---
title: "Looking at the Present from the Future: The Upper, Middle, and Lower Strategies for Distributors"
description: "In times of shrinking volume, distributors face a critical choice. The upper strategy is to build a B2b platform and seize a dominant position; the middle strategy is to become a professional promoter for major brands; the lower strategy is to retreat in an orderly manner, preserving gains."
author: "刘春雄"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2024-12-02"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/looking-at-the-present-from-the-future-the-upper-middle-and-lower-strate-cee3f205/"
markdown: "https://xinjignxiao.com/en/articles/looking-at-the-present-from-the-future-the-upper-middle-and-lower-strate-cee3f205.md"
original_source: "https://mp.weixin.qq.com/s/dV9LXktMISGqWwP6dbDy-A"
translation: "https://xinjignxiao.com/zh/articles/%E7%AB%99%E5%9C%A8%E6%9C%AA%E6%9D%A5%E7%9C%8B%E7%8E%B0%E5%9C%A8-%E7%BB%8F%E9%94%80%E5%95%86%E7%9A%84%E4%B8%8A%E4%B8%AD%E4%B8%8B%E4%B8%89%E7%AD%96-cee3f205.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/looking-at-the-present-from-the-future-the-upper-middle-and-lower-strate-cee3f205/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# Looking at the Present from the Future: The Upper, Middle, and Lower Strategies for Distributors

> In times of shrinking volume, distributors face a critical choice. The upper strategy is to build a B2b platform and seize a dominant position; the middle strategy is to become a professional promoter for major brands; the lower strategy is to retreat in an orderly manner, preserving gains.

**Upper, Middle, and Lower Strategies**
TV dramas often feature such a scene. A strategist (advisor,参谋) analyzes the current situation for his lord, then says: "My lord, I have three strategies: upper, middle, and lower. The upper is so, the middle is such, and the lower is this." Then the lord chooses.
Historically, when Liu Bei prepared to seize Western Sichuan, his strategist Pang Tong proposed three strategies:
**Upper strategy**: Take advantage of Liu Zhang's unpreparedness, send elite troops to launch a surprise attack on Chengdu. If successful, Western Sichuan could be secured in one move.
**Middle strategy**: Tell Liu Zhang that there are troubles in Jingzhou, and pretend to return to Jingzhou. When the officials see him off on the way, kill Yang Huai and Gao Pei, the famous generals of Shu, absorb their troops, and then enter Shu.
**Lower strategy**: First return to Jingzhou, then slowly plan to take Western Sichuan.
Some may think that the upper, middle, and lower strategies test the wisdom of the strategist, but that's not the case. The three strategies test the ability and determination of the "lord." Only a lord with grand ambitions would choose the upper strategy, because it can lead to a "great position," but the risk is too high.
The middle strategy is where strategists put the most effort, because more lords choose it. The upper strategy is beautiful but has too many prerequisites, making it unattainable. The lower strategy is too passive and not advisable. In fact, if one succeeds with the middle strategy, they will surely regret not choosing the upper.
The lower strategy often has the greatest operational difficulty, because although it is a retreat to advance, waiting for the situation to evolve, there are variables. If mishandled, the lower strategy can turn into a rout. Some people know how to attack but not how to retreat. Moreover, once the lower strategy is chosen, talented people with expectations may choose to leave.
**Upper, middle, and lower strategies often appear at critical moments that determine destiny.** In normal times, there are only "three plans."
In normal operations, I often provide the optimal choice or the most realistic choice. This time, I propose upper, middle, and lower strategies because I want to illustrate that distributors have reached a moment of decision. Although the overall environment is not good, opportunities to become giant distributors have emerged. For those who want greater development, if you don't choose now, the opportunity is lost; if you don't choose the upper or middle strategies, you have passively chosen the lower.
Today's "lords" are the distributors.
**Shrinking Volume Is Irreversible**
The upper, middle, and lower strategies arise from an analysis of the situation in special times. So, what is special about the current situation in FMCG?
I believe the current situation is somewhat similar to the period of the "Longzhong Plan" in the Three Kingdoms, a transition from widespread peasant uprisings to the eventual tripartite standoff.
When fires burn everywhere, both large and small can survive; in a tripartite standoff, only the large and strong giants have living space.
**First, the shrinking volume is irreversible.**
Some think the shrinking volume is due to poor economic conditions, but even if the economy improves, FMCG will not see growth. FMCG covers three of the four basic needs of daily life: clothing, food, housing, and transportation. It is already saturated. Continued growth would be unbearable for the body. The prevalence of "three highs" diseases is actually a result of affluenza from consumption.
**Second, the goal of the supply chain revolution is to "eliminate" distributors.**
The supply chain revolution is an efficiency revolution and a cost revolution. China's existing distribution channels have too long a chain, too many links, and too high costs. When supermarkets expand private labels and manufacturers sell directly, they inevitably bypass distributors. This is also a historical necessity.
**Third, the distributor community has split.**
Over 20 years of deep distribution is coming to an end. Some distributors have become third-party B2b platforms (including order B2b and warehousing/distribution B2b), leveraging digital platforms to have space to grow, or to expand horizontally across regions.
**Fourth, deep distribution is unsustainable.**
The four major actions of deep distribution:
**Customer relationship orders are hard to obtain; policy-based stock pressure doesn't work; supermarket shelf buying is being abolished by Pangdonglai and similar; terminal merchandising is also being abolished by Pangdonglai and similar.**
The confusion distributors currently face:
**Large terminals (supermarkets) are being supplied directly by manufacturers; small terminals (mom-and-pop stores) order on B2b platforms, making the traditional trading model of distributors unsustainable.**
Even if the economy improves, distributors cannot return to the past. At this point, distributors must make a choice. The upper, middle, and lower strategies are about evaluating one's own capabilities and choosing a new direction.
The current special situation is that large distributors are getting larger, and small ones are gradually disappearing. Surviving in the old state is nearly impossible.
Today's big brands became big by eliminating small brands. Future big distributors will also become big by eliminating small ones.
**Distributor Value in the Shrinking Volume Era**
The upper, middle, and lower strategies must be based on the channel value of distributors. In the era of wholesale, there were wholesalers, not distributors. The term "distributor" itself has Chinese characteristics and is a product of a specific era. This specific era is the era of growth, where due to China's unique environment of small independent terminals (Europe and the US completed large-scale terminals or small terminal chains long ago), distributors were needed to achieve high-density coverage through deep distribution. Commercial distributors are highly tied to the deep distribution model. **The advantage of deep distribution is high brand coverage, but the disadvantage is low channel efficiency.** In the growth era, as long as growth was achieved, low efficiency and high costs were not feared. But in the shrinking volume era, shrinking volume plus low efficiency becomes a channel pain for manufacturers and retailers. Entering the shrinking volume era, the historical mission of deep distribution for distributors has ended. That generation of distributors cannot survive in the new era. In the shrinking volume era, brand development mainly focuses on three aspects: **First, brand going overseas** (seeking broader markets, unrelated to distributors, not the focus of this article); **Second, enhancing brand added value**; **Third, improving channel efficiency**.
**First, the ability to promote high-value-added products.**
In the past decade, baijiu (white liquor) volume shrank by 60%, but leading companies still grew, because the added value of baijiu is increasing. Deep distribution is effective for mass products, but ineffective for high-value-added niche and segmented products. However, the organizational system of distributor deep distribution has evolved into two functions: one is purchasing terminal resources (buying displays and end caps); the other is internal involution-style preferential transactions (sales policies).
**Second, improving channel efficiency.**
In the process of deep distribution, the more the channel sinks (flattens), the more hierarchical the internal organization becomes. Regardless of the channel model, the internal levels plus external levels of leading FMCG manufacturers equal six levels. Direct supply from manufacturers improves channel efficiency, B2b is channel efficiency, and integrated warehousing, trunk, and distribution is also channel efficiency. Without efficiency, there is no living space. Distributors need to improve efficiency, and manufacturers also need to improve efficiency. **Without efficiency, there is no competitiveness in the hard discount era.** The current supply chain revolution is sometimes simply understood as "eliminating distributors," but it also "bypasses" the regional levels of the manufacturer's sales force, dealing directly with headquarters. Efficiency and cost savings come not only from eliminating distributors, but from reducing the six levels to at least one, and at most two levels in logistics and distribution.
**Upper Strategy: Build a B2b Platform to Seize the "Great Position"**
As mentioned earlier, the goal of the upper strategy is to directly seize the "great position."
What is the "great position" for distributors? It is to first become the "leader" in the regional market, then the "leader" in cross-regional markets, and finally the "leader" among the few national distributor platforms.
Deep distribution, also known as small regional agency, is an agency system based on the county as the basic unit. The scale ceiling for distributors is influenced by two major factors:
**First, the agency scope.**
In the FMCG industry, the north uses county districts as the basic agency unit. In South China, East China, Southwest, and Northwest, there are cross-county agencies, even provincial agencies. The size of a distributor's agency area determines the upper limit of its scale.
**Second, the number of categories and brands represented.**
In the deep distribution system, most distributors focus on a single category. Even within a single category, only long-tail categories have full-category agents. For star categories like dairy, beverages, and beer, giants often require avoiding competing products.
These two factors often determine that the scale ceiling for commercial distributors is not high; even the regional "boss" is not large.
The scale ceiling for B2b platform operators is broken in the following order:
**First**, a single-category platform will operate all brands in that category. The platform may not get brand agency rights, but it can definitely get goods from second-tier wholesalers.
**Second**, full-category platforms will definitely emerge, where terminals can order all FMCG categories on the platform.
**Third**, because B2b platforms have capital value, mergers and acquisitions between platforms will occur in the future, but mergers between commercial distributors in deep distribution will basically not happen.
In the shrinking volume era, the growth of one B2b platform means the shrinking or disappearance of other distributors. Distributors who do not want to seize the "great position" will disappear in large numbers.
In the shrinking volume era, the stability and balance of small distributors are broken, but opportunities to "seize the great position" emerge. This is a frustrating moment, but also an exciting one.
The "upper strategy" for distributors emerges like this: do B2b, seize the "great position" in the channel.
Of course, the "great positions" in the channel are limited; winners are kings, losers are bandits. At this time, ability, confidence, and determination are very important. Small-scale operations, seeking profit from capital, being content with small wealth, are incompatible with the "great position."
Of course, the upper strategy is not the only path; there is also a retreat. Because B2b has capital value, mergers and acquisitions provide an exit and monetization mechanism.
For most distributors, I do not recommend the upper strategy. But for some capable distributors, I think it would be a pity not to do a B2b platform. After so many years of reform and opening up, China finally has an opportunity with no upper limit on future scale, and it must be fought for.
**Middle Strategy: Become a Professional Promoter for Major Brands**
The upper strategy is destined to be for a few; most distributors can shrink to survive.
To understand the importance of the middle strategy, we can analyze the changing role of distributors.
In the era of deep distribution, distributors typically stood with manufacturers (brand owners). Deep distribution is the manufacturer's deep distribution, embedded in distributors.
The result is that distributors depend on brand owners. **The reason big brands force stock or threaten to cancel agency rights is because distributors depend on manufacturers.**
The channel role of B2b platforms has changed. B2b serves retail terminals, standing with terminals. Whatever goods the terminal wants, the platform has.
However, there are many manufacturers but few platforms. Therefore, in the future, there will not be many B2b platforms, but there will still be many new-type distributors serving manufacturers.
So, when B2b has become a trend, what do manufacturers need from distributors? As mentioned earlier, in the domestic market, brand owners have two major directions.
**First, improving channel efficiency.**
This is what B2b platforms do, and what the supply chain revolution does.
Improving efficiency transfers the two major functions of traditional distributors: **One is the order function, transferred to order B2b platforms; the other is the distribution function, transferred to logistics B2b platforms.** (Note: early B2b platforms may do both orders and logistics, but later logistics will definitely transfer to national F2B2b platforms, i.e., integrated warehousing, trunk, and distribution)
**Second, enhancing added value.**
In the shrinking volume era, sales volume is shrinking, but added value has room to rise. High-end, new mass, segmented, and niche products can enhance added value.
When order and logistics functions that require scale operations are handed over to B2b platforms, the traditional four functions of distributors (promotion, order, warehousing/distribution, and capital) actually leave only one function.
It is the strengthening of the promotion function that determines that many distributors can still survive. This is also the special feature of China's future distributors.
In Europe, the US, and Japan, promotion is mainly done through F2C models, such as advertising. In China, promotion has always been two-pronged: both F2C models (previously advertising, now online) and B2C models (such as super-symbol terminal promotion, and scenario-based C2C promotion).
At present, multiple promotion models coexist in China. CCTV advertising and Focus Media are still important for big brands, online advertising is also being invested, Hua & Hua's super symbols are quite popular, and scenario marketing has recently received attention.
Let me explain with another logic. **This is the era of user operations. User operations must reach the C-end, using F2C advertising, B2C terminal, and C2C scenario models.**
We believe that scenario-based bC integrated user operations, and C2C communication based on user operations, will definitely be the focus in the future.
As long as user operations are done well, orders and warehousing/distribution can be handed over to third-party B2b. This is the future channel system.
Is it the middle strategy for distributors to shrink from all-around commercial distributors to single-function promoters?
Yes.
The past all-around distributors were merely "small but complete." Turning into "small but specialized" is not shameful. However, some traditional distributors will definitely not agree.
At a meeting, when I proposed that distributors give up order and warehousing/distribution functions, a distributor stood up and said, "Is a distributor without warehousing/distribution still a distributor?"
Obviously, this distributor was unwilling and reluctant.
Some may think that transforming from distributor to promoter is not difficult, just a downgrade. In fact, it is very difficult.
Traditional deep distribution targets the B-end; promoters target the C-end.
Compared to the relatively limited B-end, the C-end is one or two levels higher in magnitude.
As a promoter, the B-end relationships accumulated by distributors in the past are still useful. Because the most effective user operation currently is bC integrated operation, where the B-end transfers bC relationships to the F-end and B-end for operation.
There is still much room for high-end, segmented, and niche products in China. There are not many opportunities for distributors to transform into B2b platforms, but there are many opportunities to transform into promoters, and the utilization of traditional channel resources is also very high. Therefore, I have identified the transformation to promoter as the middle strategy for distributors.
The bC integrated user operations I studied a few years ago, and the scenario marketing I studied recently, are essential skills for distributors transforming into promoters.
The middle strategy is achievable for many distributors, and there are benefits after achieving it.
**Lower Strategy: Orderly Retreat**
**Retreat, with the premise of preserving existing gains, not a rout.**
Exiting is quite difficult for distributors. The lower strategy is not easy either.
Some may think, "At worst, I just quit. What's so hard about that?"
This is related to the difficulty of monetizing distributor resources.
Distributor resources include two types: **one is tangible resources; the other is intangible resources.**
Tangible resources include inventory, receivables, warehouses, and delivery vehicles. Profits are earned as a pile of goods. Many distributors' profits are reflected in these two items. In normal operations, inventory and receivables turn over; once you stop, it's hard to recover them all. Warehouses and delivery vehicles, bought with real money, become junk when sold.
Intangible resources include agency rights and customer relationships. Once you retreat, agency rights cannot be monetized, nor can customer relationships.
Therefore, distributor retreat can easily become a big rout. Especially for distributors supported by capital chains, any slight disturbance can cause a collapse. In recent years, haven't many distributors fled?
If you can't choose the upper strategy and are unwilling to do the middle, you only have the lower strategy. If you choose to retreat, you must do it in an orderly manner.
Orderly retreat means retreating while trying to monetize resources as much as possible.
Given the difficulty of monetizing distributor resources, retreat also requires skill. Either retreat quietly (not a run-away retreat), or complete the retreat while attacking.
**Looking at the Present from the Future**
There is a saying that resonates: **Strategy is looking at the present from the future.**
Looking at the future from the present, the future is confusing.
What about changing the perspective? Looking at the present from the future. How to decide now depends on what the future looks like.
What does the future look like? Look at the channel systems in Europe and the US, and you'll roughly know.
The channel systems in Europe and the US are highly centralized, with no deep distribution and no small regional agencies. If China's 2C e-commerce is relatively developed, the US's 2B e-commerce is more developed than China's.
Centralized ordering, centralized distribution, integrated warehousing, trunk, and distribution. These things that China's B2b needs to do, they have already done long ago.
There are agency giants in Europe and the US, and China's B2b will also see giants. This is the basic judgment for the upper strategy to seize the "great position."
The 2B model is a model of scale. China's channels will eventually align with Europe and the US.
The biggest difference between China and Europe/US in marketing is the 2C model. Apart from the same advertising model in the brand era, China's channel cognition models (such as super symbols), user operation models, platform traffic models, and seeding models are strongly Chinese.
Since the future 2B model is certain, the judgment is simple: do you have the ability and determination to do something big?
China's 2C model and its particularities determine that the middle strategy (promoter model) has a clear direction but greater uncertainty in methods.
The trend of Chinese marketing is now relatively certain (unlike the uncertainty mentioned a few years ago), and the rest is just choosing based on one's own abilities and determination.
**Choose the upper strategy: seize the "great position" in scale.**
**Choose the middle strategy: be small and beautiful, survive ordinarily.**
**Choose the lower strategy: retreat without a trace, preserve the fruits of victory.**


---

## 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