"How can enterprises achieve high-quality growth in the era of shrinking volume?" This is the question on the minds of all FMCG professionals in the current context. From August 20-22, 2024, the 6th China FMCG Conference, themed "Navigating the Era of Shrinking Volume," was grandly held in Shanghai. During the conference, over a hundred guest speakers and more than two thousand manufacturer and distributor representatives from across the country explored how FMCG businesses can seek new growth against the backdrop of shrinking volume. Among them, Ms. Xin Jialin, General Manager of Ant Digital Technology's New Retail Business Department, delivered a keynote speech titled "Technology Drives New Growth in FMCG Business" at the main forum, sparking lively discussions among many manufacturers and distributors. How can channels be effectively incentivized during intelligent transformation? How can retail terminals improve operations? How can empowerment and transformation be achieved to effectively stimulate terminals, empower channels, and make business simpler and more efficient? Ant Digital Technology is the technology commercialization arm of Ant Group. Leveraging its technological innovation and industry practices, it focuses on cutting-edge technologies such as blockchain, privacy computing, IoT, security technology, and cloud-native solutions, aiming to build digital trust infrastructure. It helps various links in the industry chain establish more efficient and trustworthy collaboration networks, fostering an open, shared, symbiotic, and win-win business ecosystem, facilitating the flow of data value and unleashing digital vitality. As General Manager of Ant Digital Technology's New Retail Business Department, Ms. Xin Jialin has 15 years of experience in retail and brand digitalization, focusing on the commercial application of digital technology in the broader retail industry, with extensive practical experience in smart supply chains, digital marketing, and copyright technology. "New Distribution" is pleased to report on the highlights of her speech for our readers.
Consumption Enters the Stock Era Corporate Strategy Must Shift from Omnichannel Expansion to High-Quality Operations According to Nielsen data, in 2023, the overall omnichannel sales of China's FMCG retail market declined slightly by 0.04% year-on-year. Online channels, led by content e-commerce, saw impressive growth of 55.9% year-on-year. Offline channels, especially convenience stores and chain snack discount stores, maintained 3.9% growth due to proximity and price advantages. Overall, offline and online sales shares were 52% and 48%, respectively. It is evident that the more sluggish the economy, the faster e-commerce grows, because e-commerce touchpoints are highly digitized and easier to operate with precision. When the consumer market enters the "stock" or even "shrinking" era, brand strategies must shift from omnichannel layout and expansion to refined, high-quality omnichannel operations. At the same time, as most manufacturers are now deploying online, competition for online resources is intensifying, traffic costs are rising, and operational costs are increasing. Many companies have found that although e-commerce grows rapidly, profits are gradually declining. In contrast, offline channels, due to the widespread adoption of mobile applications, have also become largely digitized, so offline now has the foundation for refined operations. Offline channels have inherent advantages in proximity and experience, and they still account for the majority of sales. If technology can help better incentivize and empower offline channels, it will bring rapid and effective growth. Therefore, we believe that in the stock era, better refined operations of offline channels and scenarios, and better layout and empowerment of offline, is the blue ocean strategy for high-quality growth. In an omnichannel competitive market, brands will return to diversified competition in products, efficiency, and services, and must fully embrace new technologies and new models to find new structural growth opportunities. Currently, enterprises still face many issues in the transformation to high-quality omnichannel operations. For example, sales are becoming more difficult, and pushing inventory is not as easy as before, yet there is no better channel incentive capability; distributors are under increasing financial pressure, so how can brands provide financial empowerment and support to channels; incentive policies at the store level often have unsatisfactory results after implementation; how to differentiate in the face of involution; how to better understand consumer needs; and how to deal with counterfeit goods in diversified channels? Faced with these issues, manufacturers urgently need new solutions to achieve high-quality operational transformation.
Three Major Solutions to Upgrade the FMCG Brand Value Chain We just mentioned the technological capabilities of the Digital Technology Business Group. Through years of extensive exploration and practice, we have accumulated numerous applications and best practices in the broader retail industry. As the industry develops and business models continue to change, enterprise digitalization is increasingly unable to be limited to building internal capabilities; collaboration across upstream and downstream and across industries is becoming more common and important. Ant Digital Technology leverages cutting-edge technologies such as IoT, blockchain, and AI, and through trusted connections across the industrial ecosystem, traffic ecosystem, and content ecosystem of the broader retail sector, it enables data integration and linked applications of core elements such as cross-ecosystem traffic, information, and assets. This enhances enterprises' supply chain optimization capabilities, product brand upgrading capabilities, and digital marketing capabilities, providing support for high-quality development. For the FMCG segment, we also bring three solutions to assist enterprises in achieving high-quality operations.
The first solution is the supply chain finance solution. Due to time constraints, we will not elaborate on how the technology is built, but focus on the value it brings to enterprises and the application scenarios it can achieve. First, supply chain finance uses trusted link technology to create an alliance platform that connects core enterprises, capital providers, and companies in need of funds, such as downstream distributors, through trusted data links. It shares the core enterprise's ERP data and upstream and downstream order data with capital providers in a "usable but invisible" manner to enhance credit for loan companies. At the same time, by linking with the capital provider's systems, loans and repayments can be conducted online quickly and conveniently, providing distributors with loans at higher efficiency and lower cost. The second value point is fund penetration and designated use. By optimizing the channel incentive distribution model through technology, it creates a trusted and healthy distribution ecosystem. This system integrates the capabilities of the national digital currency. Through contract-based digital currency wallets, capital providers can penetrate the fund chain of stores, distributors, and core enterprises, enhancing fund control, preventing misuse of funds by distributors, ensuring that funds for each layer of transactions are used for designated purposes, while reducing the cost of fund circulation. This leverages financial leverage to empower omnichannel procurement and achieve the ultimate goal of sales growth. Third, precise empowerment of store terminals. Previously, marketing expenses for stores had to be distributed level by level through distributors, and brands had no way to verify whether the funds were fully used for the corresponding marketing activities. However, if digital currency is used for distribution, fund flows become more transparent, efficient, and compliant. At the same time, through channel and store insights, enterprises can be provided with more precise store marketing strategies, enabling them to empower stores more accurately and conveniently. Additionally, marketing expenses or financial empowerment at the store level can also be anchored to usage scenarios or repayment scenarios through the digital currency model, enhancing terminal empowerment capabilities. Fourth, the channel data obtained through financial empowerment, combined with the risk control capabilities of the data alliance chain, can provide enterprises with more ways to gain channel insights, achieve tiered management of distributors, and provide channel management capabilities.
The second solution is the digital intelligence marketing solution. It uses technology to break down data barriers, uses AI computing to restore true business performance, and assists in operational decision-making. This solution, which is the marketing capability mentioned earlier, is based on data from the data alliance chain on people, goods, and places, and can provide enterprises with decision support and operational efficiency improvements. For example, at the store level, for uncontrolled stores, data at the POI level can be used to accurately identify blank outlets, and data analysis can determine whether they are high-potential stores, allowing appropriate resource allocation. For controlled stores, based on sales performance and even competitor sales, it can analyze whether the store has further potential for placement or sales, and if so, marketing expenses can be used to assist. These capabilities help enterprises improve store expansion efficiency and sales visit efficiency, and optimize channel strategies. For offline scenarios, consumers need immediate consumption when entering a store, so the accuracy of product placement is very important. Based on insights from business district data, it can determine where products sell well or poorly. Additionally, combined with distributor data, it can analyze the price elasticity of products, and based on big data, algorithms, and AI capabilities, help enterprises optimize product and pricing strategies. Insights into target audiences by sub-category can help brands better understand consumers, enabling more precise marketing investments and improving marketing ROI.
The third solution is the product safety solution. With consumption upgrading and consumers' increasing requirements for product quality, brands need to build more comprehensive anti-counterfeiting traceability systems, allowing consumers to track the entire chain of information from source to terminal, ensuring the authenticity and safety of products. Whether a brand can establish an image of "genuine product guarantee" in the minds of users is crucial for attracting and retaining consumers. A traceability system based on blockchain technology can ensure that information on the entire chain cannot be tampered with and is permanently traceable, combined with secure data flow capabilities to ensure the authenticity and security of traceability data. Through such a system, enterprises can achieve various management needs such as quality control, channel management, terminal anti-counterfeiting, and marketing. At the terminal display level, combining computer vision and cryptography, we have designed and manufactured a QR code anti-counterfeiting label product with high-security features such as anti-generation, anti-copying, and anti-transfer, using micro-symbols and encrypted QR codes. For products where QR codes are inconvenient to paste, such as shoes, clothing, bags, and luggage, we use dynamic encrypted NFC technology with lightweight algorithms, one chip one code, dynamic links, and anti-tamper rings to prevent counterfeiting. At the same time, using AI image recognition technology, based on comparison of the original label image and the returned image/label, it can determine whether the product is the original sold product. For example, when "Kangshifu" appears on the market as "Kangshuaifu," we also have network-wide monitoring and copyright protection capabilities. There are multiple points of fraud risk in the product value chain. Ant focuses on core technological breakthroughs, end-cloud collaboration, and AI verification to effectively prevent risks. Using technology to build trusted connections, we safeguard the entire chain of product circulation. Ant Digital Technology will continue to be committed to using technology to help upgrade the entire retail value chain, focusing on the integration of technology and industry, and bringing new growth momentum to the retail industry!
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