---
title: "The Decline of Wholesale Markets?"
description: "1. What is the value of wholesale markets? 2. What are some well-known wholesale markets nationwide? 3. Why will wholesale markets continue to exist in the long term? The outbreak of COVID-19 in Beijing brought Xinfadi into the spotlight and drew attention to wholesale markets. In an era where e-commerce has permeated every corner of life, the idea of 'no middlemen to take a cut' has become prevalent. So why do wholesale markets, as 'middlemen,' still exist? What is their value and significance? In the FMCG sector..."
author: "新经销刘少德"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2020-07-07"
language: "en"
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---

# The Decline of Wholesale Markets?

> 1. What is the value of wholesale markets? 2. What are some well-known wholesale markets nationwide? 3. Why will wholesale markets continue to exist in the long term? The outbreak of COVID-19 in Beijing brought Xinfadi into the spotlight and drew attention to wholesale markets. In an era where e-commerce has permeated every corner of life, the idea of 'no middlemen to take a cut' has become prevalent. So why do wholesale markets, as 'middlemen,' still exist? What is their value and significance? In the FMCG sector...

> **1. What is the value of wholesale markets?**
> **2. What are some well-known wholesale markets nationwide?**
> **3. Why will wholesale markets continue to exist in the long term?**

The outbreak of COVID-19 in Beijing brought Xinfadi into the spotlight and drew attention to wholesale markets. In an era where e-commerce has permeated every corner of life, the idea of "no middlemen to take a cut" has become prevalent.

So why do wholesale markets, as "middlemen," still exist? What is their value and significance? What are some well-known wholesale markets in the FMCG sector? Under the new era's backdrop, where should traditional wholesale markets head in the future? (Note: In the following, "wholesalers" specifically refers to secondary wholesalers without product agency rights, not distributors.)

**-01-
Why Do Wholesale Markets Still Exist?**

Before answering this question, let's first look at why wholesale markets came into being.

Wholesale markets have existed since ancient times. In agrarian societies, people bartered to obtain a richer variety of daily necessities. Since needs and times for exchange differed, to speed up bartering, people gathered at fixed locations to display their "products," giving rise to primitive markets. By the Tang, Ming, and Qing dynasties, as the business environment gradually loosened, regional merchant guilds and wholesale markets began to appear. After the reform and opening-up in modern times, as the planned economy transitioned to a market economy, large-scale wholesale markets began to emerge in the eastern coastal regions.

Since then, wholesale markets have sprung up across the country. **Notable examples include Yiwu Commodity Wholesale Market in Zhejiang, Linyi Wholesale Market in Shandong, Changsha Gaoqiao Wholesale Market in Hunan, Wuhan Hanzheng Street Wholesale Market in Hubei, Chongqing Chaotianmen Wholesale Market, Shenyang Wu'ai Market, Shijiazhuang Xinhua Central Trade Market, and Nanchang Hongcheng Market in Jiangxi.**

Zhengzhou Wankelai Food City in Henan

Public data shows that **China has nearly 100,000 commodity trading markets, of which over 5,000 are specialized markets with annual transaction volumes exceeding 100 million yuan, with a total transaction scale of nearly 10 trillion yuan,** directly and indirectly employing over 10 million people. While various factors have contributed to the formation and growth of wholesale markets, a look at wholesale markets across the country reveals that most share the following characteristics:

**1. Integrated production and supply, with industrial clusters easily forming wholesale markets**

Production and circulation are inseparable. From an industry chain perspective, the shorter and faster the circulation chain, the higher the efficiency of goods turnover, which in turn positively promotes production, and vice versa. Therefore, to accelerate product turnover, relatively large wholesale markets tend to form in regions with more complete upstream and downstream industry chains. A typical example is Henan, where the developed food industry, large population, and vast market gave rise to many nationally renowned wholesale markets such as Zhengzhou Food City, Hanghai Road Food City, Huazhong Food City, Wankelai, Bairong, and Zhongyuan First City.

At their peak, 90% of food companies nationwide had set up general distributorships or offices in these wholesale markets, enjoying unprecedented prominence.

**2. Multi-regional radiation and convenient transportation**

**Convenient transportation is a key factor driving the growth of wholesale markets.** Large and medium-sized cities typically have thriving commercial districts. If these districts are near highways, bus stations, train stations, or water transport terminals, bustling wholesale markets are likely to emerge. The higher the level of transportation convenience, the larger the scale and radiation range of the wholesale market, as seen in Wuhan Hanzheng Street, Tianjin Dahu Tong, and Xi'an Kangfu Road.

**3. Often based on street-facing old factories or former industrial sites**

Wholesale markets generally occupy large areas, and **abandoned factories or frame-structured workshops away from urban centers provide natural business premises for their formation.** Examples include Xuanwu Market in Xuzhou, Jiangsu; Yiwu Small Commodity Wholesale Market; and Shijiazhuang's Nansantiao Shengli Road Wholesale Market, all of which are large markets formed by renovating old factories or repurposing existing high-rise buildings.

The combination of urban policies, business environment, geographical location, logistics, and transportation contributed to the development and prosperity of wholesale markets over the past decades. However, as times have evolved, the status of wholesale markets in urban commerce has gradually diminished.

**-02-
The Decline of Wholesale Markets**

In 2019, Zhengzhou Zhongyuan First City Wholesale Market, one of the largest wholesale markets in Central China, was ordered to close by the Zhengzhou municipal government. This also meant that the competitive landscape of Henan's wholesale market, once dominated by the trio of Bairong, Zhongyuan First City, and Xiao Liuqiao, was completely broken, ushering in an era of multi-point layout and multi-strength competition among Bairong, Wanbang, South China City, and Xiao Liuqiao.

Closed entrance of Zhongyuan First City

"Henan's wholesale industry has completely changed. From the train station to Hanghai Road, to the South Third Ring Road, and then to the South Fourth Ring Road, some wholesale markets have even crossed the ring expressway. Every relocation is a major reshuffle for merchants. Wholesale relies on clustering and unity; frequent relocation only causes dispersion and mutual weakening, so naturally, everyone gets smaller!" Mr. Li, who has been in Henan's food and beverage industry for over 30 years, told New Distribution. "Previously, a single stall could achieve daily turnover of 400,000 to 500,000 yuan, but now products are increasingly difficult to sell. The foot traffic in the market has noticeably declined, and the number of merchants has dropped from over 2,000 to just over 1,000. Now, even at peak times, we can only manage 80,000 to 90,000 yuan a day."

The changes in Zhengzhou's wholesale markets are just a microcosm of the national trend!

With the acceleration of urbanization across regions, city ring roads have expanded outward. Wholesale markets that once relied on bus stations, train stations, commercial streets, and old factories are now at the center of urban renewal processes. **The relocation of wholesale markets has become an unavoidable topic, directly leading to their dispersion and weakening.**

On the other hand, the younger demographic of store owners is an unavoidable issue for all wholesale formats, and the impact of internet e-commerce on wholesale markets has become apparent in recent years.

"Originally, people came to wholesale markets for cheap prices and a wide variety of items, allowing one-stop shopping. Now with B2B platforms, everything that could be done at the wholesale market can be done on a mobile app, with delivery to the store. So what value does a wholesale market still have?" Mr. Li complained to New Distribution.

Additionally, changes in upstream manufacturers' distribution strategies are a significant reason for the decline of wholesale markets. Especially in the food and beverage sector, more and more manufacturers are adopting deep distribution strategies, using granular market operations, regional contracting, and route-based sales visits, supplemented by digital sales tools and software, to achieve direct control over terminals. This is akin to cutting the ground from under wholesalers who rely on "speculative" business.

**-03-
Do Wholesale Markets Still Have Value?**

So, does this mean wholesale markets and wholesale business are at a dead end? Chang Junjie, founder of the FMCG B2B platform Pidao, gave a negative answer, citing three main reasons:

**1. China is vast, with uneven development between regions and cities, making it impossible for brand owners to achieve full-channel and full-terminal service and coverage.**

According to New Distribution's "2019-2020 FMCG Retail Small Store B2B Competitiveness Report," **China has a huge number of retail small stores, but 86% of them are still located in third-tier cities and below, serving about 74% of consumers.** This objective constraint means that currently, no consumer brand can cover all terminals and reach all consumers.

Therefore, we see that in 1-4 tier core markets, brand owners invest heavily in manpower and logistics for market coverage, with some even setting up offices or branches to directly control terminals through direct operations. However, in fourth-tier and below cities, there is little resource investment, which undoubtedly provides huge survival space for wholesale markets and wholesalers.

**2. Brand owners' direct control of stores can increase output, while covering stores through wholesale can improve market coverage efficiency.**

In high-tier markets, wholesale markets have indeed been impacted to varying degrees. In the vast lower-tier markets, although B2B platforms like JD New Channel and Alibaba Retail Link have begun to penetrate, wholesale markets remain one of the most important procurement channels for many retail small stores.

Image from New Distribution's "2019-2020 FMCG Retail Small Store B2B Competitiveness Report"

"All brand owners have a trade marketing department at headquarters that customizes marketing plans for different sales channels. The return on marketing investment is also a key indicator for channel layout.

One important reason wholesale markets still exist is that their circulation efficiency is higher than direct coverage by brands or distributors. Through wholesale markets, it is possible to cover stores and consumers that distributors cannot reach. **Brand owners directly control stores to maximize output, while covering stores through wholesale optimizes efficiency," said Chang Junjie.**

**3. The circulation and consumption of FMCG are non-linear, and wholesale markets and wholesalers act as a reservoir for market supply and demand (production and consumption).**

Except for special consumer goods like rice, flour, and oil, most categories of consumer goods have obvious cyclical and seasonal patterns, typical examples being beer, beverages, and leisure snacks. Taking beverages as an example, March to September is the peak sales period each year, while January to March and September to December are clear off-seasons.

However, factory production is linear and fixed each month. During the off-season, products cannot be fully sold in the market and have to be stockpiled in distributors' warehouses. From March to September, the peak season for beverage sales, manufacturers often arrange for distributors to pay and ship goods in the early off-season, holding "water head meetings" to secure distributors' funds and warehouse space for the peak season.

From this, we can see that distributors serve brand owners, playing roles in the circulation chain such as advancing funds, warehousing, marketing, logistics, and customer service. In this process, **distributors sell products at low prices to secondary wholesalers, transferring some of the obligations of advancing funds, warehousing, logistics, and customer service to them. The stores served by secondary wholesalers are often those that distributors "look down on" or have low cost-effectiveness.**

"Wholesale markets will not disappear, but in the process of development, a large portion of wholesalers will be eliminated through survival of the fittest, which is an inevitable trend under the market economy. In this process, what everyone competes on is who has higher efficiency, who has lower distribution costs, and who can use better tools and methods to reduce costs and increase efficiency. Digitalization is undoubtedly the biggest breakthrough.

Over the past 30 years, this trillion-yuan market has had no data accumulation. Decision-making relied on the experience and intuition of operators. This kind of business might have worked in the past, but if you still do business this way now, it's hard not to be eliminated. **Learning to use scientific management tools and methods to obtain more information, more reliable customers, improve capital utilization efficiency, and improve logistics and distribution efficiency is the only way to avoid elimination," Chang Junjie told New Distribution.**


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