Historical experience proves that truth is often unwelcome. How comfortable flattering words are! Honest advice grates on the ears. I once said I was unwilling to discuss distributor topics further because they are all 'harsh words,' but after being invited, I still have to say a few things. Don't assume that because the overall environment is bad, everyone is struggling. In fact, a bad environment is precisely the beginning of divergence: the good get better, the bad get worse. First, a word that delights the few: truly great distributors are being nurtured. In the FMCG industry, there are few distributors with tens of billions in revenue, but in the future, there will certainly be trillion-yuan distributors. Trillion-yuan distributors will definitely emerge from the B2b sector. In the future, trillion-yuan distributors will surely say that the present is the best of times. Next, a word that discourages most distributors: Right now, business is just difficult; the day when business collapses may not be far off. The economic term 'clearance' has become popular recently. When the doomed die off, the remaining businesses will thrive. That's what clearance means. I myself was a distributor over 20 years ago, served distributors, and dealt with distributors frequently when serving manufacturers. I experienced the wholesaler era and the entire distributor era. 25 years ago, the term 'distributor' didn't exist; 10 years from now, people may only see this term in historical recollections. I believe that as time advances, it waits for no one. Distributors are just passersby Distributors are a product of the special era of deep distribution and will disappear with the end of that era. 20 years ago, I wrote 'Chinese-style Marketing,' emphasizing that in the Chinese market, channel-driven strategies take precedence over brand-driven ones. The transformation of wholesalers into distributors happened in that era. Now we are entering the era of user operations, and there is no more Chinese-style marketing. Distribution remains, but deep distribution is disappearing. In this era, the factors that most affect distributors are not short-term poor environments, such as the pandemic's impact or GDP growth slowdown. These are short-term disruptions that will recover after a while. The real influences on distributors are four major trends. Trends are irreversible and can accumulate continuously; when accumulation reaches a certain stage, quantitative change leads to qualitative change. E-commerce and new retail bypass distributors to reach users directly. This is one trend, accounting for about one-third of social retail sales. It's familiar, so I won't elaborate. Supermarket adjustments and new supply chains bypass distributors. This just began in 2024, is accelerating in 2025, and I believe the pace of adjustment will be very fast. Supermarket supply is being replaced by new supply chains. Distributors lose a large chunk of sales. The diversion from B2b is like water dripping through a stone; when it accumulates to a critical point, it will accelerate the collapse of distributors. The above three trends only divert channel share, affecting channel share. However, when brand owners change their role expectations for channel partners, that is fatal. So, what will brand owners require of channel partners next? Because new supply chains and B2b are more efficient and lower-cost operations than traditional distributors, brand owners will no longer view distributors as distribution partners but will shift to a user operations role. User operations are the lifeline of future brand owners. With the combination of these four factors, distributors will face not just difficulties but a choice between rebirth and survival. Don't harbor illusions and dismiss these warnings as anxiety-inducing rhetoric. What is the future path for distributors? Please listen to my analysis below. B2b: A Bloody Path to Survival Distributors, large and small, are all doing well. But once you choose to do B2b, you embark on a road of no return. The characteristic of this road is that many participate early, but only a few become final victors. Because B2b is not like commercial distributors, which can be large or small. This bloody path of B2b can be divided into three stages: Stage 1: A few oligopolies survive in a region (county, city). Note that B2b is definitely oligopolistic. B2b is a typical scale competition and efficiency competition; only oligopolies can survive, as being too small lacks economies of scale. Stage 2: Cross-regional expansion of B2b, or cross-regional mergers with capital participation. This path may not be considered when being a distributor, as one can stay in a small county, but in the B2b field, cross-regional expansion is inevitable to seek economies of scale. Stage 3: The emergence of larger regional oligopolies, usually through capital-involved mergers. In the development of B2b, it starts with regional oligopolies, then participates in capital mergers. In this process, one either becomes a larger regional oligopoly, gets merged, or disappears. This is the inevitable path for the birth of oligopolies. This path is not smooth. In any industry with oligopolies, hasn't it gone through this path? This path is, of course, a bloody one. The successful advance over the blood of others. So, is now the time for oligopolies to emerge? No. Therefore, for the B2b path, participating now is not too early. The later you join, the higher the barriers. However, for B2b expansion, we cannot be too hasty now. Currently, B2b's distribution share is around 10% overall. Once it crosses 30%, it will expand rapidly. This is the critical point I predict. It may not be accurate, but a critical point definitely exists. So, for B2b development, we cannot be too slow now. Being too slow means missing the boat. At the same time, we cannot be too hasty; being too hasty may lead to sudden death. Survive, don't burn cash recklessly, and wait for the critical point to arrive. When the critical point arrives, then develop vigorously and expand rapidly. Commercial Distributors Have Only a Retreat The traditional distributor business model is called commercial distribution, earning the price difference. Commercial distributors are a product of brand owners' deep distribution. For leading brand owners, deep distribution requires distributors to operate exclusively, so commercial distributors cannot become too large. Only distributors in the South China region, who shield brand owners from deep distribution and do it themselves, are larger. Also, in the Southwest and Northwest, due to sparse population, there is no deep distribution. Distributors in these regions are slightly larger, and currently, B2b scale is also relatively large there. The era of deep distribution has given way to user operations. This is a trend of the times, not subject to the will of manufacturers or distributors. The original channel system led by brand owners is giving way to a channel system led by B2b. B2b is the representative of terminals and their purchasing agent. As mentioned earlier, distributors' distribution share will continue to decline due to the three major trends, but it hasn't reached the critical point yet. Even if it declines, they can still continue operating. Earlier, I mentioned the critical point for B2b, which is also the critical point for distributors. As the Go proverb goes, the opponent's urgent point is your own urgent point. The critical point for B2b is about 30% of distribution share, after which share grows rapidly. The share B2b gains is the share distributors lose. The point of B2b's success is the point of distributors' collapse. The 30% critical point is the point of collective collapse for distributors. There is no luck in this. Since I've been in the channel, I've always regarded 369 as three critical points.
Below 30%, don't be hasty; 30%-60%, don't be slow;
60%-90%, endgame. Within 30% share, distributors can hold on. At this time, everyone is enduring, and you can endure too. But collapse happens in an instant. Before the 30% critical point arrives, distributors have a retreat. Your retreat is that other distributors are still holding on. When most distributors want to retreat, it creates a stampede, leading to instant collapse. The question now is: when will the 30% critical point arrive? Sorry, I don't know either. But I know that day will come. I have repeatedly said, if distributors are not determined to carve out a bloody path in B2b, I suggest they first find a retreat, gradually exit the distributor field, and preserve their gains. A distributor's asset is customer relationships, which cannot be transferred or easily monetized. Exiting quietly has the least cost. Exiting quickly can easily lead to collapse. Operator Role Is a Viable Path As mentioned, distributors are a product of deep distribution. Distribution is the role of distributors. Now marketing has entered the era of user operations, and brand owners need a new channel role: the operator role. For user operations, e-commerce uses the F2C model, where manufacturers operate users directly online. So, how to operate users offline? It's definitely not F2C (manufacturer operates users), nor B2C (distributor operates users), because not only can manufacturers not find users, but distributors also don't know where users are. Who knows where users are? Only the b-end (retailers). But there is no connection between manufacturers and the b-end. Therefore, an intermediary is still needed to jointly operate users. Thus, the offline user operation model must be (F2B)2(b2C). That is, manufacturers and distributors as one party, jointly operating b2C. I used to call this model bC integration; some call it bC linkage. A certain liquor distributor giant with tens of billions in revenue has the boss's catchphrase 'bC linkage.' In the past, distributors' function was distribution, earning distribution margins. In the future, doing user operations, the function is to operate users and earn operating income. As for distribution, let whoever has the highest efficiency and lowest cost do it. Are traditional distributors willing to do user operations? In the market, I've found that some distributors have already shifted their focus to user operations. This connects user operations with distribution, and it's not a big problem. But many distributors are stuck at this point, accustomed to distribution and unwilling to do user operations. Dr. Sun Yat-sen said, 'The trend of the world is mighty; those who follow it prosper, those who oppose it perish.' Around 2000, wholesalers disappeared, and salesmen disappeared. Distributors rose, and sales representatives rose. Distributors and sales representatives are concepts unique to China, and they will disappear with the end of deep distribution. 25 years ago, I participated in the birth of distributors and sales representatives; now, I am participating in the birth of operators and user operation specialists. Is there still hope for distributors' business? The above discussed principles, logic, and trends. Now I'll directly answer the title question. As individuals, some distributors may see short-term business growth, but as a group, the decline in distribution share is inevitable, and no one can save them. Distributors will disappear, but channel players will remain. What will future channel players be called? I think there will be two roles in the channel. One is certain: B2b platforms. Order B2b platforms, logistics B2b platforms, and capital B2b platforms. B2b platforms are the representatives of retailers. The other's function is certain: user operations, but I'm not sure what it will be called. It will be the representative of brand owners in the channel. Let me repeat: The channel will definitely have representatives of brand owners and representatives of terminals. Only then is the channel balanced. From this, we conclude that distributors focused on distribution have no value in the future, no need to save, and must transform as soon as possible. On March 19th, in Chengdu, at the 4th China FMCG Distributor Conference, we have invited over a hundred outstanding national distributors, manufacturer executives, and retailers to jointly discuss channel changes and new paths for distributors in the new environment. There will also be excellent distributors sharing practical cases of transitioning to B2b. Interested friends, don't miss it!