2016 fmcg online b2b market study - kantar · pdf file2016 fmcg online b2b market study...

2016 FMCG Online

B2B Market Study

Summarized Report

2016 December

Content

Market Background01

Landscape02

Major Players Deep Dive03

Implication 04

3

Market Background

Source: Kantar Retail Research and Analysis

China Retail Market’s Multi-Channel Landscape with Stiff Competitions

• Typically 1,000-5,000 sqm

• 8,000-10,000 SKU

• > 3 checkout counters

Hypermarket

Standard Supermarket

Mini Supermarket

• Typically 200-1,000 sqm

• 2,000-5,000 SKU

• Nearby neighborhood

• ≦ 3 checkout counters

Premium Supermarket

• Typically 2,000-5,000 sqm

• Over 40% imported products

• 8,000-10,000 SKU

• Store size over 6,000 sqm

• 20 checkout counters or more

• Over 10, 000 + SKU, offering a full selection of

grocery items and general merchandise

• Store size from 9,000 to 20,000 sqm

• 20 checkout counters or more

• 4,000-20,000 SKU, offering large pack sizes and a

combination of private label products

• Membership card required• This channel includes stores that focus on a

single or closely related categories

Health and Beauty

Baby Specialists

Electronics• Store size from 250 to 1,000 sqm

• 3,000-8,000 SKU, including a wide collection of

private label products

• Strong budget positioning

Cash & Carry

Discount Store

Supermarket Convenience Store

Category Specialist

Modern TradeTraditional Trade

eCommerce

• “Mom & Pop” Stores, Owner is the clerk

• Store size varies, generally <200 sqm

• No checkout counters

• Offering groceries, wine, and tobacco

• C2C

• B2C

- Platform

- BBC

1. Pure Play

2. Brick & Clicks

3. Vertical

4. WeCommerce

• Below 250 sqm

• 24-hour operation

(18 hours in selected regions)

• 1,000-4,000 SKU

• Chain operation,

usually more than 20 chain stores

• ≦ 3 checkout counters

• Various value added services provided


As the Retail Market Continues to Evolve, Each Channel Faces Different Opportunities and Challenges

T5 MT retailers <30% of MT

T5 MT retailers >60% of MT



PioneersHypermarkets

Primary Formats Competition

Discounters & CVS as emerging formats

Secondary Formats

Category Specialists

eCommerce

Traditional Trade largely impacted

Differentiation to Survive

CVS, C&C

Premium Super

T5 MT retailers >70% of MT

2016E: 42%

Exploration ConcentrationPenetration Maturation Post-Modern


Traditional Trade Still Remains An Important Role in China’s FMCG Retail Market Compared

with Modern Trade & eCommerce

2014-2016E China FMCG Market’s

Shipments Share by Channels

Most brand manufactures have focused their business on MT and eCommerce,

But Traditional Trade is still the biggest channel of China’s retail market

54.9% 51.6% 49.3%

40.2%41.5% 41.6%

4.9% 6.9% 9.0%

2014 2015 2016E

eCommerce

MT

TT • Traditional Trade includes many types and different sizes

stores, such as traditional grocery stores and wine &

tobacco shops

• TT and MT complements each other, to meet residents’

demand for purchasing daily necessities conveniently

• TT also has its own value-added function: A place for

residents to socialize since most customers are regular

and familiar with each other in the community

14-16ECAGR

41%

5%

-2%

For Most FMCG Companies, Traditional Trade Accounts for More than 60% of Total Sales

12.2% 11.4% 11.1%16.7%

12.2% 14.3%11.1%

8.3%

21.6% 17.1% 25.9%25.0%

27.0%

17.1%

29.6%

50.0%

27.0%

40.0%

22.2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

快速消费品 Food/Beverage/Alcohol Personal Care/Cosmetics/Bazaar

Baby Product

% of Traditional Trade to Total Sales Value

More than 80%

60% - 80%

40% - 60%

20% - 40%

Less than 20%

FMCG

Food, Beverage

and Alcohol are

the most

dependent on

traditional trade.

Source: Kantar Retail 2016 FMCG Online B2B Industry Study – Manufacturer Questionnaire

Source: Kantar Retail’s Calculation Based on National Bureau of Statistics Data

Highly Fragmented FMCG Traditional Trade Comprises Nearly 7 Millions Local Stores across

All City Tiers

Tier 1BJ, SH, GZ, SZ

Tier 2Municipalities, Provincial Capitals,

SEZs & Independently Planned Cities

Tier 3Other Prefecture-Level Cities

County-Level Cities & Counties

Towns & Rural Areas

2016E Traditional Trade (TT) Store Count by Tier

0.53 million TT stores, 7% of total





Nearly 55% of the Manufacturers Has More than 200 Distributors to Operate Traditional Trade

45.1%

32.4%

57.7% 54.5%

54.9%

67.6%

42.3% 45.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

快速消费品 Food/Beverage/Alcohol Personal Care/Cosmetics/Bazaar

Baby Product

# of Distributors for Traditional Trade

More than 200

0 - 200


FMCG


Excessive Layers of Traditional Distribution Result in Inefficiency and Poor Profitability

Brand

Manufacturers

Regional

Distributors

City

Distributors

Wholesalers

Local

Stores

• Weak bargaining power

• Cluttered product supply

• Opaque information

• Cumbersome purchase process

• Limited product category

• Unwarranted product quality

• Lack of store operation

guidance

• Poor product distribution result with lower

efficiency and profitability

• Imprecise resource allocation, problematic in-

store execution, and high distribution cost

• Slow distribution of new product

• Lack of control over prices

• Uneven distributor service qualities

• Counterfeits and powerful local brands

• Lack of integrated and traceable data

• Decentralized channel, ineffective and immature

distribution methods

• Low turnover ratio resulted from

inventory pressure

• Stressful cash flow

• High logistics cost

• Faces stronger demands on gross

margin, expenses, and supports

from both brands and sub-distributors

Challenges in

Traditional

RTM Model

Distribute Sell-in/Service

• 10 FMCG B2B companies

started in 2013

• 14 FMCG B2B companies

started in 2014

• JD Xintonglu launched• CCOOP launched• Over 20 FMCG B2B companies started in 2016 H1


2013-2014FMCG B2B Took off

2016 Rapid Growth

2015Industrial leaders and well-known investment agencies entered the market, the Model was Endorsed

• Yijiupi lauched

• Jinhuobao launched

• 21 FMCG B2B

companies started in 2014

Received over¥

¥5 Billion

Capital Fund

Covered >1 million

stores

Over 50

FMCG B2B

Companies

9 InvestmentsCovered 130,000 Stores

29 FMCG B2B

Companies

17 InvestmentsCovered 470,000 Stores

50 FMCG B2B

Companies

• Huimin received $100 million capital fund

• ZHTX received ¥75 million from Riverhill

• Yijiupi received ¥200 million from

Bertelsmann

• Jinhuobao received ¥ 38.4 million capital fund

• Yijiupi received $100 million B+ round capital fund

• Huimin received ¥1.3 billion B round capital fund

• Yijiupi received $100 million C round capital fund

• ZHTX received ¥ 700 million form Minsun and HNA

holding

• DS365 received millions RMB angel round

capital fund from K2VC

• Dinghuo123 received millions RMB angel

round capital fund from K2VC

FMCG B2B Companies Grow Rapidly with Capital Support Since 2013

FMCG Online B2B Market at its Starting Point with Great Potential


2016E 2018E

16% StoresOwners Used Online B2B

6.8 millionLocal Stores

2%of Shipment

44% StoresOwners Used Online B2B

18.7%of Shipment

Growing Stickiness:

• Nearly 2.7 million stores start

to use online B2B platform

• 2 orders each week

• Order size over RMB1,500

• Accounting for 50% of store’s

stock value

Over RMB 330 billion Market Potential

6.1 millionLocal Stores

Around RMB 40 billion Market Size

Limited penetration at this moment

• 1.1 million stores have started to

use Online B2B Platform

• An order every 4-7 days

• Order size RMB950

• Accounting for 25% of store’s

stock value


FMCG Online B2B Platforms Receive Great Attention, yet the Industry is at Its Beginning

Most manufacturers are still

hesitating, and have concerns over

• Confliction with existing traditional trade

model and partnered distributors

• Pricing control and product distribution

management

• Insufficient business capability of current

sales team to handle B2B platforms

• Stability of the business model and the

disruptive landscape of B2B players

• Low penetration of the B2B platforms and

poor service

32.8%

35.8%

17.9%

13.4%

Has your company started to use online B2B platforms for traditional trade business?

Online B2B business accounts

for less than 1% of

manufacturers’ traditional

trade.

• Less than 15% of the manufacturers

have tried online B2B platforms in

selected regions. For them, online

B2B business has not formed at

large scale.

• More than 60% of the manufacturers

interface directly with online B2B

platforms.

Offline teams, who are closely

related to the online B2B business,

are not familiar with the industry.

Never heard of online B2B

Heard of online B2B and takes a wait-and-see attitude

Not yet started but is planning

Already started

FMCG Online B2B Market Landscape

Two Business Models of Online B2B

Manufacturers

/Distributors

1

2

Warehouse of

Platform

3Stores

Platform buyout

ownership of goods

Unified warehousing and logistics

Store place order

on platformSelf-run

Platform

Stores

2

3

4

Manufacturers/distributors in charge of delivery

4

Manufacturers/distributors ship items

to the warehouse of platform

Order transferred

to sellers

Go-between

marketplace

1

Provide item info.

Self-run ModelGo-between

marketplace Model

Manufacturers

/Distributors

Place order

on platform


OR

Comparisons between Two Models

Profit Model

Pros

Challenges

Self-run Model

• Buyout ownership of goods to control quality

• Self-run sales team to guarantee service quality for stores

• Self-run warehouses and logistics to ensure on-time delivery

• Manufacturers leverage platform’s logistics system to achieve deeper distribution

• Simplify operation of manufacturers/distributors to accelerate trade efficiency

• Gap between selling and buying price

• Relatively heavy assets limits expansion speed

• Platform takes inventory risks and financial pressure

• Relatively limited product selection for store owners

• Manufacturers with limited control power over pricing

• Possibility of conflicts with distributors

• Lower data transparency

Go-between

marketplace Model

• Commission fee

• No inventory and finance pressure

• Asset light model to accelerate expansion speed

• Relatively wide product range for store owners to pick

• Complementary resources and advantages with local distributors

• Manufacturers with control power over pricing

• Data transparency

• No ownership of goods, no control over product quality

• Depth and width of distribution relies on existing distributors’ coverage, does not solve efficiency problem in traditional trade fundamentally

• Uneven service quality of sales team in different areas under franchise mechanism

• Possibly higher delivery cost under inefficient third party delivery service


Besides Start-up Companies, Traditional Retail Industry Players and Internet Companies Also

Invest in B2B

Self-run online platforms:

• Xintonglu (JD.com)

Start-up

CompaniesHuimin.com, Jinhuobao, etc.

Traditional

Retailers/ Service

Providers

Internet

Companies

Traditional retailers:

• Quanshihui (Quanshi CVS)

• Fadaojia (RT Mart)

• Yunhou Wholesale (Bubugao)

Retail service providers:

• Integrated service provider:

Esunny (Etenal Asia)

• Logistics: Wanshanggou

(Yantaiyishang)

• Wholesale：Zallgo (Zall)

Zhanghetianxia, etc.

1. Go-between marketplace online

platform:

• Lingshoutong (Alibaba)

2. SaaS provider:

• Huixiadan, Qianmi.com, Yunpos, etc.

Self-run ModelGo-between

Marketplace Model


Coverage (# of Stores) Self-run B2B Go-between Marketplace B2B

>400,000 惠民掌合天下

200,000-400,000 零售通电商互联

100,000-200,000 新高桥，易酒批供销大集

50,000-100,000 进货宝，新通路51订货，卓尔购，云蚂蚁，云宝商

盟

10,000-50,000 易生活，棒小店，蜗牛快采

>10,000 全时汇快消帮，万商购，批多多，天天买

B2B Players with Various Scales under Each Business Model


Platforms Emerged across China; North China with The Best Progress


BJ, TJ, Hebei

Sichuan & Chongqing

Hubei & Hunan

Shandong

Henan & Shaanxi

Fujian & Guangdong

National B2B Players

Regional B2B Players

Local B2B Players

Jiangsu

Zhejiang

SH

2016 Online FMCG B2B Companies’

Coverage in Traditional Trade

Note：data as of Nov. 2016

FMCG Online B2B Market Impacts

Development of Online FMCG B2B is Still at Early Stage, but with High Expectation from

Manufacturers

Distribution

• Low distribution and weak penetration,

especially in small and medium stores

and low tier markets

• Serious problems with counterfeits at

retail terminals

Channel

control

• Weak channel control power

• Disordered pricing system

• Low working capital turnover

Cost/

Efficiency

• High channel operation cost and

management cost, resulted from

immature TT sales model and uneven

distributor quality

Marketing• Marketing resources not distributed

accurately, and unable to trace effect

• Low efficiency of marketing activities

Information

and Data

• Lack of traceable and complete supply

chain data

• Lack of understanding to stores

Problems Manufacturers

Face in TT

Expectations of Manufacturers

on Online B2BCurrent Situation

• Further expand to new market and achieve

sales improvement

• Accelerate distribution system efficiency

• Improve distribution and penetration in low tier

markets

• Transparent channel management

• Control over pricing system

• Push capital turnover up

• Simplify distribution process while minimize

channel expansion cost

• Control distributors’ quality

• Precise marketing investment and controllable

ROI

• Effective brand building at terminal stores

• Effective new product launch

• Provide complete trade data

• Assist manufacturers to understand up-to-date

sales situation

• Better understanding of stores from data

• Improved distribution from online B2B, but only

with a small amount of contribution

• Most manufacturers take online B2B as supplement of

current business

• Manufacturers have concerns over future conflict

between online B2B and traditional distribution system,

as well as control difficulty

• No platform with strong power to push terminal sales

currently

• Cost reduction

• Most manufacturers take online B2B as trial,

currently no one reduces number of distributors

• B2B platforms only assist in store expansion and

sales, with very limited assistance in marketing,

service maintenance, and promotion

• Limited data share of B2B platforms under

cooperation with manufacturers; Limited data

insight resulted from few data dimensions


• To brand manufacturers: A

more transparent overall market

picture and a traceable channel

investment

• To local stores: A more

systematic shelf display and a

more rational purchase decision

aligned with market trends

• To distributors: Enhanced

inventory turnover and financial

efficiency as a result of grasping

market dynamics

In-depth

Platform

Services under

Data Support

FMCG B2B platforms start to

standardize and modernize local stores

in the form of franchise:

• To brand manufacturers:

strengthened channel control, new

source of income

• To local stores: increasing customer

loyalty, enhanced working capital

turnover

Extension to

2C Business

• Platforms differentiate with competitors by

pursuing specialized products, forming

competitive advantage

• Platforms carry out a richer marketing

activities to promote terminal sales

• B2B platforms go beyond product sale

and distribution by developing service

qualities of covered stores, and

progressively transit to establishing brand

images with manufacturers

Closer Liaison Between

Brands & Platforms

Private Labels

• Based on the big data, B2B

platforms can provide local stores

certain amounts of credit support

to encourage new product

development, creating more sales

opportunities

• Go-between marketplace platforms

can also provide supply chain

finance to support distributors or

logistics by relieving their cash

flow pressure

Supply Chain Finance

Prospects of Online B2B Market

• Private label product has a

higher gross margin with a

control over pricing and

marketing

• Private label offers more choices

to local stores, gaining a

differentiation advantage


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Email: [email protected]

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©2016 – Kantar Retail. All Rights Reserved.

Disclaimer: The analyses and conclusions

presented herein represent the opinions of

Kantar Retail. The views expressed in this

publication do not necessarily reflect the

views of the companies covered by this publication.

This publication is not endorsed, or

otherwise supported, by the management of

any of the companies covered herein.

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2016 fmcg online b2b market study - kantar · pdf file2016 fmcg online b2b market study...

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