---
title: "In the Internet Era, Can Distributors Still Operate?"
description: "Question: In the Internet era, can distributors still operate? Li Zhengquan answers: Of course they can, but it's inevitable that old-model distributors will find it increasingly difficult and unprofitable; they must transform! First, why are old-model distributors becoming harder to operate? 1. A common reason—channel flattening: first, terminals force change, as retail systems of any scale demand direct supply from manufacturers, pushing distributors to operate small chains and independent terminal customers; second, manufacturers compress, cutting out the once prevalent second-tier and third-tier distributors layer by layer..."
author: "李政权"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-03-10"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/pWon2VUm5uOje12sGPK0kw"
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---

# In the Internet Era, Can Distributors Still Operate?

> Question: In the Internet era, can distributors still operate? Li Zhengquan answers: Of course they can, but it's inevitable that old-model distributors will find it increasingly difficult and unprofitable; they must transform! First, why are old-model distributors becoming harder to operate? 1. A common reason—channel flattening: first, terminals force change, as retail systems of any scale demand direct supply from manufacturers, pushing distributors to operate small chains and independent terminal customers; second, manufacturers compress, cutting out the once prevalent second-tier and third-tier distributors layer by layer...

**Question:** In the Internet era, can distributors still operate?
**Li Zhengquan's answer:** Of course they can, but it's inevitable that old-model distributors will find it increasingly difficult and unprofitable; they must transform!
**1. Why are old-model distributors becoming harder to operate?**
**1. A common reason—channel flattening:**
First, terminals force change: any retail system of moderate scale demands direct supply from manufacturers, pushing distributors to operate small chains and independent terminal customers.
Second, manufacturers compress: the once prevalent second-tier and third-tier distributors are being cut out layer by layer, with manufacturers directly recruiting at the prefecture-level city or even county level.
Third, "wild distributors" like wholesalers are directly eliminated by many manufacturers during channel planning and design; internally, they may even forbid mentioning the term "wholesaler" (though prohibition doesn't mean non-existence).
**2. Further disintermediation and removal of middlemen—manufacturers can now directly reach terminal customers or even consumers:**
In the mobile Internet era, various mobile terminal management systems customized by enterprises or introduced from third parties can theoretically grasp the daily sales and market management processes of each region and each salesperson, control the inventory, sales, and daily operations of each distributor and their sales staff responsible for the company's products, and also create files and ratings for each terminal customer operated directly or through distributors, mastering their information and conducting corresponding maintenance and management.
This makes old-model, old-approach distributors very uncomfortable. For example, channel promotion expenses that could previously be manipulated are now directly communicated to each terminal customer via a single electronic document notification from the manufacturer on WeChat or mobile terminal management devices... reducing room for manipulation.
Even without corresponding mobile terminal management systems, manufacturers can still gradually add each terminal customer's boss on WeChat with small favors.
Clearly, the core value that distributors previously held—terminal customers—can no longer be secretly kept in their own hands as before. That is, the root and foundation on which distributors relied for survival has been shaken!
**3. Substitution effect of new commercial forces—the rise of B-end e-commerce and new channel platforms:**
The surging new retail, Alibaba's 1688 and Retail Link, JD's New Channel and JD Daojia, WeChat's just-launched Weixuan, and various B-end e-commerce platforms are all encroaching on the survival space and value of traditional distributors.
If terminal customers eventually join platforms like JD Daojia, from a certain perspective, manufacturers could simply cooperate directly with JD and no longer need traditional distributors.
... It is precisely for these reasons that "old distributors" under old models and old approaches are becoming increasingly difficult to operate and have narrower paths to survival.
**2. All distributors face change and transformation**
**1. Transform into irreplaceable links in the channel value chain:**
The old value of distributors in the manufacturer's channel value chain—traditional value systems such as warehousing, distribution, distribution, promotion, settlement, and capital—have been disrupted, deprived, and diluted. At this point, one must look to the stars and think carefully about their future value.
Distribution has JD New Channel, settlement has Alipay, delivery has JD Daojia and SF Express... What about display and price management? Promotion? Marketing?
It is very clear that distributors will shift from being distribution-focused to becoming execution service providers focused on daily market management and services, promotion and marketing execution!
**2. Distributor as terminal customer: vertically extend downward from middleman identity, transforming into terminal customer + distributor:**
That is, compound identity: being both a terminal operator and a distributor. How to obtain the identity and label of a terminal customer? Open your own? Acquire? Integrate? Alliance? Choose a path that suits you.
**3. Distributor as manufacturer: vertically extend upward from middleman identity, transforming into manufacturer + distributor:**
In addition to promoting own brands, perhaps more importantly, become a partner, investor, or shareholder of upstream quality or potentially quality brand manufacturers for a certain brand or product line, while also being the distributor or general operator for that brand or product line.
**4. Distributor as platform: vertically extend upward from middleman identity, transforming into platform operator + distributor.**
Source: Business Trends (ID: lizhengquan02)
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