The 3rd "FMCG + Internet Conference" hosted by New Distribution was grandly held at Chongqing Yuelai International Convention Center on November 8-9, 2017! It attracted thousands of industry distributors, manufacturers, and internet companies from all over the country, with a full house and unprecedented scale. This article is based on the speech by renowned marketing expert Mr. Liu Chunxiong at the conference, with slight modifications.

Good morning, everyone!

Everyone here is either doing B2B or preparing to do B2B. I am just an observer; I don't plan to do B2B in my lifetime, so I look at it with an observer's mindset.

My core viewpoint is: The all-powerful B2B is precisely B2B's biggest enemy.

Brand owners have spoken

B2B requires three-party linkage: brand owners, platforms, and terminals. Last year, B2B platforms were very active, but the other two ends were not, so B2B platforms struggled left and right, doing many things that B2B shouldn't do, turning B2B into an all-purpose channel.

In the first half of this year, terminals began to become active. According to Zhao Bo's "New Distribution" statistics, the download rate of B2B apps in provincial capital cities exceeded 70%, and not only for FMCG; vertical B2B was also active, indicating that the overall B2B atmosphere has picked up. This is the collective contribution of all B2B players.

In the second half of this year, major brands began to follow up on B2B. In the first half, almost all major brand bosses had a report on their desks because they had done two things: first, established B2B departments, and second, conducted pilots in various places.

The pilot results were basically the same conclusion: B2B disrupts prices. But the big bosses would still say: continue the pilots.

Because the brand owners' attitude is already clear: B2B will definitely succeed. This is completely different from last year, when they didn't understand it.

This year, brand owners' bosses have almost become the ones who have invested the most effort in learning about B2B. Many employees are saying, who is the B2B expert? The boss is the expert.

In the second half of this year, the brand owners' attitude changed again, becoming active in expressing their stance and taking sides.

Is expressing a stance useful? I don't know.

Is expressing a stance harmful? Certainly not.

Does expressing a stance cost anything? No.

So, those who should express their stance do so, but when everyone expresses their stance, your stance becomes useless.

The "big heads" of FMCG are already in an oligopoly state. When one expresses its stance, the others inevitably follow. That's how the atmosphere builds up.

Normalized orders have increased

Why are brand owners actively expressing their stance? Because starting in the second half of this year, some major platforms made a big adjustment. Previously, they wanted to be an all-powerful B2B, replacing all channel functions, but now they admit they are not omnipotent.

Previously, B2B talked a lot about disruption and replacement, but now they talk more about cooperation and empowerment. This is a good thing.

Some B2B platforms tell brand owners, "There are things I won't do; I'll let distributors do them, and the platform won't disrupt your prices." So, in the second half of the year, there has been a big change: low prices on B2B platforms are no longer platform subsidies but rather manufacturer promotional activities.

Originally, manufacturers' promotional activities were given to distributors, who passed them to secondary wholesalers, who then passed them to retail stores. The platform didn't get them, so the platform subsidized, and subsidies are definitely non-normalized sales.

If B2B relies on subsidies, it cannot succeed because the subsidy pit in B2B is too deep. Only normalized orders can truly drive B2B development.

Retailers are very price-sensitive. Promotional policies initiated by manufacturers, forming normalized orders, replacing previous B2B platform subsidies, I think this is a very good trend. It is a sign of B2B platforms moving from non-normalized to normalized.

Now, I have an intuition that Alibaba Retail Link is trending towards a matching model. We have always said Retail Link is self-operated, but I feel it is already doing matching.

This is precisely what brand owners are interested in. Because what won't interfere with normal sales? Matching won't interfere.

The manufacturer's attitude is: I can cooperate with you, but you cannot interfere with me. So, I think this trend is an important sign of the change in brand owners' attitudes in the second half of this year. Matching means many channel functions are borne by manufacturers and distributors. The platform is not omnipotent. Brand owners are more willing to participate deeply and cooperate on orders because you no longer say, "I want to disrupt the channel and eliminate distributors." So now many major platforms are doing one thing in the second half of the year: reassuring brand owners and distributors, "I won't eliminate you anymore; I will empower you." I think this is normal.

At the beginning, B2B was too arrogant. I think B2B has been doing things that completely violate the spirit of the internet over the past two years.

Now B2B is still not normal, although its penetration is already quite good. Transaction volume has increased, but order density and average order value still haven't risen, and fulfillment costs remain high.

Although no platform is willing to disclose order density and average order value, we can infer from delivery costs that the data is not ideal, and there is no efficiency advantage yet.

Only normalized orders can increase order density and average order value. Normalized orders can only be achieved with the cooperation of manufacturers and distributors.

The ultimate arrangement of channels

Is B2B the channel, or is B2B part of the channel? This involves the ultimate arrangement of channels. If we understand the future clearly, we know what to do now.

For B2B to succeed, it must conform to the spirit of the internet. At the first conference, we discussed a question: B2B should control goods upstream, control stores downstream, and do everything in between that distributors do.

That is wanting to be an all-powerful B2B, wanting to be the channel hegemon. If that really happens, the world would die.

I believe such a thing cannot be done! B2B as a platform cannot be the entire channel. If it is self-operated B2B, it is not even a platform; it is just an electronic trader.

What is the spirit of the internet? In one sentence: Reduce dimensions to become a platform, and the platform generates an ecosystem.

Platforms are public infrastructure of the internet society. A platform has only one dimension. All platforms have only one dimension. Search platforms do search, payment platforms do payment, Alibaba is a trading platform, and social platforms do social. If a platform does everything, it is no longer a platform; it is a trader. Platforms serve traders. I think this is the spirit of the internet.

Reduce dimensions to become a platform. Reduce until there is only one dimension left. The future B2B platform will have only one dimension.

Channels have many dimensions, roughly divided into three: order, promotion, and delivery. Each dimension is a platform.

Same-city delivery can integrate delivery, which is efficient. B2B platforms integrating orders is also efficient, but can promotion become integrated? I don't think so.

Can promotion and orders be on the same dimension? Some can, some cannot. For example, immediate promotional activities, discounts, are part of the order platform, and they also exist in B2C.

If a manufacturer says, "I am about to launch a new product, and it will explode in volume in three to five years, but I need continuous promotion now, for three to five years," would the platform dare to take it? Would it be willing?

If the platform only does immediate promotion, then brand owners can only maintain existing volume. For incremental volume, strategic promotion is necessary.

Strategic promotion can only be done by distributors who share a community of destiny with the manufacturer. Many manufacturers require exclusive distribution, which is to become a community.

So, I think the key to long-term peaceful coexistence between brand owners and B2B platforms is whether a position can be found for distributors.

In the channel transformation of the B2B era, the non-core functions of distributors should be stripped away, turning distributors into strategic promoters for manufacturers, and they should be compensated accordingly.

The ultimate channel structure should be three major platforms jointly reconstructing the channel, with coordination among platforms.

How do platforms make money? The common feature of other successful platforms is: Generate an ecosystem around the platform, and the ecosystem brings profits.

B2B should not do what it shouldn't do

Now B2B platforms are doing many things they shouldn't, such as franchise stores. Of course, we must admit that these things have made stage-by-stage contributions to promoting B2B development. When the stage work is completed, they should not be done. Some do franchise stores for other purposes, which is beyond my discussion.

Also, things like city partners are valuable now but may not be needed in the future, and they may need to exit at the appropriate time.

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