Click to read the original article for details. **Distributors won't be eliminated, but that doesn't mean you as a distributor won't be; ** "No middleman to take a cut" is unreliable, but the "disintermediation mindset" is real. In recent years, distributors have lived in fear of being eliminated. Some distributors have seen the light early, found a big company to "take them in," and transformed from anxious bosses into professional managers. With money in hand, they live a comfortable life. I know a few distributors who have been absorbed; some are in this state. One guy even used the money from selling his company to speculate in several apartments, making a big profit. As for how the company continues, that's Boss Zhou's problem. But most distributors are not so "lucky." If they don't want to "die," it is said they must "transform." How? Usually in two directions. One is "+Internet" Ah, almost every distributor I know with a bit of scale has to get an ordering APP, and some even venture into WeChat business. The outcome is usually not pretty, because they often end up head-on against a B2B platform. Your money as a distributor is earned bit by bit through the "vicious" "middleman's cut," while B2B platforms often get their money from the capital market. They burn money on subsidies; can you afford to play that game? You finally see a B2B platform burn out and die, but before you can celebrate, another one pops up and continues burning. There will always be a time when you can't keep up. And Alibaba and Tencent's determination to lay out B2B is obvious to all. Within two years, this will be a nightmare for distributors who only do delivery. Two is extending upstream, wanting to be a "manufacturer." The distributor group as a whole has low self-identity. No matter how big a distributor gets, they always feel they are doing small business, being a "middleman," lacking a sense of security. Having their own physical factory, at least their own brand, makes them feel like an "entrepreneur." So before the Internet "trend" came, many distributors' first choice for transformation was to become a "manufacturer." Even a distribution tycoon like Lin Jianhua had to create his own brand Tianwo, listing Tianwo International instead of Nanpu Food. But being a "manufacturer" is not that simple. Over the years, I've seen a few successes, but most are failures. Manufacturers have their own thresholds and difficulties: R&D, production management, cost control, brand building, channel design—none of these are easy. Many distributors' initial idea is to see a product selling well, find a manufacturer that can produce the same product for OEM, and then build their own factory and equipment once they grow. Most distributors fail in transforming into brand owners because they die on this logic. I remember a distributor who brought several samples to me, saying he wanted to do production. The products did look good. But when I talked with him in detail, I found he knew nothing about the product's process, packaging materials, costs, formula, ingredient characteristics, or raw material sources. Such a rash reach upstream is bound to be fraught with danger. Old Miao has always been a firm opponent of the so-called "disintermediation." Anyone with basic marketing knowledge knows that middlemen have value. Unless there are redundant links, or new technology creates more efficient middlemen to replace the previous ones, disintermediation can only reduce channel efficiency. Distribution economic effect diagram Kotler said that middlemen are the "main source of economic benefits" in commerce. This is no empty talk; old Kotler doesn't need to flatter distributors. In fact, over the years, those calling for disintermediation—hypermarkets, Tmall, JD.com, and even the used car platform that advertises "no middleman to take a cut"—have not truly disintermediated. Instead, due to "platformization," the intermediary structure has become more complex. But middlemen having value doesn't mean current middlemen have value. Distributors won't be eliminated, but that doesn't mean you as a distributor won't be. In recent years, distributors have had a tough time precisely because they have lost their core value. Distributors degenerate into delivery providers, losing core value. No matter how large the enterprise scale, they fall to the bottom of the food chain. If they don't bully you, who will? If they don't push inventory on you, who will they push it on? If they don't squeeze your payment, who will they squeeze? The twenty-year history of channel development is a history of the fall of distributors' core value. Let's revisit the eight values of middlemen mentioned by old Kotler: 1. Information; 2. Promotion; 3. Negotiation; 4. Ordering; 5. Financing; 6. Risk bearing; 7. Payment; 8. Physical possession and title transfer. Old Miao previously called the first three the core value of distributors, because they represent the core operational capability; the last five represent the distribution capability. Of course, we can also call the first three "information flow operational capability" and the last five "commercial flow operational capability." See the figure below (five flows of a product in the marketing channel): Understanding the value of distributors and the flow patterns of products in marketing channels, the direction for distributor transformation becomes logical. If you have large scale, complete network, strong capital, mature warehouse and logistics, but lack core value while having solid delivery capability, my advice is: 1. Optimize the few big brands you hold. Big brands have brand pull; you should have a few. But for those clearly on the decline, always asking you to advance costs but slow to reimburse, let them go early to avoid sinking deeper. 2. Don't take on new brands, and try not to take on new products. Don't listen to the hype like "distributors should do new products." New products require promotional capability. Although you have scale, promotion is your weakness. 3. Use your strong network capability to horizontally integrate surrounding delivery providers and become a platform. 4. Open up Internet information ports as soon as possible to become a large regional or even national online "second-tier wholesaler." 5. With this, you have a say. Of course, you are no longer a distributor but a B2B platform with efficient delivery and the risk of channel diversion, but others can't do anything about it. In the end, you might still be absorbed. But for most distributors, this path is not feasible.
1. They need to forge their core value as distributors; the rest can be ignored. Master the information flow; the product flow can be left alone. Warehousing, distribution, etc., can even be outsourced.
2. Don't always rely on manufacturers to guide your promotion. Chinese manufacturers know how to advertise, but few really know how to do ground promotion, including multinational companies. Their operation manuals are mostly routines. But you can ask manufacturers for promotion expenses.
3. Master the core value of promotion. It's easier to start with products with high consumer attention and high participation. Ordinary FMCG products are difficult and less effective.
4. Clarify responsibilities and rights with manufacturers. Don't let them reach into your affairs. Any matter should bypass the manufacturer's sales staff and directly communicate with the boss or top marketing executive; otherwise, don't cooperate.
5. The premise of information flow operation is the ability to generate information traffic, including both online and offline traffic.
6. Establish a stable vertical alliance with manufacturers: In the past, manufacturer-distributor cooperation often started with a honeymoon period, but later as growth slowed, they began to fight over the existing pie. New-type manufacturer-distributor relationships should, first, establish a joint entity with mutual interest penetration, referencing the distribution joint ventures of Gree and Wahaha, or the branch company model; second, in core functions, manufacturers and distributors should be interdependent—manufacturers control the brand, distributors control promotion—each holding the other's lifeline, unable to leave each other.
7. Establish horizontal alliances with peers, not for channel diversion, but for "traffic diversion," mutual referral, and information sharing. Enhance your core competitiveness. Since writing "No Middleman to Take a Cut Is the Biggest Marketing Lie" the year before last, Old Miao has spoken up for distributors whenever possible, because this group is large in number but overall weak, at the bottom of the channel chain. Few speak for them or analyze from their perspective, but there are various traps: investment traps, new product traps, traffic traps, platform traps, technology traps—there's always one for you. In the past two years, the environment for traditional distributors has further deteriorated. A friend was once a top distributor in a big city, with annual turnover of nearly one billion yuan. Now he has basically given up, running a restaurant, making some investments, and living a semi-retired life at a young age. Although it's a pity, he's glad he exited early. What's gratifying is that I've seen some new operational distributors rise: a distributor-turned-entrepreneur used an egg yolk pastry, leveraging WeChat and e-commerce to sweep the country, quickly achieving monthly sales of tens of millions and starting to build his own brand; in the maternal and infant channel, operational distributors keep surprising us; some have achieved sales of over a hundred million through whole-network distribution and precise push; some even sell cosmetics via WeChat public accounts, with monthly sales of several million and net profits of hundreds of thousands. All advantages are efficiency advantages. "Disintermediation" is unreliable, but the "disintermediation mindset" is real: sales only happen at the C-end, and all resources and expertise point to the end user. Under this mindset, distributors who truly understand "distribution" are flourishing, and these "professional" distributors are the hope for China's distributor community. Source: Old Miao's Marketing Button (ID: yiheyingxiao)