Phenomenon: Recently, we have intensively visited multiple wholesale markets, reinforcing our earlier perception: the distribution business is becoming increasingly difficult, and this difficulty is structural.
In traditional channels, most KA (key accounts) are experiencing continuous customer attrition, with product sell-through noticeably deteriorating; they are all seeking adjustments to save themselves. Mom-and-pop stores generally report a significant reduction in restocking frequency, and even many small shops that have been around for a decade are starting to put up "for lease" signs...
The channels that veteran distributors are familiar with are almost all declining, with only the difference between a cliff-like decline and a slow decline.
Meanwhile, new retail channels are expanding aggressively, with discount formats and instant retail driving prices to the floor, leaving minimal intermediary profits. Membership warehouse clubs and direct manufacturer partnerships are developing a large number of customized products, effectively bypassing distributors...
Old channels are hard to hold onto, and new pathways are difficult to enter; distributors' business space is being squeezed from both sides.
This situation is so widespread that it indicates an industry trend rather than a short-term phenomenon—distributors who rely on inertia are being eliminated by the times.
Essence: Distribution is the circulation pathway for the FMCG market. Since retail, as the outlet for FMCG, has undergone dramatic changes, the pathway naturally needs to be rerouted.
Distributors themselves undertake the circulation function for FMCG across society, distributing products from factories to retail terminals so that consumers can purchase them at the point of sale.
In the past, retail terminals were relatively clearly segmented. For example, KA once dominated the FMCG market for a decade; as long as you served them well, you could make money. Distributors' service methods were relatively simple and straightforward.
But now, with the development of the FMCG industry, retail terminals are becoming increasingly segmented and complex. New formats such as discount stores, membership warehouses, and instant retail not only have their own rules of the game but also blur the boundaries between online and offline.
Industry trends are not formed overnight but are the result of multiple resonances among industry elements. Moreover, they are transmitted link by link along the industry chain.
To understand why the distribution business is structurally difficult, one must see through the changes in industry elements.
Of course, for distribution, the most influential variable is retail.
Retailers, as the downstream customers of distributors, have two very obvious characteristics:
They are close to consumers; like ducks feeling the warmth of spring water first, retailers are the first to know and respond to structural changes in consumer behavior.
No consumer rejects "more, faster, better, cheaper." As the final outlet for delivering FMCG to consumers, retail's direction of change is inevitably toward higher efficiency.
This summarizes what has been happening in the market over the past few years:
In an era of shrinking volume, consumers are extremely pursuing cost-performance, forcing retailers to launch an efficiency revolution, whether emphasizing price (discount formats) or quality (membership and premium supermarkets), whether it's the rise of new retail or the transformation of traditional retail.
It is precisely this change that directly impacts distributors' businesses!
The macro environment changes consumers, consumers influence retailers, and retailers in turn force distributors to change.
As the upstream link of retail, distributors are responsible for the socialized network distribution of FMCG from factories to retail terminals, constituting the entire circulation pathway of the FMCG industry.
Currently, retail, as the circulation outlet, is undergoing dramatic changes; naturally, distribution, as the circulation pathway, also needs to be rerouted. After all, adapting to market conditions and providing what customers need is the basic quality of doing business.
However, in the process of rerouting, it cannot be avoided that distributors will face two severe challenges:
Retail efficiency is increasing, driving the entire industry chain to improve efficiency; undoubtedly, a portion of low-efficiency distributors will be cleared out.
New customers have new needs; how to satisfy these new needs and successfully transform, redefining distributors' industrial value.
Impact of retail changes on distribution
Solution: Follow the trend, transform with retail, and find a way out.
For distributors, the current challenge is not only severe but also a matter of life and death.
Precisely for this reason, it is even more important not to act blindly; one must clearly see industry trends to transform, so that distributors can find a way out for their future business.
It is difficult, with no clue for a new direction; it is also simple, as the answer lies in the market.
Distributors' customers are retailers. As retail rises and falls, demand will clearly change. Wherever new demand lies, there lies the new opportunity for the distribution business.
But it is worth emphasizing that, looking at mature FMCG markets abroad, the market is only clearing out low-efficiency distributors, not denying the value of distributors' existence.
Even in mature FMCG markets in Europe and the United States, distributors have evolved over time into super service provider giants.
Super distributor giants that emerged from a century of development in the U.S. FMCG market
Therefore, regardless of whether the industry ultimately clears out 30% or 50% of distributors, as long as distributors' industrial value is sufficient, the FMCG industry still cannot do without distributors' services.
According to my observations, distributors who are transforming well have found relatively common service values:
Buying capability: acting as an external sales force for major customers, solving product development needs.
Assortment capability: solving the product mix configuration needs of mom-and-pop stores, instant retail, and local chains.
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The most typical examples are the distributor groups serving Sam's Club and those serving flash warehouse (lightning warehouse) formats.
Sam's Club distributors act as external buyers, screening the entire market for suitable brand owners and manufacturers to co-create products based on the retailer's clear product requirements.
Flash warehouse distributors act as assortment providers, directly supplying full shelves based on the retailer's complex product mix needs (typically over 2,000 SKUs with clear sell-through requirements), greatly optimizing the tedious work of product mix configuration.
Of course, there are also many distributors in the market who have begun to switch roles, no longer just distributors, but venturing into manufacturing (controlling production factories) or retail (opening stores, integrating wholesale and retail), earning industrial value beyond distribution.
It can be seen that many excellent distributors have already blazed a trail in transformation.
Expansion of the capability model for the distribution business (role extension or capability extension)
But returning to the distribution business itself, whether it was previously helping customers with capital advances and delivery, or now solving product issues through buying and assortment, it all comes down to solving customers' (retailers') problems.
Buying and assortment are merely transformations that follow changes in customers (retailers) to meet new market demands.
Borrowing from Toshifumi Suzuki, founder of 7-Eleven Japan, in his book "The Philosophy of Retail," the only constant in the retail industry is that it is always changing.
For distributors, as long as they can adapt to customer changes, find new industrial needs, and satisfy them, being a distributor of the new era, the business still has great potential!
In August, in Shanghai, we will gather brand owners, retailers, and leading distributors at the [2025 New Demand · New Supply 7th FMCG Conference] to jointly face this challenge—in the FMCG market full of variables, what exactly should distributors change and how, to avoid being eliminated?
At the 5th China FMCG Distributor Conference, we invited benchmark cases of distributors transforming in different directions: regional B2b representative - Zhong Xiaoping, General Manager of Jiecang Wanggou; platform brand transformation benchmark - Li Yong, Chairman of Shenzhen Yataixuan Industrial; retail channel operator representative - Zhang Shicheng, General Manager of Tianjin Shicheng Bofa; regional category operator - Zhang Gaifeng, General Manager of Zhengzhou Dapeng Trading; and Li Fen, General Manager of Xuzhou Runzhong Supply Chain, among others, to share their practical experience and thoughts on transformation.
At the same time, we will release the industry-exclusive "2025 China FMCG Distributor Business Condition Survey Report," to see which distributors are growing and which are being eliminated this year, the reasons, and where operational focus should be placed. We will also release the in-depth case collection "Ten Growth Case Models for FMCG Distributors," restoring real cases, providing structural thinking, and helping distributors find direction amid chaos.
In addition, we will hold the [Regional B2b Platform & Key Brand Cooperation Seminar]. It will bring together 40+ regional B2b platform owners to discuss incremental opportunities in the sinking market covering 200,000 small shops; release and interpret the "Regional B2b Cooperation Guide" on-site; and build a bridge for dialogue between regional B2b platforms and key brand leaders, with discussions, exchanges, one-click connections, and on-site supply-demand matching!
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