Introduction: Whoever holds scarce resources holds the power of choice. Author | Ren Wenqing Andy Review | Gou Gou Layout | He Wen

Last month, I visited a distributor. She had always treated the brand she represented as her entire career and did an excellent job in the market. However, since last year, the manufacturer adjusted its policies, intending to turn her into a warehousing and delivery provider. Her business immediately changed: she was forced to sign various unequal treaties, her sales team was handed over, and her net profit plummeted from 6 points to 2 points. She said she used to think she was a brand partner, but now she realizes she was overthinking it.

Almost at the same time, another distributor boss told me that surviving the three years of the pandemic was not easy, and his biggest takeaway was understanding that he could no longer rely on a single brand as before—the risk was too high, and his fate was not in his own hands.

Distributors' fate is not in their own hands. More and more distributors are feeling this way. Why is this happening? This involves two questions.

First question: How do distributors make money? Most distributors might blurt out that they earn from price differences and brand rebates. That's correct. But there's a deeper level to this question: Why does the manufacturer let you earn this money? Because it needs you to advance funds, hold inventory, and handle distribution—you do this more efficiently, and for that, you invest capital and manpower. On the surface, you earn the price difference, but in reality, it's a salary you earn from the manufacturer, corresponding to the return on your invested capital.

Second question: Why is it getting harder to earn this money? With economic downturn and stock competition, brand growth targets haven't changed. What to do? The pressure cascades down from the top, eventually landing on distributors. Gross margins shrink, operating costs rise, and with high capital costs from inventory pressure, a careful calculation shows you're not making money—maybe even losing. But you can't refuse; the relationship between distributors and brands, especially top brands, is unequal, frustrating, and undignified. This is the real feeling of many distributors.

Where to go next? How to transform? Actually, when distributors talk about transformation, another way to put it is: Can we earn money standing up?

The essence of earning money standing up is having the power of choice. The brand you represent can't do without you; other brands entering the local market prefer to cooperate with you first; you have a relatively equal relationship with brands; if they ask you to sign unequal treaties, you can choose to protect your interests, even say no directly, rather than swallowing your pride. You say you want that but can't achieve it. The key is whose resources are scarcer. Whoever holds scarce resources holds the power of choice. Scarcity is the lens through which we understand business essence.

For example, in the manufacturer-distributor relationship, why can distributors only earn hard-earned money? Because brands are scarce, while channel resources are not—if you don't do it, someone else will. Brands earn more profit essentially by monetizing their own scarce brand resources. Over the past decades, many distributors grew their businesses by following brands, but they relied on manufacturers to do market development and didn't build their own capabilities in terminal promotion and brand operation. So costs kept rising, profits thinned, and they could only struggle to maintain.

But not all distributors are like this. In the past few years, we've interviewed many "big distributors"—the cream of the crop. What is a "big distributor"? Is it just about size? Not necessarily. Recently, I visited a distributor with annual sales of 300-400 million yuan, and the boss looked worried. The market environment is tough, but brand targets remain pressing. They follow a broad distribution model and lack the ability to penetrate and cultivate channels deeply. The company has been thinking about new business directions, but more thinking than doing, still making local optimizations within the brand framework—like a frog in slowly boiling water.

In contrast, another distributor has been deeply cultivating channels over the past few years, building a team to promote new products, and actively making trade-offs and combinations of brands. Although annual sales are only 60-70 million, profits are 2-3 times that of peers. What I want to say is that a true "big distributor" is not about size. No matter how big, you're still earning a salary from the manufacturer; if brand policies change, your business could collapse. When you have sales volume, it's you choosing the brand, not the brand choosing you—that's a true big distributor. How to achieve that? The key is to own scarce resources. That scarce resource is your customers.

If you ask distributor bosses whether their company is customer-centric, most would say yes. But if you ask a different question: Who are you actually serving? Many distributor bosses would first think of the brand they represent. It's not wrong to have a service-brand mindset, because distributors exist due to brand needs. In a sense, distributors are the brand's external team. You might say serving the brand and serving customers don't conflict. Actually, this involves a fundamental difference in thinking, or rather, a business values issue. Serving the brand, you earn a salary from the brand. Serving customers, you earn profits from the market. The difference is that whether you get paid is decided by the brand, but whether you earn profits is decided by the market. The market's advantage is that if your service is better and your efficiency higher, no one can replace you, and you can earn money standing up.

In the past, distributors were not scarce; brands were scarce, and good products were scarce. Now, good products are not scarce; distributors who control terminal resources and have promotion capabilities are scarce. For example, regional platform-based distributors that have emerged now use digital tools to cover thousands of small stores, becoming local supply chain platforms. With good service, high efficiency, customer recognition, and sales volume, brands naturally seek cooperation proactively. "Distributor" is a term from the brand's perspective, an external team. "Supply chain platform" is a term from the terminal customer's perspective, an independent enterprise. They have taken the initiative in market bargaining, essentially because they transformed from brand external teams into independent enterprises serving customers well. Becoming an independent enterprise is the prerequisite for earning money standing up.

You might say, that sounds reasonable, but how exactly? Actually, speaking generally, it's just big logic and direction. For any specific distributor, because of differences in region, competitive environment, development stage, product categories and brands, team capabilities, etc., you must analyze specific problems. A few days ago, a distributor boss called me. His situation is roughly this: He's in a prefecture-level city, with current sales of 50-60 million, and he wants to reach 100 million in the next two to three years. Currently, the team isn't divided by category, leading to many brands he thinks have potential not being developed. So he wants to split the business team by category and hire one or two new people, giving opportunities to take on new brands and also to take over. He thinks this is feasible but lacks confidence. But one thing is clear: the future direction is to have more salespeople and represent more brands. After listening, I said dividing the team by category and expanding the team to increase sales is a direction, but the problem isn't whether what you're doing is right; it's where your thinking starts. I gave him two suggestions: First, the logic of thinking is important. Is setting a target of 100 million reasonable? Analyze the current store capacity: where will the 30-40 million increment come from? Which stores? Which products? Which people are needed? Based on this analysis, you can decide specific actions, including organization, performance, product selection, etc. "More salespeople, more brands" is a result, and a possible one, not the starting point of your thinking. If the starting point is wrong, even if actions happen to be right, it's more dangerous. Second, going out to learn and exchange is important. Although distributors have specific situations, the essence of business is common. I always say, the more excellent peers you see, the easier it is to position yourself, judge your current position, and know where you might go in the future. Are others' experiences necessarily useful to you? You need to see more, think more, and then combine with your own situation to try. But at least, you need to know what cases, methods, and experiences exist.

Finally, let me talk about the "Distributor Member Club" we initiated. It officially launched in June, and now over 150 outstanding distributor bosses nationwide have joined. We've already held 3 sharing sessions and 1 benchmarking distributor study tour.

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Today, the first benchmarking distributor study tour visited Xi'an Jiayun Yunshi. Distributors from all over the country gathered, eager to visit and learn. The venue was packed, with no empty seats. Founder Fan Qi of Jiayun Yunshi shared his entrepreneurial experience and insights on-site, and then we visited the 18,000-square-meter warehousing, sorting, and distribution operation, engaging in in-depth exchanges, providing an excellent case for the industry.

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△ "New Distribution · National Benchmarking Distributor Study Tour" Issue 1 · Visiting Xi'an Jiayun Yunshi

The next few sharing and study tour activities are also planned.

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If your business is facing challenges and you're stuck in a rut, welcome to join the Distributor Member Club. Seize the opportunity, reduce costs, and increase volume. Here, you can find suitable learning targets and path references! If you're doing exceptionally well in your region and have insights into management, we welcome you even more. Walk with experts, learn from each other, and progress together. Become a future leader in the FMCG trading industry and earn money standing up!

Scan the QR code to add WeChat. Welcome to join!

About the Author: Ren Wenqing, Dean of New Distribution Digital Research Institute, FMCG industry analyst, columnist for bC Integration, with research areas including channel digitalization, distributor business growth, and new retail in FMCG.

Further Reading

  1. The Rise of Post-80s and Post-90s Distributors!
  2. Non-traditional Distributors Rise: Representing Yuanqi, Yili, Arawana, and Fulinmen, Achieving 70 Million in 3 Years
  3. Distributors Trapped in Place!