Click 'Read Original' for details. At the event 'Unveiling New Marketing: Restoring Seven-Day Raw Pulp', Zhao Bo, Editor-in-Chief of New Distribution, shared insights on the mainstream trend of digital transformation in FMCG channels during the internet era. Editor-in-Chief of New Distribution: Zhao Bo Currently, the FMCG industry's channels are undergoing a digital transformation. As companies like Xiaoshile and Taishan Beer begin new marketing initiatives, we also see JD and Alibaba reshaping and reforming the FMCG industry, shifting from traditional tier-1, tier-2, and tier-3 agency models to digital marketing models. At present, a typical characteristic of China's FMCG industry is the massive overcapacity. Intense homogeneous competition means that without high-intensity, face-to-face competition at the terminal, companies find it hard to survive. This is why deep distribution emerged. Therefore, even the best products cannot achieve good results without a strong execution team. Recently, I communicated with a senior executive from a well-known domestic food and beverage brand. They have 40,000 sales personnel nationwide and strong channel power, but they are currently puzzled. The new model B2B, nurtured in the internet era, is thriving and directly conflicting with their own business. How should brand owners transform and adjust? Where will future channels head? I believe the confusion faced by brand owners stems from the following aspects:

  1. The Era of Consumer Sovereignty Has Arrived In the past, brand promotion relied on three classic tactics: advertising on CCTV, building offline channels, and running in-store promotions. These methods were repeatedly effective and built many brands. However, with the advent of the internet era, people's attention shifted from TV to various video platforms and apps. Almost all fragmented time is occupied by mobile phones, and the marginal cost of obtaining information is nearly zero. Moreover, products have moved from being purchased in supermarkets to being readily available (via e-commerce platforms). As living standards further improve, consumers' perception of consumption has fundamentally changed. Today's consumers, especially the younger generation born after 1990 and 2000, have greater autonomy in choosing products they like and increasingly seek products that reflect their identity and style. As a result, they no longer need uniform, cheap, and uninteresting products. Consumption sovereignty has shifted from manufacturers to channels, and now ultimately to consumers.
  2. High Fragmentation of Chinese Brands and Categories Today, consumer sovereignty is strengthening, and consumption demands have shifted from 'listening to others' to 'what I want'. In this context, brand owners must produce various fragmented products to meet the growing personalized needs of users, leading to a trend of brand and category fragmentation. This fragmentation is irreversible and will further intensify.
  3. Behind New Retail Lies a New Supply Chain As mentioned earlier, the arrival of consumer sovereignty and the fragmentation of Chinese brands and categories place higher demands on retail. In 2016, Jack Ma proposed the concept of '5 New': New Retail, New Manufacturing, New Finance, New Technology, and New Resources. The most well-known is New Retail, whose core is to reconstruct the people, goods, and scenes of retail. Subsequently, Tencent proposed Smart Retail, and JD proposed Unbounded Retail. Liu Qiangdong stated that the essence of retail remains 'more, faster, better, and cheaper', which implies cost efficiency and experience. These concepts all revolve around the ever-changing needs of consumers. However, behind New Retail, Smart Retail, and Unbounded Retail, supply chain transformation is indispensable. There are two directions for transformation: Social division of labor and the B2B-ization (platformization) of supply chains. Social division of labor is easy to understand: it shifts from being large and comprehensive to being vertical and specialized. The B2B-ization of supply chains (platform) means that all transactions are completed through large-scale third-party supply chain infrastructure, from factory to end-user delivery. It has four characteristics: online, visualized, data-driven, and financialized. The B2B-ization of supply chains is what we see in many FMCG B2B platforms today. They compress intermediate links, improve channel efficiency, and meet scenario-based needs. China now has over 200 B2B companies, and in 2017, their penetration rate reached as high as 37%. This year, penetration is expected to continue growing to 42%. Last year, New Distribution conducted a 7-day survey in Tai'an, a small city with a population of 4 million. Surprisingly, we found that B2B coverage had reached 52%, which was hard to imagine before. Many mom-and-pop stores can now purchase all their goods through B2B platforms in one stop, with transparent prices, a wide variety of products, and various promotions and professional business guidance and services. This is far better than the services provided by traditional distributors. However, distributors only feel that business is tough and declining, but they don't understand why sales are dropping. The trend of FMCG channels transforming to B2B is inevitable. Whether from the demands of the retail end, the pain points of brand owners, or the issues of distributors, the supply chain must move toward higher efficiency, lower costs, and more transparent pathways. Distributors unwilling to accept this change will certainly be eliminated in this industry transformation. -END-