---
title: "Pitfalls! Pitfalls! Pitfalls! Six Major Cognitive Pitfalls in FMCG B2B Entrepreneurship!"
description: "FMCG B2B has been hot in recent years, with many participants, but many still hold misconceptions and start without clear thinking, leading to constant pitfalls. This article outlines six major cognitive pitfalls in the B2B industry, including the mistake of doing services and transactions simultaneously, fearing giants like Alibaba and JD, misunderstanding channel value, and more."
author: "赵波"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2017-07-24"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/HTfiGyXYc2QKdGXNVUhqLA"
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# Pitfalls! Pitfalls! Pitfalls! Six Major Cognitive Pitfalls in FMCG B2B Entrepreneurship!

> FMCG B2B has been hot in recent years, with many participants, but many still hold misconceptions and start without clear thinking, leading to constant pitfalls. This article outlines six major cognitive pitfalls in the B2B industry, including the mistake of doing services and transactions simultaneously, fearing giants like Alibaba and JD, misunderstanding channel value, and more.

FMCG B2B has been hot in recent years, with many participants, but many still hold misconceptions and start without clear thinking, leading to constant pitfalls. Today, I will outline six major cognitive pitfalls in the B2B industry!

**Cognitive Pitfall 1: Doing services and transactions simultaneously**
Many people think that doing B2B means building warehouses, unified warehousing and distribution, then setting up a platform to sell goods, aiming to cut off service connections with small shops through warehousing and cut off transaction relationships between small shops and distributors through transactions, ultimately controlling the local market.

**Zhao Bo's interpretation:** This is a common mistake that many distributors make when starting B2B platform ventures in the early stages!
This approach is like Sima Zhao's intention—everyone knows it. Other distributors are not foolish; knowing you will cut off their retreat, why would they enter your warehouse? This is simply impossible. Moreover, B2B is not that powerful; it cannot solve the terminal merchandising, returns, and exchanges that original distributors and brands handle, nor can it solve market competition issues.
When you cannot satisfy these needs but still want to take everything, the results for such distributors are predictable.
**So, if you do transactions, don't do services; if you do services, don't touch transactions!** Focus on being a third-party unified warehousing and distribution provider; doing that well is impressive. As for cutting into transactions, you can be an investor, but expecting one platform to handle everything is basically impossible.

**Cognitive Pitfall 2: With Alibaba and JD entering, the B2B business is no longer viable**
Facing the entry of giants like JD and Alibaba, Shi Zhengchuan, CEO of Qianmi Network, once asked me: "Can JD and Alibaba succeed? If they do, what will these distributors do?" Lu Dexing, CEO of Cloud Credit Union, also asked me: "If I were an entrepreneur, how could I resist Alibaba and JD?"
JD and Alibaba squeezing into this already difficult industry scares many entrepreneurs, and even many investors who don't understand the industry are afraid to invest in B2B, believing that scale is a barrier and that once giants enter, other platforms will die.

**Zhao Bo's interpretation:** This is indeed a topic that every B2B entrepreneur cannot avoid. The essence of this question is whether B2B will, like B2C, show a Matthew effect where one player dominates and the winner takes all.
New Distribution believes it will not. B2B differs from B2C; B2B pursues long-term, stable buyer-seller transaction relationships built on minimized transaction costs. **Can scale achieve minimized transaction costs? The answer is no. Scale has some relationship with cost, but it is not a necessary outcome.**

**First:** Although B2B is a technology-driven industry that improves efficiency, it is still a very complex and labor-intensive industry. Giants can pile up scale with capital, but they cannot pile up low-cost, efficient supply chain organizations, flexible and attractive online operations, and good terminal delivery and service. These require an effective, standardized, and highly replicable operating system that takes time to accumulate. Moreover, the larger the organization, the more complex the operating system, and the longer the construction cycle. So, by the time they build it, you will have already formed your scale.

**Second:** B2B is an industry that emphasizes density and service. Different industries require personalized services from different channel partners. Large-scale standardization inevitably means the loss of personalized services. Low temperature, short shelf life, and multiple SKUs—these three things giants cannot handle. So, don't fear the giants' scale; focus on polishing your own operating system, focus on service, and focus on regional density. Giants will sit down and talk about acquiring you.

So, B2B is not a winner-take-all industry; in this game, capital will be the winner-take-all.

**Cognitive Pitfall 3: Multiple channel layers, high costs, low efficiency, and urgent industry reform**
Traditional distribution channels have many members, multiple layers, extremely high costs, low efficiency, opaque information, and low capital efficiency, urgently needing reform.

**Zhao Bo's interpretation:** This paragraph is surely written in every entrepreneur's business plan, but it is a mistake. Layers have value. Distributors provide in-depth market services for brands, helping brand owners solve channel capital buffering, product storage, terminal merchandising, and market competition issues. Currently, these issues cannot be solved by B2B because its delivery scenarios are too singular to meet the multi-channel distribution needs of large brands. More critically, once B2B grows large, it will inevitably squeeze upstream. This is fundamentally different from distributors.

Here, I need to say more: All channel changes are essentially driven by changes in consumers.

For brand owners, the most painful thing now is that consumers are becoming more "fickle," more "picky," and more "fond of the new and tired of the old." Originally, a product could sell for 10 years and satisfy 1.4 billion consumers. But now, a product's life cycle may be only one year, and it may only satisfy 100 million people, or even 10 million. This forces brand owners to continuously launch different products for different groups to meet ever-changing consumer demands, and they must iterate quickly, upgrade products, and find consumers to place products in front of them.

The traditional agency system cannot bear the changes brand owners need to adapt to consumer shifts. In the future, to meet consumer demands, brand owners must rapidly iterate products, possibly launching dozens or even hundreds of new products a month. Distributors simply cannot simultaneously promote multiple new products or handle such operational frequency.

There are also issues like store transaction data and inventory within channels, which are bugs inherent in distributors' genes and cannot be solved.

So, consumer changes force brand owners to adapt, which requires reshaping channel structures. This is the essence of channel reform.

**Cognitive Pitfall 4: Matching is not enough; self-operated is the way, preferably with store rebranding**
When I first learned about this industry, I also thought this way: pure matching has no value. Of course, that view is still valid, but is pure self-operation really viable?

**Zhao Bo's interpretation:** The ultimate target of B2B services is still small shops. Their procurement needs are diverse, high-frequency, and very complex. No single model can simply meet all the needs of small shops.

Self-operated models can put high-frequency, best-selling products online, but management capabilities are limited, and SKUs cannot be expanded indefinitely, failing to meet the diverse long-tail needs of small shops.

Matching models, where merchants are onboarded, can meet long-tail product needs, but high-frequency products are difficult to list.

Therefore, only a hybrid model combining both—front-end self-operated, back-end matching, and middle joint operation (consignment)—can meet the high-frequency, essential, long-tail, and new product needs of small shops.

**The hybrid model is the truly effective way to meet small shop needs.**

**Cognitive Pitfall 5: To build stickiness with small shops and show investors the feasibility of the business model, subsidies and big single products are used to inflate GMV.**

**Zhao Bo's interpretation:** The biggest problem with big single products is insufficient profit margins. Currently, the average markup rate in the B2B industry is no more than 8%. The core reason is the inability to control goods in small shops. To build transaction relationships and service stickiness, too many low-margin big single products are sold, even those that second-tier wholesalers are unwilling to deliver. Additionally, heavy subsidy promotions are done through discounts, rebates, and gifts.

But do small shops really only care about price? I highly agree with what Wang Yidong, founder of Wanjia Cai Supply Chain, said: "In B2B, what you gain from, you will lose from."

As mentioned earlier, scale is never a barrier; the operating system is. **Within the operating system, it's not just about price discounts; more importantly, it's about supply chain organization, platform operations, and rapid product delivery capabilities. GMV achieved through subsidies and big single products has no value!**

For brand owners, B2B is not just a place to sell big single products; it also creates possibilities for selling niche products.

What distributors have, B2B does not, and vice versa. Originally, big single products were like machine guns spraying; now personalized products require sniper rifles for precise shots. This is B2B's strength. So, B2B should not only sell big single products but also help brand owners solve the precise distribution of niche products. This is the advantage and value of B2B.

**Cognitive Pitfall 6: Becoming an agent to improve product gross margins**

**Zhao Bo's interpretation:** Many platforms are becoming agents, and doing quite well. New Distribution's view may be questioned. Of course, some say consignment is possible. Here, I clarify: consignment and distribution are completely different. Consignment is like a second-tier wholesaler, while distribution is like a first-tier wholesaler; their functions are entirely different. The agency model is meant to fulfill the manufacturer's capital and product storage functions. Once storage is involved, capital efficiency and product turnover efficiency are lost. Moreover, it occupies warehouse space, which is not B2B's core value or capability.

B2B's core value lies in data-driven operations, playing with turnover rates—capital turnover and product turnover. Becoming an agent to improve profit structure has no value. So, no matter how high product profits are, it's not B2B's dish.

There are many more cognitive pitfalls in B2B entrepreneurship, which I won't detail here. But the big trend is set, and I firmly believe in B2B's future. **Distributors are destined to be marginalized, shifting from regional agency modules to professional functional modules. But how to transition must be thought through clearly and understood before acting.** New Distribution's 8th B-end E-commerce Study Tour is now open. This time, we will visit three distinctive B2B platforms in Guangzhou and Shenzhen. During the tour, I will share and exchange insights and experiences from my recent visits. Welcome to register.

**Activity Schedule:**
> 11th: Check-in at designated hotel in Guangzhou; 12th: Visit Guangzhou 1Life; 13th: Visit Shenzhen Sealink; 14th: Visit Shenzhen Cloud Credit Union; 15th: Return or free arrangement for sightseeing.

**Guangzhou 1Life:**
Guangdong Dianba Technology Co., Ltd. was established in January 2015 by Mr. Tan Xiaoping. The company, with efficient convenience stores as an entry point, launched the "1 Supply Chain" e-commerce platform. Over two years, it built 1Life into an e-commerce service platform integrating supply chain, warehousing, logistics, data, and finance, becoming the most influential supply chain e-commerce platform in the Guangzhou area. Currently, the company owns four brands: 1 Community, 1 Supply Chain, 715 Internet Supermarket, and Youmei Life Supermarket, serving users and stores in community life, store product supply, community standard supermarkets, and store payment settlement from four dimensions, providing convenient, high-quality, and efficient internet services. The company also developed a cloud SaaS system and cloud supply chain system based on stores to better serve store internet transformation and help traditional stores improve business performance and management.

**Shenzhen Sealink:**
Sealink is committed to providing comprehensive logistics supply chain solutions and services for China's circulation industry. Headquartered in the University Town of Nanshan District, Shenzhen, it is a national high-tech enterprise with independent intellectual property and independent R&D capabilities.

Sealink focuses on three products (OMS Order Management Center, WMS Warehouse Management System, TMS Transportation Management System) and one platform (EDI Data Exchange Service Platform), providing full lifecycle information management for order delivery. Sealink has a team of senior consultants and technical R&D experts with over ten years of experience in retail distribution logistics and supply chain collaboration platform construction, with deep understanding of retail distribution business management and system construction. The company first proposed the concept of "order delivery lifecycle management" in China, aiming to provide integrated solutions and services for efficient, low-cost order delivery for Chinese circulation enterprises, and strives to become a leading provider of information systems and services for order delivery in the circulation industry.

**Shenzhen Cloud Credit Union:**
Shenzhen Cloud Credit Union Technology Co., Ltd., established in 2011, is a Shenzhen high-tech enterprise, national high-tech enterprise, professional FMCG supply chain solution provider, and pioneer of the "Internet + business district" model.

The company uses "middleware + application" technology to solve the problem of massive data concurrency for millions of stores in the small store chain format, and applies this technology to FMCG distribution, building the business district platform "Zhidianbao." "Never touch goods, never touch logistics" is Cloud Credit Union's business tenet. The company has over 2,000 large distributors and 30,000 wholesale distributor users, covering over 1 million terminal outlets, and has assisted in establishing over 40 Zhidianbao business districts. Cloud Credit Union's consistent impression among distributors is "a true information service provider."

**Welcome distributor friends interested in transformation to join us for understanding and on-site inspection:**

**Organization Form**
************1. Company visit
2. Actual market case visit
3. On-site explanation
4. One-on-one communication************

Participating distributor friends only need to pay a 200 yuan registration fee.
Other expenses are self-covered.
Long press this QR code or click "Read Original" to register.

**Long press QR code to add WeChat for registration**

**Previous Study Tour Group Photos:**

**7th B-end E-commerce Study Tour group photo, from top to bottom: Maideline, Haiding, Wangcang.**

**6th B-end E-commerce Study Tour group photo, from top to bottom: Zhongke Shangruan, Shuhai Supply Chain, Yunmei Co., Ltd., Yishang Logistics.**

**5th B-end E-commerce Study Tour group photo, from top to bottom: Huiwangxing, Beiquan, Tongying Tianxia, Quanshihui, Zhongke Shangruan.**

**4th B-end E-commerce Study Tour group photo, from top to bottom: Alibaba Retail Link, Qianmi Network.**

**3rd B-end E-commerce Study Tour group photo, from top to bottom: Yunbao Shangmeng, Weijie City Distribution, Wanshang Yizhan.**

**2nd B-end E-commerce Study Tour group photo, from top to bottom: Jinhuobao, Caiba, Yishang.**

**1st B-end E-commerce Study Tour group photo, from top to bottom: Piduoduo, Beiquan, Yishang.**

**Click "Read Original" to register**

-END-


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