In recent years, many distributors have been trying various transformations, and people often ask the author how distributors should develop in the future. The hidden question behind this is the strategic path selection and anxiety about future development. How should distributors develop? I think we must not think from a single dimension. Distributors in different industries, in different regions, with different development scales and business environments, have different growth paths. Of course, the matching paths and business directions are also different. Today, I will sort out the development directions for distributors based on category and capability. -01- Current Problems and Future of Distributors in Various Industries Starting from consumer demand, we focus on specific categories to see what market conditions distributors in different categories face, and under those conditions, the direction of business development for mainstream category distributors. 1. Planned Categories 2. Immediate Categories 3. Impulse Categories 1. Planned Categories Planned categories: purchases are pre-planned, with price comparison across the internet, considering price and cost factors predominantly. Representative categories: household and personal care, grain, oil, rice and flour, condiments, vinegar. First, household and personal care In the past, hypermarkets were the main channel, and distributors had large agency areas (compared to beverages and food), with considerable sales scale and strong professionalism. Consumers in this category are highly price-sensitive, so online penetration is high due to internet-wide price comparison. In recent years, with the rise of e-commerce and O2O home delivery, distributors in this category have found it difficult. The trend of consolidation and integration in this industry is very obvious. For example, in the early years, Eternal Asia mainly penetrated this type of distributor. Of course, in the past two years, there have also been signs of mergers between distributors. Future Development Trends: It is foreseeable that offline KA traffic is shrinking rapidly, especially with the popularity of O2O home delivery and the erosion by online channels. Even elderly women have shifted from queuing for eggs in stores to grabbing red envelopes online. Therefore, regional large distributors, especially those in second- and third-tier cities, will become increasingly difficult, while online professionalism and the trend of manufacturers going direct are becoming more obvious. Mergers and integration among distributors are likely to be a very important trend in the future. Of course, in lower-tier cities, due to lower online penetration, the process will be slower than in first- and second-tier cities, with a penetration period of three to five years. Distributors in these categories can consider early layout, selecting high-quality distributors, merging and integrating, and expanding business scale. Second, grain, oil, rice and flour In the past, the main channels were supermarkets and grain and oil stores. Distributors had large agency areas (compared to beverages and food), with large sales scale, capital-intensive, and with futures attributes. This category has low consumer involvement, is far from the internet, and online penetration is often low, so business is still okay. But they also face problems: consumer eating habits are changing, the trend of staple foods becoming subsidiary foods is obvious, and the total volume is basically constant. Therefore, the business prospects for distributors are not very clear. This industry is basically an oligopolistic market, with high capital intensity and low profits. Such distributors generally adopt a single agency model, with peripheral categories such as condiments. Future Development Trends: Currently, the grain and oil category also faces the problem of rapid KA shrinkage, but fortunately, the main market for grain and oil is gradually shifting from C-end to B-end. In addition, the channels for grain and oil are more complex than household and personal care, with channel barriers and strong professionalism. Therefore, cross-regional consolidation and integration within brands will be a relatively obvious trend. Third, condiments and vinegar Distributors of this type mainly operate through KA + wholesale, with both B2B and B2C, including hypermarkets and small stores. These products have a long shelf life and relatively good profits, but the volume per category is not large. Except for soy sauce and vinegar, other categories like dried seasonings have small capacities. Consumers have low involvement in this category, and it is also far from the internet, with overall low online penetration and considerable profits. The problems encountered are the same as grain and oil: starting to shift from 2C to 2B, with many large distributors in the industry. The circle is small and profits are high, leading to reluctance to take on other brands. Future Development Trends: The biggest opponents for condiment distributors are the rapid development of central kitchens and B2B food ingredient platforms. However, in the short term, because it is far from the internet and the industry concentration is not particularly high, business is still stable. 2. Immediate Categories Immediate categories: categories that need immediate consumption, based on physiological needs: thirsty, hungry, tired, sleepy. Consumers' relative time cost is relatively high. Representative categories: beverages, beer, milk, subsidiary foods, baijiu. First, beverages and beer Beverages have the lowest online penetration, mainly offline. Such distributors are basically logistics-type distributors, typically like Master Kong, Coca-Cola, Nongfu Spring, and some beer distributors. Brand owners adopt deep distribution and grid management, with manufacturers taking orders and distributors delivering. Therefore, such distributors only assume capital and logistics functions, with razor-thin profits. Distributors are basically mom-and-pop operations with tricycles, not paying taxes, relying on low costs from reduced configurations, and the market space is relatively small. Distributor scale is generally locked between a few million to tens of millions in GMV, with severe involution. Future Development Trends: I am relatively pessimistic about the development of such distributors. With the further development of China's economy, the comprehensive costs in all industries will increase. Such distributors are likely to be firmly locked by manufacturers in the range of millions to tens of millions, earning meager income through hard work. Second, subsidiary foods and milk These categories include a large number of low-temperature, short-shelf-life, and multi-SKU products, and offline channel coverage is also wide. Therefore, terminal operations are relatively complex, and manufacturers generally delegate a regional market to distributors. A distributor usually covers the regional market in an all-around way through distribution + sub-distribution + wholesale. Such distributors often fall into management involution and find it difficult to merge and integrate distributors across regions because the category management is extremely complex, involving reverse logistics, large-date product management, multi-channel management, multi-personnel management, and intense market competition. Future Development Trends: The biggest headache for such distributors is the people problem. The complexity of market operations means that the management radius of such distributors cannot be too long. Therefore, distributors are often locked by category and find it difficult to develop across categories. Third, baijiu The baijiu category is relatively special, with low online penetration and severe polarization. Famous baijiu distributors have better profits and easier operations compared to other categories, leaning towards resource-based businesses; regional baijiu distributors are typical zero-sum businesses, with each brand having its heyday for three to five years. Once a distillery fails to develop good liquor, distributor sales naturally decline. It is extremely difficult to operate across regions, limited to the local market, and there are few super liquor merchants across regions. Future Development Trends: Online penetration is low, so the pressure mainly comes from intra-industry competition, with a clear trend towards famous brands and nationalization. Regional liquor merchants have some living space, but development will become increasingly difficult. 3. Impulse Categories Impulse categories: not constrained by life and physiology, leaning towards taste or emotion. Representative category: leisure food. Leisure food is a very interesting market, and it is the only major category that has grown both online and offline in the past two years. Of course, this is inseparable from people's rising consumption levels and the behavioral habit of staple foods becoming snack foods. Before the internet, leisure food had not produced giant brands, which is largely related to industry characteristics. On the one hand, the repurchase rate in this category is not high, with prominent trial or periodic consumption. If you eat chicken feet today, you probably won't eat them again tomorrow; tomorrow you might eat nuts. In addition, the category requires wide coverage, and consumer loyalty may be the lowest among all consumer goods. Because of consumption behavior and habits, the upstream industry characteristics are such that brand owners are not large, but downstream distributors are larger than those in beverages. There are distributors with annual sales of over 100 million in various places, and some even go upstream to develop OEM and ODM products. Future Development Trends: Leisure food distributors may be the only distributor group that can break through the bottleneck of brand owners and exist independently. They have high scalability, high inclusiveness, and good industry profits. The overall market space is still growing, and they have the most potential for digitalization and B2B transformation and upgrading. This is the judgment and analysis based on the current survival and development status of distributors in each category and future trends, from the perspective of category and the actual business of current distributors. Looking at the future from the present. Let's look from another dimension, from the future to the present, based on the position and function of distributors, to see the three mainstream directions for future distributor development. -02- Three Types of Future Distributors Today, China's channels have evolved from a single-dimensional channel chain to a three-dimensional (offline, social, online) channel network. The complexity and difficulty of channel management are growing exponentially, which requires distributors to evolve as soon as possible, become bigger and stronger, and help manufacturers solve complex local market distribution and sales promotion. Around solving the goal of complex local market distribution and sales promotion, "New Distribution" believes that the development directions for distributors can be roughly divided into three types: First, Brand Distributors Second, Category Distributors Third, Channel Distributors 1. Brand Distributors That is, horizontal development within the agency brand, representing the same brand in multiple regions, such as beer, milk, grain and oil distributors. These categories have complex channel operations, require significant capital, strong professional operation, and close cooperation between manufacturers and distributors. When distributors do well in their local area, they can consider other regions in the province or take over gaps in other markets of the brand. Through horizontal expansion within a single brand, they can become regional agents or provincial agents, becoming truly "agents" in brand distribution. In this way, upstream manufacturer relationships, organizational personnel, operational tactics, and management experience can be reused. Of course, there are also drawbacks: if the manufacturer relationship becomes unstable, there may be cases of cutting large distributors. There are examples of this model in China, such as Coca-Cola's bottling plants, COFCO and Swire, which are essentially Coca-Cola distributors. This is the ideal state of division of labor between manufacturers and distributors. Niulanshan and Jiangxiaobai also use this model in some regions. 2. Category Distributors That is, within one or two or three categories, achieve absolute leadership or even monopoly in a regional market. By controlling the market in that category, they achieve growth and strength. Some categories such as personal care, household care, condiments, and maternal and infant products have already seen such distributors emerging in various places. Category distributors rely on professional understanding of the category and superb market operation skills to achieve market control. The advantage of this operation is that it effectively avoids competition, grasps market initiative, and has relatively good profits. Moreover, cross-regional replicability is strong, and by merging and integrating distributors in surrounding areas, they can achieve large regional control and monopoly. Of course, there are also drawbacks. In actual business, brands within the same category may have irreconcilable conflicts due to competition for resources. 3. Channel Distributors That is, for a specific channel, provide one-stop supply services to downstream customers. This model has emerged in recent years after the rise of B2B, in some categories such as leisure food and condiments. It can be understood as a distributor version of B2B. Distributors start with their advantageous agency brands, expand horizontally in categories, and gradually become one-stop supply distributors for certain channels, such as traditional mom-and-pop stores. -03- Ultimate Goal: Platform-based Operation No matter how the above three forms of distributors develop, they will face talent and management issues. Careful observation shows that to solve this problem, many distributors are gradually trying equity, amoeba management, financial independent accounting, and other means, with some achieving outstanding results. Delving into the underlying logic, the core is a manifestation of platform-based operation. The company builds an operating platform, empowers individuals, and enables individuals to realize their self-worth, thereby achieving a win-win situation for the company, individuals, and the agency brand. Although each company has different forms due to different distribution industries, regions, and development paths, from a broad logic, the trend is very clear: grassroots employees become small bosses, middle-level employees become partners, and senior employees become shareholders. Replacing management with transactions is, in a sense, a very distinct feature of the internet era. In the past two years, the rise of many new business forms has made many distributors anxious, worrying whether they will be replaced. I think there is no need for such concerns. In 2016, I predicted that it is not the internet that will defeat distributors, but high efficiency replacing low efficiency. Intermediate links are indispensable; they can only be replaced, not eliminated. As long as distributors keep up with the pace of the times, they will not be abandoned by the times. If the tip is adopted, a reward of 400-2000 yuan will be paid.