---
title: "Distributors: Guard Against Fire, Theft, and Supermarkets—Should They Still Do Business with Big-Box Retailers?"
description: "Business must look forward and adapt to market changes. Distributors are increasingly abandoning big-box supermarket channels due to rising costs, extended payment terms, and the risk of store closures, which have turned once-profitable partnerships into loss-making ventures."
author: "周群"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2023-01-12"
language: "en"
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# Distributors: Guard Against Fire, Theft, and Supermarkets—Should They Still Do Business with Big-Box Retailers?

> Business must look forward and adapt to market changes. Distributors are increasingly abandoning big-box supermarket channels due to rising costs, extended payment terms, and the risk of store closures, which have turned once-profitable partnerships into loss-making ventures.

**Introduction: Business must look forward and not remain static; distributors need to adapt to market changes.**

**Guard Against Fire, Theft, and Supermarkets: Distributors Accelerate Their Exit from Big-Box Retailers**

Recently, while visiting the market and calling on numerous distributors, I observed several regional core stores. When asked about their business over the past two years, most distributors reported that business has become quite difficult. On one hand, there is pressure from manufacturers: the overall market environment is poor, yet manufacturers' required task growth remains constant. Some distributors even complained that as soon as the market shows signs of improvement, manufacturers demand deeper market penetration to expand growth; if they disagree, manufacturers threaten to cut off their territory and develop new distributors. Of course, most distributors can still accept the pressure from manufacturers, after all, business growth benefits them too; it just means more business pressure and requires more attention to the market. What troubles distributors even more is the current state of big-box supermarket business. Although the business scale appears large, when you pull the data, many of these accounts are not profitable—they are even in a loss-making state—and they also bear the risk of supermarkets going bankrupt. One distributor vividly summarized: "Guard against fire, theft, and supermarkets." Not only is business difficult, but they also have to guard against supermarkets fleeing.

Collaborating with big-box supermarkets has become a chicken rib—tasteless to eat, but a pity to discard. More and more distributors are reducing the proportion of big-box supermarkets in their business portfolio, or even directly abandoning this channel. Why are distributors unwilling to do business with big-box supermarkets?

Over a decade ago, big-box supermarkets quickly captured consumer mindshare with advantages such as full category selection, low prices, and one-stop shopping, becoming one of the mainstream channels and highly favored by consumers. At that time, for distributors, big-box supermarkets were a "hot potato"—wait, actually, they were a "sweet bun" (a desirable thing). Once you secured a store, it was equivalent to securing annual sales of hundreds of thousands or even millions, and it didn't require much manpower or resources.

But now, big-box supermarkets have become a thing of the past, transforming from a "sweet bun" into a "hot potato," and distributors are accelerating their exit. Why does this phenomenon occur? From an industry perspective, the impact of the internet and new retail has significantly affected the business of offline big-box supermarkets. Foot traffic has declined, and overall supermarket business is shrinking. However, the decline in sales is not the core reason distributors are fleeing; the key lies in the fact that big-box supermarkets have shifted risks onto distributors.

Some supermarkets are charging increasingly higher fees and imposing increasingly unreasonable rules, causing distributors' originally profitable businesses to gradually turn into losses.

1) **Extended payment terms, tying up distributor capital**

Many distributors report that many regional big-box supermarkets now operate on a full consignment basis, with some supermarkets not settling accounts for half a year, making excuses to delay. On the surface, the payment term is stipulated as 2 months, but in reality, it turns out to be 4 months. For example, invoices from January to February are actually reconciled in April. If there are special promotions in the current month, the supermarket will also issue credit memos and re-reconcile, effectively extending the payment term further. Capital turnover occurs less than three times a year. With a 4-month payment term, calculated by interest, it means a loss of about 4 percentage points of profit. Adding front-end gross margin, back-end rebates, and corresponding taxes, the overall business is basically in a loss-making state.

2) **Adding various fees to reduce distributor profits**

As supermarket sales decline and profits shrink, they try to increase profits through various fees. Entry fees, barcode fees, new product promotion fees, activity fees, decoding fees, ground promotion fees—the list is endless. Some supermarkets, knowing their own business is poor, sign annual framework contracts when arranging displays and activities. Regardless of whether business is good or bad, fees must be paid in advance. Distributors of first-tier brands find this especially hard to bear. First-tier brands inherently have low profit margins, market prices are transparent, and the markup rates on many products are not enough to cover the supermarket's contract fees.

3) **Difficult settlement of accounts, prone to bad debts**

Even with stipulated payment terms, settlement is still fraught with problems. For example, the fee arrangement originally agreed with the buyer may not be recognized after the buyer leaves, and the supermarket delays settlement. Distributors dare not easily resort to litigation for fear of unnecessary losses, and in the end, it becomes a bad debt. For instance, a distributor sued a supermarket and won the case, but the supermarket appealed. Not only did the distributor have to pay for lawyers, but during the appeal, the court froze all the distributor's personal accounts, even credit cards, making business operations impossible.

4) **High risk of supermarket closures**

Previously, I visited a distributor who, while doing agency business, also ran his own supermarket. According to him, opening a supermarket now is simple: rent a space, do a simple renovation, spend a few hundred thousand yuan, and you can open. All goods are supplied by suppliers without spending your own money, and settlement has payment terms. Because of this, many supermarkets have no worries: they open for a month, collect a wave of cash flow, and then run away with the money. During a survey in a prefecture-level city in Anhui, distributors reported that dozens of supermarkets had closed in their operating area this year. The most extreme case was a supermarket that closed and fled less than a week after a delivery. For distributors, they cannot afford not to supply new stores; if competitors get there first, it will be difficult to regain market share later. But when stores close, they suffer heavy losses. So the current situation in supermarket business is that capable distributors don't want to do it, and incapable distributors can't do it—without several million in capital, they can't even afford the advance payments.

**Big-Box Supermarket Business**

Introduction: Zhou Qun, researcher in the FMCG distribution field, FMCG industry analyst, and lead of the "New Distribution 100 People" column, with industry research covering transformation and upgrading of FMCG distributors, distributor operations management, and new retail in FMCG.


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