---
title: "New Distribution Zhao Bo: It's Not the Internet That Defeats Distributors, but High-Efficiency Models Will Always Replace Low-Efficiency Ones"
description: "If one word were to describe the state of the FMCG industry in 2016, it would be 'decline.' In the first half of 2016, among 42 FMCG companies that disclosed financial reports, 33 saw revenue growth of less than 10%, 17 saw declines (41%), and 22 saw net profit declines (54%). Master Kong's revenue fell 13.9% to 27.99 billion yuan, with net profit down 64.8% to 614 million yuan. Wahaha's performance dropped from 72 billion to 49.4 billion yuan, a decline of 22.6 billion yuan, marking a new low in years."
author: "赵波"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-10-17"
categories: "Dealer Operations"
language: "en"
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markdown: "https://xinjignxiao.com/en/articles/new-distribution-zhao-bo-it-s-not-the-internet-that-defeats-distributors-43a9a6d6.md"
original_source: "https://mp.weixin.qq.com/s/6Z3aHkMvxozfxAg5eC2DwQ"
translation: "https://xinjignxiao.com/zh/articles/%E6%96%B0%E7%BB%8F%E9%94%80%E8%B5%B5%E6%B3%A2-%E4%B8%8D%E6%98%AF%E4%BA%92%E8%81%94%E7%BD%91%E6%89%93%E8%B4%A5%E4%BA%86%E7%BB%8F%E9%94%80%E5%95%86-%E8%80%8C%E6%98%AF%E9%AB%98%E6%95%88%E7%8E%87%E6%A8%A1%E5%BC%8F%E4%B8%80%E5%AE%9A%E4%BC%9A%E6%9B%BF%E4%BB%A3%E4%BD%8E%E6%95%88%E7%8E%87%E6%A8%A1%E5%BC%8F-43a9a6d6.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/new-distribution-zhao-bo-it-s-not-the-internet-that-defeats-distributors-43a9a6d6/"
citation: "赵波. “New Distribution Zhao Bo: It's Not the Internet That Defeats Distributors, but High-Efficiency Models Will Always Replace Low-Efficiency Ones.” New Distribution, 2016-10-17. https://xinjignxiao.com/en/articles/new-distribution-zhao-bo-it-s-not-the-internet-that-defeats-distributors-43a9a6d6/"
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---

# New Distribution Zhao Bo: It's Not the Internet That Defeats Distributors, but High-Efficiency Models Will Always Replace Low-Efficiency Ones

> If one word were to describe the state of the FMCG industry in 2016, it would be 'decline.' In the first half of 2016, among 42 FMCG companies that disclosed financial reports, 33 saw revenue growth of less than 10%, 17 saw declines (41%), and 22 saw net profit declines (54%). Master Kong's revenue fell 13.9% to 27.99 billion yuan, with net profit down 64.8% to 614 million yuan. Wahaha's performance dropped from 72 billion to 49.4 billion yuan, a decline of 22.6 billion yuan, marking a new low in years.

If one word were to describe the state of the FMCG industry in 2016, it would be 'decline.'

**In the first half of 2016, among 42 FMCG companies that disclosed financial reports, 33 saw revenue growth of less than 10% year-on-year, 17 saw declines (41%), and 22 saw net profit declines (54%).**

Master Kong's revenue was 27.99 billion yuan, down 13.9% year-on-year; net profit was 614 million yuan, down 64.8%.

Wahaha's performance dropped from 72 billion to 49.4 billion yuan, a decline of 22.6 billion yuan in revenue; 49.4 billion yuan was the lowest revenue in years!

Procter & Gamble's global sales fell 12% in the first quarter of 2016, the largest decline in seven quarters.

'When the nest is overturned, no egg remains intact.' In October, we conducted a survey on the survival status of distributors, with 2,559 distributors participating, covering all regions of the country. Among them, 47.1% had sales below 10 million yuan, and 7.4% had sales above 100 million yuan. What can we see from this data?

**Compared with the same period last year, 47.3% of distributors saw sales revenue decline, 64.8% saw net profit decline, and 71.7% saw operating costs increase. 70% of distributors said funds were tighter than last year, and 62.9% said e-commerce had impacted their business.**

Everyone is finding it harder to make money this year; 60-70% of distributors said their performance declined compared with last year. 70% of distributors said overall economic costs were rising, wages were rising, and market costs were rising, leading to a large increase in operating costs. Distributors who borrowed from banks should have noticed that banks stopped lending early this year.

What conclusions can we draw from the above data? Both manufacturers and distributors face severe challenges:

**Enterprises: Insufficient product innovation, loss of channel barriers, and consumption upgrading.**

**Distributors: Rising costs, declining profits, and the impact of the Internet.**

**Summary: The original product marketing channel model is no longer suitable for the new era; transformation is urgent.**

At the same time, a new model is continuously optimizing the supply chain. What is this model? It is B2B. Before discussing B2B, I think we need to exchange some basic theories.

**The core factor determining where consumers shop is the total consumer cost.** Let me briefly explain. The so-called lowest total cost channel is from the consumer's perspective: what is the lowest cost channel for me to purchase a product?

From the consumer's perspective, the cost of consumption is not just the monetary cost:

**Total consumer cost = product cost + time cost + logistics cost + experience cost + risk cost.**

The total consumer cost includes all benefits obtained during purchase and consumption, which may come from product value, service value, personnel value, or image value. Total cost includes the monetary cost paid for a product or service, as well as the expected time, physical, and mental costs.

What do planned and unplanned purchases mean?

Unplanned purchases are those made without prior planning, driven by sudden impulses, such as when I am thirsty, hungry, sick, or tired. These desires are physiologically driven, creating a strong sense of urgency, and are not planned in advance.

Planned purchases, like laundry detergent and toilet paper, do not have a strong sense of urgency. Consumers plan ahead, compare prices, and find the optimal cost model; they buy where it is cheapest.

Standard FMCG products will increasingly be purchased through Tmall Supermarket or JD Supermarket in the future. Non-standard products will be mainly sold through O2O, C2C, and convenience stores. I believe the future combination of channels will be vending machines and convenience stores. This is especially evident this year, with Tmall Supermarket and JD Supermarket growing rapidly in FMCG.

**For enterprises, the higher the purchase frequency, the higher the brand dependence; the lower the purchase frequency, the stronger the channel dependence.**

The penetration rate of B2C in the FMCG industry is not high. Last year, Tmall's transaction volume was 91.217 billion yuan, with FMCG accounting for less than 3%. When chatting with Tang Guangliang of Xinqiao, he told me that during last year's Double 11, Taobao sold 91.2 billion yuan, but a well-known beverage brand's mineral water only sold two packs online that day. This shows that some FMCG products are indeed not suitable for B2C sales.

What model is suitable for FMCG in the future? I believe B2B is the mainstream model for the FMCG supply chain. Why?

**B2B platforms will completely break the original supply chain model and inject new value-added services, improving overall supply chain efficiency.**

What are their advantages? Platform-based B2B networks have wide coverage, can provide detailed store data, and systematically profile users and stores.

**Types and methods of entering traditional channels:**

Currently, there are few that can claim to be platform-level: Zhongshang, Xintonglu, Lingshoutong, and Zhanghetianxia. Those integrating from a technical perspective include Zhongke Shangruan and Qianmi. Those integrating distributors include Piduoduo and Yunbao Shangmeng. Infrastructure providers include Pingan Guanjia, Yishang, and Weijie Chengpei.

**Opportunities, threats, and problems for manufacturers:**

B2B platforms present a huge business opportunity for enterprises, especially small and medium brands.

Brands that previously lacked the ability to cover the whole country and recruit distributors nationwide now have a chance to overtake on the curve. As long as your product is good, packaging is novel, and you continuously meet consumer needs, you can leverage these platforms to push products to 5.6 million small and medium stores nationwide instantly.

For details, see the PPT; I won't elaborate here.

I believe the essence of B2B is improving supply chain efficiency through scale, informatization, big data, supply chain finance, and unified warehousing and distribution. In the future, it is not the Internet that defeats distributors, but high-efficiency models will always replace low-efficiency ones, regardless of corporate will. **We also see that traditional enterprises have huge offline stock, industry characteristics, and cost and efficiency issues, so distributors and B2B will coexist for a long time.** The length of this period depends on the speed of B2B's optimization of supply chain efficiency. For example, if Alibaba could promise one-day delivery for all products, I believe distributors would be close to extinction.

So how should distributors transform? These three models are from my recent visits and personal insights. Time is limited, so I'll briefly introduce them. Those interested can hear more tomorrow afternoon.

**First, internal transformation of distributors.** We found two distributor friends in Shandong to try internal transformation reforms, and the results are good so far. Through reform of the distributor's operating model, provide your sales team with basic support in funds, logistics, warehousing, finance, and internal affairs. Split brands, account separately, and let small teams of three to five people contract and take equity in the brand. Business people become shareholders, working with the distributor to operate products. The platform ensures finance, logistics, warehousing, and financial support. Achieve internal division of labor, platform + amoeba transformation.

**Second, transform into B2B supporting infrastructure or participate in the division of labor.**

Let's look at the third model. Many distributor friends have seen this chart, so I won't go into detail.

In 2016, our FMCG distributor publication was renamed New Distribution. **Literally, New Distribution helps traditional distributors transform into a new distribution system by providing valuable, guiding content and practical knowledge. I also hope our content can bring new professional knowledge to distributors.**

In 2016, I visited over 40 B2B platforms and had in-depth exchanges with industry leaders. I wrote 40 original articles and published over 150 B2B articles on the platform. We also led nearly 400 domestic distributor friends to visit over ten 2B platforms, including Piduoduo, Jinhuobao, Yishang, Qianmi, Alibaba, etc. I believe everyone gained a lot of knowledge and experience during these visits, and I also gained a lot. I also thank everyone for taking time to come to Fuzhou to attend our 2B conference. I believe the best is yet to come.

-END-

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## Citation metadata

- Publisher: New Distribution
- Author: 赵波
- Published: 2016-10-17
- Canonical: https://xinjignxiao.com/en/articles/new-distribution-zhao-bo-it-s-not-the-internet-that-defeats-distributors-43a9a6d6/
- Original source: https://mp.weixin.qq.com/s/6Z3aHkMvxozfxAg5eC2DwQ

## Copyright and AI use

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Contact: zhaobo258@gmail.com · +86 158 5481 7671