The FMCG industry is changing rapidly, with the consumption environment and competitive landscape undergoing profound and significant changes. Against the backdrop of market contraction, how can one navigate the cycle? What capability system should the next-generation distributor possess? As a company that provides full-suite solutions to clients, Zhoupu Data, an industry-empowering data intelligence company, has conducted continuous observations of its distributor clients. In the era of contraction, the winter is biting, yet some still achieve counter-trend growth. How can one seize the core growth points and build core competitiveness to become a next-generation distributor? Zhou Zhen, Vice President of Zhoupu Data, previously served as CEO of Qianmi Network's branch company, Alibaba's brand marketing product expert, and head of regional distributors at P&G. He is responsible for driving the company's strategic development and business growth, providing innovative marketing solutions to help enterprises achieve market breakthroughs. He has also founded an instant retail project, bringing a unique perspective and deep understanding to product development and management. On August 22, 2024, at the 3rd China FMCG Distributor Conference hosted by New Distribution, Mr. Zhou was invited to attend and delivered a significant presentation—"Building the Capability System of the 'Next-Generation Distributor'"—which resonated with many distributors present. New Distribution is pleased to report on the highlights of his speech for our readers.
How Do Counter-Trend Growth Distributors Perform?
After continuous observation of tens of thousands of clients, Zhoupu Data found that despite the industry entering an era of contraction and the market feeling cold, some distributors still achieve counter-trend growth. On one hand, 75% of distributors see declining business, with over 30% experiencing a decline of 12%; on the other hand, 25% of distributors still see growth, and among them, over 30% grow by more than 10%.
Upon further investigation, we found that these growing distributors, regardless of city tier, primary category, or main channel, show similar growth trends—roughly a quarter of distributors in each segment are growing.
After further analysis of relevant indicators, we identified commonalities among these counter-trend growth distributors. First is scale. Distributors with sustained growth have larger business scale; over one-third of growing distributors have scale exceeding 50 million RMB. Second is cost. The research focused on three costs: capital cost, sales cost, and warehousing and distribution cost. Since distributor cash flow is affected by inventory, capital cost also focuses on inventory days, in addition to daily receivables and payables. Growing distributors have lower capital costs, with inventory days generally below 30 days. For sales cost, we tracked the core sales efficiency. Two indicators: first, the number of stores served per salesperson; second, the monthly order amount per store.
It can be seen that growing distributors lead the market in both indicators. Moreover, the largest contributing factor to sales efficiency is not average order value, but the number of stores served per salesperson. Combined with the data on the right, over 40% of growing distributors have adopted online B2b platforms. Their growth mainly comes not from short-sighted channel stuffing, but from using online platforms to reduce costs and expand salesperson bandwidth. For warehousing and distribution costs, there are two core costs: first, fulfillment cost; second, picking and delivery efficiency. Growing distributors have lower fulfillment costs and higher picking and delivery efficiency. Finally, service. In terms of store supply, growing distributors achieve an order fulfillment rate of over 99%, with almost no stockouts, and a return rate significantly lower than the market average. In terms of service experience, most growing distributors cover half of their stores with marketing resources, leading most peers. In terms of delivery timeliness, most growing distributors achieve a fulfillment rate of over 60% for orders placed today and delivered tomorrow. In summary, growing distributors share two commonalities: lower costs and better service. Many distributors think that better service requires adding staff to expand service bandwidth, but to achieve low costs, the only way is through technology empowerment, balancing cost and service to achieve efficient service. Another interesting point from the chart: everyone knows that larger business scale can feed back into lower costs, but how to achieve business scale? Can it be achieved through aggressive investment strategies or blind transformation? Can it be achieved by burning money like internet giants? Obviously, for most distributors, this is impossible. These growing distributors likely achieve business growth through efficient service and steady progress. The thinking behind these distributors is what we understand as the "next-generation distributor."
Three Core Supply Chain Capabilities of the Next-Generation Distributor
Growth in the incremental era was based on manpower; as long as you kept investing, you would gain returns. Growth in the contraction era is based on technology; only those distributors who diligently cultivate their internal skills can seize business opportunities. We have deconstructed the two major capability systems that distributors need in the contraction era: first, supply chain capability—how to balance cost and service to stores; second, business expansion capability—how to acquire new customers with high quality. Under the supply chain capability system, there are three core capabilities.
First, full-chain digital inventory governance capability, a core indicator for the next-generation distributor's turnover. Through scientific stocking, inventory backlog warnings, and terminal sell-through tracking, inventory turnover can be improved by 15%, ensuring precise supply and reducing capital costs. As the primary person responsible for company cash flow, distributors should not wait for professional managers to report inventory status weekly or monthly; they should be able to view real-time inventory operation dynamics. Based on past inventory occupation, pre-sales, and sell-through, adjust distribution and SKUs to avoid returns caused by overstocking or unscientific distribution. In the contraction era, not only must you tighten your belt, but you must also guard your money pocket. Even optimizing inventory by one day releases significant cash flow.
Second, integrated online and offline sales capability. Whether business costs can be reduced to below 5% is a core indicator distinguishing the two generations of distributors. Through tiered customer management, offline empowerment of salespeople, and online direct-to-store reach, sales costs are reduced and marketing models are enriched. Many distributors face significant internal resistance in the online-offline integration process, often because salespeople view it as a threat. Therefore, it is necessary to combine online and offline business: first, online sales commissions and some visits should be effectively attributed to the corresponding salesperson's work; second, online data should effectively feed back into on-site operations. Customers should be managed in tiers, with targeted information dissemination by region and channel. If you are still stuck with static labels, that is far from enough; we need dynamic tracking. For example, if a store's sales drop significantly, it should be dynamically marked as a sales warning customer, and through dynamic data tracking, labels and classifications should be updated in a timely manner.
The third capability is warehousing and distribution fulfillment capability, with the core indicator being whether warehousing and distribution costs can be reduced to below 4%. By embedding multiple warehousing and picking strategies, efficiency is improved, losses are reduced, and errors are minimized; by embedding multiple algorithms, load rates are increased and fuel consumption is reduced; combined with process standardization, dependence on people is reduced. Taking algorithm-based scheduling as an example, how to load more, deliver faster, and use less fuel—achieving more, faster, better, and cheaper? Let me share a client case: a distributor monitors fuel costs per 10,000 yuan of sales every month, measuring whether a vehicle covering 40 stores per day runs 50km or 55km, to judge the reasonableness of personnel scheduling. Business is tough; every penny saved counts. The above three core supply chain capabilities are the foundation for efficient service, and efficient service is the growth engine in the contraction era.
How to Achieve High-Quality Expansion in the AI Era?
Facing constant industry changes, how can distributors achieve high-quality business expansion? Taking Nanjing as an example, the main urban area has about 10,000 small stores. Typically, a distributor covers 3,000 stores. How to selectively cover the remaining 7,000? Zhoupu Data has collected data on 7 million small stores nationwide. Among these, 20% of stores have an average sales volume that is 300% ahead of the market. Every city can find its top 20% stores. With such targets, we return to the traditional PDCA cycle. How to set goals? How to implement them? How to continuously track? This tracking is not only for the management team to review goal execution; frontline salespeople can also see business execution progress anytime, anywhere, and follow up promptly. At the same time, performance commissions and organizational mechanisms need to be improved, with data isolation by channel and department so that teams focus on their own business. Finally, ensure the continuous operation of new stores and follow up in a timely manner. These three links are indispensable core nodes in business expansion. Due to time constraints, let me provide a brief summary. The next-generation distributor system can be expressed in the following aspects.
First, supply chain capability: through full-chain digital inventory governance, lower capital costs while improving the store supply experience.
Second, through integrated online and offline sales management, reduce sales costs and improve the after-sales experience for stores.
Third, intelligent warehousing and distribution fulfillment: reduce warehousing and distribution costs, improve delivery timeliness, and optimize customer experience.
Finally, based on supply chain capabilities, leverage data to identify effective targets and achieve high-quality expansion. To comprehensively enhance distributor capabilities, an integrated, complete, and actionable solution is needed. Zhoupu Data is willing to join hands with distributor friends, through continuous product iteration and refinement, and data empowerment, to help distributors smoothly seize the opportunities of the times, enjoy the dividends of digital evolution, and become the "next-generation distributor."
PS: For those interested in the on-site speech content, please follow the WeChat official account of New Distribution for recent posts. We will compile and publish all speakers' speeches for our readers.
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