On October 24, 2018, at the "2018 China FMCG Urban Distribution Logistics Conference" hosted by New Distribution, Mr. Rong Jun, Chairman of Jiangsu Huashang Urban Distribution, delivered a speech titled "Some Thoughts on the Transformation of Distributors." New Distribution has organized the speech content for readers. Today, my topic is "Some Thoughts on the Transformation of Distributors." Besides my personal thoughts, it also includes the difficulties, problems, and successful experiences encountered during Huashang's transformation exploration. I hope that the pitfalls and mines I have encountered, you will not have to go through again. Why did Huashang undergo transformation? I started my business in 1999 and have been a distributor for nearly 20 years. I started urban distribution as early as 2006. Initially, it was very difficult; almost no one accepted it, and it was rejected. At that time, Huashang was a relatively large distributor in Wuxi. When we went to talk to peer distributors about cooperation, they often worried that we would merge with them. It was not until 2012 and 2013 that we were gradually accepted. Now, the turnover of goods distributed by Huashang has grown from over 100 million to several billion. In 2017 and the first half of 2018, sales of products represented by Huashang declined sharply. Huashang began to clearly position itself as a logistics operation service provider integrating warehousing and distribution, providing full-chain information technology services for FMCG distribution. You might wonder why Huashang's profits are so high. I admit that these profits are not entirely from third-party logistics. If we purely acted as a third-party logistics provider, breaking even with thin margins would be good. Many people say that urban distribution providers find it hard to make money. I admit that, because I have been through it. Huashang now combines third-party and fourth-party logistics, also doing operations and expanding business scope. For example, selling services, software, and management. The profits here include not only the money earned from being an urban distribution provider. Urban distribution providers are still in the darkness before dawn. Although there is a glimmer of light, many entrepreneurs have already died in the darkness before dawn. Why transform? It's simple: I have always believed that being a distributor is a way to make money, but not a career. Although I own a company, I want to have my own brand and my own career. Although being a distributor can make money, it is impossible to turn it into a career. Distributors are middlemen. To put it bluntly, they are "parasites." The upstream and downstream are very powerful, and it is difficult to have a say, including in profits, future enterprise development, and team development. A guest speaker said that the probability of a distributor successfully transforming into urban distribution is very low. I believe that. But at the same time, I think that whether it is manufacturers, distributors, retailers, or cross-industry competitors, distributors transforming into FMCG B2B pure distribution platform service providers are the most likely to succeed. If the success rate for distributors is only 1%, then for manufacturers, retailers, and others, it might be only one in a thousand or one in ten thousand. Huashang previously tried convenience stores and OEM for manufacturers, but due to bad luck or lack of capability, we failed and lost a lot of money. Only FMCG urban distribution was relatively successful, because I think there are no big players in this industry, so there are more opportunities. Whether it is convenience stores or manufacturers, they are very powerful, and there are not many opportunities. How did Huashang Urban Distribution transform? Some guests said that third-party software is important for transforming into an urban distribution provider, but I think the team should be the first priority. The team should have a deep understanding of the industry, from understanding to familiarity, and then to control. Second, there should be a complete standardized process system, and the carrier of the standardized process system is software. In terms of software, Huashang spent a lot of money on unnecessary expenses. After trying, we found that we could not find software that fully met the company's requirements, and the development costs became higher and higher. There was no choice but to develop it ourselves and write the code ourselves. Currently, Huashang mainly develops its own software, and it has its own intellectual property and source code. In OMS management, there are four types of orders from cargo owners: first, system interface; second, table import; third, independent remote order entry; fourth, letting retailers and other receiving customers place orders themselves. WMS management can determine the picking method based on the order volume, and the method of sorting and consolidation. Finally, it determines whether to consolidate by route, by vehicle, or by area, and dispatch the corresponding type of vehicle. This is a complete logic. In addition, it must consider regional restrictions, time restrictions, customer appointment times, receiving times, etc. There is relatively complex logic here. This is the organizational structure of Huashang Urban Distribution: Human Resources and Administration Center, Logistics System, Finance System, and IT Center. The operations department is divided into three departments: Operations and Maintenance, Warehousing, and Distribution. The Operations and Maintenance department handles from order start to order end, customer satisfaction services, and information from start to finish. Warehousing handles receiving, storage, picking, and consolidation. Distribution handles timely and accurate delivery. The first step for a distributor's transformation: enterprise positioning, determine what kind of logistics provider to become, third-party or fourth-party. After positioning, confirm what service category it is: is it FMCG? Is it narrow FMCG or broad FMCG? Only after clarifying can you start operations. Then start building the team. In the process of building the team, consider recruitment, whether internal selection or external recruitment. People should be placed first, including personnel training and personnel reserve. The next step is to establish a standardized system, determine the carrier (software), go online, and debug. Next is performance assessment, process optimization, improving management level, and customer service experience. What if there are no customers? As agents, we often say a phrase: Business development must start with cold visits, the simplest action. Take out the list of local distributors and sub-distributors, and visit them one by one. You will definitely get a certain proportion of customers. A newly started logistics provider or urban distribution provider should be satisfied with a market share of 5% or 10%. Don't fantasize about dominating the world and catching all in one net. After cold visits, consider replicating in other places and cooperating with local distributors. This year, Huashang Urban Distribution established a fund for M&A business, acquiring some distributors who may want to try urban distribution but lack money and ideas. There are also logistics providers. Through M&A, we can do more cooperation. Huashang can provide a software platform and work together. Regarding warehouse setup: JD.com has two-level warehouses: city warehouses and regional warehouses. Alibaba has three-level warehouses: central warehouses, city warehouses, and front warehouses. How many levels of warehouses and how many levels of architecture should be determined by the stage of the enterprise, the market competition pattern, and the requirements of the service objects and customers. Adjust accordingly. The only standard is the lowest cost, the highest service standard, customer satisfaction, and a win-win cooperation situation. The number of warehouses should be determined based on actual conditions. If it is split-picking, the possibility of front warehouses is not high. If your products are mainly beverages, the possibility is also not high. Setting up multi-level warehouses: if the city's potential capacity is small, it is unnecessary. If the city is large, it is possible. The last sentence: Finding a partner is like finding a boyfriend or girlfriend; suitability is the most important. Whether it is a distributor or a manufacturer, only if it is suitable can we cooperate and win together. Therefore, finding the right person and doing the right thing is crucial. -END-