Preface: "All businesses in China are worth redoing." This phrase has become popular across the country in the past year or two. Against the backdrop of consumption upgrade, from consumer internet to industrial internet, from information internet to value internet, from e-commerce economy to industrial community, a large number of new species have sprung up like mushrooms. Following this logic, as a sub-sector of the FMCG trading and circulation industry, is there an opportunity for the distribution business entrenched in various regions to be redone? Around mid-July, I met with Mr. Yang Qiming, co-founder of Kuailai Zhanggui, to discuss how the company achieved annual sales of 1 billion yuan in just three years, with Shanghai market expected to reach 700 million yuan in 2019. We met at a coffee shop and talked for nearly three hours. Although Kuailai Zhanggui is a FMCG B2B platform, this article aims to discuss how it reconstructs the FMCG distribution business from the perspective of the distribution business. The business is still the same, but Kuailai Zhanggui has applied a different set of operating logic compared to traditional distributors, taking product distribution to the extreme. It is hoped that Kuailai Zhanggui's business philosophy can provide inspiration and food for thought for traditional distributors. Here, we emphasize "business philosophy" rather than "business methods," because in the view of New Distribution, the success of any model is not only due to differences in internal corporate genes but also due to many external factors or dividends. For example, Shanghai is a high-density city, with a large population leading to many stores, and many stores leading to low per-store service costs under economies of scale. Another example is that in recent years, due to urban construction and renovation in Shanghai, 50% of second-tier distributors have disappeared or transformed, bringing market dividends to Kuailai Zhanggui. Additionally, although these are still traditional mom-and-pop stores, the age and cognition of the operators are much higher than in other cities, making them more willing to accept new things. Therefore, New Distribution hopes that more distributors will see Kuailai Zhanggui's business philosophy rather than its methods. Philosophy can be learned and referenced, but methods cannot be copied blindly. Before deconstructing Kuailai Zhanggui, let me list a few sets of data to help understand its current operating status: 1. Sales per capita: Expected annual sales of 1 billion yuan in 2019, with 120 employees, averaging 8.33 million yuan per capita. 2. Warehouse turnover per capita: Warehouse efficiency of 81,000 yuan per square meter, with inventory turnover of 6.5 days. 3. Capital utilization: 100% online payment from stores, with monthly capital turnover rate of 450%. 4. Procurement efficiency: Average SKU management per person of 1,500+, with per capita procurement amount of 235 million yuan in 2018, expected to reach 420 million yuan in 2019. 5. Store coverage: Cumulative transaction stores of 30,000+, with online revenue of 90 million yuan in July 2019. Orders Online, Business Data at a Glance "When an order is generated, I know my cost, profit, and how much to pay third-party contractors." This is the sentence that impressed me most from Mr. Yang Qiming. All downstream customer stores of Kuailai Zhanggui pay online, with delivery after payment, and there are few returns. Yang told New Distribution that Kuailai Zhanggui has a minimum order of 450 yuan, with no service and no promotions. If the store refuses delivery after payment, Kuailai Zhanggui will deduct a 1% handling fee and refund to the original account; if refused a second time, a 4% handling fee is deducted. If refused more than three times, the store is directly blacklisted, the account is frozen, and Kuailai will no longer provide services. Therefore, Kuailai Zhanggui has no unexpected orders; all orders are real. When a store completes an order and pays successfully through the APP, it becomes a production task in the warehouse. Assuming there are 1,200 orders that day, the system automatically matches 60 vehicles and corresponding 60 picking tasks based on geographical location. Warehouse staff pick goods by vehicle, and drivers follow the route navigation from Baidu Maps to visit stores in order, loading goods from front to back, delivering, and completing the day's orders. Once you understand the overall workflow of Kuailai Zhanggui, you can understand why all business data is available after an order is generated. With the business data of an order, the data for the day, week, and month are clear at a glance. When the distribution business is fully online and the transaction process is real-time and controllable, what Kuailai needs to do is to identify key business points based on operating data, such as product pricing, item structure, store count, coverage radius, cost structure, etc., and adjust these key points to achieve positive operations and reach phased market goals. Drivers, Vehicles, and Warehouse Pickers All Outsourced In the past, we often said that a distributor, though small, has all the necessary parts. From front-end business to back-end warehousing and distribution, everything is done in-house. If it's the early stage of entrepreneurship, this is indeed the lowest cost and most efficient way. But once a certain scale is reached, doing everything and managing everything often becomes the least efficient. Yang told New Distribution, "Everyone has limits in management. Bosses should never be blindly confident. We can't manage everything from start to finish. Every company has loopholes, and what we need to do is find the key points and control them well." In Kuailai Zhanggui, everything from vehicles to drivers to warehouse pickers is outsourced. Regarding vehicles, buying a car is just the first step. Subsequent insurance, maintenance, repairs, accidents, and a series of non-standardized management matters follow. For example, when a vehicle needs repair, you can't check whether the driver replaced the tire with a new one or a used one. For such matters that do not directly generate business value, Kuailai Zhanggui gives up entirely. Kuailai Zhanggui introduced a third-party contractor mechanism to manage drivers and vehicles. Delivery fees are paid to contractors at an average of 2 yuan per piece, plus an additional 2‰ for breakage costs. Of course, introducing third-party contractors does not mean completely ignoring management. Yang explained that because all orders are online and vehicle routes are all running in Kuailai Zhanggui's system, they clearly know each driver's delivery efficiency. For example, they help contractors rank drivers; the top 100 are most valuable, and the bottom 10 are suggested to be eliminated by the contractor. In the future, Kuailai Zhanggui will deeply bind with contractors, planning next year's delivery tasks in advance to ensure basic tasks. Contractors will find drivers based on task volume. For drivers without vehicles, contractors and drivers will jointly purchase vehicles at a 50% ratio, with an agreed annual delivery volume, and after completion, the vehicle belongs to the driver. In the view of New Distribution, from a cost perspective, although third-party contractors require a certain premium, if there were no third parties and Kuailai Zhanggui operated directly, it would still need to hire a similar "coordinator-logistics manager," with manager salaries plus intermediate management communication costs, as well as various uncertainties and losses from self-operated vehicles. Overall, the cost of self-owned drivers and vehicles is definitely higher than that of third-party contractors. All Systems Serve Needs In the early days of entrepreneurship, Yang visited some distributors and found that the knowledge structure of the entire trading and circulation industry was too outdated. Taking warehouse inventory as an example, he told New Distribution that distributors' warehouses not only have "inventory losses" but also "inventory gains." Inventory losses are understandable—lost or missing goods. But there are also inventory gains, where goods increase, and sometimes distributors even encourage such behavior! Yang said that such things are never allowed in Kuailai Zhanggui; there is only an error rate, whether it's more or less. Compared to other systems, Kuailai Zhanggui's system is very simple, with only three core parts:
First, the order information system, which handles the collection of front-end business orders; second, the warehouse production system, which "translates" collected business orders into warehouse production tasks and matches corresponding delivery vehicles; third, an ERP system with OA functions, similar to a corporate data "middle platform," for internal operational analysis. In Yang's understanding, the front-end system handles business order acquisition, and the back-end system handles rapid order picking. The middle-platform ERP is the data aggregation for business operations, controlling key business points. There is not a single redundant function, and many functions do not even display an interface; employees only see tasks one by one. On the client side, besides seeing successful order placement, they can also see real-time order status and product flow. What Can Distributors Learn? Currently, Kuailai Zhanggui is the No.1 trading company in Shanghai's traditional TT channel. Although Kuailai Zhanggui still mainly deals in best-selling products, some of the above business philosophies are worth learning from for other distributors. First, order online. Move product distribution online, whether it's store ordering or salesperson ordering. Through going online, divide the smallest operating units, such as from single order to single store, to single product, to single day, week, and month. Combine various operating costs and product purchase prices to clearly understand overall business data. Use data to find key points for business growth, such as per-store output and item structure, quantify these key points into KPI indicators for front-end business or back-end procurement, and set up incentive mechanisms. Second, warehouse and distribution contracting. Frankly speaking, the third-party contracting model like Kuailai Zhanggui is not very applicable to the distributor group. But the method of warehouse and distribution contracting is worth learning from, especially for distributors with a certain stable business volume. In New Distribution's past "New Distribution 100" column, Tangshan Huiwangxing's approach was to sell its own vehicles to drivers at a discount, making drivers independent operators who undertake Huiwangxing's delivery business. According to Chairman Li Guojie of Huiwangxing, after contracting, logistics efficiency increased by nearly 50%, and comprehensive costs decreased by about 30%. Third, core competitiveness. Kuailai Zhanggui takes operational efficiency as its core competitiveness, without communication or promotions. But for most distributors, due to the store density in local regional markets, it is far from reaching the scale of Shanghai. At the same time, under the constraints of upstream brand owners, the core competitiveness of local distributors, in addition to improving operational efficiency, lies in the ability to distribute and promote products. Only with distribution and promotion capabilities can there be more profit space. Focusing on FMCG distributor new distribution/brand new marketing cases If you want to communicate with the author, you can add WeChat by long-pressing. When adding, please indicate your company, position, and name. Tips will be paid 400-2000 yuan once adopted. China FMCG + Internet Professional New Media Committed to FMCG manufacturer transformation and upgrading and channel digital solutions