---
title: "The Darkest Hour of Deep Distribution"
description: "Sales are declining, and I accept it. In the past, the response was to rescue sales by any means, even at any cost. Recently, a phenomenon has emerged: sales decline, and I accept it. No more rescue! It's not just small manufacturers, but giants too. More and more industry giants think this way. Now, it's discovered that not rescuing is not a big deal! However, this is the darkest hour of deep distribution, starting from the third quarter of 2024. Many leading companies agree that sales decline is normal and treat it with equanimity..."
author: "刘春雄"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2024-12-23"
language: "en"
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---

# The Darkest Hour of Deep Distribution

> Sales are declining, and I accept it. In the past, the response was to rescue sales by any means, even at any cost. Recently, a phenomenon has emerged: sales decline, and I accept it. No more rescue! It's not just small manufacturers, but giants too. More and more industry giants think this way. Now, it's discovered that not rescuing is not a big deal! However, this is the darkest hour of deep distribution, starting from the third quarter of 2024. Many leading companies agree that sales decline is normal and treat it with equanimity...

Sales are declining, and I accept it.
What to do when sales decline? In the past, the reaction was to rescue sales, using every possible means, even at any cost.
Recently, a phenomenon has emerged: **Sales are declining, and I accept it.**
No more rescue!
It's not just small manufacturers who accept it, but giants too.
It's not just individual industries that think this way, but more and more industry giants.
Now, it's discovered that not rescuing is not a big deal!
However, this is the darkest hour of deep distribution, starting from the third quarter of 2024. Many leading companies agree that sales decline is normal and treat it with equanimity.
**In the first half of 2024, FMCG listed companies were still pushing inventory to achieve beautiful half-year reports. In the third quarter, the tone shifted, and they began to control inventory.**
Those companies that actively controlled inventory were actually passive.
Because if they didn't control inventory, the channel would collapse. In fact, in some industries, prices had already collapsed, but distributors were holding on to their last breath to maintain their distributor qualifications. If they didn't control inventory, the capital chain would break.
**The term 'near-expiry products' has never been as frequent as it is now.** Near-expiry products are all due to inventory pushing.
The darkest hour of deep distribution means that deep distribution no longer has positive value; it has become a weapon that destroys channels.
First push inventory, then solve the problem of inventory pushing. Pushing inventory costs money, and solving the problem of inventory pushing costs more money.
Marketing expenses disappear in the process of inventory pushing.
Unless the model of deep distribution in channels is changed, it is difficult for companies to escape the darkest hour.
**If even the value of inventory pushing is gone, does deep distribution still have meaning?**
This is not a problem for one company; it is a common problem facing the Chinese FMCG industry.
Deep distribution, which has influenced Chinese marketing for over 20 years, is about to come to an end!
What is the next step?
**Deep Distribution: Evolution and Alienation**
I understand that deep distribution has gone through four stages: **sales run out, sales spread out, sales bought out, and sales pushed out.** These four stages go from light marketing to heavy marketing, so heavy that it can no longer be carried.
**Sales run out:** The early eight-step method of deep distribution is typical. As long as the channel endpoint extends from B-end to b-end, sales increase. At that time, customer relationships were easy to build. "Not a Famous Brand but Selling Well" describes that stage, or even earlier. As long as you dare to run, you get sales, so it was a land-grab run, only running to quality terminals. The earliest runners to terminals were not big brands, but small brands that had no way at the B-end and had to run to the b-end.
**Sales spread out:** Compared to small brands' land-grab, big brands showed channel management capabilities from the start, dividing work between distribution and shelf management, with distribution rate as a KPI, second only to sales. This stage eliminated the small brands that started deep distribution early.
**Sales bought out:** Everyone was distributing, so shelf space became valuable. Thus, companies with capital strength began to purchase terminal resources, such as displays and shelves, forcibly squeezing out competitors. Some terminals could make money by selling terminal resources. This stage, giants eliminated mid-sized brands.
**Sales pushed out (squeezed out):** Inventory pushing has conditions. For B-end pushing, the premise is that the B-end cares about the distributor; for b-end pushing, the premise is that the manufacturer has a pushing policy. There is no inventory that cannot be pushed, only policies that cannot push inventory.
**Inventory pushing can be divided into two stages:** In the first stage, after pushing, responsibility transfers to the b-end; if the b-end can't sell, they suffer losses, so as long as they stock, they will try hard to promote. In the second stage, pushing does not transfer responsibility; if the b-end can't sell, they return the goods. They dare to take any amount of inventory as long as there is a stocking policy. The near-expiry product problem is the evil consequence of the second stage of pushing. Handling near-expiry products consumes a lot of time and costs a lot of money.
The four stages of deep distribution are both evolution and alienation. It's evolution because deep distribution, to some extent, has stronger driving force than brand. Ordinary small brands might think about building a brand at low cost, but they absolutely never thought about doing deep distribution with few people. Although deep distribution achieves channel flattening, the internal levels of giants are at least four. Otherwise, it would be impossible to assess distribution rate. The alienation of deep distribution is that it becomes heavy asset operation. A lot of expenses are invested in channels without reaching consumers. And the final result of inventory pushing harms the price system, and cross-regional selling is endless.
**Deep distribution has evolved from promoting channel progress in the early days to now disrupting channels.** Under the current environment, you can't not do it, but doing it harms you. Especially current leaders, no one wants sales to decline during their tenure. So, they even do the strange thing of financing inventory for distributors. The so-called inventory control now is simply not pushing inventory.
**I even suspect that once salespeople stop pushing inventory, they might not know what to do. Because they are used to pushing inventory.**
**Why is deep distribution no longer effective?**
**Deep distribution was born in an era of growth. Early deep distribution was a machine for harvesting growth. As long as you did it, you could harvest something; the difference was how much. In 2013, the FMCG industry entered an era of shrinking volume. Why did deep distribution still exist? Because high-intensity deep distribution could squeeze the sales of small and medium enterprises. So, after 2013, the long tail in various industries basically disappeared. There was no more squeezing sales from peers. What remained were giants. During the pandemic years, it was actually giants squeezing each other through high-intensity deep distribution, finally discovering that there was a terrifying balance among giants, and no one could eliminate the others. Giants squeezing each other hurt both sides. It was not easy for giants to reach a consensus on inventory control. The current situation is that **the strength between giants and distributors is unbalanced. High-intensity deep distribution pushes inventory to distributors, either creating near-expiry products (like dairy) or occupying too much capital (like liquor).** Only when everyone feels it's the eve of channel collapse is there a consensus on inventory control. So, after entering the shrinking volume era, there are two critical points: 2013 was the disappearance of the long tail, and 2024 is the balance of giants. Finally, it is recognized that the existence of deep distribution has historical boundaries.
Is the current inventory control by giants a long-term solution? Inventory control is conservative treatment of the current situation, treating symptoms but not the root cause. What after short-term inventory control? To think about this topic, two premises must be considered: **First, the shrinking volume is irreversible. Don't expect the environment to improve; the current environment is normal. Second, don't expect competitor giants to make mistakes.**
What to do after inventory control?
**Possibility 1: Inventory pushing resumes.** After all, who can ignore sales? The awareness that inventory pushing must absolutely not be done will take time to form. Inventory pushing may repeat, because hitting a wall once doesn't necessarily teach a lesson. Policy-based inventory pushing is still an easy painkiller.
**Possibility 2: Shift from sales orientation to profit orientation.** This is highly likely. After all, capital's goal is not sales but profit. But in the growth era, sales growth meant profit growth, and inertia has formed; change takes time. In the past, they would rather sacrifice profit to maintain sales; in the future, maintaining profit over volume may become mainstream.
**Possibility 3: Focus on high-end segmented and niche markets.** To be honest, under the so-called poor environment, this proposal seems to have no market. But from the bosses of leading companies, I feel that high-end is firm. China's mass market still has a round of upgrade opportunities, which I call the "new mass," and then the mass market will stabilize, becoming national brands or national big single products. Giants that don't secure national brands or national big single products will have a worrying future. In recent years, when industry giants' sales declined, some original small and medium enterprises transformed from low-end to niche and segmented markets, achieving greater success than before. **Small enterprises cannot survive long-term in the low-end, but they can thrive in high-end niche markets. This is a huge change in the consumption environment.**
**Possibility 4: Create incremental new scenarios.** This is like squeezing milk from a stone, very difficult. But from practice, there is a novice dividend. I believe the next decade will be the era of scenario marketing.
**The End of Deep Distribution**
After entering the shrinking volume era, there has been a significant shift in understanding deep distribution.
For a while, I thought deep distribution was outdated and should be adjusted immediately to find an incremental model for the stock era.
Later, I thought improved deep distribution was effective. For example, from pure offline deep distribution to three-dimensional deep distribution. Now it seems that among giants, three-dimensional deep distribution still cannot solve the problem. Because it's the shrinking volume era.
Now, my view is: **Distribution is still needed, but not necessarily deep distribution. User operations based on deep distribution will become the main direction for future growth.**
With the rise of B2b, distribution can be handed over to third-party B2b platforms, which have higher distribution efficiency.
The biggest discovery is finding a tool to create growth in the shrinking volume era: scenario marketing, or user operations based on scenarios.
Scenarios create growth. With growth, is sales still a problem?
What is needed now is high-end growth and scenario innovation. Both require user operations.
The difference between deep distribution and user operations is: **The endpoint of deep distribution is the b-end, while the starting point of user operations is the b-end.**
Operate the C-end around the b-end. This is bC integrated user operations.
Deep distribution for over 20 years has formed muscle memory for one or two generations of marketing people, engraved in their bones. The first move is a deep distribution action, and change is difficult. This is an ecosystem; changing any part will be pulled back.
We always think marketing transformation is a generation changing, but it's actually saying goodbye to one generation of old people and welcoming a new generation.
How to change actions that have become muscle memory? It's not about changing one person, but a generation.
What comes after deep distribution? User operations.
The endpoint of deep distribution is the b-end, and the starting point of user operations is the b-end. This is the evolution of deep distribution.
The darkest hour of deep distribution reveals the dawn of new marketing.
Finally, let me mention exceptions to deep distribution. In some FMCG industries with low industry concentration, there are still many long-tail enterprises. Through deep distribution, squeezing the market of long-tail enterprises can still expand sales. These industries can still use deep distribution methods.
Final summary: **In industries with high concentration, in the shrinking volume era, deep distribution can no longer bring sales growth.**
**[New Order · Symbiosis]**
**The 10th China FMCG Innovation Conference**
**Date: March 17-19, 2025**
**Location: Chengdu, China**


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