Recently, due to company projects, I had in-depth discussions with several distributors about the distribution business, and the feedback was that most distributors are finding it hard to do business. First, in the past, with brand dividends, distributors could quickly open up channels relying on brand influence; without brands, channel advantages are greatly affected. Under this model, distributors mostly serve brands, execute according to brand operating models, and have weak control over terminal outlets; once brand momentum declines, their business follows. Second, in the past, with China's population dividend, distributors could thrive by relying on natural market growth and earning price differences, but as the demographic dividend fades, the stock market inevitably intensifies competition, making business harder. Because of brand and population dividends, many distributors have actually been "lazy" in market operations. Although they represent many brands and cover large areas, they haven't refined their markets. They handle many brands but none strongly, cover large markets but not deeply, don't engage terminals or provide services, rely solely on price differences, and fail to build core competitiveness. Many distributors have realized these issues and started to deepen their channel penetration. In discussions, some regional giants have begun building their own B2b platforms to cover all terminals. 01 All terminals are worth distributors' attention! In the past, most distributors paid little attention to small store business, and many even let wholesalers cover small stores. Reasons: on one hand, large stores and hypermarkets had large business volumes, manufacturers invested heavily in them, and profits were sufficient; on the other hand, serving small stores required more manpower and resources, and the input-output ratio was lower than large stores, so many distributors were unwilling to invest time and resources. But today, it's necessary for distributors to cover all terminals. From the external market environment, offline business is generally struggling, especially large stores and hypermarkets, which account for a high proportion. Nielsen released data showing that in the overall FMCG retail channel structure, offline accounts for 60%, online 40%, and the number of modern trade hypermarkets decreased by 3.7%. Offline market share is declining year by year, brand investment offline is decreasing, and some manufacturers have begun to cut personnel costs. Especially in the past two years, foot traffic in hypermarkets has declined, and many manufacturers' investment in hypermarkets is far less than before, so some distributors' business in hypermarket channels has declined more significantly. On the other hand, many chain systems, facing declining foot traffic, are seeking to compress costs and seek direct supply from brand owners. Under dual pressure, distributors need to find new ways to make up for lost sales. In contrast, according to Nielsen data, in 2021, the number of terminal stores around 58 square meters grew by 8%, showing a clear growth trend. Modern trade is contracting, while traditional circulation channels are growing. For distributors, it's necessary to re-cover terminals. Cover more terminals, distribute more products, and increase the share of business in small stores. 02 Self-built B2b: Large-scale terminal coverage & large-scale distribution Building a self-owned B2B is essentially about achieving large-scale terminal coverage and distribution. For example, suppose a prefecture-level city has 4,000 small stores, with an average daily turnover of 3,000 yuan per store, and snacks account for about 25%. We can roughly estimate the FMCG portion of small store business in the city: 4000300025%*365 = 1.095 billion yuan. This example aims to tell distributors: Small store business is a scale business; only through large-scale coverage and distribution can momentum be formed. In the past, large-scale coverage of small stores mainly relied on manpower-intensive deep distribution, where manufacturers or distributors used numerous salespeople to directly face terminals, take orders, and provide services. But deep distribution succeeded in the past due to two backgrounds: first, there was incremental market space, so companies pursued growth at any cost; second, labor costs were low, and profits from a single brand were enough to support salespeople. In the current market environment, neither condition holds. Distributors must both cover small stores on a large scale and ensure labor costs are covered, so they must achieve large-scale distribution and increase the share of turnover in small stores. For example, previously they distributed only 10 brands in small stores, but now they can distribute 100 brands; this large-scale distribution will inevitably lead to business growth. At this point, a new problem arises: horizontal brand stacking brings linear business growth but also leads to proportional increases in personnel, and the contradiction between output and input remains unresolved. How to balance output and input? The logic is simple: improve efficiency. In the past, one salesperson selling a dozen brands was the limit; now can one salesperson sell 200 or even more brands? This is the underlying logic behind many regional giants building their own B2b platforms. Using digital tools as a means, through B2b platforms to achieve coverage of more terminal stores, helping salespeople distribute more products more simply and efficiently. 03 Current environment is favorable for distributors to build their own B2b Recently, when I communicated with some excellent distributors, they were generally positive about doing B2b. Some regional giants believe that now is a favorable environment for distributors to build their own B2B. 1. Small stores have been educated by national B2b platforms. In the past few years, B2b platforms like Lingshoutong and Xintonglu have educated small stores to order via mobile platforms, and most small store owners have developed the habit of ordering on platforms. Distributors' self-built B2b platforms are now easily accepted by small stores. Moreover, compared with national B2b platforms, distributors' self-built B2b has more advantages. National platforms are purely about coverage; their ground promotion is just ground promotion, and fulfillment is often outsourced to local wholesalers, with basically no service to small stores. In market visits, many small stores are actually dissatisfied with these national platforms because of high personnel turnover and unresolved issues like expense reimbursement and after-sales service. For distributors, service is precisely their advantage; they are inherently local businesses with dedicated sales teams serving small stores, and based on local customer relationships, small stores naturally trust them. 2. Some brand owners are exiting terminals, leaving a market vacuum. In the early days of the FMCG industry, many brands engaged in deep distribution. At that time, labor costs were relatively low, consumer choices were limited, and per-store output was high, so manufacturers could support large sales teams with sales from a single brand. But now, with rising labor costs and other expenses, plus lower per-store output offline, manufacturers face an awkward situation: the input-output ratio at terminal small stores is not proportional. This has led many manufacturers to shrink investment in traditional channels and reduce support for terminal personnel. When manufacturers reduce direct service to terminals, a market vacuum actually emerges. The service needs of these small and medium terminal stores will inevitably be taken over by distributors. For distributors, there is a full opportunity to integrate terminal resources, provide small stores with fragmented product needs, and become one-stop suppliers and service providers for small stores. 3. Most traditional distributors have not done a good job serving small stores. The market distribution dividend has passed, and the per-store output of many terminal stores is actually declining. Store product needs have shifted from full cases to fragmented orders, such as a box of drinks, a few packs of snacks, a few bottles of soy sauce, etc. This fragmented product demand requires distributors to have extremely strong supply chain capabilities, warehouse inspection capabilities, and service capabilities. Most distributors cannot do these services well, but building a self-owned B2b will help distributors build these capabilities. In New Distribution's market research, many distributors' B2b malls can sell a pack of chips or a bottle of soy sauce, with minimum orders of 99 yuan or 199 yuan. Such service is beyond the reach of most traditional distributors. 4. Small stores will continue to exist in the future, but operators will be younger and stores will be more standardized. The depth of China's offline market is too great for chain systems to cover all areas; the market will still need many community small stores to serve consumers. But small stores will change: operators are getting younger, and management is becoming more standardized. Whether in terms of platform awareness or product knowledge, they will go further. For these young store owners, having experienced the convenience of mobile internet, they will be more willing to order one-stop on online platforms. Final thoughts: From a realistic perspective, for some distributors, building a self-owned B2B is indeed a good way out. But we should also pour cold water: not all distributors are suitable for building their own B2b. For low-tier cities with low population density and few terminal stores, it's not suitable to build a self-owned B2b; the terminal market is limited, the ceiling is obvious, and it's hard to achieve scale. In addition, from a category perspective, distributors of snacks, condiments, and daily chemicals are more suitable for building their own B2b. Distributors should still judge whether it's suitable based on their local regional environment and their own operating conditions. -END-