Sharing by David Wei, who served as CEO of Alibaba.com between 2006 and 2011, leading Alibaba’s B2B business. Wei is currently the Chairman & Founding Partner of Vision Knight Capital.

01
Why does B2B need offline push?

Many people have asked me, the Internet age, B2B still have to push it offline? I said that I must do it because 2B can’t be covered with pure internet marketing. This is still going back to the essential difference between 2B and 2C. In the 2B industry…

Sharing by David Wei, who served as CEO of Alibaba.com between 2006 and 2011, leading Alibaba’s B2B business. Wei is currently the Chairman & Founding Partner of Vision Knight Capital.

01
Why does B2B need offline push?

Many people have asked me, the Internet age, B2B still have to push it offline? I said that I must do it because 2B can’t be covered with pure internet marketing. This is still going back to the essential difference between 2B and 2C. In the 2B industry, the users of the products, the decision-makers, and the buyers are not the same person. It is natural that decision-making is with many people.

Take Alibaba’s “TrustPass” (domestic market) and “Chinese suppliers” (overseas markets) as examples. The users of “Chinese suppliers” are foreign trade salesmen, but the decision-makers are usually foreign trade managers or bosses. Also, go to financial approval, this is multi-person decision-making. So the first thing Alibaba’s sales come in is to find KP (key person).

A company may have several KPs. For example, the KPs who make purchase decisions at restaurants. Different restaurants have different conditions. There are chefs, bosses, restaurant managers, and sometimes even spouses of bosses because there is profit margin or kickbacks there. These people can you find them through accurate marketing on the Internet? Can’t find it.

The separation of users, decision-makers, and payers naturally determine that it is unlikely that you will rely solely on Internet marketing to obtain 2B users. So I suggest that you do two sets of CRM: the first set, CRM built around the enterprise; the second set, CRM built around key decision-makers. Among them, CRM around people is ignored by most 2B startups, for example.

Yi Cai is doing human resources services. Originally there was only one set of CRM built around the enterprise. But then they found that HR personnel themselves would churn, and once it quits, it might mean losing a customer. So later, Yi Chuang built another set of CRM around HR. This CRM is done, and the next company that HR moves on to may become a new customer.

02
How to do the B2B offline push?

Many 2B offline pushes are problematic in the setting of the stage KPI. For example, a local offline sales team might immediately push a new customer to make a deal, which is too anxious. I believe that companies doing B2B push should focus on four “ratios” in stages: coverage, conversion rate, repurchase rate, and penetration rate.

The first month pursued coverage. The push to learn Mao Zedong’s thoughts – “concentrate the use of soldiers.” I think many companies allocate 100 people from the promotion team to 30 cities, and each city puts 3, which is absolutely wrong. We should put these 100 people in a city and complete the coverage and aggregation effect within one month.

The second is to do the conversion rate. What is the conversion rate? The company covered in the first month, the number of orders that can be placed in the second month is called the conversion rate.

In the third month, we must start to focus on re-purchase. From the fourth month onwards, the team will be transferred. After the tasks of the promotion team are basically completed, they must hand over to the follow-up service team to infiltrate the enterprises that have opened accounts, converted and repurchased.

What is penetration? 2B Whether it is service or product type, it is very important that your platform accounts for the proportion of its entire purchase. If it gives you only 5%-10%, it means you can be kicked off at any time.

B2B companies must account for one-third or even half of the customer’s purchases, and then this customer is safe. How high your penetration of service or merchandise is, determines how stable your relationship with it is. A 2B platform cannot be successful and finally depends on the penetration rate. In the past, Alibaba was able to do well because 80% of the export volume of Chinese suppliers – that is why its position is secure.

I told many companies that they would quickly complete the previous three “ratios” within three months, but the final “penetration rate” may take three years to collapse.

03
Why is B2B not price transparent?

The price of 2C is very transparent, but 2B can’t. If you are still talking to me about price transparency, you have no understanding of the nature of the 2B transaction. Every transaction condition of 2B is different. How can price transparency be achieved?

What is the trading condition?

First, the quantity. The amount of 2C will not be very different, but 2B is not the same. I buy 10,000 pairs of shoes, can I buy the same price as I buy a pair of shoes?

Second, payment. I will pay you 30% first, and then pay 70% after the goods arrive or I will give you the cash in one lump sum. Payment terms are different, how can the transaction price be the same?

Third, the booking time. I am going to order tomorrow, I will inform you two months in advance to help me stock up, the transaction price is not the same.

These conditions determine the need to forget about B2B price transparency. If you don’t respect the B2B trading tradition (different trading conditions bring different trading prices), your trading platform can’t do well. B2B does not need to invent too much, we must respect the original trading habits and commercial nature of 2B trading.

04
Does it make sense to do B2B matching transactions?

It depends on what you do after you have made the match. It doesn’t make any sense to match for the sake of matching. If you go to subsidize the match, put the transaction up and hang it, it is really not far from death.

What makes sense? It makes sense to be able to change the match transaction. What price does a certain company use when it buys a certain quantity of certain goods? You can record these quantities well and prepare for your next transaction. This makes sense.

05
Does B2B do marketplace or do wholesale yourself?

My answer to this question is simple: don’t worry, which way to better meet customer needs. What is customer demand? 2B and 2C are highly similar at this point, called “more, faster, better, and savings.”

But whether it is 2B or 2C, don’t expect a platform to do all these four at once. You can do one to ensure that you don’t lose in the competition, you can win with two, but if you want to do three, you are not far from death. If you want to do all four, you will definitely die. Because there are contradictions and trade-offs between these.

In the beginning, Taobao focused on “more” and “savings”. JD began to compete with Taobao, the main “faster”, which sacrificed SKU (not “more”), relatively expensive (not “savings”). Later, Alibaba and JD were in great shape and were perfecting other parts. Alibaba pushes the Tmall to be “better”, pushing the Cainiao logistics is to do “faster”. JD began to open the platform to sellers to solve the “more” problem.

So more, faster, better, and savings – four words based on your customers’ needs. If the customer’s main needs are more, you can’t solve many problems with running the wholesale and distribution yourselves, you must use the marketplace or platform ideas to do it; but if the customer’s needs are better, it is still the most suitable for own distribution.

Which one is the best for customer needs, you can use this method, and even do not rule out some categories to use own wholesale, some categories use the platform/marketplace.

06
B2B information flow, logistics flow, capital flow
In the end, which “flow” to make money?

Many people say that we do three streams of B2B: information flow, logistics flow, and capital flow, which “flow” can I make money from? Let’s go look at traditional trading companies, usually “three streams” to make money.

Traditional trading companies help you to store goods, actually earning money from your money flow; providing logistics for you, earning money for logistics flow; even the worst trading company can earn money for information difference, such as buying from low prices in Guangdong, sold to Shanghai at a high price.

In the era of industrial internet, my advice to everyone is that if you want to enter an industry, you must know how the original mainstream trading company makes money, and then you do the most amazing feat – do not make money, they have no way to compete with you.

To give an extreme example: “Sino Agri.”

At that time, we wanted to do an apple business in Yantai in Shandong province, but we found that we couldn’t do it. We thought about using the information to sell Yantai’s apples farther and go abroad but found that foreign buyers have already bought them. I also thought about making money from the flow of funds, using financial to promote transactions, warehouse receipts, sealing, pledge, and found that it is not good, because Shandong’s capital flow is not so tight – people do not need that.

In the end, the entry point was actually through logistics. The cold storage in the area of Shandong is in surplus. We have packaged 100,000-ton cold storage and shouted a slogan called “Free to enter the warehouse, and charged when leaving the warehouse”.

The original warehouse owner, in fact, I hope you can’t sell it, you can’t sell it to collect rent every day. But the customer is very uncomfortable, not only does not sell but also pays you more money.

Then we will change revolutionarily. You put it in for free, wait for you to sell it, and then charge a fixed fee, which means that the charge has nothing to do with the time of storage.

In this case, all the apples in Yantai want to be put here, I can pick the best apple into my warehouse. If you have the best apple in Yantai, then all the buyers will come to you, my apple turnover will be very fast.

As a result, the average customer had to pay 60 days of rent on average, and I only had to pay 30 days, but I actually have a warehouse turnover time of just 14 days to achieve a win-win situation. We made the warehousing part free, and we destroyed the entire industry.

The logistics link also helped us to build other aspects. Because Apple is in my warehouse before I sell it, I can give you 80% of the money first, and supply chain finance will come. And no risk, because it is not a warehouse receipt, the physical apple is a better local apple, pressed in the warehouse, what am I afraid of?

Warehousing is free, finance is the highest discount, then what if I have another benefit? We have an Apple trading platform, Apple in the warehouse, I will help you to give priority to sales on the platform. When these three conditions are opened, everyone is willing to come.

Therefore, information flow, capital flow, and logistics – you often breakthrough one thing and change the trade pattern of the entire industry.

07
What is B2B’s supply chain financial risk control?

Since the 2B business has a natural financial property, what about supply chain finance? There are only two ways: first, based on the chain; second, based on goods.

Today, many people tell me that he is doing supply chain finance. I said that this is not called supply chain finance. It should be called supply ring finance, because you only have to make a closed loop of transactions, and two or more rings are put together to form a chain.

What does supply chain finance mean? You become the upstream of upstream, or the downstream of downstream, after you have locked in both trading links, you can do credit-type supply chain finance in the middle.

If you can’t do two rings for a while, can supply ring finance be done? Yes, but only based on goods. Three standard words of the goods: the judgment is accurate, can be seen, sold off.

Judging: Know the value of the goods. For example, how much is a ton of sugar, how much is a ton of silk, and many trading banks are afraid to do it because he is unclear about the value of the goods.

Can be seen: either in your warehouse or in a closed logistics environment. We used to do the supply chain finance of the whole ship’s chopping board. As long as the boards are shipped to the sea, we dare to let go because it can’t run. The robbers are not interested in chopping boards, and the insurance company will pay for the boat, so as long as the ship is shipped to the sea, I dare to let the money go, and the goods are watched by me.

Sold off: Sino Agri has sold 3 million tons of sugar a year, and 10,000 yuan and 20,000 tons of sugar are one or two days for us. In the past, banks were trading white sugar, and there were really three or five thousand tons of sugar stuck in their hands – so the goods need to be able to be sold at any time.

The most fascinating thing about supply chain finance is that you start with the goods and gradually get through the upstream and downstream, and build the chain. For example, the white sugar, silk, and chopping board just mentioned, because we started with the goods first, but we gradually began to mention the conditions, can money not be given to you immediately? Can you pay directly to your upstream? Can you put upstream transactions on my platform? To sum up, if you don’t dare to touch the financial situation, you will not do much.

These seven core issues sound like the problems that people encounter every day. They may not cover all the questions, but the source and answer of all the questions are actually here.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.

 

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