On April 9, the author had an in-depth exchange with Gong Li, COO of Shuhai Supply Chain Management Co., Ltd., in Beijing. Through the discussion, it was found that Shuhai's business model is worth learning for the B2B industry. This article explores where the core competitiveness of self-operated B2B lies, using Shuhai Supply Chain as a case study.
- A brief introduction to Shuhai Supply Chain's business model: Shuhai Supply Chain is a food ingredient B2B company under Haidilao, a domestic restaurant chain group. Its business model is based on Haidilao's standardized central kitchen system, providing one-stop primary and deep processing food ingredient supply for chain restaurants. Specifically, Shuhai centrally procures from upstream suppliers, and through its own warehousing and central kitchen system, it sorts, primarily processes, and partially deep-processes some ingredients, standardizing products and making them semi-finished. Users can order these products on Shuhai's own B2B platform, pay online, and Shuhai delivers via third-party cold chain logistics.
Shuhai Supply Chain was established in 2009, but it has only been serving externally in a B2B model for just over a year. Its main business focuses on the production, processing, and distribution of raw meat products, aquatic products, seasonings, sauces, and clean vegetables. Currently, the platform has over 3,000 SKUs, basically meeting the one-stop kitchen procurement needs of restaurant outlets.
Shuhai's central kitchens currently cover seven cities: Beijing, Shanghai, Zhengzhou, Dongguan, Wuhan, Xihe, and Xi'an, with several more under construction. In terms of service scale, it currently serves over 1,000 chain stores in China, with Beijing as the core market, covering over 600 stores of more than 80 chain brands. Its main clients are group customers such as chain restaurants, government agencies, and schools. Current monthly revenue is around 70-80 million RMB, with an estimated doubling of transaction volume by the end of 2017.
Regarding product pricing on the platform, although ingredients are processed, due to centralized procurement and the maximized use of labor in central kitchens compared to restaurant outlets, the product premium is not very high. This is somewhat like a centralized warehousing and unified distribution logistics model. Through intensive production in central kitchens, while ensuring food safety, it greatly reduces the labor costs of restaurant outlets, helping customers improve procurement and kitchen operational efficiency.
- After comparing with Meituan's business module similar to Shuhai's model, we found the following differences:
1. Built-in traffic: Meicai is a new internet company starting from zero. When it first entered the market, it had no market foundation or traffic, needing to start from scratch, including warehousing, logistics, and customer cultivation. The early market education and sunk costs were enormous.
Shuhai Supply Chain was born out of the central kitchen needs of its parent company Haidilao's chain stores. Therefore, from its inception, Shuhai had a certain base of traffic. While ensuring supply to Haidilao, it further provides services to related customers.
2. Value-added services: Meicai's business model uses its own warehousing and logistics system to primarily sort ingredients and select and wash some ingredients, but it does not provide value-added services tailored to B-end customers' personalized needs.
In contrast, Shuhai's central kitchen can deeply process ingredients into semi-finished products as long as customers have corresponding needs. This means that the greater the degree of ingredient processing, the higher the added value.
3. Target customers: Meicai: Serves small restaurant outlets in first- and second-tier cities in China, as well as some to-C home delivery services.
Shuhai: Serves group customers in first- and second-tier cities, such as restaurant chains, schools, and government canteens, that have special requirements for ingredient processing. The benefit of such customers is that cooperation is basically based on long-term procurement contracts, thus maintaining relatively stable selling prices despite fluctuations in raw material prices. It is worth mentioning that Beijing 7-11's bento boxes are currently processed by Shuhai's central kitchen.
Regarding the author's question about why Shuhai does not currently focus on serving small and medium restaurant customers, Mr. Gong told the author that Shuhai had served small B customers for a period but found that small B customers are highly price-sensitive, and their cost accounting does not include the labor costs of the shop owner and his wife. Additionally, small B customers have low order values, making it difficult for profits to cover the delivery costs. Multiple reasons lead to poor stickiness of small B customers, preventing the central kitchen from leveraging its service advantages.
- In response to the above, the author puts forward his own views and suggestions: Frankly speaking, one exchange is not enough to deeply understand Shuhai's current business model and ecosystem, but from the communication with Mr. Gong, it is clear that Shuhai Supply Chain currently positions itself as a one-stop food ingredient supply chain B2B platform.
Since the restaurant industry has low brand awareness, for categories where Shuhai does not have its own processing and production capabilities, the platform should develop corresponding ODM&OEM products upstream to meet customers' large-scale market demand, and through its huge transaction traffic, increase the transaction volume of its own products.
From a consumption behavior perspective, as the economy improves and consumption reaches a certain stage, families in first- and second-tier cities eat at home less and less, cooking less and less. The value of central kitchens in standardizing, productizing, and branding ingredients becomes increasingly evident. Therefore, Shuhai's central kitchen model, rather than just providing a one-stop trading platform for restaurant outlets, its future value lies more in creating deeper service scenarios around consumers' "eating."
Let's take an example: In the morning, a consumer buys a bento box at a 7-11 store downstairs from the office for breakfast. At noon, they eat at a nearby restaurant with colleagues. In the evening, they go home and buy four pre-cut clean vegetables and a fruit platter at the supermarket downstairs, then cook directly at home. Although consumers purchase these products in different scenarios, all these services—the bento, the ingredients in the restaurant, and the pre-processed ingredients from the convenience store—are uniformly produced by Shuhai through its own super central kitchen. Such intensive value is not only commercial but also has significant social value.
- From Shuhai's self-operated central kitchen supply chain model, let's analyze where the core competitiveness of self-operated B2B lies.
If we simply understand B2B as digitizing offline orders, and the B2B platform merely provides information and transaction services for upstream and downstream, I think it is difficult to have unique competitiveness. This is because the offline stock is already a highly competitive market environment, and traditional supply chains are already very efficient. Although self-operated platforms can improve supply chain efficiency and reduce logistics costs by compressing layers, centralized procurement, and intensive distribution, in a sense, this type of self-operated model seems to have no competitive barrier except scale, and the result will inevitably be a clear Matthew effect.
Moreover, at present, purely operating standard products and popular consumer categories makes profitability very difficult for self-operated platforms, because the products offered are not exclusive. The only way to win small store orders is through extremely low markup rates, which makes profitability a distant prospect.
Therefore, self-operated B2B should not only improve efficiency and reduce costs but also provide customers with unique value-added services. This value must be unique compared to other platforms and non-replicable, just like Shuhai Supply Chain, which has its own R&D team for dishes, provides customers with exclusive products, and in the supply chain, is not just a mover of goods and information but also provides deep value-added services, thereby obtaining transaction premiums.
Of course, self-operated platforms can also consider controlling stores downstream and monopolizing store procurement rights, but this model requires extremely high convenience store operation capabilities. In comparison, developing exclusive proprietary products is a more reliable choice for self-operated platforms.
From a retail perspective, at this stage, whether it is the Japanese trio (7-11, Lawson, FamilyMart) or heavy-asset convenience stores like Quanshi, the main source of profit is still a large number of self-developed products (bento, rice balls, sushi, oden, steamed buns, grilled sausages, etc.). Although standard products have large sales volumes, their markup rates cannot meet the profit needs of stores.
In the foreseeable future, competition between fast food and convenience stores will become increasingly fierce, and the integration of retail and online O2O will accelerate. This requires self-operated B2B platforms, while meeting the supply of best-selling products, to promote and develop proprietary products. Only by adding value and upgrading products can they achieve unique competitiveness and improve the profit structure of their product mix.
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