B2B Industry Internet Analysis

Background The decline of

China's economic growth rate is the background of the Internetization of the B2B industry. At the same time, the PPI (Industrial Producer Price Index) continues to decline. Based on the current economic situation, the state has proposed supply-side reforms, which mainly focus on resolving excess capacity, reducing corporate costs and eliminating real estate inventories. At the same time, many traditional industries represented by industrial bulk commodities have faced problems such as overcapacity, complicated distribution and trade links, lack of industry data, and extremely asymmetric information in the past few decades, which also directly led to the low overall operation efficiency of the industry.

The B2B platform reduces transaction costs by gathering the production and consumer ends of the supply chain, and removes complicated multi-layer agents; it improves information transparency by establishing an industry database, and helps the production end to carry out production activities more efficiently and reasonably. At the same time, the B2B platform accumulates upstream and downstream transaction data and corporate credit data based on subdivided industries. In response to the problem of asymmetric billing periods in traditional industries, the B2B platform provides financial services such as commercial factoring and credit for small and medium-sized enterprises in vertical fields. In addition, the B2B platform helps customers solve warehousing and logistics problems by cooperating with fourth-party logistics companies, forming a B2B comprehensive service platform for a single vertical segment.

Market Space

According to iResearch's 2015 China e-commerce market transaction data, the transaction scale of China's B2B e-commerce market in 2015 reached 11.8 trillion yuan, an increase of 18.0% over last year, and will maintain a stable growth level. The figure below shows the market size of B2B for small and medium-sized enterprises. It is predicted that the market growth rate will stabilize in the next few years.

The supply chain finance

B2B platform is mainly engaged in matching or self-operated business in the initial stage, focusing on accumulating users and obtaining various industry data. After establishing industry databases and credit and risk control models for financial services such as credit, commercial factoring, financial leasing, and guarantees, the B2B platform has entered the supply chain financial business.

China's supply chain finance market is huge and growing rapidly. At present, the industry scale has exceeded 10 trillion yuan, and it is expected to reach 20 trillion yuan in 2020; the compound annual growth rate of commercial factoring and financial leasing business scale from 2011 to 2016 is as high as 43.26% and 53.95% respectively

.

Fourth-party logistics companies are service platforms that help manufacturers, traders, and carriers provide information docking and demand matching. By gathering information on the transportation capacity of transportation companies and the freight demand of cargo owners, it helps both parties to reduce transaction costs and reduce the unloaded rate of trucks.

According to statistics, there are 2.7 million road transport enterprises in China, with nearly 8 million vehicles, and the market concentration is very low. A large number of logistics enterprises are concentrated in the logistics parks of various cities, and it is inefficient to match the needs of freight owners. According to the forward-looking consulting analysis report, the current mileage utilization rate of freight vehicles has been hovering around 50-60% for a long time.

Road transport can be subdivided into truckload transport and less-than-truckload transport. Among them, vehicle transportation accounted for 48%, LTL accounted for 40%, and express delivery accounted for 12%. LTL refers to freight with a weight between 30kg-5000kg, among which LTL companies like Debon Logistics

are concentrated in 30-100kg, and dedicated line companies are concentrated in 100kg-5000kg. The dedicated line enterprises occupy 96.8% of the LTL market.

Market entry point

Transaction link

Keywords : SKU quantity, frequency, upstream and downstream concentration, standardization degree,

there are mainly two modes to enter the transaction link: matching mode and self-operated mode

Online matching mode ( Large amount of SKU, low frequency, low upstream and downstream concentration, low standardization, long tail market)

B2B platform provides transaction matching services in one vertical field. By collecting demand information from the production and consumer ends, it improves the overall efficiency of the industry and reduces transaction costs.

The essence of the matching mode platform is to remove layers of agents by reconstructing the value chain. Compared with the self-operated model, the matching platform model is lighter and does not need to spend a lot of money on goods. At the same time, the capital demand is small, and the number of SKUs can be increased to meet the needs of different users. Therefore, in comparison, the matching platform has obvious advantages in GMV and user scale growth rate. However, because the platform does not involve offline transactions, it has limited control over product quality and quality.

In the process of accumulating users and expanding GMV, the platform collects transaction information and corporate credit information to prepare for the future entry into supply chain finance. Supply chain finance is a B2B platform that provides financial services such as commercial poly and credit for enterprises in vertical fields. It mainly solves the problem of asymmetric upstream and downstream account periods, which leads to the problem that small and medium-sized enterprises have loan needs but are difficult to obtain bank loans.

Income model: commission + supply chain finance

Self model (small SKU volume, high frequency, high upstream concentration and low downstream concentration, high standardization, stable demand)

The essence of self-operated platforms is not to remove, but to replace multi-level Agents, improve industry efficiency by reducing the number of circulations from the production end to the consumer end. The platform’s approach is similar to that of an agent. They all buy products from upstream manufacturers and then sell them to consumers at higher prices.

The self-operated platform has stronger control over product quality, which ensures the user experience on the consumer side. In terms of profitability, since the platform has replaced the multi-level agents that previously accounted for 20%-30% of the industry's profits, self-operated platforms can obtain more profits while providing lower prices. However, the characteristics of the self-operated model that needs to buy goods first also cause the platform to bear certain risks (price changes, product quality) and financial pressure. Therefore, the self-operated model can only provide a small number of SKUs in the initial stage to reduce capital pressure, but it will also reduce the speed of expansion. Compared with matching platforms, self-operated platforms must provide services such as quality control, quality inspection, logistics, payment and warehouses; the entire business model becomes heavier. In terms of providing supply chain finance, the practice of self-operated platforms is similar to that of matching platforms.

Income model: price difference + supply chain finance

SaaS

SaaS products provide enterprises with information-based software services in terms of sales, procurement, finance, and human resources, improve efficiency and transparency, and reduce operating costs. Legendshop SAAS products will be launched soon to help the development of the domestic B2B industry.

SaaS is developed for a single link of enterprise operation, and the operation process is informatized through software and APP. At the same time, it also provides a complete set of solutions for enterprises. For example, Beisen, a service provider focusing on human resources management, has products including evaluation, recruitment, performance, succession, core human resources, surveys, and work plan management platform Tita. The use of SaaS software will produce data precipitation, which increases the conversion cost and stickiness of enterprises.

At present, SaaS service providers are gradually transforming into SaaS+Pass, which provides enterprises with customizable services by providing a platform for secondary development. At the same time, analysis and prediction based on user big data is the future development direction of the SaaS industry. As SaaS service providers continue to accumulate upstream and downstream data in the industry and expand the scale of users, they also have the conditions to enter supply chain finance and B2B trading platforms.

Income model: SaaS software + cloud service

4PL logistics (a huge long-tail market)

4PL platform, by connecting the needs of transportation companies and cargo owners, reduces the no-load rate of transportation companies and reduces the transportation cost of cargo owners. Freight logistics can be subdivided into intra-city and inter-city freight. Intercity logistics belongs to the main line logistics distribution, and the gross profit margin is about 5%-6%. The same-city distribution belongs to the last mile branch distribution, and the gross profit margin is still as high as 30%, which has a large market space.

At the same time, because different B2B industries have different requirements for logistics and require higher professionalism, some 4PL companies do logistics business for a single vertical field, such as Yungang Net and Oil Xiaoer. There are two innovative service modes in the logistics industry:

• Point-to-point mode The

platform connects with the transportation company and the source of goods. The transportation company

makes quotations based on the geographic location of the source of goods, the type of goods, the weight, and the demand for vehicles. The platform uses the Internet to gather the supply side and the demand side to improve the matching efficiency

of , such as finding steel nets.

•Provide TMS (Transportation Management System) service

TMS service solves the problem of matching shipping capacity for cargo owners through SaaS software. Users pass the SaaS system

Send freight demand to TMS platform, TMS will propose a variety of

optional , such as C.H Robinson in the United States.

Income model: commission; logistics solution

B2b platform transaction process

Guaranteed transaction: order -> payment to intermediate account -> delivery -> confirmation of receipt -> payment for goods to sellers

Through a third-party agency, the intermediate transition of payment for goods has the advantage of being able to Better to protect the interests of buyers and sellers; Disadvantages: Due to the existence of an intermediate state of payment, buyers and sellers will have billing periods, and financial pressure will be great.

The secured transaction service method of the B2B platform provides a security guarantee for online transactions of small and medium-sized enterprises, which is safer than traditional transaction methods.

Supply chain finance: information flow, capital flow, logistics

Whether it is a matching platform or a self-operated platform, with the development of enterprises, most of them will get involved in supply chain finance in related vertical fields. The supply chain finance of B2B platforms is essentially based on industry big data. The platform can provide credit based on the total transaction amount by evaluating the company's capital needs through daily transactions, procurement, payment, etc.

Using big data to control risks is an important part of supply chain finance. B2B platforms need to be able to control the three basic types of data that constitute big data: information flow, capital flow and logistics, thus forming a closed loop.

•Information flow It

includes the product model, specification, quantity, price and payment method between the buyer and the seller of the enterprise; it also

includes the subsequent delivery time, location and transportation method.

•Funds flow The

capital flow reflects the capital flow of the platform and merchants' transactions, and the realization of the capital flow depends on

the function of B2B online payment, so that the transactions between enterprises are completed in the internal closed loop of the platform.

With the passage of time, the value of capital flow can judge the operation of the enterprise on a certain basis and provide financing for the follow-up.

Provides critical data.

•Logistics

In the case of only information flow and capital flow, buyers and sellers can still collude to defraud and obtain credit. However,

if B2B platform and the logistics company realize the information alley, then monitoring the real-time logistics trajectory and transportation data can

provide an effective guarantee for the risk control of the B2B platform.

Supply chain financial service model

Electronic order financing model The financing business of electronic orders is the unsecured

financing business that the e-commerce B2B platform applies to the bank by virtue of the valid order contracts with high-quality large and medium-sized enterprises (core enterprises) . The applicable object of the electronic order financing business is Yes Member of e-commerce B2B platform that maintains stable cooperative relations with high-quality large and medium-sized enterprises, and can provide real and effective contract order records or sales certification documents with core enterprises. Electronic warehouse receipt financing model Electronic warehouse receipt financing is a member of the B2B e-commerce platform The enterprise stores the goods in the warehouse of the B2B enterprise and the third-party logistics enterprise designated by the bank. After claiming a valid electronic manifest, it applies to the bank for loan financing by virtue of the electronic manifest. The electronic warehouse receipt model uses capital flow to revitalize logistics, which can reduce the occupation of funds by inventory and speed up capital flow, and obtain financing loans for enterprises. It is very suitable for small and medium-sized enterprises with excessive inventory occupation and insufficient temporary working capital. Problem Industry Barriers In terms of competition barriers, the matching platform needs to expand the user and transaction scale, gather a large number of buyers and sellers on the platform to enrich the resources on the platform, and then attract more users to participate. The self-operated platform model is more important. In addition to product quality and scale advantages, the platform can also build competition barriers through and warehousing. • How B2B matching trading platforms prevent order skipping

























Lock users by exchanging "transaction volume" for "value-added services" to prevent order skipping.

• The informatization degree of SMEs is not high, how to guide and cultivate their habits?

In the initial stage of the B2B trading platform, one-to-one communication between matching traders and users is required, and the purpose

of communication is to reshape user behavior. In addition to facilitating users to generate transactions in the early stage, the

more important thing is to guide users to use the interactive functions provided by the platform and complete the operation on their own. The

trend that

B2B platforms are easy to enter and can generate the most value is mostly industries with low concentration. Regardless of whether the

upstream or downstream concentration is low, the B2B platform needs to make it clear that the target customers are mainly small and medium-sized enterprises in the industry

.

•Although according to different industry conditions, B2B platforms will become bigger through matching or self-operation as an entry point. However,

with the expansion of the platform and the increase in the number of SKUs, the same industry but different attributes (frequency, degree of standardization) will prompt

the platform to transform into a matching + self-operated model.

•The industrial links are complex, and users form stickiness between different industrial links. The platform is the center to integrate upstream and downstream to

form an ecosystem. For

more information, please refer to LegendShop B2B industry solutions.

Refer to

Legendshop e-commerce market report

. Consumer goods: accessories, spices, ceramics The number of suppliers in sub-sectors such as handicrafts is growing

rapidly , which deserves attention