---
title: "The Historical Mission of Distributors Has Changed!"
description: "In 2024, distributors are facing increasingly difficult business conditions. Some distributor owners say, \"Goods are stocked at retail terminals but simply don't sell; after more than a decade, I don't know whether to continue.\" Even top regional distributors note that while sales are increasing, profits are declining sharply. From B2b to various e-commerce platforms, from community group buying to hard discount stores, distributors are the most affected group in every industry shift. Phrases like \"de-distributorization, no middlemen to earn the difference\" and \"90% of distributors will die in the future\" are common. However, is this really the case? After visiting a group of distributors recently, despite the prevailing pessimism, they showed positive and rapid development. The key insight is that the historical mission of distributors has changed!"
author: "任文青Andy"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2024-10-29"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/the-historical-mission-of-distributors-has-changed-9167ba5c/"
markdown: "https://xinjignxiao.com/en/articles/the-historical-mission-of-distributors-has-changed-9167ba5c.md"
original_source: "https://mp.weixin.qq.com/s/gs3ZT0q8Uc8xZ0yI7DHQ9w"
translation: "https://xinjignxiao.com/zh/articles/%E7%BB%8F%E9%94%80%E5%95%86%E7%9A%84%E5%8E%86%E5%8F%B2%E4%BD%BF%E5%91%BD%E5%8F%98%E4%BA%86-9167ba5c.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/the-historical-mission-of-distributors-has-changed-9167ba5c/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# The Historical Mission of Distributors Has Changed!

> In 2024, distributors are facing increasingly difficult business conditions. Some distributor owners say, "Goods are stocked at retail terminals but simply don't sell; after more than a decade, I don't know whether to continue." Even top regional distributors note that while sales are increasing, profits are declining sharply. From B2b to various e-commerce platforms, from community group buying to hard discount stores, distributors are the most affected group in every industry shift. Phrases like "de-distributorization, no middlemen to earn the difference" and "90% of distributors will die in the future" are common. However, is this really the case? After visiting a group of distributors recently, despite the prevailing pessimism, they showed positive and rapid development. The key insight is that the historical mission of distributors has changed!

In 2024, distributors' business is becoming increasingly difficult.
Some distributor owners say: "Goods are stocked at retail terminals but simply don't sell; after more than a decade, I don't know whether to continue."
Even top regional distributors say: "Sales are increasing, but profits are declining sharply."
From B2b to various e-commerce platforms, from community group buying to hard discount stores, distributors are the most affected group in every industry shift.
"De-distributorization, no middlemen to earn the difference."
"In the future, 90% of distributors will die!"
"Distributors have no future!"
Such voices are everywhere.
But is this really the case?
Recently, I visited a group of distributors. Amid the prevailing pessimism, they showed a positive and rapid development trend.
After talking with them, a thought came to mind: **The historical mission of distributors has changed!**
It sounds a bit grand, but I want to share the thinking behind it with you.
Over the past 20-30 years, a large number of distributors have grown under the leadership of brands.
Depending on the category, if a prefecture-level city distributor achieves tens of millions in sales, 40%-70% of that may come from its leading brand.
What money do distributors earn?
On the surface, it's the product price difference, but 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 products 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," which is a term from the brand's perspective, serving the brand.
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 it is actually 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 numbers of retail outlets. Searching, comparing, communicating, transporting, paying, and after-sales service all incur transaction costs.
So, although the commercial distribution chain seems to add layers of markup, the entire chain operates as the lowest transaction cost method for the business system.
**The existence and development of distributors are superficially the needs of upstream manufacturers, but in essence, they are the needs 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 business law of **"efficiency replacing inefficiency"**.
Two forces are driving this.
**One is technological.** For example, the development of the internet, online payments, 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.**
Over the 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:
> 1. Local key accounts (KAs) demand direct supply from manufacturers, indicating intense price competition and the need to compress intermediate costs.
> 2. Hard discount stores and small store chains are backed by more efficient supply chain systems replacing wholesalers.
>
> 3. Large distributors are replacing small ones because market profit margins are squeezed, and those lacking scale-driven efficiency advantages cannot survive.
What is the essence behind distributors feeling that business is getting harder?
**The natural market increment has disappeared, forcing the market to adjust the transaction structure. Structural changes always move toward lower costs.**
In other words, market profits cannot support so many distributors; some must exit. Commercial distribution 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 consumer 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. Distributors 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 fiercely, 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.
In 2024 so far, 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 cash flow.
**On the other hand, consumer psychology is also 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!
Consumption is a zero-sum game, and consumer demands are becoming more diverse. We have moved from the brand sovereignty era to the consumer sovereignty era, which has led to lower market concentration for brands.
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? What 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 mission of distributors.
Over the past 30 years, with economic development and expanding demand, during the historical stage when brand manufacturers were going down-market, capturing terminals, and growing rapidly, distributors were an indispensable group that 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 when obtaining brand agency rights and distributing products to terminals could make money is over.
Moreover, the transaction structure has changed; there is no need for so many distributors.
The distributor community 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 is squeezing business, and distributors are complaining 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 and 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 prevailing pessimism, some distributors are rapidly transforming.
For example, some distributors deeply cultivate categories, continuously strengthen their advantages, and are more professional than their supermarket clients 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. Clients have no credit periods, and brands actively seek cooperation.
There are also distributors who, while maintaining their trading business, enter retail. They not only create a new business segment but also open up the B2b2C link, 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 community.
Traditional distributors are brand-oriented, while new distributors are retail-oriented.
Commercial 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 in the face of market changes, excellent distributors are exploring and finding ways out. During my 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 distributor community to find a new historical mission!


---

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

Contact: zhaobo258@gmail.com · +86 158 5481 7671