---
title: "After Warehousing and Distribution Are Stripped Away, What Else Can Distributors Do?"
description: "As national warehousing and distribution platforms grow rapidly, distributors' warehousing and distribution functions are being stripped away. Distributors must transform into operators, whose core value lies in BC-integrated operations and user reach, which cannot be replaced by large platforms."
author: "刘春雄"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2021-03-24"
language: "en"
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# After Warehousing and Distribution Are Stripped Away, What Else Can Distributors Do?

> As national warehousing and distribution platforms grow rapidly, distributors' warehousing and distribution functions are being stripped away. Distributors must transform into operators, whose core value lies in BC-integrated operations and user reach, which cannot be replaced by large platforms.

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**-01-**
Currently, national warehousing and distribution platforms are developing rapidly. Large warehousing and distribution platforms have three major advantages: **scale advantages, integrated delivery, and direct user reach.** Distributors' warehousing and distribution capabilities cannot compare. It is a trend for warehousing and distribution to be stripped from distributors' functions.

**After warehousing and distribution are stripped away, the value of distributors is to become operators that are difficult for large platforms to replace.**

So, what is an operator?

**-02-**
On January 12, 2019, the first "New Marketing New Year Course" was held in Zhengzhou. Mr. Zhao Bo, founder of New Distribution, gave a speech titled "FMCG Industry New Marketing New Channels Digital Transformation Speculation," in which he mentioned a topic: "It is a trend for logistics warehousing and distribution to gradually be stripped from distributors." A participating distributor reacted strongly on the spot, stood up, and directly engaged in dialogue. His general meaning was: If warehousing and distribution are gone, what else can distributors do?

Later, I published this article on the official account under the title "Middlemen Forever, Distributors Disappear."

I can understand: If warehousing and distribution are stripped away, distributors will feel lost. They really don't know what else they can do.

**Distributors' daily work mostly revolves around warehousing and distribution. Without warehousing and distribution, they will feel somewhat lonely, or at least much quieter.**

**-03-**
**Let's restore the work of distributors under traditional deep distribution.**

The reason for warehousing and distribution is orders.

The reason for orders is customer relationships, shelf placement, display, promotion, and sales guidance. These tasks are collectively called promotion.

Early "itinerant merchants" were like caravan sellers. They carried goods and sold while traveling. Some small distributors still do this today. However, this method is very inefficient.

Later, large merchants gradually shifted to a visit-and-order system. Orders were separated from warehousing and distribution, making it much more efficient.

Later, head brands competed fiercely in central cities and felt distributors' investment was insufficient. So, head brands began direct operations (promotion and orders completed by the manufacturer), and distributors became delivery and financing providers.

**This gave some distributors an illusion: Even if other tasks are done by the manufacturer, at least warehousing and distribution can still be done by distributors, because the manufacturer's cost of doing warehousing and distribution is too high.**

**This illusion is fatal!**

**-04-**
**China's channels have always been fragmented. Fragmentation makes specialization difficult, and specialization requires scale support. This is why distributors integrate the four functions of promotion, ordering, logistics, and capital.**

In the digital environment, some tasks remain fragmented. For example, promotion must be localized, and ordering also requires local landing operators. But some tasks must form national public platforms.

Logistics warehousing and distribution is exactly such a task!

**Logistics warehousing and distribution is a typical area that must form scale advantages, and there will definitely be national large platforms in the future.**

In 2014, the B2B boom quickly cooled down, one important reason being the lack of national logistics warehousing and distribution platforms.

**Recently, national logistics platforms have gradually taken shape.** Head brands in some industries are gradually moving in. Midea Group's "Annto Logistics" is a national logistics warehousing and distribution platform. Its services are not limited to 3C products but also include a large number of FMCG products. Annto Logistics has central warehouses, sales warehouses, agency warehouses, and store warehouses in every province, with 5 million square meters of warehousing management area, 138 distribution centers, and over 3,000 delivery and installation points nationwide.

**-05-**
National logistics warehousing and distribution platforms have three major advantages: **scale advantages, integrated delivery, and direct user reach.**

Hundreds or thousands of warehouses nationwide constitute **scale advantages.**

Delivering all brands' goods to stores at once, integrating goods from all order platforms for centralized delivery. This is **integrated delivery.**

From factory directly to terminal or user, bypassing distributors, reducing intermediate links. This is **direct user reach.**

In most industries, products go through about 6 handlings from production line to user. Each handling is a cost and time loss.

Each channel level requires at least one handling (inbound and outbound).

**With proper planning, national large platforms can reduce the number of handlings to 2-3 times.**

**Direct user reach can be either direct to B-end (terminal stores) or direct to C-end (users), but not through B-end (distributors).**

From a logistics warehousing perspective, going through distributors (B-end) is a great waste.

Below is Annto Logistics' "one pallet of goods" logistics warehousing and distribution path.

**From the above path, the optimal logistics warehousing and distribution path bypasses distributors.**

**In the field of logistics warehousing and distribution, distributors have two options in the future:**

1. If manufacturers strip logistics warehousing and distribution and hand it to third-party platforms, distributors will have no choice. Head brands will likely do this in the future;
2. If county-level (or city-level) distributors have advantages in logistics warehousing and distribution, they can become local landing operators for national large platforms. In this case, they would no longer do warehousing and distribution for a specific brand or self-operated products, but serve all distributors in the region.

At this point, some may question: **What does the stripping of warehousing and distribution have to do with marketing digitalization?**

It is highly related. Because digital orders can conveniently hand scattered orders to warehousing and distribution platforms, and the platforms can complete "integrated delivery." That is, goods for one terminal are delivered uniformly.

**Scale advantages, integrated delivery, and direct user reach are the advantages of public warehousing and distribution platforms. These advantages are incomparable to distributors' small warehousing and distribution, and brand owners can hardly resist them.**

**-06-**
**Wholesalers are "sitting merchants," while distributors are "itinerant merchants."**

More than 20 years ago, we criticized "sitting merchants" and praised "itinerant merchants." An important feature of "itinerant merchants" was delivering goods to lower levels. Until deep distribution delivered to terminals.

Without the warehousing and distribution function, distributors are no longer distributors.

When manufacturers strip warehousing and distribution business from distributors, the core functions of distributors must change. The more consistent view is to transform into operators.

**Wholesaler → Distributor → Operator. This is the roadmap for the evolution of middlemen.**

Five years ago, when we talked about this view, many didn't believe it; now, it is becoming reality; in the next few years, most will be forced to transform.

Even if the warehousing and distribution function has not been stripped yet, be prepared for the day it is stripped.

Being prepared means becoming an operator, not fearing the stripping of warehousing and distribution functions.

**-07-**
What are the core functions of distributors transforming into operators?

**Operations include two aspects: one is the 2B function of traditional deep distribution; the other is the BC-integrated function in the digital environment.**

The 2B function of deep distribution does not need detailed explanation. However, in the digital channel environment, deep distribution must be digitalized accordingly.

**There are two ways for operators to digitalize channels:**

1. Large brands will definitely have their own independent digital platforms; operators only need to do digital operations well;
2. Large distributors must establish their own independent digital platforms. Many small and medium brands do not have digital platforms, but operators must complete comprehensive digitalization, so they must build their own independent platforms.

As far as I know, since 2020, large distributors have been very enthusiastic about building digital platforms.

2B digitalization will be the basic skill of operators in the future. As a basic skill, doing it well is a prerequisite. Even if done well, it does not generate competitiveness. But if not done well, they will fall behind.

The real value of operators will be reflected in BC-integrated operations.

**-08-**
**The prerequisite for marketing digitalization is users online.**

But why should users be online? How can users be online?

Users online means that head FMCG brands have hundreds of millions of users online. Currently, no brand has achieved this, not even Xiaomi with its super APP.

**In deep distribution, head brands have achieved "one million terminals." Now, who will achieve hundreds of millions of users online?**

The answer is **operators.**

According to our research on digitalization, the logic for hundreds of millions of users online is: **One million terminals, ten million super touchpoints, and hundreds of millions of users online.**

Under the deep distribution system, manufacturers and distributors have already covered "one million terminals," so this is a basic skill. The next step is to achieve "ten million touchpoints."

**Currently, there are three types of super touchpoints between terminals and users:** The first type is object-based touchpoints, such as one-item-one-code; the second is person-based touchpoints, such as sales guides, store owners, store clerks, and KOC; the third is store-based touchpoints, such as shelves, freezers, and POP.

All three types of touchpoints are means to complete user connection and achieve users online. Without these tasks, users online is empty talk.

**These tasks are beyond the capability of brand owners; they have no handle. Online efforts are powerless; they cannot exert force.**

**Distributors who have completed deep distribution are most suitable for these tasks. Therefore, in the early stage of channel digitalization, this is the most important work for operators.**

**-09-**
Once user connection is completed, online operations can be realized.

**Online operations are divided into two types:** One is purely online operations, which is the right of brand owners. It will be completed through the brand's "marketing automation," and has little to do with operators; the other is BC integration, combining online and offline. This is the main work of operators.

FMCG products are characterized by low unit value, high consumption frequency, and random purchase. Therefore, even if users are online, offline purchases may still dominate. This is a reality that must be acknowledged.

**The essence of BC integration is to use relatively low online operations to activate relatively high offline stores.** After all, store stock is large, and offline share is large.

Recently, many people have written emotionally that digitalization is online operations. Based on the specifics of Chinese FMCG, we believe that at least for now, FMCG digital operations must be online activating offline. This is also the leverage that digitalization can best exert at present.

**BC integration is an operation model with leverage value. Pure online operations do not have the concept system of BC integration.**

**-10-**
**Whether it is user reach or BC-integrated operations, it must rely on local operators.**

First, these tasks involve both C-end and B-end, and must have personnel participation.

Many distributors and terminal stores once worried about digitalization: whether middlemen would lose value once users go online.

**In fact, as long as it involves the B-end, local operators will always have value, and personnel participation, customer relationships, and connections are indispensable.**

**After stripping warehousing and distribution functions, distributors cannot make money from "price differences," but the value of operators will ultimately manifest as traffic.**

**User reach is establishing traffic entrances, BC integration is traffic activation, and in the end, it is all traffic. However, this traffic is different from platform e-commerce traffic.**

Source: Teacher Liu's Digital New Marketing


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