---
title: "Why Are Some Manufacturers Unwilling to Support B2B Platforms?"
description: "The article discusses the challenges B2B platforms face in logistics and operations, including high logistics costs due to low order density and value, and the difficulty in achieving good gross margin structures. It argues that platforms must consider the full value chain and assist manufacturers in balancing supply and demand, as manufacturers are reluctant to fully support platforms that cannot replace the functions of traditional distributors."
author: "赵波"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2017-02-14"
language: "en"
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markdown: "https://xinjignxiao.com/en/articles/why-are-some-manufacturers-unwilling-to-support-b2b-platforms-120c9b41.md"
original_source: "https://mp.weixin.qq.com/s/noCDz-1fwOTZJjIjpUQe0w"
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# Why Are Some Manufacturers Unwilling to Support B2B Platforms?

> The article discusses the challenges B2B platforms face in logistics and operations, including high logistics costs due to low order density and value, and the difficulty in achieving good gross margin structures. It argues that platforms must consider the full value chain and assist manufacturers in balancing supply and demand, as manufacturers are reluctant to fully support platforms that cannot replace the functions of traditional distributors.

**Click the image for details**
Let's start with the logistics of B2B platforms. **It is undeniable that logistics costs are a heavy burden for all B2B platforms in China. There are two issues: one is insufficient order density, and the other is insufficient order value.**
The underlying reasons for these two issues are, first, that B2B platforms are not agents, so they cannot obtain sufficiently low factory prices, and thus lack a price competitive advantage in the channel to compete head-on with traditional suppliers. At this stage, many self-operated platforms only play the role of secondary wholesalers, but they do not have the low-cost advantage of individual secondary wholesalers. Moreover, in terms of end-of-line logistics distance, large warehouses have obvious disadvantages compared to secondary wholesalers. In terms of mobility and cost, it is difficult to compete with secondary wholesalers. Therefore, they cannot obtain agent-level prices, nor can they operate at low cost like secondary wholesalers. With low profits and high costs, it is inevitable to suffer logistics losses in the initial market expansion phase.
**Second, at the operational level, it is difficult for platforms to achieve a good gross margin structure for products, and it is almost impossible to combine high and low gross margin products in a single store.** Many people blame small stores, saying they are profit-driven and buy from whoever is cheaper, but this is human nature and the essence of business, and platforms cannot avoid this issue. As a platform, we can only face it, and while meeting their cost minimization, we must maximize our own interests.
Some platforms are forced to rebrand or franchise, attempting to control stores to solve the problem. In fact, rebranding cannot solve the pressure of logistics costs. Making density larger, increasing average order value and gross margin, is the right path. However, this slows down market penetration and expansion speed, which makes capital unhappy. Because the internet has always been known for speed, B2B platforms first focus on scale to occupy the market, and then slowly do operations after occupying it. The huge logistics losses are thus easier to understand.
Not only platforms, but distributors also face significant logistics pressure when doing water business, but they can obtain fee subsidies from manufacturers by helping them handle production capacity peaks and troughs in terms of space and time. Platforms cannot use their own turnover warehouses to stockpile goods like distributors do; this is impossible. But if they cannot help manufacturers handle the off-season and peak-season inventory transfer in the background, manufacturers will find it difficult to cooperate deeply with B2B platforms at the product level.
**So I am thinking, if we don't open convenience stores, is it wrong for B2B to do full categories?**
**From a logistics cost perspective, the higher the value of goods and the smaller the volume, the lower the proportion of logistics costs in the value of goods.** Some categories are like this, such as alcoholic beverages, and some categories are light enough and have high enough gross margins, such as leisure snacks. From a logistics perspective, these products may really be able to succeed. Moreover, many platforms, such as Yijiupi and Huijinhuo, have verified through practice that segmented categories are indeed feasible. But small stores cannot install 100 apps for 100 categories on their phones; that would be weird. So, if full categories are correct, we still need to consider how to optimize logistics costs.
A B2B platform, when it can run beverages alone and break even like a beverage distributor, then the logistics is truly impressive.
After discussing logistics, let's discuss another issue.
As a platform, the connector between manufacturers and stores, if it replaces distributors, it must deeply consider the issue of replacing distributor functions. **Manufacturers fear B2B platforms largely not because of channel conflict, but because they must protect distributors. Why? Because distributors still have many functions that platforms cannot fulfill.**
How could Niulanshan not know that Yijiupi can help them sell? But if Niulanshan handed all its products to Yijiupi and did not protect the interests of distributors, and distributors stopped working, Yijiupi would not be able to maintain the market at all. Who would manage customer relationships and brand promotion for Niulanshan locally? As a standardized company, Yijiupi holds many brands; how could it do market customer relationship and brand promotion for Niulanshan?
For example, new product promotion, near-expiry product recovery, and terminal vividness functions are things that brand owners must consider in market operations. Friends doing B2B platforms rarely consider this issue for manufacturers. When B2B platforms pitch to investors, they always talk about how to optimize the supply chain from their own perspective. I think this is wrong. For incremental growth, this mindset is fine, **but for cutting into the existing pie, we must consider the full-chain efficiency and cost of the brand owner. Between scale and efficiency, between production capacity and demand, we must assist manufacturers in achieving supply-demand balance in time and space.**
If we do not consider the economic costs of brand owners, they will never be willing to fully hand over a product to a platform.
In the quadrant, the solid line represents market demand, and the dashed line represents production capacity. The space between the two in time is what distributors originally helped manufacturers solve in time and space.
**Therefore, we still need to analyze the role distributors play from the manufacturer's perspective and the functions they carry, use internet thinking to deconstruct the functions of distributors in the supply chain, and then reconstruct them, using new technologies and new means to achieve the brand owner's requirements for channel partners.** These may really require more than ten years of experience in the category to understand.
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