---
title: "New Distribution Yuan Lai: Distributors' Business Will Not Be Eliminated!"
description: "On March 17, the 10th China FMCG Innovation Conference opened in Chengdu. On March 19, at the 4th China FMCG Distributor Conference, Yuan Lai, Chief Content Officer of New Distribution, released the exclusive industry insight \"Urban Commercial Circulation Business Development Model 2.0\". The following are key points from the speech: At this time last year, I released the \"Urban Commercial Circulation Business Development Model\" at the conference. This year is version 2.0 of the model. Compared to 1.0, it more comprehensively and systematically elaborates on the development direction of distributors' businesses. To clarify..."
author: "袁来"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2025-03-21"
language: "en"
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# New Distribution Yuan Lai: Distributors' Business Will Not Be Eliminated!

> On March 17, the 10th China FMCG Innovation Conference opened in Chengdu. On March 19, at the 4th China FMCG Distributor Conference, Yuan Lai, Chief Content Officer of New Distribution, released the exclusive industry insight "Urban Commercial Circulation Business Development Model 2.0". The following are key points from the speech: At this time last year, I released the "Urban Commercial Circulation Business Development Model" at the conference. This year is version 2.0 of the model. Compared to 1.0, it more comprehensively and systematically elaborates on the development direction of distributors' businesses. To clarify...

On March 17, the 10th China FMCG Innovation Conference officially opened in Chengdu. On March 19, at the 4th China FMCG Distributor Conference, Yuan Lai, Chief Content Officer of New Distribution, released the exclusive industry insight "Urban Commercial Circulation Business Development Model 2.0". The following are key points from the speech:

At this time last year, I released the "Urban Commercial Circulation Business Development Model" at the conference. This year is version 2.0 of the model. Compared to 1.0, it more comprehensively and systematically elaborates on the development direction of distributors' businesses. To clarify the development direction of distributors' businesses, we must first establish three backgrounds:

First, over 90% of distributors conduct business based on their own cities. The distributor group was born because upstream brands authorized a scope of operations in their cities. Distributors began doing business by representing brands. Doing business in a city is the geographical environment distributors are in, and it cannot be changed.

Second, after two or three decades of progress and evolution, more and more distributors have bid farewell to being "small traders" and are gradually becoming companies with organization, departments, and management. In the 1990s, with the reform of the commercial circulation system and rapid economic growth, the role of distributors emerged like mushrooms after rain. From 1995 to 2011, offline supermarkets also entered a golden period. Under the deep distribution model, upstream brands built national distributor systems. By 2015, some distributors continuously improved their management capabilities, no longer limited to operating only one or a few brands, but forming category distribution through brand portfolios. Or they focused on specific channels and specialized in brand operations for those channels. They became category distributors or channel distributors. Whether in terms of business scale or organizational management, these distributors have completed the transformation from individual to corporate. Distributors will not be eliminated, but they must evolve.

Third, the transformation from individual to company means that such distributors are transitioning from being completely dependent on brands to being entities that participate freely in frontline market operations. Based on this background, I believe that since they are entities freely operating in the frontline market, distributors must think about the direction their business should develop to truly sustain operations and build their own moat, thereby not being eliminated by the market or replaced by peers.

**Shifting from a manufacturer business perspective to a retail business perspective**

Let me state the conclusion first. In a mainstream city (non-provincial capital or sub-provincial capital, excluding county-level cities under its jurisdiction, with a population of 2-4 million), distributors must set a strategic business goal: to become a category supply chain management company with the city as the unit and retail scenarios as the core.

What does it mean to be retail scenario-centric? Excluding catering and special industry channels, I divide the retail scenarios of a mainstream city into ten business formats. Distributors should plan coverage around these ten formats. At the same time, each retail format has different consumer demands, so the corresponding product mix and promotion logic also differ. Distributors need to design different business actions for different retail formats.

Specifically:

1. NKA/RKA (national), CVS (national) retail channels. When landing in local cities, the core functions of distributors are advance payment distribution and terminal execution, or even no execution needed, only fee advancement. In such channels, distributors should position themselves as: pallet providers.

2. LKA (local chain supermarkets), B-type medium supermarkets (individual/single), mother and baby stores/cosmetics stores. Because these retail channels are local, upstream manufacturers cannot directly operate, so full authorization to distributors is inevitable. The core function of distributors is category operation. In such channels, distributors should position themselves as: operators.

3. CD community supermarkets, TT grocery stores, snack discount stores (local), instant retail O2O to home front warehouses. These channels are numerous, scattered, small, and mixed. In the future, large-scale one-stop supply chain integration services are inevitable, that is, B2b supply chain platforms. Moreover, these channels do not have the value of promoting new products, and shoppers have a high rate of brand-specified purchases. The core function of distributors is efficient supply of standard products. There are two directions here: some distributors (mainly snack food distributors) build full-category B2b supply chain platforms, while other distributors can become category suppliers, such as supplying condiments/daily chemicals to B2b supply chain management companies.

4. Others (such as campus/labor protection/enterprise and institution group purchases). These channels exist everywhere, but they rely more on local personal relationships and are resource-based businesses. The core function of distributors is special scenario operation. Group purchase package design, even customized product combinations. Distributors should be scenario customization providers. They are not simply brand agents, but a city's supply chain management company, setting different business positions for different downstream retail channels.

I believe this is the business direction distributors truly need to consider. Of course, this does not mean brands are not important; they are still very important, but they should cooperate with upstream brands in reverse based on downstream channel types and store types, rather than as before, where they did whatever brand was well-known or whatever product had high gross margin.

**Supply Chain Management Company vs. Mainstream Distributor**

Here, I want to emphasize the differences between a category supply chain management company and a mainstream distributor.

First, business philosophy. A category supply chain management company is oriented towards store customers, while a mainstream distributor is oriented towards upstream manufacturers. The difference in business philosophy determines the difference in behavior.

Second, market goals. A supply chain management company focuses on increasing the sales capacity of the category within the store, while a distributor focuses on achieving the brand's sales task indicators. One considers category capacity, the other considers brand sales volume.

Third, core functions. The core functions of a supply chain management company are category combination, retail operation, and supply efficiency, while the core functions of a distributor are sales indicators, market execution, and capital advancement.

Fourth, product mix. A supply chain management company subdivides a large category into second, third, and fourth levels, and grades products by first, second, third tier, as well as internet-famous and local specialties, ultimately matching different product combinations to cover the store. A mainstream distributor mainly operates first-tier brands with second and third-tier brands as supplements, or combines products based on essential fast-moving items, new high-margin products, and seasonal supplements. There is no awareness of category management.

Fifth, key actions. The key actions of a supply chain management company are: product combination, product pricing, product promotion, and product display and presentation. These actions are centered on the store shopping scenario and consumer demands. The key actions of a mainstream distributor are: display facing, shelf position, promotional displays, and shopping guide promotion. These actions are centered on helping a specific brand seize more resources and increase sales share.

In simple summary, a supply chain management company should do a category, not one or several brands. Only by thoroughly doing a category can you truly build your own moat at the store level. In the past, the moat was having authorization for first-tier brands or having authorization for ten first-tier brands. In the future, the moat will definitely be your sufficient professionalism and strong category management capability in a certain category (possibly a combination of 50+ or 100+ brands) at the retail end.

**Category supply chain management company—must match different product matrices for different retail scenarios in the city.**

**Category breakdown map for condiments, daily chemicals, and snacks**

The following is a breakdown of snacks, daily chemicals, and condiments, which are the three core categories in the FMCG field, classified into first, second, third, and fourth levels. In the past, mainstream distributors considered more about brand agency and whether they could obtain brand agency resources. But in the future, we believe that as a supply chain management company, it is not only necessary to consider brand agency resources, but also to consider the selection and combination of second, third, and fourth level subcategories to match corresponding retail channels.

**Tower Alliance**

In June 2023, New Distribution initiated the first domestic distributor organization: Top500 China FMCG Distributor Supply Chain Alliance (referred to as "Tower Alliance"). To date, 472 distributor bosses have participated. The vision of the Tower Alliance is to build the alliance into a regional distributor information, capability, and resource sharing center. We believe that for a long time to come, the core work focus of distributors is: survive, eliminate peers; go out, expand survival radius. We hope to bring together distributors with the fastest business growth, the best management, the most profits, and the most outstanding in the industry. Together, we look at dividends, seize opportunities, find increments, and get resources!


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