Click 'Read Original' for details. Public data shows that by 2013, Master Kong had 566 sales offices, 33,504 distributors, and 110,355 direct retail stores; in 2007, Uni-President had 530 sales offices and over 4,000 distributors in China. That year, Uni-President divided its 8 major regions into finer segments and restructured its sales system from two business groups (instant noodles and beverages) into five (instant noodles, tea, juice, comprehensive beverages, and water). By 2012, it had basically completed a sales network covering first-tier cities, prefecture-level cities, and counties with distributors or sub-distributors. Master Kong and Uni-President are typical representatives of deep distribution among Chinese FMCG companies. Using the 'county agent as the basic operating unit,' they bypassed secondary wholesalers to reach terminals directly (A and B class outlets). Companies established 'direct-operated systems,' where distributors only handled 'capital advances and warehousing/distribution,' while the company managed terminal management, ordering, and promotion in central cities. But around 2013, these companies basically stopped increasing channel penetration, and deep distribution began to hit an inflection point, marked by a reduction in frontline staff. This was accompanied by continuous layoff news. New Distribution previously reported that a leading FMCG company was about to implement a new round of layoffs, cutting half of its workforce, amounting to tens of thousands of people. It is understood that manufacturers have been trying various forms of staff reduction over the past two years. △ Changes in personnel/sales office numbers at a well-known company Why layoffs? New Distribution has also summarized: First, labor costs continue to rise; second, ROI (return on investment) continues to decline. During the channel network construction phase, investment in personnel yielded obvious results, but during the maintenance phase, continued personnel additions brought diminishing returns, and the effectiveness of the deep distribution model hit a ceiling; third, channels are becoming increasingly fragmented: the past strategies of thorough channel management, fine control, and a 'human sea tactic' can no longer match the new retail scenarios derived from internet companies; fourth, new distribution organizations are gradually replacing company sales reps: platforms like B2B and social e-commerce (micro-business) have, in a sense, solved part of the distribution function for brands, and they use new information technology, more advanced retail concepts, and higher efficiency to sell goods directly to small shops and consumers. In short, companies see the increasing penetration of the internet into offline channels, and restructuring distribution to optimize efficiency is an unavoidable move. This is also a manifestation of the human sea tactic being replaced by more advanced productive forces. In September this year, Alibaba's Ling Shou Tong announced at a conference that it had covered 1 million stores, capturing nearly one-sixth of the country's 6.8 million small shops. With other national or regional B2B platforms also aggressively encircling, it seems that the deep distribution system that manufacturers spent years building is now about to 'collapse.' We can't help but ask: in the current environment, is deep distribution still necessary? Should we do deep distribution? As labor costs continue to rise, the most 'efficient' method is layoffs, but what after layoffs? Should the deep distribution barriers built with the human sea tactic be abandoned? With B2B coming, should we directly discard the old deep distribution routines and embrace new retail without thinking? On this topic, New Distribution interviewed several industry insiders. The feedback on whether to do deep distribution was unanimous: despite the facts of rising costs, B2B, and channel fragmentation, deep distribution must still be done. Chen Siting, founder of Wanchaobang, told New Distribution that whether it's new marketing, new communication, IP, or other 'new concepts' derived from the internet era, the ultimate goal for manufacturers is to achieve sales, even if they skillfully use these 'new concepts.' Since converting to sales inevitably involves 'meeting' consumers, as long as consumers still shop offline—whether in KA hypermarkets or traditional small shops—deep distribution is necessary. The purpose of deep distribution is competition: to seize terminals, occupy shelves, create atmosphere, and give consumers a hint to 'choose my product.' If you stop doing it because of rising costs or the arrival of B2B, then others will do it, and they will have sales, naturally leaving you with nothing. For example, Jiang Xiaobai: many people think its success is due to good communication, but in fact, Jiang Xiaobai's deep distribution work in frontline markets is no less quality than its communication. It is understood that a provincial capital city alone has hundreds of frontline salespeople. Another example is Jing Jiu, which is similar. In summary, excellent brands have never given up their basic offline distribution skills. As long as market competition exists, deep distribution cannot be abandoned. The 'soul' of deep distribution must be retained, but its 'form' must change with the times and adapt to circumstances. How to do deep distribution? In the past, manufacturers did deep distribution as a 'package deal,' spending their own money to recruit, employ, and manage people, doing everything themselves to ensure direct terminal control and market dominance. In New Distribution's view, future deep distribution will not be a 'one-man show' for manufacturers. First, the execution entity must change, with brand + 'new' distributors taking the lead. It will no longer be purely manufacturer-led, nor fully dependent on distributors to complete regional deep distribution. The 'new' distributors mentioned here can be roughly divided into three categories: First: Brand + individual entrepreneur + third-party urban distribution logistics platform Note: The individual entrepreneur handles sales and promotion functions, the third party provides warehousing and distribution, and supply chain finance is completed through data transactions. Second: Brand + marketing distributor + third-party urban distribution logistics platform Note: The marketing distributor handles sales promotion and capital advance functions, while the third-party urban distribution logistics platform provides warehousing and distribution. Third: Brand + regional self-operated B2B platform Note: The self-operated B2B platform reaches a strategic agreement with a leading brand in a certain category to complete sales promotion functions. How exactly do these three types of brand + 'new' distributor-led deep distribution models work? First, individual entrepreneurs: Chen Siting told New Distribution that these individual entrepreneurs are frontline marketing personnel with manufacturer backgrounds. They transform into new distributors, no longer in an employment relationship with the manufacturer but in a cooperative one, undertaking sales promotion functions in a certain area. These individual entrepreneurs possess professional frontline deep distribution skills and market operation awareness. Being relatively young, they are also more familiar with internet tools. Nowadays, more and more brands are starting to transfer frontline sales staff to distributor employment, but still retain management over personnel. A regional distributor for Mondelez told New Distribution that now Mondelez's salespeople are transferred to them, but the manufacturer still guides the salespeople's work through management software, including positioning, photo-taking, and even the use of promotional expense resources, applications, and personal rewards, all through an app. Frontline sales staff are a valuable asset and resource for manufacturers, as they know all the brand's sales dynamics in the regional market and the customer relationships with stores. Abandoning them outright is certainly not an option. The ideal state is for manufacturers to let salespeople become distributors for a small area, selling goods in a cooperative form. Currently, third-party professional urban distribution logistics companies are only scattered in local areas, and the formation of a third-party urban distribution logistics market will take time. The current functions of distributor warehousing and capital advances are hard to fully replace in the short term. However, it is worth noting that the above-mentioned deep distribution model of brand + individual entrepreneur (with warehousing and distribution undertaken by a third-party urban distribution company) is already being piloted by a well-known brand. In New Distribution's view, this type of deep distribution has some necessary prerequisites: the brand must be a leading brand, and the core work of the individual entrepreneur revolves around terminal sales promotion and terminal maintenance. Second, marketing distributors: In New Distribution's view, these marketing distributors evolve from traditional distributors, outsourcing warehousing and distribution functions to local unified warehousing and distribution platforms or third-party urban distribution logistics companies. In the past, one key reason why brands did not hand over deep distribution work to distributors was that distributors were not professional, lacking the skills and management level for deep distribution. But with the growth and learning of distributors in recent years, especially the increased awareness of proactive learning during this period of change, coupled with manufacturer guidance and training, more and more distributors will be able to take on the 'great task' of deep distribution. Additionally, with the help of third-party warehousing and distribution platforms, products can relatively easily achieve regional coverage. After achieving outlet density, the work of marketing distributors becomes more focused, allowing them to concentrate wholeheartedly on terminal sales promotion. This model is especially suitable for second-, third-, or fourth-tier or lesser-known brands that previously did not have 'deep distribution.' In the future, brands or marketing distributors can use data from third-party warehousing and distribution platforms to more easily obtain labels for small shops (community stores, campus stores, office building stores, station stores, etc.), and combine product positioning with the brand's budget investment to achieve precision marketing under deep distribution. Third, regional self-operated B2B platforms (new distributors): Qin Xian, founder of Rongcheng Yigou, told New Distribution that regional self-operated B2B platforms are springing up like mushrooms across the country, and this force should not be underestimated. Because self-operated B2B platforms operate in full categories, when distributing a certain category, they adopt a 1+N (brand) distribution cooperation form. That is, '1' represents a well-known brand under a certain category with strategic cooperation (such as Yili and Mengniu, choosing one of the two, as highly competitive well-known brands have exclusivity in distribution). 'n' represents more non-well-known brands that do not require deep distribution but moderate distribution. The platform will focus on '1,' continuously tracking its brand sales promotion and undertaking the brand's deep distribution work. The above are reference cooperation forms for brands and various types of 'intermediaries' to jointly establish deep distribution. It is worth noting that in the digital era, the future deep distribution model will no longer be a single, blindly broad pursuit of outlet coverage, but rather based on efficient matching of people, goods, and places, using digital tools to do deep marketing in suitable outlets and matching channels. On October 23-24, during the Autumn Sugar and Wine Fair, New Distribution will host the '2018 FMCG Urban Distribution Logistics Conference.' We will invite industry experts, FMCG warehousing and distribution specialists, and distributors who have transformed to unified warehousing and distribution platforms to discuss and answer questions about future trends in FMCG urban distribution logistics and practical cases of distributor transformation. We hope it will bring you different inspiration and thinking! -END-