The wolf is coming! This time it's real. In the information age, all business elements will be reconstructed, and products, channels, communication, and operations will all be transformed by the Internet. The essence of 'Internet+' is to improve efficiency and reduce costs. In this process, all redundant links will be eliminated, and distributor transformation is urgent.
The Internet is both a shock and an opportunity for traditional distributors. Once they spread their wings with the Internet, they will fly higher and farther. Based on market cases, the author summarizes seven models for distributor Internet transformation.
Model 1: Terminalization
In the traditional channel structure, a product goes through at least six links from factory to consumer (manufacturer—distributor—supplier—secondary wholesaler—terminal merchant—consumer). After layers of price increases, the final price to consumers is at least 20% higher than the original. High gross margin, high cost, and high energy consumption are typical characteristics of traditional channel models. E-commerce loves to disrupt 'three-high' industries. Books, clothing, 3C, agricultural products, etc., have already been or are being disrupted, and now they are targeting FMCG. How to avoid being disrupted? Only by taking the initiative to cut unnecessary distribution and management links, directly controlling terminals or building self-owned terminals. In the past, this was difficult, but now with Internet platforms, it can be well achieved.
Representative: 1919.
The core of 1919's model is 'e-commerce + store commerce', i.e., O2O. By integrating community stores and self-built terminals, it achieves online-offline integration: order online, deliver from nearby offline stores. This bypasses the multi-level turnover of distributors and terminals, eliminates the layers of price increases and fees in intermediate links, and achieves zero distance with manufacturers and consumers. It ensures quality, low prices, and meets consumers' convenience needs for immediate consumption.
Model 2: Servitization
Transforming to terminalization requires significant investment, and terminal operations, brand building, and O2O services are unfamiliar areas for traditional distributors, so the risk is high. In comparison, transforming towards servitization is more stable, as distributors are already in the service business.
Whether it's centralized B-end e-commerce like JD.com and Alibaba, or distributed B-end e-commerce like PiDuoDuo and Zhanghe Tianxia, the author believes that the service function of traditional distributors cannot be replaced by anyone. China's terminal system is extremely fragmented, unlike Europe and the US where it is mature and centralized, where controlling a few large KAs like Walmart and Carrefour can achieve national coverage. This fragmentation also means that controlling all terminal channels is impossible. Even giants like JD.com and Alibaba, the author believes, cannot achieve this. The distributor's role in customer relationship maintenance, financial services, logistics and distribution, etc., cannot be replaced by anyone at least in the short term. Distributors have local advantages. If they strengthen their services, even if they lose product agency rights in the future, they can survive by providing third-party services. Services can be divided into logistics and distribution services, financial credit services, information services, operation management services, etc. According to the service object, they can be divided into: B-end services (providing services to terminal merchants) and C-end services (providing services to final consumers).
Representative: Che Bianli.
Che Bianli is a representative of C-end services. It was jointly established by the three largest electric vehicle distributors in Zhengzhou (agents of Xinti, Emma, and Yadea brands). Electric vehicles are different from FMCG; after-sales maintenance and rescue are a large market. Traditionally, these services were provided by each brand. Che Bianli breaks this brand boundary, acting as a third-party service provider, using Internet tools such as apps and navigation to provide fast door-to-door services for users of any brand of electric vehicles.
The author once talked with Mr. Song, one of the founders of Che Bianli. The original intention of this project came from the saturation of the electric vehicle market. Since 2014, the electric vehicle market has seen negative growth, severe homogeneous competition, and increasingly thin profits (currently only 50 yuan per vehicle), while rent and labor costs are rising. So they gradually transformed into third-party service providers while maintaining their existing wholesale and retail business, integrating offline maintenance outlets through intelligent information systems to provide fast and timely services to users.
Model 3: Platformization
What is a platform? Simply put, it is an integrator of traffic, including information flow, logistics, and capital flow. The ultimate form of a platform is an ecological closed loop. Currently, C-end e-commerce platforms like Alibaba and JD.com are transitioning from integrating information flow and logistics to integrating finance, i.e., capital flow. Platforms earn management fees, which is the most long-lasting and stable business model. In the future, whoever integrates traffic best will be the winner.
Currently, the traffic dividend of C-end e-commerce has been exhausted, so the chance of new large platform companies is small. But B-end e-commerce is still in the development stage, and compared to C-end, the B-end market is much larger. As long as the model is clear and positioning is precise, it is entirely possible to have platform companies of the size of JD.com or Alibaba.
Representative: Wanshang Gou.
The predecessor of Wanshang Gou was a distributor in Yantai. Several years ago, they realized the crisis of channel merchants and began transformation. The steps were as follows: First, the company purchased a piece of wasteland and built a modern logistics warehouse; Second, they established an alliance, where all member distributors could use the warehouse for free, and provided services such as logistics and financial loans; Third, while using the warehouse for free, they required all distributors' secondary wholesalers and sub-distributors to trade on Wanshang Gou's website; Fourth, transactions through the website could stay for at most one night; if stored in the website account, interest could be paid; Fifth, through the terminal outlets served by distributors, they used the trading website to develop O2O model.
By providing free warehousing, Wanshang Gou completed the integration of regional distributor resources and terminal outlets. It is understood that its registered users have reached 5,000, and daily transaction volume has exceeded 500,000 yuan.
Platformization has the advantage of a closed loop and can enjoy traffic dividends, but it is not easy. First, the initial investment is large; building an online platform and integrating offline resources require capital. Second, educating and cultivating habits of small b (small businesses) is difficult. Most street shop owners are middle-aged or elderly. How to persuade this group to use online procurement systems? Even if persuaded, how to teach them to use it? This will incur high education costs. The education and habit cultivation of small b is also a common challenge for all B-end e-commerce.
In addition, platformization is also the direction for traditional distributor organizational management transformation. The author once interviewed a beverage distributor in Qingdao. He told the author that a few years ago he encountered a personnel management crisis: labor costs were rising, but employee enthusiasm was declining. One measure he took was a contract system: he allocated all terminal outlets in a certain proportion and contracted them to salespeople, each responsible for the maintenance of a fixed number of stores. As a result, not only did management costs decrease, but employee enthusiasm increased and income steadily grew. This distributor's approach is worth learning from. As the cost of corporate operation increases, distributors should change their mindset and turn the company into a platform for employee entrepreneurship, i.e., 'platform + individual business'.
Model 4: Symbiosis
Of course, not all distributors have the strength to build a platform. Besides building their own platform, another transformation path is to join a third-party platform, using it to achieve Internet transformation of operations and organizational management, and build their own small platform within the large platform. This is similar to the 'endosymbiont' (the smaller party) and 'host' (the larger party) in biology, forming a symbiotic partnership to grow together through symbiosis and sharing.
Representative: PiDuoDuo.
PiDuoDuo is a typical representative of distributed B-end e-commerce. It claims to create the Uber of FMCG B-end e-commerce. Its model is based on existing distributors, using information technology to reconstruct the value chain nodes and organizational structure of the FMCG industry, dividing into countless small platforms by region. Each platform consists of one operator and multiple suppliers, service providers, and terminal merchants. Platforms are separated and independent from each other. That is, the distributor's original market area will not change, but with the platform, distributors can share resources, share the traffic brought by the platform, and enjoy information and financial services provided by the platform.
The advantage of the symbiosis model is that it can achieve complementary advantages, resource sharing, quickly improve efficiency, and reduce costs. For example, in terminal distribution, if distributor A's delivery vehicle is not full, it can take nearby orders to provide delivery services for distributor B and charge a fee. For distributor A, it avoids resource waste caused by underloading; for distributor B, it can supplement areas that were previously difficult or impossible to deliver at a small cost. This is the benefit of sharing.
For distributors, because the platform has a complete trading system and training system, they can almost 'move in with just a suitcase' and quickly establish their own small platform, saving effort and worry. From the platform side, the advantage of the symbiosis model is that with the help of distributor resources, it can quickly complete early user accumulation, and the resistance to integrating small b will be relatively reduced. The difficulty is handling relationships between distributors, such as how to persuade distributors who originally had competitive relationships to cooperate with each other? Also, the division of labor and functions of distributors need to change; some become operators, while most become suppliers and service providers. Under the new division of labor, can they cooperate well and build trust with each other? This requires a process of adjustment.
Model 5: Alliance
With the market downturn, spontaneous distributor alliances have appeared in many industries, huddling together for warmth and jointly responding to crises. The benefits are: first, resolving peer conflicts and avoiding vicious competition; second, leveraging collective procurement advantages to obtain goods from manufacturers at lower prices.
Representative: Liquor Merchant Alliance.
On June 20, 2014, after months of preparation and warm-up, Hunan's first non-governmental organization in the liquor industry, the Liquor Merchant Alliance, was launched. It was initiated by Zheng Yingping, a senior figure in the liquor industry. One major benefit of distributors uniting is centralized procurement. Small merchants can use limited funds to enjoy the most favorable policies from major brands like Moutai, Wuliangye, and Yanghe. For agents, it can accelerate capital recovery and reduce the pressure on general distributors. In addition, uniting many distributors can help each other and jointly promote sales.
The industry downturn and the impact of e-commerce will force more and more distributors to unite, either through same-industry or cross-industry alliances to huddle together for warmth. Industry associations and local chambers of commerce will play an important role in this process.
Model 6: Direct Selling
Last year's toxic mask incident severely damaged the reputation of WeChat business (Weishang), and voices predicting its decline were everywhere. Although WeChat business has many problems, the author always believes that WeChat is a good distribution channel, especially for new brands and small third- and fourth-tier brands. The past problem was falling into the misunderstanding of pyramid schemes. The correct way to open WeChat business should be direct selling, where brand products reach consumers directly through first- and second-level agents.
Representative: WeChat Business.
Distributors doing WeChat business have many advantages: first, familiarity with products; second, capital advantages; third, network and customer base advantages; fourth, logistics and distribution advantages. Small and medium-sized distributors with few major brands can consider expanding their business scope through direct selling.
Model 7: Branding
'Distributors have an advantage over manufacturers in building brands,' is the view of Liu Dalei, general manager of Dalian Dalei Logistics Trading Co., Ltd. He believes that the greatest value of distributors is their connection value: upstream connecting to manufacturers, downstream connecting to terminal merchants or even directly serving consumers. Therefore, distributors are the group that best understands the entire industry chain and is most familiar with the market. Especially their channel maintenance and service functions cannot be replaced by any manufacturer or platform.
Representative: Dalian Dalei Logistics Trading Co., Ltd.
Dalian Dalei Logistics Trading Co., Ltd. was originally a condiment distributor. Later, with market development, the profits of some mature brands became lower and lower, and the survival pressure on distributors increased. At this time, Liu Dalei had the idea of transforming into a brand owner and eventually founded the mid-to-high-end condiment brand 'Zhongdiao'. Their operating model is to use the brand as a platform, adopt a shareholding joint marketing system, that is, integrate distributor resources from various regions, bind everyone together with equity, and form a huge channel system. Upstream, they seek high-quality manufacturers for OEM production according to market demand. Finally, they complete packaging design and pricing, and push the products to the market through their own channels.
In short, no matter which transformation method, you must first strengthen your own foundation. If you are a piece of mud, no one can help you climb the wall.
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