---
title: "A Few Small Trends Happening on the Frontline of the Market"
description: "After two months of field visits across more than 20 cities, a veteran FMCG manager observes subtle but accumulating changes in channels and terminals, from the consolidation of fragmented channels in high-tier cities to the resilience of traditional core channels in lower-tier markets, and the varying anxieties and strategies of distributors and retailers by city tier and scale."
author: "许翔 Ryan Xu"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2022-06-27"
language: "en"
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# A Few Small Trends Happening on the Frontline of the Market

> After two months of field visits across more than 20 cities, a veteran FMCG manager observes subtle but accumulating changes in channels and terminals, from the consolidation of fragmented channels in high-tier cities to the resilience of traditional core channels in lower-tier markets, and the varying anxieties and strategies of distributors and retailers by city tier and scale.

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Due to pandemic lockdowns, Lao Wang, who would find it hard to return to work once he goes home, has been on business trips for two full months. From cities to towns, from first-tier to fifth-tier, from authentic RT-Mart in urban areas to imitation "RT-Mart" in small towns, from tea with retail workers to drinks with distributor bosses of all sizes, the more than 20 markets he visited not only spanned all city tiers from 1 to 5 in his jurisdiction but also covered old, middle, and new channels, as well as micro, near, and long-distance scenarios.
Every night, after visiting the market and returning to the hotel, lighting a cigarette and brewing a pot of tea, Lao Wang would jot down a few paragraphs of work insights in his notebook. The more he reviewed, the more he noticed changes occurring in market channels and terminals.
Perhaps these changes are at best micro-trends, but think about it: aren't the big trends that spiral every few years in the FMCG industry born from one subtle micro-trend after another? **These insignificant yet accumulating small changes, developments, and trends may be influencing our industry...**
**1**
**Different City Tiers, Different Channels**
**01** **From "fragmentation" to "consolidation," channel changes in first- and second-tier markets are intensifying.**
In the past few years, Beijing, Shanghai, Guangzhou, Shenzhen, and other first-tier cities have been the core battlegrounds for channel capitalization and fragmentation. Traditional, core, and moat channels have been continuously eroded, transformed, and replaced by new retail and new channels.
Why are channels most competitive and fragmented in first-tier cities? Because big cities have people (the best consumers and highest-quality workers)! The bigger the city, the more it attracts young talent. The core of the internet and FMCG is people, requiring generation after generation of excellent young people to burn energy and creativity to drive every brand upgrade and product line iteration.
The complexity and iteration frequency of channels in second-tier cities are much better than in Beijing, Shanghai, Guangzhou, Shenzhen, and other first-tier cities. After all, new channels and platforms not only need young people to work but also to sell to young people. The "siphon effect" means first-tier cities not only attract newcomers and talent from tiers 3-6, but second-tier cities also don't let them go.
New channels have always been fragmented and competitive, but too fragmented to grow, too competitive to be profitable. Plus, with three years of pandemic and seemingly another three, many fragile new platforms couldn't withstand the pandemic's torment and gradually exited the arena. Now, each track has left only the top seed players.
**02** **Traditional core channels still act as the "controlling big brother," but undercurrents surge in third-, fourth-, and fifth-tier markets.**
In tiers 3, 4, 5, and 6, traditional hypermarkets, chain supermarkets, and wholesale distribution remain strong and active, seemingly peaceful. However, the three waves of B2B, community group buying, and Pinduoduo have broken the price system in lower-tier cities, making money harder to earn than before. Distributors and manufacturer sales staff feel the business environment is much worse than before.
The lower-tier market has been mentioned a lot in recent years, largely because first-tier cities are too "competitive" to move further. But the reality is that business in lower-tier cities is like a "cabbage heart"—distributors and retailers are relatively "weak," engaging in a lower level of competition. The key to cracking the lower-tier market is **to focus on core channels with saturation attacks, while combining proven tactics from first- and second-tier cities to form a dimensionality reduction strike in tiers 3, 4, and 5**, efficiently opening up county-level cities and towns.
**03** **Some channels always want to penetrate all city tiers, but penetration is easy, harvesting is not.**
  * B2B uses subsidies to target small To B shops, aiming to establish shop owners' restocking mindset for cross-city-tier channel dominance;
  * Community group buying later joined with a killer feature of dual benefits for To B and To C, aiming to build consumer-platform stickiness;
  * Pinduoduo combines price and social interaction, directly connecting with lower-tier consumers, targeting the top shopping platform in the sinking market.
These new retail channel platforms all initially wanted to use internet efficiency to solve the age-old problem of FMCG brands sinking to lower-tier markets. No matter how they evolve, they must eventually pass the profitability test. The reality is that these channels' attempts and efforts have already had a significant impact on traditional core channels in lower-tier markets, weakening them.
**2**
**Different Values, Different Paths**
**01** **Cross-border is not easy; distributors' confusion and anxiety**
Offline has been difficult for many years, so distributor bosses often ask: "Many peers are doing community group buying recently; should we also do it?" "I heard opening a store on Pinduoduo is profitable; do we still have a chance?" "Lao Li is doing live streaming on Douyin and recently cleared a lot of near-expiry products. I want to set up a room for live streaming too. Is that okay?"
Whether it's okay or not is based on a clear understanding of oneself! Because **romantic fantasies about any unfamiliar field essentially stem from ignorance of that new thing.**
Indeed, there are more and more professional specialized distributors now, such as Taobao distribution, Pinduoduo, JD POP, community group buying, Douyin, Kuaishou, etc. However, among those who have successfully emerged, they either have platform resources and relationships, years of industry experience, hired professional operation teams, or are young, eager to learn, and capable. Truly transforming from traditional to new retail and e-commerce distribution is rare.
Whether you are a veteran distributor transformed from a department store in the ancient era of the industry, or a newcomer who just switched from being a manufacturer employee to distribution, transitioning from offline to new retail and e-commerce is a grinding cross-border endeavor! Their enthusiasm for actively seeking cross-border distribution is commendable. It's suggested to start with **digital channels** closely related to offline (such as community group buying, labor insurance group buying e-commerce, and bank points drop-shipping).
**02** **Second-generation succession is difficult; new entrants also face challenges**
Having seen many markets, many problems become commonplace. In fact, if a market is sluggish, you can find a hundred reasons, but one reason is always that distributors are not enterprising. Because the first generation of FMCG distributor bosses are aging, even if they still have fighting spirit, their energy doesn't support it. The issue of second-generation succession is becoming more prominent.
Having visited countless distributors, bosses who appear glamorous in front of others always have their own bitter stories when talking about their children. In my experience, the probability of successful smooth succession is less than 10%. This is understandable. Most FMCG bosses rode the industry's wave back then, and now they may not even understand how they succeeded. Such good luck is unlikely to strike your family twice.
**First-generation distributors don't need to worry too much about their children not being able or willing to take over; they should worry about them messing around.** Compared to the real "big second generation," distributor second generations are "small second generations" with relatively fragile wealth. Doing nothing is sometimes safer than always wanting to do something, because future distributor gross margins won't return to previous levels. Preserving the fruits of victory for the next generation is most important.
On the other hand, starting a new business is becoming increasingly difficult. Receivables, personnel costs, compliance, product mix, price impact—any of these factors can give a passionate new distributor a harsh reality check.
**03** **Being a friend of time or a foe of time: the key is mindset**
The more fragmented and numerous channels mean more backdoors for shipments. In recent years, wholesale markets have become active again. Every market has a few "century-old shops" that persist, repeating the same routine of stall and warehouse, just like 10 or 20 years ago. The outside world is colorful, but their world is black and white.
Many young people who once worked under them have long since started their own businesses, and some have even surpassed their masters. This is all normal. In the FMCG world, seniority is the least valuable thing. Being old only marks the passage of time, not business capability.
**The rise and fall of FMCG distributors boils down to mindset.** Whether you are proactive, willing to try, hands-on, or timid, content with small gains, and detached from the market, the results will be streets apart. In the short term, the difference isn't visible, but over time, it becomes a gap as wide as heaven and earth.
**3**
**Different Scales, Different Anxieties**
**01** **Growth worries for retailers in high-tier markets**
This year, the only retailers with good days are membership stores. All other retailers face declining foot traffic. A nationwide layout is no longer a competitive advantage but an operational burden.
Whether national or regional clients, the pressure to stop decline and maintain profitability leads many to panic and try random measures, hoping for a quick fix. But often, the more actions, the worse the results.
Their anxiety and challenges are no less than distributors'!
Should they sell more new domestic products at bare prices or more famous brand products? Should they sell more high-margin, low-traffic standard products or allocate more space to fresh produce? Should they build their own O2O or reluctantly cooperate with head players?
**The higher the city tier, the larger the business scale, the higher the anxiety level.** Billion-dollar bosses appear commanding and graceful, but who sees the ashtray full of cigarette butts in the dead of night...
Whether brand owners can listen more to their confusion and anxiety, and help retailers solve problems empathetically, is the biggest shortcut to building customer relationships. Using this shortcut to seize competitive growth is the survival path for brand owners.
**02** **Rather than being attacked from both sides in first- and second-tier cities, why not stay in a corner?**
"Beijing, Shanghai, and Guangzhou can't accommodate the body; tiers 3, 4, and 5 can't accommodate the soul." Retail bosses in tiers 3, 4, and 5 would disagree. Small towns are their main battlefield and spiritual home! They are determined to take root in China's thousands of towns and villages, being big fish in small ponds, and resolutely not going to big cities to be dried fish.
During the pandemic, I visited the most small cities, passing through many counties and towns. Gradually, I found that the further down you go, the more stable and numerous the supermarket foot traffic, even during weekday daytime. The remaining customers keep coming, not to mention the evening peaks. The spending power of small-town youth and families is far more vibrant than depicted in analysis reports.
The first step in the sinking market is to start with the top three levels of retail stores in counties, towns, and villages! Focus on the Top 10 in counties, Top 3 in towns, and Top 1 in villages, doing the "13 Yao" ("10-3-1"), and you'll have a smooth journey in the sinking market.
**03** **O2O: Hard to love, but you have to love it**
Over the past three years of the pandemic, delivery to home has been good. In major first-tier cities, there are many young people and white-collar workers who are open to new retail. The mindset for home delivery has formed. Retailers, due to generally inefficient and low-traffic self-operated home delivery platforms, have to cooperate with head home delivery platforms. However, platform costs continue to rise, and the mystery of converting in-store foot traffic remains unsolved.
Since O2O home delivery mainly serves urban white-collar shoppers aged 25-40 who are busy with both career and family, this group is mainly concentrated in first- and second-tier cities. Accordingly, retailers in these cities need to integrate home delivery as a necessity. By combining with offline in-store, they can mitigate the impact of declining store visits and capture incremental instant shopping from effective extension of consumption scenarios.
However, shoppers in third- and fourth-tier cities have a relatively relaxed work and life pace, **so their demand for O2O home delivery immediacy is very limited**. Instead, community group buying with next-day fulfillment better fits their shopping mindset and habits.
Therefore, we see many lower-tier retailers are not in a hurry to connect with O2O platforms; on the contrary, they are delaying the penetration of home delivery platforms as much as possible. **On one hand, they worry that the relatively stable store visits will be diluted; on the other hand, they prefer to develop their own mini-programs and systems rather than pay platform fees to home delivery apps.**
**4**
**Different Learning Abilities, Different States**
**01** **Against the backdrop of channel barbaric growth, city business plans have never been so important**
The emergence of new channels means channel mix must change, and business logic must change. As a frontline city manager, should your city business plan also change?
The answer is yes. **"In difficult situations, do addition for survival; for focused breakthroughs, do subtraction"!**
Your city tier, competitive environment, and organizational capabilities determine whether you do subtraction or addition.
  * In high-tier cities, there are many, fragmented, and new channels! Both core and emerging channels need strong promotion and intensive cultivation—do addition!
  * In lower-tier markets, new channels are few but refined. Focus on core channels and selectively choose emerging channels—do subtraction!
Correspondingly, the city business plan becomes more important. With the goal of building a "perfect city," formulate quarterly and annual business plans. Every city combat commander must set "high standards! strong priorities! strict requirements!" for themselves in the plan, and decode to the team as "low standards! easy execution! strict monitoring." Only when the top and bottom share the same desire can they survive and seek breakthroughs.
**02** **Different city tiers require different talent pipelines**
  * High-tier cities use the strongest combination, balancing senior and young;
  * Lower-tier cities use the most stable combination, with local seniors mentoring apprentices.
High-tier cities are "dual-core markets"—the core of traditional channels and the main battlefield for new retail channels! As the birthplace, base, and main battlefield for new retail and new platforms, Beijing, Shanghai, Guangzhou, Shenzhen, and provincial capitals (including Dalian, Qingdao, Suzhou, etc.) should use the strongest and most capable city managers.
On one hand, traditional channels like hypermarkets and wholesale need experienced senior staff with rich social experience to handle existing business. On the other hand, the strongest young people with full energy are needed to connect with fast-paced, ever-changing, late-working new retail platforms. Whether core or emerging, whether new or old, the best cities must deploy the strongest and most capable teams!
Lower-tier cities are "single-core markets"—core channels remain the main feature. Even if community group buying, B2B, and other new retail channels have achieved local penetration, the actual purchasing power still belongs to professional distributors in first-tier cities. Therefore, daily sales operations mainly focus on traditional core channels, with new retail channels playing a supporting role.
Such markets often find it hard to attract excellent non-local young people to work. Even senior sales from outside are only temporary rotations for support. It is very important to value and develop local people, and encourage local senior sales to mentor, teach, and cultivate local young sales talent, forming a healthy reserve. This can promote local metabolism and also provide excellent trained seedlings to higher-tier markets.
**03** **The source of learning ability is a sense of urgency**
In a harsh market environment, waiting to die has no cost; only bravery does!
Traveling along the way, I've seen frontline sales teams in different cities, categories, and manufacturers—some full of combat power, some vibrant, some down-to-earth, some timid, some shaky... What makes them show different states under the same company strategy and resource allocation? Perhaps it's the difference in learning ability. In the current industry environment, only by continuously updating capability systems can one truly fight, endure, and win battles.
**Learning ability is intangible, but urgency is perceptible.** For example, when starting each new channel business, the first contact, first negotiation, first live stream, first delivery, first payment, first review—the knowledge gaps, loss of control, and hasty responses behind these create a sense of urgency, the kind that forces us to learn actively. If you feel this too, it already shows you are an enterprising FMCG person. Of course, if you've patiently read this far, you're already great.
In fact, not only frontline sales teams but also distributor bosses need a sense of urgency and crisis. In the past, channels were relatively single, business was easy, and profits were high. In recent years, channel diversification has caused serious diversion. They must actively learn and seek change together with manufacturer sales, spend more time in the market and in stores, eradicate the wrong idea of relying on manufacturer investment for profit, and earn operational gross profit, management profit, and compliance net profit.
**From the author: Over two months, I broke through layers of barriers and visited more than 20 cities intensively. Working during the day and reviewing at night, I uncovered some small changes in the market day by day, which I summarized into some small trends for peers' reference and discussion.**
**Channels are constantly iterating, and our knowledge system must upgrade too! Interested friends are welcome to scan the QR code below to join the "FMCG Omnichannel Management Exchange Group" to exchange and discuss professional channel topics in spare time.**


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