---
title: "Li Xufu of Bull Capital: Evolution of the Consumer Goods Industry Chain and Transformation of Supply Chain Structure"
description: "At a themed salon held in Shanghai on June 12, Li Xufu, founding partner of Bull Capital, shared insights on the evolution of the consumer goods industry chain and the transformation of supply chain structure, highlighting changes in channels, supply chains, marketing, and brands, and emphasizing the rise of supply chain management platforms and the role of urban distribution."
author: "李绪富"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2018-06-16"
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# Li Xufu of Bull Capital: Evolution of the Consumer Goods Industry Chain and Transformation of Supply Chain Structure

> At a themed salon held in Shanghai on June 12, Li Xufu, founding partner of Bull Capital, shared insights on the evolution of the consumer goods industry chain and the transformation of supply chain structure, highlighting changes in channels, supply chains, marketing, and brands, and emphasizing the rise of supply chain management platforms and the role of urban distribution.

On June 12, at the "New Retail · New Urban Distribution" themed salon and client symposium held by Weijie Urban Distribution in Shanghai, Li Xufu, founding partner of Bull Capital, delivered a keynote speech titled "Evolution of the Consumer Goods Industry Chain and Transformation of Supply Chain Structure." The following is an edited transcript:

**"Over the years in the investment process, I have gained many insights into the optimization of the industry chain and supply chain structure in new retail and consumer goods. I would like to take this opportunity to share them with you...**

The consumer goods industry chain includes several links: **channels, supply chain, marketing, and brands.** Over the past decade, the entire consumer goods industry chain has undergone significant changes. The earliest changes began with channels, marked by the widespread application of e-commerce, with Alibaba and JD.com emerging as leaders in this channel transformation.

**Regarding channel changes:** Before Alibaba and JD.com, channels were also constantly evolving, with Suning earlier and various formats before that. Throughout this transformation, channel efficiency has been increasing, reflected in several aspects: the ability to reach consumers, the ability to perceive consumers, the ability to delight consumers, and the ability to meet consumers' needs anytime, anywhere, more quickly and better.

**Regarding supply chain changes:** JD.com is first a channel, but essentially it is also a supply chain. The evolution of the retail industry is both a process of channel evolution and a process of supply chain transformation.

**Regarding marketing changes:** These have been evident in recent years. In the early days, television, outdoor media, and various advertising methods and carriers informed consumers about many products. With the advent of the internet, the carriers through which brands reach consumers have changed significantly, becoming more fragmented and precise. A typical example of carrier change in recent marketing transformation is the emergence of short videos.

**Regarding brand changes:** Brand owners themselves have undergone significant changes, with increasing interactions between brands and consumers. The ways brands interact with and reach consumers have changed, brands are becoming more niche, and brands are getting closer to consumers.

Here I would like to mention Xiaomi. Xiaomi is a channel, a brand, a supply chain, a media, and a marketing entity. It has now become an ecosystem. In the future, it will include not only things within its own ecosystem but also things outside it. Xiaomi will settle into becoming infrastructure for the consumer goods industry chain.

Speaking of changes, it is not just changes in one link, but a transformation of the entire consumer goods industry chain, and this transformation is still evolving.

**In the process of industry chain transformation, the changes in supply chain structure that have emerged in recent years are the most striking.** When we look at Alibaba, JD.com, and Suning, we see their ability to reach customers, that is, their ability to sell products. What supports this? It is the continuous optimization of the entire supply chain structure. I recall saying a few years ago: Why has JD.com been able to outperform in the past few years? Besides channels, it is more importantly its supply chain management system behind the scenes.

In the past, Suning's offline supply chain was organized around physical stores, though now it also has online operations. JD.com's supply chain is organized around consumers. The two systems have many differences. JD.com's supply chain is particularly simple, flexible, efficient, low-cost, and provides excellent consumer experience. This supply chain structure has enabled JD.com's rapid rise in recent years, so JD.com is essentially a supply chain management company.

Alibaba is also essentially a supply chain management company. In the early days, Alibaba was merely a platform providing a marketplace for merchants to sell products. However, with the establishment of the Cainiao system, Alibaba has increasingly become a supply chain management company.

But JD.com's and Alibaba's supply chain management are quite different. JD.com has an integrated structure of procurement, warehousing, and delivery. Alibaba, with Cainiao at its core, builds a platform that aggregates and distributes orders, driven by data, connected by IT, and involving various supply chain participants, jointly building a supply chain management platform with significant synergies.

However, over time, Alibaba's integration characteristics have become stronger. So on the surface, they are two different systems, but over time, they should converge. Looking at Alibaba's Double 11 in the past two years, it has become very smooth, much better than in the early years. This is a manifestation of the convergence of two different supply chain structures over time.

Changes in supply chain structure are happening simultaneously online and offline. We all know that a brand owner needs to sell through all channels, including offline (stores, chains, etc.) and online. In the past, in a fragmented market, each channel had its own supply chain management system and its own inventory. So a brand owner corresponded to N channels, N supply chains, and N inventories, which was very inefficient. Now it is clear that one brand, one inventory, one supply chain, and all-channel sales are very efficient. Supply chain management platforms serve two ends: channels and brand owners. For brand owners, the core story of supply chain management platforms is optimal inventory management: optimal inventory scale, optimal inventory structure, optimal inventory distribution, and optimal inventory delivery.

**Many platform opportunities arise in the process of consumer goods industry chain transformation and supply chain structure changes.** Besides supply chain transformation, with the development of social division of labor, the emergence of Weijie Urban Distribution at this point in our industry's development is by no means accidental. Just as online sales and online supply chains required offline express delivery in the early days, our online supply chain management platforms, along with the development of social division of labor, will inevitably give rise to various urban distribution companies in the future.

**Why?**

**Urban distribution is first a story of social division of labor.** A platform cannot do everything. As the social division of labor deepens, different types of companies will emerge in each link. Division of labor brings specialization and collaboration; collaboration and specialization produce efficiency; efficiency leads to scale; scale achieves cost reduction; and finally, the efficiency of the entire society improves.

**Urban distribution is also a story of networks and density.** I will not elaborate too much here. I believe that without density, it would be difficult for Weijie Urban Distribution to survive, because cost efficiency would not be optimized.

**Urban distribution is not just a story of delivery; it is also a story of warehousing and warehouse operations.** Without warehouses, it is difficult to achieve operational excellence. With warehouses, what can be reflected? First, warehouse utilization efficiency. In the market, you can see various warehouses, but many are empty, with low utilization rates and poor operational efficiency. Second, inventory turnover. If the efficiency of the entire supply chain platform is maximized and urban distribution efficiency is maximized, it must be that warehouse operations and inventory turnover are optimized, and only then can delivery be optimized.

**Urban distribution is a story of integrated warehousing and delivery.** Integrated warehousing and delivery can greatly improve efficiency and lead to data accumulation. With data accumulation, data-driven decision-making becomes possible. With data-driven decision-making, our network can be optimized, and our density distribution can become more rational.

With all this, urban distribution seems quite difficult, so sometimes I "sympathize" with Wang Qi. However, I believe that hard work pays off, and I believe the team at Weijie Urban Distribution will succeed. I believe that in the process of consumer goods industry chain transformation, supply chain structure changes, and the continuous development of social division of labor, Weijie Urban Distribution can seize and grasp the opportunities given by the times and create greater value.

Source: Weijie Urban Distribution
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