Editor's Note: In the past two months, I have intensively visited some regional B2B platforms and communicated with their founders to understand their development this year. Although the repeated pandemic has greatly impacted consumer markets everywhere, B2B has experienced varying degrees of high growth, and many B2Bs have achieved considerable profitability. It can be said that the FMCG B2B business model, after more than a decade of market validation, has become a very important distribution force.

01 After JD and Alibaba educated the market, the space they vacated has allowed many regional B2Bs to grow rapidly this year. In recent visits to Pinyi, Xu Yi told New Distribution that in 2022, they expect to achieve around 23 billion yuan. Yijiupai's scale is still around 10 billion, and it is said that Retail Link is now less than 10 billion. Several larger B2Bs in East China, such as Caihua Commercial, Zhongshang Huimin, Kuaile Zhanggui, and Wanquan Supi, are currently at 2-3 billion in scale. Regional players like Jiayun Yunshi and Weiran Jinhe have exceeded 1 billion. Single-city, single-warehouse operations like Rongcheng Yigou, Wuhan Huxiaosheng, and Luoyang Hecai are basically at 100-300 million. This is only a part; there are also many local B2Bs that have seen significant growth in both speed and single-warehouse scale. Although JD and Alibaba are no longer the leading players and forces in this market, their exit has in a sense freed up the ecological niche, making the entire industry more prosperous. And the next decade will be even better.

02 Ordering from B2B has become standard for small shops, typically choosing two to three platforms as fixed ordering platforms. I also visited some small shops and chatted with shop owners. Ordering from B2B platforms has basically become standard. In terms of ordering habits, shop owners tend to prefer one to three platforms as their main ordering targets, but they do not rule out checking other platforms. For brand-owned platforms, salespeople usually inform shop owners of promotions when taking orders, and only then do shop owners order from such brand platforms. However, the advantage is that since platform fees are more direct compared to platform-type B2Bs, and some fee verification and investment are done through platforms like Coke Go, shop owners are not averse to ordering on such platforms.

03 The survival situation of small shops is not ideal, and profitability is worrying. In the past two years, the trend of convenience store chains has been very obvious. In terms of product richness, decoration, and brand, traditional mom-and-pop stores cannot compete with such chains in hardware. We see that well-performing convenience stores usually carry fresh produce and also provide deep community services like delivering large water bottles. However, some shop owners report that group buying has made business difficult in the past two years. Currently, only tobacco and alcohol are profitable. For categories with high online penetration, such as personal care, household cleaning, grain and oil, and condiments, offline store sales are very poor. Shop owners are trying to adjust their category structure, gradually moving towards fresh produce, tobacco, alcohol, and beverages, but fresh produce is not very profitable either, and overall survival is difficult. One shop owner said they could hardly even earn a salary. Our visits found that this is not just one or two cases; it is very common in cities above the prefecture level. In some regions like Hunan, besides group buying, there are also many discount stores like HotMaxx and snack specialty stores like Snacks are Busy, giving consumers more and more choices.

04 B2B is fully profitable, with Zhongshang Huimin and Wanquan Supi close to breakeven. With deeper operations, lower backend development costs, and reduced difficulty in consumer promotion, B2B has become profitable on a large scale. Even some heavily operated self-operated B2B platforms have reached breakeven or are close to it. This means that once B2B becomes profitable, the subsequent scale advantages will immediately become prominent, also proving the basic success of this business model.

05 A large number of distributors are starting to move their existing business online to do B2B. In the past two years, we have seen that distributors' business in regional markets is not good, with no growth for many years. Some large distributors are seeking transformation, and the first choice is to do B2B. On the one hand, there is the need for growth; on the other hand, the business is quite similar, especially for snack food distributors, who will automatically enter the B2B model during digital upgrading. Third, the cost of educating small shops has decreased. Finally, because many B2Bs have succeeded, the trial-and-error cost of the business model has become very low.

06 Brand-owned digital systems have made B2B standard, as a key way to invest fees. Coke's Coke Go has been relatively successful in the past two years. The logic behind it is that when brands are vigorously promoting digitalization, moving small shop transactions online is a very important scenario, because only after transactions are online can a series of digital marketing possibilities follow. Currently, mainstream domestic brands have basically launched their own B2B platforms for trading with small shops, and even if not launched, they are in planning and construction. Moving transactions online still has some complex issues, such as brands that rely on distributors for deep distribution encountering problems with distributors' B2B operational capabilities and willingness to do B2B, but from a broad logic, there are still opportunities.

07 B2B is far from the endgame; in fact, it is just beginning. As the supply chain integrator for small shops, it will significantly replace the role of wholesalers in the market. There are three reasons for this view: China's urbanization is still ongoing, and the improvement of various infrastructures will further catalyze the advancement of B2B; second, labor costs have risen sharply in the past two years, and using software to complete automated transactions is a rigid demand for enterprises to reduce costs; third, distributors and wholesalers will continue to iterate themselves, and in the process, some strong regional supply chain platform providers will emerge, further squeezing channels and forcing wholesalers out of the market. Kuaile Zhanggui in Shanghai is the largest distributor for many first-tier brands such as Coke, Red Bull, Budweiser, and Master Kong. Why is this? Analysis shows that the efficiency advantage of the B2B supply chain will become more and more obvious with mature operations and scale expansion, while the traditional distribution system, with its multiple transaction chains and redundant and cumbersome management system, will gradually cede resources to B2B.

08 For B2B, efficiency is the ultimate weapon, and scale is an overwhelming advantage. Those that can be profitable are basically very efficient. In regional markets, due to limited market capacity, sales volume is approaching the limit of market growth, and involution is inevitable. At this time, whoever has an efficiency advantage will form an overwhelming competitive advantage in the regional market, and distribution B2B will quickly grow because of this advantage.

09 Wholesalers have strong vitality and are also trying to iterate themselves. It is understood that the number of B2B mini-programs currently counted is about a thousand. Some platforms say the number is more than that; a large number of wholesalers have started using mini-programs to create simple shelves for online ordering. New Distribution estimates that there are currently more than 10,000 wholesalers using mini-programs, but most are mainly for electronic shelf display, with communication and transactions still offline.

10 A new era of Warring States for B2B may be coming soon. Unlike the previous wave of external entrepreneurs entering the FMCG industry to do B2B, the current B2B landscape is more like the industry chain's self-iteration: brand B2B, distributor B2B, platform B2B, and wholesaler B2B. These B2Bs will compete for traffic in small shops on both horizontal and vertical levels. However, this round of competition is no longer about gaining advantage through capital burning, but through refined operations, scale, and efficiency improvements to form competitive advantages. Under such circumstances, it is still too early to assert which type of B2B will become mainstream. But the platforms that have already emerged do have obvious competitive advantages.

Boldly predicting, in the next three to five years, a new era of Warring States for B2B may be coming soon, and the second half of B2B is about to begin.

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