---
title: "Distributors' Third-Party Urban Distribution Is on the Brink of Collapse"
description: "Distributors who have transformed into third-party urban distribution platforms are facing severe losses and operational difficulties. The article analyzes the reasons for their failure, including lack of professional warehousing and distribution capabilities, and provides guidance on how to approach urban distribution correctly."
author: "任小东"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-06-14"
language: "en"
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# Distributors' Third-Party Urban Distribution Is on the Brink of Collapse

> Distributors who have transformed into third-party urban distribution platforms are facing severe losses and operational difficulties. The article analyzes the reasons for their failure, including lack of professional warehousing and distribution capabilities, and provides guidance on how to approach urban distribution correctly.

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**Third-party urban distribution distributors: a chill down the spine**
"Are there any successful cases of distributors running urban distribution platforms?" "I already have more than 30 customers, but why am I still losing money? What should I do?"
Last year, New Distribution established the China FMCG Urban Distribution Alliance. Due to work, the author visited many distributors who had transformed into third-party warehousing and distribution, but found almost no urban distribution distributors in good shape.
Entering 2019, the situation has worsened. Many urban distribution distributors have lost a lot of money and have complained to me.
Mr. Xu from Anhui said, "I've been doing urban distribution for 3 years and lost over 10 million."
Mr. Yang from Hubei said, "I'm going to switch to other businesses. Distributors doing urban distribution platforms is a big pit! It's simply not viable! My heart is completely cold. Don't mention urban distribution anymore; it breaks my heart."
Mr. He from Jiangxi said, "The company that sold me the system has no operational experience and is very unprofessional. After selling the system, they didn't provide corresponding personnel for operational cooperation. They are too irresponsible." (Note: The evaluation of this system company is the distributor's personal opinion; to avoid bias, it is anonymized here.)
Mr. Chang from Hunan said, "Brother, look, I claim to have a dozen shareholders, but in reality, they just paid a few thousand yuan as a token. In terms of system, warehouse, and distribution operations, everyone still does their own thing. I feel slapped in the face. This is simply not workable."
......
**The weather is so hot, but hearts are so cold!**
**The medicine is too bitter for distributors to swallow**
After the irrational frenzy of B2B, it has now entered a more rational deep adjustment. Distributors transforming into urban distribution cannot truly mature and grow without experiencing real pain.
New Distribution has repeatedly warned about the pitfalls of urban distribution and the difficulty of operations. Many experts have said "harsh words" to distributors transforming into urban distribution on the New Distribution platform.
**First bitter medicine:** Chen Siting, founder of Wanchaobang, once clearly stated: "99% of distributors are not suitable for transforming into third-party warehousing and distribution."
The words are unpleasant, but they may be the truth. Distributors' previous success has cultivated a path dependence in decision-making and operations. The vast majority of distributors like to make quick money, short-term money, and money from price differences.
For example, the tolerance for new products among most distributors does not exceed three months. If they don't make money in three months, most will give up.
Most distributors have never calculated their accounts clearly. They often don't care whether true sales costs, operating costs, and expiration losses are precise; they only calculate the big picture, thinking that the meat is rotten in the pot anyway.
These are genetic issues, inherent in their bones. These genes are incompatible with the genes of urban distribution service providers.
**Second bitter medicine:** Distributors should not think that warehousing and distribution is as simple as "delivering goods."
Many distributors transforming into urban distribution are very confident: "Isn't urban distribution just delivering goods? I've been doing it for nearly 20 years. Who could be more professional than me?"
Some distributors are afraid of missing the boat. "It's almost 5G, traditional business is no longer viable, but I'm good at unified warehousing and distribution. If I don't transform now, it will be too late."
Today's urban distribution distributors who are in huge losses and operational failure have all misjudged the professionalism, long-term nature, and heavy operational characteristics of warehousing and distribution. Relying on their "old driver" experience in delivery, they purchase a WMS+TMS system and start, only to be dumbfounded after doing it.
When unified warehousing and distribution business starts, involving organizational structure, software and hardware costs, warehouse planning and operations, standard pricing, service standards, and non-FMCG business expansion, most distributors are dumbfounded, leaving a mess.
**Is unified warehousing and distribution wrong? No.** In the future, more and more third-party urban distribution service providers will emerge. So what kind of distributors are suitable for entering urban distribution, and what is the correct posture for entering warehousing and distribution?
**How should distributors' urban distribution path be taken?**
First, let's clarify several situations where distributors are not suitable for urban distribution:
> 1) Distributors who want to make quick, easy, and big money;
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> 2) Distributors who want to build a platform alone from start to finish;
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> 3) Distributors in third- and fourth-tier markets where warehousing and distribution are not pain points;
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> 4) Distributors without mature management and financial experience, without a warehousing and distribution department, and without independent accounting of warehousing and distribution costs;
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> 5) Distributors with too big ambitions, starting with a 10,000-square-meter warehouse, mythologizing the power of the internet, and thinking they can command upstream and downstream after success.
If distributors feel they don't fall into any of the above categories, they can prepare for a arduous transformation journey.
**1. Find a good partner or a strong backer**
The so-called partner is not a local peer. Peers are rivals, especially local ones. Don't think peers will enter your warehouse and play by your rules.
**Partners refer to good alliance leaders or strong upstream players.** For example, the central warehouse of a big brand in this city can first take over the warehousing and distribution business of supermarkets or KA, and then plan for the future; or join JD or another big platform as a joint warehouse, and if it makes money, continue. As long as you don't buy a system worth hundreds of thousands and invest millions in a 10,000-square-meter warehouse, at least you won't lose that much money. Of course, if you've already been fooled by some system company, stop losses immediately.
**2. Work hard to cultivate warehousing and distribution operational capabilities**
It is important to deeply recognize that warehousing and distribution is an extremely professional job. Without professional team guidance, distributors cannot understand it on their own.
**Distributors' development genes determine that they are not professional in third-party urban distribution.** For example, volume ratio, inventory turnover rate, warehouse vacancy rate, pricing issues for non-standard products, warehouse design and planning, software and hardware configuration costs, etc.
If these key operational indicators are not clear, and WMS and TMS systems are not mastered, doing unified warehousing and distribution is like a blind man riding a blind horse.
There are many companies with solid professional urban distribution operational experience, such as Weijie on the urban distribution platform, and Wanchaobang, a warehousing and distribution integrated operation platform. They have all-category, all-channel operational experience that can be learned and referenced.
**3. Choose warehouse partners precisely**
Chen Siting, founder of Wanchaobang, once summarized three major customer groups: brand owners, e-commerce, and distributors. In terms of warehouse partner selection, distributors rank last. Except for those distributors who cooperated with you in the early stage, the possibility of other peers entering is very small, especially brand distributors who directly compete.
In addition, most FMCG distributors are unclear about costs. When negotiating prices, they always think you are expensive, and they wish you would give it away for free. How can you make money like that?
**Enterprises and e-commerce, including community e-commerce at this stage, have sufficient willingness and ability to pay, and have good contract spirit. They are ideal partners.**
In addition, only by laying out in provincial capitals and first-tier cities to form the foundation market for urban distribution can there be a possibility of profitability.
Why can Weijie succeed in some cities? I think three points are important:
> 1) Through joint venture companies, they solve the interest issues of participants and the imagination for the future;
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> 2) By empowering joint ventures with systems + professional operation SOP and solution models, they solve the problem of not knowing how to do it;
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> 3) With over a decade of professional accumulation in the third-party urban distribution industry, they solve the problem that FMCG distributors inherently lack the genes for urban distribution.
Back to the theme, why do most distributors fail in warehousing and distribution platforms? **Mainly because their cognition has been led into a pit.**
1. They didn't figure out whether this is a quick-money or slow-money business;
2. They lack professional organizational operational capabilities, still relying on the boss's solo efforts for operations and order-taking, overly relying on the boss's personal network;
3. They lack professional capabilities in third-party urban distribution; being familiar with FMCG distribution does not mean being familiar with other business scenarios.
In addition, the author recently noticed a new phenomenon. Recently, an operation of "using terminal store franchise chain model to force upstream supply chain into the warehouse" has appeared in some regions. This actually references the models of Meiyijia, Furongxingsheng, and Xingaoqiao, but if they are effective, distributors doing it will be another big pit. The author will discuss this in a separate article in the future.
Distributors with problems in the field of unified warehousing and distribution are welcome to add the author's WeChat for discussion. At the same time, you can also participate in the "2019 China FMCG Conference" held by New Distribution in Shanghai in August. You can find answers about the development and ideas of unified warehousing and distribution during the conference!


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