---
title: "In the First Half of the Year, Some Distributors Only Completed 50% of Their Manufacturer's Targets"
description: "Yuan Lai from New Distribution shares insights from visiting distributors and brand executives ahead of the 6th China FMCG Conference. A distributor in a fourth-tier county reported a 50% year-on-year decline in snack food sales in supermarkets, with returns rising sharply. The article analyzes the reasons behind declining store sales and offers practical advice for small and large distributors."
author: "袁来"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2024-07-24"
language: "en"
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# In the First Half of the Year, Some Distributors Only Completed 50% of Their Manufacturer's Targets

> Yuan Lai from New Distribution shares insights from visiting distributors and brand executives ahead of the 6th China FMCG Conference. A distributor in a fourth-tier county reported a 50% year-on-year decline in snack food sales in supermarkets, with returns rising sharply. The article analyzes the reasons behind declining store sales and offers practical advice for small and large distributors.

Li Chengjie, seeing this letter is like seeing me. I'm Yuan Lai from New Distribution. Recently, to prepare for the 6th China FMCG Conference in Shanghai from August 20-22, I intensively visited a circle of distributor bosses, first-line brand sales directors, and third-party industry experts to discuss current business changes. Let me first share a real market case. In a fourth-tier county, a distributor boss gave me feedback: the snack food category in supermarkets has declined 50% compared to last year (2023), and 40% month-on-month. After hearing this, I initially thought other distributor peers had taken away store sales, causing such a severe decline. But this distributor boss gave me a very clear reply: "No. My salespeople went to the stores, and the stores said the goods they stocked last month haven't sold much, so they simply can't restock; there's no sales." To verify whether this was an isolated case, this distributor boss specifically asked distributor peers in provincial capital cities, and the reply was: "Only completed 50% of the manufacturer's task." In terms of return rates, compared to two or three percentage points last year, after the Chinese New Year in 2024, the overall return rate has risen to five or eight percentage points, with return rates soaring. I asked a sales director of a certain subcategory brand, and the sales data he gave me: in the distributor channel, the least declined by 1/3, and the most declined by 2/3. Although other distributors and manufacturer friends didn't see such large declines, a decline is certain. In the past, we always said "cold winter," but unexpectedly, 2024 is the "real cold winter." Ms. Lu Xiuqiong, global expert partner at Bain & Company, said, "China's FMCG distributors have seen 20% go bankrupt in the past 3 years." Although I don't know how this was calculated or how accurate the data is, whenever I ask distributor bosses on the front line if they have peers who have gone bankrupt, the answer is always yes.
**Why are store sales declining?** Why are store sales declining? Let's look at it from two dimensions.
> **First, there is demand but people want to spend less. Second, the demand hasn't changed, but there are more stores.**
Let's interpret them one by one. **First, there is demand but people want to spend less.** Let me share two sets of data: during the May Day holiday in 2024, international flights increased 95% year-on-year, and travel trips increased 8%, all growing. But another set of data: economy class airfares fell 22% year-on-year, and Hainan duty-free consumption per customer fell 22%. I think these two sets of data fully illustrate the current state of mainstream consumer demand. **Second, the demand hasn't changed, but there are more stores.** Recently, I've been reading Dr. Brian Harris's "Category Management," and there's a viewpoint in the book I strongly agree with: some say it's the result of rapid e-commerce expansion, some say it's caused by capital "burning money" to exchange for traffic, and some say it's due to the macro environment... But the most essential thing is: **China's retail market has developed to a state of store saturation**, and the market can no longer support all existing stores. Why does a snack store opening next door have such a big impact? It's simple: there's one more store competing for sales. It's the same impact as another supermarket opening next door. Spending less is related to national confidence, which cannot be changed. **More stores are related to retail competition.** From the distributor's perspective, the main contradiction in current business has shifted from manufacturer-distributor games to store-distributor games. With more stores, some are direct-operated (wholesale supermarkets, snack discount stores, etc.), leaving no business for distributors; with more stores, some need to reduce costs and increase efficiency, simplifying backend suppliers.
Online e-commerce retail innovation has basically stabilized and matured. The reform of offline retail will be the main theme for the next 2-3 years, and all distributors will be affected, but there are differences in timing (China's market is too vast). In a 2000 m² single supermarket in the suburbs of Taizhou, doing business in the traditional way can still thrive. But in the Tao Xiaopang supermarket in Xinmi suburbs under Zhengzhou, innovation is necessary, otherwise it cannot survive. After understanding the reasons for retail format changes, let's look back at what distributors should do.
**Practical suggestions for distributor business** Similarly, before giving suggestions, let me share two cases. The first is from B2B supply chain expert Mr. Yunchuan: in China, 45-55 suppliers serve one small store, while in Japan, 3-5 suppliers serve one small store. The second is a real case of a daily chemical distributor: how to reduce costs and increase profits in stores. Suppose a store has 4 daily chemical distributors supplying it, each with a markup of over 20%. For 10,000 yuan of daily chemical business, the average gross profit per distributor is 500 yuan. But if only one distributor supplies all categories with a 10% markup, that distributor's gross profit is 1,000 yuan. One distributor replaces n distributors, improving operational efficiency. Give distributors two suggestions: **1. Small distributors should do business that makes money now. 2. Large distributors should plan for future business.** Small distributors should do business that makes money now. If it doesn't make money, don't do it. Never work for manufacturers without making money. Even if you don't do first-line brands, sell some second- or third-line products, and make money first. It's meaningless for small distributors to plan long-term, because with retail reform and supply chain integration, small distributors' business will really gradually decline in the future. An orderly retreat is not a bad thing. Large distributors should plan for future business. Offline retail is in a period of change, so wait. Don't think about making money from first-line brands; in fact, you can't make much. First, hold on to first-line brand resources. In the future, distributors in local cities need to do "resource monopoly" business, just like the principle of parking lot charging. What should large distributors plan? Except for first-tier provincial capitals (focusing on certain channels), large distributors in second- and third-tier cities and below have a core principle for business layout: **Matrix layout of urban commercial business centered on retail channels.** A city's offline channels include: hypermarkets, supermarkets, small stores, group buying, gift boxes, instant retail O2O, etc. Distributors should build corresponding brand agency matrices based on different retail channels. At the same time, based on different retail channels, combine brand agency, product price bands, functions & flavors, specifications, etc. A simple example: in small stores, snack braised products in 5 yuan, 3 yuan, and 2 yuan price bands sell well in personal self-enjoyment packs, with low brand sensitivity; first-line brands can sell, and second- or third-line brands can also move. In large stores or supermarkets, first-line brand family combo packs of snack braised products sell well. Different channels, different products (brand awareness, price band, function & flavor...) should be arranged in a matrix. **A large distributor operates a city's retail channels and should understand retail better than upstream.** Regarding the business direction of large distributors and the evolution of urban commercial circulation trends, **from August 20-22, in Shanghai, we will hold the 6th China FMCG Conference, and at the same time, we will also hold the 3rd China FMCG Distributor Conference, inviting brand founders, big distributor bosses, and service provider executives to discuss distributor development trends together. At the conference, we will release the "China FMCG Distributor B2b Platform Strategy Insight Report" and the "2024 FMCG Distributor Business Status Survey Report." Interested brand owners and distributor friends are welcome to scan the QR code to inquire about the conference details!**


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