---
title: "YijiuPi Founder Wang Chaocheng: Why Is the Industrial Internet More Efficient Than Traditional Distributors?"
description: "Wang Chaocheng, founder of YijiuPi, explains why the industrial internet is more efficient than traditional distributors, citing lower warehousing and distribution costs, and outlines the innovation value of B2B e-commerce platforms in transforming China's FMCG distribution sector."
author: "王朝成"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-06-20"
language: "en"
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# YijiuPi Founder Wang Chaocheng: Why Is the Industrial Internet More Efficient Than Traditional Distributors?

> Wang Chaocheng, founder of YijiuPi, explains why the industrial internet is more efficient than traditional distributors, citing lower warehousing and distribution costs, and outlines the innovation value of B2B e-commerce platforms in transforming China's FMCG distribution sector.

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Introduction:
Since the beginning of 2017, major financing news in the B2B field has been breaking almost every week. A set of data proves that in 2017, the total financing amount for transaction-based B2B enterprises exceeded 45.51 billion RMB, a year-on-year increase of 166.6%.
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One fact is that in the United States, To C and To B companies each account for half of the tech sector, and their market values also each account for half. However, currently, the powerful Chinese internet companies are all To C companies like BAT. Thus, in the business world, there are proposals for "supply-side reform" and "the second half of the internet," leading to the B2B track becoming increasingly hot, with financing amounts often reaching tens of millions or even over a hundred million.
Recently, at the "New Era, New Business Forms, New Technology: I Have Guests Unicorn Summit and Guest University Return Day" co-hosted by Guest University and the People's Government of Wuhu City, Anhui Province, Wang Chaocheng, a student of Guest University and founder of YijiuPi, delivered a keynote speech on the development of B2B e-commerce platforms, attempting to summarize and discover the investment and financing logic and development trends of this industry.
The following is part of the speech, organized by "I Have Guests":
Thank you for the applause from the students of Guest University. Today, I will talk about the industrial internet.
China's internet has gone through three stages. The first stage is called the consumer internet, which either consumes goods or consumes services. For example, JD.com and Alibaba are basically goods; while Baidu, Meituan, and Didi are services. Now, basically everything that individual consumers in China can consume has been internetized. But the problem is that the current internet is not just JD.com, Alibaba, Baidu, Didi as everyone thinks. In fact, the internet is transitioning from a terminal consumer internet to an intermediate industrial internet.
The Development Context and Investment and Financing Status of the Industrial Internet
What does the industrial internet mainly do? It mainly does from factories to retail terminals.
The reason is that with the development of the consumer internet to today, there are some things that cannot be solved. For example, mineral water. You are unlikely to buy mineral water on Tmall and JD.com. 99% of people may buy it from small shops nearby. If you buy mineral water from JD.com or Tmall, the cost of shipping the mineral water is more expensive than the mineral water itself. Therefore, there are many industries that cannot sell directly from factories to consumers, nor can they sell directly from distributors to consumers. They need many small shops to solve this, and fresh produce is also like this.
**We have found that the most extreme internet approach is to make the connection between factories and small shops perfect enough.**
How low is the efficiency between factories and small shops in China? Look at simple data. In the United States, the intermediate logistics cost from factory to small shop is about 6.5%, while in China it is 18.5%, almost three times that of the United States. Therefore, China's Ministry of Commerce issues notices every year saying that China needs to improve the efficiency of the circulation industry. If China's circulation industry efficiency is not high, even if the manufacturing efficiency is high, the industrial efficiency of our entire chain is very low.
That is to say, your manufacturing efficiency may be ranked first or second globally, but your circulation efficiency may be ranked 50th or 100th globally. The competitiveness of a country's economy is not just manufacturing competition, but the sum of manufacturing plus the entire circulation industry efficiency. In other words, manufacturing plus circulation is what consumers can perceive. Therefore, low circulation efficiency leads to backward industrial competitiveness.
Since 2014, a new wave of internet has risen in our country, which is the rise of the industrial internet represented by mobile phones - the mobile internet. The industrial internet is very simple: people in various retail industries, like small shops on the street, no longer need to call salespeople as in the past, but start using mobile phones to place orders, and then let suppliers deliver goods directly.
In China, there are also many industrial internet companies. Capital institutions invested 100 billion RMB into the industrial internet track between 2014 and 2015. In the industrial internet, it is very vertical. For example, we sell to the track of tobacco and alcohol shops and convenience stores; Meicai.com serves the track of restaurants; Zhaogang.com serves the steel needs of some small factories. It will serve different groups of people. That is, each industrial internet has strong verticality.
**The industrial internet in China is actually a very large internet track. In another 3-5 years, I estimate that there will be 10 or even 50 unicorns emerging. I think this is the future internet opportunity.**
Its basic model is to use best-selling products to build the stickiness of the terminal network, use the demand of the massive terminal network to negotiate with factories upstream, and ultimately achieve a shorter, more efficient, and more shared channel chain.
Why Is the Industrial Internet More Efficient Than Traditional Distributors?
Why is the industrial internet more efficient than traditional distributors? There are two reasons. The first reason is that warehousing and distribution costs are very low. When the warehouse handles wine, beverages, and food, it is actually relatively full in different seasons. Thus, the cost of the warehouse is lower than the cost of traditional merchants doing a single category, because if you only do one category, the warehouse is idle and wasted in the off-season.
The second is distribution cost. Traditional wholesale markets and distributors have relatively small order volumes and low order density, while the industrial internet has more brands. We only need to wait a short time for orders to fill the truck, and the distance each truck needs to deliver is also shorter. **So we actually use higher and more efficient warehousing and distribution to defeat the traditional decentralized operation.**
**There are three fundamental methods for the industrial internet to defeat traditional traders:**
**First**, nationwide unification. Industrial internet companies are also the largest online wholesalers in China. This is something traditional wholesalers simply cannot do. It relies on scale, so negotiating with manufacturers has a great advantage.
**Second**, order processing methods are more efficient because the industrial internet uses internet methods to process orders. We can see how many orders per hour, and the actual location. So its service is very efficient.
**Third**, technology-driven. Through digital methods, we study what warehousing and distribution management methods are best, and what order processing methods make customers most satisfied, reducing dependence on people. These intelligent methods will also improve the automation level of warehousing and distribution, and reduce warehousing and distribution costs.
What Are the Innovation Values of the Industrial Internet?
Next, I will talk about where the innovation value of the industrial internet lies.
The first value is that it is actually an efficient trading platform for the circulation industry. It is an e-commerce platform, a very short-channel trading mall from factory to end. Countless goods flow on it every day, which allows it to connect upstream with global factories and downstream with all retail terminals. So its first value is to make the cost of the circulation industry lower.
**In the entire FMCG industry, it is about 4.2 trillion, with online about 5% being JD.com and Tmall, and the remaining 95% being offline.** Removing the 20% gross profit of terminals, the entire FMCG has a 3.2 trillion To B market, which is a super large market. Once this market is e-commercialized, its significance, I think, is much greater than the significance of Alibaba and JD.com to society as a whole, because it makes the more mainstream offline business more efficient.
The second value is that after the B2B e-commerce is done, it incidentally becomes China's largest same-city warehousing and distribution platform. What is same-city warehousing and distribution? Because every city has warehouses, and every city has its own logistics vehicles that can transport goods from warehouses to small shops, the B2B e-commerce trading platform is likely to become the largest same-city warehousing and distribution platform in the country.
The third value is the financial industry. Because there are a large number of upstream first-level merchants and factories, and also a large number of small shops. If many factories and first-level merchants lack money, they can send goods to the B2B e-commerce platform, for example, to my warehouse, and I will give you money. Then every time you sell a batch of goods, you return the money to me. Distributors go from not having money to do this business to getting money through the industrial internet, and then through the B2B e-commerce warehouse pledge of the goods, it also helps them complete sales and make their funds circulate. This is called industrial chain finance, also called supply chain finance, warehouse receipt pledge. In the United States, it is collectively called industrial bank, which combines industry and finance.
Why doesn't the bank do this business? Because banks do not have the three capabilities necessary for this business: first, accurate valuation; second, effective supervision; third, the ability to sell. Accurate valuation is because B2B e-commerce has data, because it is a mall, trading every day. It has data across China and knows how much goods are worth.
**As for effective supervision, it means that B2B e-commerce has warehouses. Wherever the distributor is, the B2B e-commerce warehouse is by your side. The goods are placed in my own warehouse, which is called effective supervision. I will not pledge them in someone else's warehouse.**
As for the ability to sell, if the distributor is a bad guy, after paying a 30% deposit, he says he doesn't have the remaining money, he just won't repay, and the goods can't be sold, what then? B2B e-commerce can handle it and can liquidate tens of millions of goods in one day.
So B2B e-commerce can be an industrial mall, can also be the largest same-city warehousing and distribution platform, and at the same time, it is also the largest industrial bank in the country. If this industrial bank in every industry in China becomes the aforementioned industry-finance integration model, then China's financial capital will be highly integrated with the real economy, and China's financial capital will truly enter the real economy, rather than remaining in the capital market to circulate.
So we say that the internet's innovation to the circulation industry is the innovation to the entire upstream and downstream transactions of the industry. This innovation is more valuable to the real economy than the innovation of C-end e-commerce to retail terminals, like JD.com and Alibaba. Therefore, China's Ministry of Commerce recently issued a special notice requiring local governments across the country to focus on supporting and incentivizing the construction of distribution-oriented supply chain platforms.
**My sharing ends here. Thank you all, and thank Guest University for providing this opportunity.**
Source: I Have Guests
In late August, the "2018 China Digital Innovation Conference (2018FDIC)" with the theme "Finding New Engines for Growth" will be held in Shanghai, hosted by the China FMCG Industry Association and organized by New Distribution.
The conference will last 3 days, focusing on two major themes: marketing and supply chain, with six parallel forums: brand, channel, communication, B2B, same-city logistics, and innovative retail. We will invite industry experts, CEOs, and brand executives to deeply interpret the trends and drivers of digital transformation in the FMCG industry.
This conference will have more than 5,000+ enterprises participating. This grand event brings together outstanding explorers and promoters of digital transformation in various industries, sharing case practices of digital transformation of industry enterprises and partners, discussing digital technology development trends and cutting-edge applications, building a bridge for brand owners, distributors, retail enterprises, and marketing institutions, helping FMCG manufacturers obtain the latest information and understand the best application practices. Help brand owners and distributors find new engines for digital growth in the internet era!
Conference Time
August 22-24, 2018
Conference Venue
Shanghai Baohua Marriott Hotel
Conference Content
8.22 Full-day check-in
Afternoon 14:00-17:30
Distributor same-city logistics parallel forum
Evening 18:30-21:00
New Distribution Night Gala Dinner
8.23 Theme: Marketing Digital Innovation
Morning 9:00-12:00
Marketing Digital Innovation Main Forum
Afternoon 14:00-17:30
Brand, Channel, Communication Parallel Forums
8.24 Theme: FMCG Supply Chain Digital Upgrade
All day: FMCG Supply Chain Conference
Registration Method
The registration channel is now open. Long press the QR code below or click "Read Original" to register. Special early bird tickets are limited to 200, enjoy half-price discount, while supplies last!
Registration Consultation
Ticket inquiries:
Media cooperation inquiries:
New Distribution Previous Conference Highlights
Click the link below to review the highlights of the first, second, and third FMCG + Internet Conferences:
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