"The distributor business is getting harder and harder!" I think 90% of people would agree, but is that really the case? Is it true that all distributors are finding it harder? If that were the only answer, there would be no need to discuss this topic. Before we talk about whether distributors are doing well or not, let's talk about two stories. In all low-income countries around the world, what percentage of girls finish primary school? A. 20%; B. 40%; C. 60%. What's your answer? In one survey, only 7% chose the correct answer: 60% of girls finish primary school. Another story: What percentage of the world's population lives in low-income countries? According to statistics, among those surveyed, over 90% thought the answer was 59%. However, the real figure is 9%—only 9% of the world's population lives in low-income countries. In fact, it's far better than people imagine. Why do so many people get the wrong answer, including some famous sociologists? These two stories are mentioned in the book Factfulness by Hans Rosling, who also explains the reason behind our misjudgments: We tend to think there are many low-income countries and few girls finish primary school there, largely due to our instinct for negativity. In short, we are more likely to notice bad things than good ones. Back to the distributor business: When a friend tells you that a distributor went bankrupt due to a broken capital chain, wouldn't you pay more attention? At the same time, the external information environment, such as media news, also tends to report negatively. The instinct for negativity, combined with the fact that humans are emotional creatures, eventually turns "business is getting worse" into a common belief among almost all distributors, and they believe it deeply. We need to face this: our judgment of things is never a simple either/or, right or wrong. Things can be bad, but at the same time, they can get better; bad and better can coexist. So I believe some distributors' businesses are getting better; it's just that "good news isn't news" and isn't spread by more people. When we rationally understand this, we can then carefully analyze the distributor business, see why it's getting worse, and how to make it better. That's the correct way for distributors to think. Why do we feel business is harder? The reason for difficulty is that we always compare with the past. From the outside: upstream products have increased, competition among manufacturers is intensifying, supply exceeds demand, and there are only so many people, so naturally some grab more and some grab less. In the middle: there are more peers, not only distributors of the same category and cross-category distributors, but also community group buying and B2B platforms, all supplying retail stores. You supply, they supply; the number of offline stores is limited, so if they take your goods, they won't take others'. Downstream: there are more ways to sell to consumers. E-commerce is selling nationwide, and even WeChat and Douyin can sell goods, so fewer goods are sold through stores. Full competition at all levels divides market sales volume, and distributors, as an intermediate link, are bound to be affected. This is the objective external environment, compared with the past, causing business difficulties. From the inside: since the 1990s, distributors have evolved through four roles: capital provider → logistics provider → coverage provider → operator. In the past, to do distribution, you needed money to get goods, find a good location in the market, and business would come to you; there was almost no threshold. Later, as peers increased, and under the urging of manufacturers, they began delivering goods, either actively or passively. Then, distributors with business acumen took the initiative to cover stores, visit them regularly and periodically, build relationships, and take orders. Of course, some distributors also started doing operational work, such as brand promotion and product experience in modern channels like KA; in circulation channels, they occupied prominent positions, focused on sell-through, and fully utilized various POSM materials to drive sales. From capital provider to operator, in fact, this places increasingly higher demands on the distributor business. Both the difficulty of management and the difficulty of market operations are increasing. It's not hard to understand that the work is more detailed, and those who don't adapt will inevitably be eliminated. This is the law of the market and the rule of survival. Combining internal and external factors, the distributor business naturally becomes harder. On the other hand, how do some distributors do well? I think the core lies in two points: one is selling out, and the other is efficiency. How to make the business better? Currently, distributors are going through the transition from "coverage provider to operator." If they can't cross over, another wave will be eliminated. If they cross over, they will welcome a spring again. The two keys to being a good operator are selling out and efficiency. 1. Selling out: Make consumers buy your product, not competitors' In the past, distributors only needed to do coverage—distribute goods to outlets and that was it, relying on probability and brand. But now it's not enough because external competition is fierce. You need not only distribution but also sell-through, and the action of sell-through is selling out. How to do selling out well? The conventional way is attractive displays, which is basic. But when every brand does it, it often fails. So we don't necessarily have to make beautiful displays, but we must think about how to maximize the possibility of being sold, especially in today's homogeneous products. Back to the origin of consumption: whether you can attract consumers' attention, whether you can have a dialogue with consumers, and whether you are closest to the consumer's purchase decision determine the probability of the product being sold. For distributors, the product isn't yours, and you can't set the price. The only thing you can do is increase the attention between the product and consumers, thereby increasing the likelihood of purchase. For example, in traditional small stores, occupying the most prominent position is something distributors understand. But that's not enough; you need to think further. Suppose you sell energy drinks. Besides putting them in the cooler, are there other better positions? For example, placing your product to the right of Red Bull, "leaning on a big name"; or if you sell 2L/5L bottled water, the best way is to put it on the floor in the beverage section so consumers can just pick it up and go. In KA stores, besides occupying positions, distributors also need to have planning capabilities, using what kind of copy, what images, what text to have a dialogue with consumers and move them. For example, during the pandemic, milk inventory was high. To clear inventory, they directly discounted in stores. Although sales were okay, it wasn't the best way. Instead, they could make consumers feel that "during COVID-19, drinking milk boosts immunity; [brand] strengthens the body and is invulnerable to all diseases." Having a dialogue with consumers and giving them a reason to buy your product is sometimes more important than discounts and low prices. This is the logic of selling out: from the consumer's perspective, in the retail store scenario, how to choose my product. Of course, for distributors, accurately understanding consumer behavior and needs may be somewhat difficult, but the "selling-out mindset" must be present. For example, Hongye Hengda Trading, a distributor of Arowana, directly sold grain, oil, rice, and flour into factories, holding a "factory internal purchase event" at relatively favorable prices, selling directly to consumers with considerable sales volume. This is also the selling-out mindset: how to get closer to consumers and attract their attention. By analogy, milk and dairy products, daily chemicals, etc., can also enter similar special channels. It should be emphasized that the intensity of competition on the shelf and consumer behavior differ for each FMCG category, so even in the same store, the logic of selling out is different. A braised snack product might see a big sales increase with a hanging display, but a beverage might not see much improvement even with a prominent position. Therefore, the form of selling out varies by category, and distributors need to have deep insights. 2. Efficiency: More efficient operations, better profitability A salesperson works 8 hours a day and visits 30 stores. Your salesperson can work 10 hours and visit 40 stores, but that's not efficiency. The extra 2 hours must be exchanged for other costs. If your salesperson can visit 40 stores in 8 hours, that might not be efficiency either, because staying less than 2 minutes per store and just saying hello before leaving isn't effective. What is efficiency? It's increasing quantity while maintaining the same quality. With digital tools, following regular routes, for active stores with good relationships, based on historical order data, 5 minutes in the store is enough; for stores with average relationships and low activity, with no orders for a month, even 30 minutes in the store is not too much. This is using digital tools to grasp historical sales data to determine visit frequency, time in store, and in-store execution actions—this is efficient visiting. Rongcheng Yigou, a traditional distributor transformed into a digital distributor, went from distributing only a few brands to now distributing 400 brands, with 2019 sales increasing by over 500% compared to the previous year. This is the efficiency of product distribution. Some might think that a distributor handling so many brands can't be doing it well. But that's looking at it from the perspective of deep distribution. What about snacks? What about daily chemicals and general merchandise? Manufacturers themselves can't achieve deep distribution, but Rongcheng Yigou can not only distribute but also do periodic in-store marketing activities. Who wouldn't welcome that? Why emphasize efficiency? As a distributor, the product isn't yours, and the store isn't yours. Your core work is moving goods, getting goods into stores, and selling goods out. If you can't move goods at lower cost and faster, can't get more goods into more stores, and can't sell out quickly, where is your value? Don't always complain that business is hard. Don't feel sympathetic when you hear a distributor say business is bleak and they're about to close, and comfort yourself by saying, "Everyone's business is bad, so I'll just muddle along." Don't pay too much attention to negative voices; listen more to how excellent distributors do it. Some distributors, when they hear about a distributor doing well, always dismiss it, thinking it's because of the brand they carry, or because of some relationship or resources... In my exchanges with some successful distributors, my biggest feeling is: they always tell me, "I learned this from so-and-so; there's a distributor who does very well, and I've always wanted to go see them..." That's the difference. Is business getting better or worse? My answer is that many distributors' businesses are getting worse because of external competition; these distributors haven't kept up with the pace of environmental competition, and their value has weakened. Without value, business naturally suffers. For brand owners, they don't have coverage and can't sell out; for retail stores, they don't provide after-sales, don't do displays, just put goods on shelves. They're dispensable; they can get goods from new channels or retail platforms anyway, so they don't need to beg you. These distributors could do well in the past only because of market dividends and brand dividends, relying on courage, not really related to their own abilities. Of course, there is also a small portion of distributors whose business is getting better. They can do coverage, do operations, have a selling-out mindset, and can help brand owners launch new products. Or they can help stores achieve one-stop procurement for a certain category, such as snacks/daily chemicals/general merchandise/seasonings, and without your supply, it won't work. I believe the elimination of some distributors is inevitable, but behind the elimination, we should also see opportunities. Some distributors will rise and become major distributors, helping manufacturers sell more goods while also developing themselves, with stores at the core, operating multiple brands and categories! Are you "watching" me?