On April 7, at the parallel forum on 'bC Integration' during the 2023 (8th) China FMCG Innovation Conference, Liu Chunxiong, an expert in channel digitalization, advocate of new marketing, and dean of the Marketing Digitalization Research Institute, attended as a guest speaker. Liu Chunxiong is currently an associate professor at Zhengzhou University. His representative works, from 'New Marketing' and 'New Marketing 2.0: From Deep Distribution to Three-Dimensional Linkage' to 'New Marketing 3.0: bC Integrated Digital Transformation', have proposed a new marketing theory system. Theories such as 'All 4Ps are marketing', 'bC integrated operation', and 'three-dimensional linkage' have received widespread attention and recognition in the industry. He became the dean of the Marketing Digitalization Research Institute in September 2020, conducting research on New Marketing 3.0: full-chain and full-scenario marketing digitalization transformation, helping traditional enterprises with digital transformation and implementation from a marketing perspective, and empowering digital service providers to better serve corporate marketing needs. __ At the conference, Mr. Liu delivered a speech titled 'High-endization and bC Integration'. He believes that the growth and digitalization issues faced by enterprises ultimately need to be solved through bC integration, which must be digitalized and cannot exist independently of the marketing system. The following is an excerpt from Liu Chunxiong's speech (partially abridged). Enterprises Face the Same Problem In 2019, I proposed the concept of bC integration. Over the past few years, bC integration has gradually become a mainstream topic, even having its own sub-forum. In 2020, this concept was recognized by a multinational company with significant influence in China. Corporate recognition is the driving force behind our research. Now, many enterprises have digitalization where marketing is marketing and digitalization is digitalization. Can we integrate marketing and digitalization into one system? At this point, we need to analyze from the origin: what problems do enterprises currently face, and can these problems be solved with the same set of methods? Enterprises face three main problems: First, the growth problem; Second, the digitalization problem; Third, the supply chain transformation problem brought about by digitalization. In fact, these three problems are the same problem. To avoid the blind men and the elephant situation where everyone speaks differently, let me sort out the problems facing marketing. Whether for manufacturers or distributors, the biggest problem now is the lack of growth. The reason is simple: since 2013-2016, except for dairy products which saw growth due to the pandemic, almost all FMCG industries have entered a trajectory of declining sales. Baijiu sales have declined by more than 50% from 2016 to 2022, but the baijiu industry is still developing. Beer production capacity has been declining from 2013 to 2022, down more than 40% over the decade. Instant noodles have also declined by more than 50% since 2016. So, when the entire industry is declining, how can you grow? High-endization and White Labels With the total volume declining, the growth problem for enterprises becomes the following: either go high-end or go white label. Manufacturers need to take the high-end route, so high-endization is the new world; it is the solution for brand owners. For retailers, platform operators, or distributors, there is another solution called white label, also known as private label. Whether white label or high-end, both have a common feature: high gross margins. Someone once interviewed me and said, 'KA is declining sharply, what should we do?' I believe that it is the poorly performing KA that is declining sharply. The best-performing KA in China are growing well, such as Pangdonglai in Xuchang, Henan, and Yashi in Yichang. Why? The public knows that their corporate culture is excellent, but experts know that their white label business is excellent. So the growth problem is the problem of high-end and white label. Last month, when China Resources Beer released its annual report, Hou Xiaohai said, 'High-end does not involve involution.' Similarly, Mengniu's CEO Lu Minfang said at the 2022 annual results conference, 'Both basic demand and high-end demand are strong at both ends.' I deeply resonate with what they said. This is the path of high-endization. Different periods have different stages. 2019-2025 is the explosive period of high-endization, which coincides with the three-year pandemic. Interestingly, during the three-year pandemic, everyone talked about consumption downgrading, but the ultimate winners were those who upgraded consumption. After every economic crisis, there is a prevailing voice of consumption downgrading, but the final victors are always enterprises that upgrade consumption. In the past, the marketing system relied on was called deep distribution, which I label as the 'marketing system for mass products.' Just putting products on shelves and selling them is the marketing system for mass products. For high-end products, deep distribution is ineffective; it is necessary to reach the C-end. At this point, our offline marketing has entered a new stage called bC integration. bC integration does not necessarily require digitalization, but it will definitely be digitalized. Our marketing system goes from manufacturer to big B to small b, and now to C. Offline marketing also needs to reach C. The logic of channel evolution is to get infinitely close to C and reach C. In the past, this was impossible; now it is possible. At this time, our marketing actions will change. Traditional marketing has three major tactics: distribution, promotion, and in-store demonstration. Everyone can do them, but they are ineffective for high-end products. Why? Because high-end products require precise distribution; in-store demonstration is useless for high-end products; instead, experience is needed; products that need promotion are not high-end products. So when enterprises go high-end, the three traditional distribution actions become ineffective. At this point, three new actions of bC integration emerge: 1. 2C organization. Not only distribution to the B-end, but also sell-through to the C-end. 2. Scenario-based. In the past, we called it vividness; being attractive and scenario-based requires evoking people's emotions. 3. Immersive experience. Immersive experience can awaken consumers' desire for high-end products. The label of deep distribution is 'mass products', and the label of bC integration is 'high-endization'. Because without high-end, there is no growth; sales are declining. Ten years ago, Moutai was 800 yuan; now overall baijiu sales are declining, but Moutai sells for over 3,000 yuan. Beer is the same: in recent years, China Resources Beer's Heineken brand has done very well. During the three-year pandemic, sales in Fujian Province doubled, profits increased 9 times, sales quadrupled, and profits tripled. This is the result of high-endization. It is extremely difficult for distributors to pursue sales growth, but they must pursue profit growth. bC Integration is the Essential Path to Digitalization During the conference, there has been much talk about digitalization. What is digitalization? Digitalization is real-time online data from the C-end. It is not just ordering; even being online without ordering is data, which is behavioral data. Without C-end data, it is not true data. Digitalization must reach the C-end; otherwise, it is called informatization. Does B2B count as digitalization? No, it is a step forward from informatization, but it is not yet digitalization. For FMCG, platform e-commerce accounts for no more than 10% of sales, 90% is offline, and private domain (new retail) is no more than 5%. If enterprises do both e-commerce and new retail, the remaining 85%-90% of digitalization must be omni-channel digitalization. bC integration is the essential path to digitalization. Why? Employees in 2C roles have marketing actions that reach consumers. As long as consumers are online, activating them achieves digitalization. At this point, it is easy: offline actions reach C, and the online connection to C is completed. Many people talk about digital transformation, but in reality, there is no transformation. Why? Because your employees are doing B2B actions, and you hope to achieve C-end digitalization, which is impossible. Now we talk about digital twins. What is the concept of digital twins? A digital twin means that when you have completed b2C offline, completing b2C online is a matter of minutes. Enterprises cannot establish a digitalization system that is separate from the marketing system; they must establish a digitalization that is integrated with the marketing system, combining online and offline. Only such digitalization is vibrant. Therefore, first do offline bC integration, then do bC integrated digitalization. This is the correct sequence. Digitalization only needs to complete three major steps: connection, activation, and operation. Connection is relatively easy; the hardest is activation. Last year, a manager of a leading domestic enterprise said that there were over 60 million fans online, but they were all zombie fans. However, through bC integration, they attracted over 10 million fans, and they were all active fans. Why are they called active fans? Because the users were activated. If users download an app or mini-program but do not use it, the manufacturer has no way. But small b has a strong relationship with C, or at least a strong connection. Manufacturers have countless ways to activate users. The easiest way to activate users is through offline and communities, not online. This is bC integrated digitalization. What Does bC Integration Bring? bC integrated digitalization has three major principles: First, bC integration: through bC QR codes and bC mini-programs, technically lock b and C to know where traffic comes from. Second, online-offline integration, which is the marketing perspective and incremental thinking. Many people ask me how to pull traffic from offline to online. There is no need to pull it online because offline and online are one family. As long as there is increment, whether it is online or offline. Third, traffic profit-sharing logic: online traffic is shared among F, B, and b. In March 2020, at the end of the first round of the pandemic, I helped a store owner download a bC integrated mini-program, and that afternoon, sales exceeded 30,000 yuan. At that time, other stores were not yet open. In the past, when talking about digitalization, distributors and retailers were afraid of 'digging corners', but that was because the principle of 'traffic profit-sharing' had not been established. However, digitalization also brings new challenges. After digitalization, any two points can transact, involving four entities and seven transaction models. Logistics and delivery methods become more complex, and the role of distributors is challenged. After the Spring Festival in 2021, I visited Midea Group and was impressed by their assessment indicator 'LTL orders', which means small b places orders directly to F. This was impossible in the past. The traditional channel is an SKU funnel: a manufacturer may have 100 SKUs, big B only 50, and small b maybe only 5. In the bC integrated digitalization system, small b can sell all SKUs of the manufacturer. This brings unprecedented changes to transaction scenarios. Recently, Annto Logistics proposed 'warehouse-trunk-distribution integration' because Midea is doing this now. Midea started digital transformation in 2012, so we should learn from them and avoid the detours that predecessors have taken. After visiting Midea, I gained a deeper understanding of digitalization. The so-called integration is the trinity of cognition, transaction, and relationship; the integration of offline, community, and online three-dimensional spaces; bC integration; bC integrated digitalization; and warehouse-trunk-distribution integration. Integration brings a new business ecosystem. What is a new ecosystem? Distributors have four major functions: first, promotion; second, ordering; third, logistics; fourth, financing. In the future, a lot of our work will be outsourced to third parties. For example, logistics: either become a delivery provider or hand it over to a third party. Some industries have already done this, such as beer, mineral water, and baijiu. During the conference, I passed by an exhibition called 'Ping An Finance'. Ping An Finance has order financing: orders can be used for financing. In the past, it was difficult for distributors to get loans, but now they can use working capital loans. In the past, distributors did everything; in the future, they may only do one thing that manufacturers cannot replace, which is 'localized promotion', especially for high-end and new product promotion. When enterprises face growth problems, they solve them with high-endization and white labels. For high-endization to work, marketing bC integration is needed. Marketing bC integration naturally brings bC integrated digitalization. And bC integrated digitalization brings bC integrated suppliers, warehouse-trunk-distribution, supply chain finance, etc. The three major problems enterprises face in development—growth, digitalization, and supply chain—are solved by the same logic, which is called bC integration. Since I proposed the concept of bC integration in 2019, I have been researching and practicing it. The result of practice is that tactical actions for certain categories have been opened up. From the Spring Festival to now this year, we have been assisting in bC integration workshops. Through training, co-creation, and implementation, we are promoting the process of bC integration.**** PS: For those interested in the on-site speech content, please follow the recent posts on the WeChat official account of 'New Distribution'. We will organize and publish all speakers' speeches for readers. 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