---
title: "Yi Jiupai's Wang Chaocheng: The Battle of Models in FMCG B2B"
description: "At the 3rd FMCG + Internet Conference held by New Distribution in Chongqing on November 8-9, 2017, Wang Chaocheng, Chairman of Yi Jiupai, discussed the four models of FMCG B2B: terminal chain, transaction, platform, and warehousing/distribution. He argued that Alibaba and JD.com are not invincible in this space, and predicted a future convergence of models."
author: "王朝成"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2017-11-09"
language: "en"
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# Yi Jiupai's Wang Chaocheng: The Battle of Models in FMCG B2B

> At the 3rd FMCG + Internet Conference held by New Distribution in Chongqing on November 8-9, 2017, Wang Chaocheng, Chairman of Yi Jiupai, discussed the four models of FMCG B2B: terminal chain, transaction, platform, and warehousing/distribution. He argued that Alibaba and JD.com are not invincible in this space, and predicted a future convergence of models.

The 3rd "FMCG + Internet Conference" hosted by New Distribution was grandly held at Chongqing Yuelai International Conference Center on November 8-9, 2017! It attracted over a thousand distributors, manufacturers, and internet companies from across the country, with a packed venue and unprecedented scale. The following is the speech delivered by Wang Chaocheng, Chairman of Yi Jiupai, at the conference, organized by New Distribution for our readers.

Wang Chaocheng: Thank you for the high praise from the host. If I truly have such popularity, I must first bow to everyone. I didn't attend the morning session. Comrade Zhao Bo released a ranking, and I took a look. One indicator was decent, and another was third. Anyway, Alibaba is definitely first. Do you think this ranking is fair? Maybe it will be fair in the future, but it's extremely unfair now. Neither Retail Link nor New Road has sold as much as we have, but they are the big names in e-commerce. Even if the big names haven't done well yet, Comrade Zhao Bo favors them, so they rank first.

Today, my topic is "The Battle of Models in FMCG B2B." This is a contentious issue. That's how the world is. For example, people in SaaS say that those doing transactions can never achieve long-term greatness. But I see a bright future for transactions, with high growth every year. We have indeed sold a lot of goods. If you insist it's hopeless, I find it hard to convince myself otherwise. Those doing transactions say SaaS is not viable, while SaaS proponents say the future is mobile and decentralized.

Overall, I believe there are four models in B2B: **Looking from the bottom up, the first is the "terminal chain model."** Alibaba and JD.com have basically not found a good path in their B2B exploration over the years. Finally, they found a shortcut: because they have brands like Tmall and JD, they can lend their names to small shops, giving them goodwill. So New Road and Retail Link are important carriers of Alibaba and JD's new retail. Of course, they claim to provide more empowerment to terminals, such as data, traffic, and supply chain, but these are mostly stories. If 2B were the same as 2C, they would have already crushed all 2B businesses. 2C involves each person buying small quantities but unlimited variety. Theoretically, on Tmall or JD, you could buy any product once, making it multi-variety, small-batch purchasing. So how do Alibaba and JD achieve high frequency? It's because I buy a little of everything but many different things, so large platforms are necessarily high-frequency, and vertical 2C players die. What is the stickiness of 2B? A typical convenience store has about 500-1000 SKUs, and about 100 of the items they buy from you are very high-frequency, sold daily. In fact, for all B2B companies present, if you can handle those 100 high-frequency items well, Alibaba and JD can do nothing to you. Because their 30,000 SKUs are meaningless; 29,990 are not needed by the terminal. How can they increase frequency? I only need the top 5 brands, maybe 50 products, to get the terminal to order more than four times a month, and you can't kill me because I maintain a constant connection with them. So, 2B high frequency is continuous purchase of a few products, unlike 2C's unlimited purchase of countless products in small quantities. That's the first difference: traffic patterns. The second difference is the competitive environment. Who are Alibaba and JD's biggest competitors if they use the chain method? How many chain companies are there in China? Wumart is everywhere in Beijing, 7-Eleven too, but Tmall and JD are rarely seen. Are you a chain in Beijing? Actually, no. Shijiazhuang 365 Guodian chain stores have more authority than Tmall. In Guangdong, Meiyijia is much stronger than you. Alibaba might say they're just starting and will have many in the future. Not necessarily! Count the stores on the street; mainstream, moderately sized stores are already chained, but chain companies are regional. For small grocery stores, your conditions may not be acceptable. So the chain path is not as smooth as we imagine. We should fear, love, like, and respect someone with logic, not just because "he is the boss, so I must respect him." Then why fight? Alibaba and JD are big companies; we must study them seriously, study their tactics, find loopholes, and devise ways they can't beat us.

Historically, BAT's success rate in ground wars is not high. There's a track in the internet called food delivery. Ele.me started on campus. By 2010, Baidu entered, believing "location" was the core competitiveness, and invested heavily. What happened? Baidu Waimai was sold to Ele.me at a very low price. Alibaba believed that wherever there is transaction, there is Alibaba, and they wouldn't miss any place with transactions in China. They invested heavily in Koubei and also invested in Ele.me, but eventually Koubei quietly closed. Zhang Xuhao and Wang Xing, at that time, were not much better off than the B2B people here; maybe worse. They saw Baidu and Alibaba entering. If they had lacked ambition like some of us, there would be no Meituan today. Practice has shown that in ground battles, Ele.me and Meituan defeated Baidu and Alibaba. Alibaba later invested in Ele.me at a high valuation. That's the track model in China's internet sector.

Some say they have money and can burn it recklessly. Can B2B burn money? You can do vague red packets, but if your red packets are too generous, all suppliers will oppose you. How can distributors hold inventory-pushing meetings? So B2B hasn't seen large-scale price wars. Why not? Does Alibaba or JD lack money? They might have wanted to do it long ago, but if they did, the supply chain would die, and upstream would kill them. Chinese brand owners fear Alibaba and JD more than they fear us.

So, my first theme is to call on everyone to maintain creative desire. In today's B2B track, Alibaba and JD are on par with us; they are not as scary as you think. The chain track seems smooth, with millions of terminals quickly dominated, but that path will be long and uncertain. Many people think it's just changing a signboard.

**The second model is transactional B2B.** Our scale quickly grew large, so in public rankings, after Alibaba and JD, they were embarrassed and had to rank us higher because we indeed sell more; not ranking us high would be unfair. The biggest criticism of transactional B2B is that it disrupts the price system. My view is that e-commerce that doesn't disrupt the price system is meaningless. All e-commerce has disrupted price systems. Which e-commerce hasn't lowered prices? If prices weren't lowered, would there be a need for apps? Price is still important. Reducing costs is the customer's most important need.

We can't turn a blind eye and lie from our own standpoint. Lying is useless; terminal owners aren't here today. They continue to order from whoever is cheaper. What's the use of lying? We're not investors. Even if investors came, they wouldn't believe it; they are smart. Transaction platforms also have difficulties, such as product development, which we must objectively acknowledge.

**The third model is platform B2B.** This is too complex. You need to match many parties. If you only handle one side, you can grow fast. If you handle two sides, growth slows. If you need to handle three or more, it's basically hopeless. Some bosses are clever, saying they developed for salespeople, trained them, and they'll like using it. I've never seen any salesperson like using any platform product. We did this before; we were a consulting firm and introduced platforms to countless liquor factories. We found the best products in China, but salespeople inherently didn't want to use them. The boss wanted them to, but the salespeople didn't, even if it was user-friendly.

Second is the order flow issue in matching. If you let distributors and salespeople install the app, the powerful ones become general agents, and the weak ones can't install many. It looks good, but the platform doesn't run. Most are in this state now, unable to move. This is an objective problem. E-Dinghuo started early. It indeed didn't affect industry prices, but not affecting isn't necessarily bad, and affecting isn't necessarily bad either. Did JD and Alibaba not affect? JD rose by affecting manufacturer prices right under Alibaba's nose. Look at old reports; many companies declared, "We never supply JD, and we don't know if their goods are genuine." But now JD is big, and manufacturers say it's fine. Tmall also wants to be on it, JD too. You'd better not force me to choose one.

**What else can we do upward? Do warehousing and distribution, either warehouse or delivery. That's the fourth B2B model.** What's the core of warehousing and distribution? For FMCG, especially beverages, it's basically two tiers: general agent and distributor. General agent distribution is efficient because they deliver full truckloads to distributors. Of course, the second tier delivers again, though inefficient, but with cost advantages, as many use electric tricycles or pedal carts to reach terminals. So it has some rationality. Regarding warehouses, it's about merging the general agent's and distributor's warehouses into one. But there's a problem: one warehouse may lack delivery timeliness, while multiple warehouses increase costs. When you go to the front lines, see the essence of the business, and understand the rationality of existing players, you realize it's not that simple. Since it's not simple, there's no need to fear.

Of course, I believe sharing in warehousing and distribution is a trend. Because no matter what, if each distributor has their own warehouse, utilization is insufficient, and resources are wasted. If everyone self-distributes, sharing is definitely less efficient than joint distribution. We now do liquor distribution for distributors, costing less than a third of their original costs. But for beverages, the difference is small; we're only slightly cheaper. One benefit of shared warehousing and distribution for beverages is better data management. Also, after sharing, capital efficiency improves. If you use your own warehouse and delivery, who would lend you money? Distributors borrow hundreds of thousands or millions; if they don't repay, it's over. So sharing is necessary. It has its logic and difficulties in promotion. The world believes in hard power, not soft power. In the future, I have a view that the four models may converge. In the 2C track, Alibaba has always advocated the platform model, but Tmall also runs Tmall Supermarket. JD has always said its strength is self-operated, with large batch purchases, so JD can provide genuine goods. But JD still isn't profitable, and they found problems, so they introduced POP. If this convergence is a viable trend, how do you know B2B won't converge? They will; they're not stupid.

After Double 11, we will launch a third-party入驻 model called Yi Jingxiao. Our advantage is traffic; you put it up and it sells. Because we have hundreds of thousands of active transacting customers monthly, your products will sell immediately. Of course, SaaS companies might also do transactions, buying goods to sell. Our shared warehousing and distribution will definitely happen because we already have warehouses—85 warehouses in 80 cities and 1,000 vehicles. Why wouldn't I do it? I believe the most likely direction for B2B models is convergence, developing through integration. It's hard to say what a company does; it's highly integrated. **This is my view on the future trend of 2B: it will become model convergence.** Will future B2B be regional or national, centralized or decentralized? B2B e-commerce conquering traditional commerce will take a long time. B2B e-commerce is likely to be centralized; I don't mean absolute centralization, but relative. I estimate it won't take too long. It's simple: e-commerce requires financing, and later investors won't give money, so all dreams end without funds. But for these e-commerce companies to conquer traditional commerce, there's a long way to go. Maybe in the future, traditional commerce and B2B will be hard to distinguish. You won't know who is B2B and who isn't. The world will resolve today's seemingly unsolvable contradictions in another way, and then the internet's transformation of China's distribution industry will be complete.

Every time I speak, my words are not pleasant and offend many, but I strive to be truthful and objective, hoping to inspire everyone here. Let me tell you good news: our volume has grown significantly this year, possibly making us one of the largest FMCG companies in the industry. I say "one of" because I don't accept the ranking above; it's incorrect. We also have terminal research data. We've entered many cities, with the deepest penetration in the country. We've also seen Alibaba accelerate recently, but Alibaba has many flaws and big-company problems. Different philosophies lead to different results. In the entire B2B track, my message is: don't be pessimistic, don't be overly excited, and don't argue too much. Convergence is the big trend. Let's work together to create myths that overturn historical patterns. Thank you!

Click **Read Original** to see more highlights from the 3rd FMCG + Internet Conference...

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