---
title: "Zheng Yubin, Founder of Palm Quick Sale: FMCG B2B: The Third Wave Winning Channel for FMCG"
description: "Zheng Yubin, founder of Palm Quick Sale, discusses the future of FMCG B2B, emphasizing that for categories with low depth of coverage, regional differences are significant, making density more important than sheer city coverage. He predicts that FMCG B2B will become a major channel, transforming from a supplementary to a mainstream channel, and eventually a winning channel that reshapes the industry."
author: "郑毓彬"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2018-08-28"
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# Zheng Yubin, Founder of Palm Quick Sale: FMCG B2B: The Third Wave Winning Channel for FMCG

> Zheng Yubin, founder of Palm Quick Sale, discusses the future of FMCG B2B, emphasizing that for categories with low depth of coverage, regional differences are significant, making density more important than sheer city coverage. He predicts that FMCG B2B will become a major channel, transforming from a supplementary to a mainstream channel, and eventually a winning channel that reshapes the industry.

"For categories that are not deeply covered, such as snacks and daily chemicals, regional differences are very large. Last month I went to the Hunan market, and when I visited Changsha, I found that 70% of the snack categories in Changsha are different from those in Guangdong. When a category has huge regional differences, it means that purely competing on the number of cities covered, covering 100 cities versus 10 cities has the same network effect in terms of category."
**——Zheng Yubin, Founder of Palm Quick Sale**
This content is from Mr. Zheng Yubin's presentation on "FMCG B2B: The Third Wave Winning Channel" at the FDIC 2018 China FMCG Digital Innovation Conference, edited and organized by New Distribution for readers.

**I. The Interweaving of Channel and Category Changes**
I have always held a belief that in China, there will emerge ultra-large-scale supply chain enterprises with comprehensive categories and multiple channels. Looking at the United States, the upstream of supermarkets and restaurants is served by only about 50-60 large supply chain companies, whereas in China there are 100,000 to 300,000. From an efficiency perspective, this is unscientific.
FMCG B2B at this point in time is a new distribution format that directly covers small stores. The downstream is small B, and small B's business is standardized, which makes it easy to scale.
Therefore, in the future, FMCG B2B will be much larger than other channel formats today. The essence of channels is scale. FMCG B2B will inevitably horizontally cover other store types, becoming a large supply chain enterprise with comprehensive categories and multiple channels.
We can look at Mclane in the United States. This company started wholesale grocery business in 1903, which is today's FMCG B2B in China. Now, Walmart accounts for 25% of its business, 7-Eleven and Parkson account for 10%, and other restaurant channels account for 10%. China will also see such enterprises.
Each wave of channel rise will drive a new wave of brands. For example, in April this year, the largest hair care brand on Tmall was Adolph. The hair care category, which was once quite concentrated, has fragmented. The fragmentation of consumer demand is the fundamental reason, and the rise of e-commerce is a catalyst.
In recent years, why have categories like beverages and alcohol remained highly concentrated? Because most sales of these categories were completed through offline channels, and e-commerce has had little impact. But in the next three to five years, FMCG B2B will turn these monopolistic national distribution networks into industry infrastructure, and many new brands will emerge in these categories. These highly concentrated categories will also fragment.
But this does not mean that big manufacturers are weakened. Because consumer demand itself is fragmented, the future brand matrix of these large manufacturers will be larger than today. Five years from now, P&G might have over 200 brands instead of the current 20 or so. When a manufacturer's brand matrix becomes complex, current channels cannot carry it, and more specialized and large-scale distribution networks will emerge to carry the new wave.

**II. Future Industry Landscape: Look to Categories for Answers**
There has been a debate in the industry: Is it viable to have a national B2B, or should B2B be regional?
If we discuss this from the perspective of results, it is not very meaningful, because if one could go national, who would want to do regional? Who would want to do small if they could do big? We should discuss this from the perspective of the path, and the answer lies in the characteristics of FMCG categories. This industry is just beginning. Currently, players who spread thinly across the country have a good dream: by covering more cities, they can quickly form sufficient bargaining power with upstream, thereby gaining network advantages on the supply side. But this wish will be disappointed.
Let's look at FMCG, which is divided into two categories: deeply covered categories, where manufacturers already have sales teams directly covering end stores, such as water, beverages, and beer. These categories are highly concentrated, and manufacturers are extremely strong. In the past, small stores accounted for a very high proportion of their business, so they face the greatest pressure to change. When your opponent is both strong and conservative, simply increasing the number of cities covered makes it difficult to form strong bargaining power with upstream.
The remaining categories are not deeply covered, such as snacks and daily chemicals. Regional differences are very large. Last month I went to the Hunan market, and when I visited Changsha, I found that 70% of the snack categories in Changsha are different from those in Guangdong. When a category has huge regional differences, it means that purely competing on the number of cities covered, 100 cities versus 10 cities has the same scale effect in terms of category.
I believe density is very important in FMCG B2B. Today, deeply cultivating one place does not mean we want to be a regional B2B, but rather we want to be steady and sure. Every city we enter, we must pursue density.
Many national B2B companies in the United States were built step by step through development and mergers. So in the future, China will also see national B2B companies, and they will be built by solid players like us who really do business well, combined with the power of capital.
In the future B2B landscape, the head categories will be like the appliance industry: a few large upstream players with equal strength, and a few large downstream players with equal strength, all earning reasonable profits. But starting from the waist categories, there will be B2B enterprises with their own category strengths in each region. This judgment is important when manufacturers establish their B2B investment strategies.

**III. The Rhythm of the Industry**
The development rhythm of the entire FMCG B2B industry: The first stage: supplementary channel. The channel is very small, so small that manufacturers don't even know what FMCG B2B is. That was the case in 2016. At this time, FMCG B2B is just a secondary distributor in the industry chain. That's the first stage.
But we have empirical values: when a channel accounts for 5%-7% of the market and maintains rapid growth, manufacturers must invest, because if you don't invest and your competitors do, you will lose share. When mainstream manufacturers invest in this channel, it begins to become a mainstream channel and enters the next wave of development climax.
Today we are talking about FMCG B2B. The penetration rate of FMCG B2B in the entire FMCG channel is 3.5%-4%. We predict that the end of 2018 and the first half of 2019 will be a critical turning point from supplementary channel to mainstream channel. FMCG B2B is destined to be a major channel, and there will definitely be a third stage (winning channel), large enough to affect the competitive landscape of the entire industry.
At the same time, FMCG B2B players have also experienced three rounds of survival of the fittest.
When we started doing FMCG B2B in the second half of 2016, our month-over-month growth was over 50%. Looking back now, the period from the end of 2016 to mid-2017 was exactly the explosion point for small stores in China to use mobile phones for online purchasing. So when demand is exploding, for entrepreneurs, the competition is who can achieve a certain scale first. Players in this stage are all about expansion, and expansion requires money (the first checkpoint), which eliminated a batch of players who for various reasons did not reach a certain scale.
The second checkpoint is efficiency. This checkpoint will eliminate some players with low operational efficiency. The third checkpoint: everyone covers the same group of small stores, and competitors' operational efficiency is also high. At this point, your demand side is the same, and the next differentiation competition moves to the supply side. Narrowly, supply is your category capability; broadly, supply is your services and other empowerment. At this stage, it's about differentiated supply, forming your own unique category supply capability. Many peers in the industry are starting to do various upstream and downstream empowerment, so we enter the third stage.
The development of the industry: on one hand, the market share of the entire channel is continuously increasing, and players are constantly iterating in competition. The value of the channel is thus highlighted step by step. So I drew two straight lines, one for manufacturers and one for channels. I think the common demands of both sides are getting closer and closer. Soon, I believe we will definitely usher in a time of large-scale embrace. This feeling is especially obvious this year. Many manufacturers have started to proactively contact us, and we find that compared to more than a year ago, whether it's manufacturer friends or channel parties, what they think is getting closer and closer.

**IV. Future Possibilities**
Regarding this wave of channel revolution, if I have to mention the most exciting point, it is the path from factory to store to person, that is, B2B2C. In the past, offline channels were fragmented, but this wave, whether it's new channels or retail scenarios, naturally has internet attributes. So the story of Tmall online will definitely reappear offline. We see B2B peers trying 2C, and in the very near future, all this will definitely be realized.
In the future, the visibility and predictability of everyone's business will definitely exceed imagination. Since last quarter, Palm Quick Sale has achieved automatic pricing for top single items. Based on historical transaction data, we have fitted the correlation between sales volume, temperature, weather, and pricing. As long as you fill in that today's product needs to achieve 2 million, the machine will automatically invest in the system under each segment.
The blue curve is my actual value for the day, and the green curve is the machine's predicted value. The difference between the two curves is negligible. This data is not from a super large sample or a super long time axis; it is the daily sales change of my smallest branch company. We can only do this for top single items now, but we have reason to believe that in the next one to two years, all SKUs can achieve this. Moreover, this capability will not only be mastered by Palm Quick Sale, but possibly by all peers. All this will definitely happen.
At that time, everyone's business will be more visible and controllable. I believe that in the next one to two years, channel parties and brand owners will definitely create more possibilities together.
Click **Read Original** to see more highlights of the 2018 FDIC China FMCG Digital Innovation Conference...
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