Click to read the original article for details Zhicheng Trading, located in Linquan County, Anhui, transformed in 2018 from a multi-category, multi-brand distributor into a single snack food category supplier. With over 2,000 retail outlets, 11 salespeople, and 1,500 SKUs, annual sales growth exceeded 30%, and self-operated categories grew over 100% annually. After 10 years in the distribution business, the company has grown steadily by leveraging brand growth dividends, exploring transformation, and adjusting its business structure.
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After Surviving, Specialization Beats Diversification Wang Lei's distribution business started with selling Wrigley's gum. He paid an initial 50,000 yuan for goods, but after a month, he realized that following the manufacturer's suggested pricing often resulted in higher prices than those of parallel importers and secondary wholesalers in the area. As a local distributor, Wang Lei began analyzing the strengths and weaknesses of both sides. "Their visit cycle was once every 7 days, but since I was closer, I could visit every 3 days. In terms of pricing, I matched their prices and won through the gap in visit frequency." Through this approach, wholesalers found they couldn't sell their goods, sales dwindled, and eventually they stopped coming. After a few months, he won back the market.
With stable cooperative clients, the number of brands he worked with gradually increased, bringing pressure from manufacturers' fees and sales targets. Through data analysis, he identified the root causes:
First, from a profitability perspective, beverages accounted for 50%-60% of capital but contributed only 30% of profits—a severe imbalance in input-output. Second, compared to beverages, snack foods required little effort to drive sales growth and minimal maintenance. Monthly targets were met consistently, with nearly 20%-30% growth each month, high gross margins, and good turnover.
Through this comparison and analysis, Zhicheng Trading began its transformation, focusing on the snack food category.
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From Multi-Brand to Snack Food Category Distribution: A 25% Selection Rate For the snack food category, product selection is key. Wang Lei first divided sub-categories such as biscuits, pastries, candies, chocolates, and nuts into several major categories, then centralized purchasing by category. For example, for candies, he would purchase 200-300 SKUs from wholesale markets and distribute them to stores for batch testing.
After 2-3 months, based on salesperson feedback and sales data, he identified which products moved. From 2017 to 2019, over two years, adding one category at a time, Zhicheng Trading narrowed down from 3,000 SKUs to 700-800 SKUs, a selection rate of about 25%.
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Future Directions for Distributors Zhicheng Trading successfully transformed from a multi-brand, multi-category distributor into a single snack food category distributor. Although sales experienced short-term fluctuations early on, both gross and net profits showed rapid growth.
New Distribution previously predicted that in a regional market, the mainstream forms of distributors would fall into three categories: First, brand distributors, who form deep partnerships with an upstream brand, becoming its local service provider and directly operating retail outlets. Second, category distributors, who focus on a specific category, operate it deeply, and become the local supplier for that category. Third, channel distributors, who provide one-stop supply around retail or catering outlets.