---
title: "Insights into FMCG B2B: Logistics as the Foundation, Small Stores as the Core, and Platforms as Both Teachers and Traditional Chinese Medicine Doctors"
description: "This publication recently organized visits for 152 distributors from across the country to three B2B models suitable for distributor transformation: Yantai Yishang, Jinan Beiquan, and Zhengzhou Piduoduo. Through in-depth exchanges, the author concludes that logistics is the infrastructure of the supply chain, small stores are the core nodes connecting suppliers and consumers, and platforms must act as both teachers and traditional Chinese medicine doctors to solve distributors' problems."
author: "赵波"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-05-03"
language: "en"
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# Insights into FMCG B2B: Logistics as the Foundation, Small Stores as the Core, and Platforms as Both Teachers and Traditional Chinese Medicine Doctors

> This publication recently organized visits for 152 distributors from across the country to three B2B models suitable for distributor transformation: Yantai Yishang, Jinan Beiquan, and Zhengzhou Piduoduo. Through in-depth exchanges, the author concludes that logistics is the infrastructure of the supply chain, small stores are the core nodes connecting suppliers and consumers, and platforms must act as both teachers and traditional Chinese medicine doctors to solve distributors' problems.

This publication recently organized visits for 152 distributors from across the country to three B2B models suitable for distributor transformation: Yantai Yishang, Jinan Beiquan, and Zhengzhou Piduoduo. During the visits, the author had in-depth exchanges with many peers and summarized the following viewpoints:

**From Yishang: The Importance of Logistics in the Supply Chain**
First, a brief introduction to Yantai Yishang: Yantai Yishang is a large logistics company in Yantai, providing integrated warehousing and distribution services for the local supply and marketing system. Through unified warehousing and distribution, it helps local distributors reduce logistics costs and improve distribution efficiency.

The significance of Yishang Logistics for the FMCG industry is: **Unified distribution is possible in the FMCG industry.** Moreover, centralized distribution is a critical link in the transformation of the entire supply chain towards the Internet.

Previously, most people believed that in the FMCG B2B model, information flow could be aggregated online, and offline orders could be completely abandoned. However, it was later discovered that this approach simply does not work. Traditional distributors' existing sales volume is reluctant to move online, partly due to its sheer size and partly due to concerns about being undercut.

But Yishang has shown distributors through practical cases that unified warehousing and distribution can reduce logistics costs by 70% for existing distributors, which is a huge temptation. Distributors only need to change their original vehicle-based sales to visit-based order taking (promotion). Once unified warehousing and distribution is solved, the distributor company becomes lighter, and moving orders online naturally follows.

Viewpoint 1:
**1. Logistics is the infrastructure of the supply chain system. Without good infrastructure, even the best platform concept is a castle in the air.**
FMCG B2B is rooted in the entire commodity supply chain, and logistics is the infrastructure. Due to low value, large volume/weight, and small, scattered, and frequent orders, logistics has always been a key focus. Improving overall logistics efficiency is the easiest entry point and one of the core values of FMCG B2B. The logistics system must be either integrated or self-built, but either way, it cannot avoid the issue of concentrating or transferring existing logistics.

**2. Logistics efficiency comes from bus-style distribution, which ensures the timeliness, standardization, and normalization of online point-to-point services.**
The reason Yishang Logistics can reduce logistics costs to below 70% of the original is its bus-style distribution within a 35KM radius in the urban area, with delivery up to twice a day. Yishang's timeliness for small store orders is already higher than that of distributors' self-distribution, and its full logistics cost is significantly lower. Small stores are also more willing to accept centralized delivery.

Bus-style logistics, with fixed points, fixed times, fixed personnel, and fixed routes, has a cost inversely proportional to the volume of goods. Intensive logistics has a huge competitive advantage over traditional logistics.

**3. Distributors engaging in logistics is one of the mainstream directions of future business transformation. If they do not want to be marginalized by the Internet, they must become infrastructure in the supply chain rather than desperately competing.**
What is infrastructure?

**Let me illustrate with a case:**
China Mobile's SMS business has seen a sharp decline in user message volume with the popularity of WeChat. Not only SMS, but even voice calls have decreased dramatically due to the spread of 4G signals. The most awkward situation for China Mobile is that voice and SMS cannot compete with WeChat by being free, because the existing volume is too large, and it would be hard to explain to investors. More critically, even if they were free, they might not compete with WeChat. The final outcome of historical trends is already clear: China Mobile's true value is only to become the infrastructure for Internet communication services like WeChat, providing signals, bandwidth, and quality basic services, becoming an integral part of them. Only then will it not be revolutionized by new Internet communication methods.

**Therefore, distributors with massive offline inventory cannot move it online, and as beneficiaries of the status quo, they cannot self-revolutionize. Instead of participating in B2B platform competition in the Internet era, it is better to transform into infrastructure, become logistics providers, and help B2B grow. Only then will distributors not be eliminated in the Internet era.**

**Another case:**
Previously, I went to Ningyang County in Shandong for research and communicated with 20 local distributors. They had a total of over 80 delivery vehicles. Their original business model was to have these 80+ vehicles go to all villages and towns in Ningyang every day. If intensive distribution were adopted, only 10-13 vehicles would be needed to deliver all the goods of these 20 distributors. The logistics costs saved would be pure profit for the distributors!

**The key is that once logistics takes shape, the future supply chain platform + partner model becomes possible.**

**From Beiquan: The Future Role of Small Stores**
Traditional convenience stores are offline, store-centric, and require users to "come" to shop. The relationship between users and the store is a "transaction." In contrast, Internet+ convenience stores represented by Beiquan look the same as ordinary convenience stores on the surface, with no more than 2000 SKUs in the store. But in reality, Beiquan's true store is online, in the user's mobile phone, and the SKUs can theoretically be infinitely extended. Everything is centered on the user's living consumption needs, providing 360° all-weather, all-round, distance-free services, offering users a high-quality, convenient, affordable, and complete Internet+ omni-channel direct trading platform. The relationship between users and the platform is a "service."

From the above, we can conclude that Beiquan is not B2B, not pure O2O, and not a convenience store. It is a community comprehensive service entity based on convenience stores. It deeply connects the 1,500 households around the small store through the Internet, providing them with value-added services beyond expectations. These services are not simply receiving and sending parcels, paying phone bills, or delivering products to homes. Their core is to revolve around the convenience of consumers' lives in the Internet era, through intensive procurement and diverse, personalized services, creating services that far exceed the delivery and service radius of convenience stores.

Small stores can have unlimited imagination because they are the true nodes connecting suppliers and consumers. Moreover, the full cost of some products at these nodes is much lower than online. Through localized online and offline integrated services, the full cost of consumer purchases is further reduced, which determines that the services provided by Internet+ small stores can quickly disrupt the existing convenience store retail landscape.

Viewpoint 2:
**1. FMCG reaching small stores is not the end, but the starting point.**
**2. The true Internet+ small store is not 7-11 + Internet, but a community comprehensive service entity rooted in the Internet.**
**3. Small stores can extend in 360° directions, connecting all products and services related to consumer needs.**
**4. If B-end platforms do not engage small stores, they will lose supply chain discourse power in the future.**

**From Piduoduo: How Distributors Can Succeed in B2B**
For bulk commodity B2B, once the transaction is completed, the business ends. With a single product structure and single product attributes, breaking information asymmetry online to provide the lowest transaction cost for both supply and demand is valid. FMCG B2B differs from other industries in that products are numerous and scattered, with high brand concentration for main products, but high frequency and low value, making logistics particularly heavy. Moreover, from large B to small B, after the transaction, the shelf-stocking work has just begun. This series of tasks requires "people" to complete, which cannot be replaced online. Labor costs increase linearly with sales growth, and small stores do not gain any essential benefits. Therefore, **for FMCG B2B, simply doing online matching is of little significance.**

In the traditional FMCG industry, mainstream products are usually concentrated in the hands of large local distributors. These large distributors face the problem of excessive existing inventory during transformation. Another reason many FMCG B2B platforms fail to integrate is that they do not effectively bind these vested interests to the platform. The Piduoduo model, on the other hand, relies first on the self-transformation of distributors with huge existing inventory. Distributors unite and build their own platform. Because the platform is their own and the products are their own, they can avoid price wars, avoid poaching, and avoid burning money. They smoothly transfer offline inventory online, jointly implement unified warehousing and distribution, improve efficiency, and reduce costs. This is a difficult problem for third-party platforms to solve. Additionally, Piduoduo also verifies from another level that if distributors do not want to change and move their inventory online themselves, platforms that try to force them up through subsidies, channel stuffing, and price undercutting will definitely fail.

Moreover, Piduoduo's definition of FMCG B2B is a typical business mindset: do whatever makes money, integrate whatever can be integrated successfully. With flexible and varied tactics, and an autonomous and proactive attitude, this means that although the start may not be high-profile, it will have strong vitality.

The difference between Piduoduo and Yishang is that Yishang does not intervene in brand agency or online transactions; distributors pull orders offline themselves and let Yishang handle unified warehousing and distribution. Piduoduo, on the other hand, has distributors first unite, have salespeople "promote orders" at stores, pull small store orders onto the platform, centralize orders for unified warehousing and distribution, reduce costs, improve efficiency, and quickly generate profits through combinations of high- and low-frequency products, high- and low-margin products, and essential and non-essential products.

Viewpoint 3:
**1. This is a business; do not talk about overturning, reforming, or integrating the industry from the start.**
**2. People on B2B platforms must be both teachers, able to teach operations, and traditional Chinese medicine doctors, able to solve various difficult problems for distributors.**
**3. There are many ways to integrate resources; it is not necessary to start with distributors and FMCG. Products that are essential for small stores and have low brand concentration are the ones with real "money prospects."**
**4. For FMCG, B-end e-commerce may contain huge market opportunities in every category. The key is whether you are thin enough to leverage and integrate the industry.**
**5. It is good to connect data across the entire chain, but the premise is to first establish a foothold in one link and truly root deeply. Otherwise, you will end up with being big but not strong, and diverse but not refined.**

This platform will soon organize several experience-sharing salons titled "**How Distributors Should Operate B2B**". We will invite some distributors who have actually operated in the market for a period to share their experiences and discuss how they operate in their local markets. Interested distributors can long-press the QR code below to add the author's WeChat and participate in the sharing and exchange:

**When adding, please reply with the keyword: 操盘**

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