JD's 618 campaign concluded with JD New Channel achieving record highs in GMV, order volume, and active user growth. On June 1, the first day of the JD掌柜宝 promotion, sales surpassed the total for the entire 18-day period from June 1-18 last year; on June 18, sales surged 2300% year-on-year, exceeding last June's total within just 4 hours. Over 30,000 small stores participated offline, and this daily active count indicates New Channel's current capability to cover 1 million small stores.
While announcing these results, New Channel also stated: "JD New Channel business will cover the whole country from July 1." This means New Channel will become China's first B2B platform with nationwide coverage.
Why has it achieved such results in just a year and a half? 《New Distribution》 summarizes several points:
- Nationwide Capability: For FMCG B2B startups, two things matter most: the efficiency of warehousing, logistics, and distribution systems, and the speed of market penetration. The former determines the breadth of market coverage, while the latter determines the cost of fulfillment. Therefore, as core infrastructure, all self-operated B2B platforms have made heavy investments in warehousing and logistics.
However, this is also the biggest headache for all self-operated platforms: they bear enormous financial pressure to build infrastructure while also investing huge resources to educate the market. The long return on investment makes platform expansion exceptionally slow.
New Channel's advantage lies in leveraging JD Logistics' coverage capability, eliminating the need to build a warehousing and logistics system from scratch. Moreover, as JD's top-priority project, internal integration is far less difficult than external construction.
As of March 31, 2017, JD operated 7 major logistics centers and 263 large warehouses nationwide, covering 2,672 districts and counties across the country, with seamless coverage for both small and large items. JD's capability to serve rural townships is unmatched.
Among self-operated platforms, JD New Channel has no rival in warehousing. The largest domestic platform with warehousing scale, Best Store+, has only 43 self-operated warehouses. Apart from E-commerce Interconnect and Zhongshang Huimin, most other platforms have fewer than 20 warehouses.
As JD's long-time rival, Retail Link currently has only 18 forward warehouses covering 8 provinces (Shandong, Henan, Guangdong, Sichuan, Anhui, Zhejiang, Hubei, Jiangsu), which is incomparable to New Channel's coverage of 21 provinces/municipalities.
- Underlying Logistics Network: The profitability of a single B2B warehouse hinges on the ratio of per-vehicle fulfillment cost to profit.
Per-vehicle fulfillment cost is an unavoidable hurdle for all B2B platforms aiming for profitability. If the per-vehicle order fulfillment cost exceeds the order gross margin, platform profitability becomes nearly impossible. To achieve single-warehouse profitability, platforms must build order density—within a limited radius around the warehouse, they need to increase order density and average order value sufficiently to ensure profitable per-vehicle delivery.
However, JD's advantage is that its logistics has always existed, and its C-network logistics has been loss-making, urgently needing B-network traffic as a supplement. The greater the offline logistics traffic, the lower the logistics cost for New Channel. Therefore, B-network traffic is pure incremental volume, and there is less need to worry about per-vehicle fulfillment costs. Although merging B-network and C-network traffic is challenging, it is an internal integration issue. Since New Channel dares to claim nationwide coverage by July 1, it indicates that the integration of B-network and C-network logistics has largely succeeded.
Whether to cover the whole country is merely an internal decision for New Channel, not dependent on network density. But for other self-operated platforms, it is an almost insurmountable barrier, because not everyone has a nationwide logistics network with underlying traffic. This is a moat that competitors cannot imitate.
Of course, it is possible to build such a network, but time is the most precious resource.
- Order Traffic: The second core issue is the ordering habits of small stores. Without full store control, cultivating online ordering habits requires time, meaning market education costs are exceptionally high.
Fortunately, JD has a dedicated ground service team and strong supply chain organization capabilities. Additionally, with brand pull, it is relatively easier to accomplish.
For JD New Channel, habits can be cultivated gradually. The 4-6 tier markets are not easy for anyone to enter.
But how can B2B platforms relying on investment dare to play this game? Entering 2,300 counties at once—how much capital is needed? When will they become profitable? How will capital exit?
Moreover, the earlier they start, the more prominent JD's supply chain advantages become, the more skilled New Channel's operations become, and the stronger the stickiness with small stores, widening the moat against competitors.
So, platforms that don't need capital, have underlying traffic, and don't need to worry about density are the most formidable.
- Temptation for Brand Owners: Many brand owners and distributors believe that the essence of channels has not changed, and that B2B is a tool to improve supply chain efficiency. This is a cognitive misconception; the observation scale is not broadened to the entire chain, and the depth does not penetrate the immediate problems.
In fact, for brand owners, nationwide coverage is fundamentally different from regional coverage. With regional coverage, if products are handed over to a platform for operation, blank markets still need distributors to cover, requiring two different operating systems and two teams.
When brand owners partner with a B2B platform that has nationwide and full-network coverage, they will discover benefits:
Rapid distribution capability, precise information feedback, visible inventory dynamics, and horizontal data comparison. Although distribution costs may not decrease and might even increase, the high added value from high expenditure is worthwhile. It provides brand owners with a basis for decision-making. Fast, accurate, and visible—this gives brand owners, who have lost centralized media, a new handle in marketing.
This gives brand owners enough patience to test new product launches, promotions, and marketing on platforms like New Channel that have full-network and nationwide distribution capabilities.
I think a message posted by Han Yi of Yunniao yesterday is very valuable: "What determines what to produce is no longer the product designer, but the data generated by tens of millions of cash registers."
The value of data is only highlighted when it spans the entire network.
Another data point: P&G's online sales have surpassed Walmart's. Mondelez's online sales have exceeded 10% of total sales. Regardless of how brand owners view B2B—as a channel or a pathway—the key is that once sales reach a critical point, no brand owner can ignore this channel.
In the future, as more B2B platforms gain full-network capabilities, brand owners' product structures, channel structures, distribution models, and information feedback loops will adapt to these changes, making them increasingly willing to cooperate with such platforms.
Now it seems that the first winning factor in B2B is indeed the logistics system.
In plain terms, it's about how to deliver goods from the factory to small stores in the most efficient way.
If brand owners deliver to distributors themselves, then creating a platform is meaningless. But if you can bypass distributors and directly deliver to small stores nationwide, while adding value-added services, you are powerful.
Data has the greatest value only when it spans the entire network; a 2C+2B network is even more valuable. Of course, JD's model also has drawbacks: as market coverage expands, it's like scattering sesame seeds—density and pressure in individual markets are insufficient, making it easy for local players to grab resources. Additionally, many platforms are rapidly grabbing store resources, and New Channel's service to individual stores may not be as timely as local service providers.
The future of B2B may be a war between elephants and ants.
The key is: when will the ants awaken?
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