---
title: "Secondary Distributors Are the Culprits Behind 'Price Chaos' and 'Cross-Region Sales'! Distributors Are Deeply Hurt!"
description: "Many manufacturers and primary distributors complain about secondary distributors, who are often seen as 'weather vanes' that buy high and sell low, and are blamed for price disruptions. This article explores the misunderstood world of secondary distributors, explaining their independent business logic and the real reasons behind their seemingly chaotic pricing strategies."
author: "小天"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-05-08"
language: "en"
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# Secondary Distributors Are the Culprits Behind 'Price Chaos' and 'Cross-Region Sales'! Distributors Are Deeply Hurt!

> Many manufacturers and primary distributors complain about secondary distributors, who are often seen as 'weather vanes' that buy high and sell low, and are blamed for price disruptions. This article explores the misunderstood world of secondary distributors, explaining their independent business logic and the real reasons behind their seemingly chaotic pricing strategies.

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Many manufacturers and primary distributors get a headache when talking about "secondary distributors" (二批), often criticizing them more than praising them: they "buy high and sell low"; they seem to know about promotional information in advance; they handle a large volume of sales but often cause trouble for manufacturers, leaving them with mixed feelings... The term "weather vane" (墙头草) has become deeply ingrained in the minds of manufacturers and primary distributors as a synonym for secondary distributors. With all these doubts, let's lift the veil on secondary distributors and interpret those seemingly "mysterious" phenomena.

The "Rebellious" Secondary Distributors?
In my view, the frustration that companies and primary distributors feel toward secondary distributors largely stems from a lack of understanding, and some of our perceptions are wrong.
In the subconscious of manufacturers and primary distributors, secondary distributors are part of their sales system, so they evaluate them using their own pricing systems and sales policies. If they "violate rules" or are "disobedient," they wield the big stick, punishing or fining them.
In reality, **the secondary distributor market is an independent entity with its own system.**

**First, secondary distributors operate with the goal of maximizing profits and building their own network relationships, which differ from the interests of manufacturers and primary distributors.**

**Second, secondary distributors have complex operational rules. Many phenomena that manufacturers and primary distributors find strange or unreasonable can be logically explained within this system, but manufacturers and primary distributors either don't delve deep or always act according to their own thinking.**

**Finally, manufacturers and primary distributors typically interact with secondary distributors through sales representatives. In the game between sales reps and secondary distributors, sales reps are at a disadvantage in terms of market information and overall competence (secondary distributors have years of experience in the market, and many were once sales reps themselves).**

Manufacturers subconsciously believe they are professional marketers and their sales reps are experts who know more than secondary distributors, so they always trust their own people. Therefore, the sales reps' judgments about secondary distributors become the manufacturers' judgments, and the sales reps' misunderstandings become the misunderstandings of manufacturers and primary distributors. This is the root cause of misunderstandings and erroneous measures.

The Culprit Behind "Price Chaos"?
We often hear secondary distributors in the market accusing each other of price chaos. Sales reps are also unclear about who is actually causing it.
Generally, price chaos is caused by excessively high rebates (aimed at competing for retail customers). In such cases, adjusting the rebate amount or setting conditions for rebate redemption can prevent secondary distributors from undercutting prices with rebates.
In the common view, secondary distributors buy all goods at low prices and sell at high prices, but that's not always the case. Secondary distributors pursue overall profit; among the products they sell, some have high margins, some low, and some are sold at a loss, depending on the sales target and market development needs.

**1. Competing for retail customers leads to price fluctuations.**
For example: Lao Zhang sells three categories of products—dried goods, food, and beer—labeled A, B, and C. For general customers, Lao Zhang profits by buying low and selling high.
Now, retail store Xiao Wang calls to inquire about beer A, whose normal wholesale price is 30 yuan per case. Xiao Wang usually wavers between Lao Zhang and Lao Li for purchases. So Lao Zhang tells Xiao Wang, "I have some promotional goods here, 29 yuan per case." After Xiao Wang agrees, Lao Zhang adds, "It's inconvenient to deliver just beer; let me add some dried goods and instant noodles." Xiao Wang agrees. So the three products are delivered together. Although the beer was cheaper, Lao Zhang made more profit on the other products.
When the sales rep from Company A approaches Lao Zhang, Lao Zhang denies it and instead accuses Lao Li of selling at low prices.
Will Lao Zhang supply Xiao Wang at a low price long-term? No. Next time Xiao Wang comes, Lao Zhang will say, "The promotion is over; I'll give it to you at 30 yuan per case." Xiao Wang, feeling embarrassed to go back to Lao Li, accepts.
Generally, such occasional incidents do not affect the price system, and primary distributors and manufacturers need not take measures against Lao Zhang.

**2. Extending the promotion period to attract new customers.**
Sometimes, after a manufacturer's or primary distributor's promotion ends, some secondary distributors continue to sell their promotional stock. When two distributors compete for customers, they may dump their promotional stock into the market.

**3. "Loss-leader" sales by "dumpers."**
In every market, there are a few secondary distributors known as "dumpers" (倒家), who are rumored to sell all goods at a loss. This is actually a facade—a deliberate message from shrewd secondary distributors to sales reps to apply pressure: "If you don't give me better terms, I'll sell at low prices and disrupt your market."
I know a secondary distributor nicknamed Wang Dongguan (he dominates the Dongguan market). He deals in multiple product categories: A, B, C, D. When a customer primarily orders product A, he prices A significantly lower than competitors but bundles B and C products. When a customer primarily orders B, he prices B low but bundles A and D. This creates the illusion that all of Wang Dongguan's products are cheaper than competitors.
Moreover, he deliberately delivers at low prices to store H, which the manufacturer frequently monitors. When sales reps visit, he warmly entertains them, showing off his thriving business. Many manufacturers can't withstand this psychological warfare and give in, giving Wang Dongguan more leverage for such games.
Does he sell everything at a loss? Who believes that? Sales reps might say, "I saw it with my own eyes!" Every manufacturer's sales rep has seen it, but we only see one side, not the other. Dealing with secondary distributors requires not just eyes but also feet and brains. Handling such customers tests the patience and wisdom of the manufacturer's staff.
The above "price chaos" behaviors should be allowed. Most secondary distributors have their own fixed customer base, and most terminals won't change their supply channels for a temporary price difference. Moreover, due to asymmetric market information, occasional price fluctuations are not known to most small retailers.
As for the impact, it's often exaggerated; many sales reps spread rumors without thorough investigation. If manufacturers or primary distributors impose fines or subsidies, the situation worsens: the penalized party may leave or retaliate, while the subsidized party may follow suit and cut prices further.

The "Omniscient" Secondary Distributors? They Thrive on "Inside Information"
Secondary distributor bosses are usually "active" and love making friends. They typically have "loyal customers" in the same market to ensure timely exchange of local information, and they also have peers in other regions to communicate with. Some even have close ties with primary distributors or back onto the manufacturer's "big tree." They are good at "pooling orders" (joint purchasing), so some secondary distributors can sell without even stocking goods.
When A gets promotional information, he immediately contacts B to verify and discuss countermeasures. So when a sales rep visits B, B throws out this information, putting the rep on the defensive: "I have connections; next time you have promotional info, you'd better tell me quickly! Don't try to hide it from me!"
Secondary distributors are usually more sensitive to the market than sales reps. Before the promotion season, they go to great lengths to gather promotional information, sometimes getting it before the sales reps.
Even if the information is worthless, they "bluff" the sales rep (to gain negotiation leverage), for example: "Next door, Boss Li sells over 200 cases a day, right?" Actually, they want to know about Li's business. "Product M gives a car for selling 2,000 units; what does your company reward now?" This is to learn about the manufacturer's current policies.
Facing such "bluffs," some inexperienced sales reps either make random promises or take the secondary distributors' words at face value, spreading and verifying them, causing a stir that the secondary distributors exploit.
Selling Generic Brands at High Profits
Wang is a secondary distributor in a certain area, shrewd and with some strength. Given the high profits of a small brand, Wang uses a popular brand to drive sales of this small brand, focusing on township markets. Through consignment and high margins, he gains support (many township terminals will try their best to sell once they receive goods), achieving good sales.
Some even shrewder secondary distributors customize generic products, design attractive packaging, extract novel selling points, and use high promotions and consignment methods. In certain remote areas they control, they sell at prices higher than branded goods.
These phenomena, exaggerated by secondary distributors and blindly spread by sales reps, create a big effect: these people are capable! These "special" secondary distributor groups are sometimes seen by manufacturers as "treasures" to be won over.
"You only see the thief eating meat, not the thief being beaten." In fact, many shrewd secondary distributors have stumbled on generic brands, after all, generic brands can only hide in remote places, and such secondary distributors are active only in a corner, on the fringes. Many sales reps often say, "So-and-so secondary distributor is so powerful," or "The competitor brand is so strong," which is actually an excuse for their own poor sales performance.
The "Loyal" Network That Can't Be Penetrated
I once accompanied primary distributor Mr. K to distribute Y brand instant noodles in the countryside. At a convenience store in L Town, we had barely said a few words when the owner said, "No, we have stock." Indeed, he had stock, and even though our price was lower than his purchase price, he refused, saying, "Boss Liu usually delivers to me (secondary distributor). You can come again later."
We encountered several such cases in a day.
Mr. K's sales rep said, "This is Boss Liu's long-time customer; no one else can get in. Don't bother trying to distribute here again." Is that really the case?
After some investigation, I found the reasons:
1. After we left, Boss L called Boss Liu to verify and try to get cheaper goods;
2. He had stock at the time, so he wasn't in a hurry to buy;
3. Boss Liu delivers a full range of goods—food, daily necessities, etc.—in one go. If he rashly accepted goods from primary distributor K, his procurement costs for other items would increase;
4. Terminals owe money to secondary distributors. If they don't buy from them, they have to repay the debt. To maintain working capital, terminals try to buy from secondary distributors as much as possible;
5. Boss Liu times his deliveries well, knowing when to restock, while K's sales rep doesn't visit the market often and misses the right timing.
The main reason here is unfamiliarity. If they visited more often and timed it right, they could get their goods in. But many sales reps give up after a few tries, perpetuating this abnormal situation.

Reading Secondary Distributors Correctly
After years of dealing with secondary distributors, I've learned that they are fighting for survival with all their might because competition among them is fierce, and they lack competitive advantages. So they focus on exploiting information asymmetry and areas that upstream sales personnel don't think about or see.
However, with the rapid development of transportation and communication (making information more transparent), the rapid rise of modern terminals, and the push for market flattening, sales rep dealerization, and regionalized product sales, the situation for secondary distributors has become more difficult.
Many companies and marketing personnel fail to see the huge role secondary distributors play in product sales, always viewing them as a third party sharing profits. In the minds of marketing personnel, corporate profits cannot be reduced, and terminal prices cannot be high. What to do? Only by squeezing secondary distributor profits (unaware that there are many better ways). So large companies do direct sales, small companies do distribution—whenever possible, they abandon secondary distributors (wholesale departments in first- and second-tier cities are dying at a rate of 10% per year, and this trend is gradually spreading to third- and fourth-tier cities).
Facing increasingly severe market conditions and pressure from all sides, **secondary distributors are also optimizing and transforming internally, seeking breakthroughs: some are building their own terminals, transitioning to supermarkets and hypermarkets; some are forming horizontal alliances, such as "wholesaler associations" in second- and third-tier cities; some are aligning with big brands to become their distributors; some are moving upstream, buying out brands or products to become brand distributors.**
Regardless, existing secondary distributors still use every trick to maneuver among manufacturers, primary distributors, peers, and terminals. In their world, there are ever-changing strategies, full of deception and complexity—far from the simple first-tier price, second-tier price, terminal price, distribution, and promotion that manufacturer personnel design! Therefore, when dealing with secondary distributors, you can't disbelieve everything, but you can't believe everything either. Don't make a fuss over nothing; go deep into the market and get to the root of things.

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