---
title: "Distributors Doing Regional B2b: Price Wars Are Meaningless"
description: "At the China FMCG Conference in August, New Distribution released the '2024 China FMCG Distributor B2b Platform Strategy Insight Report' and held a closed-door B2b seminar. We observed that both brand owners and distributors are highly interested in the B2b model, driven by its value in deep coverage of small and medium stores. However, the underlying reason for this renewed attention is the lack of growth in the market."
author: "周群"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2024-09-09"
language: "en"
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# Distributors Doing Regional B2b: Price Wars Are Meaningless

> At the China FMCG Conference in August, New Distribution released the '2024 China FMCG Distributor B2b Platform Strategy Insight Report' and held a closed-door B2b seminar. We observed that both brand owners and distributors are highly interested in the B2b model, driven by its value in deep coverage of small and medium stores. However, the underlying reason for this renewed attention is the lack of growth in the market.

At the China FMCG Conference in August, New Distribution released the '2024 China FMCG Distributor B2b Platform Strategy Insight Report' and held a closed-door B2b seminar. We observed that both brand owners and distributors are highly interested in the B2b model.
Behind this attention is naturally the value of B2b—deep coverage of small and medium stores. Some may wonder: B2b has existed for over a decade, why is it attracting attention now?
A straightforward reason: lack of growth.
In the past, the market was incremental; the pie kept growing, and whether you ate fast or slow, you could get a share. But when the market enters a shrinking phase, the pie gets smaller with each bite, and those who eat slowly are squeezed out.
On the other hand, the traditional offline distribution model is gradually becoming unsuitable for the current market environment. In the past, many manufacturers covered small and medium stores through deep distribution, but deep distribution is a terminal operation system based on a human-wave tactic. Now that labor and vehicles are expensive, the cost of deep distribution is too high, and efficiency cannot keep up. A new distribution model is needed for more efficient coverage.
Recently, many distributors have talked to me about B2b; some have already started, and others ask if they can do it. Next, New Distribution will share our understanding of B2b through a series of articles.
**Distributor B2b Supply Chain Transformation**
**Is an Unavoidable Choice**
This year, when communicating with distributors, the common feedback is that business is tough; some see declining sales, while others see rising sales but significantly lower profits.
In the '2024 China FMCG Distributor Operating Conditions Survey Report' released by New Distribution, a set of data shows that only 55.0% of distributors achieved their brand sales targets in the first half of the year.
This is the current market situation: both upstream and downstream, the entire business is facing enormous challenges. From incremental to shrinking, China's FMCG market is undergoing profound changes, making FMCG distributors and brand owners face unprecedented challenges, even directly affecting their operating status and development models.
From the distributor's perspective, what changes have occurred in the market?
**First change: Channels are more diversified and fragmented.**
In the past, distributors could achieve decent growth by focusing on a single channel, but today the channel structure has evolved from one-dimensional to three-dimensional. Not only are there trends of store chainization and onlineization, but also front warehouses, community group buying, social e-commerce, etc., all of which are dividing a city's FMCG circulation volume.
The most headache-inducing issue for distributors is that after new channels enter, goods flow into the regional market, but the supply is not from them, and prices are lower, causing chaos in the supply and pricing of regional market goods.
**Second change: Brand and retail concentration.**
In the FMCG field, the trend of product branding is already very obvious. A decade ago, in township markets, you could often see 'Kangshuai Fu' or 'Yue Li Yue' (copycat brands), but now shelves are basically replaced by well-known national brands. Even white-label products are mostly integrated by chain retail stores.
Similarly, **the chainization and branding of retail stores is an irreversible trend.** In the past few decades, convenience stores were mainly mom-and-pop shops, but now chain convenience stores are everywhere, and some mom-and-pop shops are being absorbed by local retailers or distributors.
The essence of retail is to infinitely approach lower costs and higher efficiency. **Most single stores cannot compete with chain systems in operational capability. When the market enters a highly competitive stage, retail concentration will become more pronounced.**
**Third change: Higher operating costs.**
Distributors bear the value of integrating warehouse and logistics, transaction orders, product promotion, and capital advance.
The biggest difference between the past and today is that in the past, it was a stall-style business: a few hundred square meters of warehouse, a few tricycles, and two or three brands, with low costs and low efficiency, but also low store requirements.
Today, channel resource investment is higher, labor costs are higher, and stores demand higher efficiency and lower prices, meaning costs at every link are increasing. **Distributors need to rely on scale to achieve lower costs and higher efficiency.**
**Fourth change: Lower business profits.**
Channel fragmentation leads to continuous division of customer sales. Intensified market competition and reduced customer loyalty drive brand owners and channels into increasingly fierce price wars. Rising costs of rent, labor, and logistics further compress the profit space for brand owners and distributors.
Against this backdrop, the supply chain transformation of distributor B2b is actually an inevitable result. **On one hand, through supply chain scale, multi-brand agency and distribution can improve efficiency and reduce costs; on the other hand, through superior product portfolios and cost advantages, it can enhance bargaining power with upstream and downstream partners.**
**Distributors Doing Regional B2b**
**Core Value Is Not Providing Low-Priced Goods**
Recently, when communicating with distributors, everyone generally holds a positive attitude toward B2b. Many regional major distributors feel that the current environment is favorable for building their own B2b, as there are more successful cases in various regions.
According to incomplete statistics by New Distribution, there are currently over 60 FMCG B2b platforms operating normally in China, with many successful cases of distributors doing regional B2b, such as Chengdu Rongcheng Yigou, Guangxi Yijia Zhixing, Luoyang Shendu Yigou, etc. Most have reached GMV of hundreds of millions in a single city.
**Why is there an opportunity for distributors to do regional B2b now?**
After communicating with many distributors, I found a misunderstanding about B2b: some think that distributor B2b can succeed only by attracting small stores with low prices.
In a previous exchange with Mr. Hu from Yijia Zhixing, there was a viewpoint worth considering: **doing B2b purely on price wars is meaningless; price wars have no end. There are many competitors, and you cannot be cheaper than all platforms, and distributors cannot outspend capital.**
So before answering whether distributors have an opportunity in regional B2b, we must first consider another question: **What value does regional B2b actually provide to small stores?**
Despite the huge changes in China's channels, there are still nearly 6 million mom-and-pop stores in the market.
**What problems are these small stores facing now? Is it a lack of product supply?**
No, **the market is not short of products, especially large circulation goods.** Small stores now have many channels to stock up: from distributors, B2b platforms, wholesalers, wholesale markets, community group buying, and even Pinduoduo.
For small stores, there is no shortage of supply channels, and prices for large circulation goods are almost transparent; the price differences between channels are not as big as imagined.
What distributors really need to find is the underlying problem behind small stores.
In the first half of the year, New Distribution visited many terminal small stores. What we saw as the problem: in a bustling business district, a single small supermarket originally had monthly sales of 300,000 yuan, but after a chain convenience store and two snack stores opened nearby, sales directly halved by 60%.
So **the 'real problem' for traditional small stores is operational capability. When professional players like chain convenience stores, snack stores, and flash warehouses enter the regional market, traditional small stores are actually uncompetitive.**
Whatever products small stores have, they have; products small stores don't have, they also have. Moreover, these new formats have more advantageous supply chains and more refined management methods. In such an environment, small stores face the problem of survival—how to improve their operational capability to cope with external competition.
Looking back, what should B2b really do? **It is to empower stores, provide one-stop product supply, and help stores with product selection, operations, and services.**
The core value of B2b at the most basic level is not just reducing supply chain layers, improving circulation efficiency, and lowering procurement costs, but more importantly, helping small stores survive and thrive in fierce competition.
During market visits, New Distribution also saw some mature regional B2b platforms that have moved beyond simple supply and started deep empowerment of small stores, such as rebranding and store renovations.
**If You Fear Losses, Don't Try B2b**
In the last sharing session of the Tama Community, it was mentioned that distributors doing B2b should ask themselves three questions: **Can you persist? Can you overcome difficulties? Are you afraid of losing money?**
New Distribution has repeatedly mentioned in previous articles that trading business and B2b business are completely different logics. The former serves brands, doing localized brand operations and coverage; the latter serves stores, helping them with product selection, operations, and deep empowerment.
For distributors, the different underlying logic means they are two different industries. Doing B2b is not a transformation but a career change. This process involves adjustments in organization, products, systems, warehousing, and other dimensions.
Take the system as an example: the system of a traditional trading company is mainly used by salespeople for order management; the B2b system is mainly used by store owners to help them place orders independently.
**The initial capital investment and short-term team discomfort are stages that distributors doing regional B2b must go through. Having a pre-loss period is normal.**
Distributors should not only see short-term losses but also long-term value.
The entire B2b integration is divided into two parts. On one side, retailers transform into B2b, directly cooperating with manufacturers to cut intermediate links, reduce costs, and ensure supply chain stability.
On the other side, after distributor B2b platformization, they integrate retail terminals through chain franchising, rebranding, and self-opening stores, building a localized B2b platform that integrates supply and sales, enhancing control over the supply chain.
**Distributors should see that in the current market, if you don't do it, your competitors will, or even retailers will cross over to take your business.**
**If you want to communicate in depth with the author, you can scan the QR code to add the author's WeChat.**


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