---
title: "First Step in Supermarket Overhaul: Squeezing Distributors?!"
description: "As supermarket chains across China undergo transformation, distributors face significant impacts, often experiencing price cuts and reduced margins. This article analyzes the underlying logic of these changes and offers strategic responses for distributors to adapt and thrive."
author: "袁来"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2025-02-14"
language: "en"
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# First Step in Supermarket Overhaul: Squeezing Distributors?!

> As supermarket chains across China undergo transformation, distributors face significant impacts, often experiencing price cuts and reduced margins. This article analyzes the underlying logic of these changes and offers strategic responses for distributors to adapt and thrive.

Dear readers, I'm Yuan Lai from New Distribution. Before and after the Chinese New Year, I visited distributor friends in various regions, and the most discussed topic was undoubtedly the "supermarket overhaul." Starting from March 2024, when Pangdonglai assisted in transforming Bubugao, then in June transforming Yonghui Superstores, followed by Zhongbai learning from Pangdonglai in July, Lianhua Supermarket's self-initiated overhaul in September, and the recent Wumart overhaul... Over the past six months, the wave of transformation has swept across supermarket systems nationwide. Many experts have already provided in-depth interpretations of this topic, so I won't elaborate further here. This article focuses on the impact of the current nationwide supermarket overhaul trend on distributors. Behind this impact, I also want to share my understanding of how distributors should respond, hoping to provide inspiration and food for thought for distributors nationwide.

**The First Step of Overhaul: Squeezing Distributors**

A distributor boss said: "The so-called overhaul is just bare pricing. After bare pricing, the fees still have to be paid, and the maintenance still has to be done. My gross margin dropped from 15% to 12%, and the payment terms haven't shortened at all." I joked, "Is it a disguised price cut under the guise of overhaul?" The distributor replied, "Most are like this." At first, I thought it was an isolated case, but after visiting around, I found similar situations more or less. Although the forms of supermarket overhauls vary by region, regardless of whether supermarket operators have thought it through, the first step is to ask suppliers to lower prices.

A distributor of paper products shared that his supply price dropped by 15%. Although the supermarket's own gross margin also decreased, other fees remained unchanged, and payment terms stayed the same. He complained, "This kind of overhaul can't be called an overhaul; it's actually squeezing distributors." I think this is the realistic dilemma many supermarket distributors face during overhauls. Of course, some supermarkets haven't rushed to adjust FMCG standard products but have started with fresh produce, aquatic products, fruits and vegetables, and expanded prepared food and bakery sections. Through optimization and upgrades in these categories, they've increased foot traffic and average order value, bringing incremental growth to distributors.

Whether it's squeezing distributors or bringing them incremental growth, I believe every distributor working with supermarket systems should view overhauls rationally and objectively. Regardless of good or bad, we must understand what the supermarket overhaul truly means for distributors.

**Rational and Objective View of Supermarket Overhauls**

The wave of supermarket overhauls originated from Pangdonglai's assistance in transforming Bubugao and Yonghui. Many people think this is just a trend because Pangdonglai is popular, so everyone is learning from it. Once the novelty fades, the overhaul will naturally end. That's not right. As business operators in the trade, we should see the underlying logic behind the surface. Pangdonglai's overhaul is just a trigger. Why is the overhaul wave sweeping the nation now? The essential reason is that supermarket chains can no longer survive under their past business logic. In the past, supermarket systems charged brands entry fees, display fees, barcode fees, and other charges, profiting by providing a sales platform for upstream brands rather than selling goods. In the past, supermarkets just needed a good location, nice decoration, and well-designed shelf flow, then waited for customers. Products were entirely left to manufacturers and distributors, without considering consumer needs or whether certain products were needed, because manufacturers and distributors handled everything, including new product launches and after-sales service.

But now, foot traffic is declining, and the number of supermarket stores is saturated. To bring consumers back, stores must undergo overhauls and upgrades, understand consumer demands, and provide category solutions for different consumption scenarios. In simple terms, stores need to proactively think about what their product mix should be, how to price competitively, how to promote to attract consumers, and how to display products to encourage more purchases. Store operations should be centered on consumer needs, not on manufacturer fee investments. Therefore, I want to say that the overhaul is definitely not a passing trend; it's a concept, a way to bid farewell to the past. Continuous improvement centered on consumers will be the main theme for supermarket stores nationwide.

**How to Continuously Improve Operations?**

From a distributor's perspective, I think there are three key aspects: First, category management. As mentioned, define the target consumer profile, understand consumer behavior and preferences, uncover needs and pain points, and provide category solutions for different consumption scenarios. Second, product development. More and more supermarket systems will develop private labels in cooperation with upstream manufacturers or introduce differentiated products to meet consumers' segmented needs. Third, shortening the supply chain. This is the most direct for distributors: optimize supply chain management, shorten the path from manufacturing to consumers, and improve supply chain transparency and efficiency.

**What Are the Response Strategies for Distributors?**

First, objectively recognize that with mainstream supermarket systems optimizing procurement models and adjusting product structures, the number of distributors will definitely decrease. Distributors won't disappear, but their numbers will shrink. Small distributors or those with single or few brands will be eliminated in this round of overhauls. The more shelf resources a distributor occupies in a supermarket, the more the supermarket relies on you.

Second, respond actively and control reasonably. As mentioned earlier, overhauls are not achieved overnight; they are a process of continuous improvement, so it's inevitable that some unreasonable or inappropriate measures will arise. Distributors also need to adopt the concept of small steps and continuous improvement. For example, many supermarket systems hope distributors introduce niche or viral products to achieve the goal of "wide categories, narrow products," but distributors shouldn't get carried away and introduce too many niche products at once, leading to inventory buildup and greater returns.

Third, adopt a category mindset and expand capacity. In the past, distributors negotiated with store buyers about fees, not products. Slotting fees, end-cap displays, and shelf positions were more about fee and profit games. But distributors must shift their perspective: not as representatives of a specific manufacturer, but as representatives of a category. How to streamline and optimize the category, improve display, and think about how to expand the category's capacity with the store, even proactively initiating joint business plans for the category. Here's a formula for distributors: Category mix = Brand x Packaging x Function x Price, and work around these four points.

Fourth, improve supply efficiency and reduce costs. The supermarket overhaul will inevitably force distributors to enhance their operational capabilities. While adapting to changes, strengthen digital construction. In cooperation with supermarkets, don't pursue the gross margin of a single brand or SKU, but rather the overall gross margin. There will inevitably be products or brands that don't make money or even lose money, but there must also be products that make money and have margins, so do business with a comprehensive gross margin. Therefore, it's crucial to calculate accounts well. Know which products lose money and how much, and control that. Know which products make money and how much, and clarify that. Operate with numbers, reduce costs and increase efficiency, manage payment terms, and analyze regularly.

Finally, I want to say that today's supermarket overhaul is just beginning. For distributors, be patient and stay in the game. I believe offline supermarkets can win consumers back and get them to buy more. Distributors aren't doing one-off deals but sustainable business. The above strategies aren't achieved overnight; they're a process of continuous improvement. Treat the supermarket's "squeezing" of distributors as an external driver to improve your own operational capabilities, and keep a calm mindset.

The retail transformation is still ongoing. In 2025, more and more supermarket systems will join the overhaul trend. Under such changes, what shifts will occur in the retail market and trade circulation landscape? How should distributors respond?

On March 17-19, 2025, in Chengdu, at the 10th China FMCG Innovation Conference, we have specially set up a [Forum/Seminar on Response Strategies to Supermarket Overhauls], where we will invite multiple industry experts to share insights from different angles, including case studies, trend evolution, and response measures, and deeply discuss current business threats and opportunities. If you're interested in this topic, don't miss it!

[New Order · Symbiosis]
The 10th China FMCG Innovation Conference
Date: March 17-19, 2025
Location: Chengdu, China


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