In recent years, the internet has been transforming traditional brick-and-mortar retail at a rapid pace. Distributors, as the suppliers of traditional retail and the most critical link, have been in a state of being "cut off." Stores no longer source from the distributors designated by manufacturers, and goods are flowing through various channels. With the diversification of retail channels and the integration of online and offline, distributors who once operated in their own niche are becoming increasingly confused. What should they do about their business? In the new environment, what role should distributors play? How can they transform to survive?

-01- Facing the impact, distributors still have opportunities to break through!

The emergence of various new retail formats has essentially broken the traditional retail business loop. In the past, when goods entered stores, they could only rely on distributors. Now, with diversified channels—online, offline, and online+offline—there are more and more ways for goods to enter stores. In this state, the value of distributors is diminishing. Even if online platforms need distributors to supply, typically, a category or brand only needs one distributor, but the coverage area is vast, so other distributors' market share will inevitably be eaten into.

Undoubtedly, the rapid expansion of online channels has the most direct impact: the living space for distributors is further squeezed. On one hand, manufacturers advocate channel flattening; on the other hand, community group buying, B2B, O2O home delivery, and other online platforms are grabbing market share, making it increasingly difficult for distributors to do business.

Not long ago, a beverage distributor in Jiangsu complained to the author that since 2018, online platforms have had a huge impact on traditional distributors like them. Previously, a small warehouse in Xuzhou could sell over 50,000 yuan a day, but now it's less than 20,000.

In such an environment, distributors have only two choices: one is to muddle along and be gradually eliminated by the market; the other is to transform and seek new opportunities in the complex market environment. I believe no distributor wants to choose the first option, but it's also unlikely that they would completely abandon their current distribution model. So, where exactly are the new opportunities?

Based on this, New Distribution has visited a large number of distributors, from those with annual sales of several million to those with billions. Indeed, many distributors have fallen during this process, but many have also found new opportunities.

Two years ago, B2B and unified warehousing and distribution were on the trend, and some distributors transformed to do regional B2B and unified warehousing. In the past two years, the community group buying track has been active, and many distributors have seized the opportunity to build localized community group buying platforms.

But frankly speaking, whether it's B2B or community group buying, it's equivalent to a second startup, and it's not easy. If you don't do it well, you'll be out of business. Of course, there are many other transformation methods, such as becoming brand operators, category distributors, channel suppliers, or distributors cooperating with national platforms.

Recently, the author went to Jiangsu for research and found that many distributors doing joint warehousing and distribution with platforms are doing very well. One of them, a JD New通路 joint warehouse distributor, saw his business grow more than twenty-fold in just over a year after joining.

-02- Under the platform's "big tree," it's easier to "enjoy the shade!"

Joint warehousing and distribution, simply put, means that when online e-commerce platforms cannot fully cover consumer areas, they integrate local distributors' warehousing and distribution resources to complement each other's shortcomings and reach down to the township level. Its positioning is to serve the end-of-line logistics system for local stores, essentially becoming a front warehouse for stores.

Normally, there is a business conflict between distributors and B2B, so why can distributors doing joint warehousing with platforms do well?

With this question, the author had an in-depth exchange with Mr. Dai, a JD New通路 joint warehouse distributor in Jiangsu. In the competition of the existing market, coupled with the differentiation of traditional terminals, the competition for store resources is fierce, and it's increasingly difficult for distributors to penetrate the market. In this process, distributors also face many problems: outdated ordering methods, such as phone orders or salespeople visiting to take orders, which are inefficient; logistics speed that can't keep up, with no advantage compared to platforms; limited terminal customers in their coverage area, making it hard to find new growth points; and a single category of distribution that can't meet the one-stop supply needs of terminals, with obvious peak and off-peak seasons.

Changes in the retail format and the exposure of their own problems have greatly limited the development of distributors. Mr. Dai told New Distribution that when his business hit a bottleneck, he thought of many transformation methods, but most were too risky to try easily.

Fortunately, in the past two years, many platforms have approached him hoping to cooperate. After in-depth understanding, Mr. Dai believed that the joint warehousing model suited his development needs; it wouldn't affect his existing business and could bring tangible growth. As for choosing JD New通路's joint warehouse, the main reasons were that JD doesn't steal customers, doesn't disrupt prices, and ensures business security.

Mr. Dai told New Distribution that after trying the new model, his business indeed changed significantly. First, the efficiency of goods entering stores improved. Through the platform's supporting software tools, stores can order online, and warehouses deliver in real-time, reducing intermediate steps, making it convenient for stores and worry-free for distributors. Second, logistics efficiency improved. Online orders can be transmitted to the warehouse in time, reducing manual errors and enabling quick sorting and 24-hour delivery, enhancing the experience for small stores and increasing customer loyalty. Third, the number of customers increased. The platform brings traffic to distributors through online and offline channels. Offline, the platform directs its covered stores to distributors, increasing their customer base; online, it helps distributors increase exposure through live-streaming sales. Mr. Dai said the most impressive was live-streaming, which brought him great exposure. Before cooperation, Mr. Dai could cover only over 1,000 customers, but now through the platform, he can directly reach over 2,000 customers. Fourth, categories and brands increased. Distributors can access more categories through the platform, achieving one-stop supply to stores and making customers dependent. Mr. Dai also mentioned a key point: when the distributor's products conflict with the platform's self-operated products, the platform prioritizes the distributor's products. Fifth, maintaining customer relationships. The platform's ground staff, while visiting stores, proactively take orders for joint warehouse distributors and promote their products. Moreover, distributors no longer have peak and off-peak seasons; when vehicles are idle, they can undertake platform self-operated orders, reducing costs.

Facts prove that cooperating with platforms to do joint warehousing is indeed a good way out. Through cooperation with JD New通路's joint warehouse, Mr. Dai's monthly sales grew from over 100,000 yuan at the start to over 3 million yuan now, a growth of more than twenty-fold in just over a year.

-03- Where is the future for distributors?

Before discussing the future direction of distributors, we must first understand a question: will distributors disappear?

According to New Distribution's "2019-2020 FMCG Retail Small Store B2B Competitiveness Report," there are nearly 5.8 million FMCG retail small stores nationwide, but 86% of them are still distributed in third-tier cities and below, serving about 74% of China's consumers.

Facing such a complex market distribution, brand manufacturers cannot achieve full-channel and full-terminal service and coverage. Even Coca-Cola's 101 deep distribution cannot cover all areas.

Even though various online platforms are entering strongly and grabbing market share, causing significant impact on distributors, for now, distributors are still the choice for many retail small stores, and the pattern will not change in the short term.

There has always been a viewpoint in the industry: distributors as a group have value and will not disappear, but as individuals, if they don't transform or fail to transform successfully, they will likely disappear.

Since distributors won't disappear, where is their future?

Earlier, New Distribution predicted the future development directions for distributors: First, deeply explore regional outlets and become channel distributors. Outlets are not limited to circulation stores; channel boundaries can be broken, and any place that can sell goods is an outlet. Second, focus on a specific category, operate deeply, and become a brand service provider. Rely on brand direct-operated terminals and focus on covering sales outlets. Third, increase categories, focus on network channels, and become a full-category supplier. Deeply cultivate channels, gradually seize shelf space, and become a one-stop supplier for all categories in circulation stores.

New Distribution has already provided in-depth interpretations of these three directions with many cases, so I won't elaborate here. But through this year's research, we found that cooperating with platforms to do joint warehousing is also a good transformation direction.

The essence of joint warehousing between platforms and distributors is to reconstruct "knowing people, knowing goods, and knowing the place," and on this basis, upgrade retail infrastructure, link upstream brand manufacturers, distributors, and stores, effectively improve distribution efficiency, and fully release the potential of the entire channel. Joint warehousing integrates distributors' warehousing resources, connecting the platform's warehousing resources with distributors' warehousing resources, achieving a business process from central warehouse to joint warehouse to small stores. The platform empowers distributors, helping them improve warehousing management capabilities, operational efficiency, and digitalization.

Taking JD New通路's joint warehouse as an example, high-frequency, high-service-demand goods are directly shipped from the distributor's joint warehouse, while low-frequency, slow-moving goods are shipped from JD's warehouse, transferred to the distributor's joint warehouse, merged with high-frequency goods, and delivered to stores in one go.

In this way, the distributor's existing warehousing resources are fully utilized, achieving greater order density and expanding the distributor's business scope. Distributors not only gain additional distribution income but also expand their product categories and add more new customers, maximizing the use of their people, vehicles, and resources. At the same time, for stores, efficient logistics and a full range of products provide a better purchasing experience. From these two dimensions, cooperating with platforms for joint warehousing is also a good choice for distributors.

In conclusion:

Under the retail trend of channel diversification and online-offline integration, upstream manufacturers and terminal stores are changing to varying degrees. Relying on online layout is a link that distributors must master in the future. But no matter how it changes, distributors must grasp the core of "localization," which is the fundamental reason why any platform or brand cannot bypass distributors. While integrating online development, doing deep "localization" operations well, distributors cannot be replaced.

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