"For a business with 60 million in sales, I'd hand it over for 2 million." This is the self-description of a second-generation distributor, which made me ponder. Many distributors work hard all year, and although they appear to make money on paper, most of it turns into stock piled in warehouses. In the past two years, while visiting markets, I've found that many distributors have similar thoughts: they want to transfer their business but can't find someone to take over, and they can't comfortably retire, yet continuing to struggle lacks motivation and direction. Once, these distributors accumulated wealth through hard work and established a foothold in the market. But now, market changes have left them confused about the future. Why has the distributor business become so overwhelming?

Profit Margins Are Shrinking, Business Isn't Profitable "I dare not calculate profits; if I do, I can't sleep," lamented Mr. Liu, a condiment distributor in a third-tier city. "Take a well-known brand of soy sauce, for example: the gross margin is only single digits, basically sold at factory price, relying solely on year-end rebates. Even the salespeople don't want to do it." Indeed, traditional trading is facing unprecedented challenges, and "not making money" has almost become an open secret in the industry. Previously, industry expert Mr. Liu Chunxiong published an article in New Distribution that sparked intense discussion. He mentioned that the current situation is an imbalance of power between giants and distributors, where high-intensity deep distribution leaves stock with distributors, either leading to short-dated products (like dairy) or tying up too much capital (like baijiu), further squeezing profit margins. Moreover, brands, to compete for market share, have started market segmentation strategies, dividing by channel or even product line. The market is being cut into smaller pieces, leaving fewer resources for each distributor, making business increasingly difficult. Meanwhile, costs like vehicles, rent, and labor rise year by year: drivers' wages have increased from 5,000-6,000 to 7,000-8,000, warehouse rents keep climbing, plus vehicle wear and maintenance—all invisible but heavy burdens. Yet profits haven't increased with costs; the money earned basically goes to support people, vehicles, and landlords...

Terminal Sales Are Stagnant, Poor Sell-Through "It's okay if profits are a bit lower, as long as we can maintain sales volume; we can win by volume. But now, even small shops have poor sell-through!" sighed Mr. Wang, a snack distributor. In the last year or two, return rates at terminals have been rising, with over ten stores closing in a single month, making business increasingly tough. There are many reasons, but he believes the main two are: first, people are tightening their belts, unwilling or afraid to spend; second, while the overall market declines, other channels are grabbing existing market share. Macroscopically, according to data from the People's Bank of China at the end of October 2024, narrow money (M1) fell 6.1% year-on-year, while broad money (M2) rose 7.5%. This may indicate that the actual funds available for consumption have decreased, as public uncertainty about future economic prospects leads to insufficient consumer confidence, causing more money to be deposited in banks, further illustrating weak consumption. Mr. Wang joked, using himself as an example: In the past few years, he'd dine out with friends five or six times a month, drinking Moutai; now, such gatherings have decreased significantly, and the drinks have been replaced with more affordable options. Continuous price cuts in offline channels also impact stores significantly. For instance, Mr. Jia, a condiment distributor, told New Distribution that the impact of online channels is increasingly severe. In the last two years, more and more customers have complained that his supply prices are too high. Upon investigation, he found that "Pinduoduo's flash sale activities for clearance stock can even sell at our purchase price, with similar shelf life, and they ship in whole cases. Second-tier distributors compare prices and buy online directly; it's hard to track 10 or 8 cases at a time. Reporting to the manufacturer is also difficult to control because flash sales aren't permanent; even if you screenshot and report, the link is taken down when you click again. Besides, manufacturers also need to clear inventory."

Team Discord and Management Difficulties External environmental changes are only one aspect; traditional distributors also face internal management challenges. Many distributors started as mom-and-pop operations and gradually grew, cultivating a group of "veteran" employees who grew with the company. However, the market changes rapidly, and the internal team's mindset is also shifting. On one hand, salespeople who have worked for years lack drive, treating the company as a "retirement home"; on the other hand, if they overhaul the team, they worry about affecting cohesion and morale, leaving them in a dilemma. A distributor friend said bluntly, "For small enterprises like ours, being too process-oriented doesn't work, but lacking standards is also not okay." However, the process of forming these standards is painful, not just for employees but also for the boss. The most core department in a company is the sales department, and its level of professionalism is the biggest bottleneck restricting development. Mr. Zhou, a distributor, said: "Unlike positions like warehouse, driver, or finance, which are quick to learn, a new salesperson needs two to three months just to become familiar with SKUs, and that's for the smarter ones. Many find after two or three months that they're not suitable, and we have to recruit and start over. The trial-and-error cost is too high."

Children Don't Want to Take Over Building a business is hard, but maintaining it is harder. The first or early batch of distributors, whether from the supply and marketing system or starting from scratch, are now mostly at retirement age, having worked hard for half a lifetime and finally able to enjoy leisure. But the reality is that many second-generation distributors are unwilling to take over the business. Through conversations with many distributors, I've noticed an interesting phenomenon: distributors generally ensure their children receive better education, with many even studying abroad. After graduation, they mostly have glamorous jobs, making it difficult to persuade them to return. For second-generation distributors, they are generally well-off materially and educationally, well-traveled, and their friends and classmates are either entrepreneurs or in finance, foreign trade, or emerging industries. In their eyes, the distributor business is labeled as a "sunset industry." Compared to being "trapped" day after day in this traditional trading business, they yearn for the outside world and desire to carve out a new path.

Final Thoughts Times eliminate you without even a warning. Even if you haven't regressed and still operate according to the old model, that itself isn't wrong, but the market has changed. If you can't keep up, you'll find business increasingly difficult, and the current environment will be the norm going forward. We can no longer expect to return to the era of making money while lying down. How to face reality? In one sentence: "If you have energy, keep going; if not, get out." I recently visited a distributor with annual sales of 40 million. In the frontline market, this scale isn't large, but he's very happy. He said bluntly, "It's hard for an elephant to turn around. Compared to those large distributors with billions in sales, who need to relay decisions through layers, my transformation and change are much easier. I can respond quickly to market changes and implement new strategies with a single command." After all, it's not just the FMCG industry that's tough; if you broaden your perspective to look at catering or clothing, you'll feel FMCG is still viable! If you really can't hold on, then first earn what you can, and keep going as long as possible. Even if you'll be eliminated or acquired in the future, that's a later concern. What matters is what you can do now. For distributors with drive, maintaining a clear understanding, accepting reality, and quickly keeping up with the pace of change is key. Go out and keep learning, minimize detours, and refine a model that suits your own development.

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