New Distribution has learned that in early 2019, several FMCG giants such as Yili, Budweiser, Kangshifu, and Uni-President have been piloting self-built B2B systems in various regions. According to industry insiders, Uni-President has selectively piloted B2B systems in major regions nationwide, and Kangshifu introduced "Shifutong" in February this year, incorporating Kangshifu and Pepsi brands into its own B2B system. 1. Why do brand owners build their own B2B? Wang Hua (pseudonym), head of new retail at a certain brand, told New Distribution, "Starting this year, some FMCG B2B platforms have begun charging brand owners platform usage fees, ranging from hundreds of thousands to millions of yuan annually." After nearly five years of rapid development in the FMCG B2B industry, leading platforms such as JD New Route and Alibaba Retail Link have announced coverage of millions of small stores. As the FMCG B2B landscape begins to take shape, charging tolls to brand owners is only a matter of time, much like the rise of KA stores in the past. But is this the key reason brand owners are building their own B2B? Wang Hua told New Distribution, "Regardless of whether leading B2B platforms charge fees, brand owners will build their own B2B to achieve digital transformation of their channels. In the current era, digital marketing is a core competency every brand owner should possess. Moreover, brand owners have long anticipated that leading FMCG B2B platforms would charge fees." Frankly, the core reason for brand owners to build their own B2B is that channels are the core competitiveness of FMCG enterprises. Brand owners must have the ability to connect with the "last mile of consumption—the place" through channel digitalization, thereby building an autonomous and controllable distribution system. "Think of it, buy it" is the underlying logic of product distribution in the FMCG industry. Brand owners must spare no effort to compete for the last mile of consumption, achieving inventory online and precision marketing by connecting with terminals. In the past, although some leading brand owners had already built information systems to varying degrees, they often only reached the distributor level, managing goods and personnel. There were still multiple information gaps in various channel links, with no real-time online presence, and promotional spending and market feedback were severely delayed. As the demographic dividend disappears and the market enters saturated competition, simple distribution plus promotion is no longer effective, and deep distribution has reached its end. Brand owners must upgrade their distribution tactics, evolving from deep distribution to precision distribution, striking precisely and using data to improve the efficiency of product distribution and sales. 2. Can brand owners succeed in building their own B2B? Of course, self-built B2B has its "beautiful" side for brand owners, but it also hides many obstacles and challenges. For a single category or single brand, if an online APP only sells its own products, and if product sales do not account for more than 30% of a small store's total, and if it is not the sole distribution channel (with other FMCG B2B platforms), it is difficult to create stickiness for small stores, and the user usage cost is very high. In addition, for brand owners, to build a complete and independent digital distribution system, they need strong operational capabilities, IT iteration capabilities, and also pose a huge test for distributors in various regions. Currently, many distributors may not even have completed basic informatization. At the implementation level, whether true full-chain digitalization can be achieved remains to be seen. In a word, brand owners building their own B2B to create an independent and controllable digital distribution system has potential benefits, but they must also face the various difficulties behind it. At this stage, although brand owners are just beginning to pilot, whether self-built B2B is a false proposition is still worth pondering. In this regard, New Distribution invited relevant industry insiders to discuss their views and understanding of brand owners building their own B2B.
Shi Xiajun, Head of Overall E-RTM Channels at Unilever:
Regarding whether brand owners can successfully build their own B2B, if we look at this issue from a global perspective, it is possible, and there are precedents in other countries where brand owners have built their own B2B and operated it well. There are two key dimensions to consider: first, the brand owner's influence and market share; second, whether there are strong leading platforms in the market, simply put, whether there are platforms like JD.com or Taobao/Tmall in the C-end. We can see that in the FMCG B2B field, the market landscape has basically formed. Taking typical deep distribution companies like Coca-Cola, Uni-President, and Kangshifu as examples, if their channels are autonomous and controllable, with a very high share in a certain category, and they completely cut off cooperation with leading platforms, controlling all products themselves, and small stores can only get goods from one channel, then there is a possibility of success. The current attempts by brand owners to move existing outlets and products online have obvious benefits: originally, they invested 3 yuan to distributors, who only used 1 yuan for marketing. With self-built B2B and online channels, now only 2 yuan is needed, leaving room for cost reduction. In the short to medium term, if the cost reduction can offset the investment in self-built B2B, it is worth trying for brand owners that rely on deep distribution. In addition, in the past, the core capabilities of brand owners at the channel level were execution and coverage. When everything is moved online, it tests the operational capabilities of brand owners, which is precisely the shortcoming of brand owners at this stage.
Xu Yuren, Deputy General Manager of Online E-Distribution Shangrui Marketing: In my view, I interpret this from two aspects: First, what is the real demand for brand owners to build their own B2B? If it is to build an independent private traffic pool and achieve omni-channel digital marketing, brand owners may need a long time, or even this itself is a false proposition; if brand owners expect to build their own B2B to improve channel efficiency, reduce management costs, reduce waste in channel investment, and support the investment cost of self-built B2B with ROI>1, it is entirely worth exploring, especially for leading enterprises. Second, brand owners must not view the digital transformation of the entire industry channel with a mindset of competing with platforms. No matter how they compete, it is their own business. The essential purpose of FMCG B2B is still to help brand owners better achieve product distribution; otherwise, FMCG B2B platforms would have no value. Cao Jun, CEO of Moli Hutong: Regarding brand owners building their own B2B, first of all, brand owners must be clear about their original intention. There is a saying in Taiwan: "If you go to the river to catch fish, you can wash your shorts along the way; if you go to the river to wash your shorts, then don't try to catch fish." The essence of building a private domain is to improve efficiency, which is the process of channel digitalization. But don't think about opening a "mall." The logic of a mall is that for small stores, it offers category coverage, price advantages, and timely delivery. Wang Xin (pseudonym), President of a leading B2B platform: Personally, I think brand owners building their own B2B is a false proposition: First, from the perspective of downstream terminals, it completely goes against the demand for "more, faster, better, and cheaper"; second, from the perspective of distributors, it is even less valid. Unless they are exclusive distributors or support full-line product listing, there is no use value. Moreover, distributor profits have both visible and hidden parts, and the hidden parts cannot be exposed; third, not all distributors have the ability to handle inventory management and platform operations. Although the ideal is beautiful, the result may be a mess after spending a huge amount of money. If brand owners can achieve digitalization in the wholesale link, they might as well go directly to the retail link and use POS systems. In fact, this is impossible because users are unwilling and unable to use them. What do you think about brand owners building their own B2B? Is it a false proposition? Welcome to leave a message in the comment section. You can also scan the QR code below to add the author's WeChat for discussion. We look forward to sparking new ideas with you. -END-