---
title: "Making Urban Distribution from the Perspective of \"Saving Money\" for Distributors? Then Your Model Might Be Wrong!"
description: "Urban distribution transformation is a hot topic among distributors, but profitability remains elusive. The core issue is that urban distribution should not be about saving money for distributors but about providing end-to-end retail logistics solutions for brands, which requires breaking existing distribution hierarchies and reallocating channel profits."
author: "赵波"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-07-30"
language: "en"
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# Making Urban Distribution from the Perspective of "Saving Money" for Distributors? Then Your Model Might Be Wrong!

> Urban distribution transformation is a hot topic among distributors, but profitability remains elusive. The core issue is that urban distribution should not be about saving money for distributors but about providing end-to-end retail logistics solutions for brands, which requires breaking existing distribution hierarchies and reallocating channel profits.

Click to read the original article for details.
In the past two years, the topic of distributors transforming into urban distribution has been very hot, almost a consensus among all large-scale distributors. Some distributors have reported to New Distribution that while urban distribution has increased revenue and reduced costs, profitability is not as good as imagined. The business looks booming but operates at a slight loss or breakeven. As for profitability, there is currently no mature solution.
**Why is the warehouse full of goods but still not profitable?**
Of course, there are many reasons, such as inefficient IT systems, the need for磨合 during operations, excessive initial fixed asset investment, low value of goods in the warehouse, or low local warehouse rental rates that cannot generate corresponding income from warehousing.
I think these are not the core of the problem. The core is the starting point. **If you are doing urban distribution from the perspective of "saving money" for distributors, then your urban distribution logistics might be wrong.**
1. Not Making Money
First, urban distribution is not a "single warehouse" business. What does that mean? Although urban distribution operates in local cities, the essence of what it does is providing local logistics delivery services for national brand products.
In the entire FMCG supply chain, urban distribution is the end of the chain, providing the last-mile logistics solution for brand owners. Therefore, urban distribution must have the ability to handle various flexible orders at any time and efficiently coordinate with brand owners or third-party RDCs (regional distribution centers) to provide customers with a low-cost, fast delivery service system.
So from this perspective, **the core value of urban distribution is to provide brand owners with a complete set of end-retail logistics delivery solutions, not to "save money" for distributors.**
In fact, the more you "save money" for distributors, the less you earn.
In the FMCG supply chain, from factory to terminal, it is unlikely to compress the levels. In the original model, there are too many levels, and the profits have already been divided up. This money is not enough to allocate to new members. So if you say you serve your distributor, keep their revenue unchanged, and they give you a commission, in fact, distributors already earn from logistics fees, and they cannot provide more profit to you.
2. How to Make Money?
Assuming the gross profit margin from factory to end remains unchanged, there is only one way for urban distribution to obtain considerable gross profit: break the existing dual-level interest relationship of distribution + second-tier wholesalers and reallocate the interests in the channel.
You say you are in urban distribution; how can you break the existing market distributor interest pattern?
To put it bluntly, the money that was originally earned by distributors, I will compete with distributors with higher efficiency, better delivery experience, and more thorough terminal services, and take away 90% or even more of the profit in this chain.
This is the money that urban distribution should earn!
3. Methods to Break the Interest Pattern
First, you must be harmless. The so-called harmless means not competing with brand owners and distributors for order control and allocation rights. This is also the bottom line that all B2B companies touch with brand owners. **The premise of doing urban distribution orders is to give up order control first, and the platform only provides service empowerment.**
You must deeply understand the meaning of order allocation rights. This is too important. Giants are not unwilling to contribute, but their business is based on a traffic model. If they give up order allocation rights, their platform would have no commercial value. But for third-party urban distribution logistics, it is inherently a service provider, serving customers. The premise of good service is not to touch transactions.
As long as you do not compete with brand owners for order control and allocation rights, you can gain strong support from brand owners. They will give you ammunition, fees, and everything you need. Distributors will also feel safe putting their goods in your warehouse.
**Second, have the ability to promote refined services.** As long as there is competition in the market, terminal execution will not stop. This means there will still be various salespeople "competing" on the shelves and executing. But we all know that most brand owners no longer have the ability to manage and pay for huge sales teams, which gives rise to "shared business."
For example, Retail Link's "City Partner," Zhanghe Tianxia's "Mercenary World," and JD's "Ground Crew" etc. New Distribution has always believed that B2B shared salespeople is a false proposition. No shared salesperson will do refined services without brand owners spending big money, especially for brands with strong terminal execution. If brand owners do not want to be eliminated by competition, they must maintain the competitiveness of terminal execution.
So the business logic must meet the actual needs of the market. In essence, business cannot be shared; instead, brands should be more privatized, channels further flattened, and agents further granulated. Only in this way can they achieve more refined services in future market competition and not be PK'd by competitors.
**Third, platform-based urban distribution.** In the past, a large agent had many salespeople to do terminal services and meet brand owner needs. But the problem is that young people are hard to recruit, manage, and retain. Using the old management methods won't work, so small bosses and the Amoeba model emerged.
But this model is very difficult to implement under the original system of distributors. With an urban distribution platform, based on the platform's warehousing, logistics, supply chain finance, and information capabilities, it can not only be achieved but also more easily.
Urban distribution provides comprehensive empowerment to small bosses. In simple terms, based on warehousing and distribution, it supports a group of small entrepreneurs to act as agents for various products. If they lack money, you provide systems and supply chain finance for data pledge. If they lack goods, they can first act as second-tier wholesalers, and you help organize supply for support. If they lack vehicles and warehouses, you have cheaper warehousing and logistics. In a word, as long as you have the ability, there are all ready-made resources available for young people with ideas to start businesses.
**Fourth, comprehensive empowerment for small bosses.** In simple terms, based on warehousing and distribution, support a group of small entrepreneurs to act as agents for various products. If they lack money, you provide systems and supply chain finance for data pledge. If they lack goods, they can first act as second-tier wholesalers, and you help organize supply for support. If they lack vehicles and warehouses, you have cheaper warehousing and logistics. In a word, as long as you have the ability, there are all ready-made resources available for these young people to start businesses.
This means that your third-party warehousing and distribution has warehousing, logistics, and people. For brand owners, there is a new possibility to replace agents. Some poorly managed distributors have no profit in the products they represent. As soon as they give up representation, you have the opportunity to reallocate the interest pattern.
In this model, the profit you obtain is much more than simply serving agents, and you can even take 90% of the entire link's profit. Only in this way can the scale of third-party urban distribution generate benefits.
Of course, if you think waiting for distributors to give up representation is too slow, there are faster unconventional methods.
4. Ultimate Goal
Doing urban distribution by breaking the local agency pattern to reallocate interests is a necessary means to achieve profitability. B2B is the same. One of the cores of B2B is warehousing and logistics. If not done well, B2B cannot be profitable. But to do it well, you must eat up all the profits from factory to end. How to eat them? Through a platform-based one-stop service system, making yourself an indispensable role in every link. Only then can you truly make money.
Final note: In fact, urban distribution logistics, if there is no network and only a single warehouse, cannot become a climate. Distributors doing urban distribution logistics must actively join a nationwide warehousing and distribution network. Only in this way can you have the opportunity to undertake regional market business under the entire network. Otherwise, making money is really not easy.
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