---
title: "Inventory Overhang, Shrinking Profits: Distributors Must Abandon the Extensive Approach or Risk Being Replaced!"
description: "Distributors are facing tough market conditions with stagnant sales, mounting inventory, and shrinking profits. The traditional business logic is failing, but opportunities still exist for those who adopt refined management, explore new channels, and collaborate closely with brands."
author: "何雯"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2025-08-15"
categories: "Dealer Operations"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/muIZuXqIbL441li4YTY4bA"
translation: "https://xinjignxiao.com/zh/articles/%E5%BA%93%E5%AD%98%E5%8E%8B%E9%A1%B6-%E5%88%A9%E6%B6%A6%E7%BC%A9%E6%B0%B4-%E6%83%B3%E4%B8%8D%E8%A2%AB%E5%8F%96%E4%BB%A3-%E7%BB%8F%E9%94%80%E5%95%86%E5%BF%85%E9%A1%BB%E6%88%92%E6%8E%89%E7%B2%97%E6%94%BE%E5%BC%8F%E6%89%93%E6%B3%95-dc76804e.md"
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citation: "何雯. “Inventory Overhang, Shrinking Profits: Distributors Must Abandon the Extensive Approach or Risk Being Replaced!.” New Distribution, 2025-08-15. https://xinjignxiao.com/en/articles/inventory-overhang-shrinking-profits-distributors-must-abandon-the-exten-dc76804e/"
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---

# Inventory Overhang, Shrinking Profits: Distributors Must Abandon the Extensive Approach or Risk Being Replaced!

> Distributors are facing tough market conditions with stagnant sales, mounting inventory, and shrinking profits. The traditional business logic is failing, but opportunities still exist for those who adopt refined management, explore new channels, and collaborate closely with brands.

“The market is really tough now. Sales aren't moving, inventory is piling up, and business is increasingly unstable. Peers around us are contracting or even switching industries,” a regional distributor said bluntly.
Such voices are common across the country. In the past, relying on brand dividends, strong demand, and stable channels, doing good distribution was enough to make money. But today, with accelerating retail transformation, price inversions, and diversified consumer demands, more and more distributors feel that business has become difficult.
But the real problem is not that the market has no opportunities; it's that the traditional business logic is gradually failing.
The author recently visited several frontline distributors and saw many good growth cases. Despite the uncertain environment, some have found new growth points through adjustment: some distributors are intensively cultivating existing channels, spending every penny more precisely; others are actively testing new channels, adjusting quickly; and still others...
Traditional supermarkets are declining in sales, but there are still opportunities for intensive cultivation.
In recent years, the overall weakening of traditional supermarkets has been an industry consensus. “Most supermarkets now see declining foot traffic, many products simply don't sell, inventory pressure doubles, and it ties up cash flow,” lamented a daily chemical distributor, Mr. Li (pseudonym).
On one hand, low-price discount formats are rapidly expanding in lower-tier markets; on the other, young consumers' purchasing habits are shifting online and to instant retail.
Although the supermarket channel is difficult, some distributors are still seeing growth in their supermarket segments. A supermarket distributor in Henan told the author, “Doing business with supermarkets can no longer rely on the old extensive approach. The market changes too fast; we must manage meticulously.”
1. From “distribution” to “sales management,” use data to find growth points.
In the past, distributors managing traditional supermarkets mostly used extensive management, just ensuring products entered stores, placing promoters, and running promotions.
But were these actions effective? There was no data to support them.
Which stores are worth investing in? Which products are suitable for investment? What is the store's sales performance? How should shelf displays be arranged?
Use data to find sales-driving methods and concentrate resources on effective actions. “We no longer blindly distribute products but focus on high-selling items with strong market demand, such as cleaning and personal care products,” a daily chemical distributor told the author.
Even with some core customers, they use a store-in-store model to increase display space and boost sales. For example, by establishing deep cooperation with a large supermarket, they opened a dedicated personal care section in the store, and sales increased by 30% in three months.
2. Retail customers don't lack goods; they lack solutions.
Many distributors told the author that facing declining foot traffic, supermarkets themselves are seeking new growth methods but generally lack clear implementation paths.
“Many customers want to change, but due to the complexity of categories and long chains, they don't know how or where to start,” mentioned a bulk goods distributor, Mr. Wang (pseudonym).
For retailers, what is scarce now is not products but solutions for change.
Realizing this, Mr. Wang spent three years trial-and-erroring and practicing, developing a whole-store output model for bulk goods stores. “With our cooperation, customers don't need to worry about shelf displays or product selection; we provide one-stop service.”
From store traffic flow and bulk goods placement to initial display services, stocking, and holiday event planning, the service is continuous. With this model, Mr. Wang cooperates with over 100 supermarkets, and sales of bulk goods have increased by an average of 20%-30%.
From channel management to traffic management, thoroughly penetrate the local market.
“Where consumers are, sales should be.” This is an unchanging market principle.
On one hand, traditional hypermarket traffic continues to decline; on the other, new channels are rapidly rising. Community group buying, snack stores, discount stores, and instant retail are gradually taking away market share that originally belonged to supermarkets.
With the continuous decline of main channel traffic, relying on a single channel can no longer support sustainable business development. New Distribution has observed that many distributors are starting to lay out multiple channels, deepening their local markets.
In the past, it was “distributors choosing channels”; today, it's “channels choosing suppliers”: whether distributors can quickly enter new channels and establish matching operating mechanisms has become key to business success.
1. When new channels enter the local market, establish cooperation immediately.
A Yunnan distributor operating all categories and channels shared: “I have participated in almost every channel transformation—when hypermarkets rose, when local supermarkets emerged, and then when CVS, community group buying, snack stores, and instant retail expanded, I actively joined.” She emphasized, “When a trend comes, cooperate first, then optimize. Don't fear trial and error; fear inaction.”
This layout has given her a first-mover advantage in new channels, far ahead of peers, reaching more consumers.
2. Use the product demand from new channels to feed back into the original trading business.
“Young people here hardly go to supermarkets anymore; they're used to home delivery,” shared beverage distributor Mr. Yang.
Initially, his cooperation with delivery platforms was just to “move more goods,” with almost no profit. But as the platform's consumer data became richer, Mr. Yang and his team began optimizing product structure based on data, gradually introducing more products that meet consumer needs, forming new growth points.
Another daily chemical distributor, through cooperation with an O2O flash warehouse platform, tried to build his own daily chemical supply chain. He plans to push this optimized product assortment to more small and medium supermarkets, laying a foundation for future business growth.
Big customers ≠ good customers; every account must be calculated clearly.
“In the past, a round of inventory pressure could be digested in two to three months, but now some products can't be cleared in half a year,” a distributor said helplessly. “Inventory sits there, and it's worrying.”
With extended payment terms, slow sales, increased expenses, and inventory pressure, it's clear from these distributor friends that financial pressure is greater than ever.
In the past, many distributors relied on scale and used a human-wave tactic to grab market share, competing on who ran faster and distributed more. But today's market has changed; this approach is being eroded by high costs and low efficiency.
“I used to think about volume first and calculate profits later. But now, if you don't calculate first, problems will arise sooner or later,” admitted regional dairy distributor Mr. Sun. After realizing this, he set up a financial team of over ten people and established a grading system for the 3,000+ stores he covers, dividing them into A, B, and C levels based on store type, sales speed, and payment cycles.
> A-level stores are followed up weekly by dedicated staff, continuously optimizing displays and promotions;
>
> B-level stores are reviewed monthly;
>
> C-level only retains customers with stable sales and meeting profit targets.
“Even for big stores, if they don't make money, we reduce resources and stop blind investment.” With goods values in the tens of millions and increasingly transparent gross margins, distributors must know exactly where every penny goes. A distributor lamented, “Now the competition is not about who distributes more, but who calculates clearly and uses money most precisely.”
The era of relying on inertia and momentum is fading. Facing increasingly picky channels and rising sales pressure, distributors need data and profit thinking to guide decisions more than ever. Otherwise, no matter how large the scale, they may be dragged down by inventory and payment cycles.
Use manufacturer resources wisely and complement each other's strengths.
For a long time, cooperation between brands and distributors was more like fighting separately: brands sent goods and tasks to distributors, who then found ways to push them to market. As long as distribution targets were met, it seemed like cooperation was adequate.
However, this “detached” cooperation model is now exposing more and more problems.
According to the “2024-2025 China FMCG Channel Transformation Research Insight Report” released by New Distribution, 68.2% of brand owners believe distributors lack professional capability, 57.7% feel distributors lack willingness to change, and even 27.1% admit their confidence in the cooperation itself is weakening.
Low synergy between manufacturers and distributors, imprecise resource investment, and money not spent on the right things have caused many products to fail to achieve expected results in terminal promotion.
Because of this, coupled with increased uncertainty in the overall environment, some distributors and brands are beginning to realize that going it alone is no longer realistic.
For example, snack food distributor Ms. Li (pseudonym) shared, “We currently set goals around products, form small teams (3-4 people), and work with brand partners to go deep into stores. The results are good!”
She believes: “Brands understand products better and can mobilize more resources. They bring people and goods, go to market with us, and set incentive policies like horse-race mechanisms and achievement rewards. For new product launches, previously selling a dozen boxes a month was the max, but now with concentrated efforts, we can achieve 1-2 times the previous monthly sales.”
Ms. Li also revealed that the team is currently making a monthly schedule, planning to invite more brand manufacturers to co-create, take turns attacking terminal stores, and concentrate resources on key products and stores. This not only boosts sales but also keeps the team in fighting shape. She said, “Many manufacturers also want to spend money more precisely; it depends on how they coordinate with us.”
As industry involution intensifies, the manufacturer-distributor relationship is no longer the old “you supply your goods, I sell mine.” They must roll up their sleeves and work together.
Distributors need not just more rebates or policies but deep frontline collaboration from brands; brands are also looking for distributor partners willing to evolve and experiment together.
Final Thoughts
The market is always changing, but the essence of business remains unchanged. How distributors save themselves lies in building their own core moat.
From deep cultivation of channels to full-domain layout, from extensive distribution to precise profit calculation, from going it alone to manufacturer-distributor symbiosis, crises never eliminate the industry but rather those players who stick to old models and refuse to change.
Transformation is painful, but the earlier you turn, the greater the opportunity.
In the past few years, New Distribution has seen many successful transformation cases, including those opening retail stores, doing B2b supply chains, and becoming category operators.
From August 19-21 in Shanghai, at the 2025 [New Demand · New Supply] 7th China FMCG Conference and 5th China FMCG Distributor Conference, industry benchmarks will discuss how distributors should go, transform, and win in the new demand and new supply market environment. These include Zhu Jun, General Manager of Chicheng Holding Group and founder of Zuolin YouShe/Life Station convenience stores; Wu Jinghe, Deputy General Manager of Caihua Trading (Yueheji); regional B2b representative Zhong Xiaoping, General Manager of Jiecang Wanggou; platform transformation benchmark Li Yong, Chairman of Shenzhen Yataixuan Industrial; retail channel operator Zhang Shicheng, General Manager of Tianjin Shicheng Bofa; and regional category operator Zhang Gaifeng, General Manager of Zhengzhou Dapeng Trading.
At the same time, the industry-exclusive “2025 China FMCG Distributor Business Condition Survey Report” will be released, revealing who is growing and who is being eliminated among distributors this year, the reasons, and where operational focus should be. Additionally, the in-depth case collection “Ten Growth Case Models for FMCG Distributors” will be released, restoring real cases and providing structural thinking to help distributors find direction from chaos.
Furthermore, we will hold the [Regional B2b Platform & Key Brand Cooperation Seminar], bringing together 40+ regional B2b platform owners to explore incremental opportunities in the lower-tier market covering 540,000 small stores; release and interpret the “Regional B2b Cooperation Guide”; and build a bridge for dialogue between regional B2b platforms and key brand leaders for discussion, one-click connection, and on-site supply-demand matching!
🔺


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## Citation metadata

- Publisher: New Distribution
- Author: 何雯
- Published: 2025-08-15
- Canonical: https://xinjignxiao.com/en/articles/inventory-overhang-shrinking-profits-distributors-must-abandon-the-exten-dc76804e/
- Original source: https://mp.weixin.qq.com/s/muIZuXqIbL441li4YTY4bA

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