Click the blue text above ↑"Business Observer" to follow us Mining B2B Series Report No. 3 In the trillion-yuan domestic trade B2B market, especially in FMCG B2B, competitors include internet giants like Alibaba and JD.com, vertical B2B e-commerce companies like Zhanghe Tianxia and Zhongshang Huimin, and a third force: physical retailers with offline store and supply chain advantages. Physical retailers, leveraging their terminal retail scale and bargaining power in product procurement, are developing B2B as a natural "addition" to create profit increments, further integrate upstream supply chains, improve efficiency, and feed back into their own retail operations. RT-Mart, the "number one" in offline hypermarkets, regional retail leader Better Life, and home appliance retailer Five Star Electronics are typical representatives of companies that are truly and practically deploying B2B businesses. The third article in the "Business Observer" Mining B2B series first introduces RT-Mart's B2B business model. Compared to Alibaba's Retail Link, which is a platform model, and JD.com's New Path, which is a self-operated model, RT-Mart's B2B business is based on its offline RT-Mart physical stores and supply chain advantages, using internet tools to integrate small b merchants. The business layout is like two flowers blooming, each on its own branch. First, relying on the strategic cooperation with the third-party community O2O platform "Shihui" (which is strategically partnered with Feiniu.com), it deploys in first- and second-tier cities. Second, RT-Mart Feiniu.com strategically invests in campus O2O "Xiaohehe" and B2B "Fadaojia" to capture third-, fourth-, and fifth-tier markets. One Shihui ☝☝ ****Shihui is a community O2O operation model of "100 square meters to 100 meters". That is, the online Shihui APP accepts orders from residents, and the offline community "Shihui Service Centers" provide delivery to door or self-pickup at the store. In July this year, RT-Mart Feiniu.com and Shihui APP established an exclusive deep strategic cooperation nationwide—in cities where RT-Mart stores are located, all of Shihui's product services are supplied and distributed from nearby RT-Mart stores. Specifically, RT-Mart's product supply services mainly consist of two parts: 1. Speed Delivery (one-hour delivery service for daily necessities). Shihui Service Centers first order from RT-Mart Feiniu.com, which allocates orders to nearby RT-Mart stores. The products are pre-delivered by RT-Mart stores to Shihui Service Center warehouses. Community residents place orders on the Shihui APP, and the service center delivers within one hour. Currently, RT-Mart Feiniu.com's system has been connected with Shihui, selecting 600-1000 SKUs for each service center. Yuan Bin, General Manager of RT-Mart Feiniu.com's Retail Business and Business Development Department, said that 600-1000 SKUs can basically meet the immediate needs of community residents for household necessities and regular daily necessities. At the same time, Feiniu.com can also adjust based on the sales data of the service centers' products. 2. Daily Fresh (fresh food pre-order and pre-purchase service). ☝☝ Community residents order fruits, vegetables, and fresh food on the "Shihui APP" before 12 o'clock every day, and can pick up at the Shihui Service Center after work or have it delivered at an agreed time. Each Shihui Service Center orders from RT-Mart Feiniu.com, and RT-Mart picks and ships from nearby stores, delivering to each service center before 5 pm the same day. The revenue model of Shihui Service Centers does not solely rely on product price differences. They mainly use RT-Mart's supply chain to solve community residents' product service needs. Service center revenue sources also include convenience services such as Shihui Post Office, package collection and delivery, laundry and shoe cleaning, housekeeping, and home appliance repair, as well as high-margin real estate services like home renovation, home beautification, and real estate agency. The latter especially can realize the value of data from high-stickiness customers generated by product services. Currently, Shihui's platform business and offline service center network expansion are still in their infancy. Data shows that as of August 10, Shihui Service Centers have been deployed in 33 cities nationwide, with more than 250 outlets. By the end of September, Shihui Service Centers plan to open 350. By the end of this year, the goal is to achieve 1,000 stores. In terms of product sales, since May, the average daily performance per Shihui Service Center has risen from 700 yuan to 1,000 yuan. RT-Mart's stage goal for this figure is 2,000 yuan—equivalent to the daily retail sales of a community grocery store. Shihui's internal plan is to achieve this by the end of December this year. For RT-Mart, cooperation with Shihui means it can quickly expand offline small b merchants in a "light asset" model, forming B2B business increments beyond RT-Mart store operations. It can also accumulate and acquire some C-end users through service centers. ☝☝ Shihui is jointly invested by E-House China, Sina.com, Weibo, Focus Media, and STO Express. After several rounds of investment bubbles in community O2O, it still has the "ambition" to seize the community entrance. Two Fadaojia Fadaojia is a community O2O platform under Shanghai Diqi Network Technology Co., Ltd., which is invested by RT-Mart Feiniu.com. In September last year, RT-Mart Feiniu.com invested 20 million yuan to strategically acquire a stake in the campus O2O platform "Xiaohehe" under Diqi Network Technology, becoming the single largest shareholder. ☝☝ At that time, Feiniu.com hoped to enter the campus O2O market through "Xiaohehe". However, last year, Xiaohehe adopted a self-built warehouse model, which was costly. Coupled with objective reasons such as campus winter and summer vacations, high frequency of student user turnover, and capital's crazy burning of money to subsidize the campus market, Xiaohehe's advantages were not prominent. At the beginning of this year, Xiaohehe iterated its self-built warehouse model to a campus partner system, supplying RT-Mart products to campus partners, who then sell to C-end student users through physical small stores or the APP. Fadaojia is a "no-burning" light model. Launched in June this year, it positions itself to serve retail small stores, mainly helping store owners solve two problems: helping small stores "buy goods" and also helping small stores "sell goods". The business is divided into two parts: 1. B2B supply. Relying on RT-Mart's supply chain and brand "endorsement", it selects 5,000 SKUs of products and puts them on the "Fadaojia" mobile client for small store owners to choose from, providing delivery to store services with a minimum order of about 1,000 yuan. 2. B2b2C. In addition to supply, Fadaojia deeply cultivates and "re-brands" traditional retail small stores, helping them upgrade. It mainly does five things: a. Improve store image. Unify the decoration image of tobacco and alcohol shops, mom-and-pop grocery stores, and community supermarkets, "re-brand" them into Fadaojia internet convenience stores, improve store image, and optimize product display. b. Optimize product structure. Relying on RT-Mart's supply chain, provide a rich selection. Assist in differentiation, such as introducing RT-Mart store's own-brand products, special offers, bestsellers, fresh products, bento boxes, and semi-finished products, to increase product gross margins. c. Branded operation management. Provide a complete set of store product replenishment, inventory management systems, and cash register systems from backend to frontend, standardize small store management processes, reduce management costs, and achieve standardized and transparent operations. d. Bring business increments. Provide a set of internet tools to help small stores launch online to C-end play, such as push notifications, pre-orders, group buying, virtual shelves, delivery to door, and half-day fresh delivery services, helping small store owners expand and extend surrounding users, forming business increments. e. Provide on-site training. Dispatch and organize RT-Mart store management resources to provide comprehensive training for "re-branded" stores, from store image to product selection to promotion to management. How big is the B2B market? In the overall trillion-yuan FMCG B2B market, just for the Fadaojia business, in a typical third-tier city like Huai'an, Jiangsu, as long as it has 100-200 small b merchants purchasing goods, calculated with a conservative estimate of 100, it can eat up about 100 million yuan of the B2B market cake each year." Lin Yining, co-founder of Diqi Network, said. In third- and fourth-tier cities, Lin Yining unexpectedly found that the education cost is not too high—many small store owners want to improve. "In third- and fourth-tier cities, rent and labor costs are rising. For store owners with business thinking, due to lack of supply chain resources and internet tools, it is not easy to make the business successful on their own." ☝☝ The first store transformed by Fadaojia was a small tobacco, alcohol, and grocery store in the basement commercial area of a nightclub district in Huai'an. Before the transformation, this store split the business of about 7,000-8,000 yuan per night with the store opposite. After the transformation, the business ratio between this store and the opposite store changed from 5:5 to 7:3. ☟ Before the transformation, tobacco was the main product accounting for half of the store's sales. After the transformation, with the intervention of Fadaojia's new supply chain, the main products are changing and adding. For example, for mineral water, the original store sold only Kangshifu, Wahaha, and Nongfu Spring. Fadaojia, through backend data reading and business district analysis, suggested configuring higher-priced, higher-margin beverages that better match the business district's needs, introducing Evergrande Spring, Perrier, and Evian and other imported beverages. As a result, Evian sales are very good. ☟☟ ☝ Fadaojia introduced a set of imported product shelves in the transformation of traditional grocery stores. Since its launch in June, as of now, Fadaojia has registered 6,000 small B merchants, with 400 orders per day and an average order value of 2,000 yuan. Sales were 1.5 million yuan in June, 5.6 million yuan in July, over 10 million yuan in August, and are estimated to approach 20 million yuan in September, showing a stepwise "upward" business volume. This allowed Fadaojia to break even at the end of August and is estimated to achieve profitability in September. This business has an average gross margin of 2% from pure B2B supply. In addition to product price differences, the "re-branded" Fadaojia convenience store business can also earn a brand usage fee and management fee. Lin Yining introduced that the "re-branded" Fadaojia convenience store model is deep cultivation and must be expanded city by city. The goal this year is 20 stores, mainly in the East China market—the strong region of RT-Mart's offline stores. The scale of Shihui Service Centers is also considerable. Calculated at a retail sales of 2,000 yuan per center, with the expansion to 1,000 stores within the year, it means RT-Mart can achieve nearly 1 billion yuan in B2B business through Shihui. Doing "Addition" Based on Physical Stores For downstream retail small stores, RT-Mart's B2B business, because it is based on its own supply chain and offline stores as an "addition", has obvious advantages in warehousing and distribution costs, logistics radius, procurement prices, and product differentiation. 1. More product variety. The selection is relatively rich, and product quality is guaranteed. Currently, Fadaojia offers 5,000 SKUs to retail small stores. 2. Lower prices. More than 60% of RT-Mart's KA channel products have price advantages. 3. Shorter path. Delivery from nearby stores is faster, and centralized delivery is more efficient and cost-effective. "Brand supplier—RT-Mart central warehouse/RT-Mart store—retail small store", with two levels of logistics, compared to the traditional multi-level distribution system of brand owners, RT-Mart's logistics radius is shorter. In terms of cost, it is an "addition" to existing warehousing and distribution resources, without additional investment. RT-Mart's employees in stores across the country also assist in promotion, saving labor and ground promotion costs. 4. Differentiation. Compared to e-commerce companies that all do very sensitive popular products, RT-Mart has more than 30,000 products in stock and more than 3,000 own-brand products, which can help small stores select long-tail products in some general merchandise categories with relatively high gross margins. Assist small stores in differentiated upgrades. 5. Guaranteed. RT-Mart's offline supermarkets provide brand "endorsement", transparent processes, and can issue formal invoices, solving customers' trust issues regarding small store product sources and genuine products. RT-Mart stores have fast turnover capabilities offline, so even if small stores have returns or exchanges, they can be quickly processed. Becoming the Largest Category Distributor Nationwide? At present, it seems that RT-Mart's challenges are as obvious as its advantages:

  1. Both Shihui and Fadaojia are new internet brands, requiring user awareness of the new brands to be cultivated.
  2. Using stores as B2B shipping warehouses requires efficient operation of RT-Mart's internal automatic order allocation system. In addition, the idle resources that stores can allocate, the integration of employees and business, and the order carrying capacity all have an upper limit. But these are not the most difficult challenges. The real challenge may be that RT-Mart is essentially cutting through a tangled network guarded by traditional distributors. At the beginning of the year, Alibaba reorganized Retail Link to enter the B2B market, and distributors exclaimed "the wolf is coming". But later we all saw clearly that Alibaba's platform genes mean that Alibaba's B2B has no interest in subverting the traditional distribution channel. Alibaba cannot become the largest distributor nationwide." Guo Kunkun, head of Alibaba Retail Link, once said this. One man's poison is another man's honey. RT-Mart's B2B business is precisely in a certain competitive relationship with the traditional brand owners' distribution systems. In this regard, Yuan Bin, General Manager of RT-Mart Feiniu.com's Retail Business and Business Development Department, said, RT-Mart does not say it will eat up the entire market. For upstream, RT-Mart does not represent becoming the largest distributor in all categories, but it truly has the opportunity to become the largest distributor in certain categories." "In business sinking, we will avoid the resistance of brand distributors with relatively complete offline channel construction. For example, for milk, beverages, and other brands that already have relatively complete distributor networks, even covering townships, if RT-Mart goes in again, it would be grabbing their channel market. They may resist me." But in third-, fourth-, and fifth-tier cities, brand owners lacking a complete distribution network are very eager for RT-Mart to become their distributor. These brands rely on RT-Mart to sink channels and increase sales without increasing costs. Yuan Bin said, Looking at the current FMCG B2B market, there is not yet a mature model or mechanism that is process-oriented and networked, indicating that all players are still exploring." Whether it is Alibaba Retail Link or JD.com New Path, they are all based on their respective business bases, extending to surrounding provinces for regional exploration. Yuan Bin's judgment is that in the future, the B2B market may even be larger than the B2C market, but there will no longer be an oligopoly pattern dominated by traffic like in the B2C market. Looking at the B2B market, it will differentiate. Enterprises with advantageous categories and advantageous regions will do deep and thorough work, and everyone still has opportunities." Learn about previous reports in the "Mining B2B" series: Mining B2B | Besides Traffic Advantages, What Is the Value of Alibaba Retail Link? This account prohibits unauthorized reprinting Add WeChat shangyegcj to join the exchange group Long press the QR code to follow Business Observer