Recently, I've been conducting field research on the front lines, and one clear observation is that distributors are generally anxious, finding it increasingly difficult to do business. To survive, many are exploring new paths for transformation and upgrading, such as B2b or opening stores. Regarding B2b, New Distribution has reported on many cases and organized study tours for distributors to learn and exchange ideas. However, cases of distributors successfully doing retail are relatively limited. The protagonist of this edition of "New Distribution 100 People" is a 30-year veteran in the food industry, Ding Qiang, founder of Hongyihang (Shandong) Brand Operation Management Co., Ltd. Mr. Ding Qiang is both a distributor and a retailer, representing brands like Wrigley, Lay's, Richeese, Haidilao, and Weilong, with annual sales exceeding 200 million yuan in a third-tier city. Since entering retail in 2019, he has successfully opened 5 warehouse club stores with over 80,000 paying members, more than 20 snack discount stores, and also ventured into live-stream e-commerce, establishing 16 live-stream supply chain bases across the country over 3 years. Should distributors open stores? What precautions should they take? After reading this article, you will surely gain valuable insights.

30-Year Food Industry Veteran Why Transition from Traditional Distributor to Retail? Before starting his business, Ding Qiang ran a clothing business for five years in Linyi, a logistics hub. However, the market was extremely competitive with thin margins, and lacking expertise, he struggled to earn even 10 yuan a day. In 1993, when the Linyi Food Wholesale City was established, Ding Qiang saw an opportunity in food compared to the cutthroat clothing industry. He moved into the wholesale city and started a small food business targeting school channels under the brand "Hongqiang Food." After several years, Hongqiang Food gained some reputation in the local food circle. In 1999, a chance encounter with the brand manager of Wrigley's gum led Ding Qiang to help with distribution and establish a pricing system for the Shandong market. This marked the beginning of his brand agency career, as he successively represented well-known brands like Lay's and Nabati, and started doing business with supermarkets, achieving rapid growth. According to Ding Qiang, at its peak ten years ago, the single brand of Wrigley's gum alone generated 70 million yuan in revenue. However, by 2019, the situation had changed. Supermarket performance plummeted, with serious arrears, and on the other side, his core brand businesses were being carved up, causing Ding Qiang great distress. "In traditional trading, the brand isn't yours, and the stores aren't yours either. No matter how well you do, your fate is in others' hands. Manufacturers restrict you, stores owe you money, and you're caught in the middle." To find new growth points and profit models, he handed over the traditional trading business to his son and went on a nationwide market study. The decline of traditional domestic supermarkets and the boom of foreign retailers like Sam's Club and Costco left Ding Qiang deeply impressed. He suddenly realized that the decline of supermarkets and the downturn in distributor business had discernible patterns. In the past, distributors' businesses were primarily brand-based, selling whatever upstream pushed, simply moving products, often even passively taking on brand agencies. Today a manufacturer comes knocking, tomorrow they hear a brand sells well, but they have no clue about consumer needs or store sales. The result is shelves stocked with products from ten years ago or pseudo-needs, with high prices and mediocre quality. Why would consumers buy that? "The era of making money by simply representing a big brand is over. To succeed in the future, distributors must understand retail. " How to understand retail? Ding Qiang's answer: Jump in personally, learn retail logic and customer needs by opening stores.

Second Venture Optimizing Product Assortment from a Retail Perspective The logic of distribution and retail differs, and past experience couldn't help Ding Qiang. Before even opening, he hit his first pitfall. To open a store, you first need a good product assortment. At that time, Ding Qiang represented only a few hundred SKUs. How to assemble a 5,000+ SKU assortment? His initial idea was to leverage industry connections to integrate local distributor resources, with distributors supplying goods. "Wholesale market margins are about 5 points. Hongyihang takes 2 points, selling at wholesale prices. This helps distributors move inventory without breaking prices and saves them from procurement trips. It's essentially a win-win." However, he overlooked his identity as a distributor. Opening a store so conspicuously would inevitably alert peers, who might worry about losing business. When everything was agreed upon and ready for stocking, many suppliers suddenly changed their minds: either they disappeared or they supplied at supermarket channel prices, making it impossible to sell with the additional 2 points. To avoid affecting the opening, Ding Qiang decisively separated the store from the trading business, handing the traditional business to his children. He stabilized existing suppliers with persuasion while working day and night to secure first-hand supply from manufacturers. In product organization, he adopted a "first have, then optimize" strategy — with 30 years of accumulation, finding products wasn't difficult, but early on, volumes were small, so he couldn't get good prices or policies. But to get a seat at the table, you first need cards in hand. Initially, ensure you have an assortment, and once sales rise, go back to negotiate prices and policies with suppliers, gradually optimizing the assortment. How to optimize? Many distributors look at platform rankings or supermarket shelves, but consumption habits and preferences vary by region, so that doesn't guarantee fit. Ding Qiang's approach is optimizing the assortment from a retail perspective. Hongyihang adopts a wholesale + retail business model, managed with a tiered membership system.

Regular members: For ordinary household consumption, annual fee 88 yuan, enjoy wholesale prices on all 5,000+ SKUs. Venus members: For BC-type stores, annual fee 288 yuan, direct factory sourcing on all 5,000+ SKUs, with 1% rebate based on annual sales.

Elite members: For single large stores over 500 sqm and chain systems, annual fee 588 yuan, direct factory sourcing on all 5,000+ SKUs, with 2% rebate based on annual sales.

This not only simplifies cooperation with customers but also meets different consumption and wholesale needs, from individual consumers to small and medium stores and large supermarket chains. It also allows using store sales data and purchase patterns of different membership tiers to understand terminal store and consumer needs, enabling targeted product selection and elimination to optimize the product structure. In August 2019, a 6,000 sqm Hongyihang store opened, combining a food wholesale department and a brand discount warehouse. Leveraging brand, supply, and price advantages from direct factory sourcing, it was an instant hit, with single-day sales exceeding 1 million yuan. Today, Hongyihang has over 80,000 paying members, 500+ partner manufacturers, 5,000+ SKUs, with 90% of products sourced directly from the source.

Returning to Product Essence Synergizing Trading and Retail Businesses

  • In 2021, Hongyihang began national expansion, opening 5 franchise stores in Jinan, Qingdao, and other cities.
  • In 2022, Hongyihang's paying members exceeded 6,000. Leveraging the large membership base and mature assortment, Ding Qiang entered the snack discount store track, opening "Hongyihang Snack Factory" stores in township markets, peaking at 39 stores.
  • In 2023, in collaboration with local fresh supermarkets, they piloted a "food + fresh produce" format.
  • In 2024, Hongyihang's cumulative paying members exceeded 80,000.
  • ... From traditional distributor to continuously opening stores and experimenting with various retail formats, Ding Qiang's exploration in the snack food field never stops. He has also gained deeper insights into distribution and retail. When asked whether distributors should open stores, Ding Qiang's answer is: if the business has reached a certain scale, resources and conditions allow, and within controllable capital, you can try opening one or two stores. But the ultimate goal of opening stores is not to build a chain, but to return to the essence of products and let retail and trading businesses synergize. The consumer market is constantly changing. By opening stores, you can truly understand the pain points and needs of stores: what services do stores need? What products do consumers need? This helps better serve stores, while using operational metrics and data to feed back into optimizing your trading products, forming a virtuous cycle. At the same time, it's important to note that distribution and retail are two different businesses. If you decide to do retail, you must transform both your identity and your mindset. First, it's best to separate the retail business from the trading business. On one hand, the logic of trading and retail differs, and so do organizational requirements. On the other hand, opening stores as a distributor can easily provoke peer resistance, especially when you're not strong enough initially. You might not get products or favorable prices. Second, shift your mindset; don't do retail with a distribution mindset. Many distributors open stores with a product-centric mindset: if they represent brand A, they only sell brand A products and not competitors, turning the store into a product showroom over time. Worse, some become clearance warehouses for near-expiry products within six months. That's wrong. Once you commit to retail, you must be customer-centric, offering a diverse range of products to meet different needs. Third, keep learning to become professional. After going into the terminal, you can assemble some assortments, but store layout design, subsequent traffic generation, and operations are major challenges for distributors. Where do customers enter? Where do they exit? What do they pass by in between? Is the storefront transparent? These are key to enhancing the shopping experience and increasing average transaction value. When you're not yet professional, it's hard to attract professional talent. Communicate more with experts, continuously refine your model, and strengthen yourself first. Only by becoming professional can you lead your team to grow together.

Final Thoughts Sharing Hongyihang's case is not to encourage all distributors to open stores. Whether distributors should open stores has no standard answer; it depends on individual circumstances. But to develop, whether you open stores or not, you must understand retail. Not just understanding store layout design or studying consumer purchase decisions, but returning to the essence of products, shifting operational logic, and truly understanding retail needs and consumer needs. Move from passively selling based on manufacturer agency to selectively choosing and assembling products based on consumers' real needs, building product management and operational capabilities. The era of simple handling and distribution is over. To survive in the future, distributors must have retail thinking and the ability to help terminals sell products.