Click to read the original article for details Recently, I exchanged views on business conditions with a grain and oil distributor, who frankly said: "This year has been extremely tough for business, with a significant decline compared to last year." I asked if it was due to community group buying. He continued, "Although outsiders may think community group buying has a huge impact on the market, in reality, in some regional markets, the actual impact is not as great as imagined." While it is difficult to fully explain the reasons, perhaps both subjective and objective, there is no doubt that what we face today is no longer a market of certainty and stability as in the past, but an environment that is constantly changing and rapidly iterating. After hanging up, the distributor also told me, "Sometimes when I'm idle and staring blankly, I even wonder how much longer this distribution and agency business can last, and whether it can still make money in the future!" I believe there are many distributors who share this sentiment. Has the market really changed, and where? Coincidentally, recently, various FMCG and retail listed companies released their semi-annual financial reports. The descriptions in these reports may help us see some clues. Major giants are growing, while smaller giants are declining If we divide listed companies by size, we find that the top one or two giants in each category are growing, while the "smaller giants" within the category are declining to varying degrees. Looking at the growth of major giants, the core lies in three aspects: first, premiumization; second, omnichannel; third, digitalization. The decline of smaller giants is mainly reflected in the impact of community group buying and the decline in supermarket foot traffic. Let's first look at the growth of major giants. Although they are growing, frankly speaking, this growth is not directly related to local distributors. Premiumization, or new products launched based on scenarios, will not circulate in the market for local conventional distribution distributors; Omnichannel: All major giants mention omnichannel layout in their reports, but the focus of omnichannel layout points to online, whether it's O2O, community group buying, or traditional e-commerce. Obviously, this has nothing to do with local distributors; Digitalization: The core of current digital transformation is channel health management, cost reduction, and efficiency improvement. It can be seen that whether it's premiumization, omnichannel, or digitalization, in reality, they have little to do with offline distributors expanding their business scale. To put it bluntly, it's either selling new products online, using new online operational methods to increase market share, or optimizing the management of existing stock markets. This is the growth logic of major giants. The decline of smaller giants is mainly due to the grabbing of small brand business by community group buying and the decline in foot traffic in their important supermarket channels. These two impacts directly reflect the decline in local business. Although a company's financial report may not fully reflect the real market situation, if more than 80% of companies point in the same direction, it can basically determine the market direction. Traditional supermarkets have entered the darkest moment of survival Traditional supermarkets' semi-annual reports show a "uniform" decline, while in specific business segments, online business revenue shows a "uniform" growth. One decline and one rise are enough to illustrate the problem. Yonghui's 2021 semi-annual report showed its first half-year loss. However, its online business achieved 6.81 billion yuan, a year-on-year increase of 49.3%, accounting for 14.1% of revenue. As an industry leader, Yonghui is actively transforming, focusing on warehouse membership stores and developing online business. The decline in offline customer traffic has become an indisputable fact. Recently, at a dinner table, I communicated with the head of online business of a major retail giant, who directly told me that the 30% decline in offline customer traffic is the real situation. It is conceivable that the impact on distributors is naturally not small. Also recently, the two major online supermarket O2O platforms, Meituan Flash Purchase held a brand summit on September 8, and JD Daojia will hold a brand summit on September 23, almost back-to-back. It is understood that this is also the first time the two O2O platforms have held summits for FMCG brands. Why? First, O2O business is growing rapidly and accounting for an increasing proportion; second, brands have realized that online is irreversible; third, online instant consumption demand has been ignited, and platforms need brand investment. At the Meituan Flash Purchase summit, a relevant person in charge said that 46% of consumers chose O2O because they "don't want to go out." From this perspective, expecting offline foot traffic to recover is almost hopeless. Online e-commerce continues to see growth Tmall, JD.com, and Pinduoduo continue to maintain growth every year, while new e-commerce represented by Douyin and Kuaishou has seen more prominent growth. In April this year, Douyin e-commerce proposed "interest e-commerce," claiming that it will exceed 9.5 trillion yuan in two years, that is, by 2023. Traditional e-commerce giants took 10 years to push GMV to 10 trillion yuan, while "interest e-commerce" is expected to usher in the next 10 trillion yuan market in three years. In the past, we have always said that online customer acquisition costs are high and traffic is exhausted, but new online e-commerce businesses are emerging one after another, breaking the curse of e-commerce growth peaking. This is also easy to understand: when people's lives become more affluent and basic material needs are met, only more and more long-tail, novel, and unique "small" products can satisfy the small pleasures in our lives. Long-tail, novel, and unique small products are obviously not suitable for circulation in the offline market. The sales of long-tail products must be based on scenarios, content, and emotions to trigger consumer purchase conversion, and these are difficult to achieve in large-scale offline distribution. Can the distributor business still be done? What I just mentioned seems to indicate that the business direction and development of upstream, downstream, and substitutes are all unfavorable for distributors. If distributors still expect upstream and downstream growth to drive their own growth, it is no longer realistic. If external factors cannot drive growth, what should be done? The only solution: internally seize regional stock. How to seize it specifically? First, redo the offline market, intensively cultivate, and seize the market of direct competitors; second, expand categories to seize the market share of other categories in the local circulation. "Redoing the market" for distributors is a concept proposed by Mr. Liu Hong, General Manager of Hangzhou Renchuan Trading. In the past, distributors either had it too comfortable or were too extensive in their operations, getting a little volume here and a little there, and business could rise. But now it's no longer possible. Redo the market, lay a solid foundation for channel management, and then it will be possible to expand categories in the future. Short-term intensive cultivation + long-term category expansion: this is my core suggestion for the current and future business development direction of offline regional distributors. Of course, some distributors may say that since online business is growing so fast, why not go online and transform. Or, now that I have good warehousing and distribution, I can do local city distribution in the future. That's possible, but it's definitely something only a few distributors can achieve. Whether it's online e-commerce or offline city distribution, for more than 90% of distributors, it's not the best choice. Because offline distribution and agency are completely different business logics from these two types of businesses. Everyone has their own expertise; brand resources and platform resources can never match the channel operation capability in your own hands. Back to the original question: Can the distributor business still be done, how long can it last, and can it make money? The answer is also certain: It can be done, it can last for a long time, and if you become the TOP1 in a certain category in local commerce, you can definitely make stable profits! From September 23 to 25, the (4th) China FMCG Conference hosted by New Distribution will open in Shanghai. We will spend half a day focusing on discussing the business operation logic of future distributors' large-scale and digital transformation. We have also invited five local TOP excellent distributors to share their business cases on site. Interested friends should not miss it! Are you "watching" me?