In 1995, Zhang Xiaoli began her journey as a distributor. Since 2017, she has courageously embarked on the path of digital transformation, first promoting centralized warehousing and distribution, then expanding products and channels, and subsequently transitioning to a B2B platform. Today, nearly three decades into her distribution career, she has accumulated a wealth of experience. Zhang Xiaoli currently serves as the Executive President of Hebei Chengde Deyun Supply Chain Management Co., Ltd. (hereinafter referred to as Chengde Deyun). Through the transformation from a traditional distributor to a B2B platform, she and her company have successfully achieved digitalization and scale in their business. With advanced warehousing and logistics facilities and efficient operational management, they have achieved remarkable results in just a few years. Currently, Chengde Deyun's self-operated trading company has an operating scale exceeding 100 million yuan, and the overall platform's warehousing and distribution shipments exceed 400 million yuan. "There is a strange cycle for distributors of leisure food: if you don't use digitalized, modern sorting methods, it's hard to break through annual sales of 80 million yuan," Ms. Zhang told New Distribution. "Before 2017, we were hovering around 80 million yuan. By 2018, sales directly doubled to 150 million yuan." Although there are many cases of distributors transitioning to B2B, Ms. Zhang candidly admits that her transformation journey is only halfway there. With an open mindset, she is willing to cooperate and exchange ideas with more distributors, sharing her experience. Why Centralized Warehousing and Distribution? Chengde is a unique city. Surrounded by mountains, its distribution radius is very large, reaching up to 250 kilometers. Additionally, Chengde has a sparse population, with only 300,000 people in the urban area. This combination of vast land and few people makes logistics and distribution costs extremely high. Reducing logistics costs became an urgent priority. Thus, in 2017, seven companies in Chengde jointly initiated a centralized warehousing and distribution platform, and Ms. Zhang's company was one of them. By integrating warehousing and logistics resources, they established a company providing full-chain services including repackaging, distribution, and sales. The current joint warehouse consists of a large warehouse in Area A (16,000 square meters) and another in Area B (28,000 square meters). In the Area B warehouse, there is a 3,000-square-meter sorting warehouse equipped with an advanced sorting line, currently handling 3,000 SKUs. Ms. Zhang stated that this 28,000-square-meter Area B warehouse can be fully managed by just five warehouse keepers. Automated sorting line Additionally, they have independently developed an ERP software that can fulfill the functions of WMS (Warehouse Management System) and TMS (Transportation Management System), greatly improving management efficiency. For Ms. Zhang, the launch of the centralized warehousing and distribution platform and the B2B platform were almost simultaneous. However, getting manufacturers willing to store goods in the warehouse and sell products on the platform is a challenge that needs to be addressed. Ms. Zhang said that to do this, one must have a completely open mindset. Whether manufacturers or distributors come to cooperate, they can choose any part of their services: warehousing, sorting, or distribution. Furthermore, she freely opens her resources of over 2,000 stores to merchants on the B2B platform. This initiative attracted 31 merchants to join at its launch in 2017. After merchants join, each has their own account, allowing them to clearly see sales figures, product sales destinations, and payment amounts, with settlements made every Friday. Currently, her platform hosts 64 distributors, including 10 local manufacturers. Some regional food and beverage manufacturers have also benefited, and Ms. Zhang said they cooperate well. In terms of profit distribution, they follow the principle of "who contributes, who benefits", meaning those who sell more get a larger share. This warehousing and distribution infrastructure enables Ms. Zhang's B2B platform to achieve efficient delivery, with next-day delivery in all counties and districts. Transition to B2B: How to Transform? Ms. Zhang started her wholesale business in 1995, initially representing leisure food. In 2017, she began transitioning to a B2B platform, a time when B2B platforms like JD New Channel, Alibaba Retail Link, Zhanghe Tianxia, and Hui Xiadan were also rapidly developing nationwide. Her formal transformation was marked by the adoption of digital management for her company. Digital transformation is a major challenge for most traditional distributors, requiring not only a system software but also comprehensive changes in organization, management, channels, and marketing. Ms. Zhang also explored and learned as she went through the transformation. 1. Product Organization Although she started with leisure food, since 2012, Ms. Zhang has been continuously expanding categories, adding beverages, alcoholic drinks, condiments, etc., and now has over 3,000 SKUs. Currently, products represented by her own trading company account for 80% of the platform, and her ideal state is to reduce the proportion of self-operated products to 60%. In product organization, her strategy is "what others don't have, I have; what others have, I make cheaper." Currently, she has 4 procurement specialists. When selecting products, they first focus on major categories to ensure that 60% of the products in small stores are available on her platform. Secondly, they do more market visits; every month, procurement specialists go to the market to find and discover new products and internet-famous products. 2. Personnel Management Traditional distributors are usually managed by the boss alone, but now her company has warehousing and distribution, procurement, and operations departments, all managed digitally. With data support, for example, when ordering, they can refer to data from 2022 and 2023, avoiding overstocking and ensuring smoother inventory turnover. Digitalization also makes managing drivers and salespeople easier. Previously, salespeople had to carry large notebooks to record replenishments; now store owners can place orders themselves, with images, prices, and descriptions clearly visible in the system, and salespeople only need to carry an iPad. The shelves of the automated picking system help employees quickly find products. The introduction of the automated sorting line greatly improved efficiency and reduced labor intensity. Previously, they could sort at most 160,000 yuan worth of loose goods per day; now, with fewer personnel, efficiency has increased, and sales broke through 100 million yuan that year. 3. Channel Expansion Chengde has 8 counties and 3 districts. Previously, Ms. Zhang only operated in the urban area and 2 counties. After the B2B platform went live, the investment cost of the sorting line prompted her to expand channels, "It's meaningless to have a sorting line if a county doesn't achieve over 40 million yuan in sales." Each county is equipped with 4 salespeople and 1 manager to expand channel outlets. Sales assessment indicators are fine-tuned monthly, including sales amount, proportion of orders placed on the B2B platform, SKU count, new products, display, and gross profit. Currently, store owners' self-ordering accounts for 30% of orders, and Ms. Zhang plans to increase this to 50%. She must increase efforts and rebates to cultivate the ordering habit among small store owners. The reason is that she found that the return rate for orders placed by store owners themselves is low, while the return rate for orders placed by salespeople is high. Ms. Zhang believes that only when store owners place orders themselves can products enter their consciousness in a first-impression manner, and such products will be actively promoted by the owners. Orders placed by salespeople, on the other hand, often leave store owners indifferent. 4. Regional Intensive Cultivation When initially venturing into B2B business, Ms. Zhang and her partners had a clear strategy: "Products may not make money, but the platform must be built well. If we reach 1 billion yuan in annual sales, then earning just a 3% platform fee would be sufficient." Ms. Zhang hopes to attract more distributors to cooperate with her. She believes that one region only needs one B2B platform, but achieving this goal in reality is very difficult. Taking the Chengde market as an example, Ms. Zhang admits that involution is very severe, with distributors undercutting each other's prices. At this stage, she can only strive to make her prices the lowest, implementing the strategy of "what others don't have, I have; what others have, I make cheaper." When distributors all hope to become the "regional king" through B2B, fierce competition is inevitable. Some small distributors, unable to sustain their businesses, have voluntarily joined Ms. Zhang's platform, while some distributors with a better foundation also want to build their own B2B platforms, so it ultimately comes down to each one's ability. Future Outlook: Expanding Fresh Produce and Empowering Stores Looking to the future, Ms. Zhang has clear plans and goals. 1. Expanding Fresh Produce and Community Group Buying Currently, Ms. Zhang's business is mainly B2B, and the next step is to move into B2C. She is in communication with Zhongke Shangruan to upgrade the order-taking system, develop live-streaming functions, and empower small stores. Ms. Zhang observed that in Chengde, small stores of 70-80 square meters have a maximum of 1,500 SKUs, which is already the limit and hard to break through. Therefore, she plans to help these small stores expand their SKUs and activate private domain traffic. Products that cannot be sold in stores can be sold through small store owners' social groups and live-streaming. This approach neither occupies the store owners' capital nor takes up inventory. The price difference from products sold by small store owners goes entirely to them, thereby helping small stores sell goods and make money, better serving and empowering these stores. Next, she also plans to introduce fresh produce, extending services to express delivery stations and communities, expanding business boundaries through community group buying models. Ms. Zhang believes that although consumers have become more rational and consumption appears to be downgrading, people's requirements for quality of life are still rising. Her shared warehouse includes a 1,000-square-meter modern professional cold storage, which is very suitable for fresh and frozen products, laying a solid foundation for her community group buying business. Additionally, she has found stable supplier partners who can offer competitive profits to store owners. For many store owners, fresh produce is an indispensable way to attract traffic, and the introduction of fresh products can further enhance store services and customer loyalty. 2. Convenience Stores + Snack Stores Ms. Zhang cooperates with some local convenience stores, providing deeper empowerment. For partner convenience stores, she offers discounts and lower purchase prices. In addition, she assists stores in planning activities monthly and provides activity support. At the same time, she also imposes requirements on stores: all brands represented by Ms. Zhang's company must be in the store, with no restrictions on categories, only on brands. Next, she plans to learn from the current snack discount store model and create snack zones for these convenience stores. With her advantage in the leisure food category, Ms. Zhang believes she can offer very low discounts and good product combinations, helping these convenience stores attract customers and improve performance. Conclusion In the past, distributors mostly did the work of transporting, advancing funds, and distributing. Whether products moved well depended on brand owners and retailers, not on themselves. As long as goods were pushed to stores, their tasks were considered complete. "If you can't crush them, crush them harder" was the common practice in channel operations. Now, more and more distributors are learning retail thinking, studying the consumers behind the shelves, helping downstream stores operate social groups, doing live-streaming, and helping stores with product combinations, etc. In the current economic environment, on one hand, channels are fragmented, consumers are more rational, and store sell-through is slowing; on the other hand, competition among distributors is fierce, and price involution is severe. If a distributor still expects to push goods to stores and be done, the result may be increasing inventory, and even big promotions cannot stir the terminal's interest. At this point, the competition among distributors has shifted from fighting for shelf space to fighting for consumers. Ms. Zhang's innovative practices in centralized warehousing and distribution and B2B platform construction provide valuable experience and inspiration for distributors in transition. Her future plans, including expanding fresh produce business and empowering stores, further reflect her keen insight into market demand and innovative spirit, which is a vivid portrayal of traditional distributors daring to change and break through in the new era. New Distribution will continue to report on more distributors' exploration stories, conveying the experiences of those striving forward amid changing times. We hope these reports can help distributors at different stages find common ground, examine their businesses from multiple perspectives, and ultimately find the right direction for themselves. From August 20 to 22, 2024, the 2024 6th China FMCG Conference & 3rd China FMCG Hard Discount Conference & 3rd China FMCG Distributor Conference, themed "Crossing the Era of Shrinkage," hosted by New Distribution, will be grandly held in Shanghai. At this conference, we will focus on a top-tier guest matrix from leading Chinese FMCG brands, authoritatively interpret market trends, professionally analyze industry status, provide precise business docking and cooperation opportunities, help companies accurately grasp market pulse, formulate effective response strategies, and achieve resource sharing and collaborative development. At the same time, we will invite leading national retail platforms to thoroughly explain the hard discount retail competition model from multiple perspectives, interpret long-term trends and opportunities through practical cases, help companies find key opportunities, and achieve hard growth across cycles. Gathering 500+ outstanding distributors from across the country, we will comprehensively interpret distributor business from enterprise growth paths, challenges and opportunities, operational practices, etc., helping distributors open up their survival radius and solidify their business product offerings! Recommended Reading