Click to read the original article for details In the trading and circulation business, distributors have always been a commercial group that continuously evolves with market changes. Over more than thirty years of elimination and learning, distributors have gradually developed from "amateurs" to "professionals," transforming from simple sales owners into formal enterprises with operational and management awareness. New Distribution categorizes this transformation into four stages: Stage 1: Workshop-style operation, primarily consisting of brother shops or mom-and-pop stores, mainly engaged in wholesale selling. Stage 2: Family-style operation, primarily consisting of mom-and-pop stores plus relatives, mainly engaged in wholesale selling + brand agency + market services (logistics and distribution). Stage 3: Team-based operation, establishing dedicated business teams, mainly engaged in wholesale selling + brand agency + market services (logistics and distribution) + store coverage (distribution and selling-in). Stage 4: Enterprise-style operation, establishing comprehensive organizational and business management systems, mainly engaged in wholesale selling + brand agency + market services (logistics and distribution) + store coverage (distribution and selling-in) + product promotion (sell-out). Recently, New Distribution conducted a survey on the survival status of distributors. From the survey sample, we saw that over 50% of distributors have entered the fourth stage. At the same time, we also observed some issues: many distributors who have entered the fourth stage are facing bottlenecks, with slow or even declining business growth. Based on this, New Distribution conducted in-depth interviews with distributors in the fourth stage who have achieved sustained growth. From five dimensions, we summarized their paths and methods for business growth. 1. Widen: Expand more channels 2. Multiply: Represent more products 3. Deepen: Develop more customers 4. Expand: Broaden operational areas 5. Refine: Sell at higher prices 01 Widen: Expand more channels Although in the FMCG industry, offline channels are the foundation, it is undeniable that channel changes have always existed. From supply and marketing cooperatives, to wholesale, to KA, to traditional small stores, to CVS, to e-commerce, O2O, community group buying, private domains... Channels are continuously extending, and the proportion of each channel is dynamically changing. Whether new channel models will emerge in the future, or who will become the new mainstream channel, is unpredictable. In the past, traditional distributors operated relatively single channels, mainly focused on offline, such as specializing in circulation channels, modern channels, catering channels, or a combination of one or two channels. A single-channel operation model is sufficient to support business growth during market dividend periods. However, when dividends fade and competition intensifies, the development of a single-channel model becomes limited. Taking the pandemic as an example, many distributors operating single channels were significantly affected. For instance, catering channels and traditional circulation channels easily fell into stagnation when faced with lockdowns. From a channel perspective, distributors should operate across all channels and achieve multi-point touchpoints. Of course, channel expansion is not about blindly developing new channels, but rather combining existing products with proper judgment and evaluation. When communicating with a frozen food distributor, he mentioned a viewpoint: Channel expansion should combine products, channels, and consumer profiles to comprehensively evaluate whether the channel is worth expanding. Taking his ice cream business as an example, sales were good in circulation channels and CVS, but when expanding to farmers' markets and hotel channels, it completely failed. The core reason is that the consumer profiles of farmers' markets and hotel channels are completely inconsistent with the product buyers, with an overlap of less than 10%, directly leading to the failure of channel expansion. For distributors, only when the consumer profile overlap between products and channels reaches over 60% is it suitable for channel expansion. At the same time, New Distribution compared cases of distributors who expanded channels and found that the channels with the most attempts and higher success probability are of two types: special channels & new retail. The typical characteristic of special channels is that they have spatial monopoly advantages, with highly concentrated consumer characteristics, and can generate significant sales volume, such as schools, factories, government agencies, internet cafes, etc. Special channel expansion is relatively low-tech. The core is divided into two levels: first, product adaptation, such as rice, flour, oil, and grains, which are suitable for factories, government agencies, etc., as holiday gifts; second, finding key people and building relationships. New retail is a product of online derivation and is currently a fast-growing channel. However, distributors are relatively unfamiliar with new retail because in the past, most distributors operated offline, and online is a completely new thing. The past environment makes distributors naturally resistant to new things. But in fact, many distributors who actively embrace new retail have achieved business growth to varying degrees. When communicating with a condiment distributor with annual sales exceeding 100 million yuan, he cited community group buying as an example. Before entering, he first cooperated with some small regional platforms to understand the internal logic of community group buying, including consumption motivation, consumption scenarios, consumption needs, and sell-out logic. After clarifying the complete chain, he then fully entered the market. 02 Multiply: Represent more products The essence of product expansion is to seize shelf space. Store shelves are limited. Traditional circulation stores may allocate only 2-3 sections per category, accommodating a very limited number of SKUs. For distributors, every additional display position on the shelf increases the chance of product sales and generates more sales revenue. For example, if you originally distributed 100 SKUs in a store, now distributing 400 SKUs means completely different sales opportunities and volumes. When the shelf space available for existing products reaches its limit, expanding products to seize more shelf space is also a method to gain growth. Product expansion can be divided into two types. One is expanding products within the existing category to become a category distributor. By focusing on a specific category, deeply operating, and serving stores, relying on existing operational advantages to gradually expand brands and products, thereby increasing voice in stores. Brand resources will also tilt, forming a positive feedback loop. The other is cross-category product expansion for multi-category operations. Remember one point: do not easily expand across categories, as the operational logic between different categories is completely different. For example, the water and beverage category does not require high logistics and distribution standards; it is delivered as whole pieces, while snacks require split-case picking. If you follow the logic of water and beverages to do snacks, it will definitely not work. Image source: Internet When expanding products across categories, distributors must combine existing resources, thoroughly research the characteristics of the category, and verify whether it is suitable. In general, product expansion should first focus on the original category. When the original category approaches its ceiling in the regional market, then consider cross-category expansion. 03 Deepen: Develop more customers Developing new customers here refers to channel sinking around a specific channel. Taking the traditional circulation channel as an example, how many distributors can fully cover the stores in their operating area? Many distributors focus on urban areas, or due to limitations in personnel, vehicles, and management radius, they find it difficult to cover the sinking market. But in fact, the potential of the sinking market is enormous. Shi Yuzhu once said: "The real largest market is below, not above." China's sinking market population accounts for about 68% of the total population, and rural residents' income growth has exceeded urban residents for 11 consecutive years. In 2021, national rural retail consumption exceeded 5.9 trillion yuan, a year-on-year increase of 12.1%, with growth rates higher than urban areas for 8 consecutive years. The importance of the sinking market is self-evident, which is why brands have been doing channel sinking. Moreover, competition in town and village-level stores is less intense, making them potential stocks for distributor growth. Of course, channel sinking is not achieved overnight. Many sinking markets have inconvenient transportation, with dozens of kilometers from urban areas to townships, making coverage difficult. Coupled with unfamiliarity with the market, early exploration requires significant costs. Image source: Internet If coverage is truly difficult, distributors can select 1-2 secondary wholesalers in corresponding townships that operate many brands to help cover. During this period, distributors can arrange salespeople to follow the secondary wholesalers' distribution teams to visit stores, familiarizing themselves with the stores and routes in the sinking market. When resources and management radius can support coverage, choose the right time to do channel sinking. 04 Expand: Broaden operational areas In the past few decades, leading FMCG brands have adopted deep distribution as their development strategy. To ensure maximum coverage, many FMCG brands adopt intensive regional coverage, with each distributor responsible for a very small area. The limitations of the operating area, to some extent, restrict the development of distributors. The reasons for this phenomenon include not only manufacturer restrictions but also the distributors' own issues. In the past, distributors mostly served brands and were highly dependent on manufacturers, only able to operate exclusively in fixed areas. But from the current perspective, many excellent distributors have developed market operation capabilities and terminal service capabilities, shifting their moat from relying on brands to strengthening themselves. Based on this, distributors have the ability to expand regions and operate across regions. Regional expansion is a "meticulous task," requiring judgment from multiple dimensions to determine whether expansion conditions are met. 1. Product dimension. Existing brands & new agency brands: choose which method for regional expansion. If it's an existing brand, does the manufacturer agree? If it's a new brand, you need to think deeply about product selection issues. 2. Business dimension. Can personnel, logistics, and warehousing support cross-regional operations, or should you set up another business center in the expansion area? 3. Market dimension. Is the retail format in the expansion area similar to the current operating area? If there are significant differences, distributors need to conduct in-depth research on the expansion area before evaluating feasibility. 05 Refine: Sell at higher prices Mr. Li Feng of Hongye Hengda once mentioned a viewpoint: "Terminal customers buy your products 20% based on product value (whether it sells well), and 80% based on profit space (whether it makes money)." This also tests whether distributors have the ability to sell at higher prices. Some distributors are unwilling to step out of their comfort zone, always focusing on past best-selling big items that sell fast and easily. This mindset is clearly wrong. Many of those best-selling big items are products from several years ago, or even more than a decade ago, with pricing based on the market a decade ago. Whether from a sales volume or profit perspective, they should not be the focus of distributors. The entire industry has been talking about consumption upgrading, and brands have been continuously innovating products around consumption upgrading, launching high-priced, high-profit products. Distributors should also follow this trend, step out of their comfort zone, and sell higher-priced products. Behind selling higher-priced products, the requirements for distributors are also different. In the past, relying on consumers' existing awareness and price advantages, distributors could do well with basic actions like timely delivery, regular visits, and display maintenance. But selling at higher prices means distributors need to do more: store selection, entry negotiations, promotion plans, material support, and salesperson training. Each of these places higher demands on distributors. Final Thoughts: After a round of exchanges with distributors, I have a deep feeling that everything has two sides. If some distributors' business declines, there must be others growing. The market's unwritten rule is that big fish eat small fish, and in the end, the fittest survive. Looking back, from the distributor's perspective, where does business growth come from? Widen & Multiply & Deepen & Expand & Refine: distributors can choose based on their own advantages. -END-