The harder business gets, the more distributors should think about how to run their business in the next 2-3 years, especially in an era of new retail rise, online e-commerce blockade, and B2B e-commerce competition. Regarding the evolution of regional distributors, New Distribution has predicted three types: first, brand operators; second, category operators; third, regional supply chain enterprises. Frankly, there will be fewer regional supply chain enterprises, about 1-3 in a region. Comparatively, the conditions and requirements for becoming a regional supply chain enterprise are higher, making this path not the best strategy for most distributors. Becoming a brand operator or category operator is relatively easier, and making some directional adjustments based on existing distribution resources is a good choice. Brand operators, simply put, are those who reach deep strategic cooperation with an upstream brand, becoming the designated local operator, with that brand accounting for more than 50% of the distributor's business. Common brand operators include distributors for brands like Yili, Mengniu, Nongfu Spring, Arawana, and Nice (exclusive sales). These distributors typically have a product structure of "1+n": one core strategic brand and n non-well-known products. Main categories include water and beverages, dairy, and grain and oil. The distributor's strategy at the frontline terminals and sales promotion basically revolves around the core strategic brand, with other products as auxiliary, sold along the way. The above are brand operators, oriented towards the sales and service of a strategic brand. Category operators, on the other hand, are oriented towards category integration, maximizing the occupation of category shelves in terminal stores, squeezing out competitors, then adjusting product structure, promoting high-margin new products, and obtaining profits. Common category operators include distributors for snacks, general merchandise, daily chemicals, and condiments. Of course, these are "large categories" and can be further subdivided into "small categories" such as oral care, paper products, household cleaning, personal care, and bread. These category operators often have over 1000 SKUs. In the next 2-3 years, the mainstream evolution of distributors will move towards these two types. Based on these two types, let's look at the core profit logic for distributors. **-01- How do brand operators make money? Brand operators have a "1+n" distribution structure, and the core of making money depends on the distribution of the strategic brand. There are two key points: first, the distribution method; second, internal management. 1. The distribution method determines whether you make money For single-brand distribution, regardless of volume, if it still relies on the wholesale model, it is almost impossible to make money in the current era. If you only represent one strategic brand (90% of which are first-tier well-known brands), the price system for best-selling products is very transparent. Only doing warehousing and financing makes you vulnerable to price attacks from "transshipment merchants." Therefore, reducing second-tier distributors and directly controlling terminals is a path every brand operator must take. At this point, many distributors worry that if they give up second-tier distributors and go direct to terminals, they may not be able to support their personnel and vehicles. Yes, if you only do best-selling products of well-known brands, it is indeed difficult to achieve profitability. But well-known brands do not only have best-selling products; first-tier brand manufacturers basically launch several to a dozen new products each year. Becoming a brand operator is not just about selling best-selling products; the upstream manufacturer hopes that the distributor can continuously "promote high-margin new products." If the distributor cannot sell new products, even if best-selling products sell well, it is difficult to make a profit. Recently, I visited a distributor specializing in Nice brand products. They only handle the full range of Nice products and achieve a net profit margin of over 10% annually. Their core profit source is not best-selling products but the brand's peripheral new products and non-best-selling items. In a prefecture-level market, they deploy 16 full-time frontline salespeople, directly managing terminals, even going down to town and village-level markets. 2. Internal management determines whether you make money If you look only at front-end gross profit, the gross profit margin for brand operators is very limited, especially for distribution of well-known first-tier brands like Yili, Mengniu, and Arawana. Therefore, many distributors joke that profit is "saved." Many manufacturers have begun to advocate "cost reduction and efficiency enhancement" to distributors. The core behind this is that front-end gross profit is limited, so distributors must seek benefits from back-end management. The core of management is not blindly reducing costs but increasing efficiency, especially the efficiency of frontline sales visits and promotions, as well as the service efficiency of back-end warehousing and distribution personnel. For example, for dairy distributors to achieve profitability, the key is freshness management, directly reflected in the management of exchanging large-age-stock products. For large-age-stock products, if they still use the "unified return to warehouse for inspection, review, and then centralized return to KA stores or some small stores for special pricing or gift sales," the two logistics handlings, plus the distraction of business personnel, make profitability very limited. A Mengniu distributor in Fuyang, Xiehe Trading, adjusted their age-stock management method and used the Ayingli SFA tool for process supervision, allowing large-age-stock products to be exchanged directly in the market without returning to the warehouse. Compared to the 2018 exchange rate, the 2019 average decreased by 30%-40%, resulting in nearly one million yuan in additional net profit. Another Arawana distributor, Hongye Hengda Trading, in Anshan, Liaoning, a third-tier city, achieved an average salary of over 8,000 yuan for frontline salespeople through a salary and dividend system, and the overall profitability of the trading company far exceeded peers. **-02- How do category operators make money? To achieve profitability as a brand operator, you must either directly manage terminals and promote high-margin new products, or focus on cost reduction and efficiency enhancement, doing extreme management and seeking benefits from management. Compared to brand operators, the profit logic for category operators is achieved through product integration and product matrix, no longer relying on the price difference of a single product. Typically, the product structure of a category distributor is 3-5 first-tier well-known brands, plus n non-well-known brand products in that category or non-best-selling products of first-tier brands. Usually, distributors do not rely on best-selling products for profit but profit from n non-well-known products. At this point, the core role of first-tier brands is to connect with terminals, ensuring sufficient customer relationships and stickiness, thereby increasing the entry rate of non-well-known products and the shelf display share after entry. In this process, gradually increase the SKU count in this category. A snack food category operator told me, "For downstream small store customers, I don't pay much attention to single-store sales; I consider how to fill the snack category shelves of small stores and how to increase the SKU count ratio. For upstream brands, besides grasping a few core mainstream brands, I focus on which products are popular in the snack category, continuously introducing new products to meet the profit needs of small stores." In fact, different categories have different terminal strategies. For example, in paper products, Mr. Nie Biqian, General Manager of Shaanxi Baihui Trading, shared at the "Distributor Landing Growth Course" organized by New Distribution that he does paper category distribution by combining multiple first-tier brands to form a brand matrix to seize terminals. He gave an example: In 2016, a certain A brand had about 40% market share in the local market. To attack the market and "kill" A brand, they lost 2 million yuan that year. But by the next year, A brand disappeared, and the 2 million yuan loss was recovered in just one year. Category distribution, relatively speaking, is more like a positional battle. The competitors are not only brand manufacturers but also local distributors of the same category. What distributors need to win is not against manufacturers or terminals, but against similar distributors. **-03- Conclusion In the view of New Distribution, brand operators are still more manufacturer-led, while category operators are led by the distributors themselves. Compared to brand operators, category operators have higher anti-risk capability and higher profitability. In the future, New Distribution will launch a series of reports around the role of category operators, providing more practical cases for distributors in business direction. Frankly speaking, whether transforming towards brand operators, category operators, or regional supply chain enterprises, distributors must re-plan their business, combining their own resources, capabilities, and the external market environment. Last month, the father of marketing, Philip Kotler, came to China and gave a speech saying, "If you still do business the same way in 5 years, you will be close to shutting down!" For distributors, if you are still a sitting merchant, warehousing merchant, financing merchant, or wholesaler, closing down is indeed not far away! Focus on FMCG distributor new distribution/brand new marketing cases If you want to communicate with the author, you can add WeChat by long-pressing. When adding, please indicate your company, position, and name. If the tip is adopted, a payment of 400-2000 yuan will be made.