Recently, New Distribution learned that Tencent has strategically invested in the well-known FMCG B2B platform Huidanxia. Since then, the three giants ATJ have gathered in the FMCG B2B industry, bringing changes and impacts to an already fragmented and competitive landscape.
01 Tencent strategically invests in Huidanxia Public information shows that Huidanxia was established in 2015 as a pure platform-based FMCG B2B platform. After several years of development, Huidanxia has covered 24 provinces nationwide, serving over one million stores. Huidanxia was incubated from the FMCG SaaS service platform Yingxiaotong, inheriting 15 years of deep experience in the FMCG industry. Its management team is exclusively from top FMCG companies, with an average of nearly 20 years of FMCG industry experience, making it an internet platform with deep industry understanding. Huidanxia advocates the "Four No's and One Adherence" as a strong driving force for platform development: "No self-operation, no self-built logistics, no disruption of existing distribution systems, no disruption of market prices, and adherence to platform empowerment, openness, and sharing." This has received strong support from brand owners. To date, Huidanxia has successively established deep cooperation with many brands such as Coca-Cola, P&G, Mengniu, Uni-President, and Yihai Kerry. Mr. Cui Zhen, founder and CEO of Huidanxia, stated that this strategic cooperation with Tencent will enable Huidanxia and its clients to complement each other in WeChat's social ecosystem, Tencent's big data chain, and offline smart retail system, allowing traditional FMCG channels to use Huidanxia and Tencent as combined tools for self-evolution and innovation.
02 Why invest in Huidanxia? China has a vast number of traditional mom-and-pop stores, which are the last link in the trillion-yuan FMCG flow to consumers. In the supermarket and hypermarket sector, where mainstream players have generally completed their alignment, the trillion-yuan FMCG retail market has undoubtedly become a new battlefield for giants to compete offline. As an important traffic gateway connecting consumers, both Tencent and Alibaba naturally will not give up the market of over 5 million small stores. To date, in the FMCG distribution field, Alibaba has deployed Ling Shou Tong, and its affiliated companies Best Group and RT-Mart have B2B platforms Best Dianjia and RT-Mart e-Lufa, respectively. In contrast, Tencent, lacking e-commerce genes, can only complete its layout in the FMCG supply chain through "decentralization" and strategic investments. Looking at Tencent's invested companies, currently only JD.com's Xintonglu is engaged in FMCG B2B business, which is far from enough for Tencent. Tencent urgently needs new spokespersons to increase its bargaining power in competition with Alibaba and gain an advantage in the trillion-yuan offline traffic gateway competition. Under these circumstances, Huidanxia is undoubtedly a good choice for Tencent. According to New Distribution's 2017 research report, Huidanxia has developed into an industry-leading FMCG B2B platform in terms of both the number of provinces covered and the scale of stores served. Tencent's investment in Huidanxia not only promotes its financial and payment businesses, thereby acquiring vast offline user data and further improving its big data and information systems, but also effectively responds to Alibaba's rapid offline expansion.
03 Tencent's entry may cause major changes in the FMCG B2B landscape With rising online traffic costs, directing online traffic through offline retail markets has become a choice for many internet companies. Alibaba and Tencent's previous investments in supermarkets and hypermarkets were no different. Tencent's strategic investment in Huidanxia also marks the official start of its competition for the 5.6 million traditional mom-and-pop stores offline, adding many variables to the already warring FMCG industry.
1. After investing in Huidanxia, will Tencent continue to invest in other B2B platforms? From an investment logic perspective, Tencent and Alibaba have different purposes for investing in offline retail enterprises. Alibaba is essentially an e-commerce company, which determines that its investments in offline enterprises are mostly driven by traffic. As online traffic costs gradually rise, using offline retail formats to feed back online and alleviate online traffic cost pressure has become a necessary action. From the launch of the new retail sample Hema Fresh to the strategic investment in RT-Mart, it is all about traffic. Tencent, on the other hand, started with social networking and gaming, and is least lacking in traffic. So we see that Tencent's strategic investments, whether in JD.com with its nine-grid opening, or in Vipshop and Meituan, are all about empowering other enterprises through its WeChat traffic advantage and mini-programs. Its investments in offline retailers like Yonghui and Bubugao are more to promote its financial payment, cloud computing, and advertising businesses, and also as a passive defense against Alibaba's offline investment layout. Huidanxia mainly serves low-tier markets such as counties, townships, and towns, with significant deficiencies in high-tier market outlets. From this perspective, Tencent's layout in the FMCG B2B market will not stop, and investing in Huidanxia may just be the beginning.
2. Will brand owners enter the future battlefield? With the deepening of Alibaba, Tencent, and JD.com's layouts in FMCG distribution channels and the gradual increase in traditional retail stores' acceptance of B2B, brand owners will inevitably face a situation of choosing one over the other in the future. In this case, it is not ruled out that brand owners will enter the FMCG B2B field by jointly building platforms with other brand owners or through capital participation. For brand owners, first, they should not reject cooperation with B2B platforms, and then plan ahead to prevent losing their voice in future development, which is particularly important. Overall, when B2B platforms encounter a cold capital market and some B2B platforms cease operations, Tencent's strategic investment in Huidanxia is itself a positive signal for the entire industry, at least indicating that B2B still has value. As more brand owners gradually recognize the value of B2B platforms, the competition in the entire industry may truly begin.
-END-