---
title: "2019, A Large Number of Distributors Are Leaving!"
description: "A distributor in Shandong gave up a brand she had represented for nearly 20 years due to increasing annual tasks and inventory pressure. Another large distributor in eastern Guangdong cut brands like Master Kong and Oreo, and noted that many peers are struggling or closing, with B2B platforms exacerbating the difficulty."
author: "袁来"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-01-26"
language: "en"
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---

# 2019, A Large Number of Distributors Are Leaving!

> A distributor in Shandong gave up a brand she had represented for nearly 20 years due to increasing annual tasks and inventory pressure. Another large distributor in eastern Guangdong cut brands like Master Kong and Oreo, and noted that many peers are struggling or closing, with B2B platforms exacerbating the difficulty.

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Recently, a distributor of a well-known dairy beverage brand in Shandong gave up the agency of a brand she had represented for nearly 20 years. She told the author: "Because the brand's annual tasks increase year by year, distributors must stock up to complete tasks, which leads to serious return of goods and high costs. We just gave up..."
Dissatisfaction with brands and switching brands should be normal for distributors. Under overloaded tasks, there are distributors who can't withstand the pressure every year, and the author didn't pay much attention. But a week later, on WeChat Moments, the author saw a friend Wang Hua (pseudonym), a large distributor in eastern Guangdong with annual sales of 200 million yuan, lamenting: "Yesterday I talked with many friends about the market, and they all expressed concerns about 2019..." I couldn't help but think: "Is it true that distributors had a hard time in 2018?"
Subsequently, the author chatted with Wang Hua. He told the author: "This year, I successively cut brands like Master Kong, Oreo, and Alps. For Xu Fuji, which I've been doing for over 20 years, I had to give up part of the market this year and only do two local districts. I'm relatively lucky. A distributor of Want Want (dairy products) around me took over in May, and now within less than a year, he quit. Not only did he quit Want Want, but he also quit the distribution business altogether and closed down!"
Wang Hua continued, saying that other distributors around him haven't reached the point of closing down, but they've been looking for someone to take over their business for three to four months, and no one is willing to take over. Distributors are still waiting and watching, not daring to take over easily. After chatting with Wang Hua, the author continued to talk with several other distributors, and it can be confirmed that distributors' days are indeed getting harder.
**Deep distribution fails, competition enters zero-sum game**
What are the reasons for the difficulty? Different distributors have different views: some attribute it to rising labor and operating costs, some to brand owners not being supportive, some to intense market competition, some to the overall economic downturn, and some to B2B platforms, among others.
The economic winter in 2018 is an external objective factor, and for the FMCG market, it doesn't have obvious characteristics. We focus on internal causes. Due to China's large population and wide distribution, FMCG brand owners relied on deep distribution to gradually push into the market's depth since around 2003. In relatively blank markets, due to the demographic dividend and the overall consumption upgrade brought by economic improvement, consumption was strong, and market sales showed linear growth, generally in a rising phase. But around 2013, sales growth slowed significantly. There's a day when the mine is exhausted. When the market "pie" has taken shape, brands enter a stage of "grabbing the pie" competition.
In the past, brand owners led distributors, and in marketing, especially the "eight-step visit" in deep distribution systems, they could indeed lead distributors to progress and bring them substantial profits. But when the market entered the "grabbing the pie" stage, deep distribution gradually failed, and naturally some distributors fell behind. In the past, there were rumors of "pressing inventory to create a super regional distributor," but now such stories are rarely heard.
Moreover, the past consumption upgrade was because people had more money in their pockets, leading to a great satisfaction of basic material needs, and consumption demand was undifferentiated. With the advent of the internet era, the marginal cost of consumers receiving information is almost zero. The abundance of information brings cognitive improvement, and consumers pursue personal preferences more. At this time, consumption's stratification, tribalism, and niche characteristics gradually become prominent, and basic consumption needs shift towards respect and recognition.
The mainstream mass market share is gradually shrinking, while the share of sub-mainstream and non-mainstream markets is increasing, behind which is the rise of niche brands.
In a nutshell, when the market enters a zero-sum game, distributors, as the market distributors for brand owners, will naturally be impacted. This is the main reason why distributors' days are hard.
**The emergence of B2B becomes the trigger for business difficulties**
Frankly speaking, the zero-sum competition began when industry growth peaked in 2013, and distributors' difficulties have never stopped. But in the eyes of distributors, why was 2018 particularly difficult? In the discussion with Wang Hua, perhaps we can see a clue.
In the past, without B2B, the traditional distribution system was relatively stable. The game between brand owners and distributors over market investment, market tasks, etc., never stopped. Although there was a game, the price system at the small shop terminal level basically wouldn't be disrupted. The result of the game was either compromise or being replaced, and then a local distributor was established. The switching of distributors was mainly local. Although the market changed people, the traditional distribution price system remained in the hands of brand owners and distributors.
But the emergence of B2B completely broke through the previously closed and stable distribution price system. For the first time, terminal small shops gained the upper hand. Behind this dominance is not only that small shops can choose distributors, but also various B2B platforms. More importantly, B2B provides small shops with a scale, and terminal small shops have multiple price comparison tools. For the same product, they compare with B2B platforms and with distributors.
This brings three direct impacts: 1. Small shops stock less, and distributors' node ordering policies become less attractive to small shops; terminals are always comparing to see which merchant has the lowest price. 2. Price information asymmetry is disappearing, and distributors' practice of using first-tier products to drive high-margin products is gradually being hindered. 3. Cross-regional channel stuffing: regional "profiteers" of first-tier products may sell more than distributors.
Although from the current perspective, the overall ordering share of B2B platforms is still relatively low, the emergence of B2B is like tearing a small opening in the traditional "black box." Although the opening is not large, the light from outside is enough for those inside the black box to see some things clearly.
The era when distributors could "hold onto a big tree" and have a good life is over. Brand owners, under the KPI assessment of preserving existing volume and seeking growth, will further squeeze distributors. **The underlying reason for difficult business is the stock competition, and the trigger for the intensified difficulty in 2018 is the emergence of B2B.**
**The transformation of channels is accelerating**
Maybe distributors think that if 2018 was hard, will 2019 be better? The answer is no.
The current difficulty is not short-term or temporary. In the past, it might have been related to the macroeconomic downturn or a brand's marketing strategy. When the economy warms up, distributors can continue to do well, and persistence is victory; if the brand is not good, switch to another brand, believing that luck will turn. **But the emergence of B2B is completely different from the past. Behind it is the push of advanced technology, and technological change is devastating. The digital supply chain revolution driven by technology will bring the industry into a more advanced business operation model.**
The wave of closures is not alarmist. On January 24, Master Kong Holdings signed a strategic cooperation agreement with JD New Channel. In this cooperation, Master Kong will bring its five major business divisions (instant noodles, beverages, convenience foods, Starbucks, and Pepsi beverages) to the new channel. **FMCG giants represented by channel intensive cultivation cannot remain immune in the face of new technology, let alone distributors in the middle.**
An industrial revolution driven by digital technology is sweeping the offline world. With the disappearance of the dividend of pure online C-end e-commerce, on one side are internet giants, and on the other side are native entrepreneurs who master digital technology. Both are constantly impacting traditional offline fields, hoping to replace inefficient tools with more efficient internet tools, especially evident in the retail sector. From the unmanned shelves at the beginning of the year to the current community group buying, and in the middle of the year, international and domestic chain KAs have successively sided with Tencent and Alibaba.
For a time, both new retail and traditional retail are in a sea of "+ internet." Whether it's innovative new retail scenarios or traditional retail + internet, digital supply chain will be the basic guarantee. In contrast, today's distributors may not even have completed their basic informatization.
**Intermediaries still exist, but distributors will disappear**
A while ago, a distributor who transformed to B2B told the author, "I find that more and more distributors around me are transforming. I feel that the spring for distributors is coming in 2019."
The author joked, "Yes, spring is coming for some distributors, but most distributors will not have spring. In the past, there were hundreds or even thousands of FMCG distributors in a region, but with the continuous penetration of B2B and the higher efficiency of transformed distributors, the scale of business expands, and the total regional distribution pie may eventually leave only less than a hundred. Behind the less than a hundred big distributors is the disappearance of a large number of small and weak distributors. Is this the spring for distributors?"
Some distributors might think, "That's true, but according to you, it might take a long time for a region to have less than a hundred big distributors." But in the author's view, it's not so. Think back to the development of B2C e-commerce. In 2008, Taobao was just beginning to rise, and now? In 2008, smartphones were just "born," and now? Who doesn't have one or even two? **2015 was the first year of FMCG B2B. Only three years have passed, and leading FMCG companies like Master Kong, Coca-Cola, Uni-President, and Nestlé have signed strategic cooperation agreements with B2B platforms. If time goes on a bit longer, what will happen in another seven years?**
Mr. Nie Biquan, general manager of Shaanxi Baihui Trading, made a profound remark: **"Look at ten years, where is the trend? Work for one year, where is the point?"** Starting from 2025, looking back ten years, will distributors still exist in 2015?
As a distributor, even if you don't look at the big trend, you should see the current point clearly. In the author's understanding, the so-called "point" is where the "small trend" lies for distributors in the next two years. What is a small trend? In the ultimate stage of channel transformation predicted by New Distribution, can regional distributors find their position through transformation?
> **1. TP + B2B:** First, combine your own distribution business with the internet (SaaS tools) to become a regional internet-based operator, and extend retail business to the C-end (such as community group buying) to do B2B2C; second, integrate into national B2B platforms and become their warehouse distribution or promotion providers.
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> **2. DC:** Transform into a local unified warehouse and distribution platform, providing localized landing distribution services for national B2B platforms or special channel distributors and second-tier wholesalers, transforming into service providers;
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> **3. TP:** Become a regional category operator, especially in personal care, home care, general merchandise, condiments, and snack categories. Through professional product selection and precise distribution, cultivate the ability to survive in the cracks.
Mr. Zhao Bo, founder of New Distribution, once said, "In the next decade of channel transformation, intermediaries will still exist, but most distributors will disappear." In the coming year, will you still be there? Although intermediaries exist, where is your position? Are you a warehouse distributor, a promoter, or an operator?
New Distribution will hold the **2019 (5th) FMCG + Internet Conference** during the Chengdu Spring Sugar and Wine Fair from March 16 to March 18. This conference will focus on the topic of **"Breaking the Game"** and conduct in-depth discussions with many brand owners, supply chain service providers, distributors, and retailers.
Compared to previous conferences, this summit will be fully upgraded. In addition to the original topics such as **channel innovation, city distribution logistics, and distributor transformation**, it will also add multiple parallel forums on **new marketing cases, IP + FMCG empowerment, community group buying, and innovative retail**. Through three days of ten high-density, high-quality expert sharing and exchanges, we believe every brand owner and distributor can learn the latest business models, expert opinions, and practical methods, find new tools and methods to break the game in 2019, and return to the track of high-speed growth.
**-END-**


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