" Ren Xiaodong believes that FMCG brands currently face the problem of old products not selling and new products not moving, the essence of which is that brands solve problems with a 'grabbing red envelopes' mindset rather than a 'giving red envelopes' mindset. The solution lies in refining existing stock, expanding increment, and redefining product portfolios, while firmly grasping traffic, aggregating multi-channel resources, and achieving the integration of three networks: e-commerce, human, and ground networks. " This content is from the speech delivered by Ren Xiaodong, Secretary-General of the E-Commerce Association's FMCG Branch and partner of New Distribution, at the 'Brand Innovation Growth Forum' on the afternoon of the 22nd at the FDIC 2018 China FMCG Digital Innovation Conference.

  1. The Dilemma and Traffic Shift Brought by Changes in the Business Environment I have been in marketing for 13 years and am quite familiar with this system. Today we often talk about changes in industry trends and data. In fact, when the internet becomes the air in our lives and mobile phones become part of our body organs, the business environment has undergone tremendous changes, which have brought a series of chain reactions. The change in environment has also brought us some difficulties. First, we find that the direct-operated channels of the national KA system are showing a trend of rising costs and declining efficiency. Most importantly, consumers are beginning to divert, and the emergence of e-commerce has brought a strong siphon effect. Second, circulation channels are beginning to change. There is a wholesale market in Hunan that used to have 4,000 shops and 200 billion yuan in annual turnover. But now I have noticed a trend: merchants engaged in cross-regional product trafficking are gradually being replaced by B2B companies in the supply chain. We also judge that B2B development has approached the halfway point, and within 3-5 years, more distributors may face elimination or transformation. Third, after many distributors transformed to B2C, they found that costs were 36-40 percentage points, similar to traditional channels. At this point, they realized that all channels were controlled, and they began to face sluggish growth. This is an awkward situation. People often mention the term: traffic is king. So what is traffic? My own understanding is: users happily consume time. When users are accustomed to using web search, traffic is on the search side. So you will see that e-commerce platforms are all doing engine optimization, including Double 11, which is all search traffic. But when we observe the Double 11 data of JD and Tmall over the past three years, we find that sales have reached a peak. So recently, we have found that social e-commerce has begun to show strong growth, forming a new business model through social attributes to guide traffic, called social traffic. This is also the process of traffic shift.
  2. Development Difficulties and Countermeasures for Brand Owners In this business environment, what problems will brand owners encounter? Old products are awkward, like a dry towel that cannot be wrung out; they have to make a fuss about these old products and force inventory. The awkwardness of new products is that they don't sell, they don't know how to sell, and our channels don't support them. What is the essence of the problem? From the perspective of brand owners, it may still be a problem of problem-solving mindset. Everyone is still using the mindset of grabbing red envelopes, not giving red envelopes. Many new beverages, water, etc., today are in line with the consumption characteristics of this era, but from the packaging perspective, they meet niche needs, and brand owners cannot satisfy them. Our solution is, first, to refine existing stock. I believe this is a consensus among many brand owners: consolidate the foundation and achieve traffic coverage. The basis of this strategy is to stabilize the basic market and maintain the operation of the sales engine. There are usually three approaches: First, the so-called re-mining of location-based traffic. Now when we want to do vivid promotion, we must bring our own communication attributes. Every terminal display prop must have corresponding communication attributes. There must be scenes. Second, cooperation with B2B platforms. We have explored with many brand owners nationwide. For some mainstream platforms in the entire FMCG industry, we have formulated the industry's first sales visit manual. Now, based on the characteristics of B2B e-commerce, we have also made a B2B visit manual. Third, in the B2C module, we must heavily defend core sales channels. For example, Ximai did less than 6 million last year, and this year they do B2C themselves, about 160 million. The team has gone from initial outsourcing to now having their own team dedicated to this work. This is the strategy for brand owners to refine existing stock. The second step is to expand increment. To expand increment, we must fully tap and operate so-called social traffic, based on WeChat internet, including mini-programs, official accounts, service accounts, plus fission and other traffic attraction measures, fully tapping the lifetime value of users, and connecting users with membership management. We call this the M2C model.
  3. How Should Brand Owners Cooperate with B2B? First, we need to know what kind of brand owners should cooperate with B2B platforms? First, your distributor system is already aging. Second, your distribution system has shown fatigue, and high labor costs make you need digital means to optimize. Third, emerging brands have rigid needs. Last year, we counted that the total data of all B2B platforms nationwide was around 100 billion yuan. This data only accounts for 30% of the same period in the United States. From this perspective, the growth potential is still huge. In addition, we monitored brands like Lay's. Before cooperating with B2B, sales were very small; after cooperation, sales increased by 50%-100%. The entire Chinese circulation channel currently includes about 6 million small shops and 3 million restaurants. Many brand owners can only obtain a part of a certain channel through traditional methods, but through B2B, they can cover all channels. In specific cooperation, in addition to having a basic understanding of B2B platforms, you also need operational awareness. B2B is not a network point; you can treat it as a distributor. You need to supply goods, and based on the platform's characteristics, link with the operations department and product department to jointly make promotion plans. So you must pay attention to the optimization of detail pages, search optimization, various boot pages, and promotion pages. Because B2B platforms communicate differently from traditional salespeople and stores. I remember Dr. Wang Jian from Alibaba said a sentence: What is digitalization? The core of digitalization is online. Traditional distributors have a drawback: they are not digitalized; they are all separated. Sometimes even because of the dissolution of a team, the entire region disappears. Last year, we reported that when problems occurred with distributors in certain regions for Yili or Mengniu, no other distributor could be found in that region. So I think we can treat B2B as an upgraded version of the second-tier wholesaler. You need to make your own operation methods according to the characteristics of different B2B platforms. Third, because B2B platforms connect many users, in addition to selling goods to them, you can also convey brand information to end users. For example, last year a certain beverage cooperated with a B2B platform and began nationwide conversion. Previously, it took at least half a year to cover 6,000 stores; now it takes only one month. So you should comprehensively evaluate B2B platforms from the perspective of full transaction reach. I suggest that when you cooperate with B2B, you should consider whether to improve the city's distribution coverage level or improve some advantageous distribution coverage. Is there internal personnel coordination for production and sales? Because many brand owners' sales systems are different. Sales supervisors should pay attention to this. Can you produce a product specifically for a certain platform to promote?
  4. Five New Concepts and Integration of Three Networks To summarize, we propose a concept of five new things: new products, new models, new organizations, new channels, and new communication. Products become the entrance to connect users and the starting point for word-of-mouth explosion. Under this underlying design, first, we find that traffic is the source of living water, channels are the cultivated land and forests, products are seeds, IP is the fruit, and we grow food around users. We need to achieve product-user co-creation of value, making consumers feel: this product is born for me, this product is designed for me, this product is what I want to design. I think in the mobile internet era, it is easier to achieve such characteristics. In our future development, we must amplify social traffic and social e-commerce channels to achieve new channels. The sky network converts users, the human network locks users, and the ground network covers users. Achieving the integration of the three networks is the suggestion for the digital transformation of the entire brand owner. Click Read Original to see more highlights of the 2018 FDIC China FMCG Digital Innovation Conference... -END-