Year-end inventory: suppliers “seek change” community group buyingThings are changing.

Image source @Visual China

Text | itlaoyou-com

2021 is over, how are the community group buying suppliers doing?

Feng Lin, who is a supplier of a certain brand of ice cream in Nanchang, started to buy vegetables for Duoduo and Meituan Select Supply last summer. During the peak sales season, he sold more than 1,000 boxes a day. surplus.”

Su Min, a vegetable distributor far away in Suzhou, has been supplying vegetables to Duoduo since May last year. After only two months of business, he lost more than 300,000 yuan. “I’m afraid it won’t continue this year.”

Xue Wei, who supplied Guangdong Tongcheng Life, was owed 240,000 yuan in two months. Although 60% of the payment was recovered after the storm, he told Dige.com: “I will not cooperate with anyone with an account in the future. platform.”

Community group buying has changed dramatically in a year, and suppliers are even more diverse.

From the end of 2020 to the present, the attitude of brand manufacturers towards community group buying has gradually changed from “resolute resistance” to “embracing and accepting”; facing the rise of new retail channels, traditional brand manufacturers are even more unable to “stand alone”.

Community group buying is transforming the traditional retail supply and marketing chain, and dealers, wholesalers, etc., which are an important part of it, have all participated in this retail war to varying degrees and have been washed away by the torrent of the industry.

In 2021, both brands and regional distributors are seeking changes.

mixed feelings

Community group buying is raging, but dealers have a mixed life.

Although Feng Lin distributes a certain ice cream brand in Nanchang, there are still 2 or 3 local distributors for the brand; when community group buying first entered the Nanchang market, Feng Wei strived to supply platforms such as Meituan and Duoduo, and even directly “supplied at a fair price”. goods”.

“When supplying vegetables to Duoduo, I used to buy at cost and ship at cost.”

Since she became an ice cream supplier for Duoduo Shopping in May last year, Feng Lin’s sales volume has also grown rapidly. “In the beginning, it supplied 500-600 boxes per day, and during the promotion, it supplied more than 1,000 boxes a day.”

In order to ensure the timely performance of the contract, Feng Lin rented a cold storage in the logistics park ten minutes away from Dotto’s Nanchang Okang warehouse to deliver goods to Duo Duo. convenient.”

The peak season of ice cream sales is short. During the three months of supplying Duoduo, Feng Lin has basically ensured the breakeven. It is not easy to achieve this in the ice cream category. In this year’s peak season of ice cream sales, Feng is also ready to give Xingsheng. Preferred delivery.

“This year, the category line will be expanded, and beef and mutton rolls can be supplied in autumn and winter.”

Feng Lin has already made plans for long-term supply for community group purchases. In his opinion, community group purchases are a new opportunity. “In the past, bar code fees and admission fees had to be paid in advance to supply supermarkets, and the payment period was also long. , but these are not available on community group buying.”

Under the advantages of community group buying, some dealers choose to embrace new channels, but some dealers have already given up.

Sumin is a local vegetable distributor in Suzhou. He started supplying vegetables to Duoduo in May last year, but his “record” of losing more than 300,000 yuan in two months also made him criticize Duoduo.

Sumin told Dige.com that the wholesale price of vegetables fluctuates. Even in rainy and sunny days, the vegetables that wholesalers buy from farmers are two prices, but once the purchase price of the platform is determined, it will not be affected by external factors.

Not only that, the purchase of Duoduo vegetables is a price comparison mechanism. “For example, for the same batch of onions, the purchase will ask three wholesalers for prices, and finally choose the one with the lowest price to purchase.” Su Min believes that after price comparison, there is basically no profit margin for vegetables.

For example, Su Min said that the price of 50 grams of millet peppers on the platform is 0.89 yuan, and some suppliers’ quotations are even only 0.5 yuan/50 grams, excluding the performance cost, and the gross profit is only 40 cents.

“The gross profit of one or two (50 grams) of millet peppers in summer is not 0.7 yuan, and the supplier is also losing money.”

Although the platform advertises that a large number of suppliers have achieved profitability after a year of supply, it is still unknown whether Sumin can support this difficult climbing period.

“Vegetables themselves have high losses. If the returned goods are not transported back to the cold storage in time for freshness, the remaining inventory will be basically damaged.” Su Min said that after three months of supply, Duoduo’s average return rate is 8%-10%, the highest Once reached 15%.

Under the many problems, Sumin is not sure how long he can continue to supply.

Several companies are happy and some are sad. After the giants entered the community group buying, the low-price subsidy model did impact the original distribution price system. The platform often directly cooperates with the source production area, manufacturers, or the head distributors in the region.

After the outbreak of the new crown epidemic, the life of some brand distributors is not easy. For example, at the end of 2020, Yili explicitly prohibited distributors from supplying group purchases to the community, but there are still distributors who will secretly “return the goods” (cross-regional sales) to the community. Group buying platform.

According to the self-media “FMCG” report, under the appearance of Haitian Flavor’s overall gross profit rate as high as 40%, the comprehensive gross profit rate of large dealers is generally lower than 6%, and most of the products are backlogged in the dealer’s warehouse.

For community group buying and supply, the platform adopts a sales-based purchasing model, and the account period is basically around “T+3”. The inventory loss of dealers can be effectively controlled, and the risk of overpayment and delay is relatively small.

The choice of dealers reflects the changing retail business model.

Therefore, regardless of whether dealers are profitable or losing money, the rise of the community group buying model has become unstoppable, and the resulting model changes are profoundly affecting brands and traditional circulation links.

change of road

In 2021, retail channels are changing.

The snack brand Yanjinpuzi said that the company underestimated the impact of community group buying on traditional supermarkets. In the first half of the year, it invested too much in the relevant market expenses of the supermarket channel, but the sales revenue growth and channel performance of the supermarket did not meet expectations.

Quick-frozen seafood brand Haixin Foods also explained in its 2021 semi-annual report that the terminal consumption channels and structure of quick-frozen food have undergone major changes, and the number of shoppers in modern channels represented by supermarkets and BC (regional medium-sized supermarkets and convenience chains) has decreased. , while the number of competing brands and products increased.

According to the results of the semi-annual report, the sales revenue of Haixin Foods in modern channels in the first half of the year decreased by 36.79% year-on-year, and the proportion of related revenue decreased from 32.18% in the same period last year to 19.72% in this period.

Not only are community group buying channels on the rise, but traditional e-commerce, convenience stores, fresh food community stores…a large number of new formats are gradually diverting the passenger flow of chain supermarkets, and impacting traditional retailers in terms of contract performance services and commodity price-performance ratios.

“The loss of customers in traditional hypermarkets is an irreversible process,” said Huang Mingduan, former CEO of Sun Art Retail.

The retail format is changing, and brand owners are demanding changes.

The emerging power of community group buying can no longer be ignored. Even if the platform makes a fuss about price, some brand owners have to “save the country” and enter the community group buying in different ways.

The listed company Fuling Zhacai once said in an answer to investors that in principle, the company does not directly connect to the platform, and currently chooses a dealer system to achieve platform supply in different regions.

It is one of the new solutions for brands to designate distributors to supply group purchases to the community, but there are also companies actively embracing new channels. In June 2021, Haitian Flavor Industry established a special department to connect with community group buying channels.

Brands embrace new changes.

Regardless of whether the designated dealer or the company directly supplies, under the “high cost-effective” model of community group buying, in order to ensure the uniformity of the distribution price system, it is better for the brand to open up a new channel instead of letting the dealer mix the goods without permission and disrupt the pricing.

For the brand side, the whole body can be affected by one move. The online and offline distribution pricing system is relatively mature. Even if the community group buying is surging, it is difficult for traditional consumer brands to quickly achieve an “elephant turn”; for new channels, the brand side is more Most of them enter the market with an “experimental mentality”.

The brand side is still “testing” community group buying, but the new channel is actually transforming the circulation link.

In the past, due to poor information and traffic flow, it was difficult for a single company to open up the intermediate links from the production area to the whole country. Therefore, the source manufacturers developed distributors and wholesalers across the country, and the latter also became the main distributors. .

The distribution and wholesale system realizes the national circulation of products, but each additional circulation link means that the product markup rate increases by several percentage points. From the source to the consumer, the product often passes through many middlemen such as dealers and wholesale markets.

The middlemen earn the price difference and increase the price of the product, and the increase rate is even more than 95%. This means that a product with an ex-factory price of 5 yuan will sell for as much as 10 yuan at the retail terminal.

The price difference of 5 yuan is the profit of the circulation party.

Taking fresh food as an example, in the United States, nearly 80% of agricultural products are directly from the place of origin to consumers, but most of the fresh food circulation links in China will reach 5 or more.

Community group buying and new e-commerce channels are using the information symmetry of the Internet and the warehouse distribution network distributed across the country to gradually optimize the current situation of circulation, continuously reduce circulation costs, and strive to restore the most reasonable commodity pricing.

It is not easy to supply directly from the source, which involves the matching of the logistics network between the sales area and the production area, as well as balancing the interests of the original dealers. Even so far, the community group purchase has only achieved direct purchase in a small number of categories. More The category still cooperates with local first-level distributors.

Moreover, for traditional brands, the existing distribution and circulation system is still the mainstream, but with the continuous attack of community group buying and new e-commerce, the eve of channel reform has come.

In the end, traditional brand owners have to continue to seek changes.

throwing stones for directions

In the community group buying channel, a large number of brand founders are looking for new product solutions.

Arowana, a grain and oil brand, said in 2021 that it has cooperated with community group buying platforms to provide customized products to strive for a win-win situation.

On Duoduomaicai, Arowana sells first-grade soybean oil, sunflower oil and other products with a specification of 4 liters, while the specifications of similar products on Dingdong Maicai and Tmall are generally 5 liters and 1.8 liters.

Regarding pricing and product differences, the dairy company Guangming mainly promotes fresh pastures of about 10 yuan in Meituan Selection, while in supermarkets, it mainly promotes Youbei, which is about 20 yuan.

The survey of Huaxi Securities shows that most of the soy sauce products of mainstream brands in community group purchases have only 0.4/0.5g/100ml of amino acid nitrogen, while the soy sauce produced by most manufacturers currently has an amino acid nitrogen content of more than 0.8.

Behind the diversification of pricing and specifications, what is the brand’s intention?

To adopt a differentiated product strategy for community group purchases, the goal of brand merchants is to “not scramble the price” to ensure the stability of the offline price system; at the same time, some brands have also launched new items in community group purchases.

Food company Jinmailang established an e-commerce special department for community group purchase channels to customize low-cost and practical products; last year, Jinmailang launched a “softened water” product specifically for community group purchase platforms, adopting a strategy of low price and high sales.

Zhu Qian, head of community group buying at Coca-Cola (China), also said in an interview that community group buying is a very favorable platform for promoting potential items or new products.

The logic of promoting new items in community group buying is that the distribution and price systems of dominant brands or large items are relatively mature. On the contrary, there is more room for trial and error in new products, and the “interest cake” is easier to distribute, and brands can also use new products. To explore community group buying channels.

In fact, not only the new products of leading brands, but also more new brands and second-tier brands can take advantage of new channels such as community group buying to gain a place in the existing market of large categories.

Even today, the community group buying platform is still expanding its products. The sales of FMCG products other than fresh food have continued to grow. Xingsheng Select has even started selling clothing, which also leaves room and opportunities for more brands to grow.

For traditional consumer and food brands, under the changing track of the retail business, the brand side is exploring a cooperation model that adapts to the new pattern.

Not only that, a large number of dealers also need to be specialized and meticulous.

During the survey, Dige.com found that there is a local ice cream and frozen products distributor in Wuhan, which has independent logistics team, and has a dedicated driver transportation team to deliver goods to the community group purchase platform, and undertake the community group purchase contract fulfillment work of brand manufacturers.

On the other hand, some dealers will outsource the logistics system and focus on operations. At this stage, most of the community group purchases are localized operations. Enterprises need to connect with different persons in charge of procurement and contract performance in different provinces, and need manpower to handle the relationship with local dealers and service providers.

According to industry insiders, traditional fast-moving consumer goods or food companies, especially second-tier brands, lack the resources to connect with the platform headquarters.

In fact, community group buying is subtly changing the traditional retail-supplier relationship in the course of more than a year of onslaught, dealers have found new sales channels, and some brands are also actively embracing new channels.

However, due to regulatory policies, the stage of platform development and other reasons, the penetration rate of community group buying will continue to increase, and brands and distributors will continue to “seek the way”.

Things are changing.