---
title: "Forty Years of Distributors: Historical Junctures That Changed Their Fate"
description: "This article reviews key historical moments from 1979 to 2009 that shaped the destiny of Chinese distributors, from the opening of the economy to the rise of e-commerce, highlighting how these events transformed the distribution landscape."
author: "黄润霖"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-01-09"
language: "en"
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# Forty Years of Distributors: Historical Junctures That Changed Their Fate

> This article reviews key historical moments from 1979 to 2009 that shaped the destiny of Chinese distributors, from the opening of the economy to the rise of e-commerce, highlighting how these events transformed the distribution landscape.

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When I was a child, at the turn of the year, according to traditional customs, we would stay up all night. The whole family would sit around the charcoal fire, reviewing the gains and losses of the past year and casually discussing plans for the coming year. Usually, the family would stay up until the sky turned fish-belly white, and only after seeing the first ray of sunshine of the new year would everyone disperse to sleep. This symbolized that after waiting through the clouds, one would see the moonlight, and the coming year would surely be smooth sailing.
In our traditional customs, there are many public orders and good customs that cannot be explained by scientific principles, yet they guide our daily habits. These include both a tacit alignment with the natural laws of the world and the common people's good wishes for future life.
Fearing the uncertainty of the future, we prefer to seek certain patterns in past history to handle things with ease. In fact, at certain crossroads in history, there are indeed seeds of hope quietly taking root and sprouting. In the context of the time, these actions were as tiny as dust and negligible. But in the next ten or twenty years, it was their breaking through the ground that subtly changed our present.
**The forty years of ups and downs in the distribution industry have been swept along by an invisible historical law, drifting with the waves and swaying in the wind and rain.** They were born at the right time, possibly becoming rich overnight, but they were also placed in an era of great economic change, with no one to rely on, forced to move forward alone. At the crossroads of economic development, some seemingly insignificant signs could become the push that knocked them out; some seemingly accidental opportunities could become their ticket to catch the next economic express.
Taking history as a mirror, one can understand the rise and fall. The modern history of Chinese distributors has remained blank; even as far back as the peddlers of past dynasties, few have written biographies. The rise and fall of distributors is a microcosm of the bottom-level economy of an era. To observe the present, one should learn from the past; without the past, there is no present. **Reviewing the people and events at important nodes that affected distributors in history might be the best way to find an annotation for 2019.**
【1979】
In the year following Vice Premier Deng Xiaoping's visit to Japan, in June 1979, Konosuke Matsushita visited China. China's first foreign-invested enterprise began to take root.
However, at that time, those who could act as agents for Panasonic products were all department stores and supply and marketing cooperatives at various levels under the state or collective. The salespeople in the supply and marketing cooperatives were the sought-after sons-in-law for mothers-in-law at the time. They were resourceful and well-connected. As economic policies continued to loosen, the restless elements among sales personnel, using the information and channels they mastered, gradually evolved into the founding fathers of today's distributors.
Two months before Matsushita's visit to China, another remarkable figure was also invited to China. In the December 2018 episode of "Day Day Up," China's earliest model team, established in Shanghai, gathered in Changsha. As the "national models" who first participated in Paris Fashion Week, they were now ashamed to mention the famous brand that had provided their clothing sponsorship back then. Yes, that brand is Pierre Cardin, which is now everywhere, and it was the founder of Pierre Cardin who came to China earlier than Matsushita.
The romantic French were even less adept at building channels in China than the Japanese. In the early days, Pierre Cardin used an overseas export model, shipping goods through Hong Kong to the mainland. Shenzhen and Guangzhou, which are close to Hong Kong, became a paradise for profiteers, a frenzy that today's overseas purchasing agents cannot match. A Pierre Cardin jacket, from Guangzhou to the interior, could yield a profit margin equivalent to a year's income for an ordinary salaried worker.
Old Pierre saw that the Chinese market was so good that just slapping on a Pierre Cardin label could make money, so why bother with the hard work of production, processing, and long-distance transportation? In 1985, Pierre Cardin began to adopt a category licensing system, finding garment factories across China and granting them trademark usage rights. The channels and networks were built and sold by these factories themselves, while he sat in his Bordeaux estate drinking red wine, smoking cigars, and counting money. These licensed factories later underwent restructuring and transformation, mostly becoming private or individually owned. As a result, some of these factories became sources of counterfeit goods, while others became Pierre Cardin's earliest distributors in the true sense.
**The category licensing system taught Chinese distributors the value of brands, but it also laid the groundwork for Pierre Cardin's future channel chaos.**
In December 1978, Li Lisheng, the first president of Coca-Cola's China region, received a long letter from China National Cereals, Oils and Foodstuffs Import and Export Corporation (COFCO), inviting him to Beijing. On December 13, 1978, Coca-Cola signed an agreement with COFCO at the Beijing Hotel, adopting compensation trade and other payment methods to supply Coca-Cola to major cities and tourist areas in China, and to set up bottling plants in China for local production and sales. The two sides also agreed that before the bottling plant was completed and operational, COFCO would arrange sales on a consignment basis. COFCO, a state-owned enterprise, is currently China's largest FMCG distributor and an unattainable mountain in the distribution world.
In 1979, IBM, after nearly 30 years of severed ties with China, returned to China with the reform and opening-up. Five years later, 40-year-old Liu Chuanzhi founded Beijing Computer New Technology Development Company (the predecessor of Lenovo Group) and became one of IBM's PC distributors. What IBM did not expect was that this little brother who once followed behind them would, 20 years later, become a major buyer of their PC division and take the PC business to the world's number one. Thirty years east, thirty years west; many people did not expect that this was just the beginning of many distributors overtaking brand owners.
In February 1979, the Central Committee of the Communist Party and the State Council approved the first report on developing the individual economy, allowing "localities, based on market needs and with the consent of relevant competent departments, to approve some idle labor with formal household registration to engage in individual labor in repair, services, and handicrafts." **On the one hand, this opened a policy gap for 8 million returned educated youth to enter the commercial field. On the other hand, the educated youth background of China's "first generation of merchants" also laid a solid foundation for their hard work and endurance.**
On November 12, 1979, the Central Committee of the Communist Party approved the "Report on the Issue of Distinguishing Workers from the Original Industrialists and Merchants" submitted by the Central United Front Work Department and five other departments, clarifying the worker status of 700,000 small merchants, peddlers, and small handicraft workers. In an era when buying cheap and selling dear was still considered speculation, for early distributors, clarifying political identity was more exciting than receiving year-end rebates from manufacturers.
Good news came one after another. **On November 30, 1979, Zhang Huamei, known as China's first individual business owner, opened her small shop in a small alley in Wenzhou;**
In 1979, in Guangzhou, returned educated youth Rong Zhiren also founded the "Rongguang" snack shop, becoming one of the first individual business owners;
In Wenling, Zhejiang, the individual industrial and commercial business license No. 0000007, registered on November 1, 1979, and issued by the original Wenling County Administration for Industry and Commerce, was discovered to be the earliest existing individual business registration license.
...
That year, China approved about 100,000 individual industrial and commercial households to start businesses.
This profession, which was once embarrassing to mention, after being washed by history and time, has become a light topic in the mouths of many who experienced it.
In the following two years, although the state's management of the individual economy fluctuated slightly, the overall policy trend was toward loosening. In 1981, Xinhua News Agency first proposed the concept of the individual economy, allowing individual business owners to join the Communist Youth League and the Communist Party, and to hire labor within limits. **In 1981, the number of individual business owners in China reached 1.01 million, a tenfold increase compared to 1979.**
In 1979, for all Chinese people, including distributors, an old era had passed, and a new era had begun.
【1989】
In 1989, Beijing Lenovo Group was formally established. The following year, the first Lenovo microcomputer was launched, and Lenovo officially transformed from an importer and distributor of computer products into a manufacturer and seller of its own brand of computer products.
Some were riding high, while others were down on their luck. When Lenovo was at its peak, in 1987, Ren Zhengfei, who had gone through a mid-life divorce, could only rely on 24,000 yuan borrowed from friends to set up a company called "Huawei" with a partner. Starting as a distributor for Hong Kong's Kangli Company's HAX analog switches, Huawei took only two years to move to independent R&D, production, and sales of high-tech products under its own brand. In the nearly 30 years since, Ren Zhengfei never imagined that his comeback story would intersect with the 45th President of the United States. For a company like Huawei, with a market value of hundreds of billions of dollars, President Trump even risked global condemnation by creating the "Meng Wanzhou incident" at the end of 2018.
From following to leading, the rise of nations is like this, and the rise of enterprises is also like this. **Many Chinese companies started as distributors or agents, and the experience of distribution and agency became important soil for Chinese enterprises to learn from the market.**
In the same year Huawei was founded, Chaoshan young man Huang Guangyu came to Zhushikou in Beijing, rented a small storefront, and began selling household appliances. The wind rises at the end of green duckweed, and waves form from the ripples between. This retailer, once at the bottom of the home appliance industry chain, became a nightmare for many brand companies and distributors in just over a decade. Starting in 1990, Gome innovated its supply and marketing model, bypassing middlemen and establishing direct supply relationships with upstream manufacturers. **In 2004, Gome's Huang Guangyu became China's richest person. This was also the first time a distributor, or channel merchant, topped China's rich list.**
In the year before 1989, Procter & Gamble (P&G) Guangzhou was established. Among many foreign companies, P&G should be considered the one that best understood Chinese channels, with a channel depth and breadth layout that had a strong local flavor. **P&G's registered distributors, at their peak, even exceeded 1,000,** with direct supply customers, wholesale customers, distribution customers, and second-level and third-level distributors in various forms. This flexible distribution model became P&G's biggest weapon in the Chinese market.
Of course, as a daily chemical giant, P&G's decisive actions against distributors in the Chinese market are also evident. In 1999, to reduce the negative effects of the early human-wave tactics, P&G reduced 300 distributors to about 100 at one stroke; in 2006, it made intensive adjustments to customers in seven major regional markets in Shandong; in 2010, it went to court with Xuzhou Wanji Trading, causing a stir; in 2017, in the East China market, due to the "exclusive distribution" issue, most multi-brand distributors were purged by P&G. Unfortunately, the former daily chemical giant is no longer as glorious. This foreign brand, which came to China before the second "9" year of opening, has seen its sales continue to decline in recent years, with 2016 annual sales falling to the level of ten years ago.
**1989 was also a period of germination for another major consumer product in China.** Although the "old three items" necessary for marriage were not fully popularized at this time, new consumer demands were already bursting forth impatiently. On May 2 of that year, Xinjiang Guanghui Group was established. This is a typical private enterprise, and many people may not have heard of its name. But today, it has become China's largest automobile distributor brand. In the history of the individual economy, its best achievement was ranking 6th among China's top 500 private enterprises in 2014.
**In China's distributor community, there is such a group of people who have been quietly and low-key happy.**
In addition to the economic field, 1989 also saw a well-known major event in China. It was precisely because of this event that various economic reforms in China were in a state of stagnation and wait-and-see, and society's identity recognition of the private economy, individual economy, including distributors, underwent subtle changes. This awkward situation did not truly turn around until Deng Xiaoping's southern tour speech in 1992.
Fortune and misfortune depend on each other; an old saying reveals the secret of heaven. That year, a newly established Taiwanese instant noodle company, facing the withdrawal of many foreign investments from the mainland, went against the trend and decisively entered the mainland market. In ten years, it built a huge FMCG empire beyond its home market, surpassing its main competitors. **This company has a well-known name—Master Kong** (Kangshifu), and its competitor Uni-President, due to missing the opportunity that year, is still struggling to catch up today. **Today, the distributors cultivated by these two FMCG companies have become the targets of poaching by many emerging FMCG companies.** "Channel intensive cultivation" and "deep distribution" once became the flagship of channel advancement in this industry.
Two years later, Zhong Shanshan, the founder of Nongfu Spring, a major competitor of Master Kong and Uni-President in another market segment, had just gained a foothold in Hainan. As the general agent for Wahaha in Guangxi and Hainan, at that moment he was thinking more about how to smuggle the subsidized "Wahaha" yogurt to Zhanjiang, Guangdong, to earn more profit.
**The great changes ten years later were all rooted in the seeds planted ten years earlier, except that some people were running; some were walking; and some were crawling.**
That year, the number of individual business owners in China exceeded 10 million.
【1999】
In 1999, Ma Yun, who had failed twice in entrepreneurship, returned from Beijing to Hangzhou, determined to establish an e-commerce company for small and medium-sized enterprises. The company's name came from the book "Ali Baba and the Forty Thieves" he read as a child. At this time, Alibaba was unremarkable; even the owner of a small shop earning only 100,000 yuan a year might not have taken Ma Yun seriously. But it was precisely this unremarkable little man who founded "Taobao" and "Tmall," which would leave distributors in the next twenty years with nowhere to escape.
Three years before Ma Yun founded Alibaba, Suning was established in Nanjing. This competitor, which was a full nine years later than Gome, dragged Gome into a larger price war with even more frenzied tactics. For the distributor system that had long been accustomed to being guided by brand owners on pricing and promotion management, the emergence of Gome and Suning was definitely an anomaly. **The era when distributors were led by the nose by brand owners ended with the "US-Soviet hegemony" (Gome vs. Suning); brand owners began to learn to bow and tremble before channel merchants.** Although traditional distributors were still the victims in this war, it was precisely under the inspiration of the "US-Soviet hegemony" that **cross-regional alliances and collaborations among distributors began to emerge.**
During the Spring Festival of 1999, smuggler Ye Xiaofan was wanted. The smuggled goods included DVD decoder chips supplied to Jinzheng. Liu Lirong, who was still following Yang Minggui at the time, became embroiled in a legal dispute that lasted three years, only regaining his freedom in April 2002.
The distributor resources accumulated at Jinzheng allowed him to have his moment of glory again. Liu Lirong, who originally planned to make a comeback in the DVD industry, ultimately gave up on DVD and entered the mobile phone industry, thanks to the earnest advice of distributors. This gave birth to the "Gionee" brand, which once led the domestic mobile phone industry. If time could turn back, Liu Lirong, who was mired in debt in 2018, would be so grateful for the golden advice of distributors back then. However, the distributors who once pointed the way for Liu Lirong probably no longer expect Mr. Liu to remember the kindness of a meal. As the new year approaches, their biggest wish is likely that Gionee can return the payments owed to them.
Compared to Liu Lirong's entanglement in the whirlpool of a hundred-billion gambling debt, Wu Changjiang, the founder of NVC Lighting, who also loved gambling, seemed like a "good boy." However, in terms of controlling and understanding distributors, Wu Changjiang seemed to be a step ahead of Liu Lirong.
At the end of 1998, Wu Changjiang and two partners founded NVC Lighting. Compared to its main competitor Opp Lighting, which was established two years earlier, NVC was late. But Wu Changjiang, who dared to gamble heavily at the card table, also dared to spend lavishly in the market. Until its listing in Hong Kong, NVC's compound growth rate was faster than Opp's. The rapid market expansion also brought distributors' personal worship of Wu Changjiang to its peak. In the first two equity disputes, with the joint efforts of distributors nationwide, they managed to lift Wu Changjiang into the board of directors. Wu came out unscathed and even more spirited. However, Wu Changjiang, carried away by success, forgot the old adage "no more than three times." In 2014, when he had another equity battle with Wang Donglei, the exhausted distributors could no longer lift this leader of the lighting world.
At this moment, imprisoned, does Wu Changjiang, through the moonlight of the iron window, miss those distributor brothers who were loyal to him?
Around the same time Wu Changjiang founded NVC, Liu Qiangdong's JD.com was also born in 1998. Compared to Ma Yun, Liu Qiangdong's determination to become China's largest distributor was even more resolute. From distributing discs in Zhongguancun to reselling electronic products from upstream suppliers, Liu Qiangdong's new distribution asset-heavy model planted its seeds at its inception.
By 2018, JD.com had established 515 warehouses across the country, with a total area of 10.9 million square meters. It built more than a dozen Asia No. 1 smart warehouses in Beijing, Shanghai, Guangzhou, Wuhan, and other places.
As a representative of new distribution in the Internet era, marrying a beautiful woman and becoming CEO, Liu Qiangdong's day of reaching the pinnacle of life had arrived. But as the saying goes, "men become bad when they have money." The bad habits of "elegant prostitution and gambling" prevalent in the distributor community were not avoided by CEO Liu either. The law that "the wild flower is more fragrant than the home flower" remains unbroken, no matter which sister you are. Yes, no matter which sister!
**Looking back at the big shots who appeared on the economic stage over the past two decades, if you trace their roots, 90% of them have been distributors. Distribution became a training ground, and distributors became the earliest Whampoa Military Academy.**
**In 1999, according to official statistics, the number of individual business owners in China reached 31.6006 million.**
【2009】
On January 14, 2009, the National Bureau of Statistics of China revised the current price total of China's GDP for 2007 to 25,730.6 billion yuan. Based on the average exchange rate, it officially announced that China had surpassed Germany to become the world's third-largest economy. It was also in this year that China's GDP growth rate reached its peak and then began to gradually slow down. Also in this year, the contribution of individual and private economies to GDP exceeded 40% for the first time. The seed planted in 1979 was growing vigorously and unstoppably.
Also worth remembering is the court judgment of the Shijiazhuang Intermediate People's Court at the beginning of 2009. The public anger caused by the "Sanlu toxic milk powder incident" could be appeased by the trial, but for the more than 400 first-level distributors under Sanlu, the price they had to pay was just beginning. In addition to the fees and payments advanced by first-level distributors for channel goods during the entire "Sanlu toxic milk powder" incident, the inventory piled up in their warehouses, the receivables left in Sanlu's accounts, and the reputation of the regional market they had painstakingly built over more than a decade all went down the drain overnight. **In 2009, Sanlu, which collapsed like a mountain, not only betrayed the "choice of 30 million mothers" but also turned the hair of countless distributors who had vowed to follow him white overnight.**
In April of that year, the H1N1 influenza outbreak occurred. Just like the SARS epidemic in 2003, which promoted the spread of online Taobao, in 2009, "Taobao Mall" (the predecessor of Tmall), which had been launched for less than half a year, encountered another promotional opportunity. For offline physical stores, standing at the crossroads of 2009, the right time, right place, and right people were not in the distributors' cards. From then on, distributors collectively entered a "decade of confusion."
On May 19 of that year, the State Council executive meeting studied and deployed policies to encourage "trade-in" of automobiles and home appliances through financial subsidies. This was the first wave of policy dividends felt by durable consumer goods distributors under the "4 trillion new deal" of that year. Subsequent subsidies for rural areas and energy-saving subsidies, driven by policies, increased sales volume growth and reduced the enthusiasm of physical distributors for online transformation. "If a man takes no thought about what is distant, he will find sorrow near at hand." Confucius's admonition to Duke Ling of Wei more than 2,500 years ago did not anticipate that it would be fulfilled 2,500 years later on a group he deeply despised.
2009 was also an important incubation period for the Internet upstart "Xiaomi." In April 2010, Xiaomi was formally established in Beijing. This company, born with complete Internet genes, claimed to sell phones only through e-commerce channels, avoiding the capital expenditure of retail and offline channels, so the retail price of phones could be close to the extreme price, directly targeting multi-link distribution channels. It was the culprit of good quality and low price. **That year, the value of distributors to channels once again became a hot topic repeatedly discussed in the marketing community.**
Interestingly, in 2016, Lei Jun repeatedly claimed that Xiaomi had no plans to enter the offline market, but within a year, Xiaomi turned around and began to vigorously lay out offline. Xiaomi Home, Xiaomi authorized experience stores, and Xiaomi direct supply exclusive stores were established, corresponding to different markets in cities, counties, and townships. As of November 2017, only Xiaomi's direct supply exclusive stores had opened 36,256 in less than a year, covering 2,630 districts and counties and 18,049 townships across China. This former trend-chaser, after understanding the fullness of ideals and the skinny of reality, finally became what he hated most.
In "Jurassic World 2," humans who think they can dominate the fate of dinosaurs, after recognizing the destructive power of nature's vitality, the paleontologist protagonist reveals the secret: Life is not bound, life is free, and life will find its own way out.
Due to statistical calibers and historical reasons, compared to 1999, the number of individual business owners in China only saw a slight increase in 2009, reaching 31.9737 million.
【Epilogue】
John Lennon once said: Everything will be okay in the end. If it's not okay, it's not the end.
The Chinese lunar calendar is based on a cycle of "12," and 2019 is the last zodiac sign of the twelve. **Some people summarize China's economic growth as a stage of ten years, and 2019 happens to be the last year of this ten-year period. The overlap of the end of two cycles adds a bit of expectation for people's hope of returning to zero and rebounding at the bottom.**
The rise and fall of the distributor community is an important part of modern commercial civilization. After being "beaten up" by various emerging business models such as e-commerce, O2O, sharing economy, and B2B, the distributors who were not killed finally understood one thing: distributors will not die anytime soon. But the Qing Dynasty has truly fallen!
**The rules of business operation will not be more merciful because you are an old distributor, nor will they be more demanding because you are a new distributor. Standing at the historical node of 2019, we will also become history. I only hope that when we look back on this history, it will not only be with sighs and exclamations, but also with glory and dreams.**
Source: Huang's Yellow (ID: About-MrHuang)
**-END-**


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