WinChannel's Digital Gambit to Revitalize Rural China (B)

The primary purpose of this case series is to illustrate how key tools and frameworks of strategic analysis may be applied in an integrative way to understand the evolving sources of value creation and the reasons for its capture and sustainability in the fast-moving consumer goods (FMCG) industry as new digital technologies are applied. The cases will help students understand how digitization is enabling and shaping the transformation of the traditional FMCG industry in China. The case series traces the developments in China’s FMCG industry from the early 2010s to 2017, in general, and the efforts of Beijing WinChannel Software Technology Co., Ltd. (WinChannel) and its affiliated company, Huixiadan, in their attempt to apply new digital technologies to transform the traditional trade channel, in particular. Case (A) presents an overview of China’s FMCG industry in the early 2010s from the perspective of WinChannel, an information service provider to major FMCG companies in China. It explains the three major distribution channels (i.e., routes-to-market) and focuses on the challenges facing the traditional trade channel through which FMCG companies provide their products to millions of “mom-and-pop” stores (i.e., small, independently owned and operated convenience stores), especially in rural parts of China. In early 2015, Zhen (Andrew) Cui, Founder and CEO of WinChannel, is exploring how he can help improve the reach and efficiency of the traditional trade channel and wonders if the emerging online/mobile B2B FMCG platforms is the right solution for the increasingly digitized FMCG retail industry in China. Case (B) introduces Cui’s response to the challenges posed in Case (A). In May 2015, he launches Huixiadan, a mobile-based B2B FMCG ordering platform, connecting a selected group of leading FMCG companies and their numerous distributors and wholesalers with potentially millions of mom-and-pop stores in China. Huixiadan uses mobile technologies to develop an inclusive and collaborative business model around the existing traditional trade channel. However, it faces fierce competition from many online competitors seeking to disrupt the FMCG industry, including Chinese e-commerce giants Alibaba and JD.com. Cui is wondering how competitive and sustainable Huixiadan’s business model is and what he should do to withstand the competitive threats even as he tries to exploit opportunities in the traditional FMCG industry in China.