---
title: "Giving Up Deep Distribution Easily Is the Biggest Pitfall You Can Jump Into"
description: "Since 2013, the claim that 'deep distribution has failed' has sparked widespread industry debate, and today, abandoning deep distribution has become a mainstream view. However, the real problem is not that deep distribution has failed, but that its efficiency has declined due to the shift from manufacturer-led operations to dealer-led operations under manufacturer guidance."
author: "万超帮陈思廷"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-06-15"
language: "en"
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# Giving Up Deep Distribution Easily Is the Biggest Pitfall You Can Jump Into

> Since 2013, the claim that 'deep distribution has failed' has sparked widespread industry debate, and today, abandoning deep distribution has become a mainstream view. However, the real problem is not that deep distribution has failed, but that its efficiency has declined due to the shift from manufacturer-led operations to dealer-led operations under manufacturer guidance.

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**Analyzing the 'Failure' of Deep Distribution**
Since 2013, the claim that 'deep distribution has failed' has sparked widespread industry debate, and today, the argument for abandoning deep distribution has almost become the mainstream view.
What is deep distribution? It is a terminal operation system based on a human-wave tactic, a refined operation system for the vast offline terminal market.
From 2003 to 2013, the vast majority of FMCG brands in China that adopted the deep distribution model experienced the fastest growth. But after 2013, this rapid growth came to an abrupt halt and declined continuously. Many attribute this to the failure of deep distribution.
**Seeing the essence of the problem is often more important than the problem itself.** First, let's consider: has deep distribution truly lost its effectiveness? Whether deep distribution can continue to be effective depends on whether the foundation for its effectiveness still holds.
Foundation 1: Is offline still the battleground for all FMCG products? The answer is yes. According to Kantar data, in the large FMCG sector, offline still accounts for 86% of the market share. A few years ago, there was a strong voice to 'abandon offline,' but looking at the recent aggressive moves by e-commerce into offline, everyone is stunned.
Foundation 2: Will the reality of a massive number of offline terminals disappear? No. Chengdu is one of the most developed cities for modern chain retail, yet it still has tens of thousands of independent terminals. For a long time to come, the diverse and massive number of terminals will remain an objective reality.
Foundation 3: Has the influence of terminal personnel on brands and products at the terminal disappeared? No. While the industry was questioning deep distribution, the emerging white liquor brand 'Jiangxiaobai' quietly built an empire of nearly 2 million terminal networks with nearly 10,000 terminal personnel over several years. Today, in most places in China, you can see Jiangxiaobai in restaurants and small shops, adding to the brands you see everywhere.
When the deep distribution model you consider 'failed' is helping another company succeed, we can almost be certain that the 'failure' of deep distribution is not a real problem.
**So, what is the real problem with deep distribution?**
**The Real Problem with the Deep Distribution Model**
Some say the problem with deep distribution is that people are too expensive, vehicles are too expensive, and the cost of deep distribution is too high. But cost is not the real problem either.
Society progresses, incomes rise, and this is inevitable; it should not be a problem. The essence of high labor costs is actually low efficiency and low output per person, which is the real problem.
So, the real problem with deep distribution is not 'failure,' but that with intensifying competition, per-person output is insufficient to support per-person costs. This is an 'efficiency' problem.
**What causes the 'efficiency' problem in deep distribution?** In my view, the problem lies in 'manufacturer operation.' Almost without exception, deep distribution operated by manufacturers has encountered 'efficiency' problems.
First, let's look at why deep distribution has been dominated by manufacturers, even direct-operated, for the past decade or more. The historical reason is that in the past, distributors generally lacked market operation capabilities, so manufacturers had to do the market work themselves. Manufacturers bore all market pressure, while distributors were reduced to delivery roles, becoming supporting players in the market.
In the era of manufacturer-led or direct-operated deep distribution, because the total FMCG market was growing at double digits, growth masked all problems. When after 2013, all incremental measures such as channel flattening and market sinking were exhausted, problems were exposed.
Problem 1: Deep distribution management issues caused by overly long management spans.
Wanchao Bang once provided terminal delivery services for a leading FMCG brand. After the warehousing and distribution functions were fully independent for a period, the brand discovered through delivery system data that only 40% of salespeople were qualified, with 20% excellent. Yet in the brand's business system, the qualification rate was over 90%.
To meet the team qualification rate in KPI assessments, supervisors defaulted to or even forced salespeople to transfer orders and borrow performance, even requiring distributors to cooperate in cross-regional sales to boost performance. This led many excellent salespeople to resign in frustration, and distributors were also resentful but dared not speak out.
This is just a small part of the management problems. Due to overly long management spans, factionalism, collusion between levels, and fraudulent expense claims are not uncommon among first-tier brands. Can such a deep distribution team have strong combat capability and high efficiency?
Problem 2: Direct-operated deep distribution completely crippled the market functions of distributors.
Because manufacturer-employed personnel are costly and management spans are long, some brands have tried to 'return power to the people,' supporting distributors to do market work, changing from 'direct operation' to 'dealer operation.'
But then manufacturers were stunned: after years of direct operation, their distributor teams were just delivery people, almost completely lacking market promotion capabilities. Moreover, whenever sales pressure arose, they would shrink distributor territories and open new accounts, leaving their distributors either smaller or with a tiny share of their business.
Without strength, capability, team, or willingness, facing such a group of 'four-no' delivery-type distributors, is it easy to 'return power to the people'?
Problem 3: Overly concentrated on sales, terminal work became distorted.
Brands' assessments of terminal salespeople are overly focused on sales, leading terminal personnel in deep distribution to focus mainly on pushing inventory. Especially after 2013, when industry growth plummeted, the core work of all brand salespeople was almost reduced to just sales.
Distorted terminal work is a regression of deep distribution. The original emphasis on terminal visualization and scenario building was somewhat neglected and abandoned. After over-pushing inventory in a region, salespeople either moved to another region or quit being salespeople altogether.
**Output is the ultimate measure of all marketing work. Without output and profit, the entire deep distribution system sinks into a quagmire and becomes unsustainable.**
What is the correct form of deep distribution, and how can deep distribution restore 'efficiency'?
**From Manufacturer Operation to Manufacturer-Guided Deep Distribution**
Abandoning manufacturer-led or direct operation and shifting to dealer operation under 'manufacturer guidance' is a deep distribution model that is gradually being practiced by some brands and achieving good results.
Nongfu Spring began experimenting with a 'large distributor' system in 2017 and deeply practiced it in some regions in 2018. Nongfu Spring's boss, Zhong Shanshan, personally inspected and selected a group of excellent distributors. After in-depth communication, both sides reached a high degree of consensus on development ideas, models, and goals.
Nongfu Spring first expanded the distributor's market scope, then packaged market personnel and promotion costs to the distributor, who operated the market according to the manufacturer's required model and achieved goals.
Unlike the past, distributors achieved extremely high efficiency in expense usage and per-person output. Distributors completed their goals and also earned excess profits. Through this model, many distributors achieved annual sales of over 50 million yuan with just the Nongfu Spring brand.
**To learn from Nongfu Spring's operation, manufacturers need to make the following three changes.**
**1. Brands must have confidence.** Why do brand owners always like to cut agency territories finer and finer? The reason is fear that distributors will become too big and disobedient. In fact, a sense of security comes from strength and mechanisms. Big brands are not afraid of rebellion; small brands' fear is useless.
So, brand owners must have confidence. The 'intimidating' words of professional managers are often excuses to keep themselves important, just not wanting to lose power.
**2. Manufacturers and distributors must trust each other.** The premise of mutual trust is that the top leader personally inspects. To change from 'direct operation' to 'dealer operation,' you must expand the distributor's territory and rights, but the premise is that the selected distributor is suitable.
For years, the manufacturer-distributor relationship has been primarily adversarial. Without unified values, building mutual trust is difficult. How to judge whether values are unified? Only the boss can personally inspect and check; don't be lazy. This is a top-leader project.
Jiangxiaobai's experience is that all provincial platform merchants must be personally inspected and interviewed by the boss, and all distributors must be personally interviewed by the platform merchant's boss. Only when the top leader personally interviews and checks can unqualified distributors be prevented from becoming 'large distributors,' which would only lead to a lose-lose situation.
**3. Manufacturers must transform from market operators to enablers.** The manufacturer's duty is to build the brand and product, design appropriate marketing models and market operation standards, introduce or develop advanced tools and information systems, and provide sufficient and appropriate resource support to the market. At the same time, deep distribution must return to its essence: insisting on building terminal scenarios, not just sales volume.
With these three changes as a foundation, deep distribution can begin to transform from 'manufacturer operation' to 'dealer operation.' Once you complete this transformation, you will find that deep distribution has regained vitality and restored strong growth momentum.
But this is a huge channel strategy transformation, destined to be fraught with problems. **Even if the brand is prepared for the transformation, we still need to find answers to the following questions:**
> 1. How should brand owners position their future roles and functions? How should they position future distributors?
>
> 2. During the transformation, what should be done when facing fierce resistance from old agents?
>
> 3. Even if mutual trust is established, brand owners still need checks and balances. How should a balance system be designed?
>
> 4. Is this transformation a future trend? Is it an opportunity for distributors? How should distributors seize this opportunity?
I will attempt to provide my thoughts on these questions in the next article, and I also welcome readers to add my WeChat for discussion.


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