Editor's note: According to the Beijing Meteorological Observatory, from 20:00 on July 29 to 11:00 on August 1, 2023, the average precipitation in Beijing was 263.8 mm. The maximum rainfall in the city occurred at Wangjiayuan Reservoir in Changping, reaching 744.8 mm, the highest in 140 years of instrumental records in Beijing. On August 1, Xi Jinping, General Secretary of the CPC Central Committee, President of the country, and Chairman of the Central Military Commission, made important instructions on flood prevention and disaster relief work. Heavy rain in Chengdu, Zhengzhou, typhoons in Fujian, and heavy rain in Beijing - every major natural disaster reminds us of the awe we should hold for nature. And in every disaster, distributors are often the group suffering the most severe property losses. This article documents the current situation of some distributors during the July 731 heavy rainstorm in Beijing, hoping that manufacturers and distributors can unite to overcome difficulties. At the same time, it also hopes that distributors will always have a safety bottom-line awareness in their operations and not put their businesses at great risk.

"I never thought I'd have to take a boat into the warehouse one day"

Mr. Li is a food, beverage, and alcohol distributor in Haidian District, Beijing, representing brands such as Genki Forest, Watsons, and Huang Feihong Peanuts, with annual business turnover exceeding 50 million yuan. Due to tight warehouse resources in the urban area, he set up a sub-warehouse in a warehouse park in Changping District, with an inventory area of 1,700 square meters.

1) "Never thought the urban warehouse would be flooded"

"My warehouse is right next to the Wenyu River, only 50 meters from the riverbank. The rainfall in Changping District wasn't too heavy, but on the 31st, the water level of the upstream reservoir surged, and at 2 p.m., the Wenyu River's water level began to rise sharply. That afternoon, the entire park was flooded."

"There are about 17 warehouses in the park, 10 of which are food and beverage distributors. This time, all of them were affected without exception, and almost all are distributors of major domestic first-tier brands."

"I never thought a warehouse in Beijing would be flooded, so I hadn't considered buying insurance for the goods. Even less did I expect that one day I'd have to take a boat to get into the warehouse."

2) How much loss did this heavy rain cause?

"On the afternoon of the 31st, I transferred out the forklifts and delivery vehicles in advance, but over 2 million yuan worth of goods and warehouse equipment were all soaked in over 2 meters of muddy water, completely ruined."

(Piles of damaged goods in the warehouse)

"There's also the loss of accounts receivable IOUs. The system-based accounts are fine; the data is in the cloud. But a large number of handwritten IOUs and original vouchers were also soaked this time. If some terminal customers refuse to acknowledge the debts, there's nothing you can do. I estimate this loss is also over 1 million yuan."

"The ten distributors in the entire warehouse area, including goods and vehicle losses, amount to at least 30 million yuan. If all these losses are borne by the distributors, it's basically like going back to the 'pre-liberation era' overnight, or even worse. This is something we distributors simply cannot bear."

(A messy distributor warehouse after the flood)

If brand owners don't step in, affected distributors will find it hard to survive

"Many brand owners are still very concerned about distributors. As far as I know, many brand managers, or even higher leaders, called or came to the site to investigate immediately. They started to count losses, formulate plans, and apply to the company."

"For the Genki Forest brand I represent, the company's business supervisor came and stated that the company would definitely provide support to help distributors overcome difficulties. It's just that reporting to the company for approval takes time. Other first-tier brands have also shown responsibility, offering support policies, which are also in the approval process. Anyway, when brand owners provide solutions, I feel a bit more grounded."

"But one liquor brand I represent has an irresponsible attitude. They haven't given any stance, haven't promised to actively solve the problem, and even told us to continue paying for goods and stocking up as usual. With such huge losses, I'm about to go bankrupt, and they want me to borrow money to complete their stocking tasks? That's really disheartening. I hope this is just the attitude of grassroots staff, not the whole company."

In fact, in this heavy rainstorm in Beijing, there may be hundreds of distributors like Mr. Li who suffered huge losses. For example, a food distributor in Zhuozhou, Hebei, with a scale exceeding 100 million yuan, also lost over 10 million yuan in goods and more than 40 vehicles in this rainstorm.

According to a preliminary survey by New Distribution, almost all first-tier brands, including Qiaqia, Lay's, Snow, Nongfu Spring, Hsu Fu Chi, Master Kong, and Yinlu, had warehouses in Fangshan, Mentougou, Changping, or Zhuozhou, Hebei, and almost all of them suffered catastrophic losses.

With goods losses amounting to hundreds of millions of yuan, over a thousand delivery vehicles, and countless office equipment, the huge losses have directly plunged these affected distributors into operational collapse. In other words, if brand owners don't step in, most affected distributors will find it hard to survive this crisis.

"If a manufacturer truly treats distributors as partners, they will definitely lend a helping hand this time, and they will also gain the trust and loyalty of distributors. But if a manufacturer only treats distributors as tools for selling goods, then such a brand is not worthy of distributors' trust, and its reputation in this region will be ruined."

"Every affected distributor hopes to receive some support and assistance from the manufacturer to get through the difficulties. As partners who have always fought on the front lines for brand owners, this is a bit of hope after our huge losses. Please don't let our ten years of savings go to zero overnight, sending us back to the pre-liberation era," Mr. Li concluded.

(An affected distributor actively self-rescuing, showing determination to rebuild in a WeChat Moments post)

Warning after the flood: Distributors thrive in adversity and perish in comfort

We empathize with every affected distributor, and we deeply understand how difficult it is for distributor bosses to build up their businesses in today's environment of thin profits and increasingly fierce competition. We sincerely hope that affected distributors can smoothly overcome the difficulties, and we solemnly call on major brand owners to cherish these distributor 'allies' who have fought alongside the brand in the market, and to introduce some support policies at this critical moment to help them rebuild. However, we still believe that China's FMCG distributor community needs to summarize and reflect on these disasters one after another. Reflect on what? Reflect on how we should view business risks and how to set the safety bottom line for our own companies.

Why is it that once distributors are hit by disasters, they can only rely on brand owner support? Because the vast majority of FMCG distributors do not have commercial property insurance. Either they lack insurance awareness and didn't buy it, or they sought low-cost warehouses and couldn't get insurance. After the heavy rainstorm, New Distribution contacted several third-party urban distribution companies in Beijing and learned that as long as FMCG distributors had moved into professional cloud warehouses, they were safe and sound in this rainstorm, with no damage at all. The relevant cloud warehouse managers told us that even if a disaster occurs, their insurance coverage is sufficient to fully cover any potential losses.

So why haven't most distributors chosen third-party warehousing and distribution?

First, information asymmetry: they think third-party warehousing and distribution is costly. Taking Beijing as an example, beverage distributors that can deliver to terminals have a per-unit warehousing and distribution cost of 2.6 to 3 yuan due to long delivery distances and low vehicle efficiency, which is actually not low. In fact, many professional third-party warehousing and distribution companies have now reduced the per-unit cost for beverages to below 3 yuan through economies of scale and system-based route optimization.

Second, they think their business is special and third-party services can't meet their needs. For example, some distributors have clients like schools and government agencies that require delivery vehicles to be on a fixed schedule, with fixed vehicles and drivers, and sometimes urgent delivery needs. Distributors believe that third parties cannot provide such services. In fact, many professional third-party warehousing and distribution service providers have already proposed different solutions based on the characteristics of 2B delivery. They can fully cover the vast majority of distributors' business scenarios, offering customized solutions and differentiated pricing based on different scenario needs.

Third, they feel uneasy at heart. They don't feel comfortable with goods stored elsewhere, and they worry that third-party delivery might reveal customer information. This is the subconscious reason many distributors can't make up their minds to use third-party warehousing and distribution. This is a very backward business mindset, and such worries are completely unnecessary and go against the development trend of distributors. With business progress, specialization is inevitably the trend; doing everything means you can't excel at anything. Distributors should truly focus on business growth and how to meet customers' real needs. Customer relationships are enhanced by meeting core customer needs. If a delivery person can steal your customer, then you never truly owned that customer.

In the past two to three years, severe natural floods or accidental fires have occurred in major cities such as Chengdu, Zhengzhou, Beijing, and Quanzhou. We have also seen many distributors lose the fruits of more than a decade of hard work due to disasters. But distributors must learn lessons from these events and develop safety awareness and bottom-line awareness in business operations. We cannot rely on brand owners to save us every time a disaster strikes. So many distributors have already paid the price. If this still doesn't prompt distributors to reflect and improve, then it's the modern version of 'Those who mourn later do not learn from it, causing those after them to mourn them as well.'

In the final analysis, the manufacturer-distributor relationship is still a commercial partnership. Manufacturers have neither a natural responsibility nor an inevitable obligation to pay for distributors' unsafe business practices.

Additionally, just before this article was to be published, the New Distribution team learned from the market that Uni-President will provide support and assistance to four distributors that suffered significant losses in this rainstorm. We also hope that more brand enterprises will take action to help affected distributors overcome difficulties and resume normal operations as soon as possible.