---
title: "Mixed Fortunes: Where Is the Way Out for FMCG B2B in the Second Half?"
description: "Facing a 70-trillion-yuan retail market, internet giants like JD.com, Alibaba, and Tencent are sharpening their knives and entering the arena with great fanfare. In stark contrast, early entrants such as Yatang Xiaochao, Bang Xiaodian, and Dianshang Hulian have gone bankrupt or liquidated due to various problems. We can't help but ask: is FMCG B2B just a game for giants? After nearly 20 years of development, the traditional FMCG distribution system has gradually formed and improved. However, as the industry deepens, the drawbacks of the traditional FMCG circulation system are also being exposed. In this context, voices advocating the digitalization of traditional FMCG distribution channels are everywhere, and a large number of B2B platforms claiming to compress the circulation layers of FMCG have emerged."
author: "刘少德"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-06-07"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/Fhm193aTyLE9ropiKgykfg"
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# Mixed Fortunes: Where Is the Way Out for FMCG B2B in the Second Half?

> Facing a 70-trillion-yuan retail market, internet giants like JD.com, Alibaba, and Tencent are sharpening their knives and entering the arena with great fanfare. In stark contrast, early entrants such as Yatang Xiaochao, Bang Xiaodian, and Dianshang Hulian have gone bankrupt or liquidated due to various problems. We can't help but ask: is FMCG B2B just a game for giants? After nearly 20 years of development, the traditional FMCG distribution system has gradually formed and improved. However, as the industry deepens, the drawbacks of the traditional FMCG circulation system are also being exposed. In this context, voices advocating the digitalization of traditional FMCG distribution channels are everywhere, and a large number of B2B platforms claiming to compress the circulation layers of FMCG have emerged.

Facing a 70-trillion-yuan retail market, internet giants like JD.com, Alibaba, and Tencent are sharpening their knives and entering the arena with great fanfare. In stark contrast, early entrants such as Yatang Xiaochao, Bang Xiaodian, and Dianshang Hulian have gone bankrupt or liquidated due to various problems. We can't help but ask: is FMCG B2B just a game for giants?

After nearly 20 years of development, the traditional FMCG distribution system has gradually formed and improved. However, as the industry deepens, the drawbacks of the traditional FMCG circulation system are also being exposed. In this context, voices advocating the digitalization of traditional FMCG distribution channels are everywhere, and a large number of B2B platforms claiming to compress the circulation layers of FMCG have emerged.

But entering the second half of 2017, as B2B platforms faced a cold reception in the capital market, some poorly managed platforms began to exit, including star startups like Dianshang Hulian and Xingliyuan. This has led us to ponder: is the FMCG B2B track really viable?

1
**Is There Still a Way Out for FMCG B2B?**

As one of the earliest entrants in the industry, Zhongshang Huimin has, within five years, laid out its presence in 22 major cities nationwide, covering 550,000 retail points. Facing the current industry situation, Zhang Yichun, founder and chairman of Zhongshang Huimin, believes that with the recent overall tightening of bank external funds, it is inevitable that some platforms will face financing difficulties. But from another perspective, without the leverage of capital, the value of a platform's business model and core competitiveness becomes more prominent. In this case, only B2B platforms that can withstand market tests can continue to develop sustainably.

"This does not mean that capital and the market no longer favor the B2B industry. From a capital perspective, the 1 billion yuan supply chain finance credit line from Zhongguancun Bank is a sign of confidence from investors in the platform and upstream enterprises, and the 1.5-2 billion yuan Series C strategic financing that Huimin is about to complete is recognition from capital for the industry and downstream," Zhang Yichun told New Distribution. Furthermore, in recent years, Alibaba, JD.com, and Tencent have entered the FMCG distribution field directly or indirectly, which also shows that B2B still has great value, and **the entire B2B industry still has huge room for development:**

**From the perspective of macro national policies, with the acceleration of urbanization, the government's requirements for urban management, food safety, and commodity circulation efficiency are getting higher and higher.** The traditional small, scattered, and inefficient state of distributors is gradually no longer adapting to the increasingly refined requirements, and B2B can meet and achieve this through unified warehousing and distribution.

**From the perspective of brand owners, after years of development, the business model of FMCG B2B has been recognized and supported by most brand owners.** In terms of organizational form, brand owners originally relied mainly on traditional channels for product distribution, but now most brand owners have established e-commerce departments or B2B business units targeting digital channels. Brand owners' attitudes towards B2B have also shifted from initial rejection and refusal to cooperate to gradual acceptance and proactive embrace and pursuit of cooperation. For example, Coca-Cola recently entrusted the online launch channel for its honor product Culiangwang to Huimin, achieving both distribution channel reform and impressive sales, and similar brand cooperation has become the norm in the current B2B industry.

To this end, Zhongshang Huimin officially released the Huimin Index in November last year, targeting brand owners to gain insights into consumer behavior and habits. All signs indicate that brand owners have realized that efficiency improvement through channel reform is an inevitable industry trend.

**From the perspective of traditional retail small stores, store owners have generally accepted the way of ordering goods through apps.** When B2B first emerged in 2013, less than 5% of stores accepted online ordering, but after years of market cultivation, acceptance in some cities has reached over 80%. This shows that B2B has gradually become a mainstream way of ordering goods.

2
**Where Is the Way Out for FMCG B2B?**

When discussing the current business models in the FMCG B2B industry, Zhang Yichun told New Distribution, "Many people are currently discussing whether B2B is better as self-operated or platform-based, and whether regional or national platforms are better. Personally, I believe that regardless of the model, region, or national scope, there are opportunities. **Currently, in the entire FMCG distribution field, B2B's market share only accounts for about 5%. Compared to traditional FMCG distribution channels, there is still a lot of room for market expansion.** This requires all participants in the B2B platform to unite and collaborate, jointly maintain the market development environment, and only then can the industry be made bigger and stronger." **In Zhang Yichun's view, doing B2B well requires starting from the following points:**

**1. Ensure people's livelihood and promote urbanization.** With the acceleration of urbanization, some non-compliant wholesale markets and warehousing systems are gradually being cleared out, which places higher demands on the intensive layout and development of the FMCG industry.

B2B needs to meet the requirements of urbanization to a certain extent through unified warehousing and distribution, and through information-based tools and means, thereby reducing the pressure on urban transportation and construction without affecting the guarantee of people's livelihood.

**2. Promote digital transformation and improve channel efficiency.** The rising costs of manpower, materials, and other factors have also increased the requirements for standardized warehousing and logistics. To cope with these market environment changes, brand owners must innovate the traditional market circulation system.

Furthermore, as the cost of commodity circulation in traditional channels rises year by year, manufacturers' demand for refined marketing is becoming more urgent, and marketing innovation brought about by internet big data is of great significance to brand owners.

**3. Effectively help small stores increase their business.** Not only help small stores select good products and increase their turnover, but also help them attract traffic, do precise marketing, and help them increase market increment.

3
**Scale or Profit?**

In the internet industry, where "speed is everything," many entrepreneurs regard the speed and scale of enterprise development as the only creed of their development strategy. Especially under the catalysis of capital, the phenomenon of burning money on subsidies to grab users and market share is common. After several years of rapid development, Zhongshang Huimin gradually established a healthier growth pace in 2017, beginning to deepen its existing markets; in terms of business operations, it also gradually shifted from extensive management to more refined management, specifically optimizing customer structure, product structure, organizational architecture, operational capabilities, and other dimensions.

"In the early stages of enterprise development, pursuing market scale is understandable," Su Xiaoxin, executive president of Zhongshang Huimin, told New Distribution. "Especially in the early days of FMCG B2B, as a new species, market cultivation was needed. In this case, only through aggressive expansion could we gain the attention of upstream brand owners and the recognition of downstream retail stores. When the platform develops to a certain stage, it needs to continuously strengthen its market foundation to consolidate scale advantages, and refined operations become inevitable."

The essence of business is to meet user needs and ultimately achieve profitability. No matter how fast an enterprise initially develops, it must ultimately achieve its commercial goals through profitability. Su Xiaoxin believes that only B2B platforms that truly create value for users from the user's perspective can achieve long-term development, and user needs are mainly reflected in the following aspects:

**1. Price.** Among the factors influencing small store owners' purchase decisions, price is undoubtedly the most important. But compared to low prices, retail terminals care more about a long-term, sustainable market price system. Prices that are too high or too low will not lead to long-term ordering habits.

**2. Complete product range.** Traditional ordering channels are numerous and scattered, especially for long-tail products; stores often need to contact dozens of salespeople to procure all items, consuming a lot of manpower, materials, and time. Small stores need a platform to achieve one-stop procurement of daily operating goods.

**3. Standardized delivery time.** Store ordering is rational, so this also places a standardized requirement on the platform's delivery efficiency. Delivery speed is not necessarily the faster the better, but it must be within the predictable range of the store owner, which is conducive to the store's product and inventory management.

**4. After-sales service.** This includes terminal service by salespeople, returns and exchanges, etc. The quality of after-sales service determines the store's repurchase rate. Only through a comprehensive after-sales service system can a platform achieve a good reputation and customer dependency.

4
**Future Landscape of FMCG B2B**

The process of business evolution is ultimately a process of continuous efficiency improvement. After the early wild growth, B2B will inevitably develop in a more refined direction. The traditional FMCG distribution model has developed for decades to reach its current market scale, which means that B2B development cannot be achieved overnight and must also go through such a long process. **So what characteristics will the future industry landscape of FMCG B2B present?**

**1. High industry consolidation, with obvious head effect**

Due to past information asymmetry, there were a large number of distributor groups in every market. In the future, with the development of internet information technology, information barriers will be further broken, which means that the number of B2B platforms in the future cannot be as many as the distributor groups.

The internet has obvious scale effects, and FMCG B2B is no exception. This also means that whether national or regional B2B platforms, they will gather towards the head, and platforms that cannot form scale advantages in a short time will inevitably be eliminated.

**2. Business categories shift from vertical to full range**

The most important measure of a business model's success is whether it can achieve profitability, that is, achieving cost reduction and efficiency improvement in the entire operation process. Only through unified warehousing and distribution, and reasonable combination of various categories of goods, can distribution efficiency be maximized.

**3. Technology drives efficiency improvement**

With the continuous expansion of single warehouse scale, SKU scale, and sales point scale, the requirements for technology are also getting higher, which requires B2B platforms to continuously innovate technologically to meet the increasingly strong information needs. At present, most B2B platforms undertake the functions of traditional distributors, but in the future, B2B platforms will definitely be internet-based and driven by technology.

During the industry's development, it is inevitable that some platforms will exit due to management, business model, development strategy, and other reasons, but this does not mean that FMCG B2B is without value and significance. The entry of internet giants like Alibaba, JD.com, and Tencent also proves from another dimension that the track of digital channel transformation is correct.

However, FMCG B2B is by no means just a game for giants. Platforms represented by Zhongshang Huimin, Xingaoqiao, and Dianda, which are based on supply chains, deeply cultivate the market, and use information tools to effectively empower and output value to upstream and downstream, still have great value and development space, and are worth learning from for every industry practitioner.

New Distribution has always insisted that channel digitalization is inevitable, and only digitalization can bring about industry efficiency improvement. After decades of development, FMCG distribution channels will inevitably transform from the original complex layers, low efficiency, and information opacity to an efficient, transparent, digital, and visualized direction. Only through structural reform of the traditional model can we fundamentally bring about industry efficiency improvement.

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