---
title: "Dealer Strategy Is Not About Scale, but About Building a Moat"
description: "Recent visits to dealer members of the Tower Alliance have revealed that many dealers are struggling with transformation, often without a clear strategy or thorough validation. The direction of business upgrade and transformation varies by region and market demand, making a standard template impossible. Dealers must focus on building a moat based on their mission, resources, capabilities, and cognition, rather than merely pursuing scale or profits."
author: "赵波"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2024-05-06"
language: "en"
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---

# Dealer Strategy Is Not About Scale, but About Building a Moat

> Recent visits to dealer members of the Tower Alliance have revealed that many dealers are struggling with transformation, often without a clear strategy or thorough validation. The direction of business upgrade and transformation varies by region and market demand, making a standard template impossible. Dealers must focus on building a moat based on their mission, resources, capabilities, and cognition, rather than merely pursuing scale or profits.

Recently, I have been visiting some dealer members of the Tower Alliance intensively, and the exchanges have given me deep inspiration.
In the past two years, dealers' businesses have been difficult, especially those dealing with hypermarkets, and they are all trying to find breakthroughs and transformations. However, after a series of exchanges, I clearly feel that **many dealers have not thought clearly about their transformation, and even those who have thought clearly have not fully validated their ideas.**
Different dealers have different directions for business upgrade and transformation, depending on the region and market demand, so it is difficult to have a standard template for reference.
The existence of a company is essentially determined by market demand. How a company meets market demand determines how it builds and develops its own business model.
But I have found a common characteristic among dealers: **insufficient strategic thinking about their own business, lacking depth, span, scope, and understanding of the market.**
Moreover, bosses' businesses grow linearly, with severe path dependence, and they rely too heavily on brand and channel resources. Few people develop their business based on a vision or the kind of company they want to become, let alone think about building a moat and core competitiveness.
**In the industry, there are three major logics for dealer business needs: one is serving upstream brand owners, another is operating market traffic, and the last is customer supply chain services.**
**These respectively represent the paths for dealer evolution and development: large regional brand platform operation, regional market category operators, and supply chain service providers.**
The industry has basically reached a consensus on this path proposed by New Distribution.
Based on my recent exchanges with dealers, I would like to share some views on transformation.
**The category that a dealer represents is very important.** If it is grain, oil, and seasonings, the genes are not in small stores, so do not force it into small stores, but develop based on your existing customer types.
For grain, oil, and seasonings, the main customers are wet markets, farmers' markets, and community fresh food stores. Their ordering structure is different from small stores, and competition is not as fierce. **First, develop capabilities based on the category and channel, and once you have a certain base of traffic, consider how to further expand scenarios.**
Even for those doing leisure food and beverages, the transformation paths will be somewhat different.
For leisure food dealers, your customers may be KA and BC supermarkets, and most of you are good at warehouse operations. Your competitive advantage lies in the supply chain response capability for small-batch, high-frequency goods. For beverage dealers, the key customers are CD-class convenience stores, and the advantage lies in large-scale, low-cost logistics delivery.
Dealers earn money penny by penny, so for new business losses, try to shorten the loss period as much as possible. **What you are good at is the leverage for your transformation path**, so dealers should learn to use their advantages to shorten the loss period.
Another point is to **clearly define who your customers are**. Many dealers have not thought this through. In the past, your customers were brand owners, but when you decide to transform into a supply chain platform, the essence of B2B is to provide one-stop supply chain services to downstream customers, and the service target becomes downstream customers.
What is the difference? Simply put, when you serve manufacturers, your salespeople visit stores to promote products, helping manufacturers complete local market promotion. When you transform into a supply chain platform, your salespeople visit small stores to help them with purchasing and product selection, and the role has actually changed to that of a buyer.
Take BD (Business Development) as an example: **In the past, the core work of SR or DSR for dealers or manufacturers was to help manufacturers get orders and push new products, even pushing products that are hard to sell. After transforming to B2B, BD becomes a buyer, and the buyer's job is to help small stores increase sales and improve operational efficiency**, so there is a fundamental difference between the two.
If I have to say what capability is most important for a supply chain platform, I believe it is **assortment capability**.
Whether it is warehousing and logistics, platform operations, front-end BD, or team and financial management, it all ultimately points to one thing: **Do you have the ability to provide downstream customers with a one-stop, effective, profitable, and high-turnover assortment?**
Here is a counterintuitive point: **It is not that the more SKUs in the warehouse, the better, but rather the user click activity of the products. Long-tail products will slow down the entire warehouse turnover and tie up funds.**
Powerful platforms can achieve high product turnover with very few SKUs, which means that **the platform must deeply understand customer needs and help small stores achieve efficient operations.**
Community stores, street-side business district stores, BD business districts, and special channel stores (schools, hospitals) – these roadside stores all look like mom-and-pop shops, but different locations serve different customers, so the demand for assortments also differs.
At the beginning, you should also selectively serve downstream customers, not supply all mom-and-pop stores at once. Otherwise, you can only sell hard currency and bestsellers, but it is hard to make money from these categories.
Once you have locked down where your downstream customers are and what type of stores they are, then provide targeted assortment combinations. Essentially, this is **helping customers optimize their business. Only when customers make money can you make money.**
The above paragraph is the underlying logic of supply chain platform services, and dealers must think it through clearly.
When I communicated with Gao Jingjing, the boss of Beijing Guoyingjian Trading, she said that **in B2B, procurement, BD, operations, warehouse, delivery, and finance – these seven major sectors cannot have a coward in any of them**, and each department must have capable people.
I deeply agree with this. **The capability requirements for dealers doing B2B are much higher than before.** These sectors are interconnected, just like the 4P linkage. If one link has a problem or a shortcoming, the entire platform will not run smoothly, and the business will be stuck because of the shortcoming.
**Orders are the starting point of the business. Based on order demand, organize procurement, manage warehouse logistics, fulfill orders, and have front-end BD, back-end operations and finance – none can be missing.**
Based on your own category, clarify your customers, leverage your advantages, and transform in stages and steps.
But note that this staged and step-by-step approach means, under the premise of minimizing losses or no losses, the boss must be fully committed, and truly understand the underlying logic of B2B, changing from the mindset of **serving brand owners to serving downstream small stores with a platform mindset.**
At present, dealers doing daily chemical products for hypermarkets may encounter the most problems when transforming to B2B.
Because **they have not done small stores, have not developed deep team management capabilities, do not have efficient delivery and fulfillment capabilities for leisure food and beverages, and store customer relationships and category resources are even less mentioned.** This type of dealer is also the most struggling in the current market and has the strongest willingness to transform.
But if such dealers really decide to transform, it is best to find a franchise opportunity, letting them provide the operating team, goods, and system. It may cost some money, but the advantage is that you can avoid many detours and get started faster. Otherwise, the cycle of stepping into pitfalls yourself is too long.
At present, the most suitable dealers for transforming to B2B are those who left hypermarkets earlier and started doing small store leisure food, or comprehensive goods wholesalers.
Especially in the past two years, some wholesalers who cooperated with Retail Link and New Distribution as joint warehouses have developed local category expansion with the help of large platforms and understood the rules of platform operations.
The day before yesterday, I chatted with General Su of Anhui Sulong Industry and Trade. They have already achieved overall package management for the snack section for downstream KA customers. This capability can be quickly transferred to small stores. The capability I refer to is the buyer-thinking product organization capability.
**Dealer transformation and upgrade does not necessarily mean transforming into B2B. In fact, there are many paths. From brand dealer to category dealer is the inevitable path we see for all dealers.**
Going further, differentiation begins. One path is **from category dealer to category operator**, becoming specialized and broad, leveraging national platforms and channels, and leveraging operational advantages to further specialize and strengthen.
Another path is **from category dealer to B2B**, expanding within the region, extending to downstream retail stores, group and government enterprise customer supply chains, and horizontally doing logistics, marketing services, and other diversified businesses.
But no matter what type you transform into, as described in the title of this article, you should **base your business strategy on your mission and vision, resource endowment, capabilities, and cognition, and think about how to build a strong moat for the next ten years.** You cannot just randomly take on products to get bigger, nor do B2B just to make money.
Many times, if the business logic is not clear, every step you take is a pitfall for your lack of cognition.
**Tower Alliance (TOP500 China FMCG Dealer Alliance)** will also organize visits to successful dealer transformation cases in the near future. Dealers willing to visit and learn with us can join the Tower Alliance to achieve their own supply chain transformation and upgrade.
At the same time, based on the resources of the Tower Alliance, we will provide multi-angle empowerment for Tower Alliance members in **products, systems, operations, and technology**. Dealers who need these resources can also join the Tower Alliance to witness the development of the industry with us.


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Contact: zhaobo258@gmail.com · +86 158 5481 7671