---
title: "Distributors' Business Is Indeed Getting Harder"
description: "The market has indeed become more challenging. From August to now, I visited over thirty distributors and received consistent feedback that business is tough this year. Sales declines are common, and even where growth persists, it's growth without profit gains. The reasons include market share redistribution and, more importantly, the market entering a phase of contraction."
author: "周群"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2024-12-31"
language: "en"
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# Distributors' Business Is Indeed Getting Harder

> The market has indeed become more challenging. From August to now, I visited over thirty distributors and received consistent feedback that business is tough this year. Sales declines are common, and even where growth persists, it's growth without profit gains. The reasons include market share redistribution and, more importantly, the market entering a phase of contraction.

**The market has indeed become more challenging**
From August to now, I've been touring the market and visited over thirty distributors. The feedback has been consistent: business is indeed harder this year.
**Sales declines are the norm, and even where growth persists, it's growth without profit gains.** The reasons for the decline include not only the redistribution of the market pie but, more critically, the market has truly entered a phase of contraction.
A grain and oil distributor told me that his business, with annual sales in the hundreds of millions, has declined by about 20% this year.
I was quite surprised by this figure. Grain and oil are essential products, primarily consumed offline, so one wouldn't expect such a sharp decline.
After hearing the team's report, the distributor called a meeting to analyze the reasons for the decline.
Was it a problem with the team's execution? Did competitors steal sales? Or did channel segmentation take away sales?
After investigating, they found that competitors' sales were also declining, and since they had full-channel coverage locally, there was no major channel they were missing.
**The conclusion was that the problem lies with the market, not their own execution.** Not only were their sales declining, but sales in surrounding cities were also falling.
The Q3 performance reports of listed FMCG companies in 2024 also show that most brands are experiencing declining performance.
The sales decline brought by a shrinking market indeed makes business harder.
**Where did distributors' sales go?**
As the overall market contracts, everyone is struggling. But for distributors, it's even more painful: in a shrinking market, there are more players, making competition fiercer than in a growth market.
In the "2023-2024 China FMCG Distributor Business Survey Report" released by New Distribution in August this year, data shows that among surveyed distributors, 48.7% saw revenue decline and 63.2% saw profit decline.
So where did distributors' sales go?
**First, distributors operate in the same-city business, but same-city traffic is decreasing. Although the squeeze from online is weakening, it continues to divide the total volume.**
Since the rise of e-commerce, national e-commerce platforms—traditional, vertical, social—have been continuously cutting into offline business.
The chart below shows total retail sales of consumer goods from 2013 to 2023 (in trillion yuan). Over the past decade, online retail sales have grown more than eightfold and continue to increase their share of total retail sales. However, most distributors lack the operational capabilities to capture online business, whether during a dividend period or not.
**Second, the main channels for distributors—circulation small stores and traditional supermarkets—are seeing their traffic continuously diverted and eroded, with output per outlet declining.**
A regional snack food distributor told me that in the past, doing business with supermarkets and small stores was tough but stable. In the last two years, the decline has been particularly noticeable, with an overall drop of over 30% this year. Data shows many small and medium outlets have seen their business halved.
**Third, after major supermarkets undergo remodeling, they focus on direct signing and direct procurement, gradually cutting off distributor sales in that channel.**
Some leading supermarkets, facing declining traffic, have started remodeling. On one hand, they adjust product structures, which means replacing many suppliers; on the other hand, they seek bare procurement, demanding prices equal to distributor prices, clearly aiming to eliminate intermediaries.
**Fourth, distributors fail to capture and execute local instant demand.**
According to the National Bureau of Statistics and industry data, from January to August this year, the instant retail market grew 26.2% year-on-year, far exceeding the 3.4% growth of total retail sales and the 8.9% growth of online retail.
New Distribution has consistently argued that "instant retail is a channel that continues to maintain high growth in the era of contraction."
Importantly, instant retail relies on "localized supply," and distributors can participate. However, most distributors are either unaware of this or don't know how to operate it, so this supply-demand opportunity is missed, and sales are taken by competitors.
**Fifth, intense local competition, with big fish eating small fish.**
As the market contracts, and with chain supermarkets going direct, snack stores and discount stores vying for downstream outlets, distributors' original business will inevitably be encroached upon.
When sales decline and costs rise simultaneously, distributors can only stabilize, improve per-capita efficiency, and maintain margins by taking on more brand agencies, fighting for more shelf space, and expanding business scale.
This intensifies competition among distributors. **New retail formats take a share, peers take another share, and naturally, sales are eroded.**
**It's okay to be anxious about tough business,**
**but not to act blindly**
In December, I visited over a dozen distributors, and most reported that this year's sales were not ideal.
They cited many reasons: **hard discount stores have a big impact, market prices are chaotic with severe price wars, cross-regional selling is rampant with weak manufacturer control, brands aren't profitable, and white-label products don't sell.**
It's a fact that business is tough, and everyone is anxious. But how to respond? Distributors' approaches fall into several types:
**One type is "retreat":** Since business is declining anyway, they continue as is, and when it becomes unsustainable, they exit or sell the business entirely.
New Distribution previously reported on a distributor, Dalian Yixiu Trading, which acquired three distributors in five years. For some distributors, **if they can't adapt to current changes and can't manage scale and profitability, an orderly retreat is also a good option.**
**Another type is "look inward":** Without major changes or reforms, they re-examine internal management, seek internal improvements, reduce costs, and increase efficiency.
Are compensation and performance systems flawed? Are business management systems incorrect? Are digital tools underutilized? By optimizing internally, they aim to survive first.
**Another type is "look outward":** Based on the existing business, **they seek growth by expanding into new channels and businesses.**
For example, building B2b supply chains to increase sales in small and medium stores; doing category management to grow in supermarket channels; pursuing special channels like group buying for enterprises and institutions; or engaging in community group buying to grow on platforms.
These three approaches have no right or wrong; they are all reasonable and matched to each distributor's current situation.
But I must emphasize: **looking outward is correct, but it must not be blind.**
For instance, many distributors tell me they want to do B2b. When I ask why, some say that industry experts and media claim that transforming into B2b supply chains is an opportunity, so they want to do it.
If they go into B2b with such a mindset, they will likely fail and become cannon fodder.
Behind any proven new business, there are both success and failure cases. Distributors need to assess whether this direction suits them: Do they have adequate warehousing? Is the team capable? Can they assemble a product portfolio? Can they withstand one or two years of losses? **If they haven't thought it through, they shouldn't blindly expand into new businesses.**
Over the past few years, New Distribution has been communicating with outstanding distributors in the FMCG industry. We've found a pattern: successful cases of "looking outward" often share a crucial prerequisite:
**Their core business is already a local leader, with complete organization, strong teams, refined management, and high digitalization—essentially reaching the ceiling of their current business. In such a context, if they don't try new channels and businesses, further development is difficult.**
For distributors, **when business is tough, they should first look inward to see if there's room for optimization; when internal operations are solid, then look outward for new growth. Only with a fallback can there be a way forward.**
**What is the value of surviving distributors?**
Distributors cannot change industry transformation; they can only accept it. But the reality is that some distributors will stay, and some will leave.
This year, New Distribution visited over a hundred distributors and delved into many excellent cases. We have some judgments about distributors:
**First, the market still needs distributors to serve brands, but their numbers will greatly reduce.** They provide logistics, warehousing, and capital advances for brands, and handle regional market operations.
We also see that many manufacturers are beginning to delegate authority back to distributors, increasingly favoring distributors with brand operation capabilities to manage markets rather than direct manufacturer control.
For distributors, the future is not about serving a single brand but using professional capabilities to serve and operate multiple brands.
**Second, outlets remain the core asset of distributors, and the ability to cover terminal outlets is essential.** The strength of control over terminal outlets determines, to some extent, the distributor's bargaining power in the market.
**Third, category focus will become a core competitiveness for some distributors.** By deeply cultivating a specific category and combining multiple brands within that category, they maximize the capture of store slot resources, display resources, and shelf space, while using professional expertise to help supermarkets improve category sales.
**Fourth, cross-category management is a necessary topic for distributors to learn when building supply chains.** The essence of supply chain is one-stop product output, with a key point being complete categories. Distributors need multi-category management capabilities.
In the past, most distributors were in agency businesses, focusing on brand management or single-category management. But supply chain is a cross-category business, requiring distributors to understand the characteristics of different categories to meet store needs.
**Fifth, retail scenarios are diversifying and structurally differentiating, with blurring boundaries between retail types. Distributors must have the capability to manage multiple retail channels.**
Distributors operate local businesses, so they must pay immediate attention to channels related to localized supply. In the current environment, if you don't do it, competitors will. Whoever understands first gains the first-mover advantage.
**Sixth, you may not do retail, but you must understand retail and consumers.** Knowing what terminals and consumers need tells you what products will sell and what methods will drive sales.


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