---
title: "Low Prices Will Not Win Regional FMCG B2B"
description: "A regional B2B distributor builds its moat through assortment, warehouse and delivery efficiency, store insight, sales management, and cash flow—not an endless price war."
author: "New Distribution"
publisher: "New Distribution"
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published: "2024-11-17"
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# Low Prices Will Not Win Regional FMCG B2B

> A regional B2B distributor builds its moat through assortment, warehouse and delivery efficiency, store insight, sales management, and cash flow—not an endless price war.

Can a traditional distributor successfully build a regional B2B platform? There is no universal answer. Distributors differ in their capabilities, local market structure, starting strategy, and willingness to absorb the cost of transformation.

Successful cases can nevertheless reveal useful operating principles. Yijiazhixing is one such case. Over nine years, it developed from a distributor of two tissue and hygiene brands into a regional B2B platform serving more than 15,000 stores with more than 8,000 SKUs.

Its experience shows why a regional platform cannot rely on price alone.

## From Executing a Brand Plan to Owning the Business

Yijiazhixing originally distributed tissue and hygiene products to local supermarkets and generated more than RMB 100 million in sales. Yet the traditional distribution model was becoming harder. Retail fees kept rising, manufacturers passed down more sales pressure, and the distributor felt increasingly squeezed between upstream and downstream partners.

It chose to build a B2B platform at a time when few proven examples were available. The transition was painful. The sales team lacked relevant skills, store coverage was limited, and the company had little experience in cross-category management. It lost money for three years.

The company continued because it could see the nature of the business changing in a positive direction.

First, it moved from market executor to market operator. In traditional distribution, the manufacturer often determines the portfolio, territory, targets, and selling method. The distributor provides capital, carries inventory, and executes the plan. In B2B, the distributor takes greater responsibility for the assortment and the store relationship. The logic changes from “sell what we have” to “supply what stores need.”

Second, it shifted from serving individual brands to serving the store. That shift forced the company to develop a broader set of capabilities that together created a moat.

## The Capability Stack Behind the Platform

### Cross-Category Assortment Management

Traditional distributors often specialize in a narrow category because categories have different turnover, storage, shelf-life, margin, and selling patterns. A full-category B2B business must learn to manage those differences.

The platform becomes a mechanism through which the distributor develops purchasing and assortment competence across categories. It must decide not only which brands to carry, but also which price tiers, pack sizes, and long-tail items matter to local stores.

### Warehouse, Picking, and Delivery

A platform with more than 8,000 SKUs must handle split-case picking, frequent orders, rapid fulfillment, and overnight order processing. These requirements force the company to improve warehouse design, inventory accuracy, picking productivity, routing, and delivery reliability.

The system is commercially meaningful only if order density and execution efficiency produce sustainable unit economics.

### Store Management and Data

A conventional distributor may possess data only for the brands it represents. That partial view is insufficient to understand the store's total demand.

A B2B platform records a broader basket. For important customers, the company can see category mix, purchasing frequency, order value, and product movement. Those data make store segmentation and service more precise.

### Online Operations

Stores place orders through the platform, so the distributor must learn how to keep users active. Campaign planning, promotion management, recommendations, and communication all matter. But B2B customers are store owners, not consumers; consumer e-commerce tactics cannot simply be copied into a wholesale context.

## Better Cash Flow and New Revenue Options

Cash flow is the lifeline of a distributor. Traditional supermarket business often involves long payment terms and the risk of bad debt. A B2B platform can operate on payment before shipment, creating a healthier working-capital structure.

The product and fulfillment capabilities built for B2B can also support adjacent businesses. Yijiazhixing developed a group-purchasing business of roughly RMB 30 million. A broad assortment and split-case capability allowed it to assemble customized gift combinations and serve institutional buyers in ways that a conventional supermarket could not.

## Why a Price War Has No Finish Line

Many distributors misunderstand B2B as a low-price model. Yijiazhixing's experience suggests the opposite: a platform built only on cheaper prices has no defensible end state.

Stores can find low-priced products from B2B platforms, traditional wholesalers, distributors, and e-commerce marketplaces. No regional operator can be cheaper than every competitor on every item, and an independent distributor cannot outspend venture capital indefinitely.

The objective is therefore not to score 90 out of 100 on price while failing elsewhere. It is to build a balanced operating system across supply, assortment, sales management, online operations, warehousing, logistics, and service.

## Build the Assortment from Store Demand

Yijiazhixing's portfolio was approximately 50 percent alcoholic and non-alcoholic beverages and dairy, 25 percent snacks, 15 percent grains and oils, and 10 percent personal care, household care, and general merchandise. The exact mix reflects its local market and should not be copied mechanically.

The transferable principle is that assortment must begin with the needs of local retailers.

One practical approach is to collect assortment data from a group of nearby convenience stores, identify the top 2,000 to 3,000 products, and use that evidence to form the initial core range.

Within each category, the distributor should combine leading, mid-tier, and value brands across relevant price bands. Convenience-store pack sizes, travel packs, and portable formats may matter more than formats designed for hypermarkets. Long-tail needs can become profitable when aggregated across a sufficiently large store base.

In categories with low brand concentration, regional or second-tier brands may offer better margins. Short-shelf-life products can also create opportunity where no brand owns the consumer's mind, provided the platform can control inventory and delivery.

Finally, assortment is not permanent. Products should be ranked regularly by sell-through and low-performing SKUs removed. A larger catalogue is not automatically a better catalogue.

## Reward Customer Quality, Not Only Gross Sales

During the early stage, the sales organization should focus on acquiring customers and increasing order volume. Once customer habits are established, the company can develop value-added services.

Yijiazhixing used a compensation mix of 40 percent base salary and 60 percent incentive. Incentives included active-customer rewards, customer-tier rewards, and brand-execution rewards.

An active-customer target rewarded representatives for maintaining a required number of ordering stores. Customer tiers encouraged representatives to develop stable, higher-value accounts. Brand-execution rewards covered tasks such as display and in-store activation.

This design moved attention beyond a single shipment. It rewarded an expanding base of active, productive customers.

## Promotions Must Respect Operational Capacity

B2B and B2C customers behave differently. Aggressive volume campaigns may be useful occasionally, but running them too frequently can overload picking and delivery, damage customer experience, and merely pull tomorrow's orders into today.

A more sustainable promotional structure can include:

- a small fixed set of highly price-visible traffic items;
- category specials covering a controlled share of products and balancing volume with margin;
- manufacturer-funded threshold discounts or gifts that support specific brands.

Every campaign should be tested against warehouse capacity, delivery performance, gross margin, and post-promotion order behavior.

## The Real Moat Is the Combined System

Price is one capability, not the capability. Supply, selection, warehouse operations, logistics, sales management, store data, cash flow, and service can each become a source of advantage.

A traditional distributor becomes a platform operator when it takes responsibility for the whole store-serving system. That is what makes the business more stable and more genuinely its own.


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