--- title: "2019 is Over, Where Are the Opportunities for Distributors in 2020?" description: "As 2019 comes to a close, distributors are taking stock of their business performance. Beyond preparing for the final sales push, it's time to plan for 2020. Opportunities lie in category expansion and channel development, but only for those with a solid foundation in direct store coverage and brand partnerships." author: "袁来" publisher: "New Distribution" email: "zhaobo258@gmail.com" telephone: "+8615854817671" published: "2020-01-02" categories: "Dealer Operations" language: "en" canonical: "https://xinjignxiao.com/en/articles/2019-is-over-where-are-the-opportunities-for-distributors-in-2020-d691ebb5/" markdown: "https://xinjignxiao.com/en/articles/2019-is-over-where-are-the-opportunities-for-distributors-in-2020-d691ebb5.md" original_source: "https://mp.weixin.qq.com/s/xZZHj2d_Ftg8xoDoedgTsA" translation: "https://xinjignxiao.com/zh/articles/2019%E5%B7%B2%E7%BB%8F%E7%BB%93%E6%9D%9F-2020-%E7%BB%8F%E9%94%80%E5%95%86%E7%9A%84%E6%9C%BA%E4%BC%9A%E5%9C%A8%E5%93%AA%E9%87%8C-d691ebb5.md" attribution: "New Distribution — https://xinjignxiao.com/en/articles/2019-is-over-where-are-the-opportunities-for-distributors-in-2020-d691ebb5/" citation: "袁来. “2019 is Over, Where Are the Opportunities for Distributors in 2020?.” New Distribution, 2020-01-02. https://xinjignxiao.com/en/articles/2019-is-over-where-are-the-opportunities-for-distributors-in-2020-d691ebb5/" usage_policy: "https://xinjignxiao.com/ai-policy.txt" --- # 2019 is Over, Where Are the Opportunities for Distributors in 2020? > As 2019 comes to a close, distributors are taking stock of their business performance. Beyond preparing for the final sales push, it's time to plan for 2020. Opportunities lie in category expansion and channel development, but only for those with a solid foundation in direct store coverage and brand partnerships. 2019 has ended, and a year has passed—time to take stock. Distributors know best how their business is doing. Even if some can't calculate their accounts clearly, they know in their hearts whether they made money. With 2019 behind us, **besides welcoming the last "sales climax," it's also time for distributors to think about how to plan for the coming year.** You can't just take things day by day, nor can you always rely on manufacturers to make some big move to improve your business. Since you're a businessperson, don't pin your hopes on others; thinking through your own approach is far more reliable than waiting for manufacturer directives. Before discussing where opportunities lie for distributors in 2020, let's first talk about two cases from my exchanges with distributors. **-01-** **One Slims Down, One Bulks Up** The first case: At a meeting, I met a distributor named Wang Ming (pseudonym). We discussed the topic of distributors transitioning to B2B platforms. I asked him what region he operated in, what brands he distributed, and his annual sales. > Wang Ming told me that in a fourth-tier city, he represented all first-tier brands, including Yili, Want Want, Master Kong... with annual sales of 80 million RMB. That looked impressive—he should be top-notch in his area. > I continued, "How's your profit?" > Wang Ming paused for a moment. "Profit isn't high, less than 5%. I'm considering whether to cut a brand—it's not making money and it's tying up capital." > I said, "If there's no profit, you should definitely cut it. What's there to hesitate about?" > Wang Ming explained, "Well, I want to cut it, but you know, these are first-tier brands. Once I let them go, it'll be hard to get them back. I've represented them for years, and there's an emotional attachment..." There are likely many similar distributors in lower-tier markets, holding several first-tier brands and being top-notch locally. But when you look at net profit, it's pitifully low. **Distributors that are big but not strong are the most "infuriating"—they have a great hand but play it terribly.** In the end, I gave specific advice, with the core direction being "slimming down." The role of first-tier brands is to build channels and train teams. Having 1-2 first-tier brands is enough to cover target outlets. **Strictly speaking, having multiple first-tier brands across different categories has no synergistic effect. It's even a waste of resources—not fully leveraging the established outlets and customer relationships to sell more high-margin products and boost profits.** The second case: Recently, I met a distributor named Li Hua (pseudonym) in the southwest, who specializes in the daily chemical brand Nice. I thought that with the severe impact of e-commerce on daily chemicals, his business would be struggling. But Li Hua told me their net profit margin reached 10%, and sales were nearly 50% higher than last year. In the past, I thought that for daily chemicals—a relatively low-frequency category—the best distribution model was wholesale-focused, emphasizing KA and downplaying small stores. But Li Hua, dealing with a single brand, directly controls nearly 5,000 outlets, with almost no wholesale business. > At the end of 2019, Li Hua began planning expansion. His approach was to start as a secondary distributor for other brands like Tide and Liby. He told me, "These well-known brands don't require much effort; I can sell them through my existing mature outlets." > > I asked, "Can you make money with these brands?" > > Li Hua explained, "Not directly, but if I grow bigger, I'll have the chance to open a branch and become the distributor for these brands." > > I said, "You're spending time and effort to boost sales for competitors, and you might not even get the brand. Shouldn't you maximize the use of your existing outlets and customer relationships to expand into related categories? For example, kitchen cleaning or household daily necessities?" > > ... This kind of distributor has already done an excellent job. **When planning the next step, they should focus more on horizontal category expansion, designing their own category matrix, and building a moat.** Daily chemicals and general merchandise are strongly related categories. The correct path is to leverage existing outlets and customer relationships to distribute other related categories, then upgrade to become a category distributor. **-02-** **Where Are the Opportunities for Distributors in 2020?** The two cases above—one about a big-but-weak distributor adjusting its product mix, and one about a small-but-beautiful distributor planning its product structure—both highlight that distributors must have a strategic mindset. What you do now isn't just for survival today; it's to live better tomorrow. Where are the opportunities for distributors in 2020? These opportunities are not only for those who are prepared but also for those with a foundation. What does that mean? **If a distributor in a regional market lacks its own sales staff, has less than 50% direct-operated terminal outlets, or doesn't represent any first-tier brands, then the opportunities mentioned below are not for you.** **1. Category Opportunities** Category opportunities can be viewed from two dimensions: the concentration of upstream brands and the capacity of the category. Concentration depends on the share of leading brands—for example, the beverage market is largely dominated by top players. Category capacity depends on consumer demand—for instance, beverages are a trillion-yuan market. **△ High Brand Concentration & Large Category Capacity** Brands in this category are often national FMCG giants, using deep distribution models where the brand directly controls terminals or partners with distributors to do so. In this case, distributors either become mere logistics providers with little commercial capability, or they are deeply tied to the brand through exclusive agreements, leaving little room for maneuver. Of course, from another angle, this is also the "safest and most stable" option. For distributors in this quadrant, **the best approach is to break through the limitations of the current category and expand into categories that can reuse the same channel customers. For example, if you represent Yili, you can extend into snack foods; if you represent Arawana, you can extend into condiments and sauces.** **△ High Brand Concentration & Small Category Capacity** This category is typically dominated by well-known brands in vertical segments, with shallow distribution—KA stores + regional chains + wholesale trade—where manufacturers and distributors jointly build the market. In this case, if a distributor can directly control terminals and has its own sales team, there's great opportunity to extend into related categories and build a multi-category matrix. The "bulking up" case above is exactly this direction. **△ Low Brand Concentration & Large Category Capacity** Two typical large categories in this quadrant are **snack foods and condiments/sauces.** These broad categories can be subdivided into many sub-categories, each with substantial market capacity. > **Snack foods:** candy/chocolate, biscuits, pastries, puffed snacks, nuts and roasted seeds, preserved fruits and dried fruits, dried meat snacks, jelly and pudding, etc. > **Condiments and sauces:** soy sauce, oyster sauce, vinegar, cooking wine, chicken essence and seasonings, seasoning bases, sauces and pastes, grains and dried goods, etc. If a distributor represents brands like Mondelēz, Mars, and Want Want, the opportunity lies in expanding along other sub-categories of snack foods to build a multi-category, multi-brand matrix. Similarly, if you represent Hengshun vinegar and Haitian soy sauce, the same logic applies. **△ Low Brand Concentration & Small Category Capacity** Distributors in this category are often found in local wholesale markets. To achieve greater development, the most appropriate approach is: **break out of the traditional wholesale model by representing first-tier brands in paper products, oral care, laundry, etc., and directly operate terminals. Otherwise, the possibility of growth is almost zero.** Of course, the specific path of category extension also involves the distributor's own positioning. For example, if you distribute both Haitian soy sauce and Hengshun vinegar—first-tier brands in two sub-categories—your extension strategy depends on your goals. If the distributor is profit-oriented, you can extend into small categories like grains and dried goods, which have no strong brands but high gross margins. If the distributor aims to become a category distributor and a local condiment supplier, you must continue to develop first-tier brands in sub-categories and continuously build your category moat. **2. Channel Opportunities** Today, direct-operated terminals are a must-have capability for every distributor. If you can't even do direct operation and still rely on regional wholesalers to cover the market, it's hard to achieve significant growth—unless you're in a mega first-tier city (where deep ties with distributors are common). Regarding channel opportunities, frankly speaking, **the circulation channel is now a red ocean, but the foodservice market and township/rural markets still offer phased opportunities.** The opportunity in the foodservice market lies in supplying ingredients to small B-end clients, not consumers. In the foodservice market, besides the rapidly rising Meicai, Shuhaixun, and Meituan, we see Yihai Kerry also entering quickly, partnering with local distributors to deeply cultivate the foodservice market (small and medium restaurants, high-end dining, fast-food group meals), while also bringing in multiple categories like daily chemicals, condiments, rice, and noodles. According to data, **per capita annual foodservice spending is 2,660 yuan, with ingredients accounting for about 40%. There are 44 foodservice outlets per 10,000 people.** Condiment, grain, and oil distributors should focus on the foodservice channel in 2020. Direct operation is the first step; start with a small entry point, such as small and medium restaurants. Frankly, building a foodservice network takes a relatively long time and requires convincing multiple key decision-makers. Therefore, it's advisable for distributors to "acquire" small local foodservice distributors in small areas to shorten the construction cycle. **Opportunities in township and rural markets.** In the past, townships and rural areas were strongholds for counterfeit goods. But now, as consumers gradually develop brand awareness and road transportation improves, major brands are increasingly penetrating township and rural markets. As big brands gradually infiltrate lower-tier markets, the distribution network pipelines are becoming smoother. **Multi-brand or even multi-category distributors can achieve market penetration through scale, intensive logistics, and multi-category distribution.** But note: the operational tactics for township and rural markets are completely different from urban markets. What are the specific differences? Previously, I communicated with Mr. Pan Lihua from Coca-Cola, and he told me about the differences between township and urban markets: **First, retail terminals in townships do business based on personal relationships; second, consumption has obvious off-peak and peak seasons.** In urban areas, retail outlets run location-based traffic businesses; in townships, they run relationship-based businesses with surrounding customers. Behind relationship-based business, we must not judge a store's performance by its size or location during market expansion. Obvious off-peak and peak seasons refer not only to specific holidays like Mid-Autumn Festival, Qingming, and Spring Festival, but also to local festivals and customs, and even to the planting cycles of local crops. In summary, **the opportunity in urban markets lies in foodservice outlets; the opportunity in rural and township markets lies in multi-category, multi-brand distributors going downstream with scale and intensity to harvest the market.** **Conclusion:** 2019 has ended. While distributors are actively preparing for the Spring Festival peak season, don't forget to pause and think. How should you navigate your business in 2020? As the saying goes, "sharpening the axe won't delay the wood cutting." The days of taking one step at a time are over. You need to do business, but you also need to think about direction! If you want to communicate with the author, add WeChat by long-pressing. When adding, please indicate your company/position and name. If your tip is adopted, you will be paid 400-2000 yuan. --- ## Citation metadata - Publisher: New Distribution - Author: 袁来 - Published: 2020-01-02 - Canonical: https://xinjignxiao.com/en/articles/2019-is-over-where-are-the-opportunities-for-distributors-in-2020-d691ebb5/ - Original source: https://mp.weixin.qq.com/s/xZZHj2d_Ftg8xoDoedgTsA ## 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