---
title: "From Capital Provider to Distributor to Coverage Provider to Operator: The Bar for Distributors Is Getting Higher!"
description: "The emergence of the distributor community dates back to the 1990s, following the reform of the commercial circulation system, when the earliest batch of distributors appeared. At that time, distributors mainly came from the supply and marketing cooperative system, along with some who had not found suitable jobs and turned to buying and selling goods. In the 1990s, supply was less than demand, and materials were scarce, making business relatively easy. Some manufacturers' sales managers also joined the ranks of distributors."
author: "袁来"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2020-06-27"
language: "en"
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# From Capital Provider to Distributor to Coverage Provider to Operator: The Bar for Distributors Is Getting Higher!

> The emergence of the distributor community dates back to the 1990s, following the reform of the commercial circulation system, when the earliest batch of distributors appeared. At that time, distributors mainly came from the supply and marketing cooperative system, along with some who had not found suitable jobs and turned to buying and selling goods. In the 1990s, supply was less than demand, and materials were scarce, making business relatively easy. Some manufacturers' sales managers also joined the ranks of distributors.

The emergence of the distributor community dates back to the 1990s, following the reform of the commercial circulation system, when the earliest batch of distributors appeared.
At that time, distributors mainly came from the supply and marketing cooperative system. There were also some who had not found suitable jobs and, as a fallback, engaged in the buying and selling of goods. The better-off ones could open a stall in a wholesale market; the worse-off ones didn't even have a storefront, riding a tricycle, without a fixed place, doing business on the move.
In the 1990s, supply was less than demand, and materials were scarce, making business relatively easy. Some manufacturers' sales managers, seeing this business opportunity, also joined the ranks of distributors.
These three groups basically formed the role of distributors. Even up to now, there hasn't been much change.
From the 1990s to 2020, over 30 years, some distributors have fallen or fled, while others have grown their businesses bigger and bigger, from millions to tens of millions to over a hundred million, still growing at a rate of 15%-30% per year. However, most distributors are currently in a state of "deep water and scorching fire."
The exorbitant taxes and fees from downstream KAs, the credit periods and low prices from small shops, the annually increasing tasks from upstream manufacturers, and the dazzling array of new retail, live-streaming e-commerce, and e-commerce carnivals—all these torment distributors, the "honest folks."
**Business is hard; that's a consensus!** **How to win in adversity is a topic every distributor should consider.**
"New Distribution" attempts to sort out the development path of distributors, combining excellent distributor cases previously reported by New Distribution, to provide some directional thinking for everyone.
**In the current era, business is difficult, and it can no longer be solved by simply taking on one brand today and another tomorrow. Instead, it's about truly standing from the perspective of whom you serve and what value you provide. This is the core foundation for growing a distributor's business.**
**-01-**
**Capital Provider → Distributor → Coverage Provider → Operator**
In the past, if a distributor had manufacturer resources and money in their pocket, products basically sold without worry. In the era of a fully market economy, with land grabbing, competition emerged at the front line. At that time, to get products on the shelves of frontline outlets as quickly as possible, distributors entered the "distributor" era.
Now, almost all distributors have fulfilled the distribution function. Past core capabilities are now basic conditions and thresholds. More and more distributors realize that the business is their own, not the manufacturer's.
Further, doing outlet coverage and product operation is not only a requirement from manufacturers but also the key for distributors to control the market themselves. In the view of New Distribution, most distributors today are in the stage of coverage provider and operator.
For some categories in some channels, distributors just need to do coverage well. For example, daily chemicals and seasonings in mom-and-pop stores: if distributors can achieve coverage and get products on shelves, that's enough. Brand competition is not intense, and turnover in small store channels is not high.
Of course, for some categories in mainstream channels, distributors need not only coverage but also operation. For example, beverages in mom-and-pop stores: simply getting products on shelves is ineffective, and simple product displays don't help much.
**At this point, one must consider the perspective of consumers entering the store, how to operate the products to maximize the probability of being purchased. Combining the consumption characteristics of the category, designing a series of product operation actions, this places higher demands on distributors.**
It can be predicted that regardless of the category or channel, in the next stage, achieving coverage of local outlets is just a basic threshold for being a good distributor. The key to doing well depends on whether you have operational capabilities.
In the past, a strong and high-quality manufacturer looking for distributor cooperation would typically ask: How many people do you have? How many vehicles? How many outlets do you cover? I think soon, manufacturers will ask distributors: How do you plan to operate this market? What is your overall plan and marketing strategy?
**-02-**
**The Direction of Your Business Determines What Kind of Coverage You Do**
Before discussing operation, let's talk about coverage.
Although coverage is a basic requirement, there are still some differences here, which are about the choice of business direction for distributors. What does that mean?
Is it covering all channels or covering a specific vertical channel? For example, if your main brand is Yili or Mengniu, such mainstream mass-market categories, you need to cover all channels.
Distribution stores, modern hypermarkets, chain convenience stores, regional supermarkets. In addition to these conventional ones, there are also local community group buying, new retail platforms, corporate group purchase benefits, factory internal purchases... etc. Based on category characteristics, do a good job of full-channel coverage in the local market.
One more thing: on the coverage dimension, if distributors want to make money, coverage of common channels can no longer differentiate you. If you do it, others can too; the rest is a matter of resource investment. But if you can do good coverage in local special channels, there are great opportunities in both competitive intensity and profit margins.
Another type of coverage: for example, if you distribute leisure food, a large category with dozens of brands, you may not be able to effectively cover all channels. Then the core goal of the distributor is to do good coverage of a specific segment channel, such as covering more than 80% of local distribution stores.
The choice of coverage here is based on the distributor's business direction: whether to do business with one or two brands or to do business in a certain category. Given that most distributors currently distribute multiple brands, far from reaching the level of category distribution, it is recommended that distributors consider combining their own distribution category characteristics and do full-channel coverage.
**-03-**
**What Exactly Is an Operator?**
**A coverage provider focuses on selling in, while an operator focuses on selling out.** **Regardless of the type of distributor, it all comes down to one point: product operation.**
**The core goal of product operation is to sell more products.** Of course, the corresponding channels and category characteristics differ, so the methods for selling products vary.
For example, beverages: the mainstream channel is distribution stores, with product homogeneity and impulsive consumption characteristics. Selling more is more about "probability sales"—how to maximize the probability of being bought by consumers through display, posters, and placement.
For example, grain and oil: the mainstream channels are KA and supermarkets, with high brand concentration and rational decision-making. Selling more is more about "value sales"—how to get consumers to buy through product experience, product selling points, and poster materials.
**In short, each FMCG category has different consumption characteristics, mainstream selling scenarios, and external market competition. The product operation logic for each category is different. Distributors must have insights into "selling products."**
How to gain insights specifically? The core is three levels:
> **1. Does it attract consumers' attention?**
>
> **2. Can it engage in dialogue with consumers?**
>
> **3. Can it be closer to consumers?**
Beverages are the most competitive category in the FMCG industry at the front line. In terms of competing for consumer attention, they are already at the forefront of the industry. Other categories can selectively pick one or two methods from the beverage category's operational methods.
**Second, can it engage in dialogue with consumers.** There are so many products; why choose you? When brand awareness is similar—for example, Yili and Mengniu, Arawana and Fulinmen—when there is no particular difference for consumers, how do you make them choose you?
At this point, at the front-line terminal market, what distributors should do is not blindly promote the brand, say brand slogans, or talk about brand industry status; nor is it just offering special prices and promotions. Instead, it's telling consumers the reason to choose you and what problems you can solve.
For example, during the Dragon Boat Festival, compared to directly offering "Buy 1 Get 1 Free," if you change the promotional strategy to "Welcome the Dragon Boat Festival, stock up early for cheaper," and then add "Buy 1 Get 1 Free" below, the sales effect will be better. First state the reason to buy, then the purchase discount.
**Third, can it be closer to consumers.** The "closer" here essentially refers to the channels that distributors can cover. For example, community group buying, home-delivery e-commerce, food delivery platforms; special channels like corporate group purchase benefits; and during the pandemic, many distributors sold through WeChat Moments and communities, which is essentially being closer to consumers, just a screen away.
The above can be said to be the smallest operational unit for distributors to do product operation well. Going up a level, distributors need to consider the operation of product structure, the operation of store outlets, and the matching resource allocation and personnel management.
**Operation is the key to whether a distributor's business is good or bad. Without refined operation, just being a product mover and seller-in, there is almost no possibility of making money.**
Finally, I believe that in the future, competition in the local commercial circulation field will no longer be between manufacturers and distributors, nor between brands, but between distributors and distributors!
The core focus of competition among distributors is coverage and operation. Whoever covers more will get more brand distribution opportunities and more market territory; whoever operates better will get more profits and grow their business bigger!
Focus on FMCG distributor new distribution/brand new marketing cases
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