This content is the on-site sharing of "Intra-city Logistics is One of the Most Effective Paths for Distributors' Transformation and Upgrading" by Zhao Bo, founder of New Distribution, at the "2018 China FMCG City Distribution Logistics Conference", edited and organized by New Distribution for readers.

I Today I want to discuss with you the industrial transformation of China's FMCG industry, and what impact changes from the consumer side have on the functions of distributors. Undoubtedly, China's consumer market has begun to show obvious stratification, and demand is becoming more and more diversified. From Maslow's hierarchy of needs, with economic development, China's consumer demand is gradually moving upward, from the past needs of satisfaction and belonging, gradually shifting to the needs of being respected and self-actualization. Under the premise that the total population base has not changed much, the population in the dimension of satisfaction and belonging needs is slowly migrating to the sub-mainstream and non-mainstream markets, and personalized markets are also beginning to emerge. From the perspective of consumer demand, China has developed too fast in these decades, actually three waves of consumption are superimposed, and three consumption phenomena coexist in the market:

The first is consumption that requires you to satisfy;

The second is consumption that requires you to cater to;

The third is consumption that requires you and consumers to co-create. In this process, you will find that different consumer needs require different capabilities from brand owners: The first is production capacity. The second is marketing technology. The third is imagination for life. Let me use an industry transformation to explain the difference in these capabilities: China's beer industry currently has three forces. The first force is the five major beer giants, with absolute market share, firmly grasping the first type of consumer demand. But in recent years, imported and domestic short-shelf-life differentiated beers have begun to rise slowly, gradually occupying the second type of consumer demand. At the same time, craft beer has gradually become the object of young people's support, firmly grasping the third type of consumer demand. When consumers change from "I also want" to "I only want", behind this shift from following to initiative, the communication and distribution of the FMCG industry have undergone profound changes: At the communication level, four transformations have emerged: Media shifts to decentralization

Brands shift to strong IP

Products shift to scenario-based

Communication shifts to community-based At the distribution level, four transformations have also emerged: Commercial flow: visualization

Logistics: routing

Capital flow: financialization

Information flow: datafication II From the beer case, we can see that consumption stratification and consumption upgrading will make the mainstream business in the first demand zone for brand owners and traditional distributors less and less, while innovative products, innovative scenarios, and innovative channel businesses in the second and third demand zones are increasing. This will lead to product fragmentation and channel diversification. At the business level of distribution, you have to pay higher costs to meet this high-granularity demand. This poses great challenges to both brand owners and distributors. In the past, the commercial flow was one-way, without feedback. I sold the goods, to whom, how, how many, purchase frequency, and category structure? This information was unknown. And there was no need to know, because everyone needed your product, you only needed to achieve saturated coverage. New consumer demands emerge, with small, scattered, high-granularity groups. To meet them, it is difficult to use the original one-way method; instead, you need interactive, real-time, online, precise supply chain capabilities. Unfortunately, the existing business models of most domestic distributors cannot meet this demand at all. Of course, big brands have also felt this change, and they are also reflecting and re-evaluating the service capabilities of the entire existing channel based on future trends, whether adjustments are needed. We have also seen some brand owners begin to adjust their channels in organizational structure and functional structure, making changes in organizational architecture, establishing new retail, e-commerce and other departments. They have successively tried to launch various innovative products with short chains and short shelf life, suitable for e-commerce and social e-commerce. On the channel side, some brand owners have also tried to completely strip the warehousing and distribution functions from distributors, letting distributors focus on marketing. So what role should traditional distributors play in the digital era? First, look at the consumption upgrading trend from the perspective of new retail. What changes and what remains unchanged? Ma Yun said that the emergence of new technology has fundamentally changed consumers and shopping scenarios, so it is necessary to reconstruct "people, goods, and scenes". Liu Qiangdong said the essence of retail is still "more, faster, better, cheaper", and the core: efficiency, cost, and experience remain unchanged. For our distributors, the latter may be more suitable for us. But this does not mean that the supply chain has not changed. We believe that on the supply chain, the way information is obtained, the medium of transactions, and the organizational form will definitely undergo major changes. But the general trend of social division of labor will not change: specialization, focus, diminishing substitution, and customers still want more, faster, better, cheaper. These are unchanged. From a future perspective: middlemen will definitely exist, but distributors may not still be "the Xia Yuhe by Daming Lake" (a metaphor for something unchanged). There is a viewpoint in life sciences: in the process of evolution from single-celled organisms to multicellular organisms, there is a revolutionary change. When many cells gather together to become a new species, the premise is that most cells will castrate part of their functions and become part of the functions within a large organization. What does it mean? In the past, a single cell had complete life capabilities, self-reproduction and replication capabilities, and all capabilities to adapt to environmental changes. But as a single cell organization, facing more complex competitive environments, some cells have to evolve into larger multicellular organisms. You can understand it as sticking together, but this sticking together is not a pile of loose sand; it requires sacrificing part of one's functions in exchange for the opportunity to survive in a large organization. Division of labor, diminishing substitution, this is the general trend of individual and organizational evolution since life on Earth 4.6 billion years ago. III With this premise, we believe that in the foreseeable time, distributors will evolve in two directions: one is to focus on operational upgrading, and the other is to focus on providing professional information-based logistics services for local distributors. 1. There are three ways to focus on operational upgrading: The first is called technological upgrading: Simply put, it is to use new information technology to transform existing business, improving its efficiency. For example, using WeChat to maintain customer relationships with customers not frequently visited, using communities for fan interaction, and using new media for brand communication are all basic means of technological upgrading. The second is called model upgrading: In trading companies, all links unrelated to transactions are actually non-core capabilities. On the surface, the cost of self-built warehousing and logistics is low, but in fact, because you have to invest a lot of energy and human resources to manage it, this leads to insufficient investment in core business, thus restricting the development of core business. Restructuring or outsourcing non-core business and organizations, stripping warehousing and distribution functions from your own business and handing them to third parties, transforming yourself from a distributor to a marketer, is currently the most ideal means for distributors' transformation and upgrading. The third is platform upgrading: In recent years, we have seen that distributors doing business on B2B platforms such as Lingshoutong have grown very fast. They have no warehousing and logistics, no salesmen, only responsible for advance payment and marketing planning, but the service radius has changed from a single market to a national market or a large regional market. For distributors, on the surface it looks like functional degradation, but when you develop with the help of the platform, you may grow faster. 2. Focus on providing professional third-party services for distributors To do a good job in third-party city distribution logistics services for distributors, we believe there are three important points: Give up agency business and focus on third-party distribution services Logistics companies do not control goods, do not trade, do not act as agents, do not rob, Provide customers with information tools for transaction matching. The first two are easy to understand, but why provide information tools for transaction matching? Isn't it enough to just provide services? Actually, it's not like that, because we believe that city distribution logistics is actually a real matching B2B. Alibaba, JD, and all B2B platforms, whether matching or self-operated, consignment or controlling goods, all have a characteristic: they try to avoid direct contact between the two parties, not letting the goods owner directly contact the small shop, and transactions are completed through them. In essence, they control the order distribution rights. But third-party city distribution logistics does not restrict direct transactions between the two parties; instead, it encourages direct transactions. Because they directly trade, increasing order flow, it actually increases their business volume. If information means are added, providing them with professional matching platforms and ERP tools, it will make their efficiency higher and business volume larger. New Distribution's viewpoint: It is wrong to talk about matching and self-operation in B2B; instead, it should be divided into two types: controlling goods (controlling order distribution) and service platforms (providing matching tools for both parties). Only city distribution logistics can completely open up the data chain for brand owners. IV How to do the city distribution business well? New Distribution has five viewpoints: First, the upfront investment in logistics is inevitable, but blind expansion must be avoided. Why? There is an underlying logic here. As long as your model does not grow explosively, or the more you invest, the greater the cash flow, you must remember: never do city distribution with the mindset of losing money. City distribution is first a business, then a career. Doing business is first to make money. If you don't make money, don't do city distribution. Many distributors start city distribution by building 10,000 to 20,000 square meters of warehousing, and then lose money for three years. Sorry, after three years there will be another three years, because you haven't considered how this business model makes money. We have seen a large number of distributors fill warehouses at low prices but still not make money, because city distribution is not a low-cost business at all. You must do the current business well. Rent a warehouse according to the size of your business orders, and carry out a business of that scale. Business grows, absolutely not built with bricks. Second, give up the illusion of competitors or peers entering your warehouse. Don't expect your competitors or peers to enter your warehouse, especially large distributors with 100 to 200 million in revenue. Generally, distributors of this scale have extremely low logistics costs. They are enterprise logistics, you are a logistics enterprise. Enterprise logistics has no profit requirements. They avoid taxes, don't pay insurance, work 18 hours a day flexibly, so their costs are destined to be lower than yours. Don't try to persuade such distributors to enter your warehouse. What you should do is support agents, eliminate such large distributors, and reconstruct the local agency interest pattern. You should find a way to take over the agency rights of big brands, then support a group of young agents with entrepreneurial dreams, letting them start businesses relying on your warehousing and logistics. Cultivate them into new marketers, let them focus on marketing services. You provide them with warehousing and distribution, logistics, supply chain finance, and all information means to let them focus on marketing. Let them depend on you and enjoy your services. Only in this way can you reconstruct the local distribution interest pattern and ecology, and your business can be profitable. Third, don't do city distribution from the perspective of saving money. What you do in city distribution is visualized, financialized, and information-based solutions, fast delivery and high-quality service. If you do city distribution from the perspective of saving money, you will definitely fall into a vicious cycle of non-profitability. Fourth, combine sand and net. A single distributor doing city distribution is doing it locally, you are sand, it is difficult to receive national orders. National orders must be a national city distribution network. But this does not mean you don't do local same-city services well. First, you must ensure your own profitability, and then join a national city distribution logistics network. Only by combining sand and net can it be an effective city distribution business combination. China's consumer goods market undergoes a major iteration every ten years. In each iteration, a large number of distributors will be eliminated because they cannot keep up with the changes of the times and trends. The direct manifestation of this change is the decline of distributors' old business volume and the impact of new competitors entering. If distributors do not adjust their business with the times, they will definitely be eliminated in this round of market cycle. Click Read Original to see more highlights of the 2018 China FMCG City Distribution Logistics Conference... -END-