---
title: "Dealer Transformation Handbook"
description: "Over the past three decades, China's traditional FMCG distribution channels have grown rapidly, but with an aging society and rising costs, traditional distribution models are no longer viable. This article categorizes dealer transformation paths into three types—organizational, business model, and commercial model innovation—and provides detailed guidance for each, emphasizing the importance of digitalization and adaptability."
author: "袁来"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-12-10"
language: "en"
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---

# Dealer Transformation Handbook

> Over the past three decades, China's traditional FMCG distribution channels have grown rapidly, but with an aging society and rising costs, traditional distribution models are no longer viable. This article categorizes dealer transformation paths into three types—organizational, business model, and commercial model innovation—and provides detailed guidance for each, emphasizing the importance of digitalization and adaptability.

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**Introduction:** Over the past three decades, China's traditional FMCG distribution channels have grown rapidly. The market background of imbalanced supply and demand determined that the industry could only evolve towards capital-intensive and labor-intensive directions. However, as China gradually enters an aging society, the costs of manpower, materials, and other factors have determined that traditional distribution methods can no longer meet the needs of channel development in the new era. At the same time, more and more traditional distributors are facing increasingly urgent transformation challenges, but how exactly should they transform?
Undoubtedly, high efficiency will always defeat low efficiency, and the development of society as a whole will inevitably evolve towards greater intelligence and efficiency. In this process, facing the wave of digital transformation, no distributor can remain unaffected. It is clear that continuing to use traditional marketing thinking to guide product distribution in the new consumer environment is no longer viable. Only by perceiving change, accepting change, and embracing change can one avoid being abandoned and replaced in the tide of the times.
The "New Distribution 100 People" column previously launched by New Distribution aims to report on new-type distributors who possess advanced business concepts and align with the industry's future, helping more traditional distributors complete their digital upgrade. This article summarizes and organizes the transformation cases of these new-type distributors, hoping to provide a transformation guide for distributors of different categories, scales, and brands.
**Classification of Dealer Transformation Paths:**
**Category 1: Organizational Innovation:** Transformation and upgrading of the distributor's internal organization and management. Common examples include "Amoeba" and "Platform + Partner" organizational innovations.
**Category 2: Business Model Innovation:** Distributors distribute goods to small stores without changing the original distribution business structure, only changing the distribution method. For example, building a self-owned B2B to meet small stores' "one-stop ordering"; using B2B to outsource or upgrade certain functions, focus on core functions, and improve distribution efficiency.
**Category 3: Commercial Model Innovation:** Distributors completely change their past main business, no longer relying on purchase-sale price differences as a source of income. For example, joining B2B and earning income through commission or points; third-party warehousing and logistics, where income is no longer from product distribution but from service fees for providing warehousing and distribution; chain franchising, store income, etc.
1 Detailed Transformation Paths
**I. Organizational Innovation**
**1. Platform + Partner Model Innovation**
Transformation Features: Functions such as finance, logistics, and administration serve as the distributor's mid-to-back office, empowering the front-end business departments with resource support, process support, information support, and management support. The front-end revenue-generating departments establish multiple distribution partners (entrepreneurial teams) or independent subsidiary companies based on the distribution categories.
Suitable Groups:
  1. Comprehensive trading companies with multiple categories and brands;
  2. Single-brand distributors whose regional market sales have peaked and are seeking growth space in a second category or brand.
Precautions:
  1. When trying the distribution partner system, consider piloting with non-core brands or categories first to reduce trial-and-error costs. After successful piloting, summarize and organize into standard processes and norms;
  2. For the selection of distribution partners, prioritize internal cultivation. The platform provides initial financial support to partners, obtaining "**equity + capital interest + annual dividend income**". In addition to leading daily operations, distribution partners must also invest capital, bear operational responsibility, and be responsible for their own profits and losses;
  3. To ensure the smooth progress of distribution partners, it is recommended that in the early stage of incorporating new brand agency, incubate on the company platform first, and when there are certain outlets and basic sales, then allocate to the selected distribution partner;
  4. Before organizational innovation, distributors must first make internal operational data clear and standardized, with the cost proportion of each section and link clear at a glance. Each distribution partner shares the mid-to-back office operating costs according to different proportions;
  5. When implementing the distribution partner model, do not expect success at once or complete reform in one go; trial, iterate, and optimize. Start with small organizational forms, and later mature into independent subsidiary companies.
Transformation Cases:
**2. Amoeba Business Model Innovation**
Transformation Features:
  1. Divide into small organizations by department, implementing an independent accounting system;
  2. Except for the marketing center and distribution center, the distribution back office is considered a cost center, while the marketing center and distribution center are considered profit centers;
  3. The sales department uses net profit as the assessment standard (net profit = revenue * gross margin - fixed costs - variable costs), and the distribution center is similar. Establish annual and quarterly dividend systems, set net profit targets, and give corresponding rewards when targets are achieved.
Operating Principle: Maximize sales, minimize costs.
Business Philosophy: Amoeba management emphasizes that everyone is a business operator, pursuing clarity of "volume, cost, profit". Monthly sales, gross profit, costs, company net profit, and small organization net profit should be clear. The advantage of Amoeba management lies in weakening management, strengthening operations, emphasizing the operational initiative of small organizations, and making every employee have an independent business awareness.
Operational Advantages: Traditional distributor assessments usually use sales commission, and to achieve high income, salespeople only sell best-selling products. But best-selling products have the lowest profit for the company. By introducing Amoeba management and net profit commission, employees can know their gross profit, net profit, and corresponding income every day.
Precautions:
  1. The premise for introducing Amoeba management is digital operation; the profit sources of individual products, employees, and outlets need to be clear, allowing employees to understand company operating data.
  2. "Amoeba management" is a complete and scientific business philosophy that requires familiarity with and mastery of internal operating rules.
Transformation Cases:
"**Summary of Organizational Innovation:** The future organization must transform from a control-type organization to a platform-type organization. In a control-type organization, only the boss is responsible for profit, and employees share the boss's money, like a green-skinned train, where the train runs fast because of the head; a platform-type organization is like a high-speed train, where the head only controls the direction, and each carriage has kinetic energy, with the boss sharing the money of individual organizations or partners.
**II. Business Model Innovation**
**1. Self-built B2B**
Transformation Features: Distributors cooperate with third-party SaaS service providers to put all distribution actions of their own agency products and non-agency products online. Distributors use the entire SaaS system to complete product distribution, product management, and product delivery.
Suitable Groups:
  1. Regional "head" distributors, multi-brand, multi-SKU, comprehensive trading companies;
  2. Distributors of snacks/seasonings/daily care/home care/personal care/frozen products, etc., with a large number of SKUs, and upstream brand owners have weaker control over distributors compared to beverages and alcohol. Most distributors have independent distribution capabilities and strong links with small stores; beverage and alcohol distributors have high brand concentration, limited SKUs, and brand owners have established complete deep distribution systems, directly controlling core terminals. The main functions of distributors are capital and logistics, lacking strong links with small stores;
  3. Comprehensive large wholesalers.
Operational Advantages: Greatly improves product distribution efficiency. With operational data, achieve label management of small stores, help brand owners reach effective terminals at the first time during new product launches, and have the ability to develop incremental markets; orders and information are online and data-driven, achieving efficient business management.
Precautions:
  1. **Personnel:** The B2B platform is only a collection tool for information transmission and order aggregation. Do not fantasize about giving up frontline business and driving a positive business cycle through tools + subsidies. Frontline business is the core competitiveness of distributors rooted in the regional market;
  2. **Business:** The product structure of the B2B platform is X+N (X refers to the distributor's own agency products; N refers to products distributed as a second-tier distributor). Constrained by capital and organization, B2B cannot have unlimited agency, requiring distributors to have platform awareness, invite more individual organizations to start businesses, become independent distributors parasitic on the platform, and the platform provides supporting support.
  3. **System:** From the back office (warehousing and distribution) to the middle office (administration, finance) to the front office (business), it is recommended to use a unified SaaS system to fully realize the online operation of the business chain, prevent any unit from forming an information island, and truly achieve network collaboration in operations, thereby reducing operational efficiency;
Transformation Cases:
**2. Using B2B**
1) Transformation Features: Use B2B information tools to solve low efficiency in business processes and management, improve distribution efficiency, and let salespeople focus on sales promotion work.
Suitable Groups:
  1. Distributors of a single strong brand or single category, such as Niulanshan, P&G, Unilever series products;
  2. Distributors of first-line brand agencies, such as Uni-President, Master Kong, Nongfu Spring, Mondelez, etc.
Precautions:
  1. Use B2B to transform distributors into digital distributors. Operational data can not only help middle and senior management grasp the current business situation in real time, but also become a tool in the hands of business personnel, a tool to persuade small stores, through historical sales, distribution display, promotional activities, do diagnostic analysis for small stores, and provide accurate order guidance to small stores;
  2. If the agency brand is strong and upstream control over distributors is strict, to avoid sales fluctuations and quarterly/annual task pressure and policy implementation, it is recommended to pilot in a small area first. Or do not provide to small stores, simply serve as an information tool for frontline business communication and order transmission.
Transformation Cases:
2) Transformation Features:
  1. Return to the core functions of distributors, focusing on sales promotion. Outsourcing warehousing and distribution can greatly release the distributor's energy (business process management, warehousing and transportation scheduling, order accounting management, etc.), allowing distributors more time and energy to focus on the sales level;
  2. With the information tools provided by third-party warehousing and distribution platforms, achieve information management of other similar financial and business processes. Reduce complex and trivial financial accounting, order accounting, and other work;
  3. Third-party warehousing and distribution can also provide financial support for distributors, allowing them to represent more products and increase sales scale.
Suitable Groups:
  1. Distributors of first-line brands, such as Uni-President, Master Kong, Nongfu Spring, Want Want, etc.;
  2. Distributors of beverages, alcohol, instant noodles, snacks;
  3. Non-head distributors, small and medium-sized distributors.
Precautions:
  1. When outsourcing warehousing and distribution, keep a few vehicles for the promotion of some new products and emergency order processing;
  2. Use the system tools provided by the third-party warehousing and distribution platform to observe the distribution trends of small stores, establish label management for small stores, and facilitate accurate distribution of different new products in the future;
Transformation Cases:
"**Summary of Business Model Innovation:** According to insiders of a well-known FMCG company, some regions of the company are actively encouraging distributors to increase their self-sales ratio in the regional market (distributors' own teams visit for promotion and take orders, rather than the brand's own business personnel). Through assessment + rewards, promote the transformation of distributors to "brand marketing merchants".
With the diversification and personalization of consumption, future products will become more diverse and niche. These new products need on-the-ground display and promotion, requiring distributors to assist brand owners in completing the sell-through tasks of new products.
**III. Commercial Model Innovation**
**1. Joining B2B**
Transformation Features:
  1. Cooperate with B2B platforms to become suppliers or TP operators of local or national B2B platforms. Such as Alibaba Retail Link, JD New Channel, Zhongshang Huimin, Best Store Plus, and regional platforms.
  2. Always pay attention to regional or national innovative retail enterprises, such as Hema Fresh, Miss Fresh, Ai Xian Feng, Guo Xiaomei, Super Species, community group buying e-commerce platforms, etc., actively embrace, boldly try, and become a supplier of a certain brand or category on the platform.
Suitable Groups:
  1. Distributors of FMCG categories on original B2C e-commerce platforms;
  2. Distributors of KA, CVS, etc.;
  3. Distributors of first-line brands, becoming the "virtual warehouse" of Retail Link or the joint warehouse of New Channel.
Transformation Cases:
**2. Third-party Warehousing and Logistics**
Transformation Features: Distributors give up the product distribution business and transform into service providers providing warehousing and distribution support for distributors, with the main revenue source being warehousing and distribution service fees.
How to Enter the Warehouse:
  1. Low price. Warehousing and distribution fees are lower than those of distributors.
  2. Partnership, establish a same-city logistics company. In the early stage, to ensure basic commercial flow, absorb some high-quality distributors as shareholders, aggregate basic traffic before attracting investment, and then guide them to enter the warehouse through the low cost of large-scale warehousing and distribution and increasing distributor sales;
  3. Capture small stores. In the early stage, use E-second-tier (small store APP ordering) to help distributors take orders and increase volume. In the early stage, distributors place some products in the platform warehouse. As network coverage increases and order volume increases, distributors gradually increase inventory and guide them to enter the warehouse.
"**The two most common solutions when facing peer distributors not entering the warehouse:** 1. Win over distributors, low price or partnership; 2. Win over small stores, through network coverage, or small store franchise to force distributors to enter the warehouse.
How to Profit:
  1. **Pure third-party warehousing and distribution platform:** Continuously optimize warehousing and distribution delivery efficiency. Three types of profit directions: First, horizontal regional expansion. Through self-building or partnering with local distributors to replicate warehousing and distribution experience to other regions, establish same-city logistics branch companies; Second, vertical category expansion. Step out of FMCG categories, serve other industries such as chain mother and baby, fresh vegetables, etc., or provide landing distribution services for national e-commerce platforms such as JD, Alibaba, Suning, etc.; Third, sell warehousing and distribution management experience and corresponding SaaS systems.
  2. **Based on warehousing and distribution, extend downward:** Self-build ground service business, deeply link small stores. Three types of profit directions: First, franchise small stores, become a chain retailer; Second, extend to B2C, such as community group buying e-commerce business; Third, supply chain finance, provide financial credit to small stores through transaction data, and provide financial credit to distributors through warehouse receipt pledges.
  3. **Based on warehousing and distribution, extend upward:** Self-build ground service business, deeply link small stores. Two types of profit directions: First, invite local brand regional managers or distributor professional managers to start businesses on the platform, the platform "invisibly" invests, introduce third-party supply chain finance, support entrepreneurs to represent more brands, break the local distribution pattern, and the early self-built ground service business can assist in product distribution; Second, merge or invest in local distributors, take over the distribution business, establish distribution business divisions by category, and expand commercial flow.
Precautions:
  1. When transforming into a unified warehouse and distribution platform, if you hold the idea of profiting through warehousing and distribution services, the possibility is very small. Even if the warehouse is full, relying solely on warehousing and distribution service fees, it is difficult to have a large-scale profit space. It is recommended to use warehousing and distribution as a carrier, gather distributors, aggregate products, and achieve upward or downward business extension.
  2. Logistics intensification is a preferred project supported by local governments. Fully leverage local government resource support to accelerate the progress of unified warehouse and distribution projects.
  3. For the unified warehouse and distribution platform established through the partnership of various distributors, it is not recommended to merge the frontline sales businesses of each distributor, especially in the early stage. The friction and internal consumption of manpower will lead to a decline in business sales and the inability to complete the brand owner's established sales tasks.
  4. In the early stage of investment attraction, focus on attracting large merchants. The significance of large merchants entering is not only that large merchants have basic traffic and achieve initial distribution density. At the same time, large merchants have a demonstration effect, helping the platform establish trust endorsement, and then when attracting "small merchants", they can grasp the initiative.
  5. Before multiple distributors jointly establish a warehousing and distribution platform, be sure to clearly divide the dominant power of operation and management. Equity is easy to distribute, but operation and management involve daily trivial matters, which can easily breed differences and conflicts.
  6. When transforming into a warehousing and distribution platform, there will be large upfront hardware investments. When investing, act according to your capabilities. Supporting facilities such as high-level shelves, pallet jacks, forklifts, etc., should be gradually invested according to the scale of distributor goods entering the warehouse;
  7. When transforming into a warehousing and distribution platform, do not recruit all positions in the early stage. Distributor entry into the warehouse is a relatively long process. In the early stage, you can set positions according to people, one person with multiple positions, but do not set positions according to positions. In the middle and late stages, consider introducing professional logistics personnel.
Transformation Cases:
**3. Chain Franchising**
Transformation Features: Distributors transform into regional B2B platforms or unified warehouse and distribution platforms, aggregate commercial flow, and through past distribution data with small stores, screen high-quality stores for conversion. In the early stage, "light franchising", in the middle stage, "strong control", and in the later stage, incorporate into the direct operation system.
Precautions:
  1. The most appropriate for distributors extending to chain franchise retail is if they have had related physical retail business in the past, such as local medium-sized supermarkets. If there is no retail experience at all, it is recommended to open two stores in the early stage to explore experience and reserve retail operation experience for the later establishment of a chain franchise system;
  2. The goal of doing a B2B platform is not the distribution business, but through supply transactions, establish relationships with small stores, understand business needs, master distribution data, and then understand the operating conditions of small stores, accelerating the speed of small store franchise conversion.
Transformation Cases:
"**Summary of Commercial Model Innovation:** In commercial model innovation, the most common transformation for distributors is the third-party warehousing and logistics project. The supply chain of FMCG is actually the handling and turnover of products from end to end. By providing warehousing and distribution facilities and pipelines, distributors can aggregate logistics, commercial flow, and capital flow, making it easier to build a regional distribution closed loop. But if you simply do warehousing and distribution, there is actually very limited development space.
2 Transformation Summary
Dealer transformation paths can be broadly divided into 3 categories and 8 directions. Although each direction has different transformation focuses and operating methods for distributors, there are still three key points to note.
1. Information Construction
Regardless of whether distributors have strength or sales scale, information construction is a key transformation measure for enterprises to meet the changing environment in the future.
In the early stage of rapid growth of the overall industry, when sales and profit growth showed 20%, 30%, or even 100% growth, distributors could operate extensively. But once the industry's dividend period is over, distributors must go back and make up for lessons, transforming extensive operations into refined operations. The primary goal of refined operations is information construction.
Digital operations can not only help distributors identify gaps in operation and management, but also guide business decisions, and make the enterprise's operations "know what's going on".
2. Not Only a Top Leader Project, But a Whole-Employee Project
The transformation of a trading company is a top leader project, and it must also be a whole-employee project. It is not enough for only the boss to know about the transformation; employees must participate.
Distributors should start whole-employee training and examinations during the preparation period of transformation to master basic business forms; during the transformation, hold small meetings every day and large meetings every week to quickly respond to market changes and customer feedback; in the later stage of transformation, open some equity to employees to release the subjective initiative of the organization.
Let employees fully understand the necessity and value of business model, commercial model, and organizational innovation. In terms of thinking, let employees go from cognitive transformation, to passive implementation of transformation, to active embrace of transformation.
3. There Is No Uniform Standard Transformation Path
The choice of dealer transformation path is not a multiple-choice question or a math problem with standard answers, right and wrong.
If you blindly pursue a standard transformation path, it is easy to cause blind transformation, and ultimately may lead to business failure. Each distributor faces a different market environment, has accumulated different resources in the past, has different business thinking concepts, and even small things like network coverage, vehicle configuration, capital strength, business categories, and the number of items will affect the correct transformation path of distributors. If you arrange and combine the above factors, there should be no less than a hundred types.
There is no uniform transformation path. If you are not clear about how to transform specifically, it is recommended to go out more, learn more, and learn from successful distributors. Learning ability and thinking ability are also essential business thinking for distributors in a changing market environment.
What do you think about the above dealer transformation paths?
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