"90% of daily chemical distributors should center all business management on sell-through." This statement was made by me recently at a brand's distributor annual meeting. Combining my recent thoughts and research, I believe it applies not only to daily chemicals but also to condiments, snacks, and beverages. In the past, distributors made money by securing a good brand and growing with it, naturally expanding their trading business and profits. But now making money is harder: top-tier brands offer sales volume but no profit—pure grunt work. Non-top-tier brands offer gross margins but no sales. The gross margin may look like 30-40%, but it doesn't end up in your pocket because products don't sell through. For distributors to make money or survive future trade circulation evolution, they must possess one of two capabilities: either store distribution capability or store sell-through capability. Of course, this doesn't mean you need both; you can have just one. Different capabilities underlie different business models. Let's analyze each.
Store Distribution Capability Store distribution—yes, you read that right—is indeed a capability. But it's definitely not what many distributors think, like covering 1,000+ outlets with 99% no-dead-angle coverage. Clearly, that's not store distribution capability, or rather, not core competitiveness. The store distribution capability mentioned here refers to full-category distribution coverage of a specific channel type. Let me give two simple examples: For BC convenience stores like mom-and-pop shops, can distributors serve as one-stop suppliers across categories like snacks, beverages, milk, condiments, and daily chemicals? Another example: For local system stores and CVS convenience chains, can distributors achieve category exclusivity in paper products, becoming the sole supplier within the category? That's what I mean by store distribution capability. It's about making money through efficient store supply via scaled distribution coverage, scaled warehousing and delivery fulfillment, and scaled category assortment. Focus on distributing mainstream bestsellers, with little or no non-bestsellers; products have strong self-ordering rates and high turnover. Many B2B platform cases reported by New Distribution, such as Kuaile Zhanggui, Jiayun Yunshi, and Rongcheng Yigou, are typical examples of strong store distribution capability, achieving sustained growth through operational efficiency advantages. Although this is one direction for distributors to build core competitiveness, frankly, most distributors currently lack such thinking and capability because over the past two to three decades, under brand manufacturers' channel dominance, distributors' business starting point has been brands, not stores or categories. This leads to a lack of category management awareness when developing toward "store distribution capability," not only within their own category but also cross-category. Additionally, scaled store distribution requires strong application of digital tools. Manual order taking is inefficient. Online ordering, system-generated orders, and digital warehousing and delivery are all infrastructure for achieving scaled store distribution. Building store distribution capability poses significant challenges for many distributors today.
Store Sell-Through Capability Store sell-through capability, in short, is the ability to sell goods, especially new or non-bestselling products. Store distribution capability relies on scaled distribution to gain operational efficiency advantages and make money. Store sell-through capability, on the other hand, relies on selling new and non-bestselling high-margin products to make money. For core single products or bestsellers from top-tier brands, margins are around 5-10 points at most; after deducting labor, vehicles, warehousing, rent, and capital costs, you basically don't make money—just meet targets, get rebates, and make friends. Such business is unsustainable for distributors. To continue and thrive, you must be able to sell high-margin products and new products. New products offer margins from 20 to 40-50 points. Of course, high gross margins look attractive, but getting them into your pocket is no easy feat. Why can you sell well when others can't move slow-moving inventory? It tests consumer interception, conversion, and a series of other efforts. Taking the daily chemical category as an example, the mainstream offline channel is supermarket system stores. To improve in-store sell-through capability, the core is building a frontline salesperson system. This frontline salesperson system includes not only comprehensive salespeople but also temporary promotions and undercover promoters, extending management perspective to both full-time and part-time promoters. Only with consumer interception and conversion capability can you claim to have sell-through capability. Of course, this applies to daily chemicals; the sell-through logic for other categories differs. Improving store sell-through capability is easier than improving store distribution capability. Moreover, under past brand influence and guidance, many distributors have gradually developed store sell-through capability. Through the combination of promoting high-margin non-bestsellers and distributing low-margin bestsellers, overall operations continue to improve. However, overall, high-margin non-bestsellers still account for a relatively low proportion of the business structure—bestsellers account for over 80%. Further adjustment is needed to enhance sell-through capability. Regarding the two capabilities of store distribution and store sell-through, at the 8th China FMCG Innovation Conference from April 6-8, New Distribution will host two forums: the "Regional B2B Rise Special Session" and the "Distributor Digital Upgrade Special Session," inviting 12 practical distributor owners to deeply share their thoughts and practices on store distribution and sell-through in their trading businesses. Interested friends, don't miss it!