The more diligent, the more losses

Late one night before the Lunar New Year, I received a call from a friend. He has been an FMCG distributor in North China for 20 years, representing household-name brands. During the 'golden two decades,' he was almost synonymous with success: more brands, bigger warehouses, higher sales figures. But that night, he said, 'Teacher Wenqing, this past year has been really tough. I find myself in a vicious cycle: the more diligent, the more losses.' He broke down 'diligence' in detail: to keep the business alive, he added every possible lever—pressing another round of stock, adding a promotion, stacking another rebate, hiring people to monitor displays, end caps, and sell-through. The goods entered the stores, but two weeks later, when he followed up, the end caps were still there, the shelves were still there, the inventory was still there—the only thing missing was sales. This 'powerlessness of diligence' is not one person's predicament, but a microcosm of the collective anxiety across the entire FMCG industry. Over the past six months, I have attended multiple distributor conferences for leading brands and organized several business communication meetings between retailers and brands. A common picture is becoming increasingly clear: Traditional distributors still hold the market's basic plate, but they are struggling more and more within a continuously weakening 'push system'; retailers are undergoing painful transformation—cutting SKUs, demanding efficiency, co-creation, and certainty. The problem is: everyone talks about 'cooperation upgrades,' but when it comes to cost sharing, responsibility boundaries, KPI metrics, and organizational coordination, things start to stall— Brands say they want sell-through and co-creation, but their assessments still center on shipments and collections, ultimately turning into 'another round of stock pressure'; distributors say they want to transform, but their cash flow is still tied up by payment terms and inventory; retailers say they want broader categories with fewer SKUs, but a supply chain system built over decades cannot change overnight. I have been pondering a question: Why has the 'distribution logic' that worked perfectly for the past 20 years suddenly failed completely in the last two years? Everyone says, 'Things are different now.' But what exactly is different? Few can articulate it clearly. If you cannot articulate it, you can only solve problems with more force—and the more force, the more anxiety. It feels like: the body is sprinting in a new world, but the soul remains in the old era. I know you hate these—big words. But if we do not first clarify what has actually happened, it will be hard to answer the two most practical questions: Where do we go next? And how do we get there?

The problem is not stagnant demand, but failed matching

Many say business is hard because we have entered a 'stock era.' Attributing today to stock leads people into a misconception: the only way is to grab. But the more real contradiction today is: demand is changing structure, while supply is still surging according to old logic. The stock era implies an assumption—demand growth has stalled. This claim has a major problem. Because it is not true. I plotted a trend chart of total retail sales of FMCG and growth rates over the past decade (above designated size, mainly for trend judgment). You will find: the total is rising overall, but the growth rate has gone through three phases: decline, repair, and fall again. This means demand is not 'not growing,' but 'growing less impressively.' So why does it feel increasingly competitive? Because the supply side is expanding at a faster pace:

  • One end is the expansion of supply entities: the number of individual businesses and enterprises has increased significantly;
  • Another end is the expansion of online and fulfillment capabilities: online retail sales and express delivery volumes have surged, fragmenting demand into smaller, more immediate pieces;
  • Another end is the expansion of stores but declining efficiency: the number of chain stores has increased, but sales scale has not grown synchronously, diluting per-store output. Demand is rising, but supply is rising faster—the squeeze effect is intensifying, and output per operating entity is declining. More critically, demand is structurally diverging, but supply is increasing in the old way. This is a typical feature of an era of surplus. Why call it 'surplus' rather than 'stock'? First, this is not a problem of 'total volume not increasing,' but a superposition of 'excessive traditional supply + structural divergence in demand.' Demand is not stagnant; it is undergoing structural migration.
  • Declining: standardized demand centered on production, universal demand driven by mass communication, and traditional demand that is easy to scale.
  • Growing: situational, fragmented, and immediate demand; demand driven by emotion, scenario, time, and space; layered, diverse, and unpredictable small demands. Second, the implicit thinking of 'stock' is: 'The market is this big; grabbing is the only path.' Aggressive expansion, stock pressure, and price wars are actions under this thinking. But these actions are precisely making the problem of demand mismatch worse. Surplus is not just a total volume issue, but a structural issue: excessive supply + demand divergence = failed matching. The incremental era competed on 'competition,' the stock era on 'contention,' and the surplus era competes on—who can 'match' more accurately.

Is the distributor layer still needed?

A distributor boss once told me a particularly poignant phrase: 'I know the products the manufacturer promotes simply don't sell in this channel, but I have to push them.' The essence of this phrase is not 'manufacturer dominance,' but failed matching: product, channel, scenario, and people—they do not truly align, but the system still forces you to keep adding push. So when we talk about 'matching,' what exactly are we matching? To answer this, we must first clarify three things: Where does demand come from? In what scenarios is it triggered? Who satisfies it, and in what way? If you reverse these three questions, you will find one thing— Today's FMCG distribution system is reorganizing with the C-end as the center.

  • Retail touchpoints are the circle closest to the C-end: scenarios, shelves, transactions—wherever consumers make purchases, retail is there;
  • Brand strategy is the outermost circle: products, content, expenses—it is responsible for creating demand and supplying ammunition;
  • Distribution and fulfillment are in the middle circle: operations, delivery, feedback. This structure itself is not problematic. The problem is that the word 'feedback' has been virtually empty for the past two decades. Distributors push goods out, and the task is done. As for whether these goods sold, to whom, in what scenarios, which sold out and which are still piling up—brands do not know, and distributors do not bother. Information in the entire chain flows in only one direction: from brand to distribution, from distribution to retail, from retail to shelf. It has never flowed back from the C-end. This is why the logic of the distribution era has completely failed today. Demand signals cannot feed back to supply; brands can only fake growth by pressing stock, distributors can only rely on guesswork, and retailers can only sustain themselves with promotions. The chain is not broken; the direction is wrong. So, is the distributor layer still needed? Today, in more and more scenarios, brands choose to bypass distributors entirely—directly connecting with retail, or even directly with the C-end. The chain is shortest, data is most direct, especially suitable for strong brands, DTC models, and self-operated retail. This is not new; it is the market automatically optimizing structure with efficiency. But this path has a premise: the brand has sufficient capability and resources to complete local coverage and data sensing on its own. For some brands in some channels, this can be done. But the reality of the Chinese market is—in lower-tier markets, fragmented channels, and localized retail ecosystems, brands' tentacles simply cannot reach. The ones with the widest coverage and deepest penetration are always those distributors who have been local for over a decade. So, it is not that the distribution layer disappears, but that the distribution layer differentiates: those who can provide local operational capability and data relay capability stay; those who only move goods are bypassed. These are two different fates, depending on the same question: How much do you know about the consumers in your coverage area? Do you know which stores in this area have young customer bases and which have housewives? Do you know the sell-through differences between A-class and B-class stores? Do you know that a certain product moves at different speeds on weekends versus weekdays? Do you know what new products the convenience stores around a certain residential area have introduced in the past three months and how they are selling? If you do not know—brands will not learn from you either. Then your layer is just a warehousing and distribution node, not an information node. Warehousing and distribution nodes can be replaced by lower-cost solutions. But if you do know, and you can feed these local signals back to brands, helping them make more accurate assortment decisions and more precise scenario matching, and helping retailers sense which categories are starting to move in your area— Then you are not just a distributor. You are an irreplaceable local data relay station in this supply-demand loop. From distribution to operations, from moving goods to sensing, from execution endpoint to information node—this is not the direction of transformation; it is the condition for staying.

Who are the next-generation distributors?

So, back to the most practical question: which distributors are still needed? This is not a question that can be answered by feeling. Behind it are three things happening simultaneously: the profit space of traditional distributors is systematically collapsing; the functional boundaries of retail are being redrawn; and brands are rethinking what kind of channel partners they truly want. These three things stacked together constitute a knockout competition. At the CFC conference in March this year, New Distribution officially released the 'Next-Generation Distributor White Paper: China FMCG Distribution Insights 2026.' What we attempted to answer is a question many are avoiding—when supply moves toward extreme surplus and demand moves toward high divergence, traditional distributors are destined to perish. This is an irreversible industry trend. Saying this is not hard. The hard part is the next sentence: who will take over? How? So the white paper truly confronts a life-and-death proposition: in the torrent of structural change, who are the next-generation distributors? This is not just a definitional question; it concerns the three most practical issues for the industry's future:

  • Knockout competition — traditional distributors who cannot see the direction are destined to be eliminated in inefficient competition. Not because they are not hardworking, but because they are using old logic to fight a market whose structure has already changed;
  • Collaboration — retail functions are shifting, from a pure sales outlet to a frontline for demand sensing. Who can become its long-term stable partner? It relies not on historical relationships, but on whether they can provide category and operational support capabilities;
  • Layout perspective — brands must break the traditional manufacturer-distributor relationship. Not because distributors are 'not useful,' but because the old model of shipping + pressing stock + rebates can no longer generate effective growth in the surplus era. What needs adjustment is not just policies, but the underlying cognition of 'channel partners': find those next-generation distributors who have truly completed the migration of business logic, and bind with them—they are the ones who can survive cycles. These three questions correspond to distributors, retailers, and brands respectively. This is not the predicament of one group, but a collective repositioning of the entire distribution chain. The white paper does not provide a standard answer—because next-generation distributors themselves will not have just one form. Some will become deep operational partners for brands, some will become regional assortment centers for a category, and some will become local digital platforms connecting upstream supply with massive terminals. Different forms, but the same direction: upgrade from a selling node to a supply-demand matching node. In the past two decades, growth was pushed out. In the next phase, growth must be matched out. The 'Next-Generation Distributor White Paper: China FMCG Distribution Insights 2026' is now officially released. We have prepared a limited edition of 100 paper copies, which you can keep for reading, team learning, or as gifts for industry friends. Act fast, scan the QR code to add the contact below, and we will arrange shipping. First come, first served, until all 100 copies are gone.