Click to read the original article for details. In the past two years, the topic of distributors transforming into urban distribution has been very hot, almost a consensus among all large-scale distributors. Some distributors have reported to New Distribution that while urban distribution has opened new sources and saved costs, profitability is not as good as imagined. The business looks booming but operates at a slight loss or breakeven. As for profitability, there is currently no mature solution. Why is the warehouse full of goods but still not profitable? Of course, there are many reasons, such as inefficient IT systems, the need for磨合 during operations, excessive initial fixed asset investment, low value of goods in the warehouse, or low local warehouse rental rates that cannot generate corresponding income from warehousing. I think these are not the core of the problem. The core is the starting point. If you are doing urban distribution to save money for distributors, then your urban distribution logistics might be wrong.

  1. Not Making Money First, urban distribution is not a "single warehouse" business. What does that mean? Although urban distribution operates locally, the essence is the local logistics delivery service for national brand products. In the entire FMCG supply chain, urban distribution is the end of the chain, providing the last-mile logistics solution for brand owners. Therefore, urban distribution must be capable of handling various flexible orders at any time and efficiently coordinate with brand owners or third-party RDCs (regional distribution centers) to provide customers with a low-cost, fast delivery service system. So from this perspective, the core value of urban distribution is to provide brand owners with a complete set of end-retail logistics delivery solutions, not to save money for distributors. In fact, the more you save money for distributors, the less you earn. In the FMCG supply chain, from factory to terminal, it is unlikely to compress the layers. In the original model, there are too many layers, and the profits have already been divided. This money is not enough to allocate to new members. So if you say you serve your distributors, keep their revenue unchanged, and they give you a commission, in fact, distributors already earn logistics fees, and they cannot provide more profit to you.
  2. How to Make Money? Assuming the gross profit margin from factory to terminal remains unchanged, there is only one way for urban distribution to obtain considerable gross profit: break the existing dual-layer interest relationship of distribution and second-tier wholesalers, and redistribute the interests in the channel. You say you are doing urban distribution; how can you break the existing interest pattern of distributors in the market? To put it bluntly, the money that originally belonged to distributors, I will compete with distributors with higher efficiency, better delivery experience, and more thorough terminal services, and take away 90% or even more of the profit in this chain. This is the money that urban distribution should earn!
  3. Methods to Break the Interest Pattern First, you must be harmless. The so-called harmless means not competing with brand owners and distributors for order control and allocation rights. This is also the bottom line that all B2B companies touch with brand owners. The premise of doing urban distribution orders is to give up order control first, and the platform only provides service empowerment. You must deeply understand the meaning of order allocation rights. This is too important. Giants are not unwilling to give it up, but their business is based on a traffic model. If they give up order allocation rights, their platform has no commercial value. But for third-party urban distribution logistics, it is inherently a service provider, serving customers. The premise of good service is not to touch transactions. As long as you do not compete with brand owners for order control and allocation rights, you can get strong support from brand owners. They will give you ammunition, fees, and everything you need. Distributors will also safely put their goods in your warehouse. Second, have the ability to promote refined services. As long as there is competition in the market, terminal execution will not stop. This means there will still be various salespeople "competing" on the shelves, doing execution. But we all know that most brand owners no longer have the ability to manage and pay for huge sales teams, so there is the emergence of "shared business." For example, Retail Link's "City Partner" and JD's "Ground Service Guy," etc. New Distribution has always believed that B2B shared salespeople is a false proposition. No shared business will do refined services without brand owners spending big money, especially for brands with strong terminal execution. If brand owners do not want to be eliminated by competition, they must maintain the competitiveness of terminal execution. So the business logic must conform to the actual market demand. In essence, business cannot be shared; instead, brands should be more privatized, channels further flattened, and agents further granulated. Only in this way can we achieve more refined services in future market competition and not be PK'd by competitors. Third, platform-based urban distribution. In the past, a large agent had many salespeople to do terminal services and meet brand owner needs. But the problem is that young people are hard to recruit, manage, and retain. Using the old management methods will not work, so the emergence of small bosses and the Amoeba model came about. But this model is very difficult to achieve under the original system of distributors. With an urban distribution platform, based on the platform's warehousing, logistics, supply chain finance, and information capabilities, it can not only be achieved but also more easily achieved. Fourth, comprehensive empowerment for small bosses. Simply put, based on warehousing and distribution, support a group of small entrepreneurs to act as agents for various products. If they lack money, you provide systems and supply chain finance for data pledge. If they lack goods, they can first be second-tier wholesalers, and you help organize supply sources for support. If they lack vehicles and warehouses, you have cheaper warehousing and logistics. In short, as long as you have the ability, all existing resources are available for these young people to start businesses. This means that your third-party warehousing and distribution has warehousing, logistics, and people. For brand owners, there is a new possibility to replace agents. Some poorly managed distributors have no profit in the products they represent. As soon as they give up the agency, you have the opportunity to redistribute the interest pattern. In this model, the profit you obtain is much more than simply serving agents, and you can even take away 90% of the profit in the entire chain. Only in this way can the scale of third-party urban distribution generate benefits. Of course, if you think waiting for distributors to give up agency is too slow, there are faster unconventional methods.
  4. Ultimate Goal Doing urban distribution, by breaking the local agency pattern and redistributing interests, is a necessary means to make urban distribution profitable. B2B is the same. One of the cores of B2B is warehousing and logistics. If not done well, B2B cannot be profitable. But to do it well, you must eat up all the profits from factory to terminal. How to eat them? Through a platform-based one-stop service system, making you an indispensable role in every link. Only then can you truly make money. Final note: In fact, urban distribution logistics, if there is no network and only a single warehouse, cannot become a climate. Distributors doing urban distribution logistics must actively join a national warehousing and distribution network. Only in this way can you have the opportunity to undertake regional market business under the entire network. Otherwise, making money is really not easy. On October 23-24, during the Autumn Sugar and Wine Fair, the "2018 FMCG Urban Distribution Logistics Conference" hosted by New Distribution will be held. At that time, we will invite industry experts, FMCG warehousing and distribution specialists, and distributors who have transformed into unified warehousing and distribution platforms to discuss and answer questions about the future development trends of FMCG urban distribution logistics and practical cases of distributor transformation to unified warehousing and distribution, under the theme "New Distribution, New Urban Distribution." We hope to bring you different inspiration and thinking! The specific meeting topics are 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 Xuanang 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 Commercial 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. Jinshankoufu 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. Chaoan 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. ...... Distributor Transformation Representatives (Proposed) In no particular order Jiangsu Huashang Urban 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 Sanxing Lian'gou 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-