---
title: "Rising Costs and Expenses: How Should FMCG Distributors Navigate the Current Phase?"
description: "An online article once went viral, titled 'It's Not That the Old Have Turned Bad, but That the Bad Have Grown Old.' The bottleneck in the FMCG market is similar: 'It's not that customers have decreased, but that channels have aged.' Comparing e-commerce platforms from ten years ago to today reveals a world of difference, yet comparing terminal stores from ten years ago to today shows little change, not even a year's worth. Since we've fallen behind, we must catch up. FMCG distributors now face declining channel sell-through rates, rising market expenses, increasing personnel wages, and high trial-and-error costs."
author: "丁律宇"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-11-08"
language: "en"
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# Rising Costs and Expenses: How Should FMCG Distributors Navigate the Current Phase?

> An online article once went viral, titled 'It's Not That the Old Have Turned Bad, but That the Bad Have Grown Old.' The bottleneck in the FMCG market is similar: 'It's not that customers have decreased, but that channels have aged.' Comparing e-commerce platforms from ten years ago to today reveals a world of difference, yet comparing terminal stores from ten years ago to today shows little change, not even a year's worth. Since we've fallen behind, we must catch up. FMCG distributors now face declining channel sell-through rates, rising market expenses, increasing personnel wages, and high trial-and-error costs.

> An online article once went viral, titled 'It's Not That the Old Have Turned Bad, but That the Bad Have Grown Old.' The bottleneck in the FMCG market is similar: 'It's not that customers have decreased, but that channels have aged.' Comparing e-commerce platforms from ten years ago to today reveals a world of difference, yet comparing terminal stores from ten years ago to today shows little change, not even a year's worth.
Since we've fallen behind, we must catch up. FMCG distributors now face **declining channel sell-through rates** on one hand, and on the other, **continuously increasing market expenses, rising personnel wages, and high trial-and-error costs**. It's like being blocked from the front and pursued from behind. How can we survive and carve a path in such a difficult environment?
> Strategy 1: Leverage the Internet to Reduce Operating Costs
As FMCG distributors, operating costs mainly consist of labor, warehousing, and vehicle transportation. Logistics costs are unavoidable and will increase. However, for managing and communicating with terminal outlets and sub-distributors, we can fully utilize internet tools. For example, use WeChat to manage inventory digestion and sell-through rates, or use micro-courses to teach sub-distributors and small shop owners sales knowledge on how to sell products better.
With rising wages, can we negotiate contract-based employment with employees? For instance, if you're responsible for 50 stores, I'll give you a minimum basic salary, and then you can increase your income based on the purchase volume of the stores you manage. This gradually transforms the employee-boss relationship into a partnership, which can also reduce operating costs to some extent.
> Strategy 2: Agent Functional Foods to Align with Consumption Upgrades
China has experienced three consumption structure upgrades. The first was at the beginning of reform and opening-up, when grain consumption declined and light industrial product consumption rose, bringing market dividends to industries like clothing.
The second occurred in the 1980s-1990s, when the 'old three items' (bicycle, watch, radio) were replaced by the 'new three items' (refrigerator, color TV, washing machine), marking China's transition from subsistence to moderate prosperity. Subsequently, manufacturing strongly drove the economy, fueling the second wave of consumption upgrades.
Currently, we are undergoing the third consumption structure upgrade. The FMCG industry primarily developed from the second wave. To keep pace with the times, FMCG distributors must first seek products that align with the third consumption structure upgrade.
The core of the third consumption structure includes education, entertainment, culture, transportation, communication, healthcare, housing, and tourism. Among these, the only sector that aligns with the FMCG industry is the health sector. Six Walnut tells us that functional drinks for brain health can sell 15 billion yuan, and JDB tells us that drinks for preventing heatiness can account for 80% of canned herbal tea. Foods with functionality and healthy formulas should be prioritized by FMCG distributors.
> Strategy 3: De-homogenize Operations and Establish Personal Labels
Traditional FMCG distributors have no labels. Larger ones are known for representing Nongfu Spring, Yake Candy, or Yili Milk; smaller ones take on any FMCG brand, essentially being peddlers.
When all FMCG distributors are peddlers, there's no differentiation or competitive advantage—it's just about who has more terminal partnerships and who represents bigger brands. But now many niche brands have emerged, directly facing end users, and the barriers built through channels are being gradually breached.
Distributors with FMCG sell-through experience can fully leverage internet channels. Those in snacks can establish a label as snack experts; those who understand beverages can label themselves as beverage experts. In the internet age, identity is power, and labels determine fate. If you're just an FMCG distributor with terminal channel resources, you'll inevitably depreciate in the future.
The transformation goal for FMCG distributors should be to become excellent FMCG product consultants and sales consultants.
> Strategy 4: Serve Quality Terminals and Improve Sell-Through Efficiency
If previously the distribution rate for FMCG needed to be above 30%, in the future, 20% might suffice. We should eliminate terminal outlets that lack sell-through capability or struggle to survive on their own. If one store could previously cover a residential area, now it might need two areas to sustain a store of the same scale. Therefore, the number of offline outlets will decrease, inferior terminals will be phased out, and collaboration efficiency among quality terminals should improve, gradually forming small circles and then rising to small platforms. This not only enhances local sell-through efficiency but also increases bargaining power with brand owners. For example, in Shanghai, Nongfu Spring water stations have gradually formed a water station alliance, which better protects distributors' interests.
> Strategy 5: Integrate the Supply Chain and Build a National Channel
There are many businesspeople in China today, but most fail in market expansion. So if you're an experienced veteran FMCG distributor, you can consider building your own products and brands to recruit apprentices nationwide and expand into the national market.
Nowadays, there are almost no significant barriers to producing FMCG products. If you're not good at product development, you can also take on the national general agency for a promising product—many brand owners would likely approach you.
Whether you're an old FMCG expert or new to the industry, you're welcome to connect. The FMCG industry needs collective wisdom to break free from the current awkward market situation. How to find hit products, how to distribute efficiently, how to reduce costs—feel free to share your views and spark discussion.
**Source: Entrepreneur Yu Lu (ID: cyyl688)**


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