---
title: "City Distribution: Billions Invested, No Visible Effect—Is It Viable?"
description: "City distribution, an industry long favored by external observers, has yet to demonstrate its power and remains on the periphery of the market. Is the problem inherent to the industry, or are expectations too high? Since 2013, the government has heavily promoted city distribution with policies and over 10 billion yuan in incentives, yet the industry remains fragmented and in its 'primitive development stage,' though it holds immense potential."
author: "New Distribution"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2017-11-26"
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# City Distribution: Billions Invested, No Visible Effect—Is It Viable?

> City distribution, an industry long favored by external observers, has yet to demonstrate its power and remains on the periphery of the market. Is the problem inherent to the industry, or are expectations too high? Since 2013, the government has heavily promoted city distribution with policies and over 10 billion yuan in incentives, yet the industry remains fragmented and in its 'primitive development stage,' though it holds immense potential.

**City Distribution: Is It Viable?**
Capital markets are fiercely competitive, and city distribution—an industry long favored by external observers—has yet to unleash its power, remaining on the periphery of the market center. Is the problem inherent to the industry, or are expectations too high?
As is well known, since 2013, the government has attached great importance to the city distribution industry. The Ministry of Commerce alone has promoted numerous policies on urban distribution: first pilot cities for urban distribution, then logistics standardization, and now supply chain system construction. Several series of policies, each offering 80 million yuan in incentives per city, totaling over 10 billion yuan.
**The government's billion-yuan investment has not made city distribution live up to its expected appeal, leading many to question: Does city distribution truly have value?**
**For any new thing, we cannot casually deny it, because casual denial may cause you to miss opportunities for takeoff. The industry's lack of significant progress, we believe, is because it is still developing, like a sapling taking root and sprouting. We call this stage the 'primitive development stage.' Although primitive, it is full of infinite vitality.**
**I. Primitive Stage but Full of Vitality**
The extremely fragmented city distribution industry has yet to see a decent company in the market. Relative to the trillion-yuan market scale, these companies are not even small fish or shrimp; they are all 'shrimp.' This characterizes the industry's current stage, but precisely because of this, city distribution is full of vitality.
Why is it full of vitality? There are six reasons.
** _1_** Large Market Scale for Development
In this FMCG market of 10 trillion yuan, the city distribution market scale of 1 trillion yuan is beyond doubt, perhaps even more than 1 trillion. But currently, this 1 trillion contains some water, because many manufacturers, including distributors, handle warehousing and distribution themselves. Of course, in reality, this 1 trillion has not yet been socialized. Why not? Will it be socialized in the future? These are questions we need to care about and understand.
** _2_** Important Industry Position
A brief analysis of the city distribution industry reveals that it brings together various business formats. Whether express delivery, third-party logistics, or dedicated lines, everything ultimately requires 'distribution' and has a 'last mile.' City distribution is the convergence point of various formats, the entry point for new retail and new services, and the connection point for manufacturers, distributors, and retail terminals. It is precisely for this important reason that billions in capital have been poured into city distribution, yet only a ripple has been made, not a wave!
** _3_** High Technological Content
**City distribution logistics is a resource-integration industry. It deals with the 'last mile' and 'capillary' business, making operations quite difficult.**
For example, when a company's warehouse connects to a supermarket chain's central warehouse, the number of barcodes involved can reach 10,000. Distribution routes, channels, and network points also involve many high-tech technologies such as statistics and operations research. But precisely because of its operational difficulty and high technological content, customer stickiness is very high, so the future is promising.
** _4_** Super Heavy Assets
For a 10,000-square-meter warehouse, if used for city distribution, the average revenue is 15 million yuan, and this 15 million includes rent; excluding rent, it's 10 million. But if you use the same warehouse for freight or express delivery, revenue could be 200-300 million yuan.
Besides the warehouse, what else is needed? Roughly 10,000 pallets, 8,000 shelves, 60 vehicles, and goods worth 400 million yuan. A turnover of 15 million yuan corresponds to goods worth 400 million! So this is very daunting.
** _5_** Deep Connection Capability
As mentioned above, city distribution is the connection point for manufacturers, distributors, and retail terminals. It is a super heavy-asset industry. It's conceivable that this connection is not a superficial touch but should be as stable as Mount Tai! Moreover, the relationships it connects are complex. Take our retail enterprises: they are both our distribution channels and our customers, and the same applies to distributors!
** _6_** Core Data
Regarding big data, most enterprises have mixed feelings. They love the data it brings but hate that it's not core data. However, city distribution can bring you truly core data, allowing you to evaluate enterprises not only by reports but also by analyzing their water, electricity, packaging usage, etc.
It is precisely this end-to-end traceability from manufacturer to terminal, covering multiple goods and full processes, that gives us reason to believe that data from city distribution is truly valuable!
**II. Three Major Drivers of Large-Scale City Distribution**
From 2015 to 2025 is the golden decade for the city distribution industry, but the survival state of city distribution enterprises is like living day by day. Some may ask: If the industry is so good, how can enterprises be bad? Here again is a contradiction and a misconception. Throughout history, any revolution requires time, market, and capital baptism. Revolution is a qualitative change, and qualitative change requires a process that cannot be achieved overnight. 'Accumulate thickly and release thinly' is the best explanation. Hence, philosophy says 'the development of new things is always bright in prospect but tortuous in path,' and there must be truth in it.
**From the current market perspective, new retail, Industry 4.0, new logistics, smart city distribution, automation, and other high-tech things are in the spotlight. But we must be clear that new retail is built on the basis of 'big retail,' and Industry 4.0 is built on 'big production.'**
Looking back at our city distribution, it is still 'small city distribution,' the industry is still in the 'primitive development' stage, and it is extremely fragmented. Our ultimate goal is 'big city distribution.' If we want to put it on the path of scale, we need to be steady and actively promote its development.
**So, where are the drivers for big city distribution?**
**After analysis and summary, we find there are mainly three aspects:**
** _1_** Capital
Earlier we mentioned revolutions in history. If we look specifically at several important industrial revolutions, we find that capital plays an indispensable role in driving revolutions. City distribution is a small revolution in the market. Without capital, it cannot operate, so capital is an important factor driving its development.
Of course, you might argue that Deng Xiaoping said 'Science and technology are the primary productive forces.' But we must understand that this statement is aimed at manufacturing. Manufacturing is clearly different from the logistics industry. Manufacturing produces products, so technology is the primary driving force; for the logistics industry, capital is the primary productive force.
** _2_** Pallet Standardization
Friends engaged in foreign trade and international trade understand the role of containers. People say 'the container is the greatest invention of the 20th century.' Although it's just an iron box, it has played a role in changing the entire world. Pallets are also the best tool for trade, but their application is not ideal, and it is difficult to achieve pallet standardization.
Of course, pallet standardization and enterprise scaling are a 'chicken-and-egg' problem. When scale is achieved, standardization naturally follows; if scale cannot be achieved, standardization cannot be achieved either. However, what we want to say is that regardless of your will, you must move in this direction, otherwise you will be eliminated. Market rules are survival of the fittest!
** _3_** New Energy Vehicles
Speaking of new energy vehicles, if you only understand them as a means of transport, your positioning of them means you cannot see the mystery within.
In the coming years, they will be applied to the city distribution industry. They are not just advanced transport tools; they may disrupt the entire industry. 'Warehouses and vehicles' are particularly important in the city distribution industry, and this doesn't need emphasis.
With this in mind, it's not hard to see why the government strongly promotes new energy vehicles. Because managing 10,000 city distribution enterprises is painful and impossible. But if a city has only 10 new energy vehicle enterprises in the future, it will be easy to manage.
**In the future, it is likely that only a few enterprises in each city will control or operate new energy vehicles. If vehicles are controlled by these few enterprises, the government can easily manage them. So new energy vehicles will also drive this industry.**
**III. Doing Joint Distribution Well**
To achieve big city distribution, an important issue arises: 'joint distribution.' Joint distribution is also called 'unified warehousing and distribution' or 'centralized warehousing and distribution.' The government raised this issue as early as 2013.
**Everyone now knows they need to do joint distribution. But how to do it? How to achieve it? How to do it well? This is another question.**
Here, we offer four suggestions, hoping they are helpful.
** _1_** Focus
This is an old topic. Even elementary school students know to focus, but in practice, many people are eager for quick success due to immediate interests. However, to do this well, you must focus.
If you want to do FMCG, home appliances, landing distribution, last mile, and last 500 meters all at once, you will find you can do nothing in the end. You need to focus on this industry, continuously accumulate and gather resources, and the most critical resource is supply of goods!
** _2_** Professionalism
City distribution is a high-tech industry. It deals with 'capillary' business, requires solutions, is end-to-end, and truly connects production to terminals. Therefore, enterprises must have the capability to provide integrated solutions. Of course, many enterprises may not have this capability, and that's okay. As long as you carefully and sincerely choose an enterprise with the perfect solution capability to assist you, it won't be a problem.
** _3_** Systems
Systems are a crucial core for city distribution. This system is not just a logistics system but also an order management system. Orders involve pricing, especially city distribution pricing, which is very cumbersome because you need to meet customer needs.
Logistics and business flow are combined. The order system is a B2B system. Besides focusing on capturing supply, you need a corresponding system. Basically, like e-commerce, you can place orders, manage orders, and see the status of each order. The system is connected from manufacturer to terminal. You not only know how many products are sold in a district but also can see data from convenience stores, entertainment venues, etc., for analysis and to solve inventory pressure.
Transportation management system: Reconciliation in city distribution is particularly troublesome because there are many orders, each small, and reconciling with customers is annoying. If we have a system to match orders, we can save a lot of labor costs.
Warehouse management system: City distribution has many product categories, and it's impossible to remember them manually. All product dimensions, shapes, etc., are entered into the system. Then, different product sizes have targeted shelving strategies. These problems are easily solved by a WMS system. Its unique AI operation allows employees to complete work orderly by following system prompts step by step, whether inbound or outbound, achieving visualization, clarity, transparency, and intelligence without errors.
The above analysis is a key and difficult point for our enterprises. Most enterprises cannot have their own systems like JD or Alibaba. Without sufficient funds to build your own system, doing the system module well requires sharp vision from enterprise managers to discover enterprises that can build this system for you and products that can implement this system.
**IV. Only One Trigger Point Needed**
For any new thing, ordinary people view it with curiosity, doubt, denial, and other attitudes. But far-sighted and discerning inventors, capitalists, entrepreneurs, and creators spare no effort to believe, create, and practice, waiting over a long time. Of course, time always proves how correct their choices and persistence are.
City distribution, like all new things in history, is incubating and growing. It only needs one trigger point to ignite. At that time, those who watched will regret and lament, those who denied will be disappointed, and only those who believed and persisted will move toward success!
**People in marketing fear choosing the wrong direction or path. When the direction is correct, they fear lack of patience. The more eager you are for quick success, the more you lose. We now know our choice is correct. We only need to prepare well, correctly, and thoroughly before the trigger point arrives. When the trigger point comes, that will be our day of success!**
Source: Dealer Efficient Operation
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