Traditional trading businesses are increasingly difficult, so where is the way out for distributors? In the past era of “dividing the cake,” as long as you were willing, it was only a matter of eating faster or slower and getting a bigger or smaller share; but now it is an era of “grabbing the cake,” and distributors must continuously innovate to keep up with market changes. In Zhengzhou, Henan, there is a boss who initially ran a general merchandise trading business, then entered the pet supplies industry, became a supplier to Pangdonglai, and through deep cultivation of the pet category, built strong product solution capabilities, becoming a one-stop, full-store output operation solution provider for pet supplies in supermarket channels. This boss is Chen Yixin. His Haocheng Pet currently represents 151 domestic and international pet supplies brands of all sizes and has established cooperative relationships with over 3,000 supermarket stores across 32 provinces, municipalities, and autonomous regions nationwide. Mr. Chen runs a trading business, but it is completely different from traditional trading that mainly handles transportation, capital advances, and order fulfillment. Supermarkets only need to provide space; Haocheng Pet is responsible for designing shelves, configuring product assortments, helping supermarkets design operational rhythms, providing private domain operation solutions, and resolving after-sales issues. Haocheng Pet represents a development direction for distributors: becoming a category operator that helps retailers sell better. How did Haocheng Pet develop? What inspiration can its operational approach offer to traditional FMCG distributors? Abandoning General Merchandise, Deeply Cultivating the Pet Supplies Industry In 2010, Chen Yixin entered the FMCG industry, serving as the head of a general merchandise trading company. At the company's inception, it supplied to large supermarket systems such as Yonghui, China Resources, and Beijing Hualian. Due to long payment cycles and other issues with large supermarket systems, the company eventually accumulated debts of over 1.6 million yuan and could no longer operate. “At that time, the boss's capital chain broke, and there wasn't even money to pay wages. He handed over the Henan market I had developed to me, letting me take goods to sell on my own, and whatever I sold was mine.” This turn of events transformed Chen Yixin from an employee into an entrepreneurial boss. At that time, the general merchandise category was performing poorly in large supermarket systems. To solve the pain points of the general merchandise category in these systems, Chen Yixin had to think about new business directions. By chance, he came into contact with Mars' pet food. The demand for pet food in China actually emerged early on, but local brands were mostly small workshops and didn't amount to much. At that time, Mars was the world's number one pet food brand, entering the Chinese market in 1993. By around 2015, Mars almost monopolized the supply of pet supplies to large supermarkets nationwide. The most common dog food on the market was Pedigree, and cat food was Whiskas, both brands under Mars. Chen Yixin did not want to continue in the business of mass-market products. Moreover, as China's consumption levels rose, the pet industry was a blue ocean market. He obtained the supply rights for Mars in systems like Zhengzhou Yonghui Superstores, Beijing Hualian, and Vanguard, and became a distributor for Mars. While representing Mars, Chen Yixin was pondering: Mars is the leader in the national supermarket channel, with no second place. Is it possible for me to make myself the industry's second place? Based on this idea, he expanded more supermarket channels while seeking upstream brand manufacturers. “The best offline pet supplies are at Sam's Club and Costco, but they mainly focus on membership and large packages. Many regional supermarkets lack this category and also lack corresponding professional suppliers,” Chen Yixin said. Moreover, national KAs have strict product selection and long payment cycles, so starting with regional supermarkets in second- and third-tier cities could be a viable strategy. By chance, Chen Yixin came into contact with a buyer from Pangdonglai. During the conversation, they mentioned: “Now Pangdonglai wants to bring the entire pet category into the store.” This gave Chen Yixin a brand-new idea—could Haocheng do full-category output for pet supplies, becoming a one-stop category supplier for supermarkets? Full Rack Output, Good Store Service After further expanding channels, Chen Yixin discovered that while the post-90s and post-00s generations show high enthusiasm and spending power in pet consumption, most of it is online. Offline supermarket channel owners and buyers have very limited understanding of this category, either only recognizing leading brands or not even having a pet category area. Chen Yixin shared his business thinking with supermarket buyers—In the past, you introduced only a brand; now, by cooperating with me, you can introduce an industry. Supermarket buyers don't need to worry about shelf design and product selection; Haocheng Pet designs the solutions. They first create planogram effects, place different product combinations, and based on the specific operating area provided by the supermarket, give suggestions for one shelf, two shelves, three shelves, or even a pet specialty area. They can even provide the length, width, and height of shelves, the number of hooks and shelves needed, to the supermarket's stock clerks, improving their work efficiency. Haocheng Pet continuously improves its shelf and display design capabilities, currently updated to the 52nd version, using version N52. After continuous improvement, shelf display is almost problem-free, but there is still a lack of attraction to customers in terms of terminal sales. Therefore, in the second phase, Haocheng Pet did a lot of work on vivid display of shelves. They use 3D rendering technology to create three-dimensional images, showing the actual display effect. Supermarket systems easily accepted their vivid display solutions, for example, adding special shapes and scenario-based designs in the food area to attract consumers. Chen Yixin divides downstream customers into four types: Type 1: million-level systems (big whale customers); Type 2: super stores (customers with over 50,000); Type 3: ten-thousand-yuan stores; Type 4: five-thousand “households.” For Chen Yixin, Haocheng's products are never the cat food, dog food, snacks, etc., but a specific solution. He positions Haocheng's employees as “assistants to supermarket buyers.” Adhering to the principle of being responsible for customers, Haocheng Pet purchases data from Amap and Baidu Maps to count local pet stores, estimate local market capacity, and based on the products sold in surrounding stores, provide reasonable shelf recommendations and product combinations. “Our staff will visit the surrounding areas on the ground. If we see high-end products in some stores, it indicates that the area has demand for high-end products; if the store is full of unknown products, it means the consumer group in that area has no brand awareness, and as long as the price is right, it's fine,” Chen Yixin said. Haocheng Pet has designed 12 promotional events and 36 solar terms throughout the year, with different “purchasing assistants” responsible for different regional customers, assisting supermarkets in activities, and focusing on specific single products for volume and explosive sales during different periods. In addition, Haocheng Pet also collaborates with upstream manufacturers to hold pet sports events and pet clinics, guiding consumers to bring their pets out and “show them off.” Today, Haocheng has established cooperative relationships with supermarkets in 32 provinces, municipalities, and autonomous regions nationwide, achieving nationwide coverage. Among the 3,000+ stores currently cooperating, approximately 1,700 to 1,800 are active each month. To shorten the service radius of “purchasing assistants” and maintain close communication with supermarket customers, three years ago, Haocheng proposed the goal slogan of “National 72-hour Satisfactory Arrival” and set up offices in Tianjin, Chongqing, and other places. Of course, behind the full rack output and operation solutions, the continuous supply of good products from upstream manufacturers is indispensable. Deep Cultivation of the Category, Good Upstream Management In the traditional FMCG supply chain, distributors mostly play the roles of capital advance, warehousing, and distribution. Whatever the manufacturer gives, the distributor sells. But Haocheng Pet is different. For upstream manufacturers, it has strict selection criteria and management plans. In brand selection, the following points must be met: 1. Prioritize listed companies' leading brands; 2. Annual sales in the pet industry ≥ 100 million yuan; 3. Possess high-tech patented products; 4. Have a certain amount of traffic; 5. Packaging should be youthful; 6. Reasonable profit margins. Only when all six points are met simultaneously will Haocheng choose that brand. Haocheng is also very strict in product selection. Only after passing all 49 items of the “Quality Control 49 Articles” can products be put on shelves and face downstream customers. Products that have been put on shelves may still be removed. Every quarter, Haocheng replaces products on shelves, with the aim of not letting brands lie flat in Haocheng's system, allowing them to compete healthily and continuously optimize, providing better products for Haocheng's customers. To cope with low prices from e-commerce, Haocheng requires brands to supply at the same price as online, or provide exclusive customization. Once it is found that other channels have lower prices than Haocheng, the product is immediately reduced to match the online price and then removed from shelves permanently. Currently, there are 151 brands cooperating with Haocheng, with active brands accounting for more than 50%. Every January 8 and July 16, Haocheng organizes semi-annual strategic clarification meetings to set clear directions and goals for the second half of the year's business development. Haocheng will elaborate on the overall strategic direction for the second half, clarify growth targets, and activity plans. Brand business personnel share their business plans, including expected sales, number of stores, SKU count, and resource investment ratios. Chen Yixin designed a “bet on it” approach to promote goal achievement. Haocheng set up a prize pool, investing some funds themselves. Each brand's salesperson invests 200 yuan, voluntarily participating to compete for the prize pool. All ERP and sales data are open to participants, allowing them to make decisions based on the same information. Finally, based on the achievement of sales targets, the prize pool funds are rewarded to business personnel in tiers. The strategic clarification meetings allow everyone to clarify business direction, reach a consensus on performance goals, and the incentive mechanism and transparent data stimulate the confidence of manufacturer business personnel, greatly promoting performance growth. This model has been successfully implemented for 4 years, proving very effective in improving performance and team cohesion, and has even fostered a situation of “three-party collaboration” to serve the terminal well. Final Thoughts Through deep cultivation of categories and channels, controlling every product entering the shelves from upstream, motivating manufacturer salespeople to achieve growth targets, and undertaking the role of retailer sales promotion, Haocheng Pet has created a new model in the industry. Traditional distributors serve upstream brands, helping them complete distribution coverage, while Haocheng Pet has completely departed from the traditional distribution model, acting as a category operator to help downstream retail customers better serve consumers. Intermediaries will never disappear, but if they stick to traditional models and do not keep pace with the times, they will likely be eliminated. New Distribution has always said that building product management and operation capabilities is an important topic for distributors. The era of making money by representing brands, warehousing, and transporting to the terminal is over. In the past, distributors earned money by helping manufacturers with distribution coverage. In the future, to make money, they must either sell themselves or provide services to retailers, helping them sell better. Although Haocheng Pet's category is different from traditional FMCG, its business philosophy and operational practices still have great reference value, hoping to inspire traditional distributors. Recommended Reading