Recently, the author visited over a dozen distributors and listened to their operational status and market issues. Among them, one distributor's words left a deep impression: "The current market is no longer about earning more or less, but about losing money if you're not careful!" At some point, distribution became a "high-risk" trade, with heavy asset operations while bearing upstream constraints and various downstream restrictions, squeezed from both ends. Now it's even harder, with various naked procurement and direct supply models raising the banner of "de-intermediation," and a slight misstep could lead to elimination. This article shares some market conditions observed recently, discussing what market issues distributors are facing and what breakthroughs successful distributors have made. High Operating Costs, Intense Market Competition "The market has been tough in the past two years, with both profit margins and profit amounts declining." When discussing operations, more than one distributor boss reported this. According to the "2023-2024 China FMCG Distributor Operating Conditions Survey Report" released by New Distribution in August last year, 7.1% of distributors saw revenue growth, 14.2% remained flat, and 48.7% saw declines. In terms of profit, only 18.2% of distributors saw increases, while the majority, 63.2%, saw declines. This means that a significant portion of distributors, even if their business grows, are indeed seeing profits decline. The main reason for this phenomenon is: operating costs continue to rise, but the profits given by manufacturers are being continuously compressed. In the past, a few people, a few vehicles, a few hundred square meters of warehouse, and representing a few brands could start a business. But now it's not enough; channels are too fragmented and scattered, foot traffic in terminal stores is declining, and simply placing products on shelves doesn't drive sales. Therefore, stores have higher demands for service, price, and efficiency, causing many distributors to invest more manpower and resources even if their business scale hasn't changed much. "The current market is no longer about earning more or less, but about losing money if you're not careful!" Natural market growth has disappeared, and profits cannot sustain so many distributors. To survive, many distributors have to resort to wholesale markets to dump goods, and to enhance competitiveness, they source low-priced goods externally, further disrupting the market. According to feedback from a beverage distributor, "Because cross-regional selling is so severe, the largest local chain system has never been penetrated. The source of a certain beverage brand's products comes from all over the country—Anhui, Jiangsu, Shandong... different every month." "Not only is it hard to work with supermarkets, but as business declines, the return rate from small stores is also rising sharply. Customers who have cooperated for seven or eight years are now comparing prices. Previously, we guarded against supermarkets, but now we also have to watch out for small stores going bankrupt!" Downstream product circulation is blocked, while upstream continues to push inventory. High inventory and rising return rates have become the last straw that breaks the distributor's back. During a market visit in the first half of the year, I saw an extreme case: a distributor representing a brand had monthly shipments of only 600,000 yuan, but due to the manufacturer threatening to withhold expense reimbursements and tempting with territorial divisions, under repeated inventory pressure, the inventory reached over 10 million yuan. On the surface, it looked glamorous, but in reality, they had to mortgage their house and car and borrow money to keep going. Wanting to Quit but Afraid to, Searching for a Way Out in Confusion Market pressure is forcing distributors to make changes. Facing declining business, to maintain basic revenue, many distributors are forced into involution. Distributor Wang (pseudonym) is a typical example. Wang's region is a county-level city, and with a scale exceeding 100 million yuan, he is the absolute category leader locally. But in his words, the seemingly glamorous scale of over 100 million hides bitterness only he knows. "Business declines about 10% each year. To cover costs, I have to find every possible channel that can bring sales." The categories he distributes are declining sharply, but costs for utilities, labor, and warehousing remain. To ensure revenue, Wang had to engage with e-commerce platforms like Duoduo and Meituan, but these only make up for sales volume, not profits. "After doing this for so many years, even if I want to sell, no one buys! A business over 100 million can't be easily stopped; every day is a cost." To seek growth, he previously only served large stores, but now he has to pay attention to small stores. However, sales of his original categories in small stores are pitifully low. To do well in small stores, Wang had to shift from a single-category business to multi-category and cross-category operations. "I'm busy every day, spinning like a top. I've thought about giving up completely, but considering the over a hundred people under me who have followed me for so many years, I can't let go and don't dare to let go." "I have no choice but to grit my teeth and give it another go, doing B2b, treating it as my last entrepreneurial venture!" Wanting to stop but not daring to, wanting to quit but not daring to. If leading distributors are like this, one can imagine the survival situation of mid-tier and lower-tier distributors. Breaking Free from Role Constraints How can distributors seek breakthroughs? Ren Wenqing, CEO of New Distribution, once proposed this viewpoint: The existence and development of distributors are ostensibly for the needs of manufacturers, but essentially for the needs of the market. The distributor community will not be eliminated; elimination only happens because your products or services have no buyers, and the market doesn't need you, not because you are defined by a certain market role. Against the same market backdrop, we also see some distributors breaking out of traditional trading businesses and the shackles of the "distributor" identity, actively making breakthroughs. Here, the author also summarizes some points for reference. 1. Regional Distributors Deploy B2b Market competition is intensifying, and changes come one after another, squeezing the living space of traditional distributors. During market visits in the second half of this year, I found that in the face of change, more and more distributors are making B2b a key part of their strategic development. They are either doing B2b or preparing to do B2b. In 2024, when New Distribution surveyed 302 distributors across the country, 26.5% chose to build their own B2b local supply chain platform as a direction for transformation and upgrading. By deploying B2b, they complete the construction of a full-category supply chain, cover more stores, provide one-stop selection, operation, and services for small and medium stores, form strong bonds with high-quality points, strongly control terminal resources, ensure stable business sources, and deepen the channel moat. 2. Distributors Transform into Category Service Providers In recent years, supermarket sales have shrunk significantly. Since Pangdonglai began helping Bubugao with adjustments and later helped Yonghui, supermarket adjustment has become a hot topic in the industry. Many retail enterprises have realized "if we don't change, we're dead," and are scrambling to imitate. However, having been in the "selling shelves" business for so long, most supermarkets don't know how to operate shelves. In this process, many distributors have realized the opportunity for transformation, shifting from simply supplying goods to helping retail enterprises find the best solutions for product composition, pricing, display, and promotion, providing category shelf operation services for retail stores, and helping stores with adjustments. New Distribution has also reported some cases, such as Henan Shizhirui, which helps supermarkets with adjustments through a whole-store output model for daily chemicals, with zero account period and 50% annual growth; Zhengzhou Dapeng Trading, which gradually penetrates by outputting entire shelf sets in specific snack food subcategories... Interested readers can check previous articles. 3. Distributors Deploy Retail The once clearly separated distribution and retail links are infinitely converging. Facing fierce market competition, for distributors, the era of simple transportation and shelf stocking is over. To survive in the future, they must have retail thinking, either selling themselves or helping stores sell better. New Distribution has also noted that many distributors are creating a second growth curve by opening their own stores or franchising, and using store data to feed back into their trading business, with each segment synergizing. Take Jia Yongshun, General Manager of Xuzhou Jintong Trading Co., Ltd., as an example. Jia is not only a distributor but also a retailer and a franchisee of snack stores. In 9 years of entrepreneurship, he achieved annual sales of 300 million yuan in the county market, directly operates 8 chain fresh food supermarkets, and has opened 8 franchise stores of leading snack discount stores. In a live broadcast with New Distribution, Jia mentioned that each segment has its unique advantages, and this synergy can enhance the overall business. For example, the supply chain system of snack discount stores can provide high-quality, low-priced goods, the B2b platform can purchase, and fresh food supermarkets can also benefit. One point to emphasize is that distributors entering retail must first change their mindset. Many distributors think their products will sell well, but in the end, the store becomes a showroom for the brands they represent and an outlet for clearing inventory, which is wrong. Since you choose to deploy retail, you must be consumer-centric and provide diversified products based on consumer needs. The value of a retail store lies in using data to feed back into the product structure of the trading business, not just as a channel for shipping goods. Final Thoughts A billion-level snack food distributor told the author, "For a long time to come, distributors need to think about how to survive." The market changes too fast, retail transformations come one after another, too fast and too complex; the brand manufacturers that distributors relied on in the past are also struggling, with clear declines in financial reports; distributors are even more difficult, squeezed by upstream and downstream in the past, and now at risk of elimination at any moment. In the past, distributors served manufacturers well, providing transportation, warehousing, and capital advance services to help brands sell better; but now the market doesn't need so many distributors, but it does need intermediaries with scale and efficiency advantages that can provide value-added services to retail customers and upstream manufacturers. Either sell yourself or help stores sell better. For distributors, to survive and develop, they must adapt to market needs. We can't do every kind of business. The more confused we are, the more we need to calm down and think about where our core advantages lie, what market needs they can match, and continuously build new moats. From August 19 to 21, the 7th China FMCG Conference with the theme "New Demand, New Supply" will be held in Shanghai, and the 5th China FMCG Distributor Conference will be held concurrently. New Distribution has surveyed nearly 500+ distributors and will release the "2025 China FMCG Distributor Operating Conditions Survey Report" at the conference, to see which distributors are growing and which are being eliminated this year, where their operational focus is, and where business opportunities lie. Also, the in-depth case collection "Top Ten Growth Case Models for FMCG Distributors" will be released, restoring real cases and providing structural thinking to help distributors find direction from chaos. In addition, we will hold the "Regional B2b Platform & Key Brand Cooperation Seminar," bringing together 40+ regional B2b platform owners to discuss incremental opportunities in the sinking market covering 200,000 small stores; releasing and interpreting the "Regional B2b Cooperation Guide" on-site; and building a bridge for dialogue between regional B2b platforms and key brand leaders for discussion, one-click connection, and on-site supply-demand matching! 🔺