---
title: "“In the past two years, everyone has wanted to bypass distributors.”"
description: "Distributors are feeling increasingly squeezed as brands, retailers, and platforms seek to bypass them. To survive, they must transform from cost centers into value providers by controlling terminals, moving into retail, or becoming system service providers."
author: "何雯"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2026-01-30"
categories: "Dealer Operations"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/dVfqa0gXivvq3VDJm5Tvcg"
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attribution: "New Distribution — https://xinjignxiao.com/en/articles/in-the-past-two-years-everyone-has-wanted-to-bypass-distributors-b5e3aa07/"
citation: "何雯. ““In the past two years, everyone has wanted to bypass distributors.”.” New Distribution, 2026-01-30. https://xinjignxiao.com/en/articles/in-the-past-two-years-everyone-has-wanted-to-bypass-distributors-b5e3aa07/"
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---

# “In the past two years, everyone has wanted to bypass distributors.”

> Distributors are feeling increasingly squeezed as brands, retailers, and platforms seek to bypass them. To survive, they must transform from cost centers into value providers by controlling terminals, moving into retail, or becoming system service providers.

“Now stuck in the middle, it’s getting harder and harder.”
This is not a complaint from a single distributor, but the most heart-wrenching and frequently heard phrase during my visits to different cities over the past year.
A condiment distributor told me, “Brands demand inventory pressure and target chasing; terminals demand payment terms, after-sales, and service; and all I can do is move goods from one end to the other, while bearing most of the risk. High risk, feeling worthless, and profits are shrinking.”
Mr. Liu, a traditional distributor in the snack food category in the East China market, put it more bluntly: “The most obvious change in the past two years is not more competitors, but that everyone wants to bypass you.”
Brands are trying direct supply, retailers are pushing direct sourcing, and platforms are promoting a unified inventory. The presence of distributors as an intermediate link is declining. “It’s not that you’re doing a bad job, but that this position itself is no longer needed by the market.”
Declining sales are just a temporary pain, but being marginalized is a survival crisis.
This marginalization is not sudden but a slow erosion like boiling a frog. It starts with thinning profits, then policy cuts, then channel fragmentation, and finally you find yourself taking on more responsibility but having less say.
So the harsh reality distributors must face today is that if they rely solely on information asymmetry, logistics margins, and channel coverage, they will inevitably be eliminated in today’s highly transparent and compressed supply chain environment.
**Why does everyone want to bypass distributors?**
Many interpret “bypass” as “you’re not important.” More accurately, the industry chain is squeezing out “non-essential costs.” If distributors cannot transform from a “cost item” to a “value item,” they will be squeezed.
In the past two years, there have been three typical paths to bypassing distributors:
**First, brand direct supply.**
Brands directly connect with core terminals, regional chains, and key accounts, partly to stabilize pricing and partly to invest resources in more certain output ends.
When brands take back key accounts, distributors’ business is inevitably cut.
**Second, retail direct sourcing.**
Retailers shift from “sell what you give me” to “you supply what I need.”
Adjustments, category restructuring, and efficiency orientation make retail emphasize certain supply, fewer redundant brands, clearer price bands, and more stable supply rhythms.
In this process, if distributors only distribute and cannot provide “category/efficiency/service,” they will be replaced.
**Third, unified inventory and price transparency flatten the margin space.**
When prices are more transparent, comparability is stronger, and sell-through is faster, margins become thinner. Once margins thin, the buffer that distributors rely on—covering bad debts, returns, and promotional losses—also thins.
At this point, risk and reward are disproportionate, and many distributors choose to exit voluntarily.
Behind these three paths is the same causal chain: supply chain transparency, organizational efficiency, compressed layers, and every remaining node must prove its value.
In fact, it’s not that distributors are doing worse than before, but that this position itself has become harder.
But it is precisely under this high pressure that a quiet revolution is happening in the frontline market. Some distributors are rebuilding their moats through change.
**Rooting Down: Regaining Control of Terminals**
In Central China, a distributor with annual sales exceeding 100 million yuan originally relied on dozens of “second-tier distributors.” This model was once comfortable—fast capital turnover and low management costs.
But in the past two years, he made a decision to gradually cut off second-tier distributors, set up a direct sales team, and take back thousands of outlets that had been distributed.
Why take on the extra burden?
Because he found that under the second-tier model, he was blind to the market. He didn’t know where goods flowed, the real sell-through at terminals, or control the pricing system.
“The more second-tier distributors, the more chaotic prices. Once the market turns bad, they dump goods and run, leaving me to clean up the mess,” he told me. Although labor efficiency has declined and management complexity has increased, he says, “Only by holding terminals in my hands do I have data; only with data can I know how to allocate resources precisely. In front of manufacturers, I have bargaining power, not just a warehouse.”
The core logic for such distributors is to shorten the chain rather than trade scale for multi-layer distribution, keeping pace, pricing, and risk in their own hands—preferring responsibility but ensuring control.
**Step Forward: Going into Retail**
The second type of change is distributors choosing to step forward and go into retail.
Discount warehouses, community stores, and small chains are not easy. They often come with high management pressure, difficulty in hiring and retaining staff, loss control, and cash flow volatility.
Mr. Yu, a distributor in Tangshan, started laying out hard discount retail stores in 2021, based on a B2b supply chain with a unified inventory. To date, he has opened over 20 community discount supermarkets.
Mr. Yu bluntly said that opening a store is a technical job. “You really need to go all in. Store layout, stocking, hygiene, cashier, lighting, decoration—if you don’t fully commit, you won’t do well.”
Opening a store now is not like the past, where you found a good location, installed shelves, pressed distributors for payment, and stocked enough goods to run. Now almost the entire retail industry is in a state of “adjustment,” and the essence of adjustment is that stores are saturated, shifting from quantity to quality management.
But the value and significance of opening a store differ from traditional distribution. It’s a real piece of land, a more stable business. Moreover, compared to the shrinking profits of trading agency, the profitability is considerable.
Another distributor who transformed into a discount warehouse said, “Retail is tiring, but at least it’s controllable. In distribution, you can be doing well, and a policy change wipes out your profits.”
The core logic for such distributors is to shift from being a margin-earning mover to a retailer directly serving consumers. The road is hard, but once successful, profitability and business stability far exceed traditional agency.
**Upgrade in Place: Thickening Services to Become a “System Service Provider”**
There is another type of distributor that neither moves toward retail nor returns to traditional distribution, but tries to thicken the role of “middleman” itself.
What does thickening mean?
Traditional distributors function as capital advance and delivery. Now some distributors are transforming into regional B2b service providers. They start doing local fulfillment, terminal empowerment, and even digital system support.
They overlay “service capability” and “data capability” on the original “circulation function.”
A distributor doing B2b in a prefecture-level city told me, “Now I earn not only from margins but also from ‘services.’ I have the trust of 3,000 small stores, can help brands complete new product distribution within a week, and help store owners increase business by 20%.”
Although still in the middle, they are no longer just earning margins but deeply embedded in the local market, becoming a node that is hard to bypass.
### **Middlemen will not disappear**
### **But “thin middlemen relying only on margins” are disappearing**
Looking at these changes together, we see that it’s not that a certain type of distributor suddenly awakens, but that the entire distribution system is rapidly changing.
On one hand, brands’ direct supply capabilities are strengthening. More and more brands are proactively connecting with core terminals, regional chains, and even new channels, reducing intermediate layers.
On the other hand, retailers’ dominance is rising, coupled with price transparency and efficiency orientation, which continuously compresses the space for middlemen relying solely on circulation margins.
In such a market, the era of earning dividends purely from information, channel, and price differences is completely over.
The transformations mentioned earlier are themselves a risk game: direct terminal control means higher management costs, going into retail means a completely different capability structure, and thickening the middleman role requires long-term investment and patience.
There is no one-size-fits-all answer in this market. But standing still is a dead end!
Finally, I want to say, **middlemen will never disappear, because the circulation of goods requires costs, and the implementation of services requires people.**


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## Citation metadata

- Publisher: New Distribution
- Author: 何雯
- Published: 2026-01-30
- Canonical: https://xinjignxiao.com/en/articles/in-the-past-two-years-everyone-has-wanted-to-bypass-distributors-b5e3aa07/
- Original source: https://mp.weixin.qq.com/s/dVfqa0gXivvq3VDJm5Tvcg

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