I would like to start with a viewpoint: the popularization of internet technology has brought the greatest benefits to ordinary people not in commerce but in public services. Many people first experienced the convenience brought by the internet in scenarios like these: When we walk into a city or prefecture government service center, in the past, you had to find the corresponding service window and wait in line obediently. When it finally got to your turn, someone would squeeze in beside you, ignoring the order of arrival, and shove a stack of documents into the window. You would see the clerk, who had just been stern-faced, look up at the person who shoved the documents, and the two would exchange a knowing smile. You instantly realize that this person is an acquaintance of the clerk. If you are sensible, you wait while the clerk efficiently handles the acquaintance's business, silently praying that no more acquaintances show up. If you are less sensible and try to protest this unhealthy practice, the clerk will surely say, "What's the hurry? What's the hurry? This person has been waiting for a long time; they just stepped away to another window!" If you persist, beware of getting poor service! With the internet, it's different. In moderately sized cities, government service centers use ticket-taking and number-calling systems. You take a number upon entering the hall, and the ticket machine also shows a floor map to quickly identify window locations. After taking a number, you just sit on a chair and wait; when your turn comes, a voice prompt will notify you. Since the process is program-controlled, clerks must call numbers and handle business in order. This reduces queue-jumping incidents, and people no longer have to stand foolishly for half an hour. The Limitations of the Internet Indeed, in public service venues like hospitals and banks, the internet revolution has genuinely brought about changes in experience for countless ordinary people. But if we were to claim that the internet's revolution in commerce is equally stunning, it would be premature, or at least exaggerated. Is it that the commercial sector lacks awareness of the internet, leading to insufficient adoption? Or is the public service sector more self-innovative? Any one-sided view would lead to an absurd conclusion. This raises a question worth exploring: what kind of problems is the internet truly suited to solve? 1. The internet is certainly an upgrade and transformation of information, not a substitute for physical entities doing things hands-on. Therefore, the internet is best suited to solve problems arising from information asymmetry that create gray areas for power rent-seeking. Here, power includes both administrative public power and commercial private power. In terms of public power, society has begun selective attempts with significant results, such as the public services mentioned earlier, which are outside today's discussion. Private power includes the "private power rent-seeking" in the commercial world that relied on information asymmetry, such as sales personnel deducting promotional fees or withholding renovation subsidies from distributors; channel players raising prices privately or withholding policies; and retailers holding manufacturers hostage over consumer complaints and compensation. The internet is clearly better at changing the rules of the game by altering information, rather than directly participating in the game. 2. The internet has changed the basic form of data recording and accumulation, but it also has inherent flaws. From a commercial value perspective, the internet's data recording and accumulation mainly target online stores. Compared to traditional consumer surveys for physical stores, such as observing consumer movement trajectories, which required on-site observation or video recording and analysis, with limited samples and time-consuming efforts, the analysis of consumer movement trajectories for online stores is done synchronously, with all recorded data being continuous and multi-dimensional. This is what the internet excels at and is its core value. Unfortunately, even today, the internet's collection of consumer data for physical stores relies on identity categorization through membership systems, e-wallets, etc., recording purchase times and items as point-based records, forming so-called consumer profiles. For example, if a consumer pays in cash for a one-time purchase and is not a member eligible for points, that purchase record cannot be captured. In other words, the internet's data collection is passive; it can only record when people actively submit to monitoring. Thus, offline data still suffers from incomplete samples and incomplete data; the recording and accumulation of data are countless unconnected points, which are one-sided and incomplete. The internet is clearly better at waiting for rabbits to hit tree stumps (i.e., passive collection), but it still has many limitations when it comes to proactive tasks offline. 3. The ultimate goal of the internet in the commercial field is to achieve profitability, and the ultimate purpose is to integrate with finance, with currency digitization being a crucial part. Whether it's WeChat Pay or Alipay, if currency cannot be digitized, all their businesses lack foundational support. If you had to go to a bank to transfer money to top up a phone card, or go to a post office to remit money to buy clothes, Tencent and Alibaba would not have reached their current scale. This is also a convenience brought by the internet. But for physical stores, payment convenience is one thing, but payment security is another factor to consider. Security here includes two meanings: fund security and information security. Due to many practical reasons, from a commercial perspective, how many domestic distributors can pay full taxes? Because of this, cash transactions are a national condition with Chinese characteristics. Electronic currency can only solve transactions where parties do not meet, but in reality, many transactions require face-to-face meetings. Given practical considerations, how many people are willing to use electronic currency? The internet can innovate tools, but it cannot solve the distributor national conditions with Chinese characteristics. The Distributors That Can't Be Eliminated Recently, I happened to read an article by my friend Mr. Miao Qingxian titled "'No Middlemen to Earn the Difference' Is the Biggest Marketing Lie," which pointed out the distribution value of distributors, which is also the foundation of Kotler's channel theory. In Kotler's distribution theory, without distributors, a manufacturer's goods would need 9 transactions to reach all consumers, but with distributors, the number of transactions drops to 6. As shown in the figure below: Note: M: Manufacturer; C: Consumer; D: Distributor This is a direct proof of the value of distributors, although it is a very ideal state. That is, when distributors are exclusive or monopolistic, the overall social distribution efficiency improves, which is also the core value of large platforms. However, as the number of distributors increases, the overall social distribution efficiency changes, even if distributors do not pursue full coverage. As shown below, with just one additional distributor, and without pursuing full consumer coverage, the number of distributions reaches 10. Once the number of distributors grows rapidly and consumer coverage increases, social distribution efficiency decreases. If both manufacturers and distributors pursue full coverage, the number of distributions reaches 18. Clearly, the latter diagram is closer to the real market situation. Why do companies choose distributors? The fundamental reason is that although overall social distribution efficiency decreases, for each individual company, its distribution efficiency improves (in the case of a single distributor) or remains on par with competitors (in the case of multiple distributors). In short, the decrease in distribution efficiency is actually a result of full market competition. For manufacturers, although duplicate point construction is a key factor in reducing overall social distribution efficiency, it is not their primary concern. Is duplicate point construction by manufacturers due to insufficient information? Yes and no. Even if information were sufficient one day, manufacturers would still need to consider checks and balances among distributors and competition with rivals. Therefore, in practice, duplicate construction of outlets is an inevitable result. In other words, although theoretically choosing an exclusive distributor would increase social distribution efficiency, for companies in free competition, as long as distribution efficiency is not lower than competitors, duplicate construction is an inevitable choice. Platforms that appear as quasi-exclusive distributors, such as Gome and Suning in the past, and Tmall and JD.com now, while a single dominant player improves social transaction efficiency, it is like raising a tiger for both companies and consumers. This is a necessary cost of social gaming, so even if Tmall and JD.com want to eliminate distributors, manufacturers would not agree. Ultimately, a division of labor between large platforms and distributors is inevitable: which products do I sell, and which do you sell? Which part of product sales am I responsible for, and which part are you responsible for? As mentioned earlier, under full market competition, duplicate construction of outlets is an inevitable result. And it is precisely this inefficient duplicate construction that offsets the losses from not achieving so-called precise internet marketing. Theoretically, if information were sufficient and data abundant, we could precisely market to every consumer, meaning society would operate at full efficiency. But in reality, when I set up enough outlets, due to overlap between outlets, some value is wasted, and some operations are inefficient. These wastes and inefficiencies offset the losses from not operating at full efficiency, bringing the overall distributor operation to an optimal state. In fact, the fully efficient operation of social resources does not exist, as it would become a kind of ultimate static state. Only the imbalance under redundancy and dynamic investment construction is the full picture of commercial reality. Therefore, replacing the redundant and imbalanced distributors with a theoretically fully efficient internet is certainly a utopian ideal of some scholars. -END- The best FMCG distributor learning platform in China Focusing on providing professional, practical, and applicable tutorials for companies and distributors Committed to helping Chinese FMCG distributors grow rapidly The most professional and practical knowledge base in the FMCG industry Reply with the red number below to get the corresponding content Reply with number 1 to view the complete knowledge base | 001 Excellent Article Selection | 002 Distributor Market Operations | 003 Terminal Visit Management | 004 Sales Supervisor Skills | 005 Sales Improvement Techniques | 006 Channel Expansion | 007 Managing Distributors | 008 Distributor Development | 009 Distributor Internal Operations Management | 010 Team Management | 011 Efficient Distribution Techniques | 012 Sales Manager's Skills | 013 KA Operation Methods and Strategies | 014 First Lesson for New Salespeople | 015 Internet, Brands | 016 Distributor B2B Transformation | [Long press QR code to follow]