---
title: "Distributors: Should They Hang On or Let Go?"
description: "This article, inspired by a social media post from marketing expert Wei Qing, explores the dilemma facing many distributors: whether to continue in a shrinking market. It argues that the traditional trading model is outdated due to the supply chain revolution and the rise of B2B platforms, and suggests two viable paths forward: transforming into B2B platform operators or focusing on brand promotion. The article advises that if neither is possible, an orderly exit may be the best option."
author: "刘春雄"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2024-06-25"
language: "en"
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---

# Distributors: Should They Hang On or Let Go?

> This article, inspired by a social media post from marketing expert Wei Qing, explores the dilemma facing many distributors: whether to continue in a shrinking market. It argues that the traditional trading model is outdated due to the supply chain revolution and the rise of B2B platforms, and suggests two viable paths forward: transforming into B2B platform operators or focusing on brand promotion. The article advises that if neither is possible, an orderly exit may be the best option.

不如归去
This article is inspired by a paragraph from a social media post by marketing expert Mr. Wei Qing. Excerpt as follows:
****This year, several distributors have come to me on WeChat asking, "Should I keep going?" This life-or-death question is not one I can decide for others. Many distributors face the reality of being old, burdened with health issues, and unable to keep up physically, while their children are unwilling to take over the business. The business is getting harder, the market environment is chilling, and they are struggling. If that is truly the case, letting go in time may not be an unwise decision. In the first two decades of rapid growth, many distributors and manufacturers made money, leading to the illusion that "I'm great and earned this fortune through my own ability." In reality, most business success is largely due to the times and environment. In other words, riding an elevator up doesn't mean you have strong legs. How could you, with your education, ability, intelligence, and physique, have sailed smoothly for so many years? Is it really because you have extraordinary talent and superhuman effort? Do you believe that yourself? One's financial luck has a limit; wanting more is greed. Struggling desperately to earn the last copper coin might end up costing you your principal (or your life). Financial freedom has no specific number; it's actually in your heart. If you feel you have enough to spend, then you have enough. Having more is useless. When the pursuit of fame and fortune questions the cost of health and life, it's better to return home. The world is full of storms; retreating at the peak is not easy, and withdrawing unscathed is even harder. The more desires, the less joy. Better to let go and gain freedom.
**The trading business is not sustainable**
It must be acknowledged that distributors' over 20 years of deep distribution has essentially been a trading business.
The difficulty of the distributor business is still the difficulty of the trading business. So, where is the difficulty? To find a solution, we must return to the "Drucker question": the nature of the problem.
Following Drucker's habit, when encountering a problem, the first step is not to react instinctively to solve it, but to analyze the "nature of the problem."
What is the nature of the problem distributors currently face?
Is it a temporary difficulty that will pass with endurance and patience? Or has the era turned the page, entering a new era unfamiliar to traditional distributors, where the trading business is outdated? There are two different views now.
**One view holds that the distributor's problem is due to the poor overall environment.**
This view implies two value judgments: **First, "external factors" outweigh "internal factors." The overall environment is external, while the distributor's operational capability is internal; second, the overall environment will "improve" in the future, and the current downturn is temporary.**
Wei Qing is right. The 20 years of rapid growth were not because we were great, but because we rode the elevator of the times. Over 20 years of deep distribution, the distributor's business model has basically not changed. Even when encountering difficulties, they just endure and get through.
My view is: **The distributor's trading model has turned the page, entering the era of the supply chain revolution. The primary target of the supply chain revolution is distributors. China's FMCG channels will never be the same.**
Specifically, there are several aspects:
**First, the long-term industry shrinkage indicates that China's economy has entered a mature economy stage.**
FMCG has been shrinking since 2013, with many industries shrinking by more than half. This is not a deterioration of the overall environment, but a transition from a growth economy to a mature economy. **The main indicator is that China's per capita GDP reached $12,700 in 2023, exceeding the World Bank's 2019 upper-middle-income threshold of $12,500.**
In mature economies, consumption **shifts from product consumption to service consumption (shrinkage is normal and will not reverse), and from quantity consumption to quality consumption.** Therefore, shrinkage will be a long-term process, and we should not expect the so-called overall environment to improve. The current feeling of a poor environment is precisely the discomfort during the transition.
Or, even if we feel the environment improves in the future, it will not lead to growth.
**Second, during the shrinkage process, supply chain efficiency will become the channel goal.**
Some current phenomena in FMCG channels, such as the supply chain revolution brought by hard discount (essentially bypassing distributors), the emergence of B2B platform-based distributors, and the manufacturer's direct-to-terminal "one inventory" model, are all channel efficiency revolutions.
In the growth era, growth trumped everything, and channel efficiency could be lower. **In the shrinkage era, channel efficiency becomes key.**
Since 2000, China's FMCG has seen a trend of small-scale operations, with inefficient channel operations and a channel ecosystem that tolerated inefficiency. Now in the shrinkage era, inefficiency is no longer tolerated.
To solve the channel efficiency problem, there are two paths: one is the scaling up of distributors (e.g., B2B platform-based distributors); the other is bypassing distributors to achieve factory-store direct connection, such as the current hard discount in leisure snacks.
If you think the scale of leisure snack hard discount is not large enough, I suggest paying attention to the news of Pangdonglai's assistance in "reforming" Bubugao, which replaced 90% of Bubugao's products. Remember, although Pangdonglai is famous for its exceptional service, its independent supply chain is actually its foundation.
**As more KAs join Pangdonglai's assistance in "reforming," China's KA supply chain may undergo significant changes.**
**Third, small-scale trading distributors lack efficiency and will become victims of the channel efficiency revolution.**
In 2018, at the "Opening Year Course," when I mentioned that distributors would lose their warehousing and distribution functions, some distributors didn't believe it: "A distributor without warehousing and distribution is still a distributor?" Now, half of the distributors in first-tier cities outsource warehousing and distribution to third-party platforms because they are more efficient.
Currently, distributors are too small (small-scale), and their main profit model is earning price differences (trading model). Facing the high efficiency of one-stop delivery by B2B platforms, trading-model distributors have no competitiveness.
**Two Major Paths**
Channel players will not disappear, but trading-model distributors will. **The term "distributor" itself is rich in Chinese characteristics.**
There are two major paths for distributors in the future, or two types of distributors will exist long-term.
**First, B2B platform operators for one-stop ordering and delivery.**
**Platform operators will inevitably be regional oligarchs, with a few monopolizing a region.** Because one-stop ordering and delivery are not only efficient but also have a strong squeezing effect. Individual distributors are no match. In recent years, they have shown rapid growth.
B2B platform operators have relatively high operational requirements. Currently, the post-80s and post-90s adapt well, while the post-60s and post-70s find it difficult.
**Second, brand promotion specialists.**
**The opposite of shrinkage is quality improvement, which requires promotion.**
B2B platform operators can only take on ordering and delivery roles, not the promotion roles for all brands. As e-commerce share growth slows, brand owners realize the importance of "returning to offline." So, who can take on the "return to offline" role? Especially in the era of product structure upgrades, new product promotion increasingly relies on offline experience.
Therefore, **the separation of promotion functions from ordering and delivery functions will become a trend in the future.**
Facing the shrinkage era, manufacturers must fight on two fronts.
**On one hand, they compete fiercely in the mass product segment to squeeze out competitors; on the other hand, they must focus on new product promotion, especially upgraded products.** The more upgraded the product, the more it relies on offline promotion. Therefore, when manufacturers strengthen the promotion of upgraded products, whoever can assist in the channel will have channel value.
The current difficulty for manufacturers and distributors is that shrinkage interferes with product upgrades. When B2B platforms free distributors from logistics, allowing them to focus on promoting upgraded products, the effect will be better. Therefore, as long as they are industry leaders, they will not abandon distributors, but the functions and profit models will change.
**As a promotion specialist, traditional distributor operating elements such as warehouses, delivery vehicles, and capital are no longer important; what matters is the team's promotion capability.**
**Clearance or Exit**
While writing this article, I saw a sentence from marketing expert Mr. Zhang Xuejun on his social media: **The shrinkage era is an era of forceful clearance.** I resonate deeply.
Let's first talk about what clearance means. Clearance was once called "cleaning house" or "reshuffling." This is a phenomenon that occurs when competition among brand owners reaches a certain stage.
In many industries, there were thousands of manufacturers early on, but later only a few oligarchs remained. When the industry enters the concentration stage, a large number of manufacturers are forced to exit. For example, the beer industry once had two to three thousand companies, but now there are only "3 big + 5 small."
Mr. Zhang Xuejun said that in the clearance era, the vast majority feel it is cruel and cold.
In another article, I said that history progresses in cruel ways.
Distributors have not experienced clearance, only small-scale elimination. I want to tell everyone what clearance means: the vast majority will disappear during the process.
During the manufacturer clearance, 90% or even 99% of companies disappeared. In the distributor clearance, the proportion may not be as high, but it will certainly be significant.
If B2B platform operators had not emerged, I would not have made the clearance judgment, because traditional trading distributors, despite differences in scale, have no essential differences. **With the emergence of B2B platform operators, trading distributors have no resistance.**
This is the difference between this round of shrinkage and previous cyclical downturns. Previously, it was just a fluctuation; this time, it is earth-shattering. Previously, it only affected manufacturers; this time, it has a greater impact on distributors and retailers. Otherwise, there would be no supply chain revolution.
My view is that **this round of shrinkage will usher in an era of distributor scaling up, and platform operators lay the organizational foundation for scaling up.** Platform operators will gradually compress the living space of trading distributors. Therefore, "one general succeeds (platform operators) while ten thousand bones wither (trading distributors)" will reappear.
At this point, distributors have only two choices: **either be forced out or exit voluntarily.**
Returning to the article's theme: Should distributors hang on?
If you have a certain scale, are relatively young, or the second generation is willing to take over, your health allows, and you understand the internet ecosystem, I suggest proactively transforming into a B2B platform operator.
The exit of the old era is the opening of the new era. In the past, there were no big merchants; in the future, there will be no small merchants.
As long as your capability is sufficient, the new era is worth embracing.
If you cannot achieve that, then consider an active exit. I have previously mentioned "orderly retreat" to avoid rapid collapse and preserve the fruits of victory.
Because trading distributors rely heavily on salespeople's networks and manufacturer brand agency rights, during a business collapse, once salespeople leave and brand agency rights are lost, the remaining assets are worthless. Finding someone willing to take over is difficult. Of course, the longer you wait, the harder it becomes.
In the process of orderly retreat, I think choosing the second path is crucial: strengthening promotion capabilities.
In the future, brand owners may hand over ordering and delivery to third-party platforms, but they will never concentrate promotion power in third-party platforms. Promotion capabilities cannot be monopolized by platforms. If platforms have this capability, they will only charge traffic fees. Refer to e-commerce platforms.
**As long as you strengthen brand promotion capabilities, new product promotion capabilities, especially high-end product promotion capabilities, manufacturers will be willing to cooperate.** At that point, you can operate with light assets.
In the integration of internet and traditional channels, I have discovered a "light distribution" model different from deep distribution: no warehousing, no vehicles, only promotion, with ordering and warehousing handed to third parties.
This model allows for both attack and retreat. It can be a choice for distributors' orderly retreat.
**Distributors: Hang On or Not?**
As Mr. Wei Qing said, we cannot make decisions for others. But we can do logical analysis.
To summarize, there are several viewpoints.
**The variable that affects distributors the most is not shrinkage, not involution, not the poor environment, but the emergence of B2B and the supply chain revolution.**
Because of the emergence of B2B platform operators, the trading distributor model faces unprecedented challenges. Platform operators will quickly erode the market share of trading distributors. Therefore, the phenomenon of trading distributors being cleared out will occur.
Because of **the supply chain revolution, distributors are bypassed in the channel, and their market share will also decrease.**
If there were no B2B platform operators and supply chain revolution, I would definitely advocate that distributors hang on. If they endure long enough, good days will surely return, just like the economic downturns of the past decades.
But with the arrival of B2B platform operators and the supply chain revolution, everything is completely different. Hanging on may only become increasingly disadvantageous, with no hope of recovery for the traditional distribution model.
Regardless of whether trading distributors want to hang on, some will inevitably fail. This process is clearance, batch elimination, and concentrated disappearance. So, what should distributors do?
The first choice is, of course, to become a B2B platform operator.
If you can't become a platform operator, then choose the second option: strengthen the core channel function—promotion.
As long as you have strong promotion capabilities, brand owners will be willing to cooperate. Although the trading model disappears, you won't be cleared out and will still have living space.
If you can't achieve either of the above, and age is not on your side, and health is a concern, then **a victorious escape might be a good choice.**
Should you continue forward or stop? Come to the 6th China FMCG Conference, with 1 distributor conference and 2 distributor salon seminars, and I believe you will find your ultimate answer!**‍ ‍**
**From August 20-22, 2024, the "2024 6th China FMCG Conference" with the theme "Crossing the Shrinkage Era," along with the "3rd China FMCG Hard Discount Conference" and the "3rd China FMCG Distributor Conference," will be grandly held in Shanghai.** At this conference, all roles in the FMCG industry chain will gather, allowing you to grasp industry trends at a glance, understand hot track directions, penetrate industry resources, and precisely connect with leading brand owners, top retail platforms, and national excellent merchants with over 100 million in sales, providing you with precise decision-making, efficient cooperation opportunities, and on-site learning of exclusive methodologies from FMCG giants! With keynote speeches, roundtable dialogues, report interpretations, closed-door salons, and networking dinners, this thousand-person event is sure to have something for you!
**🔺Scan for ticket inquiries🔺********Recommended Reading**********


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