There is a common sentiment: in recent years, our business has become increasingly difficult. Where have sales gone? The market is becoming harder to control, with more channel conflict and price management becoming more difficult. We want to address it, but we don't know where to start. As an e-commerce operations platform focused on local life, Mr. Wang Jichao, General Manager of Zebra Business Operations Co., Ltd., has experienced and managed projects in community group buying, e-commerce, Meituan Flash Shopping, and other hot areas. At the 9th China FMCG Innovation Conference & the 2nd China FMCG Hard Discount Conference & the 2nd China FMCG Distributor Conference, he delivered a keynote speech—"The Sales Code Under the Transformation of New Retail Channels"—opening new ideas for distributors' development. "New Distribution" has compiled the essence of the speech for our readers.

Pay attention to the invisible competitors behind What I'm talking about now in instant retail is Meituan's Flash Warehouse. When Canon's competitor is no longer Nikon, when Mengniu's competitor is no longer Yili, when Master Kong's competitor is no longer Uni-President, then the invisible competitors behind are what we really need to focus on. Let me give an example of a consumption scenario. For instance, you're drinking beer with friends at night while watching football, and suddenly you realize you're out of beer. If you go downstairs to buy more, leaving your friends alone at home isn't appropriate. So where does the beer come from? The first thought might be to open your phone, place an order on Meituan, JD Daojia, or Ele.me, and have beer delivered to your home within half an hour. Another scenario: you're playing basketball with friends, and you miss a dunk, fall from the hoop, and injure your leg. You urgently need ice and crutches. In this case, do you order from JD or Taobao? Or take a taxi to a nearby pharmacy to buy crutches? Neither is realistic. The simplest way is to open your phone, check Meituan, JD Daojia, or Ele.me, and see who can deliver ice and crutches the fastest. At this point, do you compare price or quality? No. Whoever can deliver the product to you the fastest is who you choose—that's the demand. As shown in the chart, Master Kong boiled water is one cent per bottle, Suntory oolong tea is one cent per bottle, Harbin beer is one cent per can. Can they make money selling like this? Let's look at the order gross profit analysis. The first account has a total of 8,486 monthly transactions, with an estimated total gross profit of 63,753 yuan. The second account has a total of 5,864 orders, with an estimated total gross profit of 94,090 yuan. So the gross profit is still quite high. How is this profit generated? When we carefully study their products, we find that general merchandise accounts for up to 70%. Besides beverages, suits, crutches, cement, etc., can all be sold, which explains where the profit comes from.

Flash Warehouse Model Breakdown 1. The gross margin of a flash warehouse must be 50 points or above; otherwise, it is not profitable. Among the products currently sold in B2B or overall distribution, which ones can achieve a gross margin of more than 50 points? From the breakdown below, basically, with a gross margin of over 50 points, after deducting platform commission (5 points), delivery fees (16 points), and then warehouse fees, electricity, and personnel costs, the net profit can reach 14 points. There are also variables: delivery fees differ between first- and second-tier cities, third- and fourth-tier cities, and fifth-tier cities; warehouse and electricity costs also vary. For example, electricity in Guangzhou is 1.8 yuan per kilowatt-hour, while in Hohhot it's 0.5 yuan per kilowatt-hour. But product profit is fixed, so profit margins are higher in lower-tier markets.

2. The front warehouse area for a flash warehouse: 150 to 200 square meters is sufficient. Whether in terms of rent or labor costs, it is much lower than a hypermarket. If you compare a front warehouse with a convenience store, a convenience store typically has 1,500-2,000 SKUs, while a front warehouse has 6,000 SKUs. So even if 1,000 products don't make money, the remaining 5,000 can still generate profit, creating differentiation from convenience stores. Some may ask: what advantages does a flash warehouse have compared to Hema or PUPU? Customers at Hema or PUPU mostly buy fresh produce, fruits, and household staples for stocking up. In contrast, a flash warehouse provides products that are needed urgently, immediately, and right away. So it's hard to buy crutches or suits at Hema or PUPU, but you can find them at a flash warehouse.

3. Besides product differentiation, consumer differentiation is also significant. PUPU's consumers are mostly household shoppers aged 30 and above, while front warehouses mainly serve consumers aged 18-25. These younger consumers haven't accumulated much capital, so they rely more on delivery platforms and focus not on brands but on cost-effectiveness. Thus, the two differ greatly in both products and customer demographics, indicating that front warehouses have significant room to survive.

Four Key Elements for Front Warehouse Success Whether it's Taobao or Tmall, their core codes are traffic and bestsellers. For distributors, among the products they handle, which are traffic products? Which are bestsellers? Which are profit products? Do they have a perfect combination? In B2B, some make money, some don't. If a B2B platform only sells beverages, it definitely won't be profitable. How to combine products is the fundamental key to profitability. To succeed, there are four cores: site selection, product management, operations management, and store management.

The first core is site selection. The core of site selection is not about minimizing costs, but about being at the center closest to business districts, residential areas, and consumers. Consider its location, environment, and planning. The environment includes cultural environment, business environment, competitor environment, and supporting facilities.

The second core is product management.

  1. Product selection is the core of store development; it must match your consumption scenarios and customer profile. For example, 10kg bags of rice, boxes of fruit, or high-end liquor—can these sell in a front warehouse? No.
  2. Instant retail's core is urgent, immediate, and small packaging, such as 1kg of cement, 1kg of paint, or cost-effective suits.
  3. Product category completeness is also crucial—if you have watermelon, you need spoons; if you have yarn, you need needles. You need high, medium, and low price points, and a combination of traffic-generating and profit products.
  4. How can products be seen by customers on the platform? For example, if you label a pack of sanitary pads as "sanitary pads," consumers in Guangdong might not see it, because there it's called "aunt pads." If consumers can't see it, your product has no chance to sell.

The third core is store management.

  1. Platforms are definitely different from traditional offline retail stores. Offline stores can close and don't have to wait for customers, but on the platform, you must serve customers well. Business hours affect your store's weight; delivery time, customer reviews, and product availability also affect store weight. The lower the weight, the lower the ranking, the less traffic distribution, and consequently lower order volume and profit.
  2. Efficiency. The biggest costs for a front warehouse are store personnel and rent, so improving store efficiency remains key. Single-person picking output and picking timeliness need close attention.
  3. Date and product management. Expired products or products that don't meet platform requirements can lead to heavy penalties, causing losses to the store.
  4. Customer management. Responding to customer messages, managing customer groups, and converting public domain customers to private domain are all key tasks for the store.

The fourth core is operations management.

  1. Building data models and handling data issues.
  2. Mastering platform rules.
  3. Formulating, executing, and coordinating activities.
  4. Managing the three ends: products, procurement, and stores.
  5. Researching competitors.

Development Suggestions for Distributors Front warehouses are just one part of new retail; there are also snack stores, fresh food stores, etc. The development of these channels will form strong supply chain systems and erode distributors' market share. As retail evolves, distribution channels become more fragmented, and consumers have more channels to buy products. The opportunity for distributors to grow by relying on regional monopolies or working with a few major channels is shrinking. To quote Mr. Niu Gensheng: "Changing others is extremely difficult; changing yourself is simple." For distributors with a supply chain foundation, here are my personal suggestions on how to stabilize your business:

1. Build a regional digital B2B platform to reduce costs and increase efficiency through digitalization.

2. Transform from a single-product wholesaler to a multi-category, cross-category one-stop supplier.

3. Establish retail barriers by linking to the B-end and also building the B-end.

4. Develop regional private labels.

5. Expand into new retail formats like front warehouses and livestreaming, and even build a C-end sales network.