01 Ten years ago, I kept spreading three sayings, all about the importance of opportunities. First: Success comes not from solving problems but from seizing opportunities. This is from American futurist Naisbitt's book Mind Set!. Solving problems brings small success; seizing opportunities brings great success. That's the rule Naisbitt summarized. Second: When a typhoon comes, even pigs can fly. This saying comes from Li Ka-shing. I found it in a magazine and started spreading it. Later, Xiaomi founder Lei Jun joined in spreading it, so Lei Jun became the "inventor" of this saying. To not take away what he loves, I spread it less. Third: Tactical opportunities are found; strategic opportunities are waited for. This is my original. Tactical opportunities are discovered in practice, and then "successful tactics become consistent," which becomes the "bottom-up strategy" proposed by Trout and Ries in Marketing Warfare. Strategic opportunities are waited for; a person has only a limited number of strategic opportunities in life. Missing a strategic opportunity means missing the chance for success. These three sayings express the same meaning: Discovering opportunities and seizing them is extremely important for business growth, especially during entrepreneurial and transitional periods. When do strategic opportunities appear? They often appear when tradition is at a dead end. Industry and market development are cyclical. Whenever the industry or market enters a low-price period, it is often when strategic opportunities are brewing. At the peak of industry development, opportunities are often fully released. But in reality, people often revel at the peak. In the trough, they see no hope. Strategic opportunities come at the turning point of the industry trough. If you find that the familiar practices of most people around you are becoming increasingly difficult, it's time to change your thinking: Is a new strategic opportunity arriving? Industry transition periods are definitely strategic opportunity periods. This may be such a time now. 02 Distributors' 10-Year Nightmare 2012 was the starting point of the 10-year nightmare for FMCG. In 2012, e-commerce exploded, starting a decade of e-commerce prosperity. In 2012, most FMCG industries reached their historical peak in production, and from then on, industry output declined. Baijiu, beer, instant noodles, and other industries declined continuously. If not for price increases in 2016 and changes in industry structure, the FMCG industry would have been worse. Many platforms seized the e-commerce opportunity, such as the current major e-commerce platforms. Many entrepreneurs seized it. They had no offline inventory pressure and were not afraid of chaotic online and offline price systems. Many manufacturers also seized it, such as long-tail industries (e.g., snack foods), home appliances, furniture, 3C products, etc. But FMCG companies were constrained by their large offline base and the fact that scenarios are mainly offline. Leading companies had less than 10% online share. The 10 years of e-commerce were even more of a nightmare for distributors, because distributors had even fewer opportunities to go online than manufacturers. Rising costs, declining sales, and involution in marketing methods. That's the true picture of distributors' 10-year nightmare. 03 New Opportunities After 10 Years: Returning Offline Now we must face four new realities: First: Online share is at a stalemate. In 2020 and 2021, social retail online share stabilized at around 30%, and FMCG online share basically had no major breakthrough. Online has formed a stalemate, and online is more difficult than offline. Second: Offline structural adjustment has shown results. Offline structural adjustment has been very effective, greatly increasing offline profitability and changing the situation where profits overly depended on sales growth. Third: Offline household penetration determines offline status. Leading FMCG companies have household penetration rates of over 100 million households, a goal that online cannot reach. Fourth: Methods for offline C-end reach have achieved new breakthroughs. In the past, when digitalization was mentioned, people thought of "removing middlemen," believing it was necessary to "revolutionize distributors," and considered the distribution business model backward. Now there are two major breakthroughs in channel digitalization: First: The private domain 2.0 model (F2b2C) is being fully promoted in chain direct sales formats. For example: 1. Local service enterprises, such as catering and entertainment. McDonald's private domain has nearly 80 million users. Xibei completed store private domains as early as 2018, even though the concept wasn't popular then; 2. Retail chains, such as Watsons, Pagoda, and Qian Dama; 3. Short-chain channel brands, such as footwear, apparel, and luxury goods. Second: The bC integration model has shown initial results. This is a method of reaching C-end through digital means without changing the deep distribution model. Distributors must not underestimate bC integration. It is precisely because of its emergence that the internet's call to "remove middlemen" is fading, and the value of distributors in the digital environment is being re-recognized. Isn't this a strategic opportunity for distributors? Face this strategic opportunity squarely. Even if you don't understand bC integration, you will try every means to understand it. 04 Returning Offline: Three Trends Returning offline is not about going back to the past, but about reconstructing offline. Trend 1: Profit growth is offline. In the past, channels overemphasized sales growth; now we must return to emphasizing profit growth. And the main profit growth is offline. Trend 2: Small store growth exceeds KA store growth. The scene reconstruction of KA stores is more difficult, and the convenience scene of small stores is more important. Therefore, the requirements for deep distribution are higher, and the great value of small stores must be emphasized, especially their value in connecting with users. Trend 3: Digitalization around terminals. The e-commerce model is B2C, so many people assume that the manufacturer's digitalization model is F2C (direct e-commerce). Now we find this is a great mistake. Digitalization around terminals, with bC integration, is the right path. 05 Returning Offline: Three Opportunities for Distributors The three opportunities distributors face are: Opportunity 1: New profit models There are three new profit models: New profit model 1: Product structure profit. There are occasional voices about consumption downgrading in the media; these are distractions. Mid-range products cover costs, high-end products make money. This is a new profit model. Do you dare to sell at high prices? Can you sell at high prices? What terminals can sell at high prices? What is the KPI system for high-priced sales? Many distributors have already made breakthroughs. New profit model 2: Brand structure profit. Recently, there has been a lot of talk about KA creating private labels, which is one of KA's "self-rescue" methods. Distributors' self-rescue method is also to create "supply chain brands," using their own channel operation capabilities to combine first-tier brands with second- and third-tier brands to earn reasonable profits. New profit model 3: Channel structure profit. KA is a tug-of-war, and profits are consumed in the tug-of-war. Therefore, KA is characterized by "either you get sales, or you get neither sales nor profits." KA stores drive traffic, small b stores earn profits; offline drives volume, online (mini-programs) drives profits. These are all models that didn't exist traditionally. Opportunity 2: Alliance with secondary wholesalers In the deep distribution system, there is a secondary wholesaler that is not often mentioned. Because small stores order too little at a time, it's not cost-effective for brand manufacturers to deliver directly; only secondary wholesalers can provide "one-time comprehensive delivery." Since B2B, large stores are delivered directly by manufacturers, and B2B platforms have targeted secondary wholesalers. But over the years, secondary wholesalers still exist, yet they are hard to find. In China's channel system, as long as there are a large number of small b stores, secondary wholesalers will not disappear. In the digital environment, small b stores have a stronger ability to connect with C-end than supermarkets, so the strengthening of small b's value also strengthens the value of secondary wholesalers. Since secondary wholesalers cannot be eliminated, ally with them. Opportunity 3: bC integration Traditional deep distribution focuses on the b-end, e-commerce focuses on the C-end, and channel digitalization treats the b-end and C-end as a pair of objects for integrated operation, called bC integration. The technical tools for bC integration are bC dual codes and bC mini-programs. Through the b-end, connect to the C-end, forming the digital logic of B2b2C or F2B2b2C. In practice, we have also found that bC integration is an excellent channel promotion tool, more efficient than any current channel promotion method. 06 Distributors' Innovation Dividend Distributors will not disappear, but traditional distribution may disappear. When deep distribution became popular after 2000, the first batch of distributors to adopt it seized the opportunity and achieved great success. We call this the innovation dividend. When more distributors entered deep distribution, the innovation dividend disappeared and involution began. The deep distribution difficulties distributors face now are all results of involution. When new strategic opportunities arrive, distributors have two choices: one is to seize the opportunity and capture the innovation dividend; the other is to wait until it becomes widespread and involution sets in, and then have to do it. Capturing the innovation dividend is difficult. First, the direction is unclear; second, the model is hard to learn. I think there are three methods: First, some distributors have strong learning and innovation capabilities and explore new models. Few distributors have this ability, but it's possible that some new entrants do. Generally, strategic transition periods are also times when more new entrants appear. Second, learn from manufacturers with innovation capabilities. If a manufacturer is promoting a new model, that's a good opportunity. Third, learn on-site from excellent distributors. Some excellent distributors go out to learn at least once a month, including on-site learning from excellent distributors. Learning from peers and learning on-site are good methods for distributors. The 7th China FMCG Channel Innovation Conference is confirmed for August 31 - September 2, 2022! Learn excellent practical cases at the conference, meet new industry friends through exchanges, and expand new industry horizons. 2000+ industry attendees, 1500+ manufacturer and distributor executives. The latest trends, latest models, and latest business are all here! During the 2022 epidemic recovery period, the industry's first summit meeting, the annual gathering of FMCG professionals, we look forward to your arrival! Article source: Teacher Liu's Digital New Marketing (ID: liuchunxiong1964j) Author: Liu Chunxiong -END-