“Traditional distributors will have no future if they don't transform, because being traditional means no way out.” This is the view expressed by Qin Xian at a meeting regarding the transformation period of FMCG channels. In Qin Xian's view, in the field of FMCG distribution, the distributor link has gone through three generations: from the initial supply and marketing cooperatives, to wholesale market merchants, to itinerant merchants who directly supply terminals for logistics and distribution. Nowadays, the internet brings more advanced technology and tools to distributors. Every distributor should actively embrace it, proactively seek change during the turbulent market competition and the transformation period of distribution channels, and complete the transformation to the fourth generation of distributors (distributor + internet). Recently, New Distribution interviewed Qin Xian, founder and CEO of Chengdu Rongcheng Yigou. He is both a traditional distributor and a serial entrepreneur. In the FMCG distribution business, he has been through ups and downs, constantly transforming and exploring. With a sense of urgency, he leaped from a “small merchant” with annual sales of 20 million yuan to a “big merchant” with annual sales of 200 million yuan in just 3 years. How did he do it? He firmly believes that as long as distributors can wield the “sword” of the internet, stay rooted at the front line, and serve terminal small stores well, they need not fear anyone, whether it's Alibaba or JD.com! 1. Stumbling and Growing in Adversity Qin Xian started his entrepreneurial journey in his sophomore year (2004), running a bookstore, managing a teahouse, and acting as an agent for daily chemical products. In early 2009, by chance, he came into contact with leisure food and thought it was a good entrepreneurial project. “Unlike daily chemicals, consumers don't pay much attention to brands in leisure food. As long as the product's color, aroma, taste, and packaging are good, sales can be generated.” Leisure food is indeed an opportunity, but whether he could seize it was another question. In June 2009, Qin Xian became the provincial general agent for local brands Liu Xiangyuan and a dried tofu brand from Bazhou. Qin Xian told New Distribution, “After nearly a year as a provincial agent, the manufacturer began to use the network we built to penetrate channels, turning distributors into dealers. As a provincial agent, the position was awkward and had no future; being cut off was only a matter of time.” Since the provincial agent was constrained by the upstream, he decided to move upstream and create his own brand (OEM). In 2010, Qin Xian started his own leisure food brand operation, using Sichuan as a base and recruiting nationwide. The early days of entrepreneurship are always full of passion and beautiful expectations, but reality is often harsh. After a few months, problems emerged. Qin Xian recalled, “In 2011, during peak sales seasons, manufacturers only cared about their own supply, leading to frequent stockouts and shortages. Additionally, due to low pricing and average quality, some products had difficulty moving.” Distributors demanded returns, and to reduce losses and handle aged inventory, Qin Xian chose some small stores near stations and communities for distribution. Unexpectedly, he was pleasantly surprised to find that a small community store could sell 5,000 yuan worth of clearance goods in a month, which was more than some distributors sold. After some thought, in 2012, Qin Xian decided to explore terminal business. 2. Transforming into a B2B Platform: From Manufacturer Blockade to Monthly GMV Increase of 3 Million Although he had stepped into the trade business, how to proceed was still a step-by-step process. Fortunately, Qin Xian had an restless spirit. In 2013, Zhongshang Huimin entered Chengdu, allowing terminal small stores to order online (via PC). At that time, Qin Xian's trading company was also a supplier to Zhongshang Huimin. This “novel” ordering method caught Qin Xian's attention. While doing terminal business, he also explored online ordering. Others transformed due to crises around them, but Qin Xian's transformation was driven by recognizing the trend and breaking through his own business bottlenecks. In 2014, Qin Xian introduced the Order Treasure system, established the Rongcheng Yigou platform, and officially launched it in November, becoming the first local online ordering platform in Chengdu. The excitement period is always short-lived. Pioneers often become martyrs. After operating for a while, problems arose again. Qin Xian told New Distribution, “2015 was my most confused year. I kept doubting myself: Is B2B really a trend? Originally, we were distributors for Want Want, but when the dealer found out, they cut off our supply, and we were also blocked by manufacturers. When I talked about our model with 10 peers, 9 didn't recognize it and even despised it. Terminal acceptance was also unsatisfactory, and the business team was unstable...” In 2015, Rongcheng Yigou's monthly sales were less than 2 million yuan, growth was slow, team turnover was high, and it was very tiring. But the obstacles didn't seem to crush Rongcheng Yigou. Qin Xian believed that since he had identified the trend, there was no reason to give up. In November 2015, gritting his teeth, he converted all offline business to online. The spring of 2016 seemed to arrive. Qin Xian told New Distribution, “We clearly felt a change in manufacturers' attitudes, from past blockades to neutrality (neither opposing nor supporting). Distributor friends around us were also trying different forms of transformation.” Small achievements rely on friends, but great achievements rely on opponents. The existence of competitors stimulated the team's tension at Rongcheng Yigou. In 2016, Rongcheng Yigou's sales increased from 3 million yuan/month at the beginning of the year to 8 million yuan/month at the end of the year, and the product categories expanded from single leisure food to all categories, introducing beverages, daily chemicals, seasonings, etc. In 2017, Rongcheng Yigou entered the fast lane of development. It expanded from covering 12 administrative districts to 18 including suburban counties. As of now, Rongcheng Yigou distributes nearly 7,800 SKUs, represents 386 brands, including first-tier brands such as Master Kong, Dali, Want Want, PepsiCo Foods, and Hsu Fu Chi, and has nearly 9,800 active stores. 3. +Internet Distributor: Completing Distribution to 3,000 Stores in One Week On July 16, 2017, Ram Krishnan, President and CEO of PepsiCo Foods Greater China, visited Rongcheng Yigou to discuss various forms of in-depth cooperation in the future. Qin Xian told New Distribution that previously Rongcheng Yigou was only a distributor for PepsiCo Foods, and it wasn't until April that it was promoted to a dealer. Within three months of cooperation, Rongcheng Yigou had doubled the sales (GMV) of Lay's products. Earlier, Rongcheng Yigou also collaborated with Hsu Fu Chi on a new product promotion, helping Hsu Fu Chi's new lollipop complete distribution to nearly 3,000 stores in just one week. Qin Xian told New Distribution that in addition to completing the distribution quantity, Rongcheng Yigou also uploaded new product display photos in real-time via the APP, fed them back to the manufacturer, and opened backend data to the brand, allowing the manufacturer to monitor distribution status, inventory, and repurchase situations at any time. Traditional distributors are called traditional because of rigid models and low efficiency. Qin Xian believes that in the future, the key indicator to judge whether a distributor has core competitiveness is whether they have deep distribution and brand promotion capabilities. If they do, they can thrive; if not, the future is basically out of reach. The use of internet tools is not only reflected in brand promotion but also in internal management. Qin Xian told New Distribution that in the past, business assessments were usually based on sales volume, with commissions proportional to bestsellers and non-bestsellers, plus store opening rewards, and were result-oriented. But now with information tools, we pay more attention to the process. In the past, sales supervisors would ask frontline staff about sales, and the answers were just good or bad, how many cases were sold, how many small stores ordered... If sales were good today, they didn't know why; if sales were bad tomorrow, they also didn't know why. Now Rongcheng Yigou not only focuses on results but also pays more attention to process indicators: customer visit volume, registration success rate, store activity rate, new product shelf rate, new product repurchase rate, etc. Through information tools, business execution actions become more transparent, clear, and evidence-based. Final Thoughts The above is a case study of Rongcheng Yigou's transformation into a local B2B platform. We can see that compared to local B2B platforms, brand manufacturers have shifted from past blockades to active embrace and granting distribution rights. In just two years, brand manufacturers have begun to seriously and rationally view the development of B2B platforms. The support of brand manufacturers will also drive more traditional distributors to transform and upgrade. Support is support, but transforming distributors still need to prove themselves with actual actions and capabilities. Brand manufacturers not only hope you can complete monthly, quarterly, and annual tasks (maintaining the existing market) and achieve annual stepwise sales growth, but also need you to have the ability to promote new products (expanding the incremental market). In addition, with the application of +internet, they can also provide brand manufacturers with visualized data. While completing sales, it can also reverse: distributors empower brand manufacturers. This is the key to why brand manufacturers are willing to actively embrace. Regarding the transformation of traditional distributors, in the view of New Distribution, even if traditional distributors do not transform or build B2B platforms, they still need to have +internet thinking and tools. While striving to maintain the existing market, they should improve their internal capabilities and upgrade their business management level. No matter what the future transformation path is, at least you need to have an “internet gun” on you. Otherwise, in a bare-handed fight, you will definitely lose. Extended Reading: Review the exciting reports of “New Distribution 100 People” [Click to view] -END-