---
title: "80% of Distributors Will Be Eliminated! Where Is the Way Out for Distributors in the Era of Integrated Production, Supply, and Sales?"
description: "The whole society is facing insufficient effective demand, which will intensify in the context of East-West confrontation. With the increasing risk of a US economic recession, the current economy is at a historic turning point. Many people around us are still in a state of confusion. For the sake of business, most of us maintain meager profits, hoping that the market will reverse after a few years. If you think this way, it shows you are still living in the old mindset. It is difficult for people to break free from our fixed thinking patterns, as this is determined by our natural physiological structure; we are inherently prone to laziness in thinking."
author: "戚特"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2025-04-25"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/d1Kw5QOBGZXhSLG0XTvMWA"
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---

# 80% of Distributors Will Be Eliminated! Where Is the Way Out for Distributors in the Era of Integrated Production, Supply, and Sales?

> The whole society is facing insufficient effective demand, which will intensify in the context of East-West confrontation. With the increasing risk of a US economic recession, the current economy is at a historic turning point. Many people around us are still in a state of confusion. For the sake of business, most of us maintain meager profits, hoping that the market will reverse after a few years. If you think this way, it shows you are still living in the old mindset. It is difficult for people to break free from our fixed thinking patterns, as this is determined by our natural physiological structure; we are inherently prone to laziness in thinking.

The whole society is facing insufficient effective demand, which will intensify in the context of East-West confrontation. With the increasing risk of a US economic recession, the current economy is at a historic turning point.
Many people around us are still in a state of confusion. For the sake of business, most of us maintain meager profits, hoping that the market will reverse after a few years. If you think this way, it shows you are still living in the old mindset.
It is difficult for people to break free from our fixed thinking patterns, as this is determined by our natural physiological structure; we are inherently prone to laziness in thinking.
But to live our lives well, we must first understand what era we are in. Without understanding the macro environment and economic cycles, we are just performing in a snail's shell, self-absorbed.
**Under the Background of Integrated Production, Supply, and Sales**
**The Role of Distributors**
What era are we living in? How should distributors survive in the new era?
As we have said before, under the background of insufficient effective demand in the whole society, the FMCG industry will inevitably enter an era of integrated production, supply, and sales.
The reason for the emergence of integrated production, supply, and sales is that with the intensification of market competition, the three parties—production, supply, and sales—begin to merge their boundaries for better competition and survival.
This integration transforms the traditional game relationship among brands, distributors, and retailers into a search for new cooperation methods, leveraging "external forces" to create new competitive advantages. Ultimately, deep collaboration across the supply chain breaks the traditional game relationship and builds a consumer-demand-oriented integrated system of production, supply, and sales.
In this contraction cycle, the positions of all three parties are weakening, but the supply side (distributors) is precisely the link with the least bargaining power in the industry chain, so distributors are the first to face the pressure of revolution. Nevertheless, interestingly, distributors will not be completely revolutionized.
First, from a long-term perspective, four phenomena in the industry are bound to occur.
  * Retailers will tend to directly connect with brands, compressing intermediate links.
  * Discount stores and some supermarkets will build their own logistics systems, fully controlling pricing power.
  * The pace of horizontal and vertical integration in the industry chain will accelerate, leaving less and less space for small distributors.
  * Data capabilities will gradually replace the traditional relationship capabilities of middlemen.
So what kind of distributors will not be revolutionized?
Under the background of integrated production, supply, and sales, only two types of distributors can survive. **One type is large trading companies or supply chain enterprises, and the other is small distributors with distinctive features.**
The first type of distributor enterprise, in addition to having a large scale, also requires high team capabilities. That is, they need to have strong capabilities to empower both brands and retailers in both directions.
For brands, distributors are no longer just channels for moving goods and stocking inventory, but participants in product planning, demand forecasting, and data-driven distribution network construction. They also unify commercial and logistics flows, integrate warehousing, cold chain, and inventory management, helping brands save costs across the entire supply chain.
For retailers, distributors go deep into category planning and even product development, co-developing new products and customizing SKUs with brands, and some even get involved in OEM manufacturing to help retailers develop private label products.
The second type of distributor enterprise focuses on a region or special channel, providing more differentiated categories or products, such as niche products, seasonal items, or local goods, forming barriers through category expertise or high-frequency service/relationships.
**The Circulation Revolution Under Retail Transformation**
The reason for this pattern is the changes in the downstream retail industry.
From the endgame perspective, I believe there will be four different types of retail enterprises in the market, categorized by their supply chain models:
**First, all products are directly sourced from brands plus their own merchandising, i.e., complete removal of distributors.**
These enterprises are typically discount channels, or extreme manufacturing retailers, or retailers like Yonghui that are in the stage of supply chain reform.
**Second, most products (over 70%) are directly sourced from brands or OEM, with a small portion (under 30%) supplied by distributors.**
Typical enterprises are manufacturing retailers, or adjusted supermarkets returning to normal (leaning towards SPA route).
**Third, some products (20%-50%) are directly sourced from brands or OEM, with some products (over 50%) supplied by distributors.**
Other chain supermarket systems or retail formats pursuing a more "enriched experience."
**Fourth, all products are still supplied by distributors.**
This refers to non-chain retail enterprises, such as non-chain mom-and-pop stores, supermarkets, and convenience stores. Of course, we understand that this type of retail enterprise will see its share nearly disappear in a longer-term perspective.
In other words, the retail enterprises that will still need distributor services in the future are only the second and third types.
The second type of retail enterprise will open up a portion of product supply to distributors with "specialty product" capabilities or local distributors.
The third type of retail enterprise will cooperate with large third-party supply chain companies to maintain price competitiveness, while also cooperating with small specialty distributors to maintain freshness and novelty in products. Of course, most products will be directly sourced from large supply chain companies.
So we see that the core reason why the second type of specialty distributors can still survive is: "quality retail" is difficult to achieve full category coverage solely through their own product teams; there are always some shortcomings and gaps. In the face of end-consumer competition, consumers are becoming more and more picky, demanding more "surprises" and "freshness." This provides opportunities for professional category service providers.
Other distributor/service provider teams lacking distinctive features will likely be gradually integrated by the first type of large distributors. What ultimately remains in the market will be large supply chain enterprises with strong scale advantages and efficiency.
As a surviving large distributor, you not only have price advantages and the lowest fulfillment costs in the industry, but also a series of "soft strengths."
This "soft strength" can be described in one simple sentence: better able to handle "business that customers find troublesome."
On one hand, enterprises help brands and retailers complete "work that they can do themselves but find troublesome"; on the other hand, by providing added value to brands and retailers, they free up more resources and energy for more valuable areas.
In the future, if distributors only serve the function of product circulation, they cannot survive. Only by thinking from the perspective of brands and retailers, and helping your customer enterprises with limited resources, can you have the possibility of surviving the industry transformation cycle.
Next, we will focus on the core capabilities that the first type of distributor needs to survive.
I believe there are four strategic points.
**1. Comprehensive Analysis of Consumer Demand**
Distributors' business strategies must transition to a consumer-centric approach. Of course, distributor enterprises' customers are retail enterprises, not directly consumers, but ultimately, distributors reach consumers through retailers.
In the past, this point was not emphasized in the daily operations of distributor enterprises, leading to few distributors proactively analyzing consumer needs and purchasing behavior. However, consumer needs and purchasing behavior are undergoing significant changes now, so your capabilities need to be upgraded to match.
Therefore, having certain data capabilities, being able to grasp consumer changes, build data assets, and use them to provide sales solutions to retailers will have significant strategic value.
2. Revolution on the Product Side
Start thinking about enhancing product professionalism, differentiation, and uniqueness. The biggest problem in China's FMCG distribution industry today is the large amount of unsold inventory and stockpiles under the premise of insufficient effective demand.
On one hand, overall consumption will gradually decline; on the other hand, consumers will become more picky and propose more segmented needs that are not yet met.
So an important business approach is to pursue professionalism by narrowing the category scope and provide comprehensive assistance in areas that most traditional retail enterprises are unfamiliar with. Of course, you can even go further into product development and become an OEM partner for retailers.
3. Forming "Retail Support" Sales Capabilities
The vast majority of distributors in China have not yet escaped traditional push sales, such as relying on distribution and rebates. But future distributors need to be able to sell products from the retailer's perspective.
4. New Logistics and Supply Chain Capabilities
The core competition for supply chain enterprises and distributor enterprises is the lowest fulfillment cost in the industry, while also helping your customers achieve the "lowest fulfillment cost." The key here is that order management, inventory management, and delivery management systems can be coordinated with brands and retailers, i.e., the ability to connect data across the entire chain.
Japan's Integrated Production, Supply, and Sales and Distributor Transformation
Today, the country that has studied the integration of production, supply, and sales most thoroughly is undoubtedly Japan.
Moreover, although the structure of the distribution industry is not exactly the same, Japan's process of integrating production, supply, and sales has significant value for Chinese counterparts.
China and Japan have high consistency in industry structure and industrial cycles, such as:
  * Historically, there were a large number of small and medium-sized distributors.
  * The distribution chain is long, with at least two levels, just like China.
  * The industrial cycle has experienced or is currently experiencing a contraction period.
When Japan has basically emerged from this contraction cycle, from the perspective of the commercial distribution industry, the characteristics of the industrial structure are:
  * Small and medium-sized distributors have basically exited the market.
  * The distribution chain has been compressed to only one level.
  * Surviving distributor enterprises are highly embedded in the production-supply-sales system.
The surviving distributors, on one hand, are large distributors with nearly comprehensive capabilities (data, business intelligence, logistics efficiency, product development, etc.) such as Kokubu, Itochu, and Mitsubishi; on the other hand, they are small specialty distributors with specialized capabilities, such as Asahi Foods and Yamahoshiya.
As shown in the figure below:
(1) Large distributors can develop both horizontally and vertically, forming comprehensive "customer/consumer service" capabilities, able to support both retailers and brands, while also going deep into the production side to cooperate with retailers in OEM development, linking both ends of production and sales by integrating logistics and consumer data.
(2) Small specialty distributors strengthen and upgrade capabilities around a single category or region, acquiring factories in their advantageous categories to cooperate with retailers in OEM development, and some even open their own stores, forming a retail + wholesale business model in the region.
The attempts of Japanese distributors can be confirmed in the figure below.
So going to Japan to look at retail and supermarkets is just one aspect. To study Japan, it is more important to deeply understand the changes in the upstream supply chain, **how Japanese retailers organize their supply chains**.
We plan to organize a study tour to Japan in June this year, and the design concept of this tour revolves around the integration of production, supply, and sales.
Therefore, we have selected the upstream supply chains of three different types of retail enterprises for analysis: Kobe Bussan (Business Supermarket), 7-Eleven, and Aeon.
These three companies correspond to the first three types of retail enterprises we discussed.
  * Kobe Bussan (Business Supermarket) is an extreme manufacturing retailer, completely independent of external distributors, internalizing logistics capabilities and embedding them into its service provider, Access.
  * 7-Eleven is a classic manufacturing retailer, with most products directly sourced or self-produced, and a small portion cooperating with distributors.
  * Aeon is a traditional retailer in the general sense, with a portion of private label or direct sourcing, and a portion cooperating with large distributors.
By deconstructing the upstream supply chains of retail enterprises, we can understand how distributor enterprises can better embed themselves into their new systems in the future. So going to Japan will undoubtedly give you some inspiration.
If you also want to participate, the figure below shows our study tour itinerary and plan. Welcome to scan the QR code to add WeChat and contact our colleagues.


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