Different perspectives and positions lead to completely different views, which I understand. I don't think low-price competition is good, nor do I agree that everyone should engage in cutthroat competition. I also hope the trend of incremental market growth can continue. However, what we hope for is not the same as what the market actually does. Over the past year, I have been on the front lines of the market as an industry observer and researcher, hoping to understand what is really happening in the industry by communicating with as many people as possible, including brand executives, distributor owners, and retail entrepreneurs. During these exchanges, people often ask: "What do you think about the market in 2025?" Different people ask about different "markets." Brand owners want to know about channel changes and where the growth is; distributors care about the transformation of trade circulation and where the way out lies; retailers ask about the development of their business formats, such as discount stores. The focus varies, but in my view, they are all closely related to one thing: the reconstruction of the FMCG distribution order. The reconstruction of the distribution order is abstract—what does it really mean? Why is it so relevant to industry practitioners? I plan to share my thoughts with you through this article. I admit that what I see is only a part, and what I express is just one perspective. I hope it can inspire you.

In the past two years, from the rapid rise of snack discount stores to the emergence of full-category discount supermarkets, and then to the adjustments of traditional supermarkets.

It seems that overnight, everyone is clamoring for low prices, direct sourcing, bare prices, and streamlined SKUs. What is going on? I believe in one sentence: nothing happens suddenly; if you think something happened suddenly, it's only because you haven't understood many things. An important factor in not understanding is mistaking "results" for "causes." What does that mean? When discount retail emerged, traditional retailers cursed it, and upstream suppliers boycotted it: "You're using low-price competition to ruin everyone's business! You are the culprits of market chaos." On the surface, that seems true, but think deeper: why could discount retail rise? As early as twenty years ago, China had attempts at discount retail, but they didn't succeed. More than ten years ago, bulk snack stores were spreading across the country without causing much of a stir. Why does it cause such industry shock today? Because the market environment has changed. First, there are simply too many products! Behind this is severe overcapacity. Without overcapacity, there would be no hard discount. Because without overcapacity, there would be no chaos in order. Without chaos, discount stores wouldn't be able to get goods, and they couldn't develop. Second, people find low prices attractive! Behind this is rational consumption. The consumption upgrade seen during the booming economy is gone; people either really have no money or have poor expectations and are unwilling to spend. These two direct factors have contributed to the rise of discount retail today. This is what I mean by "low prices and discounts are results, not causes." But that's not all. Using an iceberg as an analogy, what we see is only the part above the water; to truly understand what's happening in the industry, we need to dissect the part below the water.

To explain this clearly, I drew a diagram.

Point: What we see—low-price involution, retail discounting, supermarket adjustments—are manifestations of industry change, behind which is a change in retail business philosophy: from selling shelf space to selling products. Line: Retail is just selling; behind it is the supply chain, so below the point is the line, which is the circulation model: vertical integration, disintermediation, and reducing markup rates. Plane: Below the line is the FMCG industry as a plane: oversupply, demand differentiation, rational consumption... Body: Finally, we are talking about these things within the Chinese economy; China's macroeconomic environment is the soil for industry changes. Snack stores carved out the snack category from supermarkets, creating a price gap with supermarkets, and then the rise of full-category discount supermarkets and wholesale supermarkets will threaten supermarkets in more categories. Supermarkets, already struggling under the impact of e-commerce, will die if they don't change. From snack discount stores to full-category discount supermarkets and the adjustment of traditional supermarkets, this is a line. Combining these two diagrams to view the current industry changes makes it three-dimensional and systematic, and we can understand what is really going on. In summary:

The "point" corresponds to low prices, involution, discounts, and adjustments, which are micro-level results.

The "plane" and "body" correspond to supply-demand changes under the economic cycle, which are macro-level causes.

The "line" is the meso-level trend, corresponding to what?

The reconstruction of the FMCG distribution order!

In the past two years, have you felt that the market is becoming more chaotic? Low prices, cross-regional selling, peers stealing business, upstream and downstream stealing business. The essence of chaos is the collapse of order. Order is an abstract word, but it's simple to understand: order is a rule of multi-party collaboration, a kind of certainty. Where does certainty come from? It comes from each participant doing their part. The existing FMCG distribution order:

Manufacturers are responsible for R&D and production, and decide prices;

Distributors are responsible for distribution and shelf placement;

Retailers are responsible for display and sales. Why is it being reconstructed? Because the functions of the participants are changing. The initiator is retail. Discount retail is the pioneer, followed by supermarket adjustments. They used to only display and sell, but now they want to—decide which products to sell and at what prices! In this process, the industry faces two major topics. What are topics? It means that many phenomena and changes we see can be attributed to these two concepts. Topic 1: Supply chain efficiency Supply chain efficiency means, from the production end to the final consumption end, how to reduce links and lower markup rates? Distributors' B2b platformization, retail discounting and chain operations, and supermarket adjustments requiring direct sourcing and bare prices—all can be attributed to this topic. Topic 2: Product differentiation Product differentiation means, how can the products retailers offer to consumers be different from those of other retailers? Why should consumers come to me? Some retailers' joint customization with manufacturers, factory white-label products, supermarkets adjusting product structures, streamlining SKUs, and retailers' private labels—all can be attributed to this topic. In the future, all retailers that want to survive and develop must work on these two topics.

For example, while traditional retail is struggling, several business formats are still well-received by the market:

Warehouse membership stores represented by Sam's Club.

Local supermarkets represented by Pangdonglai.

Hard discount supermarkets represented by Aldi. They are all popular and covered by the media. I have visited these stores for research. They look very different in form, but they share a commonality: they are far ahead of their peers in supply chain efficiency and product differentiation. From this perspective, snack stores have only completed the first topic, but the second topic is harder, so everyone is starting to shift to discount supermarkets. Based on the experience and resources of snack discount stores, discount supermarkets improve circulation efficiency in other categories while attempting the other topic. Supermarket adjustments are the same; they are trying to improve supply chain efficiency and product differentiation. Of course, who does well or poorly, who is right or wrong, is another topic, but the direction is clear.

Retail upheaval is closely related to upstream FMCG manufacturers! There are too many challenges, such as: There must be products still on shelves that will lose their display positions. There must be partners in the distributor system who will lose their living space. Also: In the past, it was about advertising in the air, then arming ground forces with enough ammunition to occupy terminal shelves and endcaps. If traditional supermarkets with the back-end model either die or transform, will this new product promotion method still work in the future? Brand owners' channel and organizational systems are matched with the past deep distribution model. How should my organizational system be adjusted to adapt to future changes? ... The so-called reconstruction of the FMCG distribution order means that the existing order is unsustainable, but the new order has not yet been established. What is the existing order? It is an order led by brand owners, pushing their products to consumers through the distribution system. This is a "push" order. What is the new order? We don't know yet, but I have an abstract summary: organize and mobilize consumers, and find good products for their needs. This is a "pull" order. I have a few judgments:

1. The relationship between zero and supply changes. Retail aggregates demand, but its advantage is not in R&D and production; to meet consumer needs, it requires cooperation from suppliers. Retailers have data, and manufacturers have R&D and innovation capabilities. In the past, manufacturers and retailers had a game-like relationship; in the future, it will definitely be an ecological collaborative relationship (in many scenarios through intermediate service providers).

2. The relationship between manufacturers and distributors changes. Manufacturers and retailers are both in the millions, so intermediaries are indispensable. Small distributors will exit, and the trend of larger distributors accelerating! And they must transform into service providers. Manufacturers should value communication and collaboration with large distributors, working together to provide good products to the retail end! Empowerment, sharing, and joint operations are the core of future manufacturer-distributor relationships.

3. Integration of production, supply, and marketing. Consumer demand is the gravitational force, accelerating the shift from a "push" order to a "pull" order. From the perspective of the industry chain, the future is the integration of production, supply, and marketing. Integration means that manufacturing, distribution, and retail are in a "symbiotic" relationship, serving consumers together.

Finally, I want to say: the pain during the transition from the existing order to the new order is not decided by any party, nor does it shift according to any party's will. What we can do is only: understand what changes are happening in the industry, and then decide how to act. Epistemology determines methodology. Different roles in the industry chain should gain insight into the essence of change and establish their role and division of labor in the new order first, to win the opportunity dividend for the next 10 years.

【New Order · Symbiosis】 The 10th China FMCG Innovation Conference Time: March 17-19, 2025 Location: Chengdu, China