---
title: "Why Is the Hybrid B2B Model More Likely to Succeed in the Restaurant Food Supply Industry?"
description: "The author recently visited Tianjin Tongying Tianxia and had an in-depth exchange with Mr. Gong. Tongying Youcai, a subsidiary, is a national vertical e-commerce platform focused solely on restaurant food ingredients, covering products for three daily meals. Its business model resembles Zhanghe Tianxia's franchise model but differs by also providing technology, supply chain, operations, and financial solutions through ODM and central kitchen integration. The author believes restaurant food B2B may achieve platform-scale profitability before FMCG B2B due to industry pain points and characteristics."
author: "赵波"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2017-07-01"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/4Qr8dPUHuPhbFFTVbMnhzQ"
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---

# Why Is the Hybrid B2B Model More Likely to Succeed in the Restaurant Food Supply Industry?

> The author recently visited Tianjin Tongying Tianxia and had an in-depth exchange with Mr. Gong. Tongying Youcai, a subsidiary, is a national vertical e-commerce platform focused solely on restaurant food ingredients, covering products for three daily meals. Its business model resembles Zhanghe Tianxia's franchise model but differs by also providing technology, supply chain, operations, and financial solutions through ODM and central kitchen integration. The author believes restaurant food B2B may achieve platform-scale profitability before FMCG B2B due to industry pain points and characteristics.

The author recently visited Tianjin Tongying Tianxia and had an in-depth exchange with Mr. Gong. Friends in the FMCG industry may not be familiar with Tongying Youcai under Tongying Tianxia. It is a national vertical e-commerce platform that only deals in restaurant food ingredients, limited to products for three daily meals, helping restaurants procure ingredients.

Tongying Youcai's business model is somewhat similar to Zhanghe Tianxia's franchise model, but with differences—not only in industry but also in supply chain integration. Currently, Tongying Youcai not only does franchising and provides technology output but also goes deep into the entire supply chain. Through ODM, central kitchen integration, and other models, it offers franchisees one-stop solutions including technology, supply chain, operations, and finance.

The author has expressed in multiple public forums a strong optimism for the development of B2B in the restaurant food industry. I believe that restaurant food B2B may be one of the industries that achieves platform-scale profitability earlier than FMCG B2B. Why so certain? Let me start with the pain points of this industry:

**I. Current State of China's Restaurant Supply Chain: Urgent Need for Integration**

First, consider restaurant procurement. The vast majority of restaurant stores still use traditional procurement methods. Typically, small and medium restaurants have owners personally go to the market to purchase, which is time-consuming and laborious. Due to information asymmetry, prices are chaotic, and problems like counterfeit goods and shortages occur frequently. Moreover, many small and medium restaurants lack bargaining power in the channel because of small purchase volumes. Even some restaurants with bargaining power have to figure out how to avoid under-the-table operations in procurement.

From the supplier's perspective, business is not easy either. Supplying the restaurant industry incurs extremely high labor costs, and payment cycles and payment delays are severe. This is a significant challenge for all distributor bosses. Many distributors typically rely on second-tier wholesalers in local wholesale markets to bear such capital pressure and payment cycle risks. However, this creates another problem: counterfeit goods and cross-regional selling. Additionally, restaurants have low brand awareness, and the market suffers from bad money driving out good. Many high-quality products lack competitiveness due to cost issues, leading to frequent food safety hazards.

Therefore, theoretically, **the restaurant industry urgently needs a product supply platform that offers reasonable prices, transparent information, and one-stop procurement.**

**II. Industry Characteristics: Easier to Integrate**

**1. Huge Market Size; the Restaurant Industry Track Is Accelerating**

On June 27, Alibaba's Koubei and CBNData released the "2017 China Restaurant Consumption Report." The report shows that the post-80s and post-90s young人群 account for nearly 70% of restaurant users, and post-90s are gradually surpassing post-80s to become the main consumer group in the restaurant industry.

In terms of consumption behavior, with economic improvement and consumption reaching a certain stage, families in first- and second-tier cities eat at home less frequently and dine out more often.

A set of data: In 2016, the number of restaurants nationwide reached 7.3 million, with small and medium restaurants exceeding 5.3 million. The market size exceeded 3.7 trillion yuan. From January to May, national restaurant revenue reached 1.5 trillion yuan, a year-on-year increase of 11%. Behind this rapid growth, the scale of China's restaurant food procurement has reached 900 billion yuan!

Behind every restaurant store, there is a weekly procurement demand of several thousand yuan.

**2. Low Brand Awareness; Middlemen Have Natural Advantages in Supply Chain Integration**

Unlike the retail industry, the product attributes in the restaurant industry differ. Ingredients are typically processed by the restaurant itself, and consumers mainly consume the processed food, being insensitive to the source of ingredients. For example, for stir-fried shredded potatoes, consumers don't know or care whether the potatoes are from Heilongjiang or Inner Mongolia. Moreover, to ensure the flavor and characteristics of their dishes, each restaurant uses different combinations of ingredients and seasonings. This makes it extremely difficult for highly recognizable, monopolistic brands to emerge as in FMCG. Take soy sauce: the top brand, Haitian, produced only 13.6% of the industry's total in 2015.

The benefit of high industry fragmentation is that middlemen can more easily integrate products online and promote them.

**3. Too Many Layers in the Industry**

The traditional supply chain from ingredients to the dining table is extremely lengthy: from vegetable bases/ingredient processing plants → purchasing agents → first-level wholesale → second-level wholesale → third- and fourth-level wholesale → farmers' markets → restaurant procurement terminals. It passes through multiple wholesale handovers before reaching the restaurant terminal.

These many layers lead to extremely high product markup rates, indicating high gross margins in this industry, so the B2B model has ample room for compression.

The above three points are why I am optimistic about the development of restaurant B2B.

**III. Restaurant B2B: Many Benefits**

**For Small Stores:**
1. Complete product range, one-stop shopping—convenience
2. Transparent prices, smooth information—cost savings
3. Small loans to solve funding problems—easing financial difficulties
4. Authentic products, traceable—food safety

**For Suppliers:**
1. Unlimited store coverage—rapid market expansion
2. One-stop direct supply to stores, compressing layers—increased profits
3. Large loans to solve funding problems—easing financial difficulties
4. Transparent channels, data sharing—precision marketing

**IV. Matching + Self-Operation, Heavy Service, Agency Operation**

In the B2B field, pure matching or pure self-operation has basically been proven extremely difficult to operate. Matching struggles to bring first-tier brands online, while self-operation struggles to achieve highly long-tail product supply.

However, the logic of the matching + self-operation heavy-service agency model is feasible in the restaurant industry:

**1. Backend Matching: One-Stop Satisfaction of Long-Tail Needs**

The biggest advantage of the matching model is that it focuses more on product richness and can theoretically meet the infinite long-tail needs of restaurant stores for ingredients. Since it doesn't touch goods, it doesn't tie up large amounts of capital in the supply chain like self-operation does, allowing the platform to be lighter and expand faster.

From distributor to store, the platform has no value or necessity. But if it's from factory to store, with enough layers to cross, the platform can deliver goods directly from factory to store. As long as efficiency is high enough and the online chain is short enough, there is enough margin to defeat the traditional supply chain. Therefore, the shorter the platform chain compared to traditional channels, the more obvious the advantage of the matching model.

The restaurant industry's characteristic is that between distributors and restaurant stores, there are usually one to two layers of middlemen, and some categories have up to five or six layers in the entire chain. So whether it's local matching or full-chain matching, there is enough margin to compress the intermediate links.

Therefore, some second- and third-tier categories that are not highly flattened are very suitable for light-asset matching operations.

But as a regional platform, it lacks the capability to organize a national supply chain. This requires a strong supply chain platform to organize backend supply chain products.

**2. Frontend Self-Operation: Bringing First-Tier Products Online to Meet Store Needs**

The advantage of frontend self-operation is that through cash procurement and self-operation, high-quality, high-frequency, non-standard products are brought online, ensuring stable procurement of essential high-frequency products for stores.

Through the backend matching and frontend self-operation model, the online product range is sufficiently rich, maximizing the satisfaction of store procurement needs.

**3. Reconstructing Middlemen, Heavy Service**

Although matching transactions bypass distributors, goods still need to circulate offline. The value-added services originally provided by middlemen need to be completed by the platform through sufficient third-party infrastructure.

At the current stage, with incomplete infrastructure in the Chinese market, platforms need to make good use of existing distributor resources, decompose and reconstruct the original distributor functions, and divide roles according to capabilities. The roles originally performed by one distributor are decomposed into warehousing and distribution, ground promotion services, capital, OEM suppliers, and other roles, making these reconstructed roles the local market platform's infrastructure.

Tongying Youcai's advantage lies in ensuring a certain proportion of direct procurement from factories and origins while fully utilizing franchisees' local connections and existing resources. By empowering local franchisees with high-margin products, franchisees can leverage their service advantages to fulfill orders, develop customers, do ground promotion, and handle warehousing and logistics, maximizing local market influence.

Through backend data analysis and frontend procurement customer service, the platform ensures the sales volume of products on the platform.

**In summary, the advantages of Tongying Youcai's franchise-based matching model: it ensures a certain degree of direct supply of supply chain products, enables light and rapid market expansion, and allows franchisees to profit in a very short time.**

Speaking of Tongying Youcai's characteristics, Mr. Gong summarized them with "single sharing":

**"Tongying Factory Product Sharing"**
**"City Distribution Channel Sharing"**
**"Headquarters Sales Data Sharing"**

Tongying Youcai adopts a rural-encircling-cities strategy. In less than three years, it has covered more than 100 cities nationwide, providing one-stop restaurant food distribution services to hundreds of thousands of restaurant stores. It has become one of the largest restaurant B2B platforms in China.

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