Source: Teacher Liu's Forum (ID: liuchunxiong1964)

To state clearly, what is the logic of 2C and 2B? The logic of 2C is traffic, or traffic thinking. The logic of 2B is "density", or traffic density. What is the difference? Use a familiar physics concept: one is pressure, the other is pressure per unit area (压强).

Current 2B companies, more or less influenced by 2C thinking, are filled with traffic thinking. They desperately chase traffic, regardless of cost, only to find that when traffic increases, problems become bigger. The logic of 2C is the pitfall of 2B.

Because B2C succeeded, various internet startups are filled with 2C logic, and few reflect on it. The first major failure of 2C thinking was O2O. At the time, many people didn't think this way; instead, they criticized O2O itself. Because O2O requires offline delivery. Offline delivery requires not just traffic, but traffic density; otherwise, service costs are too high. Only traffic density can reduce delivery costs and form a business model.

Didi, bike-sharing, and food delivery are the better-performing O2O examples. Didi started by activating taxis; both taxis and passengers had density, so subsidies could quickly activate density. Imagine if Didi had started with its current premium car service; it would have been difficult because premium cars initially had no density. The initial density of taxis solved Didi's early problems and provided a buffer for the launch of premium cars. Bike-sharing, because bikes are low-cost, could be densely deployed in central cities, so it had density. O2O with density survived; those without density died.

Some say that online brands (淘品牌) opening offline stores seem to perform poorly. Many opened stores with great fanfare, but now they are silent. This is normal. Online brands have traffic, but it's the sum of national traffic. Opening offline stores requires traffic density. An offline store has a trade area radius. Whether the traffic within that radius can reach sufficient scale is the key for offline stores. For example, an online brand may have good annual sales, but spread across a county, it might be extremely small. If this online brand wants to open a store in a county, the fan density is usually insufficient to support that county-level store. Because of this, B2B becomes the distribution center for long-tail products.

Back to B2B. I have criticized some B2B giants: their GMV seems large, but in a specific regional market, it's tiny. Because there is no density, it even leads to dark humor. For example, orders are so scattered and small that they have to use express delivery. There are two types of B2B companies: one type expands everywhere with long-term subsidies. They seem to have scale and can fool investors. This type of B2B could fool some investors before the first half of 2017. In the second half of 2017, B2B suddenly boomed, which highlighted their embarrassment. Because increased traffic did not bring down delivery costs. The more traffic, the heavier the losses. In short, traffic from land-grabbing has no value. Counting total national traffic together has no value. I am quite optimistic about some regional B2B companies; their strength lies in thoroughly penetrating local markets. The density of B2B is to thoroughly penetrate a market, achieving delivery costs lower than traditional channels.

Three years ago, I repeatedly proposed: B2B must first run the model, then run traffic. At that time, almost no one agreed. Some even said: traffic is the model. Traffic is the model—that's 2C. It's 2C thinking that harms 2B. First run the model, which means forming traffic density in a local market, with delivery costs lower than traditional channels. Once the model works, it can be replicated in other places; B2B traffic can be quickly replicated. I also proposed the "four no's": no burning money, no subsidies, no price chaos, no hijacking. Because traffic formed by subsidies is unstable, and it's impossible to maintain high subsidies in a local area for long.

If someone continues to ask: 2C also requires delivery, why can it ignore density? That's a good question. Yes, 2C also has density issues. But when discussing, many implicit conditions are not discussed. Three implicit conditions of 2C make delivery costs no longer a problem. First, JD started with 3C products, which are high-value; Taobao started with high-value-added products. Initially, even without density, gross profit had enough room to bear delivery costs. Second, 2C has been integrated delivery from the start. That is, goods from a platform or merchant are concentrated in a few logistics companies, forming centralized delivery and reducing delivery costs. Third, China's residential areas are relatively concentrated, reducing 2C delivery costs. The delivery time window for 2C is short, generally around noon and after work in the afternoon. If delivery locations are scattered, delivery costs become very high. The US 2C has this problem because delivery locations are scattered, so US 2C is delivered in a 2B model, and US 2B delivery is very mature.

China's 2B is currently very fragmented. First, 2B has industry characteristics; there are many types of 2B by industry. Especially in 2018, vertical B2B will heat up, and more segmented industry B2B will emerge. Second, China has not formed centralized urban distribution for B2B; many B2B are both order platforms and urban distribution platforms. Some even try to use urban distribution to gain order advantages. Third, China's B2B currently focuses on aggregated orders from C-class and D-class stores, with small scale and great difficulty. Without delivery thresholds, delivery costs are high. Once delivery thresholds are set, orders may disappear. Why are B2B currently mainly C and D class stores? Because in previous years, B2B was eager for quick success and mainly self-operated. Channel crossing and price chaos became B2B labels, and brand owners didn't trust them. Without brand trust, they can't do the most valuable A-class and B-class stores.

What we see is the result logic, such as 2C. The logic of success is actually process logic, such as the current 2B. Can we reverse-engineer the process from the result? No. How did B2C succeed? No one cares now. People only focus on what happens after success. Maybe Jack Ma will review B2C, but the public won't. The public assumes: the result is the process. If B2B entrepreneurs also assume this, they are greatly mistaken. After B2B succeeds, people may still say: this is traffic thinking. But the process is actually density thinking. Only those that don't need offline delivery don't need density. Everything related to offline requires density.

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