---
title: "2016 FMCG Channel Transformation Year: Transform or Die!"
description: "China's current logistics and distribution system is backward, chaotic, and lacks integration. No modern, professionally managed large-scale logistics distribution enterprise has yet emerged in the Chinese market. It is inevitable that the post-WTO landscape will bring about new changes. But will we change through internal awakening, or only after suffering heavy blows and paying a painful price? Let's wait and see. In the channel network, wholesalers at all levels have low quality, poor management, and backward business awareness. Many distributors were originally operators in wholesale markets, made heroes by the times, but the heyday of wholesale markets is over. Many wholesalers fail to transform their functions, change from sedentary merchants to itinerant ones, lack corporate management awareness, focus only on immediate gains, have no brand awareness, do not build networks, do not maintain terminals, and lack scientific inventory management, data management, and customer information management, let alone regional strategic planning."
author: "New Distribution"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-04-15"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/2016-fmcg-channel-transformation-year-transform-or-die-435bd77e/"
markdown: "https://xinjignxiao.com/en/articles/2016-fmcg-channel-transformation-year-transform-or-die-435bd77e.md"
original_source: "https://mp.weixin.qq.com/s/gcVv1uw1YGIaf1w5CkPKhw"
translation: "https://xinjignxiao.com/zh/articles/2016%E5%BF%AB%E6%B6%88%E5%93%81%E6%B8%A0%E9%81%93%E8%BD%AC%E5%9E%8B%E5%B9%B4-%E8%A6%81%E4%B9%88%E6%AD%BB%E8%A6%81%E4%B9%88%E9%87%8D%E7%94%9F-435bd77e.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/2016-fmcg-channel-transformation-year-transform-or-die-435bd77e/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# 2016 FMCG Channel Transformation Year: Transform or Die!

> China's current logistics and distribution system is backward, chaotic, and lacks integration. No modern, professionally managed large-scale logistics distribution enterprise has yet emerged in the Chinese market. It is inevitable that the post-WTO landscape will bring about new changes. But will we change through internal awakening, or only after suffering heavy blows and paying a painful price? Let's wait and see. In the channel network, wholesalers at all levels have low quality, poor management, and backward business awareness. Many distributors were originally operators in wholesale markets, made heroes by the times, but the heyday of wholesale markets is over. Many wholesalers fail to transform their functions, change from sedentary merchants to itinerant ones, lack corporate management awareness, focus only on immediate gains, have no brand awareness, do not build networks, do not maintain terminals, and lack scientific inventory management, data management, and customer information management, let alone regional strategic planning.

China's current logistics and distribution system is backward, chaotic, and lacks integration. No modern, professionally managed large-scale logistics distribution enterprise has yet emerged in the Chinese market. It is inevitable that the post-WTO landscape will bring about new changes. But will we change through internal awakening, or only after suffering heavy blows and paying a painful price? Let's wait and see.

**In the channel network, wholesalers at all levels have low quality, poor management, and backward business awareness**
Many distributors were originally operators in wholesale markets, made heroes by the times, but the heyday of wholesale markets is over. Many wholesalers fail to transform their functions, change from sedentary merchants to itinerant ones, lack corporate management awareness, focus only on immediate gains, have no brand awareness, do not build networks, do not maintain terminals, and lack scientific inventory management, data management, and customer information management, let alone regional strategic planning.

**Cross-regional dumping, low-price volume selling, customer poaching, and market order disruption**
Influenced by manufacturers' sales volume-only mentality, to obtain year-end rebates, to compete for customers, to drive sales of miscellaneous brands, and for various other reasons, many distributors seek only small profits and quick turnover, ignore consequences, and engage in cross-regional dumping with relish. Some even sell at normal prices in their own areas, then use the thin profits to subsidize low-price competition for customers outside their designated areas, disregarding manufacturer policies, regional price systems, and competitive brand situations. For their own temporary gains, they disrupt market order, not realizing that disrupting prices and order is tantamount to indirectly losing their own livelihood, just as destroying trees and forests leads to soil erosion.

**China's commercial landscape has undergone tremendous changes**
Previously, the main sales channels were department stores, wholesale markets, and retail shops. Now, large retail chains, supermarkets, hypermarkets, and other terminals have emerged in large numbers. The appearance of a hypermarket can lead to the closure of thousands of retail shops. The rise of supermarket bulk sales has accelerated the transformation of the wholesale industry. In economically developed coastal areas, traditional wholesale markets are gradually disappearing, and small shop owners are beginning to venture into supermarket operations.

**The channel network's operating models are complex and chaotic**
Currently, market sales channels are very complex: some are direct sales, some rely on channel networks, some use network plus platform, and some require both network distributors and a large number of manufacturer salespeople to take orders, with distributors only responsible for delivery. To strengthen control over terminals, manufacturers spare no expense but are at a loss. The complexity and chaos of channel network operating models have significantly reduced the effectiveness of channel networks.

**Low-price competition among distributors within the same region**
Whether to compete for customers, increase sales, or squeeze out and eliminate competitors selling the same products within the region, distributors engage in low-price competition among themselves. The resulting harm is second only to cross-regional low-price dumping. It is a form of civil war, with the consequences being: distributors have no profits, secondary wholesalers have no profits, channels are blocked, and brands decline. This reflects the low quality of short-sighted, profit-greedy, and combative behavior in the market sales channel network.

**Going their own ways, preferring to be a chicken head rather than a phoenix tail**
Individual operations, breaking up into smaller units; setting up their own businesses, dominating their own territories; selling as much as they can regardless of profit or size, either complacent and unambitious, or resorting to any means to gain petty advantages.

**Distributors lack the ability to operate brands and control the market**
Due to limitations in scale, strength, quality, management level, and business awareness, distributors are unable to achieve integrated marketing, maximize advantages, minimize costs, and combine comprehensive strengths. Even with national famous brand products in hand, they cannot make local consumers recognize them and achieve high market share. Even if they have some sales volume locally, stockouts and price chaos still occur, and they lack the ability to control the situation.

**Distributors fail to correctly establish the concept that building a secondary wholesale network is essential for sustainable regional sales**
Their attitudes toward building a secondary wholesale network are: First, they would rather not increase sales than share their market with others. Second, they compete with manufacturers for market control. Without a complete secondary wholesale system, the market is filled with scattered and weak players, and manufacturers can only control the market by relying on them; otherwise, it would be a mess. Third, they fear raising tigers to invite trouble.

**Distributors' loyalty to manufacturers is declining**
The trust between manufacturers and distributors is deteriorating. Everyone knows that only through manufacturer-distributor cooperation can the market be done well, and the best coordination between manufacturers and merchants (including channels and stores) can guide and create consumption. However, many distributors currently do not operate according to manufacturers' standards, and even payments are hard to collect. Some brand manufacturers do not treat distributors on an equal and mutually beneficial basis, unilaterally changing agreements and breaking promises. Some large supermarkets and prime locations bully their partners, with exorbitant entry fees and display fees.

**The pace of opening up China's market channel network to the outside is relatively slow**
Many advanced foreign channel network operators have not yet entered China's circulation field. Large retail enterprises like Walmart and Carrefour have only entered in recent years, and large logistics distribution companies are even rarer. Our traditional circulation forms evolved from state-regulated allocation markets to contract systems, then gradually opened up wholesale markets, giving birth to a large number of private distributors who set up their own territories, creating a Warring States period in the channel network. The domestic channels are spontaneously revolutionizing under the push of the market economy, so the chaotic state of the channel network is understandable.

**Threats from new commercial forms**
In recent years, China's circulation field has undergone profound changes, causing our enterprise distribution channels to exhibit a mix of different systems, types, levels, and operating models. Especially, channel flattening has become an inevitable trend. The rise of new hypermarkets, the emergence of new commercial forms such as direct sales, e-commerce, and large retail terminals, and manufacturers are beginning to say "goodbye" to distributors.

**Distributors caught between terminals and enterprises seem to become a burden to enterprises**
They seem to be the "culprits" hindering product circulation. Many enterprises want to bypass distributors and directly control terminals, implementing intensive distribution plans—enterprises' hands are reaching further, and the areas distributors can control are shrinking. In a word, enterprises are coming to regional markets to compete with distributors for food!

**Enterprises building their own terminals**
Since the 1980s, China's commercial circulation enterprises have gradually been left behind by rapidly growing industrial enterprises. The entire industry has developed characteristics such as "regional fragmentation, small scale, weak management, and poor credibility," which hinder the circulation of industrial products. This has forced some awakened enterprises, represented by the home appliance industry, to embark on building their own sales channels. Many companies have established brand specialty stores, shop-in-shops, or franchise stores, becoming the backbone channels for their product circulation. TCL and Haier are exemplary models.

**Corporate integrity issues constrain the further development of distributors**
The cooperative relationship between manufacturers and distributors is very unstable. In many enterprises, the manufacturer's development history seems like a history of elimination for distributors. Many enterprises advocate "customer first," but do they truly think for their customers? Some manufacturers, to invigorate the market and cultivate a competitive atmosphere, develop several distributors in one region to compete. This is originally a good thing, conducive to a "horse racing effect" and healthy competition, but often the result is that channel distributors fight openly and covertly for exclusive distribution rights, unwilling to yield, using both good and bad means, and in the end, no one gets to do business.

In the early stages of enterprise operation, when products are weak in the market, they use distributors' regional network to "borrow a boat to cross the sea." But once the market is developed, the enterprise grows, brand influence increases, and market share is gained, the enterprise "crosses the bridge and burns it, betraying trust," leaving many distributors sighing and feeling bitter and helpless! The network they painstakingly built for years disappears overnight—so distributors can only choose to protect themselves, constantly demanding policies and fees to compensate for future risks.

Compared to the temptation of high rebates and commissions, distributors care more about long-term stable cooperation with enterprises. Currently, distributors are not "all merchants are cunning," but "all merchants are struggling." They are squeezed between manufacturers and secondary wholesalers, surviving and developing in hardship.

**Market focus shifting downward: from big cities to prefecture and county markets**
Previously, many enterprises focused on big cities as key target markets, setting up sales offices in large cities, or at least provincial capitals. While many enterprises are fighting fiercely for big city markets, some have shifted their market focus to prefecture and county markets, setting up sales offices there. For example, Shuanghui Group has set up as many as 10 to 20 offices in a single province.

Shifting market focus downward is a process of market refinement, which is also reflected in the selection of distributors. As sales offices move down, customers also move down, and enterprise policies toward distributors change accordingly, from focusing on major distributors to supporting second- and third-tier distributors. For example, Coca-Cola and Midea's current channel strategy is "weaken first-tier (distributors), strengthen second-tier (distributors), and win third-tier (terminal merchants)." Master Kong implements a "channel intensive cultivation" policy, setting up its own sales offices, using distributors as transit warehouses, focusing on supporting secondary wholesalers, sending personnel to help them take orders and deliver goods, and strengthening control and service over retail terminals. This makes distributors feel anxious and uneasy.

**Enterprises have fully entered the "era of meager profits," and "breaking up" has become a helpless choice for manufacturers and distributors**
First, the old model is difficult to adapt to new requirements. The development of China's market sales channels has gone through stages from emphasizing manufacturers to emphasizing distributors, and finally to emphasizing consumers. The traditional channel model restricts direct communication between manufacturers and consumers, affecting channel efficiency. Second, the characteristics of the meager profit era, such as oversupply, fierce competition, price declines, and profit reductions, make cost control and concentration of distribution profits inevitable.

**Chaotic enterprise network channel management causes huge losses for distributors**
Chaotic enterprise network channel management not only wastes marketing resources but also leads to blindness in market planning, execution, promotion, monitoring, and feedback, resulting in significant operational risks and making it difficult to form a virtuous cycle of information flow, logistics, financial flow, and promotion flow, seriously affecting the profits of both enterprises and distributors. For example, a cement factory in Zhejiang, due to poor planning and management, started a second production line during the peak cement sales season last summer and autumn, causing power supply shortages. They then diverted power from the first line to the second, reducing cement output and causing supply shortages to distributors, leading to queues for cement and missing the peak sales season, severely impacting distributors' sales and profit commissions.

**Flattening of sales channels**
Around 1998, a channel revolution aimed at shortening channels and strengthening service functions quietly emerged in China. Although not spectacular, many enterprises were deeply involved, and it had a profound impact on the Chinese market: models such as deep distribution, direct sales, and online sales became increasingly mature, and the radiation-style free trade model of distributor models was impacted again.

Many enterprises are flattening their sales channels, meaning channels are getting shorter while sales outlets are increasing. This leads to multi-headed distribution, where enterprises cannot control the market, cross-dumping is serious, and distributor profits are threatened. Once the market experiences temporary sluggish sales, panic-driven price cuts occur.

**One-sided emphasis on the role of terminals**
One-sided emphasis on channel flattening, overly frequent channel policies by manufacturers, and constantly changing and intensifying terminal promotions. Manufacturers' excessive promotion policies for channels and terminals lead to market distortion, vicious low-price competition among manufacturers, and over-reliance on promotional policies at all levels of sales, like drug addiction—no promotion, no sales.

**Pressure from enterprises**
Manufacturers are always enthusiastic about distributors' inventory and funds, wishing to swallow them all. Therefore, during off-seasons, they often pressure distributors to stock up and collect deposits, causing excessive inventory and capital pressure on distributors, affecting cooperation.

In summary: the current channel network is fragile and cannot withstand shocks. China's entire logistics and distribution system is backward, chaotic, and lacks integration. No modern, professionally managed large-scale logistics distribution enterprise has yet emerged in the Chinese market. It is inevitable that the post-WTO landscape will bring about new changes. But will we change through internal awakening, or only after suffering heavy blows and paying a painful price? Let's wait and see.

****This platform will soon organize distributor friends interested in transforming to B2B platform e-commerce to visit and learn from some well-performing domestic B2B platforms. Friends who want to join the editor can add the editor's WeChat. Please reply with the keyword: 考察 when adding.****

****************-**************** END-

The best domestic FMCG distributor learning platform
Focusing on providing professional, practical, and actionable tutorials for enterprises and distributors
Committed to helping Chinese FMCG distributors grow rapidly

**The most professional and practical knowledge base in the FMCG industry**
Reply with the red number below to get the corresponding content
Reply with number 1 to view the complete knowledge base
| **001** Excellent article selection | **002** Distributor market operations | **003** Terminal visit management | **004** Sales supervisor skills | **005** Sales improvement techniques | **006** Channel expansion | **007** Managing distributors | **008** Distributor development | **009** Distributor internal operations management | **010** Team management | **011** Efficient distribution techniques | **012** Sales manager's eighteen skills | **013** KA operation methods and strategies | **014** First lesson for new salespeople | **015** Internet, brands |
[Long press QR code to follow]


---

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

Contact: zhaobo258@gmail.com · +86 158 5481 7671