---
title: "The Biggest Obstacle to Channel Digitalization: Once Aiming to Eliminate the Middleman, Now Demanding Their Cooperation with Confidence"
description: "Liu Chunxiong's digitalization once advocated disintermediation, eliminating middlemen, and no middlemen taking a cut. This was a detour in digitalization that lasted a long time. Now it's clear that middlemen are indispensable, and disintermediation is a wrong move. For top FMCG companies, offline channels account for over 90% of sales. I don't believe that missing 90% of the market can be called a successful digital transformation. The main theme of 2023 is returning to offline, with full-chain channel digitalization, where middlemen must also participate and cooperate. In the past, the goal was to eliminate them, but now we confidently demand their cooperation."
author: "刘春雄"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2023-07-18"
language: "en"
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# The Biggest Obstacle to Channel Digitalization: Once Aiming to Eliminate the Middleman, Now Demanding Their Cooperation with Confidence

> Liu Chunxiong's digitalization once advocated disintermediation, eliminating middlemen, and no middlemen taking a cut. This was a detour in digitalization that lasted a long time. Now it's clear that middlemen are indispensable, and disintermediation is a wrong move. For top FMCG companies, offline channels account for over 90% of sales. I don't believe that missing 90% of the market can be called a successful digital transformation. The main theme of 2023 is returning to offline, with full-chain channel digitalization, where middlemen must also participate and cooperate. In the past, the goal was to eliminate them, but now we confidently demand their cooperation.

Liu Chunxiong's digitalization once advocated disintermediation, eliminating middlemen, and no middlemen taking a cut. This was a detour in digitalization that lasted a long time. Now it's clear that middlemen are indispensable, and disintermediation is a wrong move. For top FMCG companies, offline channels account for over 90% of sales. I don't believe that missing 90% of the market can be called a successful digital transformation? The main theme of 2023 is returning to offline, with full-chain channel digitalization, where middlemen must also participate and cooperate. In the past, the goal was to eliminate them, but now we confidently demand their cooperation. That's a huge turnaround. E-commerce and digitalization based on e-commerce logic are becoming obstacles to channel digitalization. Only by removing these past obstacles can channel digitalization return to the right track. However, there are three major obstacles in promoting channel digitalization.
**Cognitive Obstacle: Disintermediated Digitalization** Channel digitalization is full-chain digitalization, involving four parties: manufacturer F, distributor B, retailer b, and user C, manifested as F2B2b2C. However, since e-commerce became popular, the public has accepted short-chain digitalization, i.e., B2C, with only two parties: merchant B and user C. Short-chain digitalization has a vivid term: **disintermediation.** There's a catchy slogan: **No middlemen to take a cut.** There's an attractive play: **Discounts across the entire network.** For a long time, short-chain digitalization was synonymous with digitalization. Therefore, when platform e-commerce's share is about to peak, the path for offline digitalization still follows short-chain digitalization. Private domain is short-chain digitalization F2C, an offline version of B2C. New retail is short-chain digitalization, either b2C or F2C. In short, it's about taking the disintermediation route. This has formed a stereotype: digitalization means disintermediation, resulting in short-chain digitalization. But FMCG channels are typically long. **Long-chain digitalization has gone through two stages:** First, direct distribution digitalization F2b2C, mainly in three industries: local services (e.g., catering, entertainment, like McDonald's, Xibei), chain services (e.g., home furnishing chains), and short-chain brands (e.g., luxury goods, apparel). Second, deep distribution industries. Direct distribution digitalization F2b2C has been very successful. For example, McDonald's and KFC have over 200 million online users, more than any B2C digitalization. Direct distribution F2b2C adds one b compared to short-chain B2C. Deep distribution F2B2b2C adds two links: B and b. When digitalization extends offline, the disintermediation slogan scares B and b. **Thus, there's a paradox: channel digitalization needs B and b to cooperate, such as connecting C and driving traffic, while also aiming to eliminate B and b.** Funny! You want to eliminate them, yet you confidently expect their cooperation. That's bold! Many companies have indeed done this in new retail and private domain. The result: **B and b resist digitalization.** Although some companies have returned to long-chain digitalization, B and b still have lingering fears. Since 2016, the damage has persisted. Even now, some are still doing it. Restoring trust with B and b: societal trust takes time, but corporate trust is built through practice. **In channel digitalization, we always emphasize one of the three principles: "traffic profit sharing," ensuring channel partners' profits.** By sharing traffic profits with B and b, trust gradually recovers.
**Logical Obstacle: Fragmented Channel Digitalization** Because disintermediation has been widely propagated, not only middlemen resist digitalization, but also traditional companies' sales departments resist it. Therefore, the early promotion of channel digitalization was assigned to IT departments. Without sales department cooperation, connecting B, b, and C is impossible. But those leading companies sell products well, and through QR codes, they connect B, b, and C all the way. From the initial "three-code integration" and "five-code integration" to the current "N-code integration," it seems channel digitalization is promising. **But now it's clear that's not the case.** Channel digitalization should be F2B2b2C, but some companies implement it as F2B+F2b+F2C. It's like buying a bunch of car parts and claiming you bought a car. This is fragmented channel digitalization. **This is the logical obstacle to digitalization. Digitalization requires all channel links to be connected, with any two points forming a connection, not just connecting with the manufacturer.** **Only full-chain closed-loop digitalization is true channel digitalization.** Why does this situation arise? Mainly because CIO-led digitalization lacks sales department participation and leadership. Currently, many companies are in this state. Digitalization and daily channel operations are two separate things. Digitalization overemphasizes fan counts and GMV, causing internal friction. To solve this, the sales department must lead the channel digitalization process. **In channel digitalization, the sales department cannot be a bystander; it must be the leader.**
**Model Obstacle: bC Integration** In 2023, leading companies are investing heavily in marketing digitalization because among the three major areas of enterprise digitalization, supply chain digitalization only requires the manufacturer to do it, with suppliers unconditionally cooperating; smart manufacturing digitalization can be bought. But marketing digitalization is the most difficult. Within marketing digitalization, channel digitalization has the lowest level of control. In channel digitalization, for leading companies, the B end is highly controlled; deep distribution also brings relative control over terminals. But only the b2C end is uncontrolled. **Therefore, we call channel digitalization full-chain digitalization, and the key link is bC integration. Once bC integration is solved, F2B2b2C can be easily connected.** This shows the importance of bC integration. Recently, we've emphasized that channel digitalization has completed epistemology and methodology, with only practice theory remaining. The practice theory of bC integration is a digital operation model summarized from practices in different industries. In current practice, we have summarized three models: **"circle-layer bC relationship," "community bC relationship," and "near-field bC relationship,"** with practical results. The bC integration wave in 2023 will surely produce a batch of benchmark companies whose practice theory will greatly advance the channel digitalization process.


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