Seeing this letter is like seeing me. I'm Yuan Lai from New Distribution. Over the past year, which word has been mentioned most frequently by frontline sales managers? Price, I think it's definitely number one. Although it existed before, it was more about online e-commerce and wholesale markets. But now, discount savings supermarkets, regional supermarkets, instant retail flash warehouses, and community fresh food chains are all in chaos, comparing prices with each other, with no lowest price but only lower! What to do about price chaos? Should we launch a new specification or packaging? That might only treat the symptoms, not the root cause. I think we should look at the current channel changes from a more fundamental perspective. In this article, I want to combine my research in the frontline market and exchanges with friends in the industry to talk about channel changes from a brand perspective, and at this turning point, adjustments in channel layout strategies.

Channel Changes on a Timeline Looking back at the past helps us understand the present and see the future clearly. Taking time as the axis, we can divide channel changes into five stages:

Stage 1: 1980-1990, Wholesale Period

Stage 2: 1990-2000, Distribution Period

Stage 3: 2000-2010, Supermarket Period

Stage 4: 2010-2020, E-commerce Period

Stage 5: 2020-present, Retail Period This is also a consensus gradually formed through exchanges with industry experts and teachers. I'll briefly elaborate on each development stage.

Stage 1: Wholesale Period, 1980-1990. During this stage, the FMCG market was basically in the "pioneering" era. Transitioning from a planned economy to a market economy, reforms in the commercial circulation system began. Commodity supply gradually started, from nothing to something. At that time, there was no so-called scientific "channel layout"; it was mainly based on provincial wholesale markets, local supply and marketing cooperatives, and sugar and alcohol companies.

Stage 2: Distribution Period, 1990-2000. At this point, true distribution layout began. Beverage giants like Master Kong and Coca-Cola began promoting deep distribution models, penetrating the market and controlling terminals. At that time, Master Kong divided the country into 1,200 small areas, each with its own sales representatives. A multi-tier channel management system was established based on administrative regions.

Stage 3: Supermarket Period, 2000-2010. Chain hypermarkets experienced rapid development. Carrefour, Walmart, Yonghui, RT-Mart, China Resources Vanguard, and local chain hypermarkets in various prefecture-level cities rose successively. This was when brand channel layouts began to stratify, divided into modern channels and circulation channels. KA hypermarkets were treated as key accounts independently, with designated distributors authorized. For circulation channels, local supermarkets and community stores were covered and distributed by city. At this time, brands focused more resources on KA modern channels, and some brands completed national layouts through KA, such as Unilever, Mondelez, Want Want, Haitian, etc.

Stage 4: E-commerce Period, 2010-2020. E-commerce experienced explosive growth. In the food sector, leveraging e-commerce, Three Squirrels was a phenomenal iconic brand. For mature brands, another branch was added to their channel layout: online e-commerce. Plus the previous offline: modern channels and circulation channels. Three lines operated in parallel. At that time, the most heard complaint was offline complaining about online price chaos. Although a bit chaotic, it was still controllable and independent. Gradually, differences in packaging specifications formed. KA packaging, e-commerce packaging, GT packaging. Brand channel layouts also corresponded one-to-one: online e-commerce (TP operators + flagship store self-operated), modern channels (direct supply + authorized designated distributors), and circulation channels (city distributors).

Stage 5: Retail Period, 2020-present. Online and offline retail are flourishing. Online instant retail, content e-commerce, and live-stream e-commerce continue to expand; offline discount retail, warehouse membership retail, community fresh retail, and regional retail supermarkets are rapidly expanding and iterating along their respective target user groups. We are currently experiencing this. Behind the flourishing retail is the diversification and stratification of consumer demand in a mature society. Diversified demand brings diversified demands for shopping scenarios. By the fifth stage, brands began to feel "at a loss" about channels, especially offline. Key retail accounts are increasing, and they are not "obedient." If they were obedient, it would just be a matter of profit distribution trade-offs. But now every key retail account wants the lowest price and differentiation. Whether new or old retail, they all want to control product discourse: first, shorten the chain to reduce product circulation costs; second, product differentiation to create reasons for customers to visit stores. From a retail perspective, this is understandable, but from a brand perspective, it poses higher challenges for omnichannel layout. Brands find that previously you managed channels, but now channels choose you.

Changing the Layout Strategy Centered on Administration Based on channel changes, let me share my understanding of channel layout at present.

First, channels are no longer simply purchase pathways; they require deep thinking about the consumption and usage scenarios behind consumers' purchases in that channel. What does that mean? Let me give an example: instant retail, delivering to consumers within 30 minutes. For brands, this is not just a new incremental sales channel. Instead, you need to think: behind the 30-minute convenient purchase, why do consumers need such a short time? What scenario are they in? What are they doing? What problem does the product they buy solve? First understand the consumption scenario behind the instant retail channel, then match the corresponding product (specifications, packaging, function, flavor, price, etc.), and finally formulate the strategy for this channel layout. If today you simply differentiate product specifications and packaging just to cope with channel diversification, you will never do well in that channel. Because today's channels are no longer just sales pathways. Redefine the product view: from physical specifications to scenario tasks.

Second, change the layout strategy centered on administrative regions to one centered on retail format types. In the past, offline channel layout strategies were mainly two types: authorizing local distributors to cover multiple channels locally based on administrative regions; and direct supply for NKA, RKA, and strong LKA. But now, that definitely won't work. As different chain retailers increasingly demand dominance over product discourse, brands must adjust to a layout strategy centered on retail types, supplemented by administrative regions. The layout strategy centered on administrative regions pursues the most efficient undifferentiated distribution coverage. The layout strategy centered on retail formats pursues the differences in consumption scenarios behind different retail types, and the corresponding product matching by brands. Let me give an example: on the same street, a "snack discount store" and a "convenience store" are two different species. The former seeks extreme cost-effectiveness, while the latter seeks extreme convenience. If you still use the same salesperson and the same policy to cover both, it will inevitably lead to price chaos and inefficiency.

Third, combine the characteristics of your category to assign influence values to different retail formats. No longer simply divide by sales volume or market size, but by purchase behavior (consumer mindset, consumer profile) under the retail type and the retail brand's position in the industry. What does that mean? For example, Pangdonglai, Sam's Club, Hema, and Xiaoxiang are high-influence channels. Although their sales volume may be limited in the total market, their influence value on other retailers far exceeds their sales volume, especially under the current trend of supermarket renovation and adjustment. Regarding category structure division and product selection iteration, they have become trendsetters. Additionally, based on consumer purchase behavior dimensions. For example, for condiments, community fresh food chains and instant retail like Pupu Supermarket and Dingdong Maicai are high-influence channels, while wet markets are low-influence channels. For beverages, chain convenience stores are high-influence channels; for daily chemicals, beauty collection stores are high-influence channels. No longer divide channel structure based on the economic level of first-tier, second-tier, high-line, or low-line cities, but truly return to the retail scenario dimension for effective channel type division. In short, brands need to redefine their "coordinate system": from sales-oriented to influence-oriented.

Fourth, establish a dynamic channel adaptation and iteration mechanism. In the past, brand channel layouts were relatively static; one cooperation could be maintained long-term. But now channels change rapidly and are dynamic. Therefore, it is necessary to build the capability of "quick pilot, quick exit, quick replication," turning channel strategy into a dynamic iterative system. It's not just about deciding "where to do business," but also establishing a mechanism for "dynamic adaptation - pilot replication - data-driven" channel layout. Only then can business goals be achieved in a fragmented and dynamic channel environment. Channel lifespans are shortening; organizations must become lighter and faster.

Summary The price collapse caused by today's dramatic changes in offline retail can no longer be patched up; patching won't help. We must re-examine each channel and the shopping and consumption scenarios behind each channel to determine new channel layout strategies. Forget the administrative map, pick up the retail map, and go find your consumers again. Everyone understands the principle, but truly shifting from "administrative region distribution" to "retail scenario adaptation" is like changing the engine of a moving car. How to redefine high-influence channels? How to reconstruct the "left and right hand" relationship between manufacturers and distributors amid the price collapse? These cannot be figured out by brainstorming in the office; they require seeing the road clearly, finding the right people, and working in sync. In March this year, at the CFC Conference in Chengdu, we will put these "broken" problems on the table. Abandon the old growth illusions and deeply dissect the "matching rules in an era of surplus." If you are also troubled by price involution and don't want to continue getting lost on the old map, welcome to Chengdu. Let us, amidst the torrent of drastic changes, find the ticket to the new continent. See you in Chengdu in March!