---
title: "Forty Years of Distributors || Monopoly is a Good Business"
description: "In the past, the high school politics course on scientific socialism had a consensus on capitalist monopoly, defined as 'dying.' But monopolies have persisted, and in China's four decades of channel evolution, monopoly is actually thriving. Whether monopoly is good depends on who you are: monopolizing others is good, being monopolized is bad. The development of China's sales channels repeatedly confirms this conclusion."
author: "黄润霖"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-12-26"
language: "en"
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---

# Forty Years of Distributors || Monopoly is a Good Business

> In the past, the high school politics course on scientific socialism had a consensus on capitalist monopoly, defined as 'dying.' But monopolies have persisted, and in China's four decades of channel evolution, monopoly is actually thriving. Whether monopoly is good depends on who you are: monopolizing others is good, being monopolized is bad. The development of China's sales channels repeatedly confirms this conclusion.

In the past, in the scientific socialism section of the high school politics exam, we had a consensus on capitalist monopoly. I remember the definition at that time: dying.
Of course, we don't say that now, not because monopoly has disappeared, but because it has been dying but not dead.
Imperialist monopoly: dying but not dead. In our own four decades of channel changes, monopoly is actually flourishing.
Monopoly is not inherently bad; it depends on who you are. Monopolizing others is, of course, good; being monopolized by others is, of course, bad. **The development of China's sales channels repeatedly confirms this conclusion.**
It's almost 2019. In Chinese feng shui, '9' is the imperial number, the Qian hexagram of spiral ascent, symbolizing perfection and full of yang energy. The number '8' is adjacent to '9', so feng shui practitioners often single out '8' for discussion. Because '8' means a fork in the road, either for better or for worse.
Counting from 1978, the first year of reform, this year marks exactly forty years of reform and opening up. According to regulations, a round number calls for a grand celebration; according to economic cycles, every year with '8' is a threshold, which seems to be a common experience for most businesspeople. This year happens to fall on that threshold, so there is a chorus of complaints.
**The Good Days of Monopoly**
If the history of China's reform and opening up omitted the development of the individual economy, it would be incomplete and lack drama. Just as in Zhang Zeduan's 'Along the River During the Qingming Festival,' if there were only neatly planned streets without peddlers hawking along the roadside, the prosperity of the Northern Song urban economy would seem somewhat petty.
Even so, in the first decade of reform and opening up, there was basically no role for distributors.
In the just-liberalized economy, all kinds of production and living materials were scarce, and supply falling short of demand was the main theme. People with and without connections racked their brains to pull strings and use back doors, just for a bicycle quota or a black-and-white TV ticket. In an era when having goods meant you could sell, what need was there for channels? What need for distributors? The profiteers who operated in the gray area monopolized the relationship resources of the 'dual-track system' at the time, absolutely buying low and selling high without bargaining. These can be considered the ancestors of modern distributors.
The ancestors were blessed by heaven. When buyers and sellers revealed their identities privately, they were proud and bold: I am a profiteer!
This title of 'profiteer' was a reputation for being able to reach the sky at that time.
So, relying on resource monopoly to make a living, distributors actually have a 'fine' tradition.
Of course, such good days did not last long. The Criminal Law implemented on July 1, 1979, broadly stipulated the crime of speculation and profiteering. Acts that aimed at obtaining illegal profits, violated financial, foreign exchange, materials, and industrial and commercial management regulations, illegally engaged in industrial and commercial activities, disrupted national finance and market management, and undermined the socialist economic order, if serious, were defined as the crime of speculation and profiteering. In short, in today's terms, being a distributor and buying and selling for profit was illegal and criminal.
The duality of things emerged. With a big knife coming down, the 'official profiteers' who truly held resources mostly retreated to the second line and hid behind the scenes. Some 'official profiteers' with prominent backgrounds didn't need to risk their lives for such small money. But it was precisely this policy that, as 'official profiteers' gradually withdrew from the market, gave some Chinese people who were eager to get rich, lacked resources, and dared to take risks, the opportunity to become second-hand, third-hand, or even N-hand profiteers.
At this point, true distributors formally appeared.
Mr. Yao from Xinjiang was born into such a distribution family. As a Henan native, he still vaguely remembers, until today, when he was about 7 years old, his father, Old Yao, took him to Shanghai secretly to stock up on goods under the pretext of visiting relatives.
'It was like meeting a spy. I suspected my dad wasn't a good person. He was doing business with his head in his belt; if caught, he'd really go to jail!' Mr. Yao said with a slightly exaggerated expression, half-jokingly tapping the table with his middle finger to emphasize.
Old Yao was a state employee, not rich but stable. His longing for a happy life led him to secretly start a distribution business. It was an era without the internet; the monopoly of information and resources allowed these distributors, who struggled at the bottom of society, to board the rapidly spinning giant ship of the times. Before they even knew what 'the first pot of gold' was, the times had already made them rich. At the peak, the price of a ton of ordinary raw material could increase tenfold from factory to sale.
The moon waxes and wanes; prosperity declines. Old Yao, who became famous as a 'ten-thousand-yuan household,' was soon targeted by local industry and commerce and public security. In 1983, Old Yao was sentenced to 2 years in prison for speculation and profiteering. Mr. Yao's memory of going to Shanghai for xiaolongbao also stopped that year.
Revolution is not a dinner party, and neither is reform. After the failure of the 'Wuxu Reform' two jiazi ago, Tan Sitong died heroically: 'All reforms in various countries have been accomplished through bloodshed. Today, China has not heard of anyone who bled for reform, which is why the country is not prosperous. If there is one, let it start with me.' The crime of speculation and profiteering, criminalized in 1979, made the earliest batch of distributors pay the cost of social progress with their youth and blood. This is also why I have great respect for this group.
Today, we cannot know exactly how many people were imprisoned for past speculation and profiteering. A Baidu search for 'speculation and profiteering' yields 3.2 million related discussions; on the China Judgments Online website, there are 462 historical related judgments. Although this crime was formally removed from the Criminal Law in 2009, from the perspective of the times, some distributors paid the price.
In that era, distributors relied on a disguised monopoly, experiencing both joy and sorrow. Although they paid a certain price, there was generally hope ahead.
As an adult, Mr. Yao left Henan for Xinjiang to make a living. Xinjiang is a more closed region with poor information and channel monopoly. Mr. Yao, who had been exposed to buying and selling since childhood, immediately smelled money in Xinjiang.
Distribution was something Mr. Yao was good at. His adult years coincided with the era of Deng Xiaoping's southern tour speeches. This was the best decade for the individual economy; distribution, franchising, and joining were the keywords for channels in these ten years. In Xinjiang, Mr. Yao's wealth exceeded ten million in just a few years. In his own words, during those days, he received no fewer than ten calls a day from banks about deposits and loans. Bank staff stared at the money in his passbook like hungry wolves eyeing fresh meat, their eyes glowing green.
Although his scale was not as large as that of peers in developed coastal cities, due to Xinjiang's lagging logistics and relatively closed information, the same product that earned peers a 1x profit could be sold at a sky-high price in Xinjiang, earning 3x or even 5x profit.
**In the good days of making money, many distributors thought it was their ability that earned the money, but in fact, they had simply stepped into a disguised monopoly market.**
Monopoly is a good time, but it doesn't always stand by you. Today, in this era of being monopolized by others, Mr. Yao, who was lost in thought, almost burned his finger with the 'Heworld' cigarette between his fingers.
**Monopolists, One After Another**
Also nostalgic for monopoly is A Zhao, a distributor in a prefecture-level city in Guangdong Province. As a former monopolist, A Zhao has his own insights into monopoly.
When I first met A Zhao, he was still young. At that time, A Zhao held the exclusive city agency for a major lighting brand and was full of vigor and pride. He boasted to me more than once that when he was under 20, he relied on a motorcycle to travel to Da'nan Road in Guangzhou (the low-end lighting market distribution center in Guangzhou at the time) once a week, transporting a motorcycle load of lights overnight, and could easily make a profit of ten thousand yuan by reselling them. Making money was so easy that he even doubted life.
I asked him, with such a big price difference, why didn't others compete with you?
'They didn't know the information!' A Zhao said with a weighty judgment.
The good days of monopoly are always nostalgic!
After the impact of hypermarkets and the killing blow of e-commerce, the replacement monopoly of new channels has trained A Zhao to remain calm in the face of change. He pointed to a relatively large community nearby and told me: 'See that community? 100% of the lights are sold by me! Is that a monopoly?'
I knew he was talking about fully decorated houses.
The Ministry of Housing and Urban-Rural Development, in the '13th Five-Year Plan for the Development of the Construction Industry,' released major good news for the development of fully decorated houses. By 2020, the proportion of newly started decorated residential units in new buildings nationwide should reach 30%. Sichuan requires the proportion of fully decorated to reach 70% by 2025, and Zhejiang requires that by the end of 2020, newly built multi-story and high-rise residential buildings basically achieve full decoration.
'The requirement for full decoration is 'three transformations': de-branding, integration, and high cost-performance. This is a nightmare for brand companies. What we agents are good at is category combination. Future community promotion will no longer be about how much each brand occupies, but a choice between 0 and 1. If you get in, it's 100% of the orders; if you don't, it's zero orders! Don't you think this is also a disguised monopoly?'
**Monopoly has never left; it just keeps changing its form and appears around us.**
In the consulting industry, there is a standard for defining monopoly based on market share. If a single channel or brand's market share is below 26.1%, it is a free competition market; if the leading brand or channel is between 26.1% and 41.7%, it is called a second- or third-type market, also known as a three-way market; if it exceeds 41.7%, it enters the monopoly market category, and if the top enterprise or channel exceeds 73.9%, it is a veritable oligopoly monopoly market.
But for channels, the truly good days are actually the days when monopoly forms.
In the forty years of reform and opening up, channel monopoly can be roughly divided into four stages:
**Stage 1: 1978 to 1988** was actually the decade when 'official profiteering' prevailed. Under visible monopoly and invisible mechanisms, the state-led planned commodity economy allowed the nascent distributor capital to find survival space in policy gaps;
**Stage 2: 1988 to 1998** was the best decade for physical distributors. Policy relaxation, increased production capacity, unmet consumer demand, plus closed information and poor sales channels, multiple favorable factors combined to allow distributors to maneuver in a seller's market formed by exclusive agency rights, regional protection, price protection, and other manufacturer policies. In these ten years, over 90% of products were digested through distributor channels. This was the most beautiful time that distributors can never return to;
**Stage 3: 1998 to 2008** saw the rise of hypermarket channels, and the main role of distribution shifted to retail hypermarkets. Hypermarkets squeezed the original profit space of traditional distributors and brand manufacturers. Various 'exorbitant taxes and levies' such as entry fees, anniversary fees, and display fees basically brought the excess profits of traditional distributors back to normal. The rapid growth of Gome's 'quasi-financial' model also emerged in this stage. 'When Gome roars, the industry trembles.' Gome, which once dreamed of dominating the world, almost fell on the threshold of 2008 due to Huang Guangyu's unexpected downfall. 'Fighting the landlord' was initially effective, but this was an era when even the landlord had no surplus grain;
**Stage 4: 2008 to 2018** saw no end to distributors' nightmares. The internet emerged with a force far surpassing that of hypermarkets. Even at its peak, the total retail sales of the top 100 hypermarkets barely reached 2 trillion yuan, accounting for about 10% of total social retail sales that year, while the online e-commerce sector grew to 4 trillion yuan in ten years, accounting for over 17%.
Not only did it sweep offline, but the unification of the online world was equally important. According to network data released by Analysys in November 2018, Tmall, China's largest B2C platform, had a 59.5% share of the online market; Counterpoint released data showing JD.com's share of the online mobile phone market in Q3 this year easily exceeded 52%. From this perspective, the 41.7% monopoly critical point has long been beyond the vision of the giants.
**Monopoly is an opportunity; competition is the norm. But only when you earn profits during monopoly can you maintain scale during competition.** This sentence applies equally to distributors.
In the last century, Andy Warhol, the advocate and leader of Pop Art, had a famous saying: Life has its highlight moments; the difference lies in who can grasp them better. China's economy has already given e-commerce the best decade. Who will be the terminator of e-commerce's highlight moment? Let's wait and see!
Epilogue
Before parting, A Zhao insisted on taking me to a local specialty seafood restaurant for oysters. These oysters were not locally produced; they were said to be air-freighted from France. The hotel chef opened the oysters in front of the diners, dipped them in seasoning, and handed them over. Diners had to eat them raw to taste the soft, rich layers of the oyster.
A Zhao was clearly not a first-timer. He skillfully dipped and mixed the sauce, and also enthusiastically guided me on how to taste the flavor of the sea. I don't dislike seafood, but such a ferocious way of eating inevitably seemed inelegant. A Zhao didn't think so. He put the sauce-dipped oyster into his mouth in one gulp, and with a 'crunch, crunch' chewing sound, a bloody sauce dripped from his swollen lips.
'To truly taste the sea flavor, swallowing raw is the best way!' A Zhao grabbed a tissue and forcefully wiped the residual juice from the corner of his mouth.
In the recent hit movie 'Aquaman,' after Arthur defeats Orm, a new generation of Aquaman is born. Arthur's mentor on his growth path, Nuidis Vulko, had his men take Orm away and specifically emphasized: 'Take him below, but make sure he sees the rest of the show!'
Indeed, characters rise and fall, seasons change, but the show doesn't end.
Two thousand kilometers away, Mr. Yao's business has been increasingly sluggish recently. This gives him more time to browse online. Half-jokingly and half-seriously, he consulted netizens on a forum: if a relative had been sentenced for speculation and profiteering in the past, could he apply for state compensation?
A netizen replied with eight characters: **Don't dwell on the past, don't fear the future!**
Source: Teacher Huang's Yellow (ID: About-MrHuang)
-END-
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