---
title: "Intermediaries Will Always Exist, but Distributors Will Disappear"
description: "The article argues that while intermediaries will always exist, the traditional role of distributors is evolving. It outlines how digital transformation is leading to the emergence of four specialized service platforms that will replace the comprehensive functions of traditional distributors."
author: "刘春雄"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2021-03-10"
language: "en"
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---

# Intermediaries Will Always Exist, but Distributors Will Disappear

> The article argues that while intermediaries will always exist, the traditional role of distributors is evolving. It outlines how digital transformation is leading to the emergence of four specialized service platforms that will replace the comprehensive functions of traditional distributors.

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**-01-**
**Intermediaries will always exist, but distributors will disappear.**
This was our judgment many years ago, and it is gradually becoming a reality.
**Do not interpret this as "disintermediation"; rather, understand it as a shift in the functions and roles of intermediaries in the channel.**
Even in the pre-internet era, the argument for "disintermediation" never ceased. In the United States in the 1920s, Japan in the 1960s, and China in the 1990s, there were claims that "wholesalers are redundant," but reality always proved them wrong.
In the internet age, the voice of "disintermediation" has only grown stronger. Although e-commerce platforms have created a 2C business system, 2B business will always exist. Moreover, in the FMCG sector, the share of intermediaries remains the largest overall.
**However, the functions and roles of intermediaries have always been changing.**
Before 1998, there were only wholesalers, not distributors (agents). Wholesalers were located in central cities (such as provincial capitals) and goods distribution hubs (such as Yiwu, Zhengzhou, Linyi, etc.).
After 1998, provincial-level, city-level, and county-level distributors emerged. After 2000, county (district)-level agency became mainstream, and deep distribution became the mainstream operating model.
**Wholesalers were "sitting merchants," while distributors (agents) were "traveling merchants." The differences were twofold: one was delivery (to stores); the other was service (to terminals).**
**The county (district) small-area agency + deep distribution model has since become the mainstream channel model in China.**
**-02-**
**The above channel model began to change in central cities (provincial capitals and prefecture-level cities) after 2010, with leading FMCG brands already implementing channel function decomposition.** For example, some manufacturers sent teams to do direct operations, while original distributors were weakened into delivery providers (warehousing and distribution) and financiers (financing). This was the initial decomposition of channel functions.
In 2014, although the B2B wave rose and fell, and third-party B2B platforms did not form a major trend, it gave birth to internal B2B systems within manufacturers, and some distributors completed digital B2B systems.
**First comes a bubble, then a winter, then success in the second round. B2B follows this pattern.**
The COVID-19 pandemic in 2020 accelerated China's digitalization by 6 years overall. **After the pandemic, channel digitalization has gradually become a reality, showing three major characteristics: first, full-chain digitalization F2B2b2C; second, full-scenario digital touchpoints connecting C-end; third, BC integrated operations.**
**Full-chain digitalization indicates no dead ends in vertical channel digitalization; full-scenario digital touchpoints indicate no dead ends in horizontal terminal digitalization; BC integration indicates that B2B has extended to B2B2C.**
The digitalization in 2020 is very different from the B2B craze in 2014. **Third-party B2B platforms tended to completely replace distributors, while digitalization has given rise to four major professional service platforms.**
**Third-party B2B platforms aim to disintermediate, while digital professional service platforms are enabling institutions. The intentions are different, and the differences are obvious.**
**-03-**
In the context of channel digitalization, the comprehensive functions and roles of distributors have been decomposed by large professional service platforms.
**Traditional distributors undertake four major channel functions: 1. Channel promotion and service; 2. Order processing; 3. Channel financing; 4. Warehousing and distribution.**
China's channels have always been fragmented (county-level small agency system), and distributors have shouldered all channel functions (the four functions) on their own. The result is that Chinese distributors are "small but complete," lacking cross-regional and national distributors (southern provinces still have some provincial and municipal distributors).
**China's channel structure is dumbbell-shaped: brand owners and KAs are large in scale, while intermediaries are small in scale.**
In the digital environment, a group of channel professional platform service providers has risen. They no longer "disintermediate" like the original B2B platforms, but instead become professional service platforms for intermediaries, and they are national institutions. **Currently, there are four types of channel professional service platforms.**
**First, professional logistics warehousing and distribution service platforms.**
**They provide warehousing and distribution, including trunk logistics and urban distribution. They offer "direct-to-user" services from brand owners to terminals (b-end) or users (C-end). This is the "disintermediation" of warehousing and distribution.**
Warehousing and distribution are typical economies of scale. Professional logistics warehousing and distribution service platforms have scale advantages and provide national services, enabling intermediaries to "not touch goods" platform services. Currently, there are warehousing and distribution logistics service platforms for 2B, 2b, and 2C.
Some new merchants do not touch goods from the start, instead focusing on core channel functions; some manufacturers directly hand over logistics to third-party platforms, preventing salespeople from having the opportunity to push inventory.
**Second, channel financial service platforms.**
**The FMCG industry is highly seasonal and has strong demand for financial services, but the financial industry adheres to "scale credit" and "asset credit." However, distributors lack scale and lack real estate and fixed assets, making financing difficult.**
Under the premise of digital transactions and third-party warehousing services, new financial institutions can provide new financial services. For example, third-party warehouse receipt financing; or financing based on digital "transaction credit."
**Third, digital link platforms.**
**Through digitalization, they achieve cognition, transactions, and relationship building. Currently, they have achieved full-chain, full-scenario touchpoints, and BC integration. Especially in the 2B part, the proportion of digital orders will continue to increase.**
**Fourth, offline promotion service functions.**
**The combination of online and offline is a major difference between marketing digitalization and retail digitalization. Online digitalization is essentially marketing automation, using MarTech technology to automatically distribute information and policies. However, offline involves multiple parties, including distributors, secondary wholesalers, terminal stores, KOCs, and C-end users.**
At the same time, some work, such as customer relationships, is more effective offline; some promotion and cognition are more useful through experience. Especially in the process of connecting the three-dimensional space, [KOC + scenario experience + community operations + network] has formed a new operating system.
**In traditional deep distribution, the channel had only one operating entity—the distributor (agent); in the digital environment, the channel has formed four major professional service entities—warehousing and distribution services, financial services, link platforms, and operational services.**
Channel professional service platforms only have advantages if they are professional, scalable, and cross-regional. These platforms can have local landing service providers, but they must be cross-regional. Without cross-regional reach, it is difficult to achieve scale.
**-04-**
Originally, a single distributor could carry all channel functions; now, four major platforms coexist and are interdependent. **Of course, transformation still requires a process, but the direction is irreversible.**
How long can distributors (agents) that undertake full channel functions survive? Without the COVID-19 pandemic, change would be slow, and the transformation cycle might be longer. When the pandemic accelerated the digitalization process, and digital channel professional service platforms are showing rapid growth, the question of how distributors should navigate digitalization becomes urgent. Of course, the more backward the region, the slower the transformation process may be.
**Newly established intermediaries can go all-in at once, directly becoming channel operators (service providers), focusing on the combination of online and offline functions, which may be a better choice.**
**Traditional distributors may be confused. Confusion one: whether to believe in the trend of channel transformation; confusion two: whether they are sufficiently prepared for the speed of channel digital transformation; confusion three: the methods, pace, and process of responding to change.**
The first two questions are about attitude, while the last is about method.
**As for the future of distributors, I agree with the following options:**
**First, choose which channel functions to undertake**
Distributors originally undertook four functions: promotion, ordering, delivery, and financing. Which functions will they choose to undertake in the future?
1\. Given that all-around distributors will gradually disappear, intermediaries should choose one or more functions.
2\. Operations (service) is a necessary option; other functions can be additional options.
3\. A better option is "operator + pallet provider." Pallet providers are integrators of the four major platforms.
## **Second, choose to become an independent operating entity or a localized subsystem of a large platform**
**To become a local operator, one must master a digital operation platform.** The three major business functions—cognition, transaction, and relationship—are all reflected in the operation platform; warehousing, distribution, and financing are derivative functions of the operation platform.
1\. It seems that leading FMCG brands will definitely establish their own digital platforms. As long as you choose a major brand, there is no choice.
2\. Large distributors will definitely establish their own digital operation platforms. Many small brands do not have the capability to establish digital operation systems, but large distributors cannot do without small brands for product mix, brand mix, and category mix. **This is an important source of profit for large distributors.**
3\. The digital systems of large brands and large distributors will be symbiotic.
## Third, choose to become a local landing partner for professional large platforms
**Warehousing, distribution, and channel fund operations require both national coverage to achieve scale and cooperation with local landing partners. This is an opportunity for regional intermediaries to cooperate.**
1\. Warehousing and distribution in central cities (provincial level and above) will be directly covered by large warehousing platforms; county-level warehousing and distribution usually require cooperation with local landing partners; city-level depends on market size.
According to our understanding, many distributors care a lot about warehousing and distribution. Some even believe that without warehousing and distribution, distributors would have no reason to exist.
The separation of warehousing and distribution from distributors may be an important measure that forces distributors to transform. Some leading brands are doing this. Distributors should see this signal clearly.
2\. Channel financing, because it is often combined with warehousing and distribution, may in the future be synchronized with warehousing and distribution landing partners.
## **Fourth, the core work of operators is full-scenario touchpoints and BC integrated operations**
Deep distribution completed the full-chain connection F2B2b2C, technically connecting the C-end through traditional channels. However, for leading FMCG brands to complete nationwide user online presence at the level of hundreds of millions, the prerequisite is to complete full-scenario user touchpoints.
1\. Full-chain connection only requires **[deep distribution + digital tools]** to complete. This will be the basic skill of future operators. Distributors' original work mainly involved this part.
2\. Full-scenario touchpoints will be the main work of operators in the interim. Without full-scenario touchpoints, brand digitalization will be empty talk. This is important work that many marketers have not understood, and it will be one of the main tasks of future operators.
Relying on millions of terminals to achieve user touchpoints and online presence at the level of hundreds of millions is extremely important work. I will elaborate on this in future articles.
3\. BC integrated operations. Once user touchpoints and online presence are completed, BC integrated operations can be achieved. BC integrated operations will become the core work of an era, just like deep distribution.
Source: Teacher Liu's Digital New Marketing (ID: liuchunxiong1964) Author: Liu Chunxiong


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