flexible.
Consumers: Changes in consumers are the most core factor determining the transformation of FMCG distribution channels. Everything changes due to consumer changes. Currently, consumer needs, concepts, and methods have fundamentally changed. Consumers have moved from meeting basic needs to pursuing potential needs, to strongly pursuing health, personality, fashion, and sports needs, to more pursuing consumption experience, with rapid changes and improvements.
In this significantly changing environment, FMCG enterprises must adapt to this change, meet this change, and respond to this change. They must respond more quickly to consumption changes, must highlight health, personality, fashion, and sports consumption demands, must meet consumers' experience needs with more detailed services, and must pay more attention to emotional communication between products, brands, and consumers.
Accordingly, FMCG distribution channels that only provide sales functions are clearly unable to adapt to this consumption change demand. New channels that can respond more quickly to consumption changes, have more interaction with consumers, and are faster and more efficient must be established.
At the same time, it is believed that further optimization of FMCG distribution channels will bring consumers richer products and more affordable prices.
III. Problems Existing in China's FMCG Distribution Channels:
Value distortion: Due to market competition, channel competition, and terminal competition, there is serious value distortion in the FMCG market. More channel fees, advertising fees, display fees, terminal fees, etc., are included in product prices, seriously harming consumer interests. According to Marx's Capital, current prices cannot truly reflect product value.
The manufacturer's price system includes a large amount of unreasonable channel fees, advertising expenses, etc. Distributors include unreasonable logistics costs, capital costs, labor costs, and terminal fees in price markups. Of course, all these costs are ultimately passed on to consumers, but in turn, the biggest victims are inevitably manufacturers, distributors, and terminals, harming the healthy development of the entire FMCG market.
Consumers are rational, and the market will eventually return to normal price order and business order. Currently, costs other than production costs account for 40-50% of the price composition for manufacturers, distributors' markup rate is about 30-40%, terminals' markup rate is about 20-30%, and the comprehensive channel markup rate is over 100%. Even with such price composition, it has caused the entire industry, from manufacturers, distributors, to terminals, to be generally depressed with significant performance declines. A very important reason is the unreasonable distribution channels.
With the FMCG market reaching trillions or even tens of trillions in scale, such circulation order will inevitably bring many adverse effects on the healthy development of the industry.
Fighting separately: Manufacturers, distributors, and terminals fight separately, each calculating their own accounts, making it difficult to form industry synergy. This is unfavorable for the development of large-scale enterprises and large-scale economies.
Low efficiency: Due to many links and independence, industry operation efficiency is low, response to consumption changes is slow, new product development and launch are slow, and coordination between links is poor. This market model cannot adapt to the requirements of rapid market changes.
High costs: Manufacturers each establish their own distributor channels and fight separately. Distributors each handle their own business, with serious problems of repeated market development and repeated logistics. This makes it difficult for manufacturers, distributors, and even terminals to sustain.
Offline channel costs are high, and online channel costs also face high levels. According to reports, among 6 million Taobao stores, profitable stores do not exceed 5%, and the situation is very serious.
IV. Direction of FMCG Distribution Channel Transformation at the Current Stage
Efficiency, quality, and cost are the main standards for measuring whether a business model is reasonable. Old models are eliminated mainly due to low efficiency, poor quality, and high costs. The consideration for choosing new models is mainly high efficiency, high quality, and low cost.
Change of concepts: Changing concepts is an important foundation for model transformation. Currently, the FMCG industry faces a major test of concept transformation.
From production-led to consumer-led: In the market environment where consumption is entering transformation and upgrading, market product supply is extremely abundant, and production capacity is surplus, FMCG production, circulation, and terminal enterprises must completely change the traditional concept of production-led and truly establish a consumer-led business concept.
Analysis: In the current consumption upgrade, consumer confidence index has remained in the 105-106 confidence range. Including the real estate market, tourism, movies, culture, sports, and other markets continuing to grow rapidly, consumers' spending power and potential demand continue to grow.
But in the current market, grasping consumer demand must be from the consumer's perspective, accurately grasping their real needs, especially being good at analyzing and mining their potential needs. Enterprises must truly establish a consumer-led business philosophy, analyze changes in consumer demand, study changes in consumption patterns, adapt to consumption changes, and meet consumption changes. Continuing to use production-led concepts and scale production methods is outdated and will ultimately be eliminated by consumers.
Adapting to personalized consumption changes: Personalized consumption is an important consumption change trend currently and for a period to come. As Tsingtao Beer Chairman Sun Mingbo pointed out: Enterprises cannot respond to all consumers with one product.
Enterprises must adapt to this major consumption change and must make changes in production, circulation, promotion, category management, marketing models, and marketing concepts in a timely manner to adapt to this change.
Repositioning target customers: In the current market environment, FMCG enterprises, whether production enterprises, distributors, or terminal retailers, will face the choice of repositioning. The previous pattern of vague positioning and market dominance no longer exists. The serious decline of market brands such as P&G and Wahaha fully proves this point.
Products need repositioning, brands need repositioning, channels need repositioning, and promotions need repositioning. In an environment with abundant product markets and fierce competition, enterprises must precisely reposition target customers to win the market.
Transformation of service functions: Currently, consumers have risen from focusing on taste and quality to focusing more on experience. In this period, consumers pay attention to scenes, culture, and process. In the new market competition environment, all links in FMCG circulation must attach great importance to consumption changes, attach importance to the transformation of service functions, pay more attention to customer service, especially the satisfaction of experience services, and pay more attention to services for upstream and downstream vertical links. According to consumer demand, continuously extend more service functions in each link, promote product sales, and increase service value marketing.
Joint and integrated development: In today's market environment, planning one's own business operations only from the perspective of one's own enterprise is difficult to achieve ideal results. It is necessary to stand from a global perspective and adopt joint and integrated methods to seek greater development of the industry and greater development of enterprises. Either horizontal joint development among enterprises or vertical integrated development of enterprises. It is necessary to drive the healthy development of enterprises with the healthy development of the entire industry.
Plan the direction of FMCG channel transformation from a more comprehensive perspective, not with the idea of fighting separately.
According to the current market environment and development requirements, combined with the development reality of offline and online channels, enterprises should re-plan the transformation of FMCG channels from a higher, more comprehensive, and more systematic perspective. The following suggestions for transformation direction are proposed:
Full industry chain model: Considering the needs of enterprise scale development and analyzing the characteristics of some mass-consumption FMCG categories, for enterprises mainly based on scale operation, such as beer enterprises and beverage enterprises, it is necessary to adjust and establish a full industry chain model.
The so-called full industry chain model means that enterprises should establish full industry chain channel integration based on production, sales, circulation links, logistics, terminals, and other links.
The purpose of establishing a full industry chain is for enterprises to completely control sales, the most critical factor affecting development, maximize circulation efficiency, improve channel quality, and reduce product channel costs, circulation costs, terminal costs, and advertising costs.
This type of enterprise has large production capacity, and its production has high dependence on distribution channels. In a sense, the enterprise's production capacity completely depends on the contribution of market distribution channels. Under such circumstances, if the enterprise does not control distribution channels and terminals, it is like losing an arm, being disabled in operation.
Therefore, this type of enterprise must strengthen control over the entire distribution channel and terminal market to enhance the initiative of production operation. The previous distributor model and customer relationships with terminal retail enterprises have resulted in production enterprises not fully forming control over sales. Enterprises must break this limitation and strengthen control over the circulation system.
In previous years, some production enterprises tried this development path, and most failed. This failure should be a problem of operation, not the path. Production enterprises developing channels and establishing terminal networks must change their thinking and carry it out in a more professional way.
Currently, the development paths of Lai Yifen and Liangpin Shop are worth learning from. With thousands of stores completely under their control, new products, marketing strategies, and market promotions are completely controlled. They completely eliminated intermediate links. This not only enabled healthy and rapid development but also greatly improved profit performance.
The path to establishing a full industry chain model can adopt self-built channels, that is, enterprises adopt self-operated or franchise models to establish their own distribution channels and terminal market networks; can integrate existing large-scale circulation enterprises and terminal enterprises; can participate in shares or acquire existing enterprises.
For example, Eternal Asia's acquisition and integration of offline distributor teams. In fact, this work is more suitable for brand manufacturers, or for manufacturers, such integration has greater value and significance. At the same time, production enterprises must also be alert to this type of market integration. If similar to Eternal Asia's integration of existing distributor distribution channels and many enterprises' integration actions of small stores form scale, it will make manufacturers more passive in the market.
Platform model: For small and medium-sized production enterprises, a platform model similar to Alibaba Retail Link is very much needed to achieve product sales. Such enterprises, affected by small scale, find it difficult to invest more in channel construction but have urgent desires to increase sales. With the help of such wholesale platforms, they can achieve larger sales markets.
But such platforms must have the following value:
Stable customer resources: The platform can provide stable and considerable customer resources for production enterprises on the platform. The value of such a platform to production enterprises lies in providing a sales network. If there are no such stable customer resources, the platform has no value.
This stability is by no means simply signing a contract with a small store. It must form a dependence of small stores on the platform, and the platform must provide fundamental support to small stores, help these small stores effectively improve sales capabilities, and the platform can replace part of their core management functions, so that small stores' operating capabilities are fundamentally improved, efficiency is higher, work is simpler, and they can trust and obey the platform's management.
If stable customer resources cannot be formed, it will be difficult to bring stable sales to production enterprises, and the small store resources gathered by the platform will wander among multiple platforms, ultimately making it difficult to form an ideal market network result.
Rapid logistics system: Possess efficient, low-cost logistics services. Logistics efficiency and logistics cost are one of the important factors reflecting platform value. The platform must build an efficient logistics system with higher efficiency and lower costs to attract customers on both ends.
Financing platform function: Able to provide appropriate financing for enterprises on the platform to help them solve capital needs. For both production enterprises and small store enterprises, capital has always been a major factor restricting development. The platform must build financing functions to provide timely and efficient financing services for enterprises on both ends, supporting and promoting enterprise development.
Omnichannel model: In the new era of rapid development of Internet applications, mobile Internet, continuous birth of new Internet business models, rapid development of online retail, and rapid development of online wholesale, omnichannel FMCG distribution is an inevitable choice for production enterprises, circulation enterprises, and terminal enterprises.
It is necessary to deeply understand this new trend of industry development and timely change business thinking. Especially traditional enterprises should eliminate both resistance to online models and the mystery of online models. More importantly, they should understand that omnichannel is the choice of the market, the choice of customers, and the choice of consumers.
Currently, while transforming offline channels, enterprises must also develop online channels. Of course, when offline channels occupy the main force, developing online channels easily conflicts with offline channels in terms of price system and customer interests.
The more such moments, the more sober the enterprise decision-makers must remain, combining their own enterprise reality, comprehensively analyzing their own advantages and problems, and taking steady steps for transformation combining offline and online.
For example, Tianjin Lingzhi Clothing Enterprise (including four brands: ONLY, Jack & Jones, Vero Moda, Selected) saw the opportunity for offline-online integrated development, made up its mind to cancel the previous distributor model, took back all company self-operation, implemented an omnichannel development model of offline and online, and achieved great success with integrated offline and online development.
In the process of developing omnichannel, enterprises should combine their actual situation and can choose to build their own online platform, jointly build, or use platform enterprises' platforms for development. Regardless of the model, the key is to meet the actual needs of the enterprise and closely combine with the enterprise's reality.
Distributor model: The distributor model will still exist in some regions, some manufacturers, and some categories. But its problems of low efficiency and high costs are increasingly prominent. Existing distributor businesses should transform as soon as possible, turning to small brands and brands with large market space.
Distributors should gradually reduce excessive dependence on manufacturers, gradually form their own market advantages, and gradually strengthen their market advantages, such as distributors' market network advantages, service advantages, and team advantages. If they still rely excessively on manufacturers, their operations will inevitably remain passive.
Regarding whether to participate in relevant integration and alliance of distributor channels, scientific analysis should be conducted: To judge the value as a channel, whether the channel grasps core key resources. As a commodity circulation channel, the key core resources are only two points: products and terminal market networks.
Either master product resources or master market network resources. Market integration behaviors that do not master either of the two major resources are absolutely without prospects and value. For example, integrations like distributor alliances cannot provide key resources, such integration is meaningless. Small sampans tied together cannot become an aircraft carrier.
At the same time, distributors should transform as soon as possible, from product sales type to service promotion type. Or cooperate with brand enterprises and transform into market promotion for brand enterprises, or cooperate with e-commerce platform enterprises and become market promotion for platform enterprises. With further market development and further optimization of business models, services will become an important business means for manufacturers, distributors, and terminal retail enterprises.
C2M model: This model will inevitably, with its advanced nature, better reflect and meet consumers' personalized needs, give play to the enterprise operation advantage of zero inventory, and thus show higher efficiency, lower costs, more precise consumer services, and achieve faster development, with greater promotion in more market fields and more product ranges.
The transformation of FMCG distribution channels is a long-term historical task. Transformation is inevitable; not transforming will cause serious market problems. Enterprises should seriously face the current market reality, accurately grasp the trend of market transformation, actively respond to transformation, participate in transformation, organize transformation, and promote further healthy development of enterprises.
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