Before 1998, China had 'big distributors,' but they were eliminated by 'big manufacturers.' The 'provincial agents' of that era were definitely big distributors. From 1998 to 2000, there was a period of 'cutting big accounts.' Now, all leading FMCG companies have engaged in 'cutting big accounts.' The 'big accounts' of that time were not called distributors but wholesalers, mainly engaged in large-scale circulation, typical traders. After 1998, the development of Chinese distributors has always been toward miniaturization. The small regional agency system is the result of distributor miniaturization. At one point, big manufacturers had the idea of developing 'township agents,' but unfortunately, 'township agents' didn't take shape, and finally settled on 'county agents' as the main model. Why miniaturize? Because when the deep distribution model formed, big manufacturers did not want to cooperate with big distributors but with 'obedient' distributors. Of course, if a distributor was both big and obedient, they could eventually stabilize. So, 'obedience' is more important than 'scale.' As long as you are obedient, big manufacturers can make you reach a certain scale. In deep distribution, distributors need to build 'guanxi' (relationships) with terminals, and 'guanxi' naturally has no scale. There are very few distributors in China that develop across regions, also limited by channel 'guanxi.' So, for 'disobedient' distributors, big manufacturers often replace them without hesitation, not caring about 'guanxi' at all, because big manufacturers have 2C capabilities, while distributors only have 2b capabilities. Big distributors are the result, not the cause. Whether distributors have 2b or 2C capabilities is the cause. When distributors have both 2b and 2C capabilities, it is not appropriate to distinguish by size, because they will eventually grow big. Such distributors are better called platform players. Wholesalers grow big through large-scale circulation, distributors cannot grow big with 2b capabilities alone, and platform players grow big again by leveraging 2C capabilities. This may be the trajectory of distributor development. In manufacturer-distributor relations, manufacturers generally dominate. Recently, we have discovered some new-type distributors who truly have the qualification to 'say no' to big manufacturers, giving us a glimpse of future 'big distributors.' Why can distributors say no to big manufacturers? Because they have channel control capabilities. To summarize, they generally have the following characteristics: First, they control a category, thereby gaining influence over upstream and downstream in a certain segment of the channel. Or they hold multiple big brand products simultaneously, thus no longer relying on a single big brand. With this capability, 2b 'guanxi' is no longer a one-sided issue; even the b-side will show some respect to the distributor, and changing salespeople won't affect guanxi as much. Second, they have channel control capabilities. The core of channel control is price control. If sales are poor, they complain; if sales are good, prices are low. That means no channel control capability. If terminals don't control prices, distributors control goods. Most distributors don't have the guts to do this. Because of this lack of guts, distributors easily fall into the paradox of 'either can't sell, or sell but don't make money.' More importantly, when sales are good in one area, it's easy to have cross-region dumping. Dumping is also a result of poor channel control. Third, they have the ability to promote white-label products. This capability is very important. Promoting white-label, new products, and high-end products is difficult, but generally, promoting white-label is the hardest. As long as they have the ability to promote white-label, it generally means they have achieved 2C capabilities. In the past, channel control was thought to be about controlling b, but in fact, controlling C enables controlling b. This approach, I call 'being the customer's customer,' and then the customer becomes obedient. Instead of just building guanxi, it's better to do 'reverse guanxi,' which is the struggle for channel dominance. Fourth, they have a good product structure. Product structure is actually the profit model. Distributors have always been in the contradiction of 'difficult to achieve both sales volume and profit,' because they only focus on scale, not results. When manufacturers force stock, they have to obey. High-end products have profits, so they won't use 'policy pressure' at all costs to exchange for false sales without profit. When distributors have the above four capabilities, as long as they have good new products, whether they are big brands or not, they can survive in the channel. Or, when big manufacturers want to replace a distributor, they have to think twice. Such distributors have channel control capabilities and have the prototype of a platform player. Distributors were once called wholesalers. Wholesalers were truly big distributors, relying on wholesale markets to radiate to surrounding areas, with large throughput, but apart from the goods in hand, they had little influence on the channel. During the 'cutting big accounts' process, they were cut off at will. Because the downstream could easily be intercepted, they lacked channel control capabilities. So, wholesalers that were once large disappeared. In the process of deep distribution, distributors are generally 'an extension of the manufacturer's channel management,' subject to big manufacturers, and during deep distribution, the distributor's channel functions gradually diminish, forming 'disability.' This statement may not be pleasant for distributors to hear, but it is true. What is distributor disability? It means the distributor's channel functions are not complete. Here are some examples of disability. For instance, during intense KA competition, the cost of KA promoters was borne by the manufacturer, and then the manufacturer intervened in management. Originally, the distributor managed the KA comprehensively, but the manufacturer gained management rights by providing personnel and expenses. For example, many big brands now implement 'closed management' for distributor salespeople; the manufacturer pays the salespeople's salaries, and the distributor only issues performance bonuses. The manufacturer exchanges salary payment for management rights over salespeople. Another example: now some distributors' promotion and orders are all handled by the manufacturer, and the distributor only takes money to purchase goods or is only responsible for delivery. Distributors become delivery providers and financiers, losing their channel operation capabilities. From a cost perspective, the above process benefits distributors. But when a large amount of channel work is done by the manufacturer, it is actually a process where the distributor's role in the channel is hollowed out, and the distributor becomes disabled in disguise. Good or bad? The process is good, but the result is not. In the above process, the distributor's channel functions become increasingly incomplete, with certain aspects always missing, eventually becoming 'disabled' distributors. Once the manufacturer stops cooperating, they are paralyzed. The manufacturer provides personnel and money, and the distributor is 'happy in it,' masking the reality of distributor disability. In the previous discussion, we linked 'deep distribution' with 'no big distributors.' Some may not agree, but that is the reality. In the past, some industries had big distributors, such as snack foods, condiments, and other large wholesale industries. As leading companies began deep distribution, big manufacturers rose, and big distributors disappeared. In some regions, such as South China and Southeast China, distributors are slightly larger, such as provincial agents and cross-regional agents. The characteristic of these big distributors is that they shield manufacturers from the deep distribution system. Of course, their own deep distribution is still good. Deep distribution has no big distributors. As long as big manufacturers participate in distributor channel operations, distributor 'disability' is hard to avoid, let alone becoming big distributors. Wholesalers were big distributors, but they were hollowed out by manufacturers' channel sinking and then disappeared. Distributors may be able to scale up, but in the process of disability, even if they grow big, they lack channel control capabilities and are subject to big manufacturers. When distributors have channel control capabilities, they become a channel platform. As long as the manufacturer's products are good, they can be sold on the platform. Becoming a big distributor particularly values scale and especially values 'goods in hand.' Goods have become the focus of distributor entanglement. A few years ago, when we talked about channel trends, we mentioned that future distributors might be distributors who do not handle goods. I remember some distributors were so shocked when they heard this that it really shocked me too. Current distributors care too much about 'goods in hand.' When we say that delivery might be outsourced to third parties in the future, some distributors act as if their lives depend on it. For a distributor who is based on 'doing business,' goods are the sense of security. They would rather give up promotion and order functions to the manufacturer, but still take money to purchase goods and deliver every day. In the prototype of platform players I mentioned earlier, every point is unrelated to goods. Moreover, third-party delivery is definitely the direction for the future. Currently, the channel has evolved from deep distribution of mass products to bC integrated promotion and bC integrated digitalization. Therefore, the four major functions of distributors (promotion, ordering, delivery, and financing) will be replaced by a digital ecosystem in the future. The digital channel ecosystem consists of four major platforms. Specifically: 1. A promotion platform for new and high-end products. This is key to determining whether a distributor can establish a foothold. Distributors with the ability to promote new and high-end products naturally become promotion platforms, and both small and large manufacturers value this capability. 2. An ordering platform. Either the manufacturer's ordering platform or the distributor's ordering platform, including both B2b ordering platforms and F2B2b2C ordering platforms. With the emergence of ordering platforms, orders will naturally concentrate on large manufacturers and large distributors. 3. A city distribution platform. City distribution will definitely be third-party. Distributors either give up city distribution or become the landing service provider for city distribution platforms. One thing is certain: city distribution is no longer the core function of distributors, and goods no longer bring security to distributors. 4. A financing platform. If goods are on a third-party platform and orders are on the platform, then both goods and orders have financial functions. China has big manufacturers (big brands) and big stores (chain KA stores), but has never had 'big distributors.' A few hundred million yuan a year might be considered a big distributor. But compared with big manufacturers and big stores, the scale is too small. It is precisely because of the miniaturization of channel players that big manufacturers have strong channel control capabilities. This is the reason why Chinese brands all have strong channel capabilities. This is a Chinese characteristic of marketing. As distributors, they do not invest in infrastructure, and it is difficult to build core competitive capabilities. The simple profit model under the logic of 'doing sales volume' and 'product mix' has only tactics and no strategy. Therefore, big manufacturers continuously release 'temptations' (such as profit sharing and manufacturer-funded expenses), and distributor disability is inevitable. It should be said that the internet has contributed significantly to the platformization of distributors. Once a platform is established, it becomes the infrastructure for core product competitiveness. This is the starting point for platform players' channel control. Especially in recent years, in the snack food category of FMCG, due to order platformization and digital delivery platforms, there has been a tendency for categories to concentrate on a certain platform player. Whether wholesalers or distributors, the undertone of trading (commerce) is too heavy; goods are the ballast, goods are the sense of security. But trading (commerce) can only earn an unstable markup. When the platformization process establishes the ability to reach C-end for new and high-end product promotion, it can become a platform for all suppliers. As long as they enter the platform, they can reach C-end and open up all channels. Extended Reading