Introduction: Distributors cannot delay or retreat; they need to take a step forward and must win their own survival space.

Author | Ren Wenqing Andy Review | Gou Gou Layout | Zhang Yuwei

Last week, I went to Tangshan and had an in-depth exchange with a local distributor boss. He entered the trading business in 2011, becoming a dairy distributor, handling business with supermarkets and circulation small stores. At the end of 2019, he launched a local supply chain platform and began shifting his business focus to small stores. Over the past three years, he continuously adjusted and experimented, finally finding a path for traditional distributors to transform into local supply chain platforms. Now his platform covers 2000+ small stores, sales continue to grow, and it has become the largest local B2b supply chain platform. His practical experience is highly valuable for many distributors.

In the past, we have reported some B2b cases and organized learning sessions, but many distributors have feedback: "My trading business is still running, and my market scale is not that large. They are doing well, but it feels a bit far from me!" Is there a more relatable transformation path from 0 to 1? Yes. He is Yu Xiuwei, founder of Tangshan Yihe, who built a local supply chain platform from 0 to 1 on the basis of traditional trading. Moreover, he was very forward-looking and entered the retail sector two years ago, founding a local snack discount chain brand. How did he think? What did he do? What pitfalls did he encounter? What experience did he summarize? Can distributors touch the snack store trend? Is it a challenge or an opportunity? Yu Xiuwei has successful practice and deep thinking, with insightful judgments on the present and future. Next, I will share the main content of our exchange with you.

Doing a Business You Lead

Before 2020, Yu Xiuwei was a traditional distributor, helping brands with distribution coverage and completing regional business targets. This is the current business state of the vast majority of distributors: manufacturers demand sales and inventory pressure, customers demand fees and payment pressure, squeezing distributors' survival space to the extreme. During the three years of the pandemic, many distributors fell. Those who survived the pandemic are not doing well either; some distributors bluntly say: "I don't know if I can survive this year." Yu Xiuwei told me that many peers are in this state, and now some people come directly to him to ask how to transform into B2b. Why do B2b? Because it won't be forced to stock by brands, and won't have payments delayed by supermarkets—this is a business that distributors can lead themselves! Take Yu Xiuwei's Jiadiantong as an example. The platform has 4000+ SKUs, serves 2000+ small stores, with online settlement and zero credit period. In the past, they sold whatever the brand had; now they sell whatever the customer needs. In the past, the manufacturer had the final say. Now, you have the final say—as long as you serve the small stores well. To do small store business well, Yu Xiuwei summarized a service triangle: First, respect, regular visits, and zero loss for stores are the foundation of doing business. Second, have first-line well-known products so customers are willing to cooperate with you. Third, select tight and profitable products to bring profits to yourself and customers. How to achieve this? Tangshan Yihe has three major centers: product, sales, and warehousing and distribution. There are four major product categories: snacks, beverages, daily chemicals, and seasonings. When the platform first started, 80% of products were from distribution agency, and 20% were sourced from elsewhere. Now it's the opposite. With a 5000-square-meter warehouse, over 20 vehicles, and 13 small store business consultants, payment before delivery ensures excellent cash flow. Small store business is a gold mine. In an ordinary third-tier city, with 3000 small stores as a benchmark, average daily sales per store of 2000 yuan, excluding tobacco and alcohol at 40%, daily sales of 1200 yuan (all FMCG categories). At 80% coverage and 80% penetration, 3000 stores * 1200 yuan daily sales * 365 days * 80% coverage * 80% penetration = 840 million yuan. If you don't mine this gold mine, others will. Now more and more distributors realize this and want to transform into B2b, but starting from trading is not easy!

From 0 to 1, Starting a B2b

Yu Xiuwei told me that many people want to transform into B2b and come to exchange with him, but they find that their ideas are good, yet they take many detours. The reason is that they haven't found a learning object with benchmarking value. Why? On one hand, the B2b platform distributors that are doing well now are basically in first- and second-tier provincial capitals, where market capacity, retail formats, and competitive environments are very different from the second- and third-tier, or even third- and fourth-tier cities where most distributors are located. On the other hand, some started as platforms from the beginning, and after years of development, they have moved away from the traditional trading company framework. Learning from them is hard to know where to start. Earlier, Yu Xiuwei learned and consulted widely, but finally found that the key is to adjust and try according to his own situation. It took three years to finally get this path through. The experience and lessons were bought with real money, time, and energy. Yu Xiuwei shared several points with me. Some distributors want to slowly transform within the trading company framework and incubate. They make a small program and say they are starting B2b. That will never succeed. B2b and traditional trading are two different business models, and the organizational models are definitely different. You must set up the standard structure from the beginning. This is crucial. Take Tangshan Yihe as an example. Three major centers: Project Management Center, mainly responsible for building the supply chain system, including operating activities; Business Consultant Center, where business personnel shift from selling goods to operational guidance; Warehousing and Logistics Center, responsible for product warehousing and distribution. Set up from the start, there will be continuous磨合 (running-in), and you need to anticipate problems at different stages. Many people care about system tools, but systems are easy to solve; some things you don't think of are key. For example, the human resources issue. Find a deputy general manager level person specifically responsible for HR. This is very important because later recruiting positions, negotiating performance, and coordinating department division of labor are very energy-consuming, and the boss alone can't handle it. Another example is the financial system issue. Once the platform runs, the accounts to handle grow geometrically compared to before. In addition, how to separate from the traditional trading business? Where to find personnel? How to adjust performance? Where to source products? How to handle local competitive relationships? These are problems that transforming distributors will definitely encounter. Tangshan Yihe has stepped on many pitfalls and summarized more experience. But Yu Xiuwei said that the biggest pitfall is that you cannot shift from a distribution mindset to a platform mindset, wavering between the two identities. If you know that is the trend, you must be firm enough. Of course, you also need to do the math to see if finances can support it.

Snack Store Trend: Opportunities and Challenges

In addition to the practical experience of transforming into B2b, we also talked about the hot snack stores. Yu Xiuwei told me that in 2021, he went to the south to inspect snack stores, and after evaluation, he began to consider opening stores. From planning to implementation, he opened the first store in just two months. That store is now doing very well, earning 300,000 yuan a year. Later, they continuously adjusted and optimized, established a dedicated retail team, and once the model was proven, they now have 8 stores in operation, with another 8 opening soon. Why open snack stores? First, distributors have only done the supply segment, but with the development of the industry, distribution and retail have merged, severely squeezing distributors' survival space. Whoever is closer to consumers can survive, and the most direct way is to open stores. Second, after careful calculation, combined with supply chain advantages, opening snack stores and then replicating is a viable business model. Most importantly, 10 years ago, distributors doing retail was unthinkable; technical capabilities, ecological environment, external support, and talent reserves were insufficient, but now they are all easily solved. After two years of practice in the retail end, Yu Xiuwei has new thoughts on the supply chain platform. B2b, which b is it to? If you have 20 stores, with single-store daily sales of 10,000 yuan, that's 6 million yuan a month. To reach that level of 6 million by supplying small stores through the supply chain requires enormous effort. If you do 6 million with your own stores, the value is greater, and it can in turn force, feed back, and optimize your B2b supply chain platform. Now snack discount stores are expanding rapidly nationwide, having a big impact on distributor businesses. Yu Xiuwei believes this model's impact on the local distribution system is systematic, and distributors must actively respond. Many people are panicked and don't know what to do. Wait for business to be taken away? How to respond? Can I open stores? How to open stores? Yu Xiuwei says this is actually an opportunity for external capital and supply chains to force local trading systems to improve efficiency. For capable distributors, challenges and opportunities coexist. He says distributors cannot delay or retreat; they need to take a step forward and must win their own survival space.

Final Words

From trading to local supply chain, and then personally doing retail, Yu Xiuwei is a rare distributor with such rich practical dimensions, and he thinks very deeply about the problems facing the current distribution system and future evolution. Due to space limitations, Yu Xiuwei's practical experience and wonderful thoughts cannot be detailed one by one. "New Distribution" will organize an in-depth study tour on August 17-18, visiting Tangshan Yihe Trading, and having in-depth exchanges with founder Mr. Yu Xiuwei: How can traditional distributors start B2b from 0 to 1? Can distributors touch the snack discount store impact on local business? How to respond? Where are the opportunities?

This study tour has limited spots. Scan the QR code to add WeChat to register.