Some say bluntly, "If I can't make money myself, helping downstream make money is pure fantasy." Others wonder, "Without price differences, are distributors just working for applause?" Some complain, "Execution is too hard—it requires capital, teams, and terminal cooperation that small and medium distributors can't handle." Others equate it to the 'big and comprehensive' store model of a decade ago, saying, "Tried it, didn't work."
I read these comments one by one and can understand that sense of helplessness—in a reality of price wars and inventory pressure, any new approach is bound to be met with skepticism.
But the more I read, the more clearly I feel one thing: while everyone is anxious about the future, there's a deep misunderstanding of the term "category operations":
- Some think it means sacrificing your own interests to benefit the terminal.
- Some see it as unrealistic talk.
- Some believe it's a high-threshold project only big players can do.
However, the truth is exactly the opposite: the core of category operations is to solve the dilemma of distributors not making money and struggling to survive.
In this article, we'll set aside complex theories and clarify three things:
- What exactly is category operations?
- How does it help distributors make money?
- Why can distributors do category operations well?
Category operations is not about helping the terminal make money, but making money together
Many distributors' first reaction to "helping the terminal make money" is rejection, which is not surprising.
For a long time, distributors' profits mainly came from the single price difference of "purchase price - selling price," while retail relied on price differences and fees; manufacturers hoped both ends would sell more and stock more.
"Helping the terminal make money" often translates into promotions, tastings, displays, and shelf restocking—I provide the labor and materials, but sales may not increase much, while costs are definitely spent first.
Over time, many distributors have only one thought: "I can barely make money myself, so how can I talk about helping others make money?"
The starting point of category operations is not to do more for the terminal, but to recalculate: In this business, how do I make money, how does the terminal make money, and together, is it more than before?
Take Henan daily chemical distributor "Shi Zhi Rui" as an example.
Initially, like most daily chemical distributors, it relied on agency for big brands to earn price differences and rebates. But as new brands, e-commerce, and price wars surged, this structure could no longer support team and warehousing costs.
Shi Zhi Rui stopped selling by brand and instead extracted its decade-plus experience in daily chemicals to do whole-store output around the category: integrating 5,000 SKUs, combining them as "1/3 first-tier brands + 1/3 imported products + 1/3 internet-famous products." First-tier brands ensure basic demand and credibility, while imported and internet-famous products drive up average order value and gross margin.
For the terminal, there's no longer a need to deal with a bunch of brand salespeople; one distributor can handle daily chemicals. Shelves are no longer scattered but clearly layered. Combined with the distributor's display suggestions and promotion rhythm, the same daily chemical shelf sees both sales and profit margins rise.
When a store personally feels that what you're doing isn't just stacking a few more boxes but truly helping build this business, its requirements for the distributor change—from "give me a few more yuan off, give me more fees" to "help me continue managing this category well." (Shi Zhi Rui's downstream stores ultimately chose all-cash settlement, with no credit period.)
For the distributor, profit is no longer pinned on the price difference of a single brand or SKU but spread across the entire category structure. Through product mix, overall gross margin increases; through "soft services" like display, promotion, and data review, they differentiate from peers who only deliver goods, avoiding low-end price wars.
They appear to be helping the terminal make money, but in reality, they are using professional capability to grow and profit from this category business, then sharing it in a more reasonable way.
If not relying on price differences, how do distributors make money?
Many distributors' biggest doubt about category operations boils down to one sentence: "If not relying on price differences, what else can I rely on to make money?"
The reality today is: terminals can compare prices on their phones anytime; manufacturers' tasks, stock pressure, and assessments are getting heavier; e-commerce, live streaming, and group buying channels all disrupt prices... Relying solely on price differences will eventually get squeezed from both ends.
Category operations changes this profit model that relies only on price differences.
It doesn't mean giving up price differences altogether, but rather not looking only at price differences, and splitting the money into several new accounts.
First, structural gross margin: Instead of betting on a single hit product, you operate a whole shelf or a line's combination, using volume products, profit products, and image products to raise overall gross margin.
Second, turnover returns: Turn inventory that used to cycle once a year into once every three months; the same capital turning more times is also making money.
Third, policy and fee space: With plans, models, and data, you have the confidence to negotiate with manufacturers, rather than just shouting "give me more points."
Fourth, service value: When you can provide structural planning, display promotions, and data review, the terminal no longer sees you as a "delivery person" but is willing to trade better prices and shorter credit periods for your capability.
In short, category operations doesn't mean abandoning price differences, but using structural gross margin, turnover efficiency, policy space, and service premium to reclaim the squeezed profit in the middle, making money in more than one way.
Why can distributors do category operations?
After hearing the first two parts, many people still have a question: I understand the logic, but is this something I can do? Isn't it a game for big companies and platforms?
In fact, small and medium distributors have three natural advantages in category operations.
First, they are closest to the terminal and can get the most authentic frontline information.
Who knows best which store's foot traffic is declining, which store's average order is rising, or which shelf looks good but doesn't sell? Not manufacturers or platforms, but distributors who visit terminals daily, check displays, and monitor inventory.
This detailed perception of stores and consumers is exactly the starting point for good category operations.
Second, low trial-and-error costs and short decision-making chains.
Compared to B2b or opening stores, category operations doesn't require systems or teams to start. Trial costs are low.
If big companies or platforms do this, they need meetings, processes, and budget approvals. Small and medium distributors can decide today, try next week, and review quarterly, adjusting faster.
Third, it's easier to become "irreplaceable" in niche markets.
Distributors' decade-plus industry experience makes them more knowledgeable about categories, shelves, and customer groups than typical store buyers. You don't have to be a "full-category expert," but you can definitely be professional in a specific niche.
These three points determine that distributors naturally have the soil for category operations.
On this basis, how do you turn "can do" into "start doing"? At this point, small categories are the best entry point.
For example, Zhengzhou's Da Peng Trading didn't start with a big category like daily chemicals but chose a lighter "small category"—coffee.
Their approach: First, secure a coffee shelf in a benchmark supermarket, and based on different forms (instant, freeze-dried, liquid coffee, coffee beans) and price bands, turn coffee into a structured shelf solution. After seeing results, they standardize the selection, price bands, and display methods into a model and replicate it to more stores.
Over time, when terminals and brands talk about "how to do coffee," the first distributor they think of is this one—not because it's the largest, but because it's the most professional in this category.
Compared to large categories like daily chemicals, this "small category + model shelf" approach is more suitable for most distributors to imitate today.
First, investment is controllable; you don't need to tear down and rebuild from the start. Second, the path is clear; you can start with one shelf or one freezer. Once the model works, you can quickly replicate it in similar stores, forming your own business card.
Final Thoughts
Many distributors' strongest feeling in the past two years is "the road of price differences has come to an end," but the real danger isn't that making money has become harder—it's that they're still using the logic of the previous round to stubbornly cope with this round's changes.
Category operations matters not because it's a new concept, but because it forces distributors to transform themselves from "porters" into people who truly manage a business.
From focusing only on the immediate price difference to starting to operate a category asset that is replicable, scalable, and indispensable.
When you can provide solutions, show models, and calculate a shared profit account in a category, your position in the manufacturer-distributor chain is no longer a replaceable link.
In the coming years, the industry will continue to be competitive. The distributors that survive won't necessarily be the largest, but they will definitely be better at calculating the "long-term category account": today, press less on ineffective inventory; tomorrow, do more valuable structure and models.
First, figure out your own account clearly, then talk about helping others make money—that might be the real sense of security for distributors.