---
title: "FMCG Distributors Are 'Quitting the Group' in Droves—Is Group Buying 'Killing' Traditional Channels?"
description: "FMCG companies now have too many channel options—traditional distributors, e-commerce, and emerging community e-commerce, community group buying, and livestream e-commerce—like five horses pulling a chariot. But if the horses pull in different directions, the chariot may be torn apart. A report on January 11 highlighted a franchisee's losses due to high channel prices, and many distributors in 2021 faced similar issues, leading some to 'quit the group' as emerging channels undercut prices and disrupted the traditional system."
author: "李振兴"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2022-01-25"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/fmcg-distributors-are-quitting-the-group-in-drovesis-group-buying-killin-18ea9a1f/"
markdown: "https://xinjignxiao.com/en/articles/fmcg-distributors-are-quitting-the-group-in-drovesis-group-buying-killin-18ea9a1f.md"
original_source: "https://mp.weixin.qq.com/s/IK_FTJowY0E0ObOd8e_qMw"
translation: "https://xinjignxiao.com/zh/articles/%E5%BF%AB%E6%B6%88%E4%B8%9A%E7%BB%8F%E9%94%80%E5%95%86%E7%BA%B7%E7%BA%B7-%E9%80%80%E7%BE%A4-%E6%8B%BC%E5%9B%A2%E6%AD%A3%E5%9C%A8-%E6%9D%80%E6%AD%BB-%E4%BC%A0%E7%BB%9F%E6%B8%A0%E9%81%93-18ea9a1f.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/fmcg-distributors-are-quitting-the-group-in-drovesis-group-buying-killin-18ea9a1f/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# FMCG Distributors Are 'Quitting the Group' in Droves—Is Group Buying 'Killing' Traditional Channels?

> FMCG companies now have too many channel options—traditional distributors, e-commerce, and emerging community e-commerce, community group buying, and livestream e-commerce—like five horses pulling a chariot. But if the horses pull in different directions, the chariot may be torn apart. A report on January 11 highlighted a franchisee's losses due to high channel prices, and many distributors in 2021 faced similar issues, leading some to 'quit the group' as emerging channels undercut prices and disrupted the traditional system.

Source: Xiaocainv Tribe (ID: cjnjbl)
FMCG companies now have too many channel options—traditional distributors, e-commerce, and emerging community e-commerce, community group buying, and livestream e-commerce—like five horses pulling a chariot. But if the horses pull with different force and in opposite directions, the 'chariot' may be torn apart.
On January 11, The Paper reported that in Hangzhou, Zhejiang, a Mr. Zhao (pseudonym) said he saw a Wahaha franchise advertisement on Baidu, but after joining, he found that the channel price and pricing were high, even higher than online shopping prices, leading to severe losses.
This is not an isolated incident; many distributors faced such troubles in 2021.
A Hebei FMCG distributor told Blue Whale Finance that he was a distributor for a well-known noodle food company but decided to 'quit the group' in 2021 and stop being a distributor for this company.
The specific reason: as a distributor, he had to 'share' the market cake in his region with community group buying, livestream e-commerce, Pinduoduo, and traditional e-commerce, but his tasks were not reduced. Moreover, the distributor's purchase price was higher than the 'latecomers' selling price, compressing the price system and causing continuous channel conflict.
Industry insiders believe that emerging channels like community group buying and livestream e-commerce are a beneficial supplement to traditional channels. Companies should choose coverage based on their own situation; if chosen well, they can improve performance and brand image. But companies need to know where their roots are and not blindly cover all channels without differentiation due to 'temptation.' Although sales may increase in the short term, it is actually 'drinking poison to quench thirst,' and the company may be constrained by multiple channels, leading to fragmentation.
******Emerging Channels Strip Brands' 'Underpants'****Lowering Brand Value**
"The normal selling price is 2 yuan per pack, and the distributor's purchase price is 1.5 yuan, but livestream e-commerce and community group buying sell at 1.5 yuan per pack, or even 1.3 yuan per pack. How can distributors sell? Isn't this 'digging your own grave' and 'exposing yourself'? Where is your brand value? Will consumers still trust this brand?" a fast-moving consumer goods distributor asked Blue Whale Finance reporter with a 'soul-searching question.'
Regarding the impact of emerging channels on the traditional distributor system, Yao Liming, director of the China Commercial Economic Research Center, believes that the impact of emerging online channels on the physical distributor system is far greater than the impact of supermarkets on department stores decades ago, and these problems are still common at this stage.
The most severe impact of emerging channels is on the price system. It is understood that in the traditional distributor system, FMCG prices decline over time to boost sales, with an annual decline of about 10%. But emerging channels like community group buying and livestream e-commerce can break through the bottom price overnight to achieve high transaction volumes and attract traffic.
This leads to chaos in the distributor system: the original stable price system of first- and second-tier distributors collapses instantly, bringing a surge in sales in the short term. Some companies mistakenly view this as 'healthy growth' and the benefits of fully embracing new channels. In fact, it is 'growth bought with life' and 'drinking poison to quench thirst.'
Industry insiders believe that introducing community group buying and livestream e-commerce in a region where there is already a distributor is a sign of lacking commercial credit. After signing agreements with regional distributors, brand companies should be responsible for them and not do things that harm their interests. "Introducing community e-commerce and livestreaming will definitely take away distributors' interests," the above-mentioned distributor said.
Besides the noodle food company, Vitasoy is a typical case. In 2020, Vitasoy adjusted its northern operations team, increased investment in online channels, and promoted low prices online to quickly meet performance requirements, resulting in online prices for the same specification products being much lower than offline. "Vitasoy hurt distributors' hearts, and offline distributors quit the group one after another," the distributor said.
In 2021, Vitasoy entered a recovery period, but its mainland China market declined severely. From April to September 2021, revenue was only HK$2.274 billion, a year-on-year decline of 29%, with a loss of HK$32.58 million. Vitasoy's poor performance in mainland China and slow recovery, although partly due to being taken off shelves, is also related to 'hurting distributors' hearts' at that time.
It is reported that not only companies with billions in revenue are 'smashing' their foundations, but even companies with tens of billions or hundreds of billions are doing the same. Emerging channels have shattered many brands' foundations (offline systems), and while maintaining certain sales, they begin to erode the brand. At that point, rebuilding the distribution system becomes difficult.
In a region, there was originally only one authorized distributor, but now the benefits of that region must be shared with community group buying, livestream e-commerce, traditional e-commerce, Pinduoduo, etc. The value of authorization decreases, but there is no protection of distributors' rights, and tasks are not reduced. "Distributors are not stupid, so they stop playing with the company."
******Not a Must-Have, but Optional, or Even Excluded**
In response, some in the FMCG circle say that the sales from emerging channels like community group buying and livestream e-commerce are hard for many companies to ignore, but when they impact the traditional distributor system, many large FMCG companies adopt a 'not support, not oppose' attitude.
Industry insiders believe that FMCG companies should make a choice. Emerging online channels are a beneficial supplement for mainstream brands, and the path for new consumer brands to break out is to run in parallel with traditional channels for health. FMCG companies should selectively cover channels based on their own situation.
Wen Zhihong, partner of Hejun Consulting and head of chain operations, believes that companies should strategically position different channels, form different channel combinations, and avoid conflicts of interest. Because if the interests of major channels are damaged, ultimately the brand itself suffers.
For traditional offline companies, their consumer groups' consumption scenarios are mostly offline, so offline is the foundation, and online can be an effective supplement.
It is understood that traditional FMCG brand Xiangpiaopiao uses livestreaming and e-commerce platforms for brand building and traffic generation, not focusing revenue on online, but still focusing on offline and continuing to penetrate lower-tier markets.
In the first three quarters of 2021, revenue was 1.974 billion yuan, a year-on-year increase of 4.29%, with net profit of 39.3955 million yuan. In the third quarter, revenue and net profit achieved sequential growth, with revenue increasing 123% quarter-on-quarter.
For FMCG brands that started online, online is their important foundation. For example, Zihaiguo, Three Squirrels, and Beicaowei mainly have online traffic, and their genes and operating models rely on online. So in the past two years, as traditional e-commerce revenue share declined, revenue from emerging online channels like livestreaming and Pinduoduo has increased. Offline channels are also increasing, but it is difficult to surpass online in the short term.
Some emerging channels can even be directly excluded. The reshuffling of community group buying and the various 'tax evasion' incidents among livestream hosts indicate that the dividends of these emerging channels are also fading.
Currently, community group buying has seen reshuffling: Tongcheng Life has entered bankruptcy reorganization procedures; Xingsheng Youxuan is holding its existing market and no longer aggressively expands. Shihuituan continues to lay off employees, reducing from 10,000 to less than 1,000 people.
In livestream e-commerce, influencer Snowberry was fined 65.55 million yuan, and top host Viya was penalized 1.341 billion yuan by tax authorities, and all of Viya's accounts across platforms, including livestream rooms and multiple short video platforms, have been banned.
These channels may be the ones some companies need to cut. The above-mentioned distributor said: "Initially, professional managers couldn't resist the 'temptation' and entered emerging channels comprehensively and without blind spots to complete tasks. This repeated pressure led to a loss of brand value.
After a year of experimentation, they found that it's not possible to 'fool' consumers with a few so-called new packages; it's self-deception. If they don't have the ability to produce products of different quality and significant differentiation to meet the precise consumers of each channel, companies should make a painful decision to cut emerging channels like community group buying and livestreaming, and fully strengthen the main channels."
Of course, in the past two years, some companies have been exploring the integration of online and offline, creating some valuable operating models and supporting technologies in the process of omni-channel sales.
Yao Liming believes that the key may still be to take the path of digital transformation. Only with digital technology support can companies achieve comprehensive precision in operations, and precision marketing reflects the essential requirements of modern market economy for enterprises.
_-END-_


---

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

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