---
title: "Supermarkets Have Changed, What Should Distributors Do?"
description: "As supermarket enterprises enter a crisis, distributors face significant operational risks. Suppliers have experienced a shift from difficult business and declining profits to high risks in the supply chain transformation driven by the rise of chain retail. Some distributors even say, 'Doing business with supermarkets is seeking death, while not doing so is waiting for death.' Facing high costs and increasing risks from supermarkets, how can distributors make structural adjustments to survive this crisis?"
author: "New Distribution"
publisher: "New Distribution"
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published: "2015-01-20"
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# Supermarkets Have Changed, What Should Distributors Do?

> As supermarket enterprises enter a crisis, distributors face significant operational risks. Suppliers have experienced a shift from difficult business and declining profits to high risks in the supply chain transformation driven by the rise of chain retail. Some distributors even say, 'Doing business with supermarkets is seeking death, while not doing so is waiting for death.' Facing high costs and increasing risks from supermarkets, how can distributors make structural adjustments to survive this crisis?

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As supermarket enterprises enter a crisis, distributors begin to face significant operational risks. Suppliers have deeply experienced the supply chain transformation driven by the rise of chain retail, shifting from difficult business and declining profits to high risks. Some distributors even lament, 'Doing business with supermarkets is seeking death, while not doing so is waiting for death.' So, facing the current situation of high costs and increasing risks from supermarkets, how can distributors make structural adjustments to survive this crisis?

The supermarket industry itself is entering a critical stage of survival of the fittest, with an irreversible trend. Correspondingly, profits are decreasing and risks are rising, and supermarkets inevitably pass these risks on to upstream distributors. Recently, the widely discussed cancellation of entry fees is actually an impossible task. Many supermarkets have canceled entry fees, but don't forget that sponsorship fees, management fees, etc., have surfaced again, and total costs are still increasing. As a distributor, don't fantasize about wolves eating grass; instead, focus on improving your own capabilities, quickly complete structural adjustments to form competitive advantages, and get through this long night.

To cope with the supermarket dilemma, distributors' structural adjustments should focus on the following aspects:

1. Adjusting supermarket channel structure
Facing rapid changes in supermarkets, we must deeply understand the trends and current situation of supermarket changes to know ourselves and the enemy. The most effective way is to conduct segmented research on supermarkets. Distributors can classify and manage supermarkets based on their scale and payment terms, adjust the supermarket structure, and bring the business structure into a reasonable range. For distributors, in addition to following up with hypermarkets, they must also enter small and medium-sized supermarkets with faster cash flow and certain sales volume to balance capital pressure and reduce operational risks. An ideal ratio is 60% of sales from hypermarkets and 40% from supermarkets with fast cash flow. (The most reasonable is that your store inventory pressure < factory distribution + monthly payment collection)

2. Reorganizing channel categories to balance risk pressure
Besides the supermarket system, abandon the past approach of only doing one type of terminal and establish a professional mindset, enriching channel categories. The most important task now is to survive in a harsh environment with high risks, rather than talking about being an expert in the abstract. Specialty stores, franchise stores, convenience stores, counters, and other channels compatible with product sales can serve as beneficial supplements to supermarket channels. As long as they have no payment terms and reasonable costs, they can be effective risk-balancing factors. Take the Nanjing Zhengjue distributor I serve as an example: originally, 100% of their network was supermarkets, with hypermarkets accounting for up to 80%. Since 2012, with the rapid development of the supermarket industry, risks have increased. Therefore, by enriching channel categories and reducing the proportion of hypermarkets, by early 2015, the proportion of small and medium-sized supermarkets rose to 40%, and non-supermarket terminals rose to 20%, effectively ensuring capital circulation speed.

3. Adjusting product structure
A good distributor should have three types of products: one for volume, one for advertising, and one for profit. As a client, you should reasonably divide your own product structure and handle the relationships between products.

4. Adjusting business philosophy and management system
First, change the business philosophy. Change the old model of focusing solely on sales volume, using special offers, discounts, and buy-one-get-one-free promotions indiscriminately. Make product profit, cash flow, and operational risk the main evaluation factors, and treat scale as an auxiliary means to achieve these factors, not the main goal. In market promotion, pay attention to several basic levels.

A. Let well-known products that drive volume sell naturally, even if promotion is phased, and in certain specific situations, even adopt limited sales. The reason is simple: the more you sell, the more capital supermarkets occupy, and the greater your capital pressure and operational risk.

B. For products with medium profit, good quality, and the ability to generate a certain scale, concentrate main resources, maintain reasonable profits, seek sales volume, and pursue both efficiency and scale.

C. For products with particularly high profit margins, adopt incidental sales forms, such as exchange purchases, focusing only on profit without excessively pursuing scale. Some may not agree with this point: why not promote high-profit products? Wouldn't that earn more money? I personally believe that generally high-profit products have two major drawbacks: either they are basically similar to products on the market, just with extremely low prices, but quality assurance and manufacturer supply capacity are questionable, and large-scale promotion can easily lead to various adverse factors, seriously affecting the distributor's credibility as a supplier; or they are differentiated products just entering the market, still in a market cultivation period, unless the manufacturer provides extensive advertising support (but if there is extensive advertising support, there won't be much profit space), otherwise you are still in an investment stage. Overall, the profit margin will not be particularly ideal, and sales volume will not increase significantly in the short term. In summary, between product scale and efficiency, achieve earning the same money with minimal cash pressure.

Second, establish a credit risk management system. Establish credit ratings for each supermarket terminal, and take corresponding measures for those exceeding credit limits. As a distributor, establishing a credit risk management system is very necessary. When a supermarket's credit limit exceeds the specified limit, you must analyze the reasons and find solutions.

Finally, establish a market information feedback system. Any supermarket has many omens before its collapse. For example, suddenly changing the original settlement method, extending payment terms; selling at special prices regardless of cost; well-known brands out of stock but not replenished; employee wages delayed or unpaid; bosses or management being evasive, etc., are all signs before collapse. As long as distributors establish a standardized information feedback system and regularly feed back relevant information, they can reduce the risk of such store collapses to a certain extent. In fact, no information system is more accurate than information from supermarket internal personnel. Handling relationships with key supermarket personnel well will bring you maximum benefits in all aspects.

If these humble opinions can bring some insights to distributor friends, I will be very pleased!

Daonong recently opened a public account specifically about how traditional enterprises can do WeChat marketing. If you are interested, you can follow it. Search for the WeChat ID above or scan the QR code below to follow.

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