At this critical juncture of industry transformation, distributors must contemplate transformation, and transformation must be based on a systematic plan.
Thirty years ago, the numerous and highly important distributor enterprises that exist in today's market did not exist. At that time, the market had a relatively complete wholesale enterprise system.
During the transition from wholesalers to distributors, most traditional wholesale enterprises were eliminated, and a batch of distributor-model enterprises that play an important role in today's market grew up. The main factor driving this change was the shift in the overall industry's marketing model and distribution system.
Distributors occupy an intermediate position in the overall FMCG industry's circulation field. They are greatly influenced by changes from upstream brand owners and even more so by changes in the market structure of downstream terminal links.
Different marketing eras require different intermediaries. In the past, it was wholesalers; in the era of channel sovereignty and deep distribution, distributors were needed.
Currently, the FMCG industry is moving into the era of consumer sovereignty. Facing the new market environment, deep distribution is gradually failing, and the overall industry needs to switch to a new marketing model. Under the new market environment and new marketing model, intermediaries with new capabilities, new responsibilities, and new roles are inevitably needed.
Professor Liu Chunxiong said: Intermediaries will last forever, but distributors will die.
Distributors are a very complex group. Currently, there are indeed some distributor enterprises with a certain market scale and certain corporate capabilities. There are also many "mom-and-pop shop" model distributor enterprises.
For these distributor enterprises with a certain scale, it is particularly necessary to see clearly the current market transformation period. On the one hand, they need to lead the enterprise to find new paths and models for transformation; more critically, they need to seize the transformation opportunities to achieve better development and make the enterprise bigger.
01 Six Reasons Affecting Distributor Transformation
Under the current market environment, distributors must consider transformation. At present, the overall industry transformation has begun, and many distributor enterprises are actively exploring transformation.
However, the current industry transformation and distributor transformation are still in the exploratory stage. Therefore, in this environment, when enterprises discuss transformation, they must first clarify the main factors affecting enterprise transformation, and under the influence of these factors, what changes will occur in the overall industry, and in what direction the industry will reform in the distribution link in the future.
Then, based on these possible industry changes, find the accurate direction for transformation. Try to avoid detours in transformation and, more importantly, avoid dead ends.
Currently, when analyzing the main factors affecting distributor enterprise transformation, one cannot only look at changes between you and brand owners or retailers; one needs to stand at a height to see the changes happening in the entire industry. Because under the overall industry marketing model reform, the relationships between distributors, brand owners, and retailers may be restructured.
Currently, analyzing the main factors affecting distributor enterprise transformation requires an in-depth analysis from the following six aspects.
--Deep changes in the consumer market structure. Currently, the biggest factor affecting the industry and distributor enterprises is the deep change in the consumer market structure.
With the rapid development of China's economy and the rapid growth of residents' income, overall, China's consumer market has undergone three significant changes:
First, overall consumption capacity has significantly improved. With income growth, compared to 10 or 20 years ago, overall consumption capacity has significantly improved.
Second, the consumer market has become a stratified market structure. According to Suning Financial Research Institute's analysis, the top 20% of consumers by income hold 45.79% of the total national disposable income. That is, the rapid rise of the middle class, which many people talk about, is gradually becoming the main force in the consumer market. Some authoritative institutions predict that by 2022, the middle class will contribute more than 80% of the entire consumer market share.
Stratification has led to fundamental changes in the overall consumer market structure. To borrow McKinsey's view: There is no longer a uniform Chinese consumer group!
Third, changes in the new generation of consumption. The post-90s and post-00s live in a new social environment, and their consumption concepts and cognitive methods have undergone tremendous changes.
Therefore, under the influence of these three factors, the overall consumer market shows an upgrade in demand levels, and the market has become a stratified, niche, and personalized market structure.
From the prominent problems shown by many brand owners and retailers: the product systems and marketing methods that previously coped with the mass market structure are now seriously inadequate in the face of new market structure changes.
Therefore, in the current environment, when considering distributor enterprise transformation, one must first conduct in-depth research on how to adapt to the structural changes in the consumer market.
--Tremendous changes in the terminal market structure. Originally, distributors mainly dealt with offline KA stores, chain stores, and numerous small stores in the market. With the innovative development of retail, this market system is gradually being broken.
First, the development of e-commerce has broken the traditional single offline market pattern.
Second, retail innovation, various new channels and models are gradually becoming more important market systems. In recent years, some innovative models represented by specialty stores have developed rapidly, while the market share of traditional KA systems and small stores has gradually declined.
Third, the innovative development of various new retail forms is forming a new important force. Especially, some new retail forms such as home delivery models and community models are developing rapidly and gradually becoming increasingly important retail channels.
China's retail market has entered an active period of innovative development. The future Chinese retail market will inevitably become more diversified and varied.
Facing the tremendous changes in the terminal market structure, traditional distributor marketing models are difficult to adapt to and must be transformed. They must adapt to the trend of offline terminal diversification and the new environment of online, community, and innovative models developing rapidly.
--Gradual changes in the distribution market structure. Originally, a distributor obtained the regional agency rights for a brand, and the products seen in that market might all come from your warehouse, but now it's not the case; they may come from Retail Link, Xintonglu, Pinduoduo, Taobao, or some distant community retail platform.
Currently, the traditional distributor model of defining market scope and doing brand agency is gradually being broken. In the future, the distribution link will inevitably present a market pattern of channel diversification.
--Major changes in the commodity market. Simply put, it is the extreme abundance of commodities. First, tens of thousands of new brands, categories, and products are launched each year. Second, some more personalized product + service innovation models are constantly emerging.
With the extreme abundance of commodities and changes in the new generation's brand perception, first, consumers have more sufficient choice; second, consumers' concept of brands is undergoing new changes: they are not superstitious about big brands. Therefore, in recent years, while some big brands face greater market pressure, some innovative brands have developed well with their personalized characteristics.
The extreme abundance of commodities is changing the previous marketing model of distributors. Originally, if a distributor got a brand and placed it in stores, it could generate sales, but in the current market environment with abundant commodities, terminal sales have become a very prominent issue.
--Changes in the environment brought by the Internet, especially mobile Internet. In addition to the impact of terminal innovation models such as e-commerce and community retail, the development of the Internet, especially mobile Internet, has three other important impacts on distributors.
First, the means of +Internet are changing industry efficiency. The simplest example: previously, it mainly relied on salespeople's two legs to run the market to get orders. Now customers can order via mobile phones, greatly improving efficiency.
Second, the Internet is constantly innovating new business models and marketing models. A more direct impact is that originally distributors could only influence terminal sales through in-store displays and promotions. In a mobile environment, there are now more means of communication via mobile phones and community methods to more effectively solve terminal sales.
In the future, there will be more and more innovative models in these areas.
Third, the Internet is constantly innovating new marketing plays. Originally, distributors mainly relied on stores for marketing. Now, in the mobile Internet environment, with the connection means provided by mobile Internet, they can effectively connect with customers and, based on that connection, effectively activate customers. And in the future, there will be more and more marketing plays based on this new environment.
--Brand owners' products and marketing will undergo systematic changes. Facing the above five changes, what distributors most need to pay attention to is: under such a new market environment, what changes will brand owners make?
Brand owners' product and marketing systems will definitely undergo major changes. Because many of the traditional product concepts, brand communication, marketing systems, and distribution models of brand owners are facing prominent problems of failure and declining efficiency. Moreover, some innovative brands and models are not only playing a demonstrative role in industry reform but also challenging the marketing models of traditional brand owners.
Overall, brand owners' changes need to revolve around how to adapt to the structural changes in the consumer market, how to adapt to the diversification of terminal channels, how to adapt to the diversification of distribution channels, how to adapt to the rapid innovation and development trends of the product market, and how to adapt to the new changes in efficiency reform and model innovation brought by the Internet.
Brand owners' product concepts must change, from mass-market products to products that adapt to niche market demands. The distribution system and terminal system must change to better adapt to the trend of diversification. The marketing system must change, from the traditional model of separating marketing and sales, to a synchronized marketing and sales approach, forming a new marketing model integrating cognition, transaction, and relationship.
The most important thing is: in the future, brand owners must move from B-end marketing to C-end marketing, relying on technology to connect the entire transaction chain and build a B2B2B2C marketing model.
That is, in the future, brand owners will not only have transaction links with distributors but also connect with terminal merchants to form a more efficient distribution chain. At the same time, they must also connect with consumers, building a marketing system that can effectively connect, activate, and manage customers.
Of course, brand owners (manufacturers) are also a very complex group, including both large manufacturers and many small manufacturers, and there may be model differences between different categories. However, from the direction of brand marketing reform, this is basically the trend.
Of course, facing this market change, some manufacturers, including some large ones, will move towards OEM, that is, becoming custom factories for retailers or traders.
Manufacturer reform is necessary. Of course, in the reform, different manufacturers will have different positions. Some manufacturers will pay more attention to the interests of distributors and lead distributors in reform together.
This reform may take a process.
02 The Key to Distributor Transformation is Finding the Right Direction and Choosing the Right Model
When distributors think about transformation, the key is to think from the direction and model end.
Because this is a transformation period. When talking about transformation, it is a major change in direction and model, not something that can be solved by some tools or methods to achieve the goal of solving fundamental problems.
According to Professor Liu Chunxiong's view: intermediaries will last forever, but distributors will die. In the future FMCG industry market, intermediaries will always exist, but the current distributor model will die out with changes in the market environment.
From the current industry development trend, this change is bound to happen. Just as current distributors eliminated previous wholesalers, in the future, new intermediary models will iterate the current distributor model.
The FMCG industry has gone through the era of product sovereignty and the era of channel sovereignty, and is now entering the era of consumer sovereignty. Generally speaking: the wholesaler model is the intermediary model that adapts to the era of product sovereignty, the current distributor model is the intermediary model that adapts to the era of channel sovereignty, and the era of consumer sovereignty requires a new intermediary model.
The current distributor model is that a distributor enterprise obtains the agency rights for a certain regional market, and then relies on brand driving force (especially first-line brands) to complete distribution coverage and corresponding market services in the agency market.
The current distributor model, facing possible future industry changes, clearly has the following problems:
First, low market coverage capability: From the offline market alone, the current distributor market model, whether it is vehicle sales or visit sales, has relatively low market coverage due to factors such as personnel capability and cost. Especially, it relies more on the personal capability of salespeople and has many defects in effectively activating users.
Facing the trend of omni-channel development, distributors have even more prominent problems.
Second, low efficiency: Especially in order efficiency and delivery efficiency. With an average visit frequency of once a week, some customers even only get monthly business visits, and it relies more on the human factor of salespeople, including the model of new product promotion involving interest issues. Overall order efficiency and delivery efficiency have become the main factors affecting market development.
Third, low marketing innovation capability: It mainly relies on manufacturers' marketing investment, basically sticking to traditional marketing methods, and cannot better play the important value of marketing in market development.
Fourth, the industry is too fragmented: Due to this brand-owner-led, agency-based distributor model, the entire market has formed hundreds of thousands of distributor enterprises. The entire industry is very fragmented. This causes waste of industry resources and high costs.
From the current change trend, the future intermediary field will have the following development directions:
--Platformization: Platformization will be the main direction for the intermediary link. That is, in the distribution link, it will gradually shift from the traditional offline model to an online distribution platform model.
The main change that the platform model can bring is a change in efficiency. Specifically, it can change three major efficiencies:
Order efficiency: from weekly orders to 24-hour daily orders.
Delivery efficiency: can effectively improve delivery efficiency, shorten delivery time, and reduce the probability of terminal stockouts.
Marketing efficiency: can use online platform means to more effectively activate customers.
Although there have been some problems in the overall B2B platform development in recent years, my analysis is that the main problem is that brand owners' marketing resources have not been transferred to the platform side, and brand owners and platform companies have not effectively tapped the marketing capabilities in the platform environment.
There will be three forces in future platforms:
Brand owners' B2B2B platforms: mainly large brand owners. In the future, to improve distribution efficiency and enhance channel control, they will inevitably introduce B2B platform models in the distribution link. Most brand owner platforms will organize the integrated transformation of distributors. Use platform models to overall improve the marketing efficiency of manufacturers, intermediaries, and retailers, and even help distributors build 2C omni-channel models.
Currently, some brand owners like Haitian have begun such exploration.
Specialized B2B e-commerce platforms: like Retail Link, Xintonglu, Yijiupi, etc. But in this field, most B2B platforms are still exploring models. In the future, there will definitely be successful models that run out.
Platforms transformed by distributors: Currently, many distributors see the important value of online order platforms in changing marketing efficiency and are actively transforming to B2B platform models. Use their understanding of the industry, combined with previous offline channel customer relationships, and use this new efficiency tool to achieve business model transformation. Among the dozens of distributor-transformed platform models I have seen, most transformed distributors have achieved relatively good results.
In the future, I am particularly optimistic about B2B platforms transformed by distributors with strong regional market coverage capabilities.
--Centralization: Especially under the platform development model, the future industry will gradually move towards centralization. In each market, there may be several or a dozen B2B platforms, but it will not be as fragmented as the current market structure.
Platforms focusing on orders will centralize, and platforms focusing on logistics delivery will also centralize. Especially logistics delivery platforms must move towards centralization. Because facing channel diversification, it must not happen that multiple sets of inventory and multiple logistics delivery systems appear in one market. If so, it will be a disaster for brand owners.
In the future, most B2B platforms will focus on orders, especially using marketing means to activate customers and improve order efficiency.
Then in one market, there will be one delivery system to complete commodity delivery. Achieve unified inventory management and unified commodity delivery.
--From coverage and distribution to promoting sales: Facing the current commodity market environment, the important impact of new communication methods brought by mobile Internet development on marketing, and the platform model transformation, the future intermediary marketing focus must change:
For B-end customers, the marketing focus is to activate customers through online means and improve order efficiency.
The function of the business team: from selling goods to developing users, terminal services, and using new methods to promote terminal sales.
--All business actions of the enterprise gradually shift from offline to the mobile phone end: In the future mobile environment, all business actions of the enterprise must be migrated to the mobile phone end. To achieve five online: customer online, product online, transaction online, marketing online, and organization online.
The online method most directly brings changes in efficiency, and this online method will also iterate more new distribution models.
Facing the above possible industry changes, distributors discussing transformation directions should think from the following aspects:
First, the enterprise's marketing focus gradually shifts from the product end to the more valuable channel system end in the future. In the future, the core competitiveness of intermediaries, product power will gradually weaken, and control over channels will become the new core competitiveness.
The intermediary's control over channels will gradually shift from mainly relying on products and brand power to other marketing means. Especially, it needs to use new technical means to effectively control the market.
Second, develop regional B2B platforms. For distributors with certain capabilities and foundations, they must explore B2B platform transformation as soon as possible. For distributors without the ability to transform to B2B, they should explore how to cooperate with B2B platforms.
The key to transforming to B2B is to find new operating models under the new tool environment.
In the platform environment, intermediaries need to explore cooperation with all value platforms. Because different platforms have different market coverage capabilities and marketing capabilities.
Third, actively innovate new models. Currently, China's retail has entered a new era of innovative development. Especially, retail innovation based on mobile social platforms is constantly iterating new models. Distributors should pay close attention to current new retail innovation, especially new retail model innovation based on community environments. In the future, channel communityization and community channelization are important development directions.
Fourth, transform to delivery platforms. For capable distributor enterprises, in suitable markets, they can transform to delivery platforms. But for the logistics industry, it requires heavy investment and has a certain degree of specialization.
03 Five New Capabilities for Distributor Transformation
Currently, distributor transformation must start with possessing new operational capabilities. The premise of transformation must first be capability improvement. If capabilities do not change, transformation will take detours.
All transformation directions and actions require the support of new capabilities.
Distributor transformation should focus on improving the following five new capabilities:
--New market coverage capability: Facing channel diversification and omni-channel, distributors must possess new market coverage capability, not only covering traditional channels but also effectively covering new channels, not only covering offline channels but also effectively covering online and community channels.
At the same time, under the current market environment, not only the width of market coverage but also the depth of market coverage and the closeness of links with customers should be considered.
Moreover, the new market coverage capability is not just market coverage driven by products and brands, but also new coverage capability generated by new technical means and marketing capabilities.
The new market coverage capability is the main core competitive capability of future distributors.
--Platform-based distribution capability: Either build your own platform or have strong cooperation capabilities with various distribution platforms.
In the platform-based distribution environment, the enterprise's marketing capability must shift from product thinking to customer thinking, from mainly selling goods to managing customers.
Platform-based distribution capability requires new capabilities to capture customers, activate customers, operate platform models, and market in the platform environment.
To possess these new capabilities, it is necessary to change and adapt to the new marketing concepts of platformization, transform the enterprise's marketing organization functions, adapt to platform-based marketing needs, and comprehensively improve the enterprise's platform-based distribution capability.
--Strong market service capability: On the one hand, continue to do well in market promotion, terminal services, and other related actions. More importantly, facing new market changes, current market services require distributors to gradually shift from B-end services to C-end positioning services.
The key is to combine the current market environment, not only relying on traditional sales actions like distribution and terminal display, but shifting the focus of market services to effectively helping terminal sales with new means.
It is necessary to combine current mobile communication methods and social community methods to build a new market service system and improve new market service capabilities.
--Strong marketing organization capability: Under the new market environment, traditional marketing means and methods are gradually failing. It is necessary to combine current market changes and new characteristics of consumer demand to establish new marketing organization capabilities mainly based on online.
The new marketing capability is supported by new communication capabilities. In the future, "all enterprises are media," and future marketing will "sell in communication, communicate in sales."
In the future, marketing capabilities adapted to the new marketing communication environment will be the core capability of distributors.
--Strong organizational innovation capability: Whether in the current transformation period or future industry development, innovation will become the core competitiveness of all enterprises. As some experts analyzed: the biggest feature of current consumption changes is that it changes too fast, and the biggest feature of current market changes is that it changes too fast.
Facing the rapidly changing market, the only way is to reform the enterprise organization, turning the enterprise into a new type of enterprise organization with high innovation capability, innovation vitality, and high flexibility.
04 Four Key Points for Distributor Transformation
The current distributor transformation must be a systematic model conversion. It is a transformation that involves the entire industry and must happen.
Currently, transformation is being discussed from the brand owner end to the terminal retail link and e-commerce enterprises.
This round of transformation has no teacher compared to the previous round, because many brand manufacturers including P&G and Coca-Cola are exploring transformation. At present, distributor transformation needs more exploration in the "no man's land."
But currently, some forward-thinking distributor enterprises like Hebei Dunjie, including innovative practices of some innovative enterprises, especially the rapid development practices of B2B, B2C, O2O, and community models in recent years, have brought many valuable insights to distributor transformation.
Therefore, distributor transformation must clearly see the future development trend of the entire industry, find the possible model changes of future intermediaries, systematically plan, focus on breakthroughs, and implement step by step.
--Transformation must first change concepts: Any transformation is first a deep revolution in concepts. In this transformation, distributors need to first change their business concepts.
Concept changes involve business concepts, marketing concepts, organizational management concepts, and other aspects.
Changing concepts requires "the boss to change circles." Stand at a higher height to see the possible reform trends of the entire industry. And new concepts must come from outside the traditional distributor field. In the traditional distributor circle, people see problems together a bit more; it is necessary to change circles, especially to the new fields where the Internet and innovative development are very active, to find new inspiration, new ideas, new directions, and new paths.
--Transformation must change the business model: From visiting many distributor enterprises that have switched to new models in recent years, because they changed to new business models, most enterprises have achieved new rapid development, some with triple-digit growth in performance, and because they switched to new models, everyone is very confident about the future.
Therefore, in the transformation process, everyone should focus on finding the right model based on their own enterprise's actual situation. Once you see it clearly, act actively.
--Transformation must change technical means: One of the very important factors driving this round of enterprise transformation is the Internet, especially the mobile Internet environment, where new technical means and new Internet-based connection technologies are changing the traditional business environment. On the one hand, they bring more efficient means; on the other hand, they reconstruct more new business models.
Therefore, in this round of transformation, distributors should strive to study the impact and opportunities brought by new Internet technology means, especially actively research how to integrate new technologies that have already produced important value in the e-commerce field, social field, and other industries into their own enterprise marketing and management.
In this regard, some distributor enterprises have made good explorations and achieved mobile and mobile-end management methods.
--Transformation must change the organizational system: The inflexibility of the organization, the continuous rise in costs, and the increasing difficulty in managing business personnel are all challenging distributor organizational management.
Transformation must change the organizational system and management model. Turn the enterprise organization into a new enterprise organization that is very flexible, can quickly adapt to market changes, can effectively stimulate the potential of business personnel, and can continuously optimize the enterprise's management costs.
The partnership system is more suitable for distributor enterprise organizations. Distributors should use the partnership model reform, with the help of the transformation of the enterprise's marketing model and business model, to build a new type of enterprise organization with platform-based operation and platform-based organizational management. It can attract more excellent talents, integrate more market resources, and rapidly develop the enterprise.
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