The Century of FMCG Involution: Is Private Domain the Lifeline?

On August 10, New Distribution's video channel hosted a live stream themed 'New Private Domain, New Growth'. The event invited four guests: renowned marketing expert Liu Chunxiong, Deputy General Manager of Qingdao Beer's Innovation Business Unit Shi Yonggang, CMO of Jukebao Zhang Jia, and Deputy General Manager of Nanfang Black Sesame E-commerce Company Qin Mengke. Over two hours, they shared insights and engaged in deep discussions around the core topic of 'FMCG Private Domain'. The live stream generated significant industry response and attention, with over 16,000 viewers watching and actively interacting. The following is a compilation of the guests' key viewpoints and core content, hoping to provide useful reference for FMCG marketers and distributors who are paying attention to, researching, or practicing private domain strategies.

01 The Century of FMCG Involution In recent years, few marketers or business owners in the FMCG industry feel that business is easy. It seems all the dividends have suddenly disappeared. Whether it's online e-commerce channels or offline traditional channels; whether it's brand owners, distributors, or retailers, or even the once-hot community group buying and live-stream e-commerce, either there's no growth, or revenue increases without profit gains, or both sales and profits are being squeezed dry by leading brands. Accustomed to long-term double-digit high growth, stagnation has left many confused and lost. Why does business become harder and harder each year, with more effort but less profit? There are many surface-level reasons: generational shifts in consumers causing drastic demand changes, new channels emerging endlessly and fragmenting infinitely, and the infrastructure and digitalization of mobile internet raising the operational bar. These are all valid, but they are not the root cause. To find the essence, we must start from the basic relationship of commodity economy—supply and demand. Taking food and beverage FMCG as an example, the total market demand is the sum of consumers' stomach capacity. China's population growth rate has been declining significantly since 2013, reaching a historic low of 0.06% in 2021. With an aging population, the total population will continue to decline. This impact is enormous. For beer, the industry peaked at 49.83 million kiloliters in 2013, but by 2021, total output was only 35.63 million kiloliters. In less than a decade, industry capacity dropped by nearly one-third. With population no longer increasing and almost no hungry people, the total market stomach capacity has reached its limit, yet supply continues to rise. Besides industry involution, is there any other way out? FMCG growth is not permanent; no matter how long the spring, winter will inevitably come—this is the rule. Everyone should prepare for the day when natural growth disappears and be fully prepared for the industry's great involution.

02 Can Private Domain Save FMCG Brands from the Fire? The term 'private domain' has become very popular in recent years. The hottest private domain case in consumer goods is Perfect Diary. Through private domain building, Perfect Diary, founded in 2018, exceeded 5 billion yuan in scale within just three years, successfully listing on the U.S. capital market and becoming the first overseas-listed beauty brand. Thus, private domain has become one of the hottest marketing concepts in the past three years. Increasingly involuted FMCG marketers are also exploring and practicing private domain, and the industry has seen rapidly growing brands like One Cow Raised by One Person that use private domain as a key strategy. But can private domain truly be the 'lifeline' for FMCG? Let's state the conclusion first: It is definitely not a 'lifeline'. Shi Yonggang, Deputy General Manager of Qingdao Beer's Innovation Business Unit, believes that FMCG currently has three major misconceptions about private domain: that doing private domain will lead to soaring success, that not doing it means certain death, and that doing it requires abandoning traditional channels. Unrealistic expectations, illogical judgments, and unscientific strategies—if these three misconceptions are not eliminated, FMCG private domain cannot be on the right track. For FMCG giants with tens of billions in scale, especially heavy goods like beer and beverages, private domain sales account for less than 1% of total sales. From a sales perspective, private domain's role is more about icing on the cake. In contrast, Qin Mengke, Deputy General Manager of Nanfang Black Sesame E-commerce Company, believes that due to sales scale and market position, private domain is icing on the cake for leading enterprises, but for other SMEs, it could change their destiny. Qin Mengke categorized FMCG companies' private domain approaches into four levels, from shallow to deep. First, for traditional brand enterprises, private domain is in its infancy. Traditional e-commerce dividends are gone, and offline channel dividends have disappeared. Many traditional brands have the idea and motivation to break through in private domain. However, limited by traditional thinking and constrained by the current interests of offline channels, they are in a fragmented state—thinking a lot but not moving. Second, traditional enterprises have recognized the value of private domain at the cognitive level and believe it must be done, but are constrained by conflicts between online and offline interests, so they experiment on a small scale. It is usually placed in the e-commerce or new retail department, existing as part of the online department's functions, and is generally assessed simply by sales ROI. Currently, development is slow, user scale is small, and value is limited. Third, new consumer brands with internet backgrounds. They have a natural user mindset, with online share greater than offline. Therefore, whether it's traditional e-commerce, new e-commerce, or private domain, they are the bravest and most determined practitioners. In comparison, their private domain operations are more efficient and systematic because their existing scale is small, growth is rapid, and they can secure more investment. Fourth, a perfect state. Traditional big brands with a solid offline foundation, where the boss and senior team have forward-thinking mindsets, with the top leader personally leading, integrating online and offline, coordinating operations, and resolutely facing the future. These enterprises have strong explosive power in private domain. Qin Mengke believes that the value of FMCG private domain is significant, but the challenge lies in the difficulty and exhaustion of execution. Can business owners and senior management teams fully recognize the value of private domain? Can they lead personally to overcome obstacles? Can they maintain enough determination to face setbacks in private domain operations? The excellent private domain cases we see in FMCG today, such as Bestore and Lin Qingxuan, have all achieved online-offline integration, real-time data support, and unified online-offline interests. The market's reward for innovators is that during the pandemic of the past three years, they have all achieved growth far exceeding their peers.

03 The True Value of Private Domain Lies in Marketing Over the past three decades, the biggest highlight of Chinese marketing has been channel innovation, specifically the widespread application of deep distribution. This has enabled countless FMCG brands that still thrive today. When deep distribution is no longer a unique secret of a few brands, the model's dividend has disappeared. With market growth hitting a ceiling, everyone can only continue to refine at the channel level, eventually forming a zero-sum competitive landscape. Consumer volume has peaked and is even shrinking, so the trend of brands and products moving toward mid-to-high-end has become the most important. In the mid-to-high-end segment, consumers' brand voice is increasingly powerful. You may be able to distribute products everywhere, but in the mid-to-high-end segment, consumer preference is increasingly crucial. Why is the true value of private domain in marketing? Zhang Jia, CMO of Jukebao, stated: Private domain is one of the most suitable ways to build customer relationships. It should become the foundational infrastructure for brand marketing in FMCG enterprises, not merely defined as a sales channel. The value of private domain is underestimated or misjudged because many FMCG companies fail to recognize its true marketing value. Only by connecting with a large number of consumers can our product development truly meet customer needs, our new product launches have a low-cost, high-efficiency customer base, our marketing activities align with customer preferences, and we have the opportunity to organize and mobilize customers. Snow Beer in Guizhou, through digital marketing, mobilized terminals, integrated B2B and B2C, and cultivated over 100,000 private domain customers. On July 23, 2022, they successfully held the 'Refreshing Guiyang, Snow Beer International Music Festival'. In just two hours, Snow Beer Guizhou sold tens of thousands of tickets through private domain, more than two professional ticketing websites combined. This is a classic case of linking and mobilizing customers through private domain. The true value of private domain lies not in short-term monetization but in long-term marketing value. Find and cultivate our brand's customers, get infinitely close to them, understand them, deeply connect, and continuously interact—they will surely create value beyond sales for us.

04 Clearing the Fog: Scientifically Understanding and Categorizing Private Domain The definition of 'private domain' has become increasingly chaotic and vague. Teacher Liu Chunxiong stated: The concept of 'private domain' corresponds to 'public domain', originated in e-commerce, and from the start carried the unsavory connotation of 'traffic smuggling'. Teacher Liu Chunxiong divided private domain development into three stages. Private Domain 1.0 is still an e-commerce concept, with transaction conversion as the top priority. Taking Pop Mart, which does private domain best, as an example, in 2021 it had 15 million private domain users, with transaction volume of only 890 million yuan. This is the best-case scenario; most brands cannot achieve this number. For e-commerce, private domain has no traffic cost, making it a decent growth point. But for FMCG products that are low-value, require high purchase convenience, and have large overall volume, this private domain sales volume is just a drop in the bucket. Private Domain 1.0 is characterized by direct e-commerce, eliminating intermediate platforms. The chain is shortest, but traffic is small, living in the shadow of e-commerce, and it's hard to break through 10%. Currently, most leading FMCG companies' understanding of private domain is at the 1.0 level. With such small sales, it's understandable that attention and investment are insufficient. If Private Domain 1.0 is a small dish, then Private Domain 2.0 is different. KFC has 330 million members, and all 7,900 stores operate private domain through WeChat Work. Nai Xue has 43.3 million members with a repurchase rate of 30%; Miniso has 14 million members, and members' sales are 1.5 times higher than non-members. These rely on direct-controlled stores for traffic, sharing traffic within the system, achieving significant scale breakthroughs. Private Domain 1.0 has only two participants: the manufacturer and the customer. The biggest progress of 2.0 is the entry of 'stores', turning the two-party relationship into a three-party one. The store's entry simultaneously solves the issues of continuous traffic introduction and service. Currently, most benchmark cases cited by Tencent are store cases, such as store services, dining and entertainment, retail, local services, and some short-channel categories like footwear, apparel, and luxury goods, which have no distribution. Private Domain 1.0 and 2.0 are relatively mature, but there are almost no classic FMCG cases. Now we have entered the era of Private Domain 3.0. The biggest feature of Private Domain 3.0 is its entry into the distribution field. With the addition of distributors, FMCG Private Domain 3.0 has begun to have enormous exploration value. Compared to 1.0 and 2.0, Private Domain 3.0 has four participants: manufacturer, distributor, store, and customer. The manufacturer leads, distributors are the main force, mobilizing extensive terminals to connect with a broader customer base. This is the core logic of Private Domain 3.0. Link with scenarios, improve efficiency with tools, and monetize through relationships (terminals). This is a near-perfect Private Domain 3.0 model for FMCG. Private Domain 3.0 doesn't care about monetization at all. With a million terminals monetizing for the brand, why would it focus on that tiny private domain sales volume? And being able to connect with tens of millions of customers has immeasurable value for brand marketing. The Snow Beer Guizhou case mentioned earlier is just one manifestation of private domain's value. If Private Domain 1.0 is an appetizer, 2.0 is a main course, then 3.0 is a feast. This feast deserves strategic attention from brand owners. Zhang Jia, CMO of Jukebao, made a clear classification of the chaotic private domain landscape. Based on who owns the traffic, Zhang Jia divided private domain into 'Channel Private Domain' and 'Brand Private Domain'. Channel private domain's core is selling goods, including all traffic owners in the market whose purpose is to sell. For example, community group buying, live-stream e-commerce, terminal group buying, etc., are usually assigned to the new retail department in FMCG companies. Brand private domain refers to a system directly linking a large number of customers, established and led by the brand owner. Selling goods should be its least important function. Zhang Jia believes that any direct contact, link, or service to customers by the brand owner counts as brand private domain. Zhang Jia further divided brand private domain into three types based on purpose: advertising to customers, transacting with customers, and building relationships with customers. Advertising. Focused on information transmission and notification, treating customers as advertising targets, including brand official accounts, video accounts, etc. Transacting. Focused on selling goods, treating customers as transaction targets, including mini-programs, micro-malls, short-video live-stream selling, etc. Building relationships. Mainly through WeChat Work, WeChat, and WeChat groups. These three purposes basically cover all current brand private domain purposes in the market, and the classification is scientific and clear. However, these three purposes are not mutually exclusive. For example, WeChat private domain is for building customer relationships, but it also completes brand communication and information notification, and can also conduct some transactions, such as new product launch activities. Through the sharing of Teacher Liu Chunxiong and Zhang Jia, we can basically clarify the clear definition, development stages, and classification standards of private domain. This can serve as an important reference for FMCG private domain research.

05 Crossing the River by Touching the Stones of Success: How to Succeed in FMCG Private Domain? How can FMCG private domain be done well? There is almost no precedent, so the difficulty is imaginable. 'New Distribution' recently surveyed dozens of FMCG executives with two questions: How would you rate the necessity of FMCG companies doing private domain in the next five years? How would you rate the difficulty of doing private domain well? Both questions had a total score of 10. For necessity, scores ranged from 7 to 10, indicating it's very necessary; but for difficulty, almost everyone scored 9 or 10, with one executive giving a desperate 100. This shows that even if the future value of private domain is recognized and the definition and classification are clear, how to do it well remains the biggest challenge for FMCG companies. Innovation has a cost, and it's not low. Therefore, the most effective way to innovate is not to cross the river by feeling the stones, but to cross by following the successful. Qin Mengke of Nanfang Black Sesame believes that for FMCG to do private domain well, only a top-leader project can achieve great success. Private Domain 1.0 is e-commerce logic, just a small dish. The 3.0 suitable for FMCG requires integrating online and offline, and planning the brand's private domain system development from a strategic level. Without top-leader involvement, it's basically hopeless. Shi Yonggang of Qingdao Beer believes that the core of private domain operations lies in operations. For many leading brands, traffic acquisition is very simple—product QR codes, mobilizing terminals—can quickly generate huge traffic. But if operations are poor and can't handle it, this traffic will become stagnant water, achieving little. Jukebao is currently the largest full-channel automated private domain operations platform service provider in China, serving over 5,000 companies including Viya, Mengniu, and Genki Forest. Jukebao CMO Zhang Jia is an expert in private domain operations, having coached clients to create many classic cases. Zhang Jia believes that in private domain operations, one must master or form an effective methodology. There are two cores: one is what value to provide to customers? This requires every brand marketer to exhaustively integrate resources and design customer value. The other core is a set of scientific methods, which he summarized as 'One Main Line, Two-Dimensional Table, Four Operational Paradigms'. The main line is five words and five steps: 'Guide, Receive, Operate, Convert, Manage'. These are traffic guidance, reception, operation, conversion, and management. In each step, brand companies must sort out and summarize effective methods and means based on their own business characteristics. The two-dimensional table has time on the horizontal axis and user status (new user, active user, loyal user, superfan) on the vertical axis—a lifecycle table for private domain user growth. In the cells where the axes intersect, fill in the operational actions to take for that type of customer at that time point. The time unit can be days or weeks. What to fill in the cells? Four paradigm plays can be freely combined. First, customer service type: use WeChat to do 400-phone service; second, personalized push for thousands of people; third, quasi-WeChat business model: find opinion leaders in groups, give benefits and honors, and help our brand operate the community; fourth, funnel-style screening: through continuously upgraded user tasks, screen out the best customers and put them into another deep-operation private domain pool. Each of the above operational actions requires a powerful and intelligent private domain operation tool to support and assist. For example, Jukebao, as a technologically advanced and highly intelligent private domain operation tool system on the market, can reduce the workload of 10 people to 1 person, and can tag customers, using algorithms to ensure every operational action is what customers need, not a disturbance. FMCG private domain is a long march that has just begun in the new era. It certainly cannot be the lifeline for FMCG companies, but with reasonable expectations, scientific planning and implementation, and appropriate operational tools, private domain can add icing to the cake for large enterprises, enable small enterprises to rise abruptly, help companies move faster and better, and gain the qualification for continued survival and development.

PS: FMCG marketers and distributors interested in private domain operations can scan the QR code to contact and exchange ideas.