A month ago, in Wuhan, I met Mr. Hu Xiaosheng, General Manager of Wuhan Shengxing Zhonghe Marketing Company, and we talked for nearly three hours. It's hard to imagine that this boss is not only a traditional distribution businessman but also a devoted student of Buddhism. **This distributor, with a 'scholar's quality,' has built a snack food distribution business in Wuhan reaching 200-300 million in scale, with over 70 brands, mostly second and third tier, except for a few first-tier brands like PepsiCo Foods.**Covering all channels except mom-and-pop stores. He joked that although the scale is only 200-300 million, the gross margin is probably equivalent to that of a first-tier brand with 700-800 million in sales. To achieve such a level, I think Mr. Hu Xiaosheng is not only a super procurement expert but also a very skilled channel operator, able to sell many second and third-tier brands at first-tier brand volumes. He has exceptional abilities in channel distribution and sell-through. Of course, besides the traditional trading business of Shengxing Zhonghe, in October 2020, he decided to step out of his comfort zone and embark on a new entrepreneurial journey, partnering with Chengdu Rongcheng Yigou to establish the 'Guoran Shifen' platform from scratch, extending his distribution business to the most widespread mom-and-pop stores in the local area, positioning it as a procurement platform for Wuhan local supermarkets. After three hours of exchange, I have compiled and summarized this article, sharing his business methodology with you, hoping to provide some inspiration and food for thought for distributors:
01 After 3 years of entrepreneurship, moving into an office building
02 Operational methodology for first and second-tier brands
03 Four sales capabilities: distribution, promotion, selling, and best-selling
04 New venture: starting with 3 people, building a 60-person team in 25 days
05 Business insights: Where there is danger, there is opportunity; adapt to industry changes **-01- After 3 years of entrepreneurship, moving into an office building He started his business in 1993, before which Hu Xiaosheng was a math teacher. Unwilling to accept fate, he decided to take a gamble, using the 1,000 yuan he had saved to embark on his entrepreneurial journey. Hu Xiaosheng recalls that at the time, there were two options: first, a quick and profitable business—selling tobacco, which was not yet illegal then; second, a long-term and stable business—distributing food products, which was relatively safe. Obviously, Hu Xiaosheng, with his teaching background, chose the food business. With 3,000 yuan (including 2,000 from his parents), he headed south to Guangzhou. At that time, there was no concept of brand agency; in an era of material scarcity, you sold whatever sold well! In the early days, Hu Xiaosheng spent 15 out of 30 days a month on trains. With little capital, he had no choice but to travel more frequently than others. There was no concept of turnover then; he just knew to sell quickly and restock. Many people say the first generation of distributors were 'sitting merchants,' but Hu Xiaosheng believes the earliest distributors should be called 'standing merchants, squatting merchants, or running merchants,' with only a half-meter stall, standing or squatting. Good products and well-known brands were monopolized by state-owned sugar and wine companies, so they had to constantly run around to find products. After three years, thanks to his diligence, the business gradually grew, and he became a millionaire. By 1996, he formally established a trading company and, under the guidance of a senior, moved out of the Hanzheng Street stall to an office in a residential building. Then, he moved from the residential building to an office building. To outsiders, moving offices might seem like a sign of growth and a desire for a more comfortable working environment. But in reality, Hu Xiaosheng did it because of a senior's advice. The senior told Hu Xiaosheng to stay away from stalls and wholesale, to avoid the smell of a 'sitting merchant,' and to become a 'traveling merchant.' Take the initiative to run business, hire people, and learn to divide and cooperate. Since then, for 27 years, Shengxing Zhonghe has been very successful. In Hu Xiaosheng's view, without the decision to move out of Hanzheng Street and become a traveling merchant, the current business might not exist. Like many grassroots merchants, they would have faced ups and downs, and eventually, the business would have disappeared amid changes. Hu Xiaosheng advises that when we encounter so-called prophets or seniors in our entrepreneurial journey, we must respect and trust them. Once trust is established, we should listen to their guidance and do it honestly and immediately! Additionally, after 27 years in business, Hu Xiaosheng admits that besides food agency, he has done nothing else. Focus, specialization, professionalism, and expertise. In his view, a person should have a craft, a specialty, and the more singular, the more efficient. He doesn't buy stocks or have a brokerage account. His money is earned step by step, saved up. **-02- Operational methodology for first, second, and third-tier brands Product selection is the starting point of the distribution business. Often, a distributor picks the right brand and becomes successful overnight. But in Hu Xiaosheng's view, such a business is not stable. The downstream customers are not yours, and the upstream brands are not yours either. If a distributor gets a Baiyunbian or a Moutai and grows the business, that's not really your core competitiveness. At best, you've seized an opportunity, or your personal judgment and relationship-building skills have turned into economic benefits, but this ability is not what a company should have, nor is it a team's ability to sustain operations. The ability to grab a good brand opportunity is often not replicable. At Shengxing Zhonghe, except for Pepsi, all are second and third-tier brands. Why represent first-tier brands? Hu Xiaosheng explains, The most basic need for doing first-tier brands is to build channel stickiness, but the real high-level need is to learn, interact, and experience with first-tier brands. Take PepsiCo Foods as an example. The reason it has become a long-lasting brand must be worth learning from, especially in marketing. Therefore, Hu Xiaosheng's approach to first-tier brands is: cooperate—implement—execute. Learn through cooperation, summarize through cooperation, and eventually turn it into your own operational methodology for managing other brands. For second-tier brands, Shengxing Zhonghe generally chooses category brands and must contact the brand's boss and director. Only by contacting these two levels can I grow. Why? Because second-tier brands need to invest in the market. Why would others invest in you? How can you impress the boss and the director? Because Hu Xiaosheng has a set of market operation methods learned from first-tier brands: **Transform the methods of cooperating, implementing, and executing with first-tier brands into your own trading company's operational methodology.**When a second-tier brand is selected, Hu Xiaosheng's logic is: participate—cooperate—implement—execute. For third-tier brand selection, Hu Xiaosheng uses a term: excavate product power. Third-tier brands essentially have no brand; they rely on low prices and hard products. The factory owners don't have much vision; they don't plan to build big brands. They have factories to keep production lines running and make a little profit, so the cost-performance is extremely high. After selecting these brands, they go to the warehouse, become inventory, and then how do you sell them? **-03- Four sales capabilities: distribution, promotion, selling, and best-selling During our conversation, a Yonghui Superstore opened in Wuhan. What did Shengxing Zhonghe do? Everyone went all out to maximize sales. Hu Xiaosheng said, "Why must we boost their first-day sales? Because it's the first day of Yonghui Superstore. Today they need face and data; I must help them create data. That is, only when you create value for others can you enjoy the best display positions and activities later. You must help others first, and then they will help you." Of course, it's not just about helping them sell; it's also the best time for Shengxing Zhonghe to grab traffic. For the opening, they must have invested a lot in advertising and won't make money. Today, they've attracted so much traffic; they need to create data. We're also creating data along the way. Even if I don't make money today, they'll welcome me. When my business volume is the highest in their system data, I'll have leverage in later resource negotiations. All promotions are deployed; whatever they need, I cooperate. A distributor who doesn't seize timing opportunities is definitely not a competent one. Operating in key account channels is just one point. In fact, regarding selling, Hu Xiaosheng has distilled the 'four sales capabilities': distribution, promotion, selling, and best-selling. Distribution is easy to understand: full-channel coverage. Not just traditional channels, Shengxing Zhonghe also embraces new channels immediately. When Alibaba Retail Link came, they became one of the first partners. Whether they understood it or not, they embraced it first. Many people say Alibaba Retail Link's business model doesn't even have its own accounts figured out and won't last. But I believe it's right because I trust Alibaba has money. Many people like to think and try to understand the internal logic. But I think when facing new things, instead of thinking about whether to cooperate, just act. The cooperation with Retail Link didn't yield much, but without it, the second venture wouldn't exist today. Also, community group buying, which is very popular recently, has arrived. Should distributors do it? For this, Hu Xiaosheng specifically set up a department called the 'New Retail Special Channel Department.' Although the name is odd, never mind. Since new channels are here, with so many giants and capital entering, we don't understand it either. Where there is existence, there is reason. We'll learn by doing. Embrace it and get on board first. This is Shengxing Zhonghe's understanding of new channel distribution. Regarding promotion and selling. Promotion is the conversion rate of sales; selling is the implementation method to ensure the conversion rate is achieved. If it's just price reductions, buy-one-get-one, or gift bundling, that's not enough; it's just a dead thing. Offline can never beat online in price. What is selling? It's pulling customers in front of you, making them interact with you, and forming brand awareness. Everyone is displayed together; you can display beautifully, and others can display even better. But there's one thing hard to copy: how to turn a 'dead' display into a live one. This is also called scenario-based marketing. Actively offer samples, chat with customers, and keep them in front of the product. People follow the crowd; consumers won't pick a product that isn't selling, no matter how beautifully displayed. They choose products with more people. What Shengxing Zhonghe does is to stir people to come to my product display. For example, during promotions, they often organize small activities like violin performances or Mongolian dances. As soon as there's a performance, all the crowd rushes over. The position is fixed, but people are mobile. The so-called selling ability is the ability to attract and gather traffic. **What is the ability to make products best-selling?**Inventory management: frequent purchases and quick sales. If there's a package in the store today with a near-expiry date, can you spot it immediately and replace it with fresh stock? At the same time, quickly liquidate the replaced goods through 'drains' to cash. For example, sell at a discount in wet markets or crowded places. There are always people with different needs. The key is to find these people and satisfy them, achieving rapid turnover and cash flow. Hu Xiaosheng explains why Shengxing Zhonghe is not called a trading company but a marketing company. Because Shengxing Zhonghe is not a sitting or traveling merchant; that's outdated. We already have the ability to actively market. What is marketing? It's creating an environment for sales. Without this ability, it would be hard to make money from product price differences today. It is understood that at Shengxing Zhonghe, a non-famous brand like Dushi Muchang or Chundong can achieve annual sales of over 10 million. Many similar non-first-tier brands rank at least top three in sales in their national markets, and maintain this ranking long-term. This is definitely not accidental but a marketing capability. **-04- New venture: starting with 3 people, building a 60-person team in 25 days Guoran Shifen is positioned as a procurement platform for Wuhan local supermarkets, officially launched on November 15, 2020. Within 25 days of our conversation, it achieved 4,000 registered small and medium stores, over 2,000 monthly active stores, and over 4,000 SKUs. Not only that, Hu Xiaosheng told New Distribution that when he decided to start the venture, he only brought 3 people. The current 60-person team was almost built within these 25 days. Regarding why he started a business for traditional small stores, it's necessary to mention the connection with PepsiCo Foods and the encounter with Chengdu Rongcheng Yigou. Hu Xiaosheng recalls that around June or July, PepsiCo Foods set up the 'Ruhu Tian'e' project, using Rongcheng Yigou as a benchmark case to empower distributors in transformation and upgrading. Against this backdrop, Hu Xiaosheng began to seriously study the Rongcheng Yigou model. Initially, it was just PepsiCo organizing meetings, live streams, and site visits. Later, Hu Xiaosheng took the initiative to visit Rongcheng Yigou himself, going back and forth, repeatedly verifying, negotiating, and communicating. In discussions with Qin Xian, the founder of Rongcheng Yigou, they even talked about the maximum loss this venture could bear. Since the new venture, Hu Xiaosheng explained that although the project hasn't been successful so far, and nine out of ten people around him opposed it, the decision to extend operations to small stores was not made lightly. He has his own judgments. First, from his own business perspective, Shengxing Zhonghe focuses on the snack food category with full-channel coverage, but the only thing not done is small stores. If you look at the value chain, only with stronger distribution capability will upstream brands have greater demand for me. If I don't do small stores, I'm always missing an arm, and it's not truly full-channel; Second, from the customer traffic dimension, foot traffic in modern retail has indeed shown a downward trend in recent years, with traffic being divided and fragmented. This is an objective fact that cannot be changed. Even if you play tricks in the store, the decline in foot traffic is unstoppable. Customers are migrating, consumption scenarios are migrating, so we must migrate too. Third, from the downstream small store dimension, while foot traffic in retail is declining, traffic in small stores is increasing, and these small store owners all use apps. At the same time, small stores offer higher value for many products. A product that costs 2 yuan in a retail store can be bought for 1.5 yuan in a small store. Why? Because retail stores need 25 points, while small stores only need 22 points. Small store owners work from morning to night and don't mind; they have more operational flexibility. In Hu Xiaosheng's view, the Guoran Shifen platform can provide value to small stores not only in product supply but also as their professional procurement advisor. Small store owners can even not know the products; they can contact Guoran Shifen for any quality issues. At the same time, it serves as a daily distribution center for small stores, without occupying inventory. **-05- Business insights: Where there is danger, there is opportunity; adapt to industry changes The market changes too fast now. Many distributors think this industry is done and switch to another, but that's not adapting to change. Change means upgrading on the original basis; change means not leaving your core business. As a distributor, when you see external changes, you should proactively change, using new tools, new models, and new methods. Many distributors who didn't change during a new round of industry changes have faded away. Shengxing Zhonghe's turnover has not seen a cliff-like decline due to industry changes, reduced foot traffic, or online discounts. Promotion and selling are still effective; foot traffic is still there, just not as much as before. If you still expect that many people every day, how is that possible? Today, with fewer people, distributors need to improve accuracy and achieve data-driven operations. You can't cast a wide net anymore; you need coordinates, radar, and upgraded tools. Through tools and data, increase your capture rate. Of course, this is also a process of business reshuffling. Your business declines, mine doesn't. The business you release naturally goes into my pocket. Hu Xiaosheng always says: Crisis, crisis, there is no eternal danger; behind danger, there is always opportunity. The Korean War created Henry Fok's wealth. See, even in wartime, some people got rich. Hu Xiaosheng believes that as long as every distributor adapts to this era, repositions themselves, adjusts strategic deployment, and always changes with the industry, doing their own work well and sticking to their value, regardless of new retail or community group buying, distributors will always have business. But the premise is to first ask yourself: in the local supply chain system, do you have a position? Can you hold your value? Focus on FMCG distributor new distribution / brand new marketing cases For communication, you can add WeChat by long-pressing. When adding, please indicate your company, position, and name. If you provide a tip, you will be paid 400-2000 yuan after it is adopted.