Source: Teacher Liu's Digital Marketing (ID: liuchunxiong1964)

Channel digitalization is different from digital channels, but people often confuse the two.

E-commerce is a digital channel. E-commerce is a new type of channel that has been digital from the start, unrelated to traditional channels.

Channel digitalization, on the other hand, involves combining traditional offline channels with digital tools to transform into digital channels. After channel digitalization, traditional channels do not disappear; they merge with digitalization to become new channels.

Because e-commerce has been overly successful for a decade, in the process of channel digital transformation, there is a tendency to benchmark against digital channels, hoping that digitalization will become a second e-commerce system. For example, the popular private domain traffic theory is influenced by e-commerce in many thoughts, viewpoints, and methods.

Business thought has a standpoint. The standpoint is from whose perspective you think. The platform thinking and traffic thinking that prevailed in the past are business viewpoints from the platform's perspective.

The protagonist of e-commerce is the platform, while the protagonist of channel digitalization is the traditional enterprise. Different protagonists lead to different standpoints and different business thoughts.

When explaining the two core points of channel digitalization, first discuss misunderstandings, then correct interpretations.

E-commerce is not B2C, but B2P2C

E-commerce is disintermediated, it is B2C. This is a widely known viewpoint from the platform's perspective. This article often expresses it that way as well.

This is like a matchmaking agency: there are not only two parties (male and female), but a third party: the intermediary.

E-commerce is not just B and C; there is a third party: the platform.

The term B2C is deceptive because it suggests the shortest possible channel; no channel is shorter than B2C.

The digital F2C model is a replica of the B2C model, except that instead of obtaining public domain traffic from the platform, the manufacturer (F) directly acquires private domain traffic.

B2C is the shortest channel for public domain traffic, and F2C is the shortest channel for private domain traffic. These are the ideal digital models in many people's minds.

Scott Brinker, a famous American expert and proponent of MarTech, drew a diagram in his book "Hacking Marketing" (as shown below). Seeing this diagram, I suddenly understood that e-commerce is not B2C, but B2P2C, where P is the Platform.

In traditional channels, channel members are big B (distributors, wholesalers) and small b (retailers), composed of a group of institutions or individuals. Channels are human chains, and human chains are visible.

In e-commerce, although there are "customer service representatives," merchants (B) basically interact with a series of software. Software is invisible, leading us to believe there are no intermediaries.

In reality, the parameters of the software on the platform are also designed by humans. Different merchants have different permissions, and the parameters in the software system are also different. This is similar to how traditional channels have different levels of importance (weights) for manufacturers.

What e-commerce calls disintermediation is merely removing traditional intermediaries but adding a new type of intermediary composed of software systems. It is this new intermediary that connects B and C.

After channel digital transformation, traditional channels will also be composed of a series of software systems, just like e-commerce systems. The role of people in the channel is to set parameters for the software systems.

Is there any difference between the B2P2C path of e-commerce and the F2B2b2C model of channel digitalization? Essentially, they are the same. There are two similarities: 1. Both have intermediaries; 2. The intermediaries are software.

In the B2C model of e-commerce, without the platform, there is no traffic source; in the private domain traffic F2C model, because traffic sources are limited, it is difficult to scale.

Whether platforms or channels, they are all intermediaries. Over the past decade of e-commerce, there has been too much negative talk about intermediaries, suggesting that DTC is becoming a trend. This is incorrect.

Whether online or offline, to connect with more C, one must rely on intermediary channels. Platforms and channel members are both intermediary channels.

The Main Battlefield of Digitalization: F2B2b2C

Influenced by the so-called disintermediation of e-commerce B2C, channel digitalization can easily go astray and take the F2C path. The currently popular private domain traffic is actually this model.

F2C is not only disintermediation but also de-terminalization.

It's not that F2C cannot be done, but what goals can F2C achieve? If it's only a hundred thousand or a million C-end users, F2C is feasible. If you want to reach ten million C-end users, F2C is very difficult. If you want to reach a hundred million C-end users, F2C is almost impossible.

Leading enterprises have more or less tried F2C models, either without the participation of traditional channels or with traditional channels unwilling to participate. This approach turns F2C into a second e-commerce.

If the F2C model becomes the mainstream model for traditional enterprises, it is essentially making enemies with intermediaries. Therefore, intermediaries will not participate.

The F2C model is also de-terminalization; terminals are only valuable when absorbing private domain traffic, and are discarded after use. Thus, F2C also makes enemies with terminal merchants.

As long as it is the F2C model, not only are channel members unwilling to participate, but the sales team is also unwilling, because F2C is essentially "undermining" the sales team.

Because the sales team is unwilling to participate, some enterprises have two teams: one for F2C operations and one for sales. Some are run by e-commerce teams that draw traffic from platforms; others are run by IT teams that hope to use social fission to attract traffic. These practices are like "guerrilla warfare" for traffic, making it difficult to scale.

F2B2b2C is not F2B + B2b + b2C

Traditional channels are indeed three-stage: manufacturer to distributor (F2B), distributor to retailer (B2b), and retailer to user (b2C). Each stage is relatively independent.

The B2B that started in 2015, including third-party B2B (Alibaba Retail Link, JD New Pathway), brand B2B, and distributor B2B, used digitalization to connect one or two stages of the channel.

Now it seems that third-party B2B (essentially B2b) failed overall; distributor B2B (essentially B2b) partially succeeded; brand B2B (essentially F2B, partially including B2b) was relatively successful overall.

The relatively successful brand B2B and distributor B2B actually treated B2B as a management system (digital ERP system), not a transaction system. For example, the brand's SFA system is more of a management system.

Why did B2B not succeed overall? There are three reasons:

First, it did not connect the entire channel or reach the C-end. Without connecting the C-end, it is closer to informatization rather than digitalization; Second, there was no front-end "middle platform" or regional "middle platform," so B2B generated a lot of data, but frontline personnel could not get data support from the middle platform; Third, the atmosphere of disintermediation encountered resistance from channel members.

Digital F2B2b2C is difficult to succeed with a three-stage operation. Therefore, F2B2b2C cannot be simply understood as F2B + B2b + b2C.

F2B2b2C includes two parts: one is the external connection b2C; the other is the internal connection F2B2b.

Without b2C, F2B2b is a disguised form of informatization.

Once the b2C model is completed, the channel shifts from a push model to a pull model, and F2B2b becomes a natural progression, because F2B2b is essentially an internal control system.

What is the difference between external digital connection and internal digital connection? Leading companies in China's FMCG industry must be particularly strong in channel organization and control, which is determined by the fragmentation of Chinese channels.

The deep distribution of leading enterprises is essentially "making the channel an extension of internal management." The advantage is strong channel control, but the problem is that the store can bully the customer.

Enterprises that do deep distribution well have particularly good internal information systems. To what extent do leading enterprises' sales informatization reach? The less advanced ones have no problem with F2B informatization, and the better ones have achieved F2B2b.

Therefore, for industry leaders' channel digitalization, because they have the internal informatization of the sales system F2B2b as a foundation, as long as they complete the C-end connection b2C, the rest is internal informatization work.

Online-Offline Integration

Many people ask me, after channel digitalization, what about the impact of low prices online? This is a typical mistake of treating channel digitalization as a second e-commerce, still using e-commerce logic to deduce digitalization logic.

After channel digitalization, online and offline are integrated, and one team operates both online and offline. How could there be low-price impact? Isn't that self-inflicted?

Some say e-commerce also competes with itself. E-commerce and traditional channels are two teams within the enterprise, so internal conflicts are normal.

Channel digitalization does not mean adding a team to do digitalization while traditional channels continue as before. Channel digitalization will "eliminate" the pure traditional channel team (though it takes time), nor will it be a purely digital team.

In the future, there will be only one team: the channel digitalization team. Online and offline will be fully integrated. Including the marketing department, it must also be fully integrated into the channel digitalization system. After completing channel digitalization, there will be no traditional marketing department. The marketing department will transform into a digital marketing department, i.e., a digital marketing middle platform.

Some also think that channel digitalization means looking at online sales. This is a misunderstanding.

In the practice of channel digitalization, sometimes users need to be pulled online to establish closer relationships (stickiness). Sometimes online traffic needs to be pulled offline to drive traffic to a specific terminal, creating "incremental" sales and activating the terminal. Therefore, it is also incorrect to define the success of digitalization solely by online sales.

Online-offline integration is not measured by single-dimensional online or offline metrics, but by activating overall network sales.

How can online and offline be fully integrated? This requires the use of Teacher Shi Wei's concepts of "Trinity" and "Three-Dimensional Space" to explain.

Teacher Shi Wei believes that marketing can be simplified into three processes: cognition, transaction, and relationship.

Obtain information, generate cognition. For example, through mass media advertising, internet information, word-of-mouth, and social platforms, one can obtain information and generate awareness.

When cognition reaches a certain level, transactions occur.

In the internet age, as long as a transaction occurs, a relationship can be established. At least technically, a relationship is established.

Teacher Shi Wei believes that in the information age, there are three commercial spaces: offline (on-site) space, community space, and cyberspace.

Traditional channels are in offline space, social e-commerce is in community space, and e-commerce is in cyberspace. However, these three commercial spaces are isolated from each other.

Cognition, transaction, and relationship can each occur in the three-dimensional space. This forms the integration of online and offline.

For example, cognition can occur offline (word-of-mouth, experience), through community fission, or online seeding.

Transactions can also occur in the three commercial spaces: cash on delivery at stores, community group buying pre-sales, and e-commerce transactions.

Now, even offline personnel commonly establish relationships with users through community users. By turning personal relationships with users into relationships between all channel links and users through the system, the C-end is shared among manufacturer, distributor, and retailer.

Digitalization solves this problem.

After channel digitalization, cognition, transaction, and relationship can freely switch among offline, community, and cyberspace. This creates very complex combinations. Complex combinations also provide more variables and opportunities for marketing.

For example, offline is more conducive to strong relationships, communities are more conducive to interaction, and cyberspace is more convenient for transactions.

After online-offline integration, there will be no distinction between online and offline. As long as there is still a distinction, digitalization must continue to deepen.

Manufacturer, Distributor, Retailer: Tripartite Unity

In traditional channels, manufacturers, distributors, terminals, and users form three relationships, each being an independent transaction system.

Channel digitalization creates a closer relationship among the three parties that previously managed their own segments. I call this "tripartite unity."

Channel digitalization changes the channel logic: as long as b2C is achieved, the channel is pulled. Unlike segmented transactions, the benefit distribution logic of channel digitalization is traffic distribution logic.

As long as any one of the manufacturer, distributor, or retailer establishes a technical relationship with C, the other two can also establish technical relationships with C. Moreover, technical relationships can evolve into offline community relationships, leading to user relationships in three-dimensional space.

As long as there is traffic, regardless of whether the operation path is F2C, B2C, or b2C, the channel benefits must be distributed among the three parties.

That is to say, traditional channels distribute benefits in three segments through transactions. But after channel digitalization, offline transactions still follow the above principles, but online transactions distribute channel benefits according to the pre-agreed rules among F, B, and b.

For example, if a user C buys a product online from manufacturer F, but the product is not in stock at the store, yet it is available on F's shelf, then the benefits from the online sale cannot be monopolized by F; they must be distributed among F, B, and b.

b participates in benefit distribution because user C was contributed by b, and B participates because b is its downstream; without B's participation, the b2C relationship might not have occurred.

The tripartite unity benefit distribution model breaks the model where F2C allows the manufacturer to monopolize benefits. This model breaks the paradox of traditional commercial differential rent and is a major breakthrough in commercial history.

System Design for the Two Major Integrations

Online-offline integration and tripartite unity of manufacturer, distributor, and retailer are easier said than done.

Traditional e-commerce did not achieve this. B2C is against traditional channels, at least in terms of pricing.

The F2C model digitalization is a replica of B2C, and it is difficult to fully integrate with offline except by directing offline traffic to C.

It can be said that currently there is no digital system integrated with traditional channels. Without such a system, any DTC model conflicts with traditional channels.

We realized that we must not follow the B2C or F2C models for channel digitalization, because there is no system design for integration with traditional channels.

In digital practice, we discovered a model that can have both fish and bear's paw. We call it the "six doubles" channel digitalization system design: dual paths, dual private domains, dual scenarios, dual shelves, dual delivery, and dual middle platforms.

Dual paths means long path to reach F2B2b2C and short path for operations (F2C, B2C, b2C). The long path solves the problem of connecting massive C-end users; the short path solves operational efficiency. Best of both worlds.

Dual private domains means brand private domain + retailer private domain. Dual private domains provide dual stickiness. This solves the problem of retailer motivation and also the problem of manufacturers being far from users, making it difficult to activate and mobilize users. Stores have connections with users in offline, community, and cyberspace, making relationships closer.

Dual scenarios means offline scenario + online scenario. This solves the problem of e-commerce diverting traffic. With dual scenarios, any scenario can solve the convenience of user transactions.

Dual shelves means offline shelf + online shelf. With dual shelves, even the smallest store can have all suitable products of the manufacturer on the shelf. Offline stores can also have unlimited shelves. Offline stores solve the sales of high-frequency products, while online shelves solve the sales of low-frequency products.

Dual delivery means 2B delivery + 2C delivery, home delivery + store delivery. Dual delivery ensures both store pickup and home delivery are possible.

Dual middle platforms means rear middle platform + front middle platform. Moving the middle platform forward solves the problem of online-offline integration and distributor participation in online operations.

The "six doubles" system design facilitates the integration of offline and online, making manufacturer, distributor, and retailer integration conflict-free, achieving the best of both worlds.

The key to integration lies in the word "double," through which integration and connection are achieved; through "double," both can be obtained.

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