--- title: "Why Is FMCG B2B Regional Dominance?" description: "After several years of development, FMCG B2B has begun to take shape. According to incomplete statistics from New Distribution, the transaction scale of FMCG B2B reached 100 billion yuan in 2017, and it is expected to reach around 300 billion yuan in 2018. The boom in B2B has left distributors confused: if giants come, what should we do? Should we do it ourselves, join them, cooperate, or compete head-on? Moreover, the rapid expansion of giants has made investors more cautious in B2B investments, with a large amount of capital flowing to leading platforms, which has slowed the expansion of many regionally successful B2B platforms compared to those that received investment." author: "赵波" publisher: "New Distribution" email: "zhaobo258@gmail.com" telephone: "+8615854817671" published: "2018-01-29" language: "en" canonical: "https://xinjignxiao.com/en/articles/why-is-fmcg-b2b-regional-dominance-082dc12a/" markdown: "https://xinjignxiao.com/en/articles/why-is-fmcg-b2b-regional-dominance-082dc12a.md" original_source: "https://mp.weixin.qq.com/s/IITUAZxU-dNUTtQNtQBfdQ" translation: "https://xinjignxiao.com/zh/articles/%E4%B8%BA%E4%BB%80%E4%B9%88%E8%AF%B4%E5%BF%AB%E6%B6%88%E5%93%81b2b%E6%98%AF%E5%8C%BA%E5%9F%9F%E4%B8%BA%E7%8E%8B-082dc12a.md" attribution: "New Distribution — https://xinjignxiao.com/en/articles/why-is-fmcg-b2b-regional-dominance-082dc12a/" usage_policy: "https://xinjignxiao.com/ai-policy.txt" --- # Why Is FMCG B2B Regional Dominance? > After several years of development, FMCG B2B has begun to take shape. According to incomplete statistics from New Distribution, the transaction scale of FMCG B2B reached 100 billion yuan in 2017, and it is expected to reach around 300 billion yuan in 2018. The boom in B2B has left distributors confused: if giants come, what should we do? Should we do it ourselves, join them, cooperate, or compete head-on? Moreover, the rapid expansion of giants has made investors more cautious in B2B investments, with a large amount of capital flowing to leading platforms, which has slowed the expansion of many regionally successful B2B platforms compared to those that received investment. After several years of development, FMCG B2B has begun to take shape. According to incomplete statistics from New Distribution, the transaction scale of FMCG B2B reached 100 billion yuan in 2017, and it is expected to reach around 300 billion yuan in 2018. The boom in B2B has left distributors confused: if giants come, what should we do? Should we do it ourselves, join them, cooperate, or compete head-on? Moreover, the rapid expansion of giants has also made investors more cautious in B2B investments, with a large amount of capital flowing to leading platforms. This has slowed the expansion of many regionally successful B2B platforms compared to those that received investment. However, New Distribution believes that giants with large amounts of capital are not to be feared. Localized platforms still have the opportunity to compete with large platforms in local markets. 1. B2B is destined to be a density business, not a winner-take-all game. In fact, most people have a cognitive error in B2B market competition, thinking that FMCG B2B will also have a strong Matthew effect like B2C. This is not the case. B2C customers are consumers, who are not price-sensitive, have extremely low repurchase rates for single categories, but have extremely diverse product needs. This leads to stronger supply chains on large platforms, resulting in higher user stickiness. In contrast, FMCG B2B customers are small retail stores, characterized by continuous high-frequency repurchases, focusing on profit and turnover, and being extremely price-sensitive. Therefore, long-tail products do not bring stronger competitiveness to large platforms; instead, they increase delivery costs. In terms of delivery, the shorter the delivery radius, the higher the density, the higher the efficiency, and the lower the delivery cost. Moreover, due to the natural attributes of FMCG—low value and heavy logistics—FMCG B2B must emphasize delivery density. Therefore, large warehouses with long-distance delivery do not have advantages. If giants say, "Since we can't deliver long-distance, we'll bring the goods to sell locally," sorry, but due to the agency attributes of China's FMCG industry, goods cannot circulate across regions, and regional protection is an objective fact. Therefore, large platforms cannot mobilize resources from other regions to inject into local markets. Localized inventory is actually a scarce value. No matter how well you do B2B in Hangzhou, it has nothing to do with Ningbo. No matter how powerful the giant, markets must be conquered one by one. **In regional markets, even the largest platform competes at the same level as regional B2B.** Now, the digital transformation of China's FMCG industry channels must first focus on density, then on breadth. Platforms that focus on breadth first are destined to endure long-term losses. Therefore, no matter how lively the giants are, FMCG B2B is far from the harvest stage. As long as distributors are willing to do it, there are still many opportunities. 2. Regional B2B and national B2B operate under different logics. Most localized B2B platforms are based on resource entrepreneurship, mostly transforming existing businesses, and lack cross-regional capabilities. Therefore, they can only operate deeply in their own territory, serving small stores well. Their underlying logic is procurement and sales, providing one-stop solutions to small stores, making single-store penetration very important. Figuratively, it is like greenhouse crop economy. National B2B platforms mostly layout markets around strategy. Their underlying logic is distribution, providing national distribution solutions to brand owners, helping them complete new channel and market coverage, and achieving precise promotion of new products. Therefore, national platform coverage area becomes very important. They cannot invest heavily in all markets, making it a large farmland economy. When the operating logics differ, the business models also differ to some extent. The problem with large platforms is insufficient density, making logistics costs hard to reduce. Therefore, they need to set up front warehouses and cooperate with local distributors to jointly develop markets. In the future, it is possible that self-operated platforms like JD.com and Best Store+ will form strategic cooperation with distributors. The fatal weakness of regional platforms is that their product capabilities are inferior to national platforms, so they need to deeply cultivate stores, even control store procurement. However, regional platforms opening small stores, loose franchising, and direct operation all have problems. Without strong control and management of stores, small stores have almost no loyalty to B2B. The problem with franchising is the inability to control stores, while direct operation has high operating costs and extremely high operational capability requirements. Therefore, **to control stores in regional markets, franchising must be adopted.** 3. For distributor transformation, the best approach is to provide services. As mentioned earlier, due to the naturally fragmented inventory in local markets, resource integration is actually very difficult for distributors wanting to do B2B. Many distributors' livelihoods depend on this business, so if you touch their business, they will fight you. Distributors doing B2B should not consider building procurement-based self-operated B2B platforms. **Moreover, at present, self-operated platforms, unless they adopt franchise convenience stores, find it difficult to run an effective model.** The best way for regional platforms to solve the issue of getting distributors online is not to snatch their business, but to provide services. Provide unified warehousing and shared distribution logistics. On the basis of logistics services, add commercial value-added services, with transaction matching as just one of the basic services. **If you want to touch goods, the best way is to adopt franchising, achieving a closed-loop supply chain through brand output + training consulting + exclusive supply chain capabilities.** In 2018, digital transformation of channels in the FMCG industry is a mainstream trend. New products, new channels, new models, new marketing, new communication—almost every link in China's FMCG industry is undergoing restructuring. Enterprises that do not use the internet for digital transformation of traditional industries may face the risk of being marginalized. -END- --- ## Copyright and AI use This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL. Contact: zhaobo258@gmail.com · +86 158 5481 7671