---
title: "Tormented Brand Owners: Should They Cooperate with B2B or Not?"
description: "In recent years, due to the overall environment, most mainstream brand owners face significant growth pressure: aging products, insufficient innovation, high channel costs, and reluctance to raise prices or cut staff. Despite efforts like inventory pushing, promotions, and expanding outlets, sales remain stagnant. Industry data confirms this, with Bain's recent report showing only 3% growth in China's FMCG market in 2016. This article explores whether brand owners should cooperate with B2B platforms, how to do so without harming existing business, and offers strategic advice."
author: "赵波"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2017-12-19"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/SCw742g6RDGTLl5m0LqJvg"
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# Tormented Brand Owners: Should They Cooperate with B2B or Not?

> In recent years, due to the overall environment, most mainstream brand owners face significant growth pressure: aging products, insufficient innovation, high channel costs, and reluctance to raise prices or cut staff. Despite efforts like inventory pushing, promotions, and expanding outlets, sales remain stagnant. Industry data confirms this, with Bain's recent report showing only 3% growth in China's FMCG market in 2016. This article explores whether brand owners should cooperate with B2B platforms, how to do so without harming existing business, and offers strategic advice.

In recent years, due to the overall environment, most mainstream brand owners have faced significant growth pressure. Mainstream products are aging, innovation capacity is insufficient, channel costs remain high, and they dare not easily raise prices or lay off staff. They want to adjust product structure but find that partners only want to sell bestsellers; high-priced, high-end, and new products don't sell. Facing so many problems, many brand executives have racked their brains, trying various methods—pressing inventory, promotions, expanding outlets, adding sales channels—yet sales still don't grow.

Industry data confirms this. Bain's recent report, "Double-Speed Growth in China's FMCG Market: 2017 China Shopper Report," shows that in 2016, China's FMCG market sales growth was only 3%, down 0.6 percentage points from the previous year, and far from the 11.8% growth rate in 2012. The culprit is sluggish FMCG sales volume, which grew only 0.6% year-on-year. Average selling prices also stagnated: price growth was 4.4% in 2015 but shrank to 2.4% in 2016, slightly above inflation.

Beverages are among the hardest-hit categories. Over the past year, sales growth was only 2.0%, down from 5.5% in 2015. In the three years prior, this category's annual sales growth remained at 9% or higher. The cliff-like decline is mainly due to stagnant average prices, which grew only about 1.2%, down from 6.1% the previous year. More seriously, the price decline did not stimulate consumer purchases; sales volume grew only 0.8% annually.

The emergence of mobile internet has given consumers more choices, diversified purchasing methods, and an abundance of products. However, most traditional FMCG brand owners' marketing and distribution methods remain largely unchanged from a decade ago. **This is a fatal problem: consumer scenarios not covered by brand owners will be satisfied by competitors.**

The dimensions of market competition have also changed. Originally, Master Kong's competitor was Uni-President; now competitors include fresh food in supermarkets, private labels from chain supermarkets, high-speed rail, and food delivery. Competitors compete with brand owners in places they cannot see, vying for consumers.

**Against this backdrop, when new distribution models emerge, most brand owners are willing to try them. However, New Distribution has found that most brand owners' cooperation with B2B is limited to incremental volume in blank markets and new products. For transforming existing markets, most brand owners remain conservative, as the traditional stock is too large and is the foundation that cannot be easily touched.**

In 2017, according to incomplete statistics from New Distribution, most mainstream brand owners in China have successively cooperated with B2B platforms, and some have signed strategic agreements. However, after a period of cooperation, some brand owners found conflicts between B2B platforms and distributors' businesses; others found sales did not meet expectations; and some platforms were undisciplined, frequently engaging in channel stuffing and price chaos, affecting the market. This confuses brand owners: where exactly is the value of B2B?

These problems are real and objective. If B2B cannot provide a practical solution, brand owners will lack confidence in future cooperation.

Moreover, in terms of coverage density, new product promotion, and communication with brand owners, B2B is inferior to distributors. Many brand owner friends have asked me: Should we cooperate with B2B? Can B2B help achieve blank market coverage and low-tier market penetration? How should we cooperate to avoid affecting existing sales while bringing incremental volume?

**First point: Should we cooperate with B2B?**

New Distribution believes that traditional enterprises that do not integrate with the internet will inevitably be eliminated. The question now is how to integrate existing business with new business, not whether to integrate.

History is strikingly similar; the innovator's dilemma repeats across industries. The problems mentioned at the beginning are like gray rhinos, but no one will pay for the pains, risks, sales declines, and stock price drops of corporate transformation.

The aforementioned B2B problems are merely a phase in its development. Brand owners' existing offline channel stock, organizational driving forms, and incentive methods are not conducive to cooperation with innovative channels. I hold the view that the biggest resistance to corporate reform comes from professional managers burdened with KPIs. Behind this issue lie interest entanglements and the strength of the owner's reform determination.

**Can B2B help brand owners achieve channel growth for old products and penetrate blank markets?**

All B2B platforms want to sell the best-selling products in the regions where brand owners sell best—this is driven by interest, inevitably causing conflicts with traditional distributors. This is a thorny issue. The key is how brand owners evaluate B2B's future value and coordinate the interest conflicts between the two.

Regarding so-called blank markets, from first-tier to sixth-tier, I believe all are red oceans. Without a very strong ground execution team to provide service guarantees, relying on product strength alone to achieve channel penetration is basically nonsense.

For example, Master Kong instant noodles have a 50% market share. Despite such high share, in third- to sixth-tier markets, Jinmailang still achieves continuous sales growth year after year through a strong ground execution team. Is it because Master Kong hasn't covered these markets? The fundamental reasons are: first, Master Kong's strategic focus in previous years was not on low-tier markets, leaving a window for Jinmailang to grow; second, Master Kong's ground execution team in third- to sixth-tier markets is indeed not as strong as Jinmailang's.

For existing mass-market products, apart from distributors, there is no other distribution model that can achieve personalized service and high-density market coverage. So if brand owners plan to use B2B for distribution of old products in blank markets, the prerequisite is to ensure ground execution after distribution.

**Can B2B help brand owners promote new products?**

It depends on the product. Unless your product has extremely strong appeal and can sell naturally on the shelf, you will face significant distribution pressure and risk of unsold inventory.

Of course, this also varies by category. Some FMCG categories with low brand awareness can still achieve rapid market penetration through B2B. However, the problem with such products is that without price and cost advantages, it's hard to scale up quickly.

Additionally, some platforms support data-based store selection and distribution, and products targeting specific segments and channels can achieve effective distribution coverage.

But all new product promotions, like the above issues, must ensure terminal execution is in place. Otherwise, it will be difficult to achieve healthy turnover of new products on B2B.

**For brand owners' current problems and B2B cooperation, my advice is to make systematic adjustments based on their own conditions:**

> 1. Absolutely do not cut distributors or salespeople; ensure the utilization rate of existing production capacity and the share of existing channels. What needs to be done now is to strengthen channel management and squeeze the last bit of value from traditional channels.
>
> 2. Actively engage with new channels, multiple channels, and multiple distribution methods—as long as they can generate sales and create incremental volume. Even WeChat business should not be excluded, because multi-channel distribution is the main direction of channel reform in the future.
>
> 3. Adjust organizational structure promptly. For innovative businesses and channels, create innovative organizational structures to gain decision-maker support. Avoid letting people burdened with traditional business KPIs do innovation projects.
>
> 4. Accelerate product innovation, develop different products for different segments, and distribute different products in different channels. Short-tail, mid-tail, and long-tail correspond to distributors, B2B, B2C, and even content marketing and WeChat business.
>
> 5. Actively explore innovative scenarios in market competition. Let your imagination run wild: why can't convenience stores sell cooked instant noodles? Why can't Bestore open unmanned retail stores? Why can't mineral water do membership sales?
>
> 6. Abandon scale thinking and shift to segmented groups. The era of traditional low-cost mass production and high-density market coverage is over. Niche, mid-tail, long-tail, community, personalization, customization, C2M, crowdfunding—these distribution methods may have small sales volumes, but they are high-margin and create high-profit marketing forms.

**The core value of B2B is to help brand owners achieve efficiency gains and cost reductions through digital distribution. B2B brings a rare opportunity for future product and structure upgrades for brand owners. Therefore, this ticket cannot be lost. And the earlier you enter, the better. The key is how to leverage internet tools combined with your product advantages to amplify competitiveness.**

**In the future, for brand owners' distribution channels, wherever consumers are, brand owners must be there. Where products are sold doesn't matter; what matters is where consumers buy. Reconstruct channels and brands with consumer needs as the goal and consumer behavior as the guide. Only then can you avoid being eliminated in this once-in-a-decade industrial upgrade.**

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