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Distributors are a vital link in enterprise marketing, playing a decisive role in product sales and market operations. However, as China's economy matures, the internet society develops, and enterprises increasingly adopt channel flattening strategies, the entire operating environment for distributors is changing. The current business ecosystem is being disrupted by emerging forces, leaving traditional distributors in a harsh survival environment. The law of natural selection in market competition forces traditional distributors to confront this pain and contemplate how to evolve in the future to avoid being abandoned by manufacturers, the market, and customers.

As a marketing planner who has long worked with distributors and enterprises, I deeply understand the pain faced by traditional Chinese distributors. I hope that the insights I've extracted from observing their markets can inspire distributor friends on the front lines. No matter how harsh the environment or fierce the competition, paths are still made by people, and markets are ultimately created by people. There is no hurdle in life that cannot be overcome, and distributors will also overcome their difficulties.

So what difficulties lie ahead for traditional distributors in the new era? The challenges may vary across industries and individual distributors, but in summary, traditional distributors currently face three practical difficulties. Here, I will briefly elaborate without overcomplicating.

Three Practical Difficulties Facing Traditional Distributors:

  1. Shrinking Territory, Becoming Manufacturers' Border Troops: Markets are becoming marginalized and segmented, losing core markets, and being forced to serve as manufacturers' border troops, acting as guerrilla forces cultivating long-tail markets.

    • Territory shrinks mainly because as brand markets mature, core, prosperous, and important regions are increasingly taken back by manufacturers for direct operation or divided among new customers.
    • Market marginalization occurs as the rise of terminal retail chains makes it hard for traditional distributors to adapt to modern channel management. Retailers negotiate directly with manufacturers, squeezing distributors out of prosperous cities and marginalizing their markets.
    • Important channels are fully operated directly by manufacturers due to pressure from manufacturers' market development, distributors' own capabilities, and terminal chain expansion, resulting in distributors losing good markets and channels, with shrinking territories and deteriorating channels.

  2. Diminishing Power, Becoming Pure Logistics Providers: Earning only distribution fees, losing market initiative, and being passively controlled because switching distributors is cheap for manufacturers.

    • Power diminishes because, on one hand, enterprises' marketing, market, and sales centers are becoming more capable, forcing traditional distributors to follow the corporate pace as small soldiers. On the other hand, as competition intensifies, traditional distributors struggle to bear market risks such as capital requirements for modern circulation, management costs, and payment cycles. They are eventually reduced to regional pure logistics providers, paying deposits and guarantees, handling goods transportation, providing transit warehouses, and earning 5%-10% distribution fees while covering vehicle, personnel, and fuel costs. Manufacturers earn big profits while distributors earn small ones.
    • Moreover, they must follow orders strictly, without participating in manufacturers' market management and operation meetings.

  3. Slimming Profits, Becoming Manufacturers' Hype Tools: Manufacturers profit like flowing water, while distributors earn only by talking, with rising market management and operation costs squeezing profit margins.

    • Profit shrinkage is a common puzzle for many distributors. A saying in the circulation industry goes: 8% profit is break-even, 15% is huge profit. However, under current market conditions, with price transparency, complex operating costs, and lack of market opportunities, distributors not only see shrinking profits but also rarely have chances to earn large price differences. Many distributor friends say that product gross margins are too low now, and wholesale alone earns little, making business increasingly difficult.
    • Profit shrinks because market maturation intensifies competition, making it hard for distributors to earn high profits from mature brands and products—an inevitable result of market development.

Facing these difficulties, how can we transform? How can we shift from passive to active, upgrade market operations, and better adapt to new competitive demands to sustain our businesses? Based on current market development patterns, I believe traditional distributors must first complete three modern transformations.

Three Modern Transformations for Traditional Distributors:

  1. Channelization Transformation: From Brand Distribution to Channel Operation

    • This requires distributors to operate, maintain, and manage their own systems, develop terminal retail outlets themselves, including self-built, self-operated, and jointly operated terminal networks, to form a stable downstream network for effective market competition. Previously, distributors only sat in stores, waiting for customers at wholesale markets and terminals, knowing only where customers were from but not where products were sold.
    • Channelization transformation addresses the needs of evolving channel models. As channel reform deepens, China's traditional channel models must shift to modern ones to better meet economic and social development needs.

  2. Corporatization Transformation: From Boss to Entrepreneur

    • This requires distributors to learn modern corporate management and operation, moving away from traditional store-based, disorganized, undisciplined, and unplanned distribution. They should operate and manage their businesses in a corporate manner, establishing short-term and long-term goals, business philosophies, operational plans, management norms, and capital controls. This transforms their product distribution into a distribution company, enhancing market competitiveness and helping them evolve from small bosses to entrepreneurs.
    • Notable examples include Jima Wine and Beijing Chaopi Trading Co., Ltd. Jima Wine has established over 2,000 offices nationwide, tens of thousands of terminal outlets, and four major marketing divisions in South China, East China, West China, and North China, forming a three-tier marketing system centered on provincial capitals, focusing on prefecture-level cities, and radiating to county-level cities. Beijing Chaopi Trading Co., Ltd. is a joint-stock enterprise transformed from Beijing Chaoyang Non-staple Food Wholesale Corporation, with a registered capital of 80 million RMB. It currently owns an intelligent office building of over 8,000 square meters, 45,000 square meters of standard warehousing, over 140 new business vehicles, full modern office equipment, and an experienced management team.

  3. Branding Transformation: From Distributing Brands to Operating Brands

    • This is a key marker of modernization. Traditional distributors only helped brand enterprises distribute products and brands, but future modern distributors must learn brand operation methods to cultivate and build brands—both co-building with enterprises and creating their own.
    • Many successful brands were established by distributors, such as Liby and Dayun Motorcycles in Guangzhou, and Renhe in Jiangxi. Dayun Motorcycles was founded in 2005 by a distributor who previously dealt in Dayang Motorcycles, and now has its own brand and factory.
    • Liby, a benchmark in China's daily chemical industry, was founded by Chen Kaixuan, a former detergent distributor. In 1987, during the Spring Festival, Chen used 3,000 yuan to buy two boxes of laundry detergent and shampoo, entering the daily chemical industry. He later started a trading agency distributing foreign detergents and daily necessities. After years of accumulation, he opened his own mall and gradually became the largest detergent and daily necessities trader in Puning, expanding to Guangzhou, Shenzhen, and the Pearl River Delta. After gaining experience and connections through trade, Chen felt the detergent industry was profitable and decided to start his own factory. In 1991, he registered the Liby trademark—at that time just a brand without a factory or products.
    • To date, Liby has become one of the two major daily chemical brands alongside Diao Pai.

In addition to completing these three modern transformations, traditional distributors must also plan their career development. Every person's career continuously improves, and distributors' careers will also advance with market and time. To be a successful distributor, one needs such a career plan. If we consider five years as a milestone, distributor friends might create their own three five-year plans.

Three Five-Year Career Plans for Traditional Distributors:

Based on the process of capability development, here are three five-year plans for distributor friends. Each person can tailor them to their actual situation.

  1. First Five Years: Focus on Products, Cultivate Markets with Traditional Operations, and Enhance Hard Strength

    • Do well in traditional projects and products, implement effective product portfolios and market cultivation, improve distribution capabilities, and enhance hard strength so enterprises see your sales and market promotion abilities.

  2. Second Five Years: Focus on Management, Enhance Personal Modern Operations, and Improve Soft Strength

    • Implement corporate management and operations, effectively improve personal and team capabilities, enhance business management skills, and transition from store-based distribution to corporate distribution, thereby improving soft strength and completing modern operational upgrades.

  3. Third Five Years: Focus on Branding, Upgrade Company Brand Operations, and Enhance Comprehensive Strength

    • Build and develop brands, shift from distribution to brand operation, help enterprises effectively build brands or establish your own, and realize the transformation from distributor to entrepreneur.

As the economy evolves, the traditional distribution ecosystem has been disrupted. From being sedentary merchants in large circulation markets to mobile merchants in modern office buildings, the form of distributors has changed. Simultaneously, their business attitudes have shifted dramatically—from initially seeking good manufacturers and passively accepting product sales to now actively discovering products that represent market trends. The professional difficulty for distributors has also increased; previously just product agents, they are now partners in brand building. Facing this environment, distributors can only truly evolve into modern distributors by completing the three modern transformations and the three five-year career plans, gaining rebirth in evolution and achieving development.

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