---
title: "The FMCG Industry Has Completely Changed"
description: "If one word were to sum up this year's FMCG industry, it would be 'difficult.' Retail channel transformations have come one after another, with intense competition both online and offline, including supermarket overhauls and the aggressive expansion of snack stores. Brand owners are struggling with declining financial reports, having been held hostage by e-commerce in the past and now by new retail. Distributors face even greater hardship, squeezed by upstream and downstream players, and many are being abandoned, with the trend of big fish eating small fish becoming increasingly evident. However, 'difficult' is the current state, behind which lie changes in the underlying survival logic of retailers, the severe weakening of brand owners' market influence, and the need for distributors to redefine their roles."
author: "周群"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2025-07-26"
categories: "Dealer Operations, Distribution & Channels, E-commerce & Instant Retail, Retail Formats"
language: "en"
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---

# The FMCG Industry Has Completely Changed

> If one word were to sum up this year's FMCG industry, it would be 'difficult.' Retail channel transformations have come one after another, with intense competition both online and offline, including supermarket overhauls and the aggressive expansion of snack stores. Brand owners are struggling with declining financial reports, having been held hostage by e-commerce in the past and now by new retail. Distributors face even greater hardship, squeezed by upstream and downstream players, and many are being abandoned, with the trend of big fish eating small fish becoming increasingly evident. However, 'difficult' is the current state, behind which lie changes in the underlying survival logic of retailers, the severe weakening of brand owners' market influence, and the need for distributors to redefine their roles.

If one word were to sum up this year's FMCG industry, it would be 'difficult.'
Retail channel transformations have come one after another, with intense competition not only online but even more so offline, including supermarket overhauls and the aggressive expansion of snack stores.
Brand owners are also having a tough time this year, with financial reports showing severe declines one after another. In the past, they were held hostage by e-commerce; now they are held hostage by new retail.
Distributors are finding it even harder. Previously squeezed by upstream and downstream players, many are now being abandoned by them, and the trend of big fish eating small fish is becoming increasingly evident.
However, 'difficult' is the current state, behind which lies:
> **1. The underlying survival logic of retailers has changed.**
> **2. Brand owners' market influence has been severely weakened.**
> **3. Distributors need to redefine their roles in the market.**
**The underlying survival logic of retailers has changed.**
There is a saying in the consumer goods industry: 'Whoever is closer to consumers has more say.'
In the commodity circulation chain, retailers are the final link that directly sells to consumers, so they have always had significant influence in the channel, especially hypermarkets and national CVS chains.
It is precisely this influence that has kept traditional offline retail giants aloof. **Their business logic is essentially not selling goods but selling shelf space.**
Various entry fees, barcode fees, display fees, promotional fees, and various anniversary fees, plus rebates. Whoever can afford the fees gets their products on the shelves.
This business model directly results in **the limited shelf space being mostly bought up by leading brands.**
For consumers, there is homogeneous merchandise everywhere, and the products on shelves are almost no different from those of a decade ago. Even new products are mostly from leading brands.
When there was insufficient supply and terminal channels were concentrated, consumers had no other choice but to passively buy these products, and this business model did bring huge profits.
But today, supply is severely oversupplied, and retail transformations are happening one after another. **The times have changed; 'selling shelf space' no longer works, and consumers are no longer buying it.**
In earlier years, these traditional retailers mostly blamed online channels for their poor performance. Indeed, the rise of various e-commerce platforms has had a certain impact on offline.
However, traditional retailers themselves have bigger problems.
In recent years, the rise of new retail formats such as warehouse membership stores and snack stores shows that **it is not that consumers are unwilling to shop in stores, but that traditional retail stores have not given consumers a reason to enter and buy.**
Many people think these new formats attract consumers simply with low prices and a large number of white-label products. But that is just the surface. The underlying logic is the optimization of commodity circulation efficiency and product differentiation.
Biut president shared at the New Distribution conference: 'In traditional supermarkets and convenience stores, from factories to distributors across the country, the markup is as high as 20 percentage points, and retailers add another 20 percentage points, resulting in a final price to customers that is 40 percentage points higher, much more expensive than Japan and also more expensive than online.'
The fundamental reason for the high retail prices in traditional supermarkets is low commodity circulation efficiency and excessive markup rates. Moreover, due to various fees, shelves are piled with products that few people buy, turning them into advertising spaces for brand owners.
The new retail formats we see, such as membership stores, discount stores, and snack stores, actually reduce terminal retail prices by improving the efficiency of the commodity circulation chain. At the same time, these new formats no longer follow the shelf fee logic in product selection; instead, they stand from the consumer's perspective, seeking upstream manufacturers and products with good quality-price ratios.
Of course, traditional retailers are gradually realizing these problems. On one hand, some retailers are undergoing supermarket overhauls, such as Zhongbai and Yonghui seeking help from Pangdonglai, with a focus on adjusting product structure.
For example, in Yonghui's overhaul at the Beijing Shijingshan Xilongduo store, 11,430 SKUs were removed, a removal rate of 79%, and 12,765 SKUs were replanned, with new products accounting for 76.2% of the increase.
On the other hand, some retailers are seeking direct sourcing, canceling all front-end and back-end fees, canceling return and exchange requirements, and shortening settlement cycles, but requiring the same prices as distributors and the freedom to adjust retail prices.
Behind this shift, a signal is being sent: **Retailers' survival logic is shifting from 'selling shelf space' to 'selling products,' from focusing on front-end and back-end fees to focusing on supply chain efficiency and the products themselves.**
**Brand owners' market influence has been severely weakened.**
Earlier, I communicated with a brand owner friend who mentioned: 'There are more and more channels, and they are increasingly connected with consumers, so their influence is growing. In contrast, brand owners are becoming weaker.'
In the past, the distribution system was brand-led, with manufacturers rising through the HBG model (mass production, mass communication, mass distribution) during a relatively simple market environment.
But today, with market changes, the manufacturer-led channel distribution system has gradually become unable to adapt to the current environment.
The market influence of leading brand owners is also being weakened bit by bit. This can be roughly divided into several stages:
**Stage 1: Mom-and-pop stores plus wholesale markets.**
**Leading brands held absolute influence through deep distribution models.**
**Stage 2: The rise of chain convenience stores and hypermarkets.**
Large retail chains gained a strong position, but due to their model of charging channel fees, leading brands with strong financial advantages still dominated the shelves.
**Traditional retail giants and leading brands were co-conspirators in the channel system, with leading brands still firmly holding market influence.**
**Stage 3: The rise of e-commerce platforms such as platform e-commerce, vertical e-commerce, and private domain e-commerce.**
The era of unlimited shelves began, significantly reducing the cost of product listing, breaking the traditional retailers' profit model, and allowing many small and medium-sized brands to directly reach consumers.
**The influence of leading brands was weakened, while the influence of online platforms was strengthened.** But platforms still have various 'channel fees,' and leading brands can still dominate, as 'money can buy traffic.'
**Stage 4: The rise of new retailers, such as Sam's Club, Hema, Metro, and current snack stores.**
They truly focus on consumer needs, **leading the supply chain through cash-based product selection and customized development, rather than relying on channel fees.**
Market influence is gradually shifting to retailers who are 'needed by consumers,' **and brand owners' influence is severely weakened in this process.**
Consumers' choices are more diversified and personalized, from being willing to pay a premium for brands to now preferring products with good quality-price ratios. Whoever can better meet this demand will hold market influence. Currently, these new retailers are truly doing this.
Looking through the surface to the essence, it is **the FMCG industry has shifted from a 'seller's market' to a 'buyer's market,' from brand sovereignty to consumer sovereignty.**
In this process, many small and medium-sized brands, white-label products, and private labels have found opportunities, with good products appearing on shelves and being seen and chosen by consumers.
A couple of days ago, I met the founder of a regional instant food brand. She told me that after cooperating with several leading snack store chains, sales in the snack store channel reached 200 million yuan a year, directly accounting for one-third of total sales.
While the influence of leading brands is severely weakened, it also gives opportunities for small and medium-sized brands, white-label products, and private labels to develop.
**Distributors need to redefine their roles in the market.**
Every channel transformation hits distributors the hardest, because they are in the middle, squeezed by both downstream retailers and upstream manufacturers.
Basically, the slogan 'remove the middleman' is raised every once in a while. In the past, although distributors had a hard time, it was mainly due to the impact of online channels. But today, the difficulties are not only from online but also from the continuous segmentation of offline local business.
**First, after the survival logic of retailers changed, the business available to distributors has shrunk.** In the past, many chain supermarkets were supplied by distributors, but now leading retailers seek direct supply and bare prices, either cutting off distributors or leaving them with almost no profit.
Also, supermarket overhauls involve the replacement of a large number of suppliers. Some retailers even directly compete with distributors, such as some chain systems doing their own trading business and B2b, supplying small retail stores.
**Second, the era of relying on brand momentum to distribute products to terminals and make money is over.** Distributing big brands is not profitable, but small and medium-sized brands place high demands on distributors' product selection and operational capabilities.
Even some brands want to take over distributors' business, such as a brand cutting off distributors' warehousing and distribution to do it themselves, and another brand launching B2b to supply small and medium-sized stores.
The market needs fewer distributors, and the requirements for their capabilities are increasing.
Therefore, in such a market environment, distributors really need to redefine their roles in the market.
In the past, most distributors were in the agency business, brand-oriented, serving brands. They provided services to brand owners, including transportation, warehousing, and capital advances.
Today, **the market still needs such services, but it does not need so many distributors to provide brand services.**
What other services are needed from distributors? New Distribution has observed in the market, and some distributors have already succeeded in these directions:
**One type is regional B2b platform distributors, providing one-stop product selection, operations, and services to small and medium-sized stores.**
New Distribution previously made a judgment: branding and chain operation will become an irreversible trend in the evolution of traditional small retail stores.
Under such a trend, small and medium-sized stores face great survival challenges. Distributors can help these stores survive the chain trend by providing complete supply chain services and terminal operation guidance. This allows them to strongly control outlets and maintain a stable source of business.
Some mature B2b platform distributors have also started their own retail operations, such as store rebranding, directly operating supermarkets and snack stores, moving towards integrated distribution and retail.
**Another type is category operation distributors, who deeply cultivate a specific category, form a brand matrix through multiple brand combinations - category distribution, and provide shelf operation services for retail stores.**
In the supermarket overhauls mentioned above, many retailers do not understand how to operate shelves or manage sub-categories, which actually gives opportunities to distributors who have deep expertise in categories.
For example, Zhengzhou Dapeng Trading, previously reported by New Distribution, has seen continuous business growth by providing whole-shelf output in the snack food sub-category. Also, Zhengzhou Shizhirui, in the daily chemical category, provides whole-shelf output, and so on.
**In conclusion**
During a visit to a distributor in Xuzhou, she shared with me: 'I feel the industry is now all about 'involution.' Persist in not being the first to fall; the industry pattern will always eliminate those who cannot keep up. Market competition is cruel. If you don't want to be swept away, you must work hard to sweep away others.'
The market has always been there, and FMCG products are relatively more resilient than other industries. It's just that more participants and increased competitive pressure are forcing all roles in the industry to evolve.
Retailers, brand owners, and distributors will always exist in this market, but in the end, who remains in each role is ultimately survival of the fittest.
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## Citation metadata

- Publisher: New Distribution
- Author: 周群
- Published: 2025-07-26
- Canonical: https://xinjignxiao.com/en/articles/the-fmcg-industry-has-completely-changed-c9b8d8ab/
- Original source: https://mp.weixin.qq.com/s/Ch0dSZh_6DFe42vvVBperg

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