---
title: "Where Is the Way Out for Brand Owners? Come and Find Out!"
description: "The digital upgrade of FMCG distribution channels has become a basic consensus among brand owners, who face problems such as multiple layers, high costs, low efficiency, and lack of precision and control in traditional distribution. This article explores two viable business models for brand owners to achieve digital channel upgrade without disrupting existing business models or channel interests."
author: "赵波"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-07-21"
language: "en"
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# Where Is the Way Out for Brand Owners? Come and Find Out!

> The digital upgrade of FMCG distribution channels has become a basic consensus among brand owners, who face problems such as multiple layers, high costs, low efficiency, and lack of precision and control in traditional distribution. This article explores two viable business models for brand owners to achieve digital channel upgrade without disrupting existing business models or channel interests.

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In the past two years, the digital upgrade of FMCG industry channels has gradually become a basic consensus among brand owners. **Traditional distribution models suffer from multiple layers, high costs, low efficiency, imprecise channels, and lack of control, and most brand owners feel it is time for a change.**
Since B2B emerged on a large scale in 2013, its online ordering, one-stop procurement, intensive logistics, and flexible promotional methods have been well received by small shop owners, and penetration has reached an astonishing 31%. This has led many brand owners to consider whether to abandon their own supply chain systems and put transactions on B2B platforms. However, the centralized traffic model of B2B also gives brand owners headaches.
**Brand owners' concerns mainly focus on the following aspects:**
> 1. Can platforms like JD New Route and Alibaba Retail Link each absorb millions of mom-and-pop stores?
>
> 2. After B2B platforms grow, will they charge brand owners? If so, how should brand owners respond?
>
> 3. If channel conflict or price undercutting occurs when cooperating with B2B, how should brand owners handle it?
There are many other issues during cooperation, which I won't list one by one. Some friends also ask: "Since there are so many problems with B2B cooperation, is it feasible for us to build our own platform?"
New Distribution believes it is feasible, but most brand owners lack deep understanding of the underlying logic and industry when building their own B2B, leading to many low-level mistakes:
  * Brand owners make their own online APP, selling only their own products, making user costs too high;
  * Treating B2B as a tool without deeply understanding the problems arising from games among supply chain links;
  * Competitors will not sell goods on your platform.
**How can brand owners complete the digital upgrade of their channels?**
Recently, I have been thinking about two relatively stable business models, suitable for brand owners who heavily rely on deep distribution and emphasize channel execution.
The first: a partner model based on same-city logistics.
This model is based on the concept of social division of labor, outsourcing non-core business and letting professionals do professional work.
Let's simulate a scenario: A brand owner, due to high labor costs in recent years, considers laying off some market sales personnel. However, laying off these people requires a large severance package. Because of the high cost, the brand did not directly lay off employees but reduced staff size through natural attrition.
But these business personnel are valuable assets to the company. They have received professional training, are familiar with products and markets, and have good customer relationships with outlets. If directly laid off, it would waste talent.
**In this situation, the brand owner took the following measures:**
1. Cancel the regional distribution rights of outdated dealers that do not align with the company's long-term development strategy, and instead support new dealers with strong commercial flow capabilities, or transfer willing salespeople in the region to become partners (dealers) within their areas. The market remains unchanged, but the dealer structure has been upgraded to include new dealers with promotional capabilities and partners (dealers) transformed from salespeople.
2. Seek cooperation with third-party same-city warehousing and logistics companies such as Wanchaobang, and sign strategic agreements with such companies to hand over all goods in the region to this third-party logistics company for unified same-city delivery.
3. Change the income model for salespeople from basic salary plus commission to a partner model based on product price differences; change the original dealers' profit model from relying mainly on logistics income to high-value commercial flow income, improving channel profitability.
4. Partners only need to focus on marketing work, without worrying about warehousing, logistics, loading/unloading, or product freshness (inventory sharing).
5. If partners lack sufficient funds, the brand owner provides partial startup funds, using warehouse receipt pledge to reduce financial risk and solve startup capital issues.
6. Through the logistics platform's one-stop ordering system, partners and new dealers can use it themselves or let small shop owners use it. After ordering, the backend receives orders promptly, delivers in time, and collects payments in real time.
**Through this model, the brand owner perfectly solved the problems of personnel placement and market service. The benefits of this model:**
> 1. Centralized warehousing and shared delivery reduce warehousing and logistics costs;
>
> 2. Online transactions with accurate real-time orders help brand owners achieve precise visual data analysis;
>
> 3. Stripping non-core functions allows salespeople to focus more on marketing services;
>
> 4. Real-time sharing of inventory data ensures product freshness;
>
> 5. Own business ensures execution at own terminals and market competitiveness.
The second: an online integrated transaction model based on the WeChat ecosystem.
Simply put, all online transactions of the brand owner are realized through WeChat, requiring full utilization of various capabilities of the WeChat ecosystem:
WeChat → communication, Mini Programs → transactions, coupons → incentive systems, Enterprise WeChat → ERP, Official Accounts → advertising, Moments → promotional notifications.
Small shop owners can learn about new products, promotions, and other activities in real time through WeChat, Official Accounts, and Moments, and can receive promotional coupons and place orders online via Mini Programs. Sales personnel can use a series of management tools in Enterprise WeChat for scheduled visits and market operations, and can complete internal SOP processes such as expense approvals, business process reviews, and market reward collection.
The biggest feature of this model is that small shop owners have high WeChat open rates, no need to install separate APPs, and all online functions are familiar to them, with no learning or migration costs.
Currently, all functions of this model are ready-made; brand owners only need to find someone to package WeChat's various capabilities into a system. I think this is not complicated; the core is the operation system built by the enterprise using WeChat based on this system.
**Benefits of the WeChat ecosystem operation model:**
> 1. Does not break the original supply chain system.
>
> 2. No migration cost for small shop owners.
>
> 3. Small shop owners can learn about promotional activities in real time online.
>
> 4. All transactions are online in real time, precise and controllable.
>
> 5. Fully utilize various capabilities of the WeChat ecosystem to maximize efficiency.
**Both models share a common feature: they do not share their own channel networks, do not leak transaction data, do not rely on breaking price systems to obtain orders, do not break original business models, and do not affect the interest patterns of original channel dealers. Instead, they achieve digital channel upgrade through gradual changes based on the original business.**
Of course, brand owners can also implement both systems simultaneously; they do not conflict. Enterprises can design their digital supply chain according to their own situations.
At the FDIC2018 China FMCG Digital Innovation Conference held by New Distribution from August 22-24, 2018, we will provide answers for you!
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