---
title: "Distributors: No Longer a Simple Moving Business for Everyone"
description: "As channels diversify and demand becomes more personalized, only large distributors can withstand risks and seize opportunities. The author, Yuan Lai, reflects on the increasing difficulty of the distributor business and the need for scale and professionalism."
author: "袁来"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2023-08-01"
categories: "Dealer Operations"
language: "en"
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markdown: "https://xinjignxiao.com/en/articles/distributors-no-longer-a-simple-moving-business-for-everyone-6cefe633.md"
original_source: "https://mp.weixin.qq.com/s/V7NlV7TKTBZE3Wu1JiD2dg"
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attribution: "New Distribution — https://xinjignxiao.com/en/articles/distributors-no-longer-a-simple-moving-business-for-everyone-6cefe633/"
citation: "袁来. “Distributors: No Longer a Simple Moving Business for Everyone.” New Distribution, 2023-08-01. https://xinjignxiao.com/en/articles/distributors-no-longer-a-simple-moving-business-for-everyone-6cefe633/"
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---

# Distributors: No Longer a Simple Moving Business for Everyone

> As channels diversify and demand becomes more personalized, only large distributors can withstand risks and seize opportunities. The author, Yuan Lai, reflects on the increasing difficulty of the distributor business and the need for scale and professionalism.

**Introduction**: As channels diversify and demand becomes more personalized, only large distributors can withstand risks and seize opportunities.

**Author** | Yuan Lai
**Review** | Gou Gou
**Layout** | He Wen

Dear friends, hello. Seeing this message, I am Yuan Lai. **Distributors are no longer a simple moving and agency business that anyone can do.** I believe many distributors will resonate with this statement; business is getting harder and harder. Downstream, terminal stores are extending payment terms, while upstream brands maintain growth targets and impose more fines. Store traffic is declining, and sales volumes are shrinking. Salesperson costs are rising, with average wages increasing 5%-10%. Additionally, financial and tax regulations require all trading and circulation enterprises to operate in a standardized manner. Most importantly, old products are not profitable, and new products are not selling. Old products turn over quickly but are heavily discounted and available everywhere. Adjusting the structure and promoting new products is extremely difficult. Although the gross margin per unit for new products is high, the volume is too small, and there are issues with slow-moving returns; in the end, you don't make much money. **The barriers to entry for the distributor business are rising, and it is becoming increasingly difficult.** These are the current phenomena. Of course, we need to further examine how the distributor business has evolved from the past to the present.

**Distributors in 2000 and 2020**

For ease of understanding, I divide distributors into two time periods: those around 2000 and those around 2020. What does this mean? Distributors around 2000 basically emerged after the reform of the commercial circulation system in the 1990s, as supply and marketing cooperatives faded from public view. Some backbone members of supply and marketing cooperatives (or sugar and wine companies) left the system and started their own businesses as distributors. Additionally, individual shop owners who previously operated wholesale and retail businesses transformed into distributors. Distributors around 2000 had three characteristics:
- **Resource-based business**
- **Relationship-based business**
- **Individual-based business**

If you knew someone from a brand and could get the agency, you could make money. If you knew a KA purchasing manager and had goods, you could basically cooperate. Some businesses even had no worries; they waited for customers at the door, and grocery stores would come to the wholesale stalls to find products. Distributors around 2000 operated in a context of "everything waiting to be done." Whether it was national KA chains like Walmart, Yonghui, and RT-Mart, or local chain supermarkets transformed from local department stores, they expanded rapidly around 2000. Upstream brands were also laying out nationwide strategies. The demographic dividend, brand dividend, and supermarket dividend jointly drove the distributor business forward. This was the era for distributors in 2000.

For distributors around 2020, the aforementioned opportunities have basically disappeared. The quantitative expansion of supermarkets has ended; large supermarkets have become smaller, and standard product supermarkets have become standard plus fresh food supermarkets. Quantitative expansion is gone, replaced by structural adjustment. **Essentially, the battle for existing retail formats has begun.** In terms of FMCG brands, a careful reading of listed companies' financial reports shows that companies generally mention premiumization in their product strategies. From selling more to selling more expensively, this is necessary to support sales growth. Consumption volume for categories has basically peaked. Regarding online e-commerce, for offline distributors, it is a competitor for sales. Distributors around 2020, if they can survive and thrive, and even achieve growth of 20% or even 50%, are truly remarkable. Because the commercial circulation business around 2020 is essentially a zero-sum game. Distributors around 2020 have three characteristics:
- **Capital-intensive business**
- **Professional business**
- **Corporate business**

Today, it is easy to get to know a brand, but why should the brand choose you? Do you have money? Are you professional? Do you have a team? These are the basic screening criteria for a brand when selecting a distributor. As industry competition intensifies, the requirements for the distributor business naturally increase. Having resources is not enough; you need capital. Having relationships is not enough; you also need to understand market promotion. Individual businesses cannot grow large; only corporate businesses can sustain progress!

Distributors in 2000 and distributors in 2020 have completely changed over twenty years of evolution and iteration.

**The Core of the Distributor Business: Cost and Efficiency**

Why mention the above changes? The core message is that today's distributor business is completely different from before. For the older generation of distributor owners, it is necessary to view today's distributor business from a new perspective. Sales channels are increasing, store trade terms are becoming more stringent, the pressure of brand growth targets has not decreased, and competition for shelf space among similar brands in stores is becoming more intense. Facing these changes and challenges, distributors need a new business mindset to think about business development. Returning to the basics, let's break down the distributor business. Distributors exist because of the efficiency of product delivery, as shown in the figure below.

Without distributors, three brands would need at least 9 deliveries to get their products to stores; with distributors, only 6 deliveries are needed. Therefore, the value that distributors provide is combining warehousing and logistics, transaction orders, product promotion, and capital advance. Through lower costs and higher efficiency, they deliver a large number of products to stores.

In the past, distributors in 2000 were family businesses with a few hundred square meters of warehouse and a few tricycles, representing two or three brands, relying on reduced configuration to achieve low cost and high efficiency in product delivery. Now, distributors in 2020 are corporate operations with thousands of square meters of warehouse and a dozen logistics vehicles, representing dozens of brands, relying on scale to achieve low cost and high efficiency in product delivery.

Previously, I have always said that **distributors do not create value; they only transfer value. In the product delivery business, there cannot be small but beautiful or small but strong distributors; only scale effects matter.** Although distributors operate in different categories, regions, and channels, there is a unified trend: become a large distributor! Looking back at distributors who have grown sales over the past 10 years, aside from product innovation and channel changes, it is often because they have taken sales from other distributors. Behind the growth is the seizure of sales. Getting good brands and covering good stores are just actions; the real reason is that you have taken sales from others. **The offline market is a "survival of the fittest" market.**

Since it is "survival of the fittest," which distributors will survive? Based on our exchanges and research with nearly 300 distributors in New Distribution, we have set a benchmark line for annual sales to help distributors understand their current stage.
- **County level with 1 million population: 50 million RMB sales volume**
- **Prefecture level with 2 million population: 80 million RMB sales volume**
- **Prefecture level with 5 million population: 100 million RMB sales volume**

Although annual sales volume alone cannot make precise judgments or conclusions, from a national perspective, we hope to have a similar "North Star metric" to facilitate faster and more efficient evaluation of distributor development. Therefore, we choose the annual sales volume under "independent distribution" as the evaluation metric. We believe that distributors with corresponding sales volumes in different regions will truly be able to enter the next decade. Only these distributors can face more challenges in the future market. Channels are becoming more diverse, demand is more personalized, and operating costs are rising. Only large distributors can withstand risks and seize opportunities.

**Summary**

At this point, many distributor owners may wonder: how can we become large distributors? Becoming a large distributor is the result of operations; the process involves internal organizational management, external business management, and more. In fact, each distributor's path to becoming large is different, related to their own resource endowments, the categories they operate, their current distribution model, and even the retail environment of their city. Since the paths are different, how to become a large distributor? We believe the most effective way is **learning, communication, and discussion.** When you face business confusion, seeking answers internally will never find the answer; instead, you will fall into involution. Seek externally, look at the thinking logic of excellent large distributors, and you will truly find the answer you want. If your business is facing challenges and you are stuck in a rut, you are welcome to join the "Distributor Member Club" to seize opportunities, reduce costs, and increase growth. Here, you can find suitable learning objects and path references. If you are doing very well in your region and have insights into management, we welcome you to join, walk with experts, learn from each other, and become a future leader in the FMCG trading industry!

On August 3rd, this Thursday, our 4th member club internal distributor owner sharing session will begin. General Manager Liu Fen of Hubei Quanjie Lai Trading will share with distributor owners. Interested distributor friends should not miss it. To ensure the purity and exclusivity of the "Distributor Member Club," currently only distributor owners can participate; other roles are not open yet. We sincerely invite you to join.

**Scan the QR code to add my WeChat to register**


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## Citation metadata

- Publisher: New Distribution
- Author: 袁来
- Published: 2023-08-01
- Canonical: https://xinjignxiao.com/en/articles/distributors-no-longer-a-simple-moving-business-for-everyone-6cefe633/
- Original source: https://mp.weixin.qq.com/s/V7NlV7TKTBZE3Wu1JiD2dg

## Copyright and AI use

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Contact: zhaobo258@gmail.com · +86 158 5481 7671