In the past few months, due to the pandemic, lockdowns and road closures have frozen offline business almost completely. During this period, community group buying boomed, and manufacturers seemed to find a survival path, coaxing and pushing distributors to do business online—communities, Moments, mini-program stores—a flurry of activity. In the end, it seemed to yield little. When the pandemic ended, everyone returned to their own affairs and normalcy... During this time, many forward-thinking distributors asked me whether online business is still viable, for example, opening a store on Pinduoduo or selling on Taobao.

Online business is growing rapidly, while offline business is getting harder. Given such an obvious trend, if a distributor hasn't even considered online business, it's basically safe to say their business isn't big—they haven't even thought about it. Therefore, this article discusses whether distributors can succeed in online business.

Before analyzing, I think every distributor should have a basic understanding: As a traditional distributor deeply rooted in offline, when you see an online business dividend, it's essentially already the tail end of that dividend. For example, during the pandemic, you saw community group buying explode; you might think, "This business is so hot, I'm a distributor for a certain category, can I supply them?" Unfortunately, the suppliers behind community group buying are already very mature; they don't need you. Therefore, if distributors are harboring the mindset that there are still dividends and opportunities online and want to make a quick deal, I advise you to put that aside.

-01- The essence of doing well in online business is catching the dividend

Let me first share a few cases of traditional distributors doing online business.

First, recently, New Distribution interviewed Nanchang Bajie Trading Co., Ltd., a condiment distributor that achieved annual sales exceeding 100 million yuan in just six years. Of that, 30% of sales came from community group buying. This isn't Bajie Trading's own community group buying, but supplying condiments to local community group buying platforms. According to General Manager Leng Wenjun, when community group buying first emerged in 2018, Bajie Trading cooperated with them immediately. As community group buying grew, the condiment business naturally increased. See? That's what it means to catch the dividend. In 2018, when community group buying was just emerging, many distributors probably didn't even know this business model existed, but conscious distributors had already entered early.

Second, a grain and oil distributor with annual sales of nearly 400 million yuan opened a brand store on JD.com in 2016, and reportedly did well. The reason is that grain and oil are heavy goods, and logistics is inconvenient. The brand manufacturer led the distributor to open the store; located in East China, logistics was convenient and costs relatively low, shipping directly to JD's large warehouses. This succeeded due to the heavy goods category and regional advantages. Of course, it also required brand manufacturer support.

Third, a daily chemical distributor with annual sales of several hundred million yuan, in addition to offline regional agency business, also has a presence on Tmall and Alibaba's Retail Link. According to the distributor, they entered Taobao online in 2012, fumbled for two years, and didn't do well. So they acquired an e-commerce operations company. From 2012 to 2014, they lost money for two years; only in 2015 did they stop losses; 2016-2017 saw slight profits; and 2018 was truly the harvest season. Not to mention whether traditional distributors could have had such insight to enter online in 2012, but just the two years of losses would make many distributors give up.

After seeing these three cases, for the vast majority of distributors wanting to enter online, either you can catch the dividend in time, or you have manufacturer resource support, or you set aside short-term profitability and plan long-term. Even long-term planning is based on your advantages in capital and goods.

-02- Better to focus on offline than to fumble with online

Of course, this doesn't mean distributors can't enter online at all, but from a business perspective, compared to online, there may be more opportunities offline, and the resources and configurations are more suited to doing offline business well.

Every distributor must clearly understand: Online business targets "unknown" consumers. Many distributors are completely incapable of user operations and user insight. Even if they try, it's no less than a second startup. If it's a second startup, why not invest that energy, time, and personnel into your own offline territory? I once chatted with a distributor who told me he planned to open a store on Pinduoduo this year, selling the products he distributes. I asked why. He said he saw other distributors doing well, and he had product advantages; at worst, it would just cost one person's salary. If profit > personnel cost, he wouldn't lose. At first glance, that seems reasonable, but if a distributor is only considering online from a simple business perspective, not to mention losses, how big can it get, and how far can it go? As I said, from the perspective of simple business dividends, traditional offline distributors are always the "last" to see a dividend; it's already the tail end. Is it still worth entering? Unless you have irreplaceable product resource advantages.

Business dividends are always "relative." They must be matched with your own advantageous resources. From this perspective, isn't there a dividend offline?

Previously, when communicating with Wu Min, General Manager of Hefei Bangwei Trading, he repeatedly emphasized, "Distributors should enjoy the dividend of industry decline." What does it mean to have a dividend during industry decline? It means when all distributors find business difficult and are about to give up, when others stop, you can take over the remaining brands and the remaining outlets. Industry reshuffling always eliminates weak and small players. I believe the offline distribution industry will see a wave of prosperity. And the protagonists of that prosperity will be distributors who have already become formalized trading companies, completed basic offline outlet coverage, and possess marketing and promotion capabilities.

-03- Distributors' business is worth doing all over again

When every distributor faces a bottleneck, consider from three levels whether there is still room to explore, and invest the time and energy spent on online into offline to find incremental opportunities.

1. Products

In the past, distributors often represented one or two brands, with one main and several auxiliary. The core strategic brand, plus a few unknown brands. The salesperson's core energy was basically on the strategic brand. But in the future, large-scale distribution and agency of products will become an inevitable trend. The key point behind this is: Through digital tools, digital distribution and precise sell-through can be achieved.

Digital distribution is the matching of outlets and products. Not all products need to be sold to all outlets. Nor are all outlets suitable for selling all products. Each specification and price point of a product has its most suitable outlet profile. When a salesperson enters a store with a digital tool, whether matching products based on outlet profiles or benchmarking historical sales data to decide whether to distribute more or less, this is entirely achievable.

Precise sell-through is the matching of products and demand. What flavors and specifications are most likely to be sold at which outlets? What promotional materials and copy to use? With digital tools, finding consistent outlets is also easy.

The greatest value of data is discovering patterns; discovering patterns allows predicting the future. Therefore, with the support of digital tools, large-scale products can actually allow distributors to obtain more distribution data. Based on data, do distribution and sell-through well. If you have the ability to do distribution and sell-through well, why worry about brands blocking you from taking on more agency?

2. Outlets

Regarding outlets, first talk about coverage. I always believe outlet coverage is a basic capability for distributors: whether in the area you distribute, you can achieve at least 50% coverage of outlets matching the relevant category. This is a basic requirement and a criterion for judgment. Of course, this refers to 50% coverage by your own team, not coverage done by manufacturer salespeople. Why? For distributors, whether it's advance payment or warehousing and distribution, it's never a source of income; it's all cost. What truly pays you is the outlet; it's the only source of income. Outlets are your core asset; products are just the carrier for serving outlets. The income we get from serving outlets is just quantified through the standard carrier of products.

Since it's a core asset, you must manage it well. How? Through tiered management. Which outlets bring the greatest contribution? Which have negative return on investment? Which can be moderately invested? With digital tools, digitize each outlet, subtract costs and investments from revenue, and see which outlets are truly high-quality, not just those with high volume.

3. Organization

The business model of distribution is relatively simple. In organization, the most critical role is the salesperson. How to maximize salesperson productivity is a headache for every distributor. We find that more and more distributors realize that a simple employment relationship is hard to maintain long-term, and daily efficiency cannot be guaranteed. Therefore, distributors start to give salespeople the "little boss" label. But often it's treating symptoms, not the root cause. The idea is right, but just having the idea isn't enough; you must change how the little boss earns. You can't just say they're little bosses while their daily income remains the same—base salary plus commission, simple and crude.

What is the correct little boss approach? First, since they're bosses, they must bear costs. The simplest way is to add product gross margin and store expenses to the income structure, so salespeople feel they're not just selling products but also managing stores. Second, provide methods and corresponding assessments. What does that mean? Have salespeople do cut-case displays, increase shelf facings, with corresponding assessments, and manage their daily processes. Salespeople don't have overall distribution thinking, so distributors must break down distribution strategies into market actions. If they do the actions well, give them corresponding income. Third, immediate feedback. Since they're salespeople, they largely lack long-term vision; they're often short-termists, pursuing immediate rewards. If I do something today, I want to see my income by the end of the day. If income is low, work harder tomorrow; if high, continue with the same method. That's immediate feedback.

So, distributors, when offline business hits a ceiling, take a moment to think: Is there still room to explore in these three areas? Don't think about online. In 2019, almost every industry said, "Every business is worth doing again." I think this applies to the distribution industry as well. Instead of chasing dividends, think about how to take your business to the next level, how to use new internet tools to redo your business. There are definitely opportunities, but whether they're yours depends on your thinking, your cognition, and your determination!