Will distributors be killed by B2B? I think not. The main reason is not the distributors themselves, but that manufacturers are unwilling; the secondary reason is that distributors evolve. Distributors will not be killed by B2B; only poorly performing distributors will be eliminated by manufacturers. Manufacturers eliminate distributors for only one reason: a better distributor appears. If B2B wants to eliminate distributors, can B2B replace the functions of distributors? If not, then why should B2B be able to replace them? If B2B wants to replace distributors, can B2B be as "obedient" and even "put up with grievances" as traditional distributors? Can it follow orders like distributors? If B2B wants to replace distributors, can B2B practice "brand exclusivity, not handling competing products" like traditional distributors? If B2B wants to replace distributors, can manufacturers confidently hand over new product promotion entirely to B2B? For over 100 years, distributors worldwide have been a group that is often disliked, looked down upon, yet cannot be abandoned.
Can B2B establish nationwide distribution capabilities? In China, there was a once-famous magazine called "Sales and Marketing" (销售与市场), a ten-day publication with monthly circulation exceeding 600,000. When communicating with German counterparts, they said such a magazine would not exist in Germany. The United States once had "CMO" magazine, which disappeared a few years after its founding, while licensed editions in other countries still survive. Why did "Sales and Marketing" have such high circulation? Because it is said that China has 80 million marketing professionals, one of the four largest occupations alongside farmers, industrial workers, and salespeople (service staff). Why does China need so many marketing people? Because China's channels are fragmented, unlike developed countries with developed vertical channel systems (strong trading companies) and horizontal channel systems (chains, KA, etc.). Channel systems form property rights and management relationships, allowing products to reach end customers directly through internal distribution. China's channels are fragmented, so many salespeople are needed to negotiate with individual fragmented channels and terminals, giving rise to the concept of "deep distribution." Only through deep distribution can a nationwide terminal system be established. In other words, Chinese companies build channel systems through the combination of marketing systems and distributor networks. B2B differs from C2C. C2C eliminates two channel links (distributors and retail) and becomes the retailer itself, effectively saving one link. B2B does not save any links. Even if it replaces distributors, it becomes a distributor itself. If it does not eliminate distributors, it adds an extra link. That is, B2B does not have the natural advantage of C2C. If B2B e-commerce wants to replace distributors, it must obtain agency rights from manufacturers and, more importantly, establish a nationwide channel system (not just a low-price order-taking system); otherwise, it is just a large-scale gray market trader. Manufacturers will certainly scrutinize whether B2B e-commerce has the capability to form nationwide terminal coverage. Manufacturers will only confidently hand over agency rights to B2B based on three considerations: first, channel coverage capability; second, higher efficiency and lower costs; third, no risk of becoming too powerful to control. Currently, all three aspects are difficult to achieve.
Is B2B willing to be controlled and managed by manufacturers, even "put up with grievances"? From the perspective of "the next process is God," distributors are also the "God" of manufacturers. However, agents of strong brands rarely feel like gods. The term "managing distributors" violates business logic, but it is normal in China. Distributors have to endure a series of "unequal treaties" such as inventory pressure, warehouse occupation, dedicated personnel and vehicles. Chinese companies still believe that "sales are squeezed out," and this statement is somewhat true. Under the premise that channel power is more important than brand power, manufacturers do not have strong leverage over channels, so it is normal for sales to be squeezed by competitors. Once B2B gains momentum, it will inevitably become as powerful as large C-end platforms, which is the inevitable result of "the shop being big and bullying customers." From the perspective of manufacturers' discourse power over channels, they still feel more assured with distributors.
Can B2B do brand exclusivity like distributors? Strong manufacturers generally require distributors not to handle competing products. B2B e-commerce systems generally want to have it all: doing both Master Kong and Uni-President, both Wanglaoji and JDB, both Yili and Mengniu. This all-category approach violates a major taboo. Brand owners are first and foremost competitors, and in China they still want to eliminate each other; B2B will find it difficult to balance the conflicting interests of both sides.
Who will do new product promotion? If best-selling old products can be handed over to B2B platforms, then can B2B platforms handle new product promotion that requires long-term investment? In China, new product promotion typically requires more investment in the channel system than in the communication system, takes a long time, and has a low success rate. I have not yet seen any B2B platform with this capability.
Which manufacturers will be interested in B2B? It is said that some big brands are interested in B2B platforms, such as manufacturers who believe their brand power is strong and think the channel can be handed over to anyone. I guess some multinational brands have this intention. Multinational brands have good backend systems. In developed countries, they hand over frontend systems to third parties with channel integration capabilities, forming contractual relationships. This is a mature practice. But among multinational companies that do well in China, who can say they have not compromised on channels? Even P&G and Coca-Cola have Coca-Cola's "1+1" model, and P&G's unsuccessful "three trips to the countryside." China currently has three major channel systems: first, the fragmented so-called trade channels; second, KA with relatively higher concentration; third, platform-based C-end e-commerce. In the past, trade channel profits subsidized KA; now they subsidize both KA and C-end e-commerce. Fragmented trade channels have always been criticized, yet they are an important source of profit. Who would dare hand them over to powerful B2B? Why do KA and C-end e-commerce not make money? Because they are too powerful. Because trade channels are fragmented and not powerful enough, they are the source of profit. Many people have not realized this.
How long can platforms that engage in gray market selling last? Currently, there are roughly three types of B2B: first, vertical platforms that want to replace distributors, essentially online distributors; second, service or matchmaking platforms that mainly improve distributor efficiency; third, vertical-service hybrid platforms. In terms of numbers, vertical replacement platforms account for the largest proportion and have the most traffic. When vertical e-commerce platforms do not get manufacturer supply, they have to source from the secondary market, which is essentially gray market selling. Sourcing from the secondary market means no price advantage. If there is no efficiency or cost advantage either, they will lose money. Of course, some vertical B2B platforms make money from secondary market sourcing, such as in high-margin industries like baijiu (Chinese liquor). The high gross margin of baijiu corresponds to high promotional investment. A baijiu product requires a long cycle of investment with a low success rate. If promotion succeeds, the gross margin is naturally high. If B2B platforms skip promotional investment and directly enjoy the later high gross margin, they can also make money. This is like someone spending years planting peach trees, and you only pick the peaches at the end, then claim that peach picking is profitable—that does not make sense. However, such things are done under the banner of e-commerce. I believe that things that do not conform to reason cannot last.
What are the weaknesses of distributors? B2B targets distributors not only because they dare to do anything under the banner of e-commerce (like the overall collapse of O2O), but also because of distributors' weaknesses. Distributors used to be a low-efficiency, low-cost channel system. Now they have become a low-efficiency, high-cost system. That is weakness number one. Distributors rose from merchants, but when they reach scale, they have high demands for management. That is weakness number two. Some people see B2B as a channel disruption system; I see B2B as an efficiency system. If an efficiency system can compensate for distributors' weaknesses, then should distributors still fear B2B? I summarize B2B's value for efficiency in three sentences: B2B's visit-sales and ordering software is an internet-based deep distribution tool. B2B's internet-based delivery system is a low-cost delivery tool. B2B payment and the data credit built on payment are financial tools.
Will distributors disappear? On the evening of October 15, at a small B2B forum in Fuzhou, many B2B experts answered the last question posed by B2B expert Zhao Bo: Will distributors disappear? The experts' answer was: No. Only the questioner's answer seemed different. In fact, as a group, agents have been disliked by many for over 100 years, and predictions of their disappearance have been made. In the 1920s, many Americans thought agents were "big and lazy" and should disappear. In the 1960s, some in Japan also agreed that agents would disappear. In the early 21st century, some in China also thought agents would disappear. This time, the "agents will disappear" theory is just a revival under the banner of the internet. The actual result is that agents as a whole have rising turnover but declining market share. That is the real situation.
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