---
title: "No First-Tier Brands, No Logistics Fees—How Did He Achieve Annual Sales Over 100 Million and Profits Over 10 Million?"
description: "In the FMCG distribution sector, dealers have generally gone through three generations: 1.0 era, before reform and opening up, dominated by department stores and supply and marketing cooperatives, mostly 'official merchants'. 2.0 era, after reform and opening up, some left the state-owned system and formed wholesale markets, known as 'sitting merchants'. 3.0 era, as competition intensified, some 'sitting merchants' began to go out, doing delivery, business visits, and terminal execution, known as 'traveling merchants'. However, Li Xintao believes that today's 'traveling merchants' are essentially still doing what 'sitting merchants' do, just delivering goods to stores instead of waiting for orders. He argues that a true 'traveling merchant' is one who has the ability to promote new products and operate the market. As a dealer focusing on non-first-tier brands, he outsourced warehousing and distribution to focus on sales promotion, and also invested in over 120 vending machines in Zhengzhou, all profitable."
author: "袁来"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-08-17"
language: "en"
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markdown: "https://xinjignxiao.com/en/articles/no-first-tier-brands-no-logistics-feeshow-did-he-achieve-annual-sales-ov-a0ccfc23.md"
original_source: "https://mp.weixin.qq.com/s/2UfTNgo5scVCAqHeJZthwQ"
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---

# No First-Tier Brands, No Logistics Fees—How Did He Achieve Annual Sales Over 100 Million and Profits Over 10 Million?

> In the FMCG distribution sector, dealers have generally gone through three generations: 1.0 era, before reform and opening up, dominated by department stores and supply and marketing cooperatives, mostly 'official merchants'. 2.0 era, after reform and opening up, some left the state-owned system and formed wholesale markets, known as 'sitting merchants'. 3.0 era, as competition intensified, some 'sitting merchants' began to go out, doing delivery, business visits, and terminal execution, known as 'traveling merchants'. However, Li Xintao believes that today's 'traveling merchants' are essentially still doing what 'sitting merchants' do, just delivering goods to stores instead of waiting for orders. He argues that a true 'traveling merchant' is one who has the ability to promote new products and operate the market. As a dealer focusing on non-first-tier brands, he outsourced warehousing and distribution to focus on sales promotion, and also invested in over 120 vending machines in Zhengzhou, all profitable.

**In the FMCG distribution sector, dealers have generally gone through three generations:**
1.0 era, before reform and opening up, dominated by department stores and supply and marketing cooperatives, most dealers were 'official merchants'.
2.0 era, after reform and opening up, some people left the state-owned system like supply and marketing cooperatives. To make it convenient for small shops to purchase, these people gathered together and gradually formed wholesale markets, which were called 'sitting merchants' at that time.
3.0 era, as the number of dealers increased and competition became fierce, some 'sitting merchants' gradually went out, and after getting orders, they did delivery, business visits for terminal display, and implemented promotional policies. We call them 'traveling merchants'.
However, in Li Xintao's view, these so-called 'traveling merchants' are essentially still doing what 'sitting merchants' do. The difference is just that previously people came to your store to pick up goods, now you deliver goods to the stores. Most orders are completed by the manufacturer's sales staff, and the dealer only does warehousing and distribution. This is no different from 'sitting merchants', as orders still come to you.
**What is a 'traveling merchant'? A dealer who has the ability to promote new products and operate the market is called a 'traveling merchant'.** Recently, New Distribution interviewed Li Xintao, General Manager of Zhengzhou Longting Trading Co., Ltd. As a dealer mainly representing 'non-first-tier' brands, he has outsourced warehousing and distribution functions to focus on the 'traveling merchant' function—sales promotion. How does he think about 'traveling merchants'? Under the new retail trend, he has invested in over 120 vending machines in Zhengzhou, all profitable. How does he position his vending machine business?
**1**
**What is a professional beverage dealer?**
Before 2010, Longting Trading was just a wholesaler with a store in the wholesale market doing large circulation business, always a 'sitting merchant', but it became increasingly tiring. After 2010, Longting went out and established a trading company.
Li Xintao recalled, "At that time, although we transformed from 'sitting merchant' to 'traveling merchant', the early stage was extremely difficult, especially in recruiting. We were in the dark, didn't know how to recruit or manage, and would grab anyone and bring them to the company for training, then take them out to do business." Longting Trading has stumbled along to today, but it has been relatively smooth.
Currently, Longting Trading mainly represents brands such as Tianwo Tea House, Heika 6 Hours, Jingkou Glucose, Laoshan Soda Water, and many other 'non-first-tier brands', as well as two first-tier brands: RIO and Starbucks beverages. It has nearly 300 SKUs, with 2017 sales exceeding 100 million yuan and a sales team of nearly 60 people.
**About 'not doing deep distribution for first-tier brands'.** Li Xintao told New Distribution that it's not that Longting looks down on these first-tier brands (brands with deep distribution). In fact, during the most difficult times, they considered it, but they still felt that doing first-tier brands is essentially being a 'sitting merchant'. Our function is just a warehousing and distribution provider, with no value. Dealers like Nongfu Spring and Want Want are 'sitting merchants'. When the manufacturer gives a policy or an activity plan, the dealer executes it like a child.
Longting Trading hopes to become a professional beverage dealer, which was Li Xintao's original intention when establishing the company. Although big brands have mature and standard business distribution systems, when doing market work, dealers often can't fully use their abilities. Expenses require layer-by-layer approval, and even if there is an opportunity in the market, it may be delayed by approval time. In addition, the national market is like a chess game, and some marketing plans may not fit the local market environment.
Li Xintao told New Distribution that cooperating with first-tier brands, the profit is not enough to support dealers to do many things independently. We prefer to operate in a 'package' form, giving Longting more operational space.
For example, in March 2016, when Nongfu Spring's new product, Tea π, was launched, the tea beverage competition was already a red ocean. Despite the pessimistic outlook, Longting Trading took over the package operation for 2 years. Although it is now a 'mature' brand and has been distributed to more than 20 dealers in Zhengzhou, looking back, our past operation was relatively successful.
On April 10, 2017, a fire broke out in the toy factory next to the company's warehouse. The fire caused Longting a direct loss of over 30 million yuan. This sudden disaster made Li Xintao think a lot, and finally he decided to outsource warehousing and distribution to a third-party warehousing and distribution platform, Wanchaobang.
He told New Distribution that he had similar thoughts two years ago. As transportation costs increased and the business volume grew, Longting's distribution capacity was very limited. Sometimes customers called to complain that goods hadn't been delivered after 5 days, or even 10 days.
Distribution had always been a pain point for Longting, but the fire made Li Xintao realize that it is almost impossible for a dealer to do everything perfectly. It's not realistic. It's better to outsource warehousing and distribution, focus on doing sales work well, and let each party do their own job.
Now Longting Trading has covered 11,000 outlets, with a frontline sales team of nearly 60 people. The backend still retains some vehicles for handling urgent orders and promoting new products through vehicle sales.
**2**
**Deploying vending machines, not to chase the trend**
As of now, Longting Trading has invested in over 120 vending machines in Zhengzhou, uniformly named 'Longting Micro Super'.
Li Xintao told New Distribution that although vending machines are a trend shouted out in the new retail era and an industry trend, our starting point was not to chase the trend. Before investing in vending machines, we did market research and found an interesting phenomenon: in hospitals or schools, there might be two or three machines placed, with different models, but they have one thing in common: severe product homogenization.
Operators may choose to cooperate with first-tier brands to ensure traffic, but the main group consuming beverages now is aged 15-35. They no longer drink like five years ago, with unified choices of cola, iced tea, and Mizone. Now these young consumers have diverse beverage choices and low loyalty. They are willing to try and accept second- and third-tier niche products.
In addition, considering the current situation of Longting Trading's represented products: we have good products but no way to display them, and some channels are inaccessible because of 'unknown' brands. Based on this background, we made the vending machines.
In actual operation, Li Xintao, in order to allow these 'niche, novel' products to interact more with consumers in the vending machines and let consumers fully understand the products, when selecting vending machines, he mainly chose intelligent ones with interactive interfaces, with prices ranging from 15,000 to 27,000 yuan.
Li Xintao calculated an account for New Distribution: currently, the average revenue of Longting Micro Super is 5,000-6,000 yuan per machine per month, with an average gross profit margin of 45%. Excluding rental costs of about 10%, each vending machine of Longting Micro Super is currently profitable. Although the initial investment is a bit large, the profitability is still good.
**3**
**Reverse assessment: reward first, then work**
In addition to outsourcing warehousing and distribution and deploying vending machines, Li Xintao also has his own set of sales management methods.
In his view, the current post-90s generation is different from the post-70s and post-80s. The post-70s and post-80s may value how much money they earn, while the post-90s care more about whether they are happy at work. These young people are playful and always have an attitude of 'if this place doesn't keep me, there are other places'. Therefore, at work, Li Xintao also plays with them.
Many dealers usually divide business units by region, such as South Group, North Group, West Group, etc., but Longting does not do these norms. Li Xintao told New Distribution that the name of this area can be arbitrary, as long as it is positive and energetic. For example, now the business groups are called Huashan Sect, Taishan Sect, and Changjiang Gang...
In terms of employee incentive assessment, more than 95% of trading companies settle at the end of the month: how many pieces Zhang San sold this month, how many Li Si sold, and then rewards and punishments. But Longting Trading does it in reverse: first give bonuses, then work.
Li Xintao told New Distribution that with the system of setting tasks at the beginning of the month and issuing bonuses at the end, salespeople don't feel anything from the 1st to the 25th, always thinking there is still time. But at the end of the month, they get anxious and post on WeChat Moments things like 'help me rush the task at the end of the month'... Longting has salespeople set their own sales targets for the next month at the end of each month, and the company does not assign tasks.
After setting tasks, the sales ranking is announced immediately. Whoever sets the highest task gets cash rewards on the spot, even phones. Whoever sets the lowest task is fined directly. Many people are unhappy on the spot, saying they haven't started working yet but are fined, so these salespeople voluntarily increase their tasks. Young people have a competitive spirit, and in the end, sales naturally increase by the end of the month.
In addition to assessment rewards, to avoid 'skipping stores, picking stores, and missing stores' during business visits, Longting Trading has also established a market supervision department that reports directly to Li Xintao and regularly inspects the market based on business routes or a new product.
**Final Thoughts**
The above is the transformation and upgrading case of Zhengzhou Longting Trading. Many people think that for dealers to transform and upgrade, they need to become warehousing and distribution providers, B2B platform operators, or retailers. But in the view of New Distribution, similar to Longting Trading outsourcing warehousing and distribution, focusing on the core function—sales promotion, and returning to the dealer's essential work, is also a way of transformation and upgrading.
Li Xintao told New Distribution that at this stage, Longting Trading doesn't think about anything else but to be down-to-earth, refine the Zhengzhou market, conquer terminal outlets one by one, and become a professional beverage dealer.
1. Why haven't dealers outsourced warehousing and distribution functions, especially those representing first-tier brands? In New Distribution's view, it's not that they are unwilling to outsource, but after outsourcing, even the last profit is gone, and they can't sustain operations. From another perspective, in the future, when urban distribution becomes infrastructure in regional markets, those dealers without first-tier marketing capabilities, especially new product promotion capabilities, will have no core competitiveness. The final way out may really be to become the front warehouse of B2B platforms, earning money from warehousing and distribution.
2. Regarding why they didn't transform into a B2B platform, Li Xintao told New Distribution that the current B2B platforms have too high expectations for circulation and distribution, and their purpose is too strong. The grand goals of 'change and subversion' require considerable costs. Even if they burn money, it's hard to cultivate fixed and long-term ordering habits among terminals. Now, for terminal small shops, ordering apps have gradually become an app for 'comparing prices'.
Although Longting Trading will also do an ordering platform in the future, Longting only treats it as an auxiliary tool to help terminals order more conveniently, rather than pursuing the so-called 'platform, ecosystem, traffic'.
**Extended Reading: Review the exciting reports of "New Distribution 100 People" [Click to view]**
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