Click to read the original article for details. "Manager Zheng!" At the 3rd China New Retail Supply Chain Conference, people frequently addressed the man from Shanghai with this title. With curved smiling eyes and an easy manner, he exuded a confident calm. He is the head of Kuailai Zhanggui, which entered the FMCG B2B track in 2015. As the name "Kuailai" (meaning "come quickly") suggests, Zheng Lei believes the core of FMCG B2B lies in efficiency improvement. Zheng Lei, Founder and Chairman of Kuailai Zhanggui
The Essence of Efficiency: Supply Chain Upgrades and Profitability
In 2015, the nascent Kuailai Zhanggui did not choose the lower-tier markets that later entrants often targeted, but resolutely made Shanghai its starting point, joining the FMCG B2B marathon. At that time, Shanghai, as one of the most competitive markets, featured multiple convenience formats coexisting and strong chain brands densely deployed. Despite being a newcomer, Zheng Lei never confined Kuailai Zhanggui to the regional market. In his view, to realize the vision of a national market, Shanghai was the best testing ground. "Shanghai is the best place to build internal strength, and the core of that strength is efficiency. Future competition lies in the empowerment of efficiency," Zheng Lei said. He believes efficiency is the foundation supporting FMCG B2B development: "Expansion without efficiency will eventually turn every place into a pitfall. That's why we've seen some rapidly expanding national B2B platforms collapse. Many enterprises attribute their failure to capital cooling, but if a platform lacks efficiency, why would capital choose you?" According to Zheng Lei, after two years of refinement, by October 2017, Kuailai Zhanggui had begun to lay out its presence in first- to third-tier cities in East China. "Today, the efficiency improvement of the B2B supply chain can be maximally unleashed in first- to third-tier cities, thus creating possibilities for regional B2B platforms and bringing new supply chain value. Fourth- to sixth-tier cities currently need more informatization upgrades." So, what is the root of efficiency? What does efficiency improvement mean? "Efficiency improvement is actually the improvement of supply chain efficiency, and the ultimate result is the enterprise's profitability," Zheng Lei explained, elaborating on the specific manifestations of efficiency improvement in two links: logistics distribution and warehouse management. "When distributing goods through logistics, the higher the density of orders and small shops, the shorter the distance vehicles need to travel, thereby achieving efficiency improvement." Kuailai Zhanggui focuses on two key indicators for goods distribution: the balance of vehicle loading space and tonnage. Through a self-developed intelligent scheduling system, it effectively plans the volume and weight of goods, shop geographic locations, and vehicle matching, thereby reducing costs and improving efficiency. In warehouse layout, Kuailai Zhanggui has established a nearly 20,000-square-meter city center warehouse in Shanghai, covering 600 square kilometers within the outer ring road, serving nearly 30,000 social retail small shops. Efficient in-warehouse sorting capability, through effective coordination between systems and people, achieves an average of 2,000-2,500 items sorted per person per day, far above the industry level.
The Barrier of Efficiency: Combining Asset-Light and Asset-Heavy, and Outputting Value
The entry of many players and the fusion of different genes have given birth to more differentiated models in the industry. Some avoid the heavy and adopt a technology-driven SaaS model for empowerment; some enter with a heavy model, even doing direct-operated small shop business. Differences in models bring more collisions of thinking, and the exploration under contention adds more inspiration and reflection to the development of FMCG B2B. "The positioning of the platform determines the difference in models. There is no right or wrong in models, but the value behind them is clearly different," Zheng Lei said. In his view, in fourth- to sixth-tier cities, there is a lack of information flow control. In first- to third-tier cities, the platform should primarily adopt a self-operated model, must control the flow of goods (control goods), control logistics, and thus effectively control shops: "A self-operated primary model can form sufficient barriers, allowing the platform to establish itself and grow in first- to third-tier cities." If only a self-operated primary model can form sufficient barriers for the platform, then what are the differences between B2B self-operation and B2C self-operation? Zheng Lei interprets the ideal self-operated model for FMCG B2B as "asset-light + heavy management": "Controlling warehouses does not mean building your own warehouses; controlling distribution does not mean buying your own vehicles. The key is to have strong control over warehousing and distribution vehicles, while ensuring efficiency improvement and reducing corresponding cost inputs, making more effective use of funds." Zheng Lei believes that the value of FMCG B2B is not only in the price difference of goods, but gross profit must cover the supply chain costs, enabling sustainable development. Otherwise, the larger the scale, the greater the losses, eventually making the enterprise unsustainable. At the same time, Kuailai Zhanggui has adopted a differentiated approach in payment: online instant payment. Since its inception, Kuailai Zhanggui has adhered to the principle of full online payment for goods, i.e., payment before delivery. Currently, it seems that Kuailai Zhanggui is the only FMCG B2B platform that can achieve this. "100% of our orders are paid online, and this action has changed the industry's common cash-on-delivery rule, improving our entire supply chain efficiency by 30% and reducing marginal costs by 3%. This advantage gives us sufficient capacity to export capital to cope with fierce competition." "Perhaps some small shops only prefer cash on delivery, and such shops are clearly not our customers. Kuailai Zhanggui does not pursue full coverage, but rather covers those small shops willing to accept this common standardization. Higher user stickiness is more meaningful than the pursuit of full coverage scale."
The Development of Efficiency: From Digitalization to Intelligentization to Ecologicalization
Zheng Lei has planned three development stages for Kuailai Zhanggui: 1.0 digitalization, 2.0 intelligentization, and 3.0 ecologicalization. In his plan, the three stages will coexist, related to the degree of urban development layout, with differentiated key layouts. In the 1.0 stage, the platform will strive to achieve online transactions to gradually complete the industry's digitalization layout. Judging from the current development status, most of the markets where Kuailai Zhanggui has laid out are in this stage. In the 2.0 stage, Kuailai Zhanggui will attempt to empower small shops with some intelligent upgrades, which is also the direction Zheng Lei wants to focus on next. In fact, in February 2018, Kuailai Zhanggui partnered with DeepBlue Technology to enter the community unmanned retail market through TakeGo self-service vending cabinets. In the attempt at intelligentization, Kuailai Zhanggui mainly focuses on the application and development of intelligent vending cabinets: "On the one hand, from the perspective of small shops, the digitalization of channels brings more empowerment of small shops to the platform, bringing traffic, revenue, and capital to the platform. But if we can provide small shops with applications beyond retail procurement, we can increase the stickiness of small shops, thereby achieving strong connections like chain stores." This vision also makes the development of Kuailai Zhanggui's 3.0 ecologicalization stage possible. So what is the value of FMCG B2B? Zheng Lei made an analogy: comparing the B2B platform to a subway rail transit network, traditional wholesalers to traditional bus networks, and the supply and marketing network of FMCG products to a city's transportation network. The construction of a subway rail transit network effectively improves travel efficiency, while traditional bus networks serve as a supplement. The entire urban transportation is an integrated market, with no complete substitution or absolute possession. "B2B is street warfare. Heavy troops and heavy weapons do not necessarily have an absolute advantage. The FMCG B2B arena competes on who is more grounded." Source: B2B Industry Information -END-