The 'Digital New Infrastructure · 2020 (3rd) China FMCG Conference', hosted by New Distribution, was grandly held from August 24-26 at Shanghai Fuyue Hotel. The event attracted 3,000 industry professionals including distributors, manufacturers, and internet companies from across the country, with a full house and unprecedented scale. The following is the speech content of Mr. Zhao Bo, founder of New Distribution, organized and published for readers. The sudden outbreak of the pandemic in early 2020 plunged the entire FMCG industry into deep anxiety. On one hand, sales were blocked by the pandemic; on the other hand, new business models emerging during the pandemic led anxious manufacturers and distributors to try anything, whether effective or not. All offline activities of New Distribution were suspended, and we fully shifted online, conducting over 40 live streams during the pandemic to guide FMCG manufacturers and distributors on how to respond. Afterwards, we began to reflect: what is a company's core capability, and can this capability be transferred in any form during any period? We concluded that when facing uncertainty, what we need is not trial and error, but a larger thinking framework to recognize the essential patterns behind phenomena, and use our transferable underlying capabilities to cross cycles. -01- In traditional marketing models, if a brand wants to sell products to consumers, the chain is roughly divided into two layers: the communication chain and the distribution chain. Communication, i.e., TV media, uses advertising for brand value communication, and then through offline distribution systems, via distributors and stores, achieves transaction and delivery with consumers. This model has been implemented in China for over 30 years, producing many classic brand cases and business models, such as the well-known big single product model, the 'bid champion' that frequently won CCTV media, and later the manufacturer-dealer integrated deep distribution system. It can be said that most Chinese FMCG brands, over the past 30 years, have not deviated from the dual-bridge chain system based on supply and demand. In this dual-chain model, many brands gained competitive barriers through monopolizing communication and distribution resources. For example, supermarket shelves are essentially a scarce resource. Many brands secure terminal channel exclusivity (through location display buyouts or store exclusivity) or use capital strength to grab scarce media resources like CCTV (advertising bid champions), thereby monopolizing channel and communication resources, ultimately achieving market monopoly and competitive barriers. Before new technological iterations emerged, breaking such barriers was extremely difficult because the competitive barriers large brands built by inflating prices of scarce resources were thresholds small brands could not afford. This situation persisted until e-commerce emerged. In fact, e-commerce began early in China. In the early days of PC普及, during the BBS era, online transactions had already sprouted. Taobao's birth in 2006 marked the real watershed for Chinese e-commerce. After 2013, with 4G普及 and the mobile internet explosion, especially from 2017 with the rise of short videos, China's online penetration further deepened and strengthened. -02- Excluding the pandemic, the three busiest things in the consumer goods sector in the first half of 2020 were definitely short videos, live streaming, and O2O home delivery. Let's look at some data: Xinba, the most popular on Kuaishou, on June 15, used the most straightforward form to achieve 1.2 billion GMV in a single session, pushing live streaming e-commerce to a climax. This included celebrities like Dong Mingzhu, Wu Xiaobo, Luo Yonghao, and countless stars and small influencers, all flocking to this carnival. Not only that, in the short video field, Li Ziqi's e-commerce company exceeded 4 billion GMV in 2019; Xingsheng Youxuan just raised $800 million in July 2020, with a reported 2020 GMV target of 30-40 billion. Behind this national online carnival, what I see is that in 2019, online traffic growth had basically ended, but the pandemic once again drove lower-tier markets and elderly populations online. From a short video perspective, the pattern is basically set: Douyin in high-tier cities, Kuaishou in lower-tier cities, new retail O2O in high-tier cities, and community group buying in lower-tier cities. Going deeper, the explosion of short videos, live streaming, and O2O, coupled with B2B and B2C e-commerce, means China's consumer goods marketing model is undergoing a systematic reconstruction. The way consumers access information, shop, and receive goods has undergone a structural change. This structural change is essentially a technological iteration, fundamentally altering interactions between people, objects, and the world. This inevitably requires brand owners to rebuild their marketing methods around these consumer changes. This is also the core topic of our conference today: digital new infrastructure. -03- We see that the new supply-demand logic is that the bridge from manufacturer to consumer has changed from the past model to a user interaction + supply chain model. A large number of sales transactions have shifted from offline to online, and payments have almost fully moved from cash to mobile. This model is essentially a structural change. After the integration of cognition and transaction, all past forced-feeding communication methods that relied on user memory are gradually failing. Communication forms that can move users and generate immediate transactions are more likely to obtain consumer orders. Moreover, crucially, after mobile payment, consumer behavior can be fully, real-time, and continuously online. In a sense, brand owners can obtain user transaction behavior at any time. This model also poses a huge challenge to manufacturers. Their traditional business models were built on competitive barriers constructed under a retail model centered on transaction + delivery. This model has a characteristic: manufacturer-dealer integration. Manufacturers must protect the interests of offline partners to enable them to provide deep services for the brand in local markets. But the problem is that all past scarce resources have become surplus today. At the product level, Yuanqi Forest was launched in 2016 but only had its first factory in 2020. From 2016 to 2019, Yuanqi Forest used socialized factories for production. This shows the overcapacity in the consumer goods industry. Moreover, small-scale, small-batch rapid production has become very easy today. We see many internet-famous craft beers brewed with low-cost, small production equipment. At the channel level, the online e-commerce model of cognition + transaction allows entrepreneurs to completely bypass the channel barriers built by big brands in hypermarkets, convenience stores, and restaurants, delivering products to consumers through e-commerce + logistics. At the communication level, on Toutiao, you can place ads for 100 yuan, or even more extreme, if you have enough WeChat friends, you can post on Moments for free to sell goods. This means that the barriers for new entrants are greatly lowered. As long as you have good products and good content, with new channels and new communication methods, you can quickly deliver products to consumers and test feedback on product quality. This is why so many small brands can rise rapidly. -04- How should enterprises restructure their marketing models to adapt to today's market changes? I believe the core of enterprise digital strategy is: rebuilding the connection between value and demand. What are the key elements in the new connection?
1. Marketing strategy must shift from occupying physical resources to occupying mindshare resources; 2. Communication chain, supply chain, and transaction chain must be fully integrated horizontally and vertically; 3. Shift from information-based decision-making to data-driven decision-making. 1. Marketing strategy must shift from occupying physical resources to occupying mindshare resources The essence of competition is effective occupation of scarce resources. In the past, scarce resources were physical: supermarket shelves, TV time slots. Today, the only truly scarce resource is consumer mindshare. For brand owners, in the coming period, whoever can capture consumer attention, be recommended by consumers, and have consumers willing to interact and purchase long-term will win in future competition. If consumers find that Yuanqi Forest is not available at the convenience store downstairs, they can pick up their phone and order on Tmall anytime. So how can brand owners turn the tide? Create waves, be noticed, be recommended – good products, long retention – continuously provide value. 1) Create waves: the ability to create spectacles that trigger national discussion and emotional resonance. Li Ziqi's pastoral short videos have over 100 million global fans, with single videos easily exceeding 10 million views. Good products themselves may be content, and good content itself is a product. One characteristic of FMCG is impulse consumption. When people's consumption capacity reaches a certain stage, the consumption end is no longer the product itself but the meaning the product can bring. So, whoever can give consumers this meaning will be the next Li Ziqi. 2) Be recommended: a good reputation far outweighs an expensive advertisement. On one hand, with information explosion and people's extreme aversion to information retrieval, the popularity of Viya and Li Jiaqi essentially helps users save time and avoid choice paralysis through strict selection of massive products. On the other hand, users themselves can act as communication media to amplify this effect, creating a wonderful chemical reaction: people are willing to listen to others' advice while also willing to give advice to others. The recommendation model will become the main form of future transactions; concepts and reputation will spread rapidly through friends, KOLs, and decentralized networks. 3) Rapid fission: any good or bad will be magnified dozens, hundreds, or even tens of thousands of times. Here, KOLs will become the core lever for recommendations. The influence of a KOL on a network node may exceed a well-produced advertisement. 4) Long retention: continuously provide value. From 2019 to 2020, the most 'girl-heart' toys might be Pop Mart's. I think Pop Mart's greatest strength is continuously launching various IP products and using blind box mechanics to keep consumers constantly fresh and desiring to open boxes. From a psychological mechanism, people are not pursuing the material itself but the reward obtained during the process. 2. Communication chain, supply chain, and transaction chain must be fully integrated horizontally and vertically For enterprises, when consumers are everywhere, how to connect the cognition, transaction, and delivery chains, and effectively reach and establish contact with consumers, is one of the core issues brand owners must consider in digital new infrastructure. On the delivery end, whether B2B, B2C, or O2O, being able to deliver one-stop through an effective supply chain system, achieving high efficiency and lowest cost, is the most important outcome of digital supply chain transformation. 3. Shift from information-based decision-making to data-driven decision-making Here I want to discuss three topics: dynamic data feedback, algorithm-driven goals, and system-linked response. Dynamic data feedback: because users are online, all data today is essentially accessible to brand owners anytime. Based on feedback data, brand owners can use internal and external collaborative networks to adjust feedback in time, and use big data algorithms to drive goal achievement. For example, in the past, when we exercised, we didn't know our own data and trained by feel. But today, a small wristband can provide real-time feedback on heart rate, stress, steps, and speed. What does this mean? All data is fed back to you in real time. At this point, the big data platform behind this data will calculate in real time whether you need to lose weight or train your cardiopulmonary interval based on your conditions, and finally complete a perfect training through your execution. Therefore, the ultimate goal of digital new infrastructure is essentially to provide perfect services for consumers based on full-space, all-weather, and full-Maslow experiences. Shift from managing goods to managing people, building a full-scenario economic entity from their time, space, and Maslow lines.