Distributors' businesses are increasingly difficult. Some distributor bosses say: "Goods are placed at terminals but simply don't sell; after more than a decade, I don't know whether to persist." Even top regional distributor bosses say: "Sales are increasing, but profits are declining sharply." From B2b to various e-commerce, from community group buying to hard discount, distributors are the most affected group in every industry change. "De-distributorization, no middlemen to earn the difference." "In the future, 90% of distributors will die!" "Distributors have no future!" Such voices are endless. But is it really so? A while ago, I visited a group of distributors. Amid the general pessimism, they showed a trend of rapid positive development. After talking with them, a phrase came to my mind: The historical mission of distributors has changed! It sounds a bit grand, but I want to share the thinking behind it with you. In the past 20-30 years, a large number of distributors have grown up under the leadership of brands. Depending on the category, if a prefecture-level city distributor achieves tens of millions in revenue, 40%-70% of that may come from its leading brand. What money do distributors earn? On the surface, it's the product price difference; in essence, it's the "salary" paid by manufacturers. You know, China has 333 prefecture-level administrative regions and 2,843 county-level administrative regions. For manufacturers to distribute goods to offline terminals and make them accessible to consumers, it is completely unimaginable without distributors. Someone has to do the job of getting goods to terminals, and this money has to be spent. Building warehouses, hiring employees, advancing funds, and handling distribution—in a sense, distributors are actually outsourced teams hired by manufacturers. This is evident from the name "distributor" (经销商), which is a term from the brand's perspective, born to serve brands. Without brands, these distributors could not have developed. Not only do brands bring business, but crucially, they teach distributors how to maintain terminals, set up organizational structures, formulate processes, and divide labor. Of course, the "salary" is paid by manufacturers on the surface, but in reality, it is allocated by the market. Manufacturers produce products and sell them to consumers through retailers. Why not do it directly? Because transaction costs are too high. The Chinese market is huge, with massive terminal networks requiring search, comparison, communication, transportation, payment, after-sales, etc.—all these are transaction costs. So, although the distribution chain seems to add layers of markup, the entire chain operates as the lowest transaction cost method for the commercial system. The existence and development of distributors are superficially the need of upstream manufacturers, but in essence, they are the need of market transactions. Now, why are many distributors struggling? Is it because manufacturers no longer need them? No. It's because the market transaction structure has changed. Behind the change in market transaction structure is the law of business "efficiency replacing inefficiency" at work. There are two forces driving this. One is technological. For example, the development of the internet, online payment, and logistics allows us to buy more goods at lower prices online through various e-commerce platforms. Another example is the application of various digital tools, which greatly reduces transaction costs caused by information asymmetry and opaque credit among transaction parties. Another force superimposed on this is market competition. During decades of rapid growth since China's reform and opening up, the pie has been growing, and market profits have been sufficient for everyone to share; various transaction entities could enter and get a piece. But when the pie's growth slows down, or even stops, the transaction structure inevitably adjusts. We see several phenomena:
Local KA (Key Accounts) demand direct supply from manufacturers, indicating intense price competition and the need to compress intermediate costs.
Hard discount and small store chains are replacing wholesalers with more efficient supply chain systems.
Large distributors are replacing small ones because market profit margins are squeezed, and those lacking scale-based efficiency advantages cannot survive. What is the essence behind distributors feeling that business is getting harder? The natural increment in the market has disappeared, forcing the market to adjust its transaction structure. Structural changes always move toward lower costs. In other words, market profits cannot support so many distributors; some must exit. The distribution industry will move toward scale, standardization, and intensification. Moreover, the industry has transitioned from brand sovereignty to consumer sovereignty. Roughly speaking, the FMCG industry has gone through three stages: product sovereignty, brand sovereignty, and now consumer sovereignty. In the product sovereignty era, goods were scarce, demand exceeded supply, and consumers' demands were simple: cheap prices, basic functionality, and availability. In the brand sovereignty era, manufacturers used mass media for communication and occupied terminal shelves through channel systems to generate sales. The distributor group thrived in this era. Now it's different. On one hand, supply is severely excessive. Since the beginning of this year, I've been conducting market research and seeing: retailers are competing, distributors are competing, manufacturers are competing, and even within manufacturers, different departments are competing. More than one brand executive has told me: As long as there is a channel to achieve a certain sales volume, factories can customize products, specifications, packaging, and even prices flexibly. From 2024 to now, many manufacturers lament that there are truly no incremental channels left, but growth targets remain! Manufacturers' biggest headache is how to achieve sales growth; distributors' biggest pain is growing inventory and tightening capital chains. On the other hand, consumer psychology is quietly changing. In the past, they were willing to pay a premium for brands; now they care more about value for money. Consumer choices are diversified, and consumption demands are personalized; no brand is irreplaceable! With consumption as a zero-sum game and consumer demands becoming increasingly diverse, we have moved from the brand sovereignty era to the consumer sovereignty era, which makes brand market concentration increasingly lower. What does this lead to? In the past, brand goods were scarce, good products were scarce, and being an agent could make money. Now, brand goods are not scarce, product homogenization is severe, and being an agent doesn't make money. In this situation, distributors who don't change will find it increasingly difficult. So, are distributors still needed? Where is the way out? We need to look at it from the logic of the market. What is the logic of the market? Whether your business has a future depends on whether the market needs your services. In the past, distributors could exist and develop because of the division of labor in the market; someone needed to get goods to terminals. In a sense, this was the distributors' mission. In the past 30 years, with economic development and expanding demand, during the historical stage of brand market penetration, terminal conquest, and rapid growth, distributors were indispensable and created enormous value. You provided services like transportation, warehousing, and capital advancement for brands; the market needed them and allocated corresponding profits to you. But now, the era of obtaining brand agency rights and placing products at terminals to make money is over. Moreover, the transaction structure has changed; not so many distributors are needed. The distributor group must have a clear understanding of this. They must break free from the constraints of their past identity and look at their own way out from the logic of the market. We need to ask: What services are there in the market that distributors should and can provide? Retail transformation squeezes business, and distributors complain bitterly. But what is the truth we see?
1. Supermarkets have been used to good times and don't know how to operate shelves at all. 2. Homogeneous products are everywhere; consumers expect different, better product choices. 3. Mom-and-pop stores will always exist, but their products and operational capabilities urgently need upgrading.
4. Distribution efficiency is low, and regional supply chains are accelerating integration. Amid the general pessimism, some distributors are rapidly transforming. For example, some distributors deeply cultivate categories, continuously strengthen their advantages, and are more professional than supermarket customers in supply chain and category management. They provide whole-shelf output, and their business grows against the trend. Another example: some distributors use B2b platforms to cover thousands of small stores, transforming into regional supply chain platforms. Customers have no credit periods, and brands actively seek cooperation. There are also distributors who, while maintaining their trading business, enter retail, not only creating a new business segment but also opening up the B2b2C chain, which in turn strengthens their trading business. From these distributors, I see the essence of change: The era of simple transportation and distribution is over. To survive in the future, you must have retail thinking; you must have the ability to (help terminals) sell goods. If the market has needs and you can provide solutions, you can survive and have a future! This is unrelated to the industry or the role in the industry chain; it applies to all enterprises. Of course, this does not mean distributors should abandon brands. The Chinese market is vast, with regional and category differences, making it hard to generalize. We have classified the current distributor group. Traditional distributors are brand-oriented; new distributors are retail-oriented. Distribution is an old and fragmented industry, and distributors are a group squeezed from both ends. This is not surprising because distributors were originally meant to serve manufacturers—this is the historical mission of distributors. But facing market changes, excellent distributors are exploring and seeking ways out. During exchanges with these distributors, a phrase kept echoing in my mind—The historical mission of distributors has changed! Traditional distributors serve manufacturers well, helping brands sell better; new distributors focus on terminal stores and consumers, helping them buy better. This is from the perspective of the historical stage of market development and the industry group. The historical mission of distributors has changed, or rather, the time has come for excellent distributors to lead the group to find a new historical mission! In August, in Shanghai, at the 2025 [New Demand · New Supply] 7th China FMCG Conference and the 5th China FMCG Distributor Conference, we have invited benchmark cases from different transformation directions: Regional B2b representative—Zhong Xiaoping, General Manager of Jiecang Wangou; Transformation platform benchmark—Li Yong, Chairman of Shenzhen Yataixuan Industrial; Retail channel operator representative—Zhang Shicheng, General Manager of Tianjin Shicheng Bofa; Regional category operator—Zhang Gaifeng, General Manager of Zhengzhou Dapeng Trading, and Li Fen, General Manager of Xuzhou Runzhong Supply Chain. They will discuss how distributors should go, transform, and win in the market environment of new demand and new supply. At the same time, we will release the industry-exclusive "2025 China FMCG Distributor Operating Status Survey Report" to see who is growing and who is being eliminated among distributors this year, the reasons, and where operational focus should be. We will also release the in-depth case collection "Ten Growth Case Models for FMCG Distributors," restoring real cases and providing structural thinking to help distributors find direction from chaos. In addition, we will hold the [Regional B2b Platform & Key Brand Cooperation Seminar]. It brings together 40+ regional B2b platform owners to discuss incremental opportunities in sinking markets covering 200,000 small stores; on-site release and interpretation of the "Regional B2b Cooperation Guide"; and build a bridge for dialogue between regional B2b platforms and key brand leaders, with seminars, one-click connections, and on-site supply-demand matching! 🔺