---
title: "From Distributor to Category Operations Service Provider"
description: "The core value of intermediaries will no longer be limited to the physical transfer of goods, but will evolve into a hub for value exchange in the digital world. At the 10th China FMCG Innovation Conference held in Chengdu from March 17 to 19, Chen Yixin, founder of Haocheng Pet, delivered a keynote speech on this transformation, sharing insights on how distributors can evolve into category operations service providers."
author: "陈一鑫"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2025-04-03"
language: "en"
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---

# From Distributor to Category Operations Service Provider

> The core value of intermediaries will no longer be limited to the physical transfer of goods, but will evolve into a hub for value exchange in the digital world. At the 10th China FMCG Innovation Conference held in Chengdu from March 17 to 19, Chen Yixin, founder of Haocheng Pet, delivered a keynote speech on this transformation, sharing insights on how distributors can evolve into category operations service providers.

**The core value of intermediaries will no longer be limited to the physical transfer of goods, but will evolve into a hub for value exchange in the digital world.**

From March 17 to 19, the 10th China FMCG Innovation Conference, the 4th China FMCG Hard Discount Conference, and the 4th China FMCG Distributor Conference, under the theme "New Order · Symbiosis," grandly opened in Chengdu.

Mr. Chen Yixin, founder of Haocheng Pet, delivered a wonderful keynote speech titled "From Distributor to Category Operations Service Provider." The following is an excerpt of Mr. Chen's on-site speech (with some deletions), compiled for our readers.

**Current Phenomena**

Supermarket procurement is divided into three types:
* Third-rate procurement is mainly responsible for order processing and product entry.
* Second-rate procurement is responsible for category management, including normal contract negotiations with suppliers.
* First-rate procurement has industry knowledge and advisory power over consumer insights.

In the past, what were the requirements for traditional supermarket procurement?
They needed a rich assortment of products, following the long-tail theory, and keeping up with market peers—learning from what others do, what European and American supermarkets do, and what Walmart and Ito-Yokado do.

Also, they needed to cater to the mass market. Without carrying brands like Master Kong or P&G, a supermarket couldn't open; small brands found it hard to get shelf space. Additionally, they needed professional buyers; when you negotiate with them, you find they are quite professional in certain areas.

What about now?
Now it's about product simplification. Leading supermarkets in Henan have very simple product lines, with the ability to develop and create, and they lead lifestyle trends. Modern life emphasizes simplicity and convenience, so supermarkets need to introduce such simplified and innovative products.

What are traditional distributors like?
They are pure intermediaries in the circulation of goods, reaching customers through their geographic coverage and personal sales experience.

Most distributors are either family businesses or entrepreneurial ventures with certain customer relationships, doing well in their regions. Or the owner might be a former executive from a company with accumulated experience and connections, using personal sales experience to reach customers, with inventory turnover.

Today, intermediaries have transformed into digital service integrators, focusing on empowering upstream and downstream customers by improving operational efficiency.

When I started in the pet business in 2017, we were learning from Ito-Yokado, and I visited again recently. I noticed that Ito-Yokado is not as good as it used to be. It's not that they're bad, but reaching this point shows they haven't changed in some areas.

**Therefore, it is our responsibility as intermediaries to respond quickly to changes in the environment.**

Another aspect is the ability to accumulate data assets. Despite the many software systems available, the key is whether we can turn data into insights and apply them in product selection.

**The core value of intermediaries will no longer be limited to the physical transfer of goods, but will evolve into a hub for value exchange in the digital world. Simply put, in the past we sold products; now we sell value in the digital realm.**

What is this value? Let me talk about Haocheng Pet. Haocheng Pet was a second entrepreneurial venture in 2017. Previously, we were in the general merchandise business, mainly serving well-known large systems in China, with long payment cycles, leading to business failure and debts of over 1 million yuan. Facing transformation, I chose to represent the pet brand Mars. The supermarket shelves were mostly filled with brands like Pedigree and Whiskas. I thought, since there is a market leader, is there a potential second place? After research, I found this gap.

However, large supermarkets like Walmart and Carrefour have a rich assortment of pet supplies and toys. Given this, I introduced products from Ito-Yokado, Walmart, and Carrefour, and established partnerships with leading retailers in second- and third-tier cities. Currently, Haocheng Pet's cooperation network covers 80% of the 330 prefecture-level cities nationwide.

Our target consumer group is the new middle class. We are committed to creating a warm supply chain ecosystem; this is our mission.

**Three Forces Model**

I have been looking for a word to summarize what we do. Last year, I came across a book by Lin Xueping called "Supply Chain Offensive and Defensive Battle" (供应链攻防战). It talks about "three forces," and I borrowed that concept.

**1. Linkage Force**

Everyone talks about how to solve upstream safety and trust issues, but it's difficult. So we made all safety and trust concrete.

**The first thing is to establish a Chief Quality Officer.** The first task of the Chief Quality Officer is product traceability. For a bag of cat or dog food, we can know the cost price, logistics costs, and which company's raw materials (beef, chicken) are used. Only by understanding the raw materials can we determine if it offers value for money.

Brands we cooperate with must pass six checkpoints, with the primary condition being whether they are listed companies. If not, we assess whether they have high-tech, youthful packaging, and reasonable profit margins. We have 49 quality control criteria, condensed from the quality requirements of Hema, leading Henan supermarkets, and some of Sam's Club. Only those meeting all 49 criteria can enter our stores.

**The second thing is to establish execution standards.** What is a standard? The standard is the first; the first is the standard. Now everyone finds that any industry standard is set by the leader; they are the first.

Currently, we are a trading company and do not have BSCI and HACCP certifications, but we require our upstream partners to have BSCI and HACCP. Only with these certifications will we cooperate.

We compiled European and American standards and European customs requirements. Using Youdao Translate and Baidu Translate, we created two versions of the European and American standards.

**2. Control Force**

**We address the middle part: operational capability and accounting capability.**

For operational capability, we established a **Procurement Assistant**. Why call it Procurement Assistant?

Have you noticed what kind of relationship we have with supermarkets? Is it a commodity exchange, a buying-selling relationship, a friendship, or a kinship?

Our way of cooperating with customers is to become a procurement assistant. Does an assistant understand the boss? Of course, they do; otherwise, the boss would replace them.

As intermediaries, we don't aim to be the leader among partners, but rather to be the gap-filler, becoming one of the intermediaries or suppliers in the first, second, or third tier, with a sense of filling gaps.

Next, we established a **Category Manager**. From traceability to horizontal aspects, we built a product database for the industry, with 10 major categories, 5 levels of classification, and 366 subcategories.

Supermarket buyers are not very familiar with the pet category, but the boss has already required them to introduce pet products, which takes time to learn. So I categorized it. Now many domestic retail systems use our root and subdirectories.

Of course, no matter how large an enterprise is, if internal processes are not streamlined, it will not last long. To quote Huawei: "Changing tires on the highway" certainly requires confidence, capability, and courage.

In terms of governance, we hold company-wide strategy meetings every November and June, taking half a day for everyone to raise questions. No employee's question is refuted; they are recorded by administration. We treat these questions as "roadblocks" on our growth path.

To activate the team, we have monthly PKs for war zones, customers, and brands, with cash rewards.

**Controlling the company's reasonable growth is also a top priority.** Earning reasonable profits is what intermediaries should do today. Cash flow solves survival; whether you can stay at the table depends on whether you have cash flow.

During the COVID-19 "black swan" event a few years ago, did you notice that many distributors you used to play with are no longer around? It was because the "black swan" event caused cash flow strain, and many distributors couldn't survive more than three months.

While having tea and chatting, you suddenly find a supermarket has closed, and huge debts are hard to recover. Suddenly, a supplier has long payment terms, manufacturers no longer offer credit periods, and banks stop renewing loans—the "gray rhino" appears.

**Therefore, my team prefers steady development over blind expansion to avoid adverse consequences.**

**3. Design Force**

Design force addresses downstream customers. We actually have three customers: upstream, downstream, and internal.

To solve efficiency and scenario issues, we established **Terminal Display Designers**. People often treat salespeople as order-takers, but in our company, we don't call them salespeople; we call them Terminal Display Designers.

What do they do?

Based on the "Big Whale Customer Strategy," we divide customers into four categories: million-yuan systems, super stores, ten-thousand-yuan stores, and five-thousand-household stores, with different support for each.

This support is not requested by customers but proactively provided by us. When a supermarket buyer meets certain criteria, we invest on our own. For example, we support promotional staff, provide an advertising TV, or renovate the entire section. These are all coordinated by the display designer with the buyer.

Second, we find a "Changjin Lake" to fight a tough battle. Everyone has probably seen the movie. When the Chinese People's Volunteers fought the US military, if the US held Changjin Lake, they would push back 20 kilometers; if the Chinese took it, they would push forward 20 kilometers. **For all our sales teams, we require that the "Changjin Lake" customer in a certain city must be won; this requirement is very strong.**

In 2024, we achieved 72-hour satisfactory delivery nationwide. I proposed this during the pandemic when logistics were inconvenient and many goods couldn't arrive. By 2024, we will ensure 72-hour satisfactory delivery across the country. We have established warehouses in Tianjin and Chongqing, and plan to add warehouses in Lanzhou and Hangzhou this year.

In 2025, we will be by your side, with 12 small teams nationwide. We also work with customers on the value proposition of "Pet Insider." Why do we do pets? **It is to make companionship easier.** We work together around this value proposition.

This is a 3D display design for supermarkets; we have already started providing whole-store output solutions.

To build new scenarios, we require upstream customers to have manufacturers come for a performance report salon every July 16 and January 8. Downstream, we address neighborhood relations.

Have you noticed what supermarket buyers worry about most? They worry that products won't sell after introduction. One thing we do is organize pet sports events, pet markets, and photo contests in the supermarket's name, bringing people together and providing emotional value services.

Supermarkets have 52 merchandise categories (MD), while Haocheng has 36 special segments. We hold themed events every month, each with detailed planning and timelines.

**Ecosystem**

As intermediaries or agents, in the past, business was either driven by brand dividends or by entrepreneurs who were former regional managers or sales directors with connections. What drove this business? **It was opportunity-driven.**

**But in this era, relying on opportunity is difficult; we must rely on our strategy.**

Strategically, we must align with our mission. In a chaotic and disordered environment, we have made many complex plans, but if you want a stable and clear business logic, without a mission, the business cannot go far.

What is the essence of an enterprise? It is understanding your downstream customers, internal customers, and upstream customers. Haocheng always adheres to a people-centered approach, focusing on core products, providing differentiated products and services to segmented populations in core markets. This is what we have been practicing over the years.

For an enterprise to grow, it needs to create a warm supply chain and clarify its ecological niche. Whether you are a big fish in a small pond or a small fish in a big pond, different stages require different strategies.

To build an ecosystem of a shared future, all businesses will find it hard to survive if they are not bound together. Today, making quick money for a moment is unlikely to last. Last year, we communicated with upstream manufacturers and partners: what I do with you is bound together by destiny. Only by establishing the integration of information flow, capital flow, and logistics, connecting upstream, midstream, and downstream, and responding quickly to the market, can such a community of shared future go further.


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