---
title: "Secondary Distributors: A Brand's Pain?"
description: "In provincial capitals and above, secondary distributors once greatly increased product coverage but are now a pain point for almost all brands. The article categorizes provincial capital models, discusses price chaos under squeeze competition, and suggests that internet platforms may solve the secondary distributor problem."
author: "刘春雄"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2017-07-24"
language: "en"
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# Secondary Distributors: A Brand's Pain?

> In provincial capitals and above, secondary distributors once greatly increased product coverage but are now a pain point for almost all brands. The article categorizes provincial capital models, discusses price chaos under squeeze competition, and suggests that internet platforms may solve the secondary distributor problem.

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Author|Liu Chunxiong
Source|Teacher Liu's Forum (ID: liuchunxiong1964)
**No secondary distributors, no sales**
In cities at the provincial capital level and above, secondary distributors once played a huge role in increasing product coverage, but now they have become a pain point for almost all brands.
1**The difference in provincial capital models lies in secondary distributors**
There is a big difference between provincial capitals and county towns, and the core of the difference is not scale but the role of secondary distributors. I roughly divide the secondary distributor models in provincial capitals into three categories:
**▊First, the "Unified Model"**
Its core is "strong secondary distributors, weak primary distributors." In the unified provincial capital model, primary distributors basically only play the role of "payment," and secondary distributors are the key. However, secondary distributors are controlled by Unified, and they only undertake distribution functions, with orders in the hands of the manufacturer. Even in the "self-operated to customer-operated" plan under Unified's planning, orders remain in the hands of primary distributors. So, in the "Unified Model," secondary distributors are controllable. The cost of controllability is also high: in provincial capitals with more than 30,000 circulation stores, taking orders from such a large number of stores is a very complex task.
**▊Second, the "Old Village Chief Model"**
The Old Village Chief Model is "no secondary distributors," where agents directly serve terminals. Taking an ordinary provincial capital as an example, to cover 30,000 circulation stores and 20,000 catering outlets, a distributor needs about 100 delivery vehicles and a sales team of about 150 people.
**▊Third, the ordinary model**
In the ordinary model, primary distributors do the market, secondary distributors take orders and deliver, and the market is actually in the hands of secondary distributors.
Among the above three provincial capital models, the first two are characterized by hard work but controllable markets. The ordinary model is relatively easy but markets are prone to losing control.
2**Price chaos under squeeze competition**
In 2013, almost all FMCG industries reached their historical peak in sales volume. Since then, declining sales have become the norm. The FMCG industry has entered a state of 'squeeze competition.'
**Squeeze competition means that if you don't squeeze in, you will be squeezed out.** Even if sales decline, it is still the result of squeezing.
Squeeze competition creates a bad outcome: the more a distributor operates big brands, the thinner the profit, and it can even become a source of losses.
Because in the squeezing process, big brands are relatively sharp squeezing weapons. So, big brands are used as weapons, with policies as the guide, to carry out strong squeezing.
The main way of squeezing is "tiered policies." Tiered policies are not only absorbed by terminals; some are absorbed by secondary distributors, and some are used for cross-regional selling (dumping).
Cross-regional selling in provincial capitals affects prices within a 100-kilometer radius. In the internet age, price changes spread too quickly, especially for big brands.
"Provincial agent resurgence" and convenient logistics also make cross-regional selling more convenient than in the past.
All cross-regional selling is behind price chaos.
3**Secondary distributor policies feed B2B platforms**
The B2B platforms currently on the front line are basically "super secondary distributors." What they do now is the work of secondary distributors. They can get goods because of secondary distributor policies. Without this gap of secondary distributors, their survival would not be easy.
**The magic weapon that e-commerce has tried and tested is 'subsidies,' and subsidies mean low prices. The combination of tiered policies and B2B subsidies forms the survival soil for B2B platforms.**
B2B platforms initially did not intend to become "super secondary distributors." If they had known they would play this role, they would have felt ashamed. But why did they eventually become "super secondary distributors"? It is because of the widespread existence of secondary distributors in provincial capitals and above.
Self-operated B2B is currently mainly in provincial capitals, while county-level markets are basically platform-based B2B. Self-operated B2B chooses provincial capitals not only because of large scale but also possibly because of the widespread existence of secondary distributors.
The channel structure in provincial capitals is vastly different from that in county towns: in provincial capital markets, secondary distributors are almost indispensable; in county towns, secondary distributors are supplementary. Secondary distributors in county towns are basically "wholesale and retail, mainly retail." Even if secondary distributors disrupt prices, it will not affect as widely as in provincial capitals.
4**The "secondary distributor pain" of big brands**
In the past, agents were proud to represent big brands. Now, if you only represent big brands, it is the most uncomfortable. Big brands do not make money; it is by leveraging big brands to drive small brands that there is a little profit. So, the brand structure of agents is very important.
For brand manufacturers, it is increasingly difficult to force agents with brand power. If the provincial capital problem is not solved, other markets will be affected.
**In the past, deep distribution was the solution to the secondary distributor problem. Now deep distribution has been abandoned, and we cannot solve the 'secondary distributor pain' with deep distribution thinking.**
'Platform thinking' might be an effective way to solve this problem.
In the internet age, channels are changing. In the past, agents did everything, but efficiency was low. What changes are happening in channel structure? The internet is characterized by "reducing dimensions to form platforms."
■**Taking the provincial capital channel as an example, three major platforms are now forming:**
  * **First, the unified warehousing and distribution platform;**
  * **Second, the order platform;**
  * **Third, the operation platform.**
The above three major platforms will dismember the functions of traditional operators. Each field will have large platforms, and the efficiency of large platforms will be higher than that of agents.
For example, the distribution efficiency of agents is currently very low. Secondary distributors were originally supposed to undertake distribution tasks, and other functions came with distribution. Rather than letting secondary distributors undertake distribution tasks, it is better to let more specialized unified warehousing and distribution platforms undertake them. The warehousing and distribution platform directly delivers goods to terminals without going through secondary distributors, eliminating the problem of cross-regional selling and price chaos by secondary distributors.
After "dimension reduction," agents will hand over distribution and order tasks to large platforms, leaving only operation and promotion tasks, which can be solved with relatively few elites.
Secondary distributors have always been both loved and hated by manufacturers and distributors. Around secondary distributors, manufacturer and distributor models have constantly changed. In the future, the real solution to this problem may still be internet tools.
Under traditional thinking, the secondary distributor problem in provincial capitals has no solution. But the emergence of internet B-end platforms may be an opportunity.
**The internet will definitely change channels, but channel merchants will not die.** Some people worry that agents will be killed by platform companies. I do not think there is such a worry. If you really refuse, then there is indeed a possibility of being killed.
Given that B2B has already gained some momentum in provincial capitals, why not cooperate with B2B platforms to solve this problem?
**Not all B2B are enemies of manufacturers and distributors. The task of manufacturers and distributors is to find B2B platforms that 'help distributors make business simpler.'**
The emergence of platform companies actually provides an opportunity to solve the secondary distributor problem. It is just a matter of whether others are using you, or you are taking advantage of others.
The time to recommend internet platforms to solve the "secondary distributor" problem has come.
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