China's FMCG distribution industry is undergoing a historic transformation. In an economic downturn, the positions of producers, distributors, and retailers are all weakening, and distributors are precisely the link in the industry chain with the least bargaining power, so they are the first to face the pressure of being revolutionized. Nevertheless, interestingly, distributors will not be completely eliminated. First, from a long-term perspective, four phenomena in the industry are destined to occur:
Retailers will tend to directly connect with brands, compressing intermediate links.
Discount stores and some supermarkets will build their own logistics systems, fully controlling pricing power.
The pace of horizontal and vertical integration in the industry chain will accelerate, leaving less and less space for small distributors.
Data capabilities will gradually replace the traditional relationship-based capabilities of middlemen. So what kind of distributors will not be eliminated? Is there a suitable market to reference to foresee what future distributors will look like? Today, worldwide, the country that has studied the integration of production, supply, and marketing most thoroughly is, in my opinion, undoubtedly Japan. China and Japan have highly consistent industry structures and industrial cycles, such as:
Historically, there have been a large number of small and medium-sized distributors.
The distribution chain is long, with at least two tiers, just like in China.
The industrial cycle has experienced or is currently experiencing a downturn. Now that Japan has basically emerged from this downturn, from the perspective of the commercial distribution industry, the characteristics of the industrial structure are: Small and medium-sized distributors have basically withdrawn from the market.
The distribution chain has been compressed to only one tier.
Surviving distributor companies are highly embedded in the production-supply-marketing system. The surviving distributors are, on one hand, large distributors with nearly comprehensive capabilities (data, business intelligence, logistics efficiency, product development, etc.) such as Kokubu, Itochu, and Mitsubishi, and on the other hand, small specialized distributors with unique capabilities, such as Asahi Food and Yamahoshiya. As shown in the figure below:****
- Large distributors can develop both horizontally and vertically, forming comprehensive "customer/consumer service" capabilities, able to support retailers and serve brand owners, while also going deep into production to cooperate with retailers in OEM development, and linking both ends of production and sales by integrating logistics and consumer data.
- Small specialized distributors strengthen and upgrade their capabilities around a single category or region, acquiring factories in their advantageous categories to cooperate with retailers in OEM development, and some also open their own stores, forming a retail + wholesale business model within the region. The attempts of Japanese distributors can be confirmed in the figure below. So going to Japan to look at retail and supermarkets is just one aspect. To study Japan, it is more important to deeply understand the changes in the upstream supply chain and how Japanese retailers organize their supply chains. From June 22 to June 26, we will take 30 of the best distributor owners from across the country to Japan to see the operating systems and successful experiences of large Japanese distributors (trading companies). Core highlights of this study tour:
- Learn and exchange on the operating systems and successful experiences of large Japanese distributors (trading companies);
- Using 7-Eleven as a case study, interpret the role of supply chain intermediaries—empowering product development upstream and sales strategies downstream;
- Using Kobe Bussan ACCESS as a case study, look at practical strategies for low-cost distribution and global supply chain models;
- Visit top chain retail stores—Aeon, 7-Eleven, Kobe Bussan's business supermarkets, etc. Why go with us? New Distribution CEO Ren Wenqing, New Distribution Chief Content Officer Yuan Lai, and New Distribution Research Institute Chief Research Consultant Qi Te, three industry distribution experts, will accompany you throughout the trip. Industry experts will accompany you for exchange, understanding the industry, retail, and distributors, knowing the current direction in China, following "New Distribution" closely, seeing the differences in operations between China and Japan, and exploring new directions suitable for domestic distributors. On-site exchange, listening, watching, and discussing, the frontline has spirit, and on-site insights are valuable. Who should go?
- Local leading distributor owners
- Young second-generation distributors
- Founders/CEOs of FMCG supply chain management companies Contact us