By Ren Xiaodong, Vice President of New High Bridge
I. Is There Still Opportunity in B2B?
The term FMCG B2B seems to have hit a cold front in the past six months.
Many B2B platforms around us are struggling to survive, and I estimate that by the end of the year, another batch will die.
This is a good thing, in line with Darwin's theory of evolution. I once heard a senior industry figure quote marketing expert Jin Huanmin's golden words: "What should die, dies" (paraphrased)! I deeply agree.
Coincidentally, the FMCG B2B Conference is about to be held in Chongqing, so I'll take this opportunity to talk about FMCG B2B.
In the past six months, with many peers announcing financing rounds of 300 million, 700 million, and 1.1 billion yuan, it seemed like B2B was in its mid-game. Then, in the last two months, with JD.com's New Route pushing forward, Alibaba's Retail Link adjusting, and some B2B matchmaking platforms and SaaS software companies exiting, it feels like B2B is in its endgame.
People can't help but wonder: Does the FMCG B2B track still exist? Has FMCG B2B fully matured?
My answer is: Not by a long shot!
My judgment is that FMCG is still in its childhood!
I basically agree with the views in Li Zhujie's article from Buhuo Ventures. Interested folks can check out his piece "B2B Entrepreneurship is Still in Its Infancy, Many Institutions Continue to Bet and Bulk Buy." Some data in it is worth referencing, such as listed B2B companies in the US accounting for up to 30% of some industries, while domestic B2B in China currently holds less than 1% share. If B2C can overturn a bunch of companies in two or three years and eventually have one dominant player, the FMCG B2B track, due to the complexity of small B terminal scenarios and the omnichannel control of upstream giant manufacturers, will surely allow two or three national platforms and dozens of local platforms to coexist.
Let me give a few examples:
• Would companies like Yili, Red Bull, Wrigley, and Master Kong allow their lifelines to be in one platform/channel? Certainly not, as it's their lifeline.
• Would national platforms' products suit the small B end in a specific region? The long tail of different FMCG categories exists, and each small B end has limited SKUs. A platform's data doesn't mean that SKU is a bestseller in that channel. Looking at well-performing supply chain companies domestically and internationally, this contradiction must be resolved by platforms that are most familiar with the channel scenario. Internet-famous products may not sell well in offline channels nationwide; matching online bestsellers to offline stores via so-called big data might be a pitfall.
• Is the current playbook final? Everyone is still focused on competing in supply chain efficiency, not yet on collaboratively handling industry value chain efficiency. Manufacturers have started participating, but many paths and methods from deep distribution to systematic distribution still need iteration and upgrades. Otherwise, how would a manufacturer dare to risk a chaotic situation with sales in the tens of billions?
• Have small B end users changed? At least by 2017, I haven't seen many post-85s or post-90s becoming supermarket owners. This change will take at least 5 to 10 years. You can't rush it; you just have to wait. For example, Alibaba's Weijun Supermarket in Hangzhou: if the owner's son hadn't graduated, he wouldn't have wanted to change.
• Are distributors passively changing? No! According to Zhao Bo's New Distribution data, many local distributors are uniting and developing, also building B2B e-commerce platforms. Those doing well have platforms generating 100 million, 300 million, and 600 million yuan in revenue. This is also a force resisting national platforms.
So, my judgment is that enduring is the basic strategy for regional platforms at this stage, and this window of opportunity still exists. Everyone should repeatedly refine their models, stickiness, replicability, and scalability, and eventually become a regional power.
Consider not just how to profit, but how to create value for upstream and downstream. Go deep into the front lines, provide solutions, rather than sitting around talking and being full of fantasy. Time will give the victor's fruits to those who practice! I think this also aligns with the principles of lean entrepreneurship.
Enduring is a strategic judgment, and it's also a "Gong Shou Dao" for peers who fantasize about burning money to gain user numbers and traffic. Undeniably, convenience stores are a gushing spring when online dividends turn into a black hole in the mobile internet era, a huge traffic entry. But it depends on what you use that traffic for. After all, convenience stores have scenarios and circles. Think carefully before burning money. If you haven't thought it through and just want to burn cash, China is vast—try burning for 2-3 years and see if you're still around. I don't know, but the key is there's no user loyalty. I've seen five companies disappear with this logic.
II. What is B2B?
Benchmarking the development space and stage of the US B2B industry, with foreign markets reaching 30% and domestic less than 1%, as a 15-year veteran in the FMCG industry, my conclusion is: when we discuss FMCG B2B, we must return to the essence and think about what this really is.
My conclusion: This is a contest between new and traditional channel models, not a contest among B2B peers.
- It's a contest between new and traditional channel models
I believe FMCG B2B is restructuring the circulation market, redefining the five supply chain roles: D (design), F (production and communication), B (distribution platform), F (retailer), and C (consumer), and redefining division of labor, functions, processes, and mechanisms. So, this is a contest between old and new channel models. In this contest, whoever has efficient solutions for manufacturers' needs, distributors' needs, terminals' needs, and consumers' needs will ultimately win! It's not about handling them in isolation!
- It's not a contest among B2B peers!
We should thank peers for educating the market! Thank JD.com and Alibaba for entering! Of course, we should also thank ourselves, like New High Bridge. We've initially got on track with the B2B e-commerce platform + franchised convenience store model. We've been persisting and striving for the past three years, solidifying our foundation to ensure rapid replication in the future. Of course, we should also thank platforms like New Distribution for facilitating exchanges among practitioners—great merit.
So, based on the data and development stages we've observed, everyone is still in the Spring and Autumn period. From 2014 to 2017, it's been a FMCG B2B Spring and Autumn era with good news all around. 2017 is about to pass, and many will miss it.
2018 will be the first year of the Warring States period for FMCG B2B, and we are all born at the right time. Professor Liu Chunxiong, a flag bearer of Chinese-style marketing and a renowned expert in B-end e-commerce and new marketing, once joked privately that nationally, B2B looks to Hunan, and in Hunan, B2B looks to New High Bridge. Why? Not because New High Bridge is doing well, but because Changsha has 20-30 B2B platforms competing (New Distribution data)—the competition is too fierce! Looking at another city's convenience store growth ranking, Changsha ranks fourth nationally. I think that's the result of efforts by New High Bridge and peers together.
So, again, thanks to peers for educating the market! Thumbs up to all peers in the Hunan market. Old iron, 666!
- There will be no distinction between matchmaking and direct operation; everyone is copying
Don't look down on each other, don't delay each other. Three years have proven it—stop the nonsense. If traffic favors matchmaking pioneers, add direct operation. If traffic favors direct operation pioneers, open up matchmaking. The model doesn't matter; customer experience matters most, and maximizing customer value matters most.
When New High Bridge proposed the pioneering model of B2B e-commerce platform + urban convenience store franchising in 2014, this year JD.com opened over 1,000 convenience stores, and Alibaba started Tmall Xiaodian. Of course, these will spur and motivate us to run faster on the basis of 10,000+ stores. We don't have a super dad; we only have super action and wild growth.
III. Opportunities for Regional Platforms
- The water is vast enough
Why does China have opportunities? Because it's big enough! Wide enough! Deep enough!
Any province has 60 million to 100 million people. Build a regional platform, cover 3-4 provinces, and you can reach 200-300 million people. There are at least 10 provinces with over 60 million people!
Take New High Bridge as an example: currently, the platform has 50,000+ registered users, and its "Happy Hui" and "New High Bridge" franchised stores exceed 10,000, covering only 12 cities, less than one province. Imagine if we covered 5 provinces, with 500,000 registered users and 100,000 franchised stores, we should be able to live well in the regional market.
Build high walls, stock up on grain, and delay claiming kingship. This is the basic operational strategy for regional platforms at present.
- National policy support
Recently, the State Council issued the "Guiding Opinions on Actively Promoting Supply Chain Innovation and Application." This is the first guiding document issued by the State Council on supply chain innovation and development, which will play an important role in improving China's supply chain development level. I believe this document will be a boon for all FMCG B2B platforms.
Three quotes as follows:
In recent years, with the refinement of social division of labor and the advancement of information technology, China's supply chain development has entered a new stage of deep integration with the Internet and the Internet of Things, becoming a new organizational form of industry and economy. "This guiding opinion is of milestone significance for China's supply chain development," said Zheng Shuwei, deputy director of the Market System Construction Department of the Ministry of Commerce.
It is understood that the opinion not only clarifies the guiding ideology of supply chain innovation and application but also sets development goals: by 2020, form a batch of new technologies and models for supply chain development suitable for China's national conditions, basically form a smart supply chain system covering key industries, cultivate about 100 leading global supply chain enterprises, and make China an important center for global supply chain innovation and application.
"An efficient supply chain can bring more cost reductions and convenience to the people," said Zhang Wei, deputy director of the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce. From a national perspective, a country's supply chain level affects its global competitiveness.
- Wholesale market dividend
There are large wholesale markets everywhere. Despite the impact of e-commerce and other channels, they are still full of vitality.
Large group customers, supermarket users not accustomed to using phones, and remote county and township users—these three types of users are the traffic of wholesale markets.
Example: Why is New High Bridge called New High Bridge? Because we have the nationally third-ranked Old High Bridge locally, with an annual throughput of several billion yuan. But what are the pain points of old wholesale markets? Too many fakes, difficult product selection, difficult transportation, time-consuming, and too tiring. So, New High Bridge was born.
I believe this statement also holds for regions with wholesale markets across the country.
- Convenience store dividend
In Japan, there is one convenience store per 2,100 people.
In Hong Kong, Taiwan, and the US, there is one convenience store per 2,300 people.
In Beijing, Shanghai, Guangzhou, and Shenzhen, how many people per convenience store?
In various regions, can we make a difference?
Example:
For instance, New High Bridge in Changsha has 6,000+ "Happy Hui" convenience stores out of 12,000 provided by Amap. Only now can we joke that the flames started because of "Happy Hui Speed."
You can too! This is the opportunity left to us by the times!
In summary, the region is vast enough, the state has policy support, and locally you can do old city renovation and new city construction. This is the regional platform opportunity for FMCG B2B. If you grow yourself fiercely at this opportunity point, the future will have room for imagination.
- A joke: The meme of Hunanese in the internet circle
New High Bridge CEO Old Tang once joked internally that half the internet circle is Hunanese (Tang Yan of Momo, Yao Jinbo of 58, Zhang Xiaolong of WeChat, Xiong Xiaoge of IDG, etc.), so the next round of B2B should be New High Bridge's turn. Of course, this is actually self-mockery. Essentially, it's about the psychological preparation for doing FMCG B2B: endure hardship, be tough, and be patient.
The restructuring of the circulation industry is not achieved overnight, not by relying solely on technology, not by having a rich dad, and not by random national expansion. The hardship of warehouse logistics, the toughness and patience of building product strength, the pitfalls and time of conquering territories, and the coordination of manufacturer and distributor cognition all require timing.
Use the above paragraphs to conclude and argue the importance of timing. Both you and I lack it. Dreams must be had; what if they come true?
The 2017 (3rd) FMCG + Internet Conference will be held in Chongqing in November 2017. The conference will closely focus on the theme "New Forces, New Ecology," inviting 1,000+ distributors, 500+ brand owners, founders of 200+ B2B platforms, and 100+ investment and financing institutions to jointly explore a new chapter of cross-border integration!
Registration is hot, with only 20+ tickets left... Long press the QR code below or click "Read Original" to register.
Click the links below to review the highlights of the 1st and 2nd FMCG + Internet Conferences:
2016 "FMCG + Internet" Summit Forum
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