Amid the surging B2B industry, B2B companies on the same track show significant differences. What factors influence their development? At the '2016 China FMCG + Internet Summit' held on October 16, Wang Chaocheng, Chairman of Shengchu Consulting, provided answers. The core content of his speech is organized as follows:
1
What are the differences between B2B e-commerce and B2C e-commerce? In China, the most representative B2C e-commerce platforms, JD and Alibaba, have many products online, but few customers buy beverages and shampoo. This is because the logistics cost of buying a bottle of water on JD is much higher than buying from a nearby store. So even though B2C e-commerce has many categories, the more such products are sold, the more losses are incurred. So is B2B the most suitable? Can all industries do B2B? The essence of e-commerce is to use the unbounded nature of information links to aggregate scale and produce a relatively superior business model. Only then can this advanced model replace traditional industries. B2C means the manufacturer directly delivers goods to consumers, saving the cost of intermediate merchants. The essence of B2B is that the manufacturer delivers goods to a central warehouse, which then distributes goods to each terminal according to orders. This optimizes warehousing and logistics. Some may ask: Why can traditional beverage distributors make a profit? This is due to the advantage brought by capital. Assuming the net profit per bottle of beverage is 1-2 yuan, the traditional general distributor delivers goods to second-tier distributors, using street-level wholesalers to cover the area. The volume per store is large, so they don't lose money. But B2B delivers to small stores, requiring high-frequency delivery. No matter how optimized, there is usually limited room. Therefore, not everything can be done with B2B. 2
Is B2B platform-based or vertical? If it is platform-based, then current distributors may be replaced by platforms like Alibaba and JD. Because if it is the same platform, it has the largest traffic and the lowest cost. Why do I say this? B2C satisfies consumer needs because a person's needs are diverse, and consumers can choose anything they want through one platform. B2B satisfies the needs of retail terminals. The needs of terminals are essentially vertical. For example, the owner of a tobacco and liquor store needs tobacco, alcohol, tea, and beverages. Even if your categories are rich, the terminal may not be interested. Whether your customer needs are vertical or diverse determines whether the industry is vertical or platform-based. Even if you have few categories, as long as you can meet customer needs, you can achieve high frequency. But vertical does not mean serving only one type of customer. Verticality is determined by the nature of the industry. For example, some wholesale platforms only serve small convenience stores. These stores sell alcohol accounting for only about 20% of their sales, and it is mostly low-end. Even if you cover all small convenience stores, your total alcohol volume is only about 20%. But if you are an e-commerce company only doing alcohol, you not only serve tobacco and liquor stores, but also supermarkets and restaurants. Currently, a tobacco and liquor store's sales volume accounts for about 45%, and restaurants about 20%. So your total alcohol volume can be very large. This gives you a clear advantage over traditional wholesale platforms. Similarly, with a larger sales volume, your purchasing power increases. Once you have this capability, your price cost advantage becomes prominent, and you create a positive cycle. Regarding the discussion about whether B-end can have negative gross margins, in my view, alcohol not only has positive gross margins but also positive profits. The essence of verticality is industry verticality. Supplying only supermarkets is not B2B. B2B means supplying all customers in an industry. For example, an alcohol B2B e-commerce company serves all terminals that sell alcohol, not just one type of customer. 3
B2B's business model and profit model All e-commerce companies check whether there is profit after deducting delivery costs; this is the core. In B2C, delivery costs vary by product. If a product's gross margin is not high, its delivery cost will be high. But B2B is different. Its delivery costs are warehouse, vehicles, fuel, and personnel wages. A vehicle from warehouse to terminal, regardless of what is loaded, its delivery cost will not be low. If the cost is 300, then if the net profit of a vehicle's products is less than 300, the more sold, the more losses. Yijiupi currently only does alcohol. Suppose a vehicle can load 300 cases, and each case earns 4 yuan, then a vehicle earns 1200 yuan. Do you think Yijiupi loses money? Of course not. So this is the basic principle of B2B's existence. Of course, this existence reflects the extremely important value of categories to B2B. If traditional merchants only have one or two products, they must distribute through first-tier and second-tier distributors. But B2B does not have this phenomenon. When orders with different needs in a region come in, it solves the problem of vehicle full loading. This is the most basic principle of B2B's existence. For merchants, it is essential to understand B2B's business model and profit model. The concept of B2B being industry-wide is actually a false concept. E-commerce also has boundaries. 4
If starting a B2B business, some industries are not suitable Suppose an industry that does well in B2C may not be suitable for B2B, because consumers directly shopping online affects store business, and what you do is supply stores. Then whether you can do well is a question. Secondly, industries with a high degree of chain operation may not be suitable for B2B. The largest chain company is essentially a B2B company. The manufacturer delivers goods to the chain company, which then distributes goods to each store at low prices. These stores have obvious cost advantages. Therefore, highly chained terminal industries are not suitable for B2B. Summary
B2B is primarily vertical, not platform-based. So in the future, Chinese B2B companies may not reach the scale of Alibaba, but they will not be small. Secondly, not all B2B is suitable to do. Finally, B2B's profit model includes single-vehicle cost and single-vehicle gross profit. If single-vehicle gross profit is greater than single-vehicle cost, then it works; otherwise, it does not. -END- The best learning platform for FMCG distributors in China Focusing on providing professional, practical, and applicable tutorials for enterprises and distributors Committed to helping Chinese FMCG distributors grow rapidly The most professional and practical knowledge base in the FMCG industry Reply with the red number below to get corresponding content Reply with number 1 to view the complete knowledge base | 001 Excellent article selection | 002 Distributor market operation | 003 Terminal visit management | 004 Sales supervisor skills | 005 Sales improvement techniques | 006 Channel expansion | 007 Managing distributors | 008 Distributor development | 009 Distributor internal operations management | 010 Team management | 011 Efficient distribution techniques | 012 Sales manager's eighteen skills | 013 KA operation methods and strategies | 014 First lesson for new salespeople | 015 Internet, brand | 016 Distributor B2B transformation | [Long press QR code to follow]