1、Business Model Innovation (Part 2)Winnie LoE-commerce . Business Models . InnovationsAugust 2020Overview of the innovative B2B business models in China 04 03Key takeawaysUnlike the winner-takes-all B2C market, B2B market is fragmented and distinctly characterized. Digitization and innovation in B2B

2、businesses in China are in progress, with different paces in various supply chains, verticals and support services. No single service provider can dominate all market segments for the time being. Huge growth in Chinas B2B market is expected.Whats next: Some buzzwords are frequently mentioned by Chin

3、as B2B business guru in the midst of the Covid-19 outbreak, e.g. digitization, supply chain resilience, B2B (export) e-commerce, branding, mergers and acquisitions, etc.Map 6:Digitization in financial sectorMap 3: Supply chain visibility Map 4: Enterprise digitizationChanges in consumer expectation

4、drive B2B business transformationKey drivers of innovation in Chinas B2B business: 0102The government supports B2B business innovation and acceleration of industrial upgradingInternet giants eye on the next blue ocean market, B2B businessTechnological advance leads to digital transformationMap 1: Di

5、stribution in FMCG Map 2: Apparel supply chainMap 5:Innovations in B2B logistics2Source: Fung Business IntelligenceZoom in: A lot of B2B business innovations aim at solving the pain-points facing supply chains and streamlining the four flows in supply chainProcess flowInformation flowLogistics flowC

6、ash flowB2C business innovations emerged at the “consumer”, “product” and “channel” levels*. B2B business operators have to satisfy the changed consumer demand by reforming product and channel management, with the aid of various support services and technologyB2C commerceDATAB2CinnovationsConsumerCh

7、annelProductB2B servicesLogistics servicesFinancial servicesEnterprises servicesB2B infrastructure(AI, Blockchain, Cloud services, Data)TechnologySourcing & distributionMarketingBrandingCustomer relationshipProduct designManufacturingOrder managementABCDChanged consumer demandChanged consumer demand

8、B2B productionChanges in product managementB2B commerceChanges in channel management3* For detail of innovative B2C business models, view also Fung Business Intelligences Report, Jan 2020: “Overview of the innovative B2C business models in China” Source: Fung Business IntelligenceVertical platformsD

9、igitization and innovation in B2B businesses in China are in progress, with different paces in various supply chains, verticals and support services. Unlike the winner-takes-all B2C market, no single B2B service provider can dominate all market segments. Chinas B2B market has huge potential4IOT = In

10、ternet Of Things; BOM = Bill Of Materials; MRO = Maintenance, Repair and OperationsSelected innovative companies in Chinas B2B marketB2B commerceB2B productionB2B servicesLogistics servicesFinancial servicesEnterprises servicesB2B infrastructureABCD (AI, Blockchain, Cloud services, Data)TechnologyIn

11、tegrated marketplacesSmart Manufacturing FMCGFresh produceCommodityFabric/ Apparel(including BOM, MRO & distribution)* Icon source: InternetSource: Fung Business Intelligence(including automation, robots, machine tool,IOT, manufacturing software, etc.)Innovation in Chinas B2B businessKey drivers of

12、innovation in Chinas B2B business:1. Changes in consumer expectation drive B2B business transformationChinese consumers today are empowered by mobile technology and have different lifestyles and consumption practices from those of their previous generations. To differentiate from the competitors, ma

13、ny B2C operators are exploring various ways to enhance their supply chain capabilities. Some of them engage in upstream B2B business. Some seek assistance from innovative “to B” solution providers.6*MOQ = minimum order quantityUpstreamDownstreamUpstreamDownstreamMass productionAccept large-size orde

14、rs with certain MOQ* requirementLong production lead timeSupply drivenDemand drivenDemand for diversified, customized goods/ servicesDemand for short production and delivery lead timeAccept small quantity, rapid replenishment ordersPastNow& FutureSource: Fung Business IntelligenceBox 1. Different bu

15、ying behaviours of B2B and B2C customers7SupplierCompany/ GroupIndividual/ familyBuying decision: Complex, tendering for high value order is neededProduct price: Lower unit price (wholesale price)Product quantity: Higher, meet with suppliers MOQB2BbusinessB2CbusinessBuying expectation: Good quality

16、and services experience, quick responseBuying expectation: Good quality, specialized services and efficiencyBuyers loyalty: Higher, stick to trusted supplier baseTransaction risk:Higher for bulk orderProduct quantity: Lower, as low as single unitBuyers loyalty: Lower, relatively price sensitive$Tran

17、saction risk: Lower for buying single unitProduct price: Higher unit price (retail price)Buying decision: Instant, straight forwardSource: Fung Business IntelligenceKey drivers of innovation in Chinas B2B business:8Pain points facing the traditional B2B business in China:Aging labour force and incre

18、asing production costsProvision of low value-added services along the global value chainwithout owning the core technologies, earning a very thin marginHomogeneous competition in local marketMade in China 2025By The State Council20152. The government supports B2B business innovation and acceleration

19、 of industrial upgradingA number of regulations promulgated in the recent yearsare conducive to the development of B2B business inChinaSevere international competition in the globalized eraTo climb from the bottom of the global value chain, B2B business operators have to explore innovative models an

20、d transform from being OEM to become ODM or OBMProduct development & designProduct processing & assemblyProduct brandingTechnicaldevelopmentProductdistributionOEMOBMODMMost of the B2B business operators in ChinaValue-added*OEM = original equipment manufacturers; ODM = original design manufacturers;

21、OBM = original brand manufacturersGuiding Opinions of the State Council on Deepening Integration of Manufacturing Industry and InternetBy The State Council 2016Integration and Development Plan of Informatization and IndustrializationBy Ministry of Industry and Information Technology 2016Guiding Opin

22、ions of the General Office of the State Council onVigorously Advancing the Innovation and Application of Supply ChainsBy The General Office of The State Council 2017Source: Fung Business IntelligenceKey drivers of innovation in Chinas B2B business:Source: Datagoo, Time data, Tianyancha, Wind, itjuzi

23、, compiled by Fung Business Intelligence3. Internet giants in China have become more conservative about investing in B2C startups since 2018. They eye on the next blue ocean market, i.e. B2B businessIn 2019, 8 internet giants newly invested in over 400 startups in China and overseasBaiduAlibabaTence

24、ntJD.comBytedanceMeituanDidiXiaomiEnterprise InformationMedia &Finance Lifestyle TransportB2B/ B2CMedical & Education Gaming Logistics Property SocialAdvertising AgricultureNew Travel servicestechnology entertainmentservicese-commercehealthservice network & marketingindustry1084442113111112111121497

25、551156122092116511987822232946734112213481144132111111111726551329151134*number of investment projects9Big data analyticsCloud computingBlockchainArtificial IntelligenceKey drivers of innovation in Chinas B2B business:4. Technological advance leads to digital transformationD A T AProduct development

26、 and designVirtual Design3D scanning3D printingInternet of ThingsAugmented Reality/ Virtual RealityRoboticsAutomationManufacturing and Quality ControlOnline marketplaceSupply chain finance platformSale/ Inventory management systemSourcing/ DistributionAutomationRoboticsAugment Reality/ Virtual Reali

27、tyInternet of ThingsUnmanned vehiclesSharing platformLogisticsProduct researchConsumer financingMobile technologyAnytime (24 hours x 7 days); Anywhere (shop, restaurant, home, office, on the road, etc.)Product reviews Order placementConsumersD A T AD A T ASoftware as a Service (SaaS)10Source: Fung B

28、usiness IntelligenceEnterprise resources managementSupply chain managementCustomer relationship managementHuman resources management(Remote) Office assistanceFinancial managementLogistics managementE-contractZoom in: B2B Business Innovationin terms of the 4 Flows of Supply ChainA lot of B2B business

29、 innovations aim at solving the pain-points facing supply chains and streamlining the four flows in supply chainB2C commerceB2B commerceB2B productionProcess flowInformation flow Logistics flow Cash flow12* A supply chain manages four flows, including process flow, logistics flow, information flow a

30、nd capital flow. Source: Fung Business Intelligence1. B2B innovation in process flowMap 1: E-commerce giants tried to reform distribution processes in China by becoming one-stop-shop intermediates and replacing existing traditional multi-tier intermediates. Many FMCG distribution e-platforms have em

31、erged, linking brand owners and retail stores in cities and villages.It takes time for the downstream users to become familiar with the new tools and compare the quotes from newintermediates and the grandfather pricing offered by traditional distribution partners13BrandownersRetail stores/mom-and-po

32、p storesTraditional distribution processDigitized distribution processRegional distributorLocal agentProvincial agentMarkupMarkupOne-stop-shop services:Transparent information sharing, order management, consumer relationship management, retail data analytics, logistics management, etc.FMCG e-platfor

33、msMarketplaceSelf-operatedMarkupMarkupAlibabaLingshoutongYijiupifunding (2018) andSeries-E funding (2019) from Tencent & VCsULaunched in 2017 Launched in 2016 Established in 2014Parent company: Parent company: Obtained Series-DChina PostXintongluJD.comHuitongdaLaunched in 2010Parent company:Fivestar

34、 HoldingsInvested by Alibaba in 2018, after obtaining Series-C funding from VCsHuiminLaunched in 2015 Established in 2013Parent company: Obtained Series-Cfunding in 2019from VCsPrincipal distributorMarkupSource: iResearch, compiled by Fung Business Intelligence1. B2B innovation in process flowMap 2:

35、 Chinas apparel sector is highly fragmented and consists of millions of small-size operators. Some innovative fabric/ apparel B2B models have emerged to tackle pain points facing the industryIcon source: InternetPain points facing the traditional apparel stakeholders in the non-digitized eraMismatch

36、 of demand & supply offabric & accessoriesLong production lead-time of fabricNo guarantee on product quality &delivery lead-timeHigh level of safety stock and slow cash flow returnIntellectual property issues infashion designLong lead-time spent on obtaining design and sample approvalDiscrepancy bet

37、ween design and samplesCustomers always expect for new designResistance on digital/ automated changesby factory supervisors & workersLow digitization level of supply chain(esp. small-sized factories)High cost incurred in product personalizationSmall orders & rapid replenishment requested by downstre

38、am operatorsSmall orders & rapid replenishmentrequested by downstream operatorsMulti-tier small-sized distributors incurred high transaction costsNon-standardized products with short shelf-lifeKeen competition as low entry of barrierProduct designManufacturingRaw materialsourcingDistributionBaibuFab

39、ric sourcing platformEstablished in Guangzhou in 2013Obtained Series-D funding in Dec 2019FuliaoyiAccessories sourcing platformEstablished in Shanghai in 2016Obtained Series-A+ funding in Mar 2018LianshangFabric & accessories sourcing platform with QC servicesEstablished in Shanghai in 2015Obtained

40、Series-Pre-C funding in Jul 2017Designer platform, ordermanagement and distributionEstablished in Hangzhou in 2015Obtained Series-A funding in Sep 2017Linctex3D design platformEstablished in Shanghai in 2015Obtained Series-A+ funding in Dec2019ShenShangTechDesign solution backed by AIEstablished in

41、Beijing in 2019Obtained Angel fund in Dec 2019YunejianDistribution platformEstablished in Guangzhou in 2017HaoyihulianDistribution platformEstablished in Beijing in 2016Obtained Series-C funding in Apr 2018YmhcPPwangDistribution platformEstablished in Guangzhou in 2015Obtained Series-B funding in Ma

42、y 2019YSDSmart factory solutionParent company, Cimpress: established in Paris in 1995 & listed in Nasdaq: CMPRManufacturers and buyers matchingplatform for kidswearParent company, Weilan Technology:established in Hangzhou in 2019Obtained Angel fund in Feb 2020TaofactoryplatformManufacturers and buye

43、rs matchingParent company, Alibaba: established in Hangzhou in 1999 & listed in NYSE: BABA; HKSE: 9988KuaiyiLevels of digitization of the various sectors along apparel supply chain are different. For the time being, no single third-party service provider dominates the market and controls the entire

44、supply chain14Source: Fung Business Intelligence2. B2B innovation in information flowMap 3: Internet giants offer digitized solutions enhancing supply chain visibility of small- and medium-sized factories.For instance, Alibaba set up , aiming at bridging factories and downstream sellers. The B2B pla

45、tform is empowered by data analytics services with data sourced from its B2C marketplaces, logistics and financial platforms15FactoriesE-sellers& web celebritiesTaofactoryMatch Taobao sellers and factories, who are willing to handle small orders, able to offer rapid replenishment withproduction capa

46、city reservedOffer factory inspection servicesPilot run of factory transformation in 2018ChengxintongSetup e-store for factoriesOffer marketing, customer servicesand order managementEstablish factory credit systemProvide data analytics servicesChanghuotongProvide digitized distribution solution for

47、factories, based on the data from various B2C platformsunder Alibaba groupstrategiesSuggest product and pricingNew product launch servicesDATADATADATAManufacturers and buyers matching platformDifferent functions under Source: Fung Business Intelligence2. B2B innovation in information flowMap 4: Apar

48、t from supply chain visibility, many companies seek new solutions to enhance their operational excellence and flexibility. A lot of SaaS startups emerged in China16* SaaS = Software as a Service. According to Microsoft, SaaS allows users to connect to and use cloud-based apps over the Internet. The

49、service provider manages the hardware and software, and with the appropriate service agreement, will ensure the availability and the security of the app and data as well.* CRM = Consumer relationship management, ERP Enterprise resources planningIcon source: InternetSource: iResearch, compiled by Fun

50、g Business Intelligence71%665%1029%1329%1648%243439%40%4738%65201420152016201720182019e 2020e 2021eDevelopment of SaaS market for enterprises services in China (RMB billion)CRM SaaS* accounted for around 20% of the entire vertical SaaS market in 2018, followed by customer services and call centre (1

51、5%), ERP (11%) and enterprise communication (11%).6%)CRM (20%)*Customer services & call centre (15%)Accounting/ Tax (9%)E-contract (ERP (11%)*Human resources management (9%)Enterprise communication (11%)Office assistance (9%)Others (10%)3. B2B innovation in logistics flowMap 5: With the aid of data

52、analytics tools, AI, IoT, robotics and other advanced technologies, innovations in various B2B logistics segmentshave developedInnovation in warehouse operations and managementRobotics & automationWarehouse solutionsPain pointsLow efficiency of manual operationsCapacity and labour shortage during pe

53、ak periodNo real-time information sharing between stakeholdersError incurred and inefficiency of data double handlingInnovation in transportationTruck matching platformsUnmanned vehicles(drones, trucks, etc.)Pain pointsLow level of cargo tracking and tracingMismatch of consigners/ consignees and tru

54、ckersImbalance in inbound/ outbound traffic flowHigh operation costsAI/ IoT solutionsLogistics information system17*AI= Artificial Intelligence; IoT = Internet of Things Source: Fung Business Intelligence4. B2B innovation in cash flowMap 6: Digitization in Chinas financial sector enhanced transparen

55、cy and efficiency of supply chains and reduced risk and cost of B2B financial operationsDifficult for SMEs without sufficient collateral to obtain bank loanHigh financial risk if any supply chain partners with low financial credibility run out of cashComplex inter-companies financial processes, espe

56、cially no data synchronization among different systemsDifficult for banks to control supply chain risk by simply examining the financial statements of loan applicantsInefficient financial operations, as manual and double handling are commonThird-party financial service providersTechnology companiesA

57、IBlockchainCloud servicesBig dataFinancial challenges facing the stakeholders in the non-digitized era Innovative financial companies supporting B2B businessIntegrated solutionsLoan solutionsPayment solutionsStakeholders worry about data security and information leakagePain point 1Pain point 2Pain point 3Pain point 4Pain point 5Pain point 618Source: Fung Business IntelligenceWhats next?20*API = Application programming interface Source: Fung Business IntelligenceBig data analyticsCloud co