Low prices, discount formats, and supply-chain restructuring are compressing the space available to traditional intermediaries. The old division between distribution and retail is becoming less distinct.
From a retailer's perspective, this is closer integration with suppliers. From a distributor's perspective, it is the integration of distribution and retail. Moving cases and placing products on shelves is no longer enough. A distributor increasingly needs retail thinking and the ability to help stores sell products through to consumers.
New Distribution discussed this transition with Jia Yongshun, general manager of Xuzhou Jintong Trading. He operates as a distributor, retailer, and franchisee. Over nine years, his company expanded revenue roughly one hundredfold. In Feng County, a market of about 700,000 people, the trading operation reached annual revenue of nearly RMB 300 million. The group also opened eight directly operated fresh-food supermarkets in eighteen months and eight franchised snack discount stores in two months.
His experience offers a practical guide to what distributors should—and should not—do when entering retail.
Survival Requires Scale and Relevant Diversification
Jia expects a major consolidation among distributors. As the market becomes more concentrated, fewer intermediaries will be needed. Regional leaders will have the strongest chance of surviving.
That does not mean every distributor should immediately open stores or launch a B2B platform. The first step is usually relevant diversification within the existing business.
A snack distributor can broaden its brand portfolio. A frozen-food distributor can move beyond ice cream into breakfast and hot-pot products. A household-care distributor might operate branded shop-in-shop counters inside supermarkets.
For a small operator dependent on one brand or channel, the sequence matters:
- Select an appropriate category and define the direction.
- Build depth across multiple products within that category.
- Expand into additional channels after establishing local influence.
- Consider a regional B2B platform only when the organization and supply base are ready.
Skipping stages sharply reduces the probability of success. A single-brand distributor should not copy a large operator's B2B transformation without the portfolio, systems, capital, and organizational capacity needed to support it.
Why Move Downstream Into Retail?
During the pandemic, Jintong's core cooking-oil business remained relatively stable, but the broader market outlook was weakening. Management wanted a new path for the team.
A trading company can move upstream into branding, manufacturing, or processing, or downstream into retail. Upstream expansion generally requires unfamiliar capabilities and greater investment. Retail was closer to Jintong's existing experience because the company had worked with supermarkets for years.
Fresh-food supermarkets were especially attractive. They serve essential, frequent household needs and can support long-term demand. Jintong therefore developed the Jintong Wanjia format.
Store size was adapted to local demographics. County-seat stores were positioned at roughly 500 to 1,000 square meters. Township stores could exceed 2,000 square meters because families with children and older residents often preferred a comprehensive shopping destination. Younger county-seat consumers, by contrast, valued convenience and speed.
The lesson is broader than store size: a format should be designed around the people and occasions in its specific trade area, not copied mechanically from another city.
A Distributor Must Stop Thinking Like an Agent
The greatest mental barrier appears when a distributor treats a retail store as an extension of its agency portfolio.
Some distributors open supermarkets and stock only the brands they represent. Others turn a new store into a channel for clearing near-expiry inventory. Both approaches put the distributor's inventory problem ahead of the shopper.
Retail requires a customer-first assortment. A competing product still has its own consumers, even when the store owner represents another brand. Once a distributor enters retail, it must act as a retailer serving the full market rather than as an agent protecting one supplier.
This distinction determines whether the store becomes a real consumer business or merely another warehouse.
Hard Discount Is a Supply-Chain Model
Traditional thinking often equates a discount store with near-expiry goods. The stronger hard-discount model is different: it lowers cost by simplifying and upgrading the supply chain.
It is not primarily about selling cheap goods; it is about selling goods more cheaply. Price is only one part of the proposition. Shopping experience, rapid product renewal, flexible pack sizes, and alignment with younger consumers also matter.
For example, a shopper may hesitate to buy a tiny quantity of a product from a traditional supermarket's bulk counter. In a snack store, trying one piece can feel natural. The format reduces the psychological and financial cost of discovery.
When branded snack chains enter a region, merely changing the snack assortment or décor inside a conventional supermarket may not be enough. A distributor must decide whether to develop a competing format, join an established system, or focus resources elsewhere.
Jia chose a franchise because building a brand and operating model from scratch would have required a long and expensive test period. An established franchise offered brand recognition, supply-chain capability, and a proven store model. In his case, the stores performed well with relatively light management, although he emphasized that underperforming locations should still be closed or relocated quickly.
Franchising is not universally appropriate. The local competitive map must come first. Snack stores may have more room in lower-tier cities and townships than in saturated major-city markets. A strong nearby store can demonstrate demand, but intense competition among several leading chains is a warning against entering casually.
Choosing a mature brand for its consumer awareness and operating system is usually more important than choosing the lowest franchise fee.
Distribution and Retail Can Reinforce Each Other
Jintong operates fresh-food supermarkets, a regional B2B platform, snack discount stores, and traditional distribution. These businesses can create supply-side and demand-side synergies.
Products sourced through a snack chain's efficient supply system may benefit the B2B platform or supermarket assortment where commercial terms permit. Retail stores reveal real consumer demand. The distribution network contributes local sourcing, warehousing, delivery, and account relationships. The B2B platform can organize competitively priced products across the portfolio.
The value does not come from collecting unrelated businesses. It comes from sharing relevant capabilities while allowing each format to serve its own customer correctly.
Seven Disciplines for a Distributor Entering Retail
1. Define the Format
Decide whether the local opportunity is in snacks, fresh food, staples, or another category. Match store size and format to the trade area. Then articulate a clear direction and customer promise.
Jintong Wanjia, for example, defined itself as a neighborhood market and family kitchen: a community fresh-food supermarket with convenience and human warmth.
2. Treat Location as a Critical Decision
Retail cannot rely on the belief that a good product will attract customers to a hidden location. Business follows people. A poor site can overwhelm good operations.
3. Build the Assortment Around Target Customers
Understand who lives nearby, what they need, and what gaps exist in the local market. Product selection should follow those needs rather than the distributor's existing agency list.
4. Design the Customer Path
In stores larger than about 500 square meters, circulation has a material effect on experience and basket size. Management should know where customers enter and leave, which categories they encounter, and whether the storefront feels open and inviting.
5. Invest in Local Marketing and Membership
Retail competition can appear directly across the street. Stores need a combination of social video, private customer groups, membership operations, local promotion, and traditional marketing to attract and retain shoppers.
6. Select Digital Systems for the Intended Scale
The right system depends on whether the ambition is one store or a chain. Replacing core software later is expensive and disruptive, so the initial choice should support inventory, membership, purchasing, pricing, and multi-store management at the planned scale.
7. Build the Management System Early
Retail succeeds or fails in details. A distributor intending to build a chain should establish its organizational structure, operating standards, and store-management team before reaching ten locations. Once the headquarters system is sound, new stores can execute with greater consistency.
The Owner Must Become More Professional
An owner who lacks retail knowledge may not be able to identify genuinely capable experts. Jintong initially paid for advice that did not create sufficient value. The experience led Jia to a clear conclusion: the owner's understanding sets the ceiling for the team's direction.
Before leading a transformation, the owner must learn enough to judge people, models, sites, systems, and operating results. The company must also develop the ability to review each investment honestly.
Even a failed project should produce transferable lessons. The worst outcome is not simply losing money; it is losing money without improving the organization's judgment.
For distributors, entering retail is therefore not a shortcut away from pressure. It is a demanding capability expansion. Success depends on customer-first thinking, careful sequencing, local format design, disciplined systems, and the willingness to learn faster than the market changes.