---
title: "Two Intractable Problems in Regional B2B and Supplier Cooperation"
description: "Regional B2B platforms face two awkward problems when cooperating with suppliers: they cannot act as agents and cannot help brands achieve precise distribution of personalized categories. This leads to the consequence that regional B2B can only be a non-profitable super second-tier distributor at this stage."
author: "赵波"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-10-10"
language: "en"
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# Two Intractable Problems in Regional B2B and Supplier Cooperation

> Regional B2B platforms face two awkward problems when cooperating with suppliers: they cannot act as agents and cannot help brands achieve precise distribution of personalized categories. This leads to the consequence that regional B2B can only be a non-profitable super second-tier distributor at this stage.

Click to read the original text for details.
Regional B2B, because its coverage is generally a single market or a local market, leads to two awkward problems in cooperation with suppliers:
> 1. Cannot act as an agent;
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> 2. Cannot help brand owners achieve precise distribution of personalized categories.
This leads to a consequence: **At this stage, regional B2B can only be a non-profitable super second-tier distributor**. On the surface, it seems that regional B2B can do both things, but upon careful analysis, it turns out not to be the case.
**Let's first analyze the several forms of cooperation between B2B and upstream suppliers:**
> Cooperation with brand owners;
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> Cooperation with regional distributors;
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> Cooperation with specialized brand licensors.
1. B2B cooperates with brand owners to act as an agent
Let's start with who the B2B service targets are. Is it the brand owner? I think not, because B2B cannot provide services such as off-season inventory pressure and capital advance for brand owners, nor can it provide long-term personalized market services for a single brand owner.
The core capability of B2B is to improve supply chain management efficiency through technology. Capital, turnover, warehousing, logistics—all work revolves around efficiency. But in fact, once you act as an agent, you must provide refined services for certain brand owners, and in this case, you cannot兼顾 the efficiency of warehousing, capital, and logistics. In other words, distributors are not in the efficiency business.
So B2B acting as an agent is not a good choice, which means that when B2B cooperates with brand owners, it is difficult for both parties to achieve a satisfactory result.
2. B2B cooperates with distributors to act as a second-tier distributor
Since it cannot achieve a win-win effect with brand owners, it might as well cooperate with distributors and act as their second-tier distributor.
The characteristics of B2B are large warehousing, multiple SKUs, informatization, and one-stop distribution. In essence, B2B is a super shared warehouse for small shops, providing them with services such as collection, storage, and distribution. To put it bluntly, B2B is an upgraded version of the second-tier distributor in the digital age. This "second-tier distributor" is much more efficient than traditional second-tier distributors, which is why in cities like Beijing, Shanghai, Guangzhou, and Shenzhen, where B2B coverage is relatively comprehensive, second-tier distributors have become hard to find. A few days ago, I discussed with a beer distributor who told me that most second-tier distributors in Beijing have moved to outside the Sixth Ring Road. The core reason is indeed that B2B has obvious advantages.
In the process of cooperating with distributors, one thing troubles B2B very much: **Insufficient gross profit cannot support operating costs**.
In the FMCG industry, existing products, especially best-selling products, generally have low gross profit, and some even have negative gross profit. The reason for this phenomenon is product homogenization and fierce market competition. The reason why products can still be sold in the market under such low or even negative gross profit is that most distributors operate irregularly, with relatively low costs, and daily operations are driven by their own funds, earning hard-earned money.
On the other hand, if B2B wants to establish close ties with small shops, it has to sell these high-frequency, low-value, low-margin, high-logistics-cost heavy goods. Second-tier distributors do not undertake marketing functions, so they can only sell best-selling products. The gross profit they can obtain in the supply chain is generally only 6%-10% of the product supply price, but many B2B platforms have logistics costs exceeding that. So we see that many regional B2B platforms, with not very good category structures, cannot achieve profitability despite large scale.
Of course, we also see many B2B platforms trying various efforts to increase single-store penetration, adjust their category structure, directly cooperate with some brand headquarters, try to act as agents for products with low brand attention, negotiate payment terms with suppliers, increase per-person output, increase full-load rate and per-vehicle cargo value rate, increase per-person output, improve operational efficiency, etc. But looking at the FMCG industry, the discourse power in the supply chain is still in the hands of brand owners. If brand owners do not make systematic adjustments in products and organization, it is really difficult to restructure this profit structure.
Moreover, B2B platforms that have received VC money are all aiming for listing, so most of them operate very standardized. The cost of standardization alone has made it impossible for them to compete with low-cost distributors and second-tier distributors.
3. Acting as agents for personalized products to help brand owners increase increment
Since regional B2B cannot act as an agent, and the gross profit of best-selling products is not high, and it has to operate with high-cost standardization, then I might as well change the way and use B2B's professional capabilities to help brand owners increase increment, right? That is, help brand owners distribute new products, personalized products, and products with unique functions.
Moreover, from the market trend, consumer demand has shifted from mass demand to niche and personalized demand. In this process, fragmented and mid-to-long-tail product demands are gradually emerging. And existing distributors do not have the distribution capability for niche personalized products. Theoretically, B2B's digital capabilities can help brand owners achieve precise distribution, which is feasible in theory.
This should work, right? Maybe it still won't. FMCG itself is a logistics business. Existing B2B platforms are either single-warehouse or single-region, and most have not formed high-density regional coverage. For small categories, although the cost of end-of-line distribution is reduced through B2B's city distribution logistics, the small sales volume leads to extremely high distribution costs from factory to warehouse, which is ridiculously high.
Beverage factories are set up in advance, basically solving the logistics problem from factory to warehouse nearby, but most brand owners do not have the capability of nationwide factory layout, so they cannot achieve low-cost nationwide delivery of small-batch products. When B2B cannot provide a nationwide low-cost logistics solution, there is no point in talking about high operational efficiency. On top of B2B, if there is no large-scale trunk logistics transfer infrastructure, then this cost is either unbearable for brand owners or unbearable for B2B.
Currently, only national platforms like JD and Alibaba, which have central warehouse trunk logistics, can help brand owners distribute small categories to small shops. But their trunk transportation costs are also frighteningly high. Of course, this is not unsolvable.
Another problem is that B2B needs best-selling products to support traffic; only then can these personalized new products have the possibility of large-scale market distribution. Moreover, the personalized service capability of B2B's ground promotion personnel is really not commendable. Using B2B's shared salesmen to promote new products is very unreliable, but shared merchandisers are feasible.
4. Development opportunities for regional B2B
This article does not mean that regional B2B has no opportunities. On the contrary, compared with national B2B, the author believes that regional platforms may have a better chance of producing excellent cases first.
Compared with national B2B platforms, regional B2B platforms have a relatively deep understanding of the regional market. Whether it is the product structure of grocery stores or the consumption tendencies of local consumers, they have incomparable advantages over national platforms.
We see that this year a large number of regional B2B platforms have started community e-commerce, and several have received considerable financing. This shows that in vertical supply chain services, the advantage of density is greater than the advantage of the entire network.
What should regional B2B do in the face of these two difficult problems?
The author believes that it should be viewed in layers. The operation of B2B in municipalities directly under the central government and provincial capitals is completely different from that in third- and fourth-tier cities, because from the perspective of logistics, the pain point of FMCG in high-tier markets is warehousing, while in low-tier markets, the pain point is distribution. Different pain points require different business models to provide personalized solutions in supply chain integration and market penetration.
But in terms of overall solutions, the author provides two immature suggestions for reference:
1. Restructure the profit distribution of the agency industry in the region, support agents, break the monopoly pattern of large distributors, and change the self-operated model into logistics matching + consignment services, using the service model to eat the entire supply chain profit.
Regional B2B must rely on best-selling products to support the bottom line, but insufficient gross profit is a big issue. The main reasons for insufficient gross profit are, one, insufficient profit from best-selling products, and two, the agency rights of best-selling products are generally in the hands of local large agents. Large agents, due to their own operating costs, will take away part of the profit, making it difficult for B2B to obtain higher product premiums.
If large distributors are strong, you can change your thinking: break up the large regional distributors, and the platform supports a group of suppliers with entrepreneurial ideas. The platform provides financial, logistics, and transaction services, letting them find ways to obtain the agency rights of best-selling products. In this way, when the upstream agents change from large agents to small agents, B2B's bargaining power in the chain will be much higher. Moreover, through matching and consignment services, part of the tax and invoice costs can be avoided.
2. Cultivate provincial agents with cross-city distribution and promotion capabilities, and use shared warehousing professional services to achieve optimized combination of long-tail products.
B2B platforms with multiple market coverage and certain strength in the region can support and cultivate a group of provincial agents. These provincial agents, while giving priority to ensuring your small-category supply, can also further distribute these small-category products in other channels.
These two suggestions are given by the author based on the problems found in the process of communicating with many brand owners and platforms. They may not be mature and are for reference only.
**From October 23 to 24, during the Autumn Sugar and Wine Fair, the "2018 FMCG City Distribution Logistics Conference" hosted by New Distribution will be held.** At that time, we will invite industry bigwigs, FMCG warehousing and distribution experts, and distributors who have transformed to unified warehousing and distribution platforms to discuss and answer questions around the theme of "New Distribution, New City Distribution" about the future development trends of FMCG city distribution logistics and practical cases of distributor transformation to unified warehousing and distribution. We hope it can bring you different inspiration and thinking! The specific meeting topics are as follows:
**List of participating companies**
In no particular order
Hunan Zonglan Diandan Network Technology Co., Ltd.
Jingbang (Wuhan) International Freight Forwarding Co., Ltd.
Mengniu Dairy
Qinghai Hanxiang E-commerce Co., Ltd.
Unilever Service (Hefei) Co., Ltd. Shanghai Branch
Huicong
Hunan Xuan'ang Food Co., Ltd.
Guangzhou Tongdaoren Information Technology Co., Ltd.
Qingdao 888 Trading Co., Ltd.
Uni-President Enterprises (China) Investment Co., Ltd.
Hunan Province Zhongxiang Gongpei Logistics Co., Ltd.
Shenglong Ingredients
COSCO Shipping Logistics Warehousing and Distribution Co., Ltd.
Guangxi Yongpai Liquor Industry Co., Ltd.
Shangqiu Kangrong Trading Co., Ltd.
Jinan Dingzhong Economic and Trade Co., Ltd.
Liaoning Bimai Agricultural Technology Co., Ltd.
Kunming Xiongjia Trading Co., Ltd.
Shaanxi Houheng Trading Co., Ltd.
Guangzhou Dingwo Enterprise Information Consulting Co., Ltd.
Shaodong Jiajiale Commercial Firm
Boda Trading
Industrial Bank Changsha Branch
Wuhan Muchen Convenience Store Chain Co., Ltd.
Fujian Fuxing Yuncang Logistics Co., Ltd.
Guizhou Yilimi E-commerce Co., Ltd.
Jiangxi Xiao Laoer E-commerce Co., Ltd.
Jinshan Koufu
Shanxi Taihang Yuanjing Supply Chain Management Co., Ltd.
Shanxi Dezhun Supply Chain Management Co., Ltd.
Shaoyang Tongdeli Trading (Xiangbang Logistics)
Huanfu
Tongda Express City Distribution
Beijing Xinjingxiang Food Co., Ltd.
Wuhan Huizhong Tianhong Liquor Industry Co., Ltd.
Changsha Paide Biotechnology Co., Ltd.
Chao'an Tuqiang
Guizhou Yihe Bopin Supply Chain Management Co., Ltd.
Jiangxi Kang'en Industrial Development Co., Ltd.
Xiangtan County Yisuhe Town Yuhua Paper Store
Luoyang Yuanlang Trading Co., Ltd.
Tongchuan Yaozhou District Huayuan Supermarket Co., Ltd.
Hunan Yongfu Jiujiu Trading Co., Ltd.
Zhejiang Chengchengtong Logistics Co., Ltd.
Chongqing Kaiguo Materials Trading Co., Ltd.
Beijing Xianmaixianmai Data Technology Co., Ltd.
Hanchuan Qixing Trading Co., Ltd.
Tongxin Jiuzhiru Trading Co., Ltd.
Guizhou Meiguo Guoguo Network Technology Co., Ltd.
......
**Representatives of distributor transformation (tentative)**
In no particular order
Chairman of Jiangsu Huashang City Distribution Network Co., Ltd. Rong Jun
Chairman of Hubei Yijiaren Logistics Co., Ltd. Wang Bo
General Manager of Sichuan Chengdu Xingrenxing Trading Co., Ltd. Jiang Shuming
Chairman of Shandong Yunbang Warehousing and Logistics Co., Ltd. Liu Jichen
Chairman of Chongqing Lingyu Consumer Goods Supply Chain Management Co., Ltd. Tu Mingyu
Chairman of Guangzhou Zhongshan Wanrong Marketing Co., Ltd. Yang Su
Chairman of Sichuan Bajie Supply Chain Management Co., Ltd. Yuan Xia
Co-founder of Hubei Pengdun Meiyitian Supply Chain Management Co., Ltd. Li Qiangyun
Chairman of Henan Xuchang Jiulegou E-commerce Co., Ltd. Zhang Jianyong
Founder of Hebei Changyi Logistics Co., Ltd. Ma Haichao
General Manager of Hebei (Chengde) Wulian Yuncang Co., Ltd. Meng Yucun
Chairman of Xinjiang Urumqi Su'an Jinchi Logistics Co., Ltd. Zhang Xun
Chairman of Jilin Sansheng Lian'gou Zhang Hailing
Founder of Hebei Dunjie Supply Chain Management Co., Ltd. Qiang Huitao
General Manager of Hunan Damei Supply Chain Management Co., Ltd. Liao Lei
......
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