Click to read the original article for details
Having gone through the "Groupon Wars" and being CEO of a listed company, what has this 94-born entrepreneur accomplished?
After starting two businesses, why did he set his sights on front warehouses?
In last-mile delivery, how did he achieve 3-hour delivery and 25 million yuan in monthly revenue within half a year? Last-mile delivery is often a thorny issue that hinders the growth of e-commerce companies, and the traditional FMCG sector is no exception. In the FMCG distribution channel, retail stores are small and scattered, making it impossible for traditional distributors to provide comprehensive coverage and service. As a result, a large number of capillary-like wholesalers have emerged. However, changes in the market policy environment, coupled with rising costs, have further compressed the living space of wholesalers. Under these circumstances, where is the "last-mile delivery" for retail terminals headed? In August 2017, Ren Ci founded Zhitongcang, using front warehouses as an entry point to provide last-mile terminal delivery services for brand owners, B2B platforms, and unmanned retail enterprises. Since its establishment, Zhitongcang has built 13 warehouses in the Beijing market, covering over 10,000 square meters, and secured a tens-of-millions-yuan angel round of financing in December last year. Under the capital winter, what makes Zhitongcang, which enters the FMCG supply chain through front warehouses, different? 1 Started a business in college, experienced the Groupon Wars, became CEO of a listed company at 22 2010 is widely recognized as the first year of group buying. Due to the extremely low barrier to entry, a large number of group buying companies entered this track. According to incomplete statistics, by August 2011, there were as many as 5,058 group buying companies in the market. Three years later, in June 2014, although the number of group buying companies had significantly decreased after the "Thousand Groupon War," it still couldn't stop the enthusiasm of new entrepreneurs, and Ren Ci was one of them. In 2014, while a junior in college, Ren Ci and his classmates saw an opportunity in the campus group buying market and started a business, establishing the "Red Scarf" food delivery platform. At its peak, Red Scarf handled over 100,000 orders per day and raised hundreds of millions of yuan in the capital market. The market is ruthless; after fierce competition, people only remember the survivors. Although it built its own delivery team earlier than Ele.me and Meituan, the student market ultimately had its limitations. In the internet industry, where the Matthew effect is evident, Red Scarf eventually lost to leading players like Ele.me and Meituan. In 2015, Red Scarf pivoted, and Ren Ci chose to exit, earning his first pot of gold from his initial entrepreneurial experience. Although the venture failed, the campus entrepreneurship experience and accumulation in the food delivery market provided more possibilities for Ren Ci's subsequent development. By chance, the young Ren Ci impressed the founder of the listed company Xiang'e Qing with his understanding of the catering industry and was appointed CEO in a time of crisis. At that time, due to changes in the market environment, the high-end catering industry in China suffered a major setback. Especially for Xiang'e Qing, which had been established for over 30 years and was large in scale, the decline in demand led to a massive waste of production capacity. How to digest excess capacity became an urgent issue. "At that time, the standardization of Chinese cuisine was not high, but Xiang'e Qing had strong capabilities in food standardization. We sold our own ingredients and semi-finished products to some small restaurants and community organizations, which directly boosted the group's internal performance by 18%." Later, due to disagreements with the founding team of Xiang'e Qing on the company's development direction and management style, Ren Ci officially left Xiang'e Qing in 2017. 2 Opportunities in the Trillion-Yuan Urban Distribution Market After experiencing ups and downs in both a startup and a listed company, Ren Ci's thinking about his new career direction began to change. "Many industries are greatly affected by external factors such as policies and the economic environment, which makes me more inclined to develop in the real economy, where the impact of economic fluctuations is relatively smaller." Ultimately, Ren Ci chose the urban distribution field. Besides the fact that urban distribution, as infrastructure, is less affected by economic cycles, Ren Ci chose front warehouses as an entry point for the following reasons: 1. The trend of specialized division of labor and information tools Originally, downstream wholesalers were mostly small and scattered. Unlike distributors who bear the functions of advancing funds and market services, most individual and retail investors only played the role of logistics and delivery. Ren Ci believes that technological development brings about specialized division of labor. Many wholesalers are just doing the work of porters, and in the future, the living space of such capillary-like wholesalers will inevitably shrink. An obvious manifestation is the change in wholesale markets. Taking Beijing Xinfadi as an example, as the largest agricultural trade distribution market in North China, it has been undergoing internal top-down adjustments since 2016. Behind this adjustment is, on the one hand, the need to change the original scattered and chaotic business state, and on the other hand, the hope to make the entire circulation process informatized and transparent through such changes. 2. Wholesalers are disappearing in large numbers, and distributors cannot fully provide terminal delivery services The rising costs of warehouses, manpower, and materials have made it impossible for many small and scattered wholesalers to cover operating costs with their profits. Coupled with policy reasons, many second-tier wholesalers can no longer survive. In addition, traditional distributors bear the functions of advancing funds and market services, and in order fulfillment, they can only meet the needs of some KA customers, while traditional grocery stores are mostly served by wholesalers. This leads to a situation where, once second-tier wholesalers have problems, there is a lack of effective connection between distributors and traditional grocery stores, resulting in a large vacuum in market services. 3. Serious duplication of resources Ren Ci believes that whether it's brand owners like Coca-Cola and Master Kong, or B2B platforms like Zhongshang Huimin, Yijiupi, and Meicai, there is duplication in the logistics and delivery to downstream stores, which provides living space for professional third-party warehousing and distribution companies. Ren Ci told New Distribution, "It is impossible to guarantee timeliness through city warehouses or large warehouses, and large trucks cannot guarantee high efficiency in order fulfillment. The reason second-tier wholesalers exist is that they are close enough to stores, so goods can be delivered quickly after users place orders. To achieve such an effect, third-party service companies can only do so through front warehouses." 3 Three-Hour Delivery, 25 Million in Revenue, How Does He Achieve Single-Warehouse Profitability? Currently, Zhitongcang's clients mainly include brand owners, B2B platforms, unmanned retail enterprises, and some community group-buying e-commerce companies. The different types of clients also result in differences in how Zhitongcang serves them, specifically: Serving brand owners: Since its launch half a year ago, Zhitongcang has reached strategic cooperation with Coca-Cola, Pepsi, Master Kong, Uni-President, Nongfu Spring, and others. In addition to providing third-party warehousing and delivery services, Zhitongcang also provides an online trading platform for brand owners. After users place orders and pay on the mini-program, Zhitongcang delivers the orders to stores within three hours. Serving B2B: In the form of cooperation with B2B, Zhitongcang mainly helps B2B with the turnover of "heavy goods," such as rice, flour, and oil in cooperation with Meicai, and beverages and alcohol in cooperation with Zhongshang Huimin. "Beverages and alcohol are generally fast-moving items in stores. For these categories, we help B2B platforms achieve three-hour delivery; as for the remaining snack products, although they have high gross margins, they don't turn over as quickly as beverages. These products are delivered by the platform to our various front warehouses the next day, and then we deliver them," Ren Ci told New Distribution. Through the large-scale construction of front warehouses, Zhitongcang has basically achieved three-hour delivery of orders. In terms of delivery methods, Zhitongcang uses new energy vehicles and tricycles, further reducing its warehousing and distribution costs. According to Ren Ci, Zhitongcang's monthly revenue in August reached about 25 million yuan, achieving single-warehouse profitability. He analyzed that the ability to be profitable is mainly due to the following two points: 1. Single-platform traffic cannot support front warehouse costs, so horizontally expand the types of warehouse clients Even platforms like JD.com have been losing money on logistics. To reduce losses, JD.com had to spin off its logistics into a separate company. This logic still applies in the FMCG B2B field. Many B2B platforms, after trying the front warehouse model, found that although front warehouses improved logistics efficiency and customer experience to a certain extent, the final accounting showed that the efficiency gains brought by front warehouses could not support their costs. The core reason is that single-platform traffic cannot support front warehouse costs. 2. Vertically share warehousing and distribution across multiple types of clients at all times to improve warehouse utilization Different types of clients have different requirements for delivery times. For example, catering clients may require delivery to start at 4 a.m., while general retail stores require evening delivery. This creates a time gap in warehousing and distribution facilities for high-turnover front warehouses. Only when both warehouses and vehicles are in working condition is efficiency highest. To this end, Zhitongcang's solution is as follows:
0:00-4:00, goods from upstream suppliers are put into storage;
4:00-12:00, deliver for catering channels such as Meicai;
8:00-20:00, deliver for grocery channels such as Zhongshang Huimin Even so, Zhitongcang's comprehensive warehouse utilization rate is only 40%-50%, with net profit reaching about 15%. For the future, Ren Ci told New Distribution that he hopes to find partners to enter front warehouses for delivery during the 20:00-24:00 time slot, and does not rule out the possibility of co-building front warehouses with regional distributors in the future. Final Thoughts It is undeniable that after decades of development in the FMCG distribution channel, each link has its value and significance. When a link breaks, new productivity and production methods will immediately emerge in a new form to fill the gap. For Zhitongcang, its entrepreneurial entry point is indeed worth learning from and referencing. Especially for super first-tier cities like Beijing, Shanghai, Guangzhou, and Shenzhen, changes in the macro environment and operating costs will inevitably lead to changes in their living environment. When their living space is squeezed, new trading and circulation methods are inevitable. The question is how many people have seen the changes? On the other hand, the entry barrier for front warehouses is relatively low. As the division of labor between upstream and downstream participants in the supply chain blurs and different functions penetrate each other, the front warehouse model may face more intense market competition. How to form an effective competitive barrier may become a problem that Zhitongcang has to consider in its development. From October 23-24, the 2018 China FMCG Urban Distribution Logistics Conference, hosted by New Distribution, will be held in Changsha. Industry bigwigs have sent their blessings for the conference. Click the video to watch; see below for more details. At the 2018 China FMCG Urban Distribution Logistics Conference, New Distribution will invite industry bigwigs, FMCG warehousing and distribution experts, and distributors who have transformed into unified warehousing and distribution platforms to discuss and answer questions around the theme of "New Distribution, New Urban Distribution," exploring and answering questions about the future development trends of FMCG urban distribution logistics and practical cases of distributor transformation to unified warehousing and distribution. We hope it will bring you different inspiration and thinking! The specific agenda is as follows: List of Participating Companies In no particular order Hunan Zonglan Diandan Network Technology Co., Ltd. Jingbang (Wuhan) International Freight Forwarding Co., Ltd. Mengniu Dairy Qinghai Hanxiang E-commerce Co., Ltd. Unilever Service (Hefei) Co., Ltd. Shanghai Branch Huicong Hunan Xuan'ang Food Co., Ltd. Guangzhou Tongdaoren Information Technology Co., Ltd. Qingdao 888 Trading Co., Ltd. Uni-President Enterprises (China) Investment Co., Ltd. Hunan Province Zhongxiang Gongpei Logistics Co., Ltd. Shenglong Ingredients COSCO Shipping Logistics Warehousing and Distribution Co., Ltd. Guangxi Yongpai Liquor Industry Co., Ltd. Shangqiu Kangrong Trading Co., Ltd. Jinan Dingzhong Economic and Trade Co., Ltd. Liaoning Bimai Agricultural Technology Co., Ltd. Kunming Xiongjia Trading Co., Ltd. Shaanxi Houheng Trading Co., Ltd. Guangzhou Dingwo Enterprise Information Consulting Co., Ltd. Shaodong Jiajiale Trading Firm Boda Trading Industrial Bank Changsha Branch Wuhan Muchen Convenience Store Chain Co., Ltd. Fujian Fuxing Yuncang Logistics Co., Ltd. Guizhou Yilimi E-commerce Co., Ltd. Jiangxi Xiao Laoer E-commerce Co., Ltd. Jinshan Koufu Shanxi Taihang Yuanjing Supply Chain Management Co., Ltd. Shanxi Dezhun Supply Chain Management Co., Ltd. Shaoyang Tongdeli Trading (Xiangbang Logistics) Huanfu Tongda Express Urban Distribution Beijing Xinjingxiang Food Co., Ltd. Wuhan Huizhong Tianhong Liquor Co., Ltd. Changsha Paide Biotechnology Co., Ltd. Chao'an Tuqiang Guizhou Yihe Bopin Supply Chain Management Co., Ltd. Jiangxi Kang'en Industrial Development Co., Ltd. Xiangtan County Yisuhe Town Yuhua Paper Store Luoyang Yuanlang Trading Co., Ltd. Tongchuan Yaozhou District Huayuan Supermarket Co., Ltd. Hunan Yongfu Jiujiu Trading Co., Ltd. Zhejiang Chengchengtong Logistics Co., Ltd. Chongqing Kaiguo Materials Trading Co., Ltd. Beijing Xianmaixianmai Data Technology Co., Ltd. Hanchuan Qixing Trading Co., Ltd. Tongxin Jiuzhiru Trading Co., Ltd. Guizhou Meiguo Guoguo Network Technology Co., Ltd. Hubei Anjie Logistics Co., Ltd. Hubei Kuaixiao Hulian Technology Development Co., Ltd. ...... Representatives of Distributor Transformation (Proposed) In no particular order Jiangsu Huashang City Distribution Network Co., Ltd. Chairman, Rong Jun Hubei Yijiaren Logistics Co., Ltd. Chairman, Wang Bo Sichuan Chengdu Xingrenxing Trading Co., Ltd. General Manager, Jiang Shuming Shandong Yunbang Warehousing and Logistics Co., Ltd. Chairman, Liu Jichen Chongqing Lingyu Consumer Goods Supply Chain Management Co., Ltd. Chairman, Tu Mingyu Guangzhou Zhongshan Wanrong Marketing Co., Ltd. Chairman, Yang Su Sichuan Bajie Supply Chain Management Co., Ltd. Chairman, Yuan Xia Hubei Pengdun Meiyitian Supply Chain Management Co., Ltd. Co-founder, Li Qiangyun Henan Xuchang Jiulegou E-commerce Co., Ltd. Chairman, Zhang Jianyong Hebei Changyi Logistics Co., Ltd. Founder, Ma Haichao Hebei (Chengde) Wulian Yuncang Co., Ltd. General Manager, Meng Yucun Xinjiang Urumqi Su'an Jinchi Logistics Co., Ltd. Chairman, Zhang Xun Jilin Sansheng Lianguo Chairman, Zhang Hailing Hebei Dunjie Supply Chain Management Co., Ltd. Founder, Qiang Huitao Hunan Damei Supply Chain Management Co., Ltd. General Manager, Liao Lei ...... -END-