Click the image to register China's traditional mom-and-pop stores are numerous and play a crucial role in the FMCG distribution chain, with hundreds of millions of goods flowing to consumers through these small shops. However, problems such as complex procurement channels, high operating costs, and low informatization levels in traditional retail stores further constrain the development of China's FMCG industry. Against this backdrop, internet giants like Alibaba and JD have successively entered the FMCG sector, attempting to improve distribution efficiency through informatization and digital tools. As online traffic dividends peak, the 6.8 million offline retail small shops have become a new blue ocean for competition among giants. But can internet giants with online traffic advantages truly navigate the deep waters of the FMCG B2B market? This seems reminiscent of when Koubei and Baidu aggressively entered the food delivery market. Will FMCG B2B see a repeat of the food delivery wars? 1 What Giants Can and Cannot Do According to Alibaba's financial reports, as of Q3 2017, Retail Link had served over 500,000 mom-and-pop stores. Undeniably, internet giants backed by substantial capital can expand markets rapidly. The entry of giants has also promoted the development of the entire FMCG B2B industry. On one hand, their entry changed traditional brand owners' attitudes toward B2B, making them recognize its role and value in channels. More brand owners like Coca-Cola and Mengniu have begun proactively cooperating with B2B platforms. On the other hand, it improved small shops' acceptance of B2B, with mobile apps replacing secondary distributors as the main procurement method. Public data shows that in cities with well-developed B2B markets like Changsha, Dongguan, Nanjing, and Suzhou, B2B has become the primary ordering method for small shops. But can internet giants like Alibaba replicate their success in the C-end market in FMCG B2B? I think not, for the following reasons:

  1. The platform model may not work in FMCG B2B In traditional goods circulation, distributors sell to secondary wholesalers and terminals, who then sell to consumers. In contrast, the platform model represented by Tmall allows distributors to sell directly to consumers via the platform, reducing distribution layers and bypassing offline terminals, thereby increasing distributor profit margins and expanding their customer base. Thus, distributors are willing to sell through the platform and pay transaction fees, making the platform model viable in the C-end market. However, the platform matching model in FMCG B2B merely moves offline inventory online. Goods still circulate between local distributors and local terminals, with no change in upstream and downstream compared to traditional distribution. Gross margins don't actually improve, and no new sales increments are generated for distributors. Yet the platform charges service fees, which is vastly different from Tmall's matching value. Moreover, since Alibaba Retail Link does not control inventory or conduct procurement in various regions, first-tier distributors on Retail Link supply directly to terminals. If their supply price is lower than what secondary wholesalers charge terminals, the secondary wholesalers who dominate sales will object; if the price is higher, terminals won't purchase, making it meaningless. This paradox directly leads to Retail Link cooperating mainly with regional secondary wholesalers. In such cases, the so-called shortening of channel layers is difficult to achieve under a platform-based business model.
  2. Personnel Alibaba Retail Link's matching model essentially aims to establish an offline connection model of "manufacturer—Alibaba Retail Link—terminal—consumer," which is inherently about removing intermediaries and being exclusive. However, Retail Link develops local agents by recruiting city partners, but there is no actual employment relationship between them, resulting in weak stickiness and inconsistent terminal service. After giants like Alibaba and JD entered the FMCG B2B market, they did not replicate their dominance in the C-end market. On the contrary, data shows that in many markets, giants perform even worse than B2B platforms like Yijiupai and Best Store Plus. Facts will prove again that giants with a "centralized" gene show obvious Matthew effects in B2C, social, payment, and gaming, where the strong get stronger. But when facing a "distributed" localized competition model, giants have not yet shown absolute advantages. The challenges of integrating offline distribution and retail channels may be even greater than those in the food delivery and ride-hailing markets. 2 3+X Market Structure FMCG B2B is ultimately a business about density. When a platform covers enough market regions, it accumulates vast data and experience, which can be directly converted into productivity, feeding back into regional market development. Take the real estate market as an example: large domestic real estate companies like Evergrande, Country Garden, Wanda, and Vanke are national enterprises. But real estate itself is a regional business because land doesn't move, and residents generally don't move or move infrequently. However, after completing national layouts, these companies can quickly enter regional markets leveraging their national brand advantages; on the other hand, experience and data accumulated nationwide enable them to develop regional markets faster, build homes quicker, design better layouts, and reduce errors during development. By analogy to the FMCG B2B industry, the density logic still applies. In other words, the more regions a B2B platform covers, the stronger its overall competitiveness. Compared to regional platforms, national B2B platforms not only have experience and data but, more importantly, their large-scale national layout makes it easier to obtain exclusive agency rights for brand products, forming scale advantages from factory to terminal. Regional platforms, lacking sufficient outlets and layout, cannot meet brand owners' requirements in a single market, making it difficult to do factory-to-terminal business and resulting in relatively poor profitability. This mirrors the "thousand-group war" and ride-hailing wars, where national players like Meituan-Dianping and Didi-Kuaidi eventually won and became industry leaders. Data we observed shows that the FMCG B2B market has already formed a 3+X competitive landscape. The 3 refers to three national B2B platforms: Yijiupai, Alibaba Retail Link, and Best Store Plus, each covering over 50 cities with platform transaction volumes exceeding 4 billion yuan. The X refers to numerous regional platforms covering fewer cities. 3 Losses and Profitability Since 2013, China's FMCG B2B platforms have developed rapidly. Relevant data shows that there are currently 254 FMCG B2B platforms in China. However, almost all platforms are in a state of continuous losses, with profitability far off. Among them, Yijiupai is quite special: an extremely low-key company that quietly achieved the largest scale. A group of founders without backgrounds led the company to rapidly rise in the B2B industry, unafraid of giants, and wherever they go, their comprehensive competitiveness is among the best. As an FMCG B2B company that started with alcohol, Yijiupai achieved sustained profitability in Q3 and Q4 of 2017, covering 81 cities nationwide with a platform GMV of about 7.4 billion yuan. In a B2B market crowded with giants, how did Yijiupai stand out? This has drawn our attention.
  3. Firmly occupying the "base" of alcohol products Relevant data shows that beverages and mineral water are the most frequently purchased products by small shops after tobacco. This has directly led to almost all FMCG B2B platforms using mineral water and beverages as entry points for market development. However, the low value and high fulfillment costs of these products have made it difficult for many platforms to profit. Yijiupai has taken a different path from other B2B platforms. As is well known, Yijiupai started with alcohol, an industry with relatively high profit margins, which directly gives it stronger profitability than other platforms.
  4. Bypassing first-tier distributors to reduce layers: direct agency from manufacturers In 2017, Yijiupai quietly changed its name from Yijiupai (酒批) to Yijiupai (易久批), signaling its official transformation into a full-category, comprehensive FMCG B2B platform, and began increasing the proportion of non-alcohol products. According to internal employees, in 2017, non-alcohol products accounted for 40% of Yijiupai's operations, and this figure may increase to 50% or even higher in 2018. An increase in non-alcohol products means a decline in platform profits. To ensure profitability, Yijiupai obtained regional agency rights for over a hundred brands, including first-tier brands like PepsiCo and Master Kong. At the same time, Yijiupai established strategic cooperation with many domestic first-tier brands such as Yanghe, Jiugui, Hengshui Laobaigan, Fenjiu, Gujing, and Castel, securing national agency rights and supplying goods directly to terminals as the China general agent.
  5. Refined product operation capabilities Relevant data shows that the third reason for Yijiupai's profitability is its refined operation of long-tail products. Besides alcohol and beverages, Yijiupai is increasing the proportion of categories such as food, rice, flour, oil, and general merchandise. Additionally, due to its high density of downstream terminal coverage, Yijiupai has strong bargaining power with upstream brand owners. As the first profitable national FMCG B2B platform, Yijiupai's development path and its refined long-tail product operation capabilities offer significant reference value for the entire industry. 2017 has come to an end, and the aggressive advances of giants have further stimulated the transformation and rise of various B2B platforms. The essence of FMCG B2B is the integration of offline traditional channels. For such a business, the direct entry of giants has never been frightening. The huge FMCG market still holds plenty of opportunities for entrepreneurs. For FMCG B2B, the Warring States period may have just begun!