---
title: "Once Thriving, Now Being Cut: Why Have Secondary Distributors Reached This Point?"
description: "Secondary distributors once thrived by providing distribution, capital recovery, hotel terminal control, fast delivery, and new product launch support. However, due to weakened capital functions, information transparency, intense manufacturer competition, and their own learning deficiencies, they are now being phased out."
author: "唐江华"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-08-19"
language: "en"
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# Once Thriving, Now Being Cut: Why Have Secondary Distributors Reached This Point?

> Secondary distributors once thrived by providing distribution, capital recovery, hotel terminal control, fast delivery, and new product launch support. However, due to weakened capital functions, information transparency, intense manufacturer competition, and their own learning deficiencies, they are now being phased out.

**· Where does the vitality of secondary distributors lie? ·**
01
**Distribution capability**
Secondary distributors each have their own small territory, and through diligent visits and deliveries, they have cultivated loyal outlets in a small area. Especially in the era of extensive operations, primary distributors focused on making big money and looked down on the small profits from such small deliveries, so they were willing to let secondary distributors handle secondary deliveries to outlets. Over time, this formed a tacit understanding.
Moreover, secondary distributors do not specialize in a single brand; if they did, their competitiveness would be weak, and small-area outlets would not recognize them. This is quite different from primary distributors who focus on one or two or several brands. Because of this, secondary distributors do not pursue profit maximization for a single brand but focus on the overall profit of a delivery transaction—that is, how much can I earn overall from the goods this outlet orders? Rather than how much can I earn from delivering a single product? This reduces delivery costs, something that previous primary distributors could not do.
02
**Capital recovery capability**
Primary distributors sometimes face large funding gaps when they need to complete tasks or achieve phased inventory pressure with manufacturers. Relying solely on the primary distributor's own capability may not meet the manufacturer's funding requirements. At this time, early payments from secondary distributors can alleviate the primary distributor's capital pressure.
One of our clients, while handling our products, also handled popular brands like Red Bull. His Red Bull payments were made through early payments from secondary distributors, with almost no use of his own funds. A few years ago, when I was managing a health wine brand, due to monthly limited supply and planned promotion, the primary distributor's payments were also the result of early payments from secondary distributors, rarely using their own funds. These are examples of the capital reservoir function of secondary distributors.
There is also a capital advance function, where secondary distributors provide credit sales to downstream customers, especially to hotels. This financial risk is borne by the secondary distributors. If primary distributors bypass secondary distributors, they would be pulling the risk onto themselves.
03
**Control over hotel terminals**
Secondary distributors have a certain control over hotel terminals in their area. As the distributor for this small area, many hotel goods are supplied directly by secondary distributors, thereby establishing good customer relationships. These relationships are very useful when secondary distributors launch new products, much more effective than salespeople directly negotiating with hotel terminals.
Most importantly, secondary distributors control a small number of hotels in the area, allowing them to form deep customer relationships, and their development of these hotels is more thorough than that of salespeople.
04
**Faster delivery speed, more convenience**
Secondary distributors' deliveries are centered around their own stores in a small area, and they can usually reach outlets within half an hour. This convenience is a hard requirement and pain point for small outlets. Primary distributors find it difficult to achieve this unless their vehicles and personnel can keep up, but after calculating, they might lose profits, so they often give up.
This function is even more prominent for township secondary distributors. In the past, when roads were not particularly smooth, it was unimaginable for primary distributors to achieve full coverage of township outlets without the cooperation of secondary distributors.
05
**Faster new product launch speed**
In the past, manufacturers often required 80% outlet coverage within a week or half a month for new products. How was this achieved? Typically, they would gather the secondary distributors in their area, allocate outlets, set launch rewards, and once the secondary distributors' enthusiasm was mobilized, the manufacturer would assign a salesperson to assist and supervise one or two secondary distributors, and the weekly outlet target would be easily achieved.
06
**Market promotion effect is also obvious**
Secondary distributors sometimes have their own promotions. For example, if they have a good relationship with a manufacturer's salesperson or a primary distributor, that manufacturer's or primary distributor's products will be promoted by the secondary distributor, and the performance will be much better than similar competing products. Therefore, manufacturers or primary distributors will compete for secondary distributors, and sometimes, for market needs, they will replace secondary distributors in the area to cooperate with them. This is a game process, which I won't elaborate on.
However, the promotion by secondary distributors is limited to their own small area, and without linkage with other areas, the overall market impact is limited. This is also the fundamental reason why secondary distributors cannot fundamentally shake a manufacturer's brand foundation.
**· Why have secondary distributors reached the current situation? ·**
Currently, channel reforms represented by companies like Niulanshan and Luzhou Laojiao are all about de-secondary-distributor, weakening the functions and roles of secondary distributors. Platform and e-commerce companies like Yijiupi even propose to eliminate secondary distributors. What are the reasons for the once-thriving secondary distributors to reach the current situation?
**Weakened capital reservoir function**
Primary distributors, through years of accumulation, are now financially strong, and capital is not a problem. Moreover, credit is becoming more relaxed, and many primary distributors now have money but nowhere to invest. In this case, primary distributors' demand for secondary distributors' capital is increasingly fading compared to before.
Additionally, the function of inventory pressure on outlets has weakened. With information transparency, outlets are reluctant to hold inventory; they buy only what they sell, not wanting to tie up funds. When secondary distributors cannot collect payments, they are constrained by profits and naturally will not proactively pay advance funds to the upper level. Some even require primary distributors to give them credit periods, further losing the value of capital recovery.
**Information transparency forces chain shortening**
Previously, secondary distributors profited from the price difference between upstream and downstream. With the popularity of mobile internet, the price difference from manufacturer to consumer has been compressed repeatedly, and secondary distributors cannot find a profitable position in the middle. Primary distributors' profits can be reduced but supplemented by manufacturer subsidies and the small profits from many outlets to accumulate. What can secondary distributors rely on? The price difference is too small to cover the interest on capital turnover, and they also need to provide credit to terminals, so the pressure is immense. If they don't do it, their outlets will shrink day by day, and eventually, they will be abandoned by both manufacturers and terminals.
The prices secondary distributors give to outlets cannot be as high as in the era of information opacity due to e-commerce influence, and the price difference that primary distributors can offer is fixed; they cannot sacrifice their price system for secondary distributors, affecting the overall market. In this dilemma, primary distributors either reluctantly cancel secondary distributors and supply directly, or compress secondary distributors' profits, letting them earn a bit of transportation fee to maintain the fragile cooperative relationship.
**Intense manufacturer competition squeezes the living space of secondary distributors**
The ultimate goal of manufacturer competition is to control outlets and terminals themselves, even directly control consumers. Directly controlling consumers and winning them over is, of course, the best, as seen with Xiaomi, JD.com, and Jiuxian.com. But directly controlling outlets and terminals is what most liquor companies in the industry are doing, especially in recent years when government consumption has shrunk and consumer consumption has risen, making it a key action for liquor companies. Even Moutai and Jing Brand cannot resist the wave of channel flattening and are all moving away from large distributor cooperation models, let alone ordinary small and medium liquor companies.
Therefore, under the wave of refinement, it is not surprising that secondary distributors are left high and dry again.
**Intensified competition among secondary distributors weakens control over small areas**
Secondary distributors are also developing; some have developed well and become primary distributors. The small profits that primary distributors once gave them no longer satisfy their appetites. Where there is profit, there are people!
As a result, the appetites of small outlets in the area have also been whetted. Previously, there was only one distributor, and there was no room for negotiation. Now, with so many people coming to me, I will be picky and make demands. The control capability of individual secondary distributors over regional outlets has significantly weakened, and some have even lost their voice. Do you think such secondary distributors are still useful? Are they worth reserving a portion of profits for?
**Inability to learn, disappearing in the tide of the times**
The secondary distributors said to be eliminated in the industry are basically those who do not learn and do not adapt, always lying in the glory of the past, recalling life and begging for life. The times have changed; if you don't change, your past advantages will become your disadvantages, and you will trap yourself in a circle.
Great changes inevitably give rise to great development! The elimination of secondary distributors means more new models will emerge to replace them. Just as the decline of mobile information has allowed WeChat to flourish. According to the law of conservation of energy, the disappearance of one energy does not mean the death of that energy, but just another transformation of energy.
Therefore, your learning ability determines the height of your transformation, and the same applies to secondary distributors.
Source: Tangjiu Kuaixun (ID: tjkx99)
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