--- title: "Second-Tier Distributors Are the \"Brand Killers\"" description: "Second-tier distributors in rural markets survive on profit margins, not brand loyalty, making them a barrier for branded products. To overcome this, manufacturers and first-tier distributors must create profit space for second-tier distributors through regional monopolies, high-entry pricing, and sub-brand launches." author: "刘春雄" publisher: "New Distribution" email: "zhaobo258@gmail.com" telephone: "+8615854817671" published: "2014-08-16" language: "en" canonical: "https://xinjignxiao.com/en/articles/second-tier-distributors-are-the-brand-killers-5a8f0f8c/" markdown: "https://xinjignxiao.com/en/articles/second-tier-distributors-are-the-brand-killers-5a8f0f8c.md" original_source: "https://mp.weixin.qq.com/s/Ioj4h1Ahzkb_-sSr8XE6Fg" translation: "https://xinjignxiao.com/zh/articles/%E4%BA%8C%E6%89%B9%E6%98%AF%E5%90%8D%E7%89%8C-%E6%9D%80%E6%89%8B-5a8f0f8c.md" attribution: "New Distribution — https://xinjignxiao.com/en/articles/second-tier-distributors-are-the-brand-killers-5a8f0f8c/" usage_policy: "https://xinjignxiao.com/ai-policy.txt" --- # Second-Tier Distributors Are the "Brand Killers" > Second-tier distributors in rural markets survive on profit margins, not brand loyalty, making them a barrier for branded products. To overcome this, manufacturers and first-tier distributors must create profit space for second-tier distributors through regional monopolies, high-entry pricing, and sub-brand launches. **Friendly Reminder:** Click the blue text above “FMCG Distributor Professional Consulting” to learn more about marketing and distributor internal management. **Second-Tier Distributors Sell "Profit Margins"** Currently, for products to enter the rural market, township second-tier distributors remain an insurmountable barrier. Due to the scattered residence of rural inhabitants, low purchasing power of farmers, small scale of rural consignment stores, and underdeveloped rural transportation, manufacturers or county-level distributors find it difficult to directly supply village-level consignment stores. At best, they can only directly supply to larger villages and those along major traffic routes. Some forward-thinking township second-tier distributors have already begun delivering to village-level consignment stores. First-tier distributors are typically factory general agents, surviving on sales volume and rebates. Terminals survive on "terminal monopoly" and high retail gross margins. Second-tier distributors survive on "profit margins." First-tier distributors build brands; second-tier distributors build categories. This dynamic determines that second-tier distributors become "brand killers." First-tier distributors very much hope to turn their agency brands into famous brands, thereby reaping greater benefits. Terminals hope to sell famous brand products because they sell well. Consumers want to buy famous brands, as they usually represent the maximization of consumer interests. However, second-tier distributors do not like famous brands because their prices are highly transparent, or prices have already hit rock bottom, leaving little "profit margin." All benefits for second-tier distributors are realized through "profit margins." Products without profit margins are not welcomed by second-tier distributors. Second-tier distributors are not afraid of ruining any brand because they sell categories; if sales are poor, they immediately switch to other brands. In rural markets where second-tier distributors dominate, famous brand products are hard to find. Although second-tier distributors are called "brand killers," they do carry a small amount of famous brand products, but the most prominent positions are always reserved for products with the largest profit margins. Famous brand products are usually placed in inconspicuous corners. If a buyer insists, second-tier distributors will sell them. **Creating "Profit Margins" for Second-Tier Distributors** To solve the second-tier distributor problem, one must start from the perspective of "profit margins." Method 1: Regional monopoly for second-tier distributors. Manufacturers typically grant regional monopoly authorization to distributors—general agency—but first-tier distributors rarely grant regional monopoly authorization to second-tier distributors. As long as competition among second-tier distributors is allowed, prices will quickly hit rock bottom. Therefore, first-tier distributors can select second-tier distributors and grant them regional general agency monopoly authorization, thereby protecting their interests. Regional monopoly authorization can take various forms, such as category general agency, brand general agency, or product variety general agency. Method 2: Adopt a "high-open, low-go" approach for product launch. That is, enter the market with a higher price, then gradually lower it. This has three major benefits: First, a high entry price gives the product a higher positioning and a better image. In today's market, where consumers cannot make substantive judgments about products, they can only infer quality from price. Second, a high entry price provides greater policy space, giving second-tier distributors the incentive to promote new products, which is conducive to successful new product promotion. Third, as the price gradually decreases, each reduction creates a new "profit margin" for second-tier distributors. Method 3: While maintaining the main brand unchanged, continuously launch new sub-brand products. The benefits are: First, keeping the main brand unchanged allows leveraging its influence to promote sub-brands. Second, each new sub-brand creates a new "profit margin" for second-tier distributors. **Second-Tier Distributors: The Eternal Pain of Famous Brands** In urban markets, second-tier distributors are nearly extinct, but in rural markets, they will continue to exist for a considerable time. Urban markets have long been dominated by famous brands; the smaller the terminal, the more it sells famous brands. Supermarkets and hypermarkets, due to their capacity to accommodate a wide range of brands, actually have a higher proportion of non-famous brands. It is not that farmers cannot afford famous brand products, but that they cannot buy them. Due to the barrier of second-tier distributors, famous brand products find it difficult to cross township second-tier distributors to reach village-level consignment stores. Whoever solves the township second-tier distributor problem will truly become a famous brand in the Chinese market. --- **Like this article? Feel free to click the top right corner to share it to your Moments.** About us: WeChat Name: FMCG Distributor Professional Consulting Management Account Introduction: 20 years of FMCG distributor operation and management experience, professionally addressing distributor internal issues. Click the "Read Original" link below to enter our micro-community for interactive communication and questions. Learning and Exchange QQ Group: 344257092 Reply 1 to enter the micro-official website to view historical messages. --- --- ## Copyright and AI use This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL. Contact: zhaobo258@gmail.com · +86 158 5481 7671