---
title: "How Can Distributors Break Through When Peers Refuse to Enter Warehouses in Same-City Logistics Transformation?"
description: "At the 2018 China FMCG City Distribution Logistics Conference, a panel of distributors who transformed into same-city logistics providers discussed how to persuade fellow distributors to use their warehousing and distribution services. Key strategies included offering low prices, providing value-added services, forming partnerships or equity alliances, and focusing on local market depth."
author: "新经销团队"
publisher: "New Distribution"
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published: "2018-10-28"
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# How Can Distributors Break Through When Peers Refuse to Enter Warehouses in Same-City Logistics Transformation?

> At the 2018 China FMCG City Distribution Logistics Conference, a panel of distributors who transformed into same-city logistics providers discussed how to persuade fellow distributors to use their warehousing and distribution services. Key strategies included offering low prices, providing value-added services, forming partnerships or equity alliances, and focusing on local market depth.

**New Distribution Note:** On October 24, 2018, at the "2018 China FMCG City Distribution Logistics Conference" hosted by New Distribution, the following is a roundtable discussion on the theme "How Can Distributors Break Through When Peers Refuse to Enter Warehouses in Same-City Logistics Transformation?"

**Moderator:**
Wang Jun, renowned new retail expert;

**Panelists:**
Liu Jichen, Chairman of Shandong Yunbang Logistics;
Li Qiangyun, Co-founder of Hubei Pengdun Mei Yitian;
Zhang Hailing, Founder of Heilongjiang San Sheng Lian Gou;
Rong Jun, Chairman of Jiangsu Huashang City Distribution.

**Moderator:** Please take one minute each to introduce your company.

**Liu Jichen:** I am from Yunbang Logistics in Tai'an, Shandong. After more than a year of transformation to unified warehousing and distribution, we now have 100,000 square meters of warehouse space and are currently preparing for front warehouses.

**Li Qiangyun:** Hubei Pengdun Mei Yitian has developed over the past three years, with annual sales and distribution volume of about 500 million yuan. Our business scope covers about 8,000 outlets in urban and rural areas.

**Zhang Hailing:** We were originally distributors. In 2016, we went to Yantai Yishang to learn. Currently, we have registered two companies: one e-commerce company and one logistics company. We have been online since August 1, 2016, and it has been tough. Distributors transforming into same-city logistics companies need sufficient determination and a spirit of hard work; crossing industries is not easy. After two years, we are basically on track. Our warehouse is full, but we have few customers—only six in total, three large and three small. Overall operations have not yet achieved profitability.

**Rong Jun:** In the blink of an eye, Huashang City Distribution has been transformed from a traditional distributor for over 8 years. From the beginning, city distribution revenue accounted for less than 2% of total revenue, to now city distribution business accounting for half of Huashang's total revenue. Rooted in Wuxi, we have now expanded to 15 cities nationwide.

**Moderator:** Good, let's get to the point. **In the shortest time, tell me how many distributor users have entered your warehouses for unified warehousing and distribution?**

**Liu Jichen:** There are 53 distributors, and we have 3 large warehouses.

**Li Qiangyun:** We currently serve 23 distributors, of which 18 have become shareholders of the platform. Our total warehouse area is about 40,000 square meters.

**Zhang Hailing:** We have fewer customers in our warehouse, only 6, and 10,000 square meters is full.

**Rong Jun:** Huashang City Distribution has over 100,000 square meters. In Wuxi, more than 100 distributors have entered our warehouses, and we have 8 warehouses in the Wuxi area.

**Moderator:** You now have the core data. I'll give each of you two to three minutes. **How do you break through when fellow distributors refuse to enter warehouses?**

**Liu Jichen:** How did we break through when fellow distributors refused to enter? Two words: "cheap." If 100,000 doesn't work, I'll do 80,000; if not, 60,000; if not, 40,000. Now we've reached a point where we can pick and choose customers.

I lost over 1 million yuan in the first year, but now customers have turned around. What customers feel is not how much money they save, but the peace of mind. The most typical example: a customer who originally handled one brand can now handle three or four brands because they have the energy to focus on the market. They didn't have the energy before. Now our warehouse is gradually moving out of losses. Moreover, once customers enter the warehouse, the main action is to help them move inventory. You must help them; their lifeline is sales. Especially for new agents, after entering the warehouse, old agents will be overtaken by new ones.

From the beginning of our transformation to today, **the deepest pitfall is the system.** Warehouses are simple, finding customers is simple, but the biggest pitfall is the system. The system itself is not valuable, but the damage it causes is the greatest. I've changed several systems because each region has different dimensions and conditions. Even if a system is good, I only need one-third of its functions.

**Moderator:** Summarizing Yunbang's approach to getting distributors into warehouses: First, cheap. Get on the bus first, buy the ticket later. Second, create incremental growth. Third, empower small distributors. At a very low price, they come in, and then you support more suitable users to divide the existing market. Very impressive.

**Li Qiangyun:** From 2015 to 2016, we spent a year recruiting three, and the communication cost was high. There are three points for recruitment: First, **your service capability.** After many distributor groups transform, their past genes are actually commercial trade genes, but after truly transforming to B2B and city distribution, many have never done this; they are outsiders. So your service capability must meet the needs of customers within the system. Different categories have very complex delivery scenarios. So initially, some early customers came in, and indeed, the service was not good enough, affecting their business. If orders don't come out in three days, you need to do a lot of communication work to improve service capability, making customers feel that their goods are safe in your warehouse, and correspondingly, the speed is fast.

**Second, system issues.** Software is a necessary tool for many traditional enterprises in transformation. There are many software options, but you need to see whether the current focus is **B2B front-end or warehousing and distribution, and find the software that best suits you now.**

**Third, team service capability.** When we communicate with distributors, we find that their management level is very weak, including team performance appraisal methods and business processes, which are not standardized. We need to help distributors empower in this regard, help them open channels wider, cover more outlets, and increase sales. If capable, help them with team building and training. I think this is what distributors currently need, and we are doing this work.

In the first year, we recruited three; in the second year, we recruited 18. **At that time, we adjusted our strategy: we newly established a same-city logistics company, and for different categories, we found a major distributor. They are both our partners and our shareholders, developing together locally. So the recruitment speed has greatly improved.**

**Moderator:** We see a new highlight: **When facing peers who refuse to enter warehouses, establish a new company and use equity participation. Summarizing the views of the previous two guests: first, low price; second, equity participation and new company formation.**

Let's further exchange and collide. The four guests present can challenge each other. **Using price as the entry point, even causing initial losses, do you all agree?**

**Zhang Hailing:** I think from the perspective of integrity, if you enter at a low price and then raise the price later, it defeats the purpose of getting them into the warehouse.

How did we recruit distributors into the warehouse? We started in 2016, but only began recruitment this year. We first sorted out our own system and processes, and then this year we selected some target customers (actually some peer friends). We conducted in-depth research on each distributor, understanding their cost management in all aspects. After the research, we held some communication meetings: What will it be like after you enter the warehouse? You won't save money; it might be a bit more expensive, but not much more. When selecting customers, we cannot choose very poor customers to enter our warehouse because they cannot afford our fees. So we try to choose customers who can afford the fees and talk to them.

**Moderator:** Standardized operations will inevitably increase costs. Zhang Hailing's view is to only find users that suit me.

**The second controversial point: using equity, investment, or shareholding to get distributors into the warehouse. Do you all agree with this view?**

**Rong Jun:** How to break through when peers refuse to enter warehouses? How does Huashang do it? **First, cast a wide net. After casting, there will be a certain ratio. Visit 50 companies a day, and a few will succeed. Use cold visits. Then, targeted breakthroughs: catch the big fish, use relationships to break through, and do customer service. Third, low prices. Logistics will earn it back, so there won't be losses.**

Second, regarding the shareholder issue: our company is a listed enterprise with two partnership enterprises, and there are many shareholders in the partnerships. After shareholders come in, **if there are many, as the saying goes, many shareholders cannot share hardships. If they don't make money, they will definitely withdraw. So I think you should be cautious in finding partners. You can do it, but be careful.**

**Moderator:** I noticed that in the last segment, no audience member left. Regarding Rong's point, what do you want to express?

**Li Qiangyun:** In my earlier statement, there was a point: we selected more than ten major distributors of different categories locally, the top merchants, strictly screened. **From the current perspective of unified warehousing and distribution, doing pure third-party work locally, doing the moving work, has very little space. So it is very likely that later we will reverse-import back to commercial flow, making the ten or so top distributors the largest locally, and at the same time, our platform will also have corresponding equity involvement.** This is our idea.

**Moderator:** Good, next question. Answer in turn: Are you profitable now? Also answer the second question: When do you plan to be profitable? Third question: When do you plan to expand beyond your current city?

**Liu Jichen:** First question: We are at break-even, neither losing nor making a profit.

**Moderator:** How long have you been operating?

**Liu Jichen:** More than a year. We don't plan to make significant profits now because unified warehousing and distribution is a low-margin business. Third question: We won't leave Tai'an. We only do Tai'an. Many areas in Tai'an have asked us to join, but we declined because we haven't done well ourselves yet. As long as I do well in this area, I'll wait for others. Who? For example, national city distribution companies, waiting for them to merge with me or cooperate with me. I can get many resources; this is win-win. I won't go to every region. Even if I go, my warehousing and distribution probably won't work. How much empowerment can I do? Impossible. I'll just do my own place.

Also, **good news: small cities can make big money. Don't underestimate your city. After deep cultivation, it's better than doing a whole province.** Because through this channel, you can expand to fresh food, cold chain, etc. There are many unexpected businesses, even express delivery.

**Moderator:** Due to time constraints, let me summarize Liu's view: **Deeply cultivate the local area, deepen the business format.** Currently, Liu has already started fresh food chain supermarkets and community group buying, innovating business formats, cultivating deeply, broadening the field, and finding new profit points. Focus on doing Tai'an well and wait for big players to acquire.

**Li Qiangyun:** We just achieved profitability in March this year. Our next development is divided into two parts: First, deepen locally, thoroughly develop the current field; there is still much room for growth. Second, as a distributor expanding to the national market, our financing ability is limited, and our overall replication capability is insufficient. We will leverage platform parties, technology partners, and software partners to connect the national market and find true profit points.

**Moderator:** There's a big chess game: city distribution alliance.

**Zhang Hailing:** Currently not profitable. It's a bit difficult to make money; it may take some time because we can't easily raise prices, so we can't make money unless efficiency improves. Do well locally; no intention to expand outward. Because this thing is not as simple as imagined, so we need to think carefully.

**Rong Jun:** Our current profitability: this year we estimate 22 million yuan in profit. Although I do city distribution, it may be a bit different from third-party city distribution. I don't deny that if you do pure city distribution as a third-party logistics provider, you won't have such high profits, so don't be misled. Third, our company has expanded beyond: we have a presence in 13 prefecture-level cities in Jiangsu, as well as Shandong, Hubei, Yunnan, and Zhejiang.

**Moderator:** Rong has already achieved profitability and expanded beyond the local area. I ask each of you one question: If time could go back one year, would you do the transformation to FMCG city distribution again?

**Liu Jichen:** I would definitely choose to do it.

**Li Qiangyun:** I should persist.

**Zhang Hailing:** I have regretted it, but now that I've persisted, it counts as success.

**Rong Jun:** In the past, as a distributor, I was the largest distributor in Wuxi. If I had to choose again, I wouldn't be a distributor, and I wouldn't want to do FMCG city distribution either.

**Moderator:** I believe on this topic, everyone should have their own answer in mind. How do you view this matter? Where is your core competitiveness? How do you do it? How to break this proposition? We can only share up to here; the answer is in your minds.

Click **Read Original** to see more highlights of the 2018 China FMCG City Distribution Logistics Conference...
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