Many distributors are asking why business is so difficult this year and when it will get better. Business has been tough for a decade, and many bosses have expressed such sentiments. The difference is that back then, despite the difficulty, business was barely passable; today, it's almost unsustainable. When upward growth is hard, large enterprises habitually squeeze downward. First, they squeeze distributors; second, they use price and cost wars to squeeze small and medium brands. A milk distributor told the author that in 2023, with revenue exceeding 100 million yuan, after deducting all expenses, they found themselves losing hundreds of thousands. With sales scale exceeding 100 million, yet losing hundreds of thousands a year—while not yet a universal phenomenon, it is increasingly common in certain categories. Most distributors say times are tough, and some are at a life-or-death moment. What can distributors do at this time? Why is the FMCG business no longer easy? Only in hindsight do we realize that the distribution business we complained about over a decade ago was actually quite good. Instead of answering why business is hard today, it's better to answer why it was easy in the past. The truly key answer is only one—the times. Does the capability of distributors matter? Of course, but it's not the key. Individual capability determines your survival qualification and even industry position, but in the face of "era factors", individual capability has negligible impact. "In a big fire, there is no wet wood; in big waves, there is no sinking sand." The past four decades were an era of continuous market expansion. As long as distributors actively participated, regardless of size or strength, there was room to survive. Your efforts would eventually be rewarded, and the reward often exceeded expectations—this was the era of incremental growth. But the economy always has cycles, and today the times have changed. "New Distribution" has repeatedly analyzed why the era of incremental growth in FMCG has become a thing of the past. Population growth, brand and category penetration rates, and consumer shifts—at any level, it is clear that the era of "incremental" will not return. From a broader perspective, the society-wide "homogeneous overcapacity" and "supply-side reform" also prove that the era of "volume" is over. In the coming market competition, there will inevitably be fierce and cruel "involution" competition to clear excess capacity, forcing redundant enterprises and distributors to exit the market until supply and demand balance again. Those participating in the involution are not just the original distributors. Although FMCG is no longer a good business, compared to other industries, FMCG's relatively stable cash flow and market seem like a good business. So, while distributors in the industry complain bitterly, many outsiders are flocking into FMCG, such as beer and liquor. Not to mention that since 2014, various internet-backed players have entered FMCG, stirring things up and making the industry's survival situation even worse. Do you think today's FMCG business can be easy? What should FMCG distributors do? Self-pity will not help you out of trouble. The sun will rise as usual; no matter how hard it is, distributors' companies must continue operating. But how to continue? In 2024, "New Distribution" went deep into the market and visited a large number of frontline distributors. Through in-depth research and discussions with many excellent distributors, we summarize and give the following suggestions to confused distributors. 1. First, establish a strategy: advance or retreat? Distributors' businesses are local, and the environment and problems they face today are very specific. What is the channel landscape in the local market, and what is your position? Do your brand resources have an advantage? Do your team capabilities and channel network have advantages? If the answers to the above are all yes, then the era of shrinking volume may be an opportunity for you to consolidate your position and increase market share. If the answers are no or uncertain, ask yourself: if in the future there are only three distributors in this regional market for this category, what is the probability that you will be one of them? If the probability is high, it's worth a try; if low, consider gradually reducing scale or even selling the business. Because in the visible next three years, business pressure will only increase. At this time, retreating may not be another way of advancing. 2. Second, determine the direction: where to go? In changing times, the worst way is to stand still. Even if you can't find a business development direction for the moment, you can start by improving internal capabilities in organizational models, internal management, digital tools, etc. Most distributors have historically focused on business growth, with weak internal control management; this is the perfect time to optimize and improve. For distributors, there are only a few future paths, and not all are suitable; you must choose one. Three main paths for distributors We mainly analyze the three most important paths. First, the firm brand distributor path. Distributors all started with brands, and most can succeed on this path. But choosing this path requires several necessary conditions: The category is on an upward trend with long-term prospects, such as snack foods, seasonings, and light bottle liquor; The brand companies you choose should have a good reputation, be willing to follow rules, have certain strength, and their current brand position is secondary; You should have contact and good personal relationships with the company's boss or president to ensure you won't be abandoned by regional managers later. Second, transform into B2B, becoming a local supply chain platform. I don't deny that B2B is one of the future trends. But I firmly believe that 99% of distributors transforming into B2B will not succeed. The reasons are as follows: B2B platforms require a certain internet operation gene, which is contrary to the genes of most distributor bosses and teams; Investment is large and requires continuous investment. B2B is not just about installing ordering software; later operations require professional teams and long-term promotional policies. Currently, distributors doing B2B in various places are almost all losing money, subsidizing the platform with agency profits; Local B2B is bound to be an oligopoly business. Therefore, before a true absolute oligopoly forms, fierce competition among several local B2Bs is inevitable. In the end, the winner takes all, and the losers lose everything; If the hardship of being a distributor is 100 points, then the hardship of doing B2B is at least 300 points. Distributors who are not prepared for this should be cautious. Given the above reasons, if you have sufficient strength, capability, and determination, you can enter B2B. Otherwise, entering rashly will surely make you regret it. Third, transform into professional logistics, becoming a local logistics service platform. Many large brand distributors have capabilities mainly in capital and logistics. Such distributors transforming into logistics save on infrastructure investment in warehousing and transportation, and have a certain business volume as a base, making the transformation path the shortest. But the challenges for such distributors are mainly two: First, transforming from internal logistics to professional logistics services is not just a word; it requires significant changes in digital systems, organizational structure, service standards, and systems. Second, how to scale up the logistics business. Without volume, logistics services cannot make money. It's likely that you won't get business from distributors of the same category in the same city. So, how to obtain enough local business in the short term and how to integrate into the national logistics network to gain incremental business is a major challenge for such distributors. But relatively speaking, the direction of transforming into professional logistics is suitable for most distributors with sufficient transportation capacity, but they should not go it alone; they can cooperate with professional third-party systems, such as Annto Zhilian, which is at the forefront in this field. Of course, there are other transformations like new retail channels, or even going upstream to become a brand, or downstream to open discount stores, etc., which are not representative and will not be elaborated here. Key action for transformation: Stones from other hills can polish jade In the era of shrinking volume, the most critical action for distributors to take is "see how others do it." In the past three years, "New Distribution" has organized multiple in-depth study tours for distributors and held several large-scale industry conferences, with many distributors actively participating each time. Many distributors have had a good start in their transformation in recent years, and some have achieved initial success. One important reason is that they left their cities, participated in industry activities, gained experience from excellent distributors across the country, and made their transformation path well-chosen and stable. At this time, we urgently want to see more successful cases and practical methods from excellent distributors. From August 20-22, 2024, at the "3rd China FMCG Distributor Conference", New Distribution will invite benchmark distributors from various regional markets to share their thoughts and practices in depth. This will provide inspiration and thinking for distributors still anxious and confused, helping them find the direction for business development. At the same time, a seminar on "Regional B2B x Brand: Breaking the Ice" will be held, inviting 20+ regional leading B2B platforms and 20+ brand sales directors to interpret the key paths and methods for distributors to do regional B2B from multiple dimensions, while helping regional B2B and brands achieve precise demand matching and discuss growth together. Interested friends are welcome to scan the QR code for more details about the conference!