---
title: "How Distributors Can Overcome the Challenge of 'Further Development'"
description: "Under the trend of channel flattening, distributors with already squeezed profit margins face even tougher conditions, struggling to increase sales and expand due to strict regional restrictions. This article, based on the experience of marketing expert Wang Huanzhi, analyzes common growth methods, reasons for failure, and solutions to help distributors break through bottlenecks and achieve sustainable growth."
author: "New Distribution"
publisher: "New Distribution"
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published: "2014-08-17"
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# How Distributors Can Overcome the Challenge of 'Further Development'

> Under the trend of channel flattening, distributors with already squeezed profit margins face even tougher conditions, struggling to increase sales and expand due to strict regional restrictions. This article, based on the experience of marketing expert Wang Huanzhi, analyzes common growth methods, reasons for failure, and solutions to help distributors break through bottlenecks and achieve sustainable growth.

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Under the overarching trend of channel flattening, distributors, whose profit margins are already extremely compressed, generally face even more difficult circumstances. Sales volumes struggle to increase, and strict regional restrictions in their markets make it hard for them to find greater room for growth.

Consequently, topics like "How can distributors break through bottlenecks and continue to expand their scale?" have become frequent questions from distributors. Mr. Wang Huanzhi, a renowned marketing expert, drawing on over a decade of experience serving numerous distributors, has summarized common methods of distributor development, the reasons for failure in the process of breaking through bottlenecks and achieving rapid growth, and approaches to solving these problems, hoping that distributors can benefit from this insight.

**Common Ways to Go a Step Further**

Many distributor friends, through years of hard work, have gradually escaped the survival crisis of a husband-and-wife operation or a newly established trading company, transitioning into a stable development phase. At this stage, distributors become adept at managing product portfolios, capital strength, and experience. Meanwhile, their capital, time, and energy become more relaxed. Therefore, they are no longer satisfied with the status quo and seek new growth points to advance their business further, making it a primary goal to reach the next level. Most distributors, in order to break through bottlenecks and achieve rapid development, often adopt the following methods:

**A Region + B Region.** This involves cross-regional development beyond the original operating area. After a period of accumulation with their main products or product mix, distributors have made it successful, earning money and gaining extensive experience. Thus, they feel confident in operating these products. However, since many manufacturers restrict existing distributors from handling competing brands, at this point, they often see cross-regional operations as the primary method to further expand their scale, especially with the support of manufacturers or encouragement from their sales staff. They resolutely adopt the "A Region + B Region" development approach, opening up new territories through branch offices or base radiation.

**A Product + B Product.** This involves adding new products to the existing portfolio, seeking product overlay development. Some distributors, after completing initial capital accumulation, considering local market connections or resource advantages, often adopt the "A Product + B Product" development method. Specifically, they use existing networks or resources to add products of the same category or other categories. For many overlays of similar products, under pressure from manufacturers, more distributors opt to establish new companies to seek breakthroughs, but in essence, these are different manifestations of breakthrough methods under the same distributor system.

**Extending in Both Directions of the Value Chain, Seeking Vertical Development.** This approach requires relatively higher operational and resource capabilities from distributors, and it has two manifestations:

First, moving toward becoming a brand operator. As business scale and operational capabilities grow, distributors can gradually own their own brands through OEM, buyouts, or building their own production bases. For example, the Huaze Group, parent company of Jinliufu, is a typical representative of this development model. Second, deepening along the distribution path, moving toward end-of-channel retailers. This involves deep distribution in the channel until establishing their own retail terminals, forming excellent management and service capabilities between upstream manufacturers and consumers, to seek enterprise development breakthroughs. Chaopi Trading and Zhejiang Shangyuan are representatives of this model.

**Analysis of Reasons Why Distributors Find It Hard to Break Through Bottlenecks**

The above three development approaches are theoretically correct and can enable distributors to break through bottlenecks and achieve rapid development. However, in reality, some distributors have successfully broken through, opened new territories, and rapidly expanded their company scale, while most have returned in defeat. The main reasons include the following:

**Lack of Development Opportunities to Break Through the Current Scale.** Whether starting a business or accomplishing something, success only comes by aligning with the prevailing trends, which we call opportunities. Many distributors, during their first venture, either rode the wave of industry development, leveraged the growth of the brand they represented, or received help from influential people. Whether by following the trend or by coincidence, they achieved business success. However, further development during the stable period is a second venture. If they fail to seize development opportunities for this second venture, they will face many difficulties, or even total failure.

**Loss of the Original Entrepreneurial Spirit and Drive.** Distributors should prioritize the human factor, but when learning about many entrepreneurs who want both leisure and entrepreneurship, the most common saying is, "If you sleep eight hours a day, what kind of business are you starting?" Although this statement is somewhat absolute, it also indicates that the process of distributors moving beyond their current scale is a second entrepreneurial endeavor, with difficulty no less than the first.

However, after years of development, many distributors have basically accumulated wealth, grown older, and become accustomed to a comfortable life. They no longer have the drive to visit clients on the streets at night, chase orders, or strive to meet clients. They also lack the "traveling at night, arriving in the city at dawn" workaholic spirit. Naturally, their chances of success are greatly reduced.

**Lack of Determination and Desire to Achieve Goals.** Many distributors, when they first started their businesses, were often penniless. When making decisions, they didn't have many concerns, and their desire for success and goal achievement was very urgent. These factors generated strong motivation, leaving no room for retreat, only moving forward. However, after escaping poverty, distributors in their second venture have a reduced urgency to change their status quo and a diminished desire for goals. Therefore, once they encounter difficulties on the path to breakthrough, they are prone to give up, especially if it affects their main business, leading to half-hearted efforts. The goal of moving beyond the status quo and going a step further becomes more talk than action.

**Insufficient Resource Preparation for Expansion, Leading to Premature Failure.** To go a step further, success requires all conditions to be in place. For a machine to run normally, all parts must be good, but for it to stop, only one key screw needs to break. Therefore, distributors must be fully prepared in all aspects: "people, capital, goods, affairs, and momentum." Many distributors rush into expansion without adequate preparation, which is also a reason for failing to move beyond the status quo.

For example, many manufacturers implement deep distribution market strategies, establishing distribution teams in each region for vertical management. In such cases, many distributors hand over management of their teams to the manufacturers, and some even become mere logistics providers without their own core teams. Under such a system, the chances of distributors moving beyond the status quo and developing rapidly are self-evident.

**Some Thoughts on Distributors Moving Out**

For distributors to move beyond the status quo and grow, it is a long-term process. Many distributors often lack sustained motivation and perseverance, letting opportunities pass by.

**Persist and Seek Opportunities.** Opportunities are not just encountered; they are more often seized through persistence. This is like mobile warfare in military strategy: movement is not the goal; the goal is to seize opportunities during movement and eliminate the enemy. Once distributors decide to break free from the status quo and continue developing, they must set practical goals and strategies to achieve them, and persist in their operations. In the initial stages, they may encounter many difficulties and incur losses, but they must persevere, overcoming obstacles as they come.

**Case Study:**

Puyang Shuguang Trading Company, after stabilizing its business with Jiujiahong liquor in 2003, sought greater development opportunities. At that time, its boss, Du Xuemin, secured the agency for a rising dairy brand. Initially, operations were very unsuccessful, with no improvement for over ten months and significant losses. However, when a certain food company adjusted its development strategy in 2003, making liquid milk a strategic focus, Shuguang Trading seized the opportunity. Leveraging the brand, it quickly achieved a leap in operations, not only making money but also rapidly expanding its distribution network to five counties and cities in its jurisdiction. Currently, Shuguang Trading represents multiple first-tier brands and has a complete county and terminal network, becoming a notable trading company in the Puyang region.

**Establish an Open Mindset and a Win-Win Entrepreneurial Approach.** As age increases and economic conditions change, distributors' original entrepreneurial spirit and energy have waned. At this point, it is essential to adopt an open mindset and a win-win entrepreneurial approach, cultivating and selecting young people in the company. As the new generation of economic development, they have strong entrepreneurial spirit, energy, and urgency for success. At this time, give them the opportunity to start their own ventures, provide resource support, and while assisting them, also bring your own enterprise beyond its original scale to a higher level.

**Case Study:**

The most representative example in this regard is Manager Yang Zhonggui of Hongze Xingshi Trading in Huai'an, Jiangsu. In 2005, Manager Yang was a distributor for Junlebao in the Hongze area. Over the years, he became the general agent for dairy companies such as Sanyuan, Yili, Weigang, and Wandashan, earning the title of "Milk King" in Hongze.

However, due to the limited economic scale of the Hongze region, he couldn't achieve significant growth. So, Manager Yang conceived the idea of stepping out of his "one-acre, three-fen land." In 2008, he had his most innovative and capable employee launch the Lianshui market, starting a venture together. Later, he had another employee launch the Yangzhou market. Currently, Xingshi Trading is not just Hongze Xingshi Trading; it has established Xingshi Trading companies in multiple cities and counties in Yangzhou and Huai'an, successfully breaking out of its existing scale and achieving further development.

**Stabilize Team Building.** In the process of breaking through the status quo and seeking rapid development, the main reason for failure is the lack of standardized management and talent development mechanisms. Conversely, successful distributors all have their own teams and successful models. Many distributors think they are doing well and are successful, but during cross-regional or cross-category expansion, they overlook that they used to do it themselves, but as they grew, it became a team effort.

To make the team work as hard and skillfully as you did, it is necessary to distill a successful model and replicate it in other regions or categories, and also cultivate suitable employees to replicate these models.

Only by establishing standardized management mechanisms can distributors transform their entrepreneurial and dedicated spirit into corporate culture, and turn their experiences and lessons into successful models. A standardized talent development mechanism is a necessary means to achieve replication, so the importance of establishing standardized management and talent development mechanisms is self-evident.

**Case Study:**

In the two years before Gome's rapid expansion around 2003, through continuous thinking, summarization, and adjustment, it formed a 400-page "Gome Electrical Appliances Management and Operation Manual." This document clearly defined the organizational structure, function allocation, and job responsibilities of Gome's headquarters and branches, and specified in detail how to carry out various tasks during expansion, including expansion goals, stages, store site selection, personnel recruitment, salary levels, decoration models, store layouts, and financial, business, logistics, planning, and after-sales work in the expansion areas. This provided a mature set of standards for its external expansion. If it had rushed out without such a mature model, it certainly wouldn't have achieved its current position.

Source: Sugar, Tobacco, and Wine Weekly

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