---
title: "Leveraging a Fulcrum to Shift Distributors' Bargaining Power in the Industrial Value Chain"
description: "Distributors occupy a pivotal position in the industrial value chain, linking manufacturers upstream and channel members downstream. To enhance their bargaining power, distributors must first clarify their role and value in the chain, then adapt to market trends by focusing on service, scale, and building shared-interest communities with channel partners."
author: "杨永华"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-11-28"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/leveraging-a-fulcrum-to-shift-distributors-bargaining-power-in-the-indus-952cda40/"
markdown: "https://xinjignxiao.com/en/articles/leveraging-a-fulcrum-to-shift-distributors-bargaining-power-in-the-indus-952cda40.md"
original_source: "https://mp.weixin.qq.com/s/oTa23M3lA9cax2kn8k7Fng"
translation: "https://xinjignxiao.com/zh/articles/%E6%92%AC%E5%8A%A8%E7%BB%8F%E9%94%80%E5%95%86%E5%9C%A8%E4%BA%A7%E4%B8%9A%E4%BB%B7%E5%80%BC%E9%93%BE%E4%B8%AD%E8%AF%9D%E8%AF%AD%E6%9D%83-%E4%BD%A0%E5%8F%AA%E9%9C%80%E8%A6%81%E6%89%BE%E5%87%86%E4%B8%80%E4%B8%AA%E6%94%AF%E7%82%B9-952cda40.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/leveraging-a-fulcrum-to-shift-distributors-bargaining-power-in-the-indus-952cda40/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# Leveraging a Fulcrum to Shift Distributors' Bargaining Power in the Industrial Value Chain

> Distributors occupy a pivotal position in the industrial value chain, linking manufacturers upstream and channel members downstream. To enhance their bargaining power, distributors must first clarify their role and value in the chain, then adapt to market trends by focusing on service, scale, and building shared-interest communities with channel partners.

By Yang Yonghua, Chairman of Guanfeng Zhiye Group

Distributors occupy a pivotal position in the industrial value chain of the entire market or commercial sector. Upstream are manufacturers, downstream are channel members. For manufacturers, distributors are the outlet for their products to enter the market and a key link in most manufacturers' value chains. For downstream channel members, distributors are the core bridge connecting manufacturers and channel members.

In a sense, to enhance distributors' bargaining power in the industrial value chain, one must first clarify the status and value of distributors as a "link" in the chain. At the same time, by combining trends in market and commercial circulation, one can find the right fulcrum to leverage and shift distributors' bargaining power.

1. Distributor Value Evolves with Market Development

For the vast majority of manufacturers, distributors are a necessary passage for products to enter the market, as they provide capital, logistics, warehousing, and after-sales service. Distributors also undertake core market operations, and further, they are the core link in manufacturers' marketing.

The value of distributors in the industrial value chain changes with market development. In the early stages of a market economy, due to material shortages, the value of distributors to enterprises was purely financial. But as goods became abundant, their value expanded beyond capital to include logistics and warehousing.

As competition intensified and markets became buyer's markets, the value of distributors relative to manufacturers surged. Beyond traditional value, distributors added market operation functions. During this period, distributors became the vanguard for products entering the market. This increased dependence of manufacturers on distributors strengthened their position in the value chain, and compared to previous manufacturer-distributor relations, distributors began to dominate the chain.

2. From "Agent" to "Distributor" to "Operator": The Changing Terminology Reflects Shifts in Manufacturer-Distributor Relations

Relative to manufacturers, distributors' bargaining power can be understood through the evolution of how manufacturers address them.

In the early 1990s, manufacturers called clients "agents," positioning them purely for product sales. "Agency" implied employment or temporary assignment. Relations were loose, with manufacturers dominant.

By the late 1990s, the term changed to "distributor." Though similar, "distribution" implied operation and sales, or "essential sales." This showed manufacturers' full dependence on distributors and recognition of their value.

After 2000, there were two major shifts. Around 2005, distributors gradually became "operators." This reflected manufacturers reclaiming market operation initiative, as in the distributor era, buyers held absolute market power—"the customer bullies the shop."

To regain control and avoid being held hostage, some manufacturers repositioned distributors as operators, focusing purely on capital, logistics, warehousing, and after-sales. Manufacturers set up their own market operations, and operators earned not from price differences but from fees for warehousing, logistics, and labor, plus commissions like annual rebates or bonuses.

This model led many operators to complain of manufacturer tyranny, feeling like hired laborers or even indentured servants. This sparked bargaining between the two sides.

The result was a repositioning: large operators became OEM (original equipment manufacturer) brands. In the OEM era, distributors obtained brand and production resources from manufacturers, achieving a complete division of labor—manufacturers became producers, distributors became traders.

From this evolution, it's clear that to enhance bargaining power, distributors must control market operations. Only by winning in the market can they win at the negotiating table.

3. Three Key Aspects for Distributors to Enhance Bargaining Power Among Channel Members

First, service. Before 1995, distributors (as wholesalers or general distributors) were mostly "sitting merchants," providing only product resources to downstream retailers. After 1995, with marketization and product abundance, distributors became "traveling merchants," taking on logistics and delivering to doorsteps.

After 2000, traveling merchants evolved into "network merchants," as distributors realized that simple logistics was easy; competition pushed them to offer after-sales and customer service, fostering loyalty among downstream channel members.

As consumer markets matured, brands became the main selection criterion. Network merchants evolved into "brand merchants," many vying for brand distribution rights at great cost.

But with supply-demand shifts and intensified competition, brands became commonplace, and distributors faced pressure from downstream channel members who carved up their resources. By 2005, many network merchants moved down the channel to directly control terminals, becoming "terminal merchants."

In essence, this evolution reflects changes in distributor service. The ultimate outcome is that distributors, as intermediaries, must base themselves on service to control market operations and gain bargaining power.

Second, scale. Distributors often ask how to control downstream channel members. Our answer is simple: there are only two ways. One is to have exclusive, irreplaceable products that are essential bestsellers for downstream clients—the classic "what others don't have, I have." But in today's market, this is hard because Chinese brands and categories are dual-structured: Sanquan and Synear, Yili and Mengniu, Master Kong and Uni-President, JDB and Wong Lo Kat. Products cannot be irreplaceable.

The other way is scale. Scale means resource capability; a distributor with sufficient scale can become the main source of profit for downstream clients. Simply put, if 80% of a downstream client's profit comes from products you distribute, they won't leave you because you are their "money tree."

Third, shared interests. A famous business saying goes, "There are no permanent friends, only permanent interests." This is not cynical but direct.

In reality, relations between manufacturers and distributors, or between distributors, are often simple buying-selling or price-difference relationships, which are fragile and vulnerable to competition.

To enhance bargaining power with downstream channel members, distributors must transform traditional transactional, adversarial relationships into shared-interest communities.

In serving a super-large distributor, we launched a "market consortium" operating model, effectively bundling the interests of distributors and channel members. The lever for measurement and distribution was performance, not simple price differences or rebates. After two years of practice and refinement, this model achieved remarkable results.

-END-

China's best FMCG distributor learning platform
Focusing on providing professional, practical, and actionable tutorials for enterprises and distributors
Committed to helping Chinese FMCG distributors grow rapidly
**The most professional and practical knowledge base in the FMCG industry**
Reply with the red number below to get corresponding content
Reply with number 1 to view the complete knowledge base
| **001** Excellent Article Selection | **002** Distributor Market Operations | **003** Terminal Visit Management | **004** Sales Supervisor Skills | **005** Sales Improvement Techniques | **006** Channel Expansion | **007** Managing Distributors | **008** Distributor Development | **009** Distributor Internal Operations Management | **010** Team Management | **011** Efficient Distribution Techniques | **012** Sales Manager's 18 Skills | **013** KA Operation Methods and Strategies | **014** First Lesson for New Salespeople | **015** Internet and Brands | **016** Distributor B2B Transformation |
[Long press QR code to follow]


---

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

Contact: zhaobo258@gmail.com · +86 158 5481 7671