In the past period, I visited some distributors. With declining demand and recurring pandemic outbreaks, everyone genuinely feels that business is tough. However, these distributors' businesses not only remained unaffected but also continued to grow, with some even achieving annual growth of tens of millions in an ordinary prefecture-level city. Growing against the trend is no easy feat! Although they all grew, the reasons differ. After in-depth understanding, we found there is much to uncover. We say, results are important, but the process of achieving results is more important; growth is important, but knowing the type of growth you have is even more important! Why talk about growth types? Because purely from the numbers, there's no difference. But with deeper analysis, you'll find that the same growth of 10 million has completely different value. This article shares my observations. Furthermore, why do people say they can't make money? What kind of business are distributors really in? Which type of distributor will stand out in the future? Read patiently, and you might gain a new understanding of your business.

01

"Dividend"

The recurring pandemic has caused difficulties for many distributors' businesses. However, some distributors have achieved growth several times their usual during the pandemic! After interviewing several distributors, they all mentioned a common reason—being on the supply guarantee list. Such growth actually stems from a "dividend." Why? The essence of a dividend is a temporary supply-demand imbalance. Pandemic lockdowns caused supply difficulties, but demand didn't decrease; it even increased significantly due to hoarding, creating a temporary supply-demand imbalance. At this time, if you can get on the supply guarantee train, you can stabilize your business, and even achieve growth several times the norm. Some distributors, due to the characteristics of their product categories, such as rice, flour, and cooking oil, are more likely to be on the supply guarantee list. Others leverage their logistics advantages to partner with other supply guarantee units and seize such opportunities. To be honest, distributors who can seize such opportunities are already outstanding among their peers. But know this: it's good to enjoy a dividend, but dividends don't last forever; you can't treat it as the norm. This sentence is very important. Truly understanding it gives you a clear perspective on many things. Many things we tend to attribute to "skill" or "ability" are, in the end, "dividends." For example, Taobao over a decade ago, Pinduoduo six years ago, Douyin and Kuaishou four years ago. With the rise of any platform or model, early entrants find it easier to gain attention and exposure, and thus easier to succeed. The same goes for trading businesses. Because of some opportunity, you get a brand's agency, the brand grows, the market has natural increments, and as long as the distributor does the moving work, they can make money. Many distributors started their businesses in the past, in a sense, by enjoying dividends. Why do people say business is hard these days? Essentially, the era when you could do well just by relying on natural market growth is over. In other words, the dividend is gone. Remember, dividends are always temporary—though "temporary" here is relative—it more truly means, because new supply enters, it will eventually be leveled; if you don't do it, others will!

02

"Wages"

Besides "dividends," some distributors have achieved growth by expanding categories and taking on new brands. This is something many distributors are pondering now. The main brands they handle have already done well in their regions, the market capacity is limited, and to grow further, they can only expand categories. If the team is capable and pushes harder, they can also bring considerable growth. But what is the essence of such growth? It's because they put in more effort and got a "wage increase." What does that mean? For example, with a 10-point margin, after deducting warehousing costs, logistics expenses, personnel wages, and capital costs, and then doing promotions, a net profit of 2-3 points is good. To earn this money, you have to stock up to meet targets, cooperate with various policies, even if unreasonable, and force a smile. Many distributors say they feel "frustrated" and "without dignity." But why do you still do this business? Simple, it's the same as a worker earning a salary but not daring to quit! Distributors are essentially outsourced teams hired by manufacturers to get products to terminals. Someone has to do it, and the money has to be spent. You rent warehouses, hire employees, advance funds, and handle delivery. On the surface, you earn from the price difference, but in reality, you're just earning a "wage" paid by the manufacturer. If you represent multiple brands, multiple manufacturers pay you wages. To earn an extra wage, you have to expand your team. Operating new categories well, serving new brands, and management efficiency may have synergies, but the essence is the same. So we say, growth through category expansion is essentially earning a "wage increase" by working harder. Recognizing this is important. Distributors often say that agency business doesn't make money, and that's quite true. Because making money and earning wages are different: profit is earned, wages are earned. As an outsourced team of the brand, the financial "profit" is, from a business perspective, actually the "wage" society pays you. Developing by enjoying "dividends," but because you do basic work with high substitutability, you can only earn a "wage" through hard work. This is the state of the vast majority of distributors. So, is it inevitable that distributors must accept this state? Of course not.

03

"Profit"

Among the distributors I recently visited, there are cases that broke through traditional trading models by building their own B2b platforms, achieving double-digit growth on a scale of tens of millions. The speed is terrifying! How did they do it? Traditional trading businesses represent a few or a dozen brands, but building a B2b platform can directly connect thousands of terminals, centralize demand through large-scale coverage, and then establish business relationships with more upstream manufacturers, helping hundreds of brands complete large-scale distribution of thousands of SKUs. This type of growth is fundamentally different from the types mentioned earlier, and it has the highest value. Why? Because it stems from the most fundamental driver of business—efficiency. What is efficiency? Let me give an example. Suppose a product gives the manufacturer a margin of 5 yuan, and someone needs to handle warehousing, transportation, and delivery. The average cost for distributors is 4.8 yuan, and everyone is similar. What is the extra 0.2 yuan? It's the "wage" the manufacturer pays the distributor. But with refined management, standardized processes, and digital tools, your cost can be 4.6 yuan, and the extra 0.2 yuan is your "profit." The ultimate competition in business is efficiency. If you don't do it, others will, and you just earn a wage. Because of efficiency advantages, if you don't do it, others can't, and only then can you earn "profit." The growth brought by B2b is essentially an efficiency advantage built through digital tools, large-scale coverage, and distribution. Benefiting consumers is the task of business, and high efficiency replacing low efficiency is always the direction of business progress. Growth through efficiency advantages is the more valuable growth. Why? Efficiency advantage—earning profit—providing better service—obtaining large-scale business—further reducing costs is a positive feedback system. It helps distributors build true core competitiveness.

04

"Business Rationality"

We have analyzed the different sources of growth and the business logic behind them. Why do this analysis? In recent years, the term "supply side" has been discussed more. Essentially, because in the past, natural market growth could drive growth, but now we are in an era of stock, and there isn't enough to share. To do well, you must think from the supply side of the enterprise itself. This is like in the past, when exam difficulty was low, even poor students could score 60 or even 80, but now that difficulty has increased, poor students will naturally be eliminated. Only those who are diligent and excellent enough can pass and do well. So how do you become an excellent student? You must operate your business based on business rationality. What is business rationality? In the past, seizing an opportunity, rallying a group, and maintaining good relationships was enough to do business and make money, but now it's not. There are too many monks and too little porridge. You must think of every way to improve efficiency, reduce costs, and provide real value to customers. In the startup phase, you can skip management and processes because getting things done is most important. But when the business reaches a certain scale, with more people and complex processes, management becomes essential. You must shift from relying on personal rule to relying on processes, systems, building organizational capabilities, and using digital tools to improve efficiency and build competitiveness. This is business rationality. Is it difficult to operate a business based on business rationality? Yes! In reality, the vast majority of distributor bosses still rely on primitive business cognition and emotion to drive their businesses. This is reflected in: lacking understanding of the underlying business logic, having no clear understanding of what business they are actually in; having no concept of enterprise management, with rough processes and systems, and low efficiency; having no financial planning, with costs, expenses, and profits being a mess; having an incomplete organization, relying entirely on personal ability, not knowing how to use people, and not daring to use people. And so on. China's distributor community is huge, and the vast majority are locked in such a state. But there are a few distributors who have broken out of this state. The excellent distributor bosses I've met have different personalities, backgrounds, and business directions, but I found a common trait: they operate their businesses with business rationality. They understand the essence of business, build a good corporate governance structure, invest heavily in internal management, make decisions based on business frameworks, and use digital tools to improve efficiency... This is why they stand out, grow stronger, transform, and grow continuously. In the future, 90% of distributors will be eliminated, but for excellent distributors, this is an opportunity!

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