In August 2024, a New Distribution industry report showed that over half of distributors experienced declining sales. But in the first two months after the Chinese New Year, I visited over twenty top regional distributors, and their feedback was that despite the difficult business environment over the past year, overall business remained stable or grew, though profits declined. Why were the larger distributors less affected? During our discussions, I found a common trait: they all had full-channel coverage in their localized markets, especially in non-first-tier cities. A distributor friend from Yunnan shared, "When sales in a single channel or store are all declining, it's hard to increase per-store output through vertical cultivation. In contrast, horizontal channel expansion is more effective. So as long as there is a channel that needs product supply locally, we basically supply it." For distributors, products are the foundation, and outlets are the core. The essence of outlets is sales channels; thoroughly tapping into local channels is also a moat. This article, based on discussions with distributors, sorts out and summarizes the sales channels that distributors can focus on. Supermarkets: Deep Category Operations Since 2018, supermarket business has been on the decline. So in the past few years, many distributors have voluntarily withdrawn from supermarket systems. This is understandable, as high front-end and back-end fees and the need for dedicated service personnel often mean no profit. A distributor friend supplying supermarkets told me that a national supermarket chain caps annual profits at no more than 4%, imposes various overbearing clauses, forces promotions, and even supplies goods to nearby small stores, disrupting market prices. Should distributors do supermarket business? Actually, it depends on the situation. One type is international and national supermarket chains, which generally have stable national suppliers, and regional distributors mainly serve as advance-payment distribution functions for certain brands. For such business, you need to calculate carefully. If it can make money, do it; if it can't and can't expand business opportunities through this channel, then give it up. The other type is regional supermarkets. Since last year, there has been a major change—supermarket reform. These traditional regional supermarket giants have realized that their original business models have certain problems. It's not that consumers don't come to the store, but that we haven't given them a reason to. Because the products on the shelves aren't necessarily what consumers really want; they're there because those brands paid more. The underlying logic of supermarket reform is "provide what consumers want," and a key part is adjusting the product mix. Behind the reform is a large-scale replacement of suppliers, and many distributors have lost business as a result. But we also see that a few distributors with advantages in product assortment and more competitive operating costs have gained greater market share in the process. In wholesale markets across various regions, we see many distributors growing rapidly in the supermarket sector. The reason is that supermarkets don't need a simple "middleman," but rather distributors who truly understand consumers and products. For distributors positioned as "category operators," the current supermarket business is actually an opportunity. By focusing on a specific category and expanding vertically, they can help supermarkets operate that category one-stop. Small and Medium Stores: One-Stop Product Supply Chain The FMCG business of small and medium stores has always been loose, with small stores having many channels to source goods: distributors, sub-distributors, wholesalers, platform self-purchasing, wholesale market self-purchasing, community group buying self-purchasing, etc. This loose model results in increasingly difficult business for small stores. Especially with the acceleration of chain expansion, most independent stores cannot compete with chains in cost and efficiency. When the market is good, independent stores can survive well, but when competition becomes fierce, it's a knockout round. At this time, for distributors, there is an opportunity to help small stores survive under the chain trend through multi-category supply chain services and terminal operation guidance. The core keyword for doing business with small and medium stores is "efficiency," reflected in two aspects: First, product supply efficiency: one-stop product supply chain services to help small stores with product selection and supply; Second, product sales efficiency: help small stores improve operational and sales capabilities. This is also the core value of B2b at the most basic level—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. Small and Medium Chains (convenience stores, snack stores, discount stores, etc.): No Franchise Dividend, but Supply Opportunities In a previous article, New Distribution made a judgment: traditional retail small stores will not completely disappear, but branding and chain development will become an irreversible trend in their evolution. Today, this process is accelerating. The reason is simple: online e-commerce is squeezing, and offline snack stores and flash warehouses are grabbing share. If it weren't for the sale of cigarettes and betel nuts, small stores' business would only get harder. For distributors, as traditional small stores are continuously absorbed, the business available to distributors will decrease. The chain trend is irreversible, but distributors can leverage their core advantages: quality product assortments and localized distribution networks. When these chain systems enter a local market, they usually need local distributors for service. The best way is to form cooperation with chain systems as early as possible and become a core supplier. Moreover, I've talked with some distributors who told me that after establishing supply relationships with some chain systems, they have enjoyed some chain expansion dividends, such as cross-regional and cross-city product supply. Regarding chain franchising, some feedback suggests that if distributors lack retail thinking and don't have the energy to build a new team, they are not advised to open their own retail stores. The competition in offline stores is too intense now, especially snack stores, which are spending heavily to grab share. Distributors should be cautious about franchising. Tobacco and Alcohol Stores: Customer Relationship Business and Gift Box Increment In discussions with distributor friends, we received feedback that market changes haven't had a significant impact on tobacco and alcohol store business. The reason is that the core business model of tobacco and alcohol stores differs from other retail formats; it is essentially a fixed customer relationship business, highly dependent on personal connections and social needs. Tobacco and alcohol stores are not high-frequency daily consumption formats but a retail model driven by social scenarios. Consumers visit these stores typically for the following needs: Gift-giving scenarios: Main products like high-end cigarettes, high-end liquor, and red wine are standard for social gifting. Whether for personal exchanges or business occasions, these products fit perfectly. Banquet scenarios: Many consumers purchase alcohol and cigarettes for weddings, birthday banquets, etc. Tobacco and alcohol stores are the preferred channel due to convenience and wide selection. Fixed customer base: Business relies heavily on "regular customer economy." Operators maintain customer relationships over time, accumulating a loyal consumer base. These regular customers not only stabilize revenue but also bring in new customers through word-of-mouth. We see that some distributors have seized opportunities in this channel, such as placing gift boxes in tobacco and alcohol stores, resulting in significant business growth. However, there are some precautions: not all gift boxes should be placed; the goal should be to drive sales. 1. Based on time nodes: For example, during traditional holidays like Mid-Autumn Festival, National Day, and Spring Festival, "face projects," appropriately stock high-end gift boxes. 2. Based on consumer groups: Based on the fixed consumer base of the store, such as what price range of cigarettes and alcohol they usually buy, determine what price range of gift boxes to stock. 3. Based on scenarios: For example, if the store has many banquet customers, consider adding customized gift boxes. Special Channels (enterprises, institutions, factories, etc.): Closed Channels, Treat with Priority Special channels are a general term for special channels, usually including catering, campus, enterprise and institution procurement, and scenic area channels. Special channels have certain barriers; not all distributors can enter, requiring certain qualifications and strength. The main characteristic of special channels is strong closure. Because of the barriers, once a distributor enters, there are few competitors. At the same time, special channels have strong stability. Within the contract scope, distributors can ensure a monopoly on a particular special channel, and product turnover is very stable. A distributor friend from Yunnan told me that initially he didn't do special channels, but later found that many enterprises and institutions have public bidding, so he proactively made some bids. Now special channel business accounts for over 30% of his stable business. Key nodes in special channels:

  1. Scenic area channels: peak season explosion. Sales in scenic area channels show obvious seasonality. For example, during peak tourist seasons (such as May Day, National Day Golden Week, summer vacation), demand for beverages, snacks, and local specialties increases significantly. Plan ahead for peak season supply to ensure coverage and timely delivery.
  2. Enterprises, institutions, factories, etc.: group purchases before holidays. Procurement needs are usually concentrated before holidays. For example, before Mid-Autumn Festival and Spring Festival, many units purchase gift boxes, alcohol, tea, and other welfare items as employee holiday benefits.
  3. Campus channels: high demand during school opening season. Consumption peaks during the back-to-school period, with students' demand for beverages, snacks, stationery, etc., surging. Distributors can plan product combinations suitable for students in advance and boost sales through promotions. Community Group Buying: Quieter, but Market Share Remains A couple of days ago, Taobao's next-day pickup service was officially replaced by a courier model, marking Alibaba's formal exit from the community group buying track. Compared to its peak, the ebb of community group buying is not an isolated phenomenon. The only national players left are Meituan Select and Duoduo Maicai; Xingsheng Youxuan operates in only 8 provinces, and the rest are regional players. Although the voice of community group buying has softened, it still holds a certain market share. According to public data, in 2023, Duoduo Maicai's GMV was about 190 billion yuan, and Meituan Select's GMV was about 140 billion yuan. Besides national platforms, regional players in community group buying have also found survival space in local markets. Many regional platforms have achieved over 100 million yuan in GMV locally by deepening localized operations and strengthening supply chain efficiency. Although smaller, these platforms are competitive in regional markets and can precisely reach local consumers. For distributors, community group buying remains an important sales channel, especially for clearing excess inventory and selling low-priced goods. Moreover, as competition in community group buying shifts from scale expansion to supply chain efficiency, platforms will pay more attention to cooperation with distributors, optimizing inventory management, reducing logistics costs, and improving delivery efficiency to enhance overall operations. Of course, some distributors have reported that cooperating with community group buying platforms squeezes prices so low that there's basically no profit. But consider this: even if you don't supply them, they can still get goods from the market, ultimately impacting your market. So set a baseline: as long as you don't lose money, it's better to keep this channel. Instant Retail: Certain Growth in a Major Trend On September 24, 2024, Douyin's hour-level delivery was launched nationwide, intensifying instant retail. On October 15, Meituan announced over 30,000 flash warehouses and set a target of over 100,000 by 2027. Also, a couple of days ago, JD.com's food delivery officially launched, entering with a "5% commission" to attract merchants, significantly lower than Meituan and Ele.me's 6%-8%. With front-warehouse formats like Pupu Supermarket, Dingdong Maicai, Xiaoxiang Supermarket, and Sam's Club Cloud Warehouse gradually becoming profitable, and with Meituan, JD.com, Ele.me, and Douyin intensifying O2O instant retail, instant retail is a significantly growing channel, and in localized markets, its share will continue to rise. In the past, distributors might not have felt it, but now they can clearly feel their business being affected. Especially the expansion of front-warehouse formats, which clearly impacts surrounding retail stores. Distributors should pay close attention to the local layout of instant retail, especially the flash warehouse format. They can provide one-stop product supply chains to the chain merchants behind flash warehouses. In Nanjing, I met a beverage distributor who entered by supplying water and beverages to all flash warehouses in Nanjing. Through deep cooperation, they gradually added categories, feeding back into their own trading business, and eventually became a full-category supply chain, doubling their business scale. Pharmacies: A New Track for Cross-Border Retail The pharmacy channel has received relatively little attention in the domestic FMCG field. But abroad, "pharmacy + FMCG" is a common model. For example, Japan's Welcia chain pharmacy combines drug sales with convenience store and daily necessities retail, selling food, cosmetics, baby products, etc., creating a "one-stop healthy lifestyle shopping" scenario. Of course, some distributors are now starting to pay attention to this channel. Typically, distributors of functional foods and beverages like Red Bull and Dongshen Te Yin will stock products in pharmacies, and beauty and personal care products are also common in pharmacies. Now, when you walk into a pharmacy, you can see they are no longer limited to selling medicines but are gradually expanding categories, bringing FMCG products like food, beverages, and health products onto shelves, and in some areas, they have become an emerging channel for FMCG sales. Behind this is a fit of scenarios. As consumers' health awareness increases, pharmacies are transforming from "treatment places" to "health management centers." While buying medicines, consumers often also pay attention to health foods, functional beverages, health products, etc., providing a natural consumption scenario for category expansion. Moreover, pharmacy consumer traffic has a natural health attribute, with the main consumer groups being middle-aged and elderly people, housewives, and young white-collar workers. These groups have high demand for health foods, functional beverages, and premium snacks. Introducing related FMCG products can more fully tap into the value of existing traffic. For distributors, matching products based on pharmacy consumer profiles can be an incremental opportunity. Final Thoughts Listing these channels one by one is not to suggest that everyone should expand into all of them at once, but to provide distributors with a more comprehensive perspective to discover hidden growth space in localized markets. Each channel has its specific characteristics and opportunities, but whether it suits you depends on how distributors combine their own capabilities, resource advantages, and market environment to find the most suitable entry point.