---
title: "The Truth About Internet+ in FMCG"
description: "Not all FMCG products are suitable for Internet+. While traditional enterprises are rushing to embrace Internet+, the real opportunity lies in long-tail products, and the future of FMCG distribution will involve VEM, CVS, KA, and O2O."
author: "赵波"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2015-07-03"
language: "en"
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# The Truth About Internet+ in FMCG

> Not all FMCG products are suitable for Internet+. While traditional enterprises are rushing to embrace Internet+, the real opportunity lies in long-tail products, and the future of FMCG distribution will involve VEM, CVS, KA, and O2O.

**1. Not all FMCG products are suitable for Internet+**

The Internet thinking that was all the rage last year suddenly turned into Internet+ in 2015, and the speed of change left us editors dizzy. With a studious mindset, I delved into how the FMCG industry can embrace Internet+, and after understanding it, I found that not all FMCG products are suitable for the Internet.

I have compiled some data to share with you:

**Data 1: China's Internet user scale and Internet penetration rate**

In 2014, Chinese Internet users spent 32 billion yuan on FMCG products online. Although this figure only accounts for 3.3% of China's FMCG sales in 2014, the current base of 649 million Internet users and 47.9% Internet penetration rate have already forced many FMCG companies to pay attention to the issue of transitioning to the Internet.

**1. Traditional enterprises are busy transforming**

On April 30, 2015, JDB held a WeChat launch event for a thousand people, first releasing its mobile Internet+ strategy; launching the "Gold Can JDB 2015 Gold Rush Action".

The gold can JDB uses the QR code on the packaging as an entry point to connect consumers with convenient life services. Users only need to scan the QR code on the gold can JDB to enter the "Gold Rush Action", where they can shake their phones to grab "gold packages" and enjoy exclusive discounts provided by several mobile Internet companies for JDB users, as well as gold gifts worth over one million yuan provided by JDB.

After the first batch of partners announced on April 30: JD.com, Didi Dache, HSTYLE, eHi Car Rental, etc., the second batch of partners joining the gold can JDB "Gold Rush Action" can be described as "luxurious": Baidu Takeout, Dangdang, Yintai, Zhang Xiaohe, Minsheng Bank, WeChat Movie Tickets, Aviva-COFCO Life, and nearly ten other leading brands in various fields. The largest cross-industry "Golden Life Alliance" in FMCG history has begun to take shape.

Shortly after JDB's Internet+ strategy was released, Wanglaoji was not to be outdone. On May 10, it launched the Internet "Super Ji+" strategy, using the barcode on the Wanglaoji can as an entry point, based on the traffic of 6 billion cans consumed annually, to build an interactive and service platform on mobile Internet. This platform will connect everything, currently divided into three main parts: e-commerce entry, content channel, and interactive services. Consumers can achieve e-commerce purchases, food sharing, complaints and communication, game interaction, customized services, and other functions on this platform.

In 2015, Uni-President also launched Xiaoming Tongxue tea drink, leveraging Weibo and reality shows for Internet-based brand marketing. Of course, many other FMCG companies are eager to try and embrace the Internet one after another, which I won't list here one by one.

Also, in 2015, countless industry summits were themed around Internet+ for discussion and exchange. A large number of practitioners in traditional industries are exploring the path of Internet+, but despite the industry being noisy, the vast majority of FMCG companies are making a lot of noise but little action, with more observers than practitioners. The reason: lack of truly effective methods and paths, and no successful transformation cases for the industry to reference.

JDB's gold can and Wanglaoji's Super Ji+ both use products to connect users with Internet people and services. This concept seems like a miracle drug, bringing infinite imagination. But I think the concept of the entry point is largely at the marketing level, more like a cross-border promotional activity.

Let's put aside the appearance of the entry point and look at the essence of consumer consumption:

1. Consumers choose a product because it can solve their problem. The so-called "connecting everything" is not a pain point that users are willing to pay for.
2. Consumer scanning is a probabilistic event. User randomness and sufficient reasons for interaction are the core of secondary conversion. But it will not effectively increase product sales. So at the level of sales and consumption behavior, there has been no effective breakthrough.
3. Marketing models similar to Xiaoming Tongxue have a clear purpose: it is purely an Internet marketing behavior.

**2. Why can't FMCG do well on the Internet?**

Let's first dig into the characteristics and fit between FMCG and the Internet:

First, although they are all FMCG, the degree of e-commerce/Internet penetration varies by category.

Cosmetics, baby diapers, infant formula, and skincare are the main categories of FMCG e-commerce, accounting for 59% of e-commerce FMCG sales. Other categories are growing rapidly. (1)

But the rapidly growing products are mainly high-margin long-tail products or high-quality imported goods. The brand power of standard offline products is not very attractive to online consumers.

Why does this result occur? Let's first analyze several characteristics of offline FMCG:

1. Short consumption cycle: The reason "fast" is added before consumer goods is that the product's service life is short and consumption speed is fast.
2. The unit price per package is low, and consumption frequency is high.
3. Consumption is highly random, and brand loyalty is not high.
4. Purchases are irrational, influenced by the on-site atmosphere, and prone to impulse buying.
5. The higher the consumption frequency and the shorter the service life, the higher the requirement for convenience.

In summary, these characteristics determine that consumers' purchasing habits for FMCG are: **simple, fast, impulsive, and emotional**.

**3. Advantages and disadvantages of Internet e-commerce compared to traditional distribution:**

**Advantages:**

1. Price advantage of e-commerce: The e-commerce model, through direct logistics distribution, eliminates intermediate links, reduces costs, and can sell at lower prices.
2. Communication advantage of new media: User habits have shifted, and the correlation between new media and consumers is higher than traditional media. In addition, new media uses multi-platform big data for more precise communication, finding target user groups at lower cost.
3. Due to no spatial limitations, products are diversified, and consumers have a high degree of choice for product diversity.

**Disadvantages:**

1. The purchase process for consumers takes too long, and they cannot get the goods immediately after payment.
2. Lack of product experience before purchase.
3. Long customer complaint handling cycle.

**Combining the characteristics, advantages, and disadvantages of traditional and Internet mentioned above, let's analyze the obstacles for consumers choosing FMCG on the Internet:**

Consumer product consumption cost assessment:

Product consumption cost = product cost + time cost + risk cost.

According to the above analysis, although the purchase cost of goods online is low, the time cost is high. The purchase cost of goods offline is not much different from online, but the time cost is low.

The value of time cost is inversely proportional to the consumer's consumption frequency, service life, and convenience needs.

Is it a bit tongue-twisting? Simply put:

1. The shorter the consumption cycle of a unit product, the higher the consumption frequency and randomness, the higher the requirement for convenience, and the lower the tolerance for time to obtain the product. Since the Internet purchase cycle far exceeds the consumer's use and consumption cycle, consumers' willingness to buy such products online is not strong.
2. Consumers have low brand attention, and for products with low unit cost, price sensitivity is low, offsetting the low-price advantage of the Internet.
3. Traditional offline purchase is convenient, and transaction speed far exceeds online.

**Truth 1: The more the consumer's online product consumption cost is lower than offline consumption cost, the more suitable it is for Internet sales, and vice versa.**

So, JDB and Wanglaoji are just selling hype.

**2. Future Internet trends for FMCG:**

Let's first analyze the advantages and disadvantages of traditional enterprises' existing stock:

**1. Stock advantages:**

Relying on years of deep cultivation, the short and wide distribution network covers a large number of terminal channel outlets, providing consumers with extremely high purchase convenience.

Through mass production and procurement to reduce product costs, consumers can buy high-quality and low-priced standard products at very low prices.

**2. Disadvantages:**

Due to high product homogeneity, full market competition, and limited terminal resources, enterprises need to invest more energy and resources to cope with channel competition.

This also determines that such products have a common characteristic: they only focus on a sufficiently large consumer market, can only meet part of the consumption needs of most consumers, and for consumers' diverse long-tail needs, limited by production costs and geographical space, it is difficult to meet them.

Because China has enough users and a large enough market, existing FMCG (standard low-margin products) will still be the mainstream consumer goods in the short term. Based on years of deep cultivation and marketing, high consumption convenience, and huge stock, traditional enterprises and products will find it difficult to transform their sales models to the Internet in the short term. However, they can still use the Internet to improve their own operational efficiency, reduce operating costs, and use big data to launch more segmented products for different markets and consumer groups.

But the Internet brings not only a new lifestyle. With the post-80s generation growing into the backbone of society, and the emergence of post-90s/00s generation, who are Internet natives with high consumption potential, consumers have unprecedented enthusiasm for high-quality personalized products, and longer tails and more diverse consumption needs are being rapidly released. With the transformation of Internet communication methods and marketing models, the long tail has also become large enough. **The characteristics of the long tail make it difficult for traditional marketing models to exert force, but the Internet's communication methods and marketing models happen to make up for this deficiency. In summary, the long tail is the real point where traditional enterprises need to exert force when transitioning to the Internet.**

At present, almost all FMCG enterprises transitioning to the Internet in the market are based on existing products or products that do not precisely segment consumer needs, using emotional packaging and marketing methods to gain consumer favor and recognition. But such products are still standard low-margin products. According to the long-tail theory, such products will not die out, but while being distributed through existing distribution channels, they will use the Internet to move towards higher efficiency, new channels, and new industries.

**3. The Matthew effect will become more and more obvious:**

Because the Internet greatly compresses the space and time difference, the cost for users to obtain information is almost zero, and the path and channel to obtain products are no longer important. This means that the possibility of traditional enterprises using follow-up strategies, compressing costs through scale production to gain channel competitive advantage and defeat competitors is greatly reduced. Brands with unique USP and high reputation can gain higher competitive advantage and thus win in the Internet era.

**4. Future product trends in the Internet era:**

1. Use effective analysis of big data, through highly intelligent terminals, to place suitable products in the most appropriate places when consumption is most needed (keywords: big data, intelligent terminals).
2. High-quality, rare, personalized, extreme, highly differentiated. (Keywords: long tail, brand)

In addition, the Internet has spawned a large number of new industries, and sales models have also given traditional FMCG new consumption models: (same-city O2O, super vending machines with online payment functions (VEM), new highly Internet-based super shopping centers (KA), micro-businesses with strong personalized colors, etc.)

The future product category and attributes determine its distribution attributes in the Internet era, as shown in the figure below:

Low-margin standard products: vending machines, community convenience chains

High-margin standard products: e-commerce, same-city delivery

Personalized long-tail high-margin products: online stores, same-city delivery

High-frequency low-margin non-standard products: hypermarkets, community chains

**3. Summary:**

China's current actual Internet users are around 649 million, and it has not been subdivided how many of them have paying habits. Based on the current market situation analysis, the real big market for FMCG is still offline. The Internet has divided Chinese people's consumption habits and paths into two worlds and two different markets. The current significance of Internet+ is that the value of brand communication is greater than the benefits brought by actual product sales.

**Standard low-margin products in existing stock still need to be distributed through existing traditional distribution channels in the short term, but VEM+CVS+KA+O2O will definitely be the trend for rapid FMCG distribution development in the future, and its importance will be from front to back. Therefore, FMCG enterprises should lay out a national VEM strategy in advance.**

**1. About new media marketing**

The existing new media marketing promotion only solves some problems of online and offline local markets. Facing the national market, WeChat seems not as useful as Weibo, but Weibo itself is declining, with rampant zombie fans. Old marketing models are failing, and new marketing models are only at the theoretical and awakening practice stage. The changes brought by mobile Internet seem to be shifting from changes in information dissemination to the redistribution and reorganization of social resources. Enterprises must clearly recognize: Internet+ is 2015, but mobile Internet is the future. The current layout of new media by FMCG enterprises is only at the stage from nothing to something, lacking professional Internet marketing planning talents, long-term planning, and top-level design.

**New media marketing is more suitable for high-margin non-standard products. Enterprises can develop non-standard personalized products according to the needs of long-tail users.**

**2. About e-commerce:**

**Some high-margin standard products are indeed suitable for e-commerce sales, but the premise is that the products must have a certain scarcity and be high-quality mass consumer goods. Such products must have certain technical barriers.**

**3. About FMCG distributors:**

Distributors are not a redundant link, but their efficiency is not high enough, which is the core factor. FMCG requires distributing products to a large number of terminal outlets. In today's highly homogeneous products, they also face high-intensity competition at terminal sales points, which requires terminal operators to have refined operations. These are problems that logistics providers cannot solve.

At present, the **four major bottlenecks** for traditional enterprises transitioning to the Internet are: **the boss's thinking, professional talents, existing stock, and market opportunities**. The problems are: not deep, not in place, not zero-based, not suitable. If these four problems cannot be solved, don't rush into it. The current poor market is not only due to the impact of the Internet, but more because with the end of China's high economic growth, all industries have overcapacity, and rigid demand is no longer the mainstream consumer demand. The highly homogeneous and extensive competition model of FMCG has come to an end. Followers, imitators, and low-price low-quality products will inevitably be eliminated by history, and it has little to do with the Internet. If you don't want to be eliminated, then start with the product, reform the existing marketing and management model, and use craftsmanship to create good products with emotion. In the Internet era, good wine really doesn't need a deep alley.

Data source:

(1) "2015 China Shopper Report" jointly released by Bain & Company and Kantar Worldpanel on July 1.

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