---
title: "The Last Straw That Broke Deep Distribution's Back"
description: "Deep distribution, a marketing strategy with Chinese characteristics, has been expanding but is now facing a crisis due to the massive loss of frontline staff, which has become the last straw that breaks its back."
author: "刘新华、方悦"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2015-07-09"
language: "en"
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# The Last Straw That Broke Deep Distribution's Back

> Deep distribution, a marketing strategy with Chinese characteristics, has been expanding but is now facing a crisis due to the massive loss of frontline staff, which has become the last straw that breaks its back.

**Expanding Ever Larger**
Those familiar with the development of marketing in China know that deep distribution is not an imported concept but a marketing product with distinct Chinese characteristics that originated in the late 20th century.
At that time, China's consumer market exhibited a unique dual structure, with distribution channels extending four to five levels. Against this backdrop, "channels" took center stage, even outshining "brands," which had to yield. Other marketing elements like "product strength" and "communication power" were considered inferior to deep distribution, looking up to it from afar.
The core idea of deep distribution is simple: manufacturers bypass or sideline distributors, moving from behind the scenes to the forefront to become the main body of distribution, continuously sinking their marketing organization's focus.
Looking at the current situation, taking FMCG as an example, companies with sales exceeding 10 billion yuan have basically sunk their marketing organizations to the township level. You can calculate: if on average 2 townships have 1 distributor, with 40,000 townships nationwide, that amounts to 20,000 township-level distributors.
Moreover, these companies, to directly control terminals, have deployed tens of thousands of "ant soldiers" (terminal route salespeople) in first-, second-, and third-tier cities. Adding these together, the number of grassroots salespeople these companies employ ranges from 30,000 to 50,000. You can check the annual reports of companies like Master Kong, Uni-President, and Coca-Cola; they all have similar numbers.
While this may be astonishing, you don't need to naively question whether such a large investment is effective. Think about it: with tens of thousands of people deployed daily to visit stores, build relationships, tidy shelves (essentially squeezing out competitors' display space), and occasionally run special promotions or bundle gifts, how could it not be effective?
Especially in oligopolistic competition, if others don't do it and you do, you definitely gain an advantage. Conversely, if others do it and you don't, you definitely suffer. Therefore, it's easy to understand why competing manufacturers seem possessed, competing to increase the number of terminal staff and the depth of channel sinking. If you hear that some daily chemical manufacturers have taken deep distribution to the village level, you don't need to think it's just a legend.

**Hard to Extricate Oneself**
However, what is effective may not be profitable. Or, today's deep distribution is still effective, but its marginal benefits are rapidly diminishing, and total benefits have long approached zero.
Especially in recent years, as labor costs have risen sharply, companies mired in this are complaining bitterly, trapped in a "prisoner's dilemma" with no way out. The total benefits of deep distribution are likely already negative. If any academic friends are interested, they could build a mathematical model to verify this.
Why do I say deep distribution has no benefits or even negative benefits?
The essence of deep distribution is nothing more than a "human wave tactic," which doesn't require much technical skill. Therefore, deep distribution itself is not a core competitive advantage; it has nothing to do with phrases like "can't be learned, can't be taken away, can't be stolen." At best, it's a relative, comparative competitive advantage.
As you can see, companies initially competed on "who first," seeing who could do it first, aiming to gain the upper hand. Later, they competed on "depth," who could go deeper, to establish a firm foothold and accumulate more resources.
But we know that any competitive advantage that exists by comparison can be easily copied and replicated by competitors at some future point.
For example, comparing deep distribution today, to be honest, there's basically nothing left to compare:
- If you do it, I'll do it immediately; everyone is doing it, so there's no first or last.
- If you go to townships, I'll add people and go to townships or even villages; there's no deep or shallow.
- If you deploy one person, I'll deploy one too, and they'll be ex-military, tough and resilient, not losing in a fight; there's no more or less.
The result is naturally tragic, because any investment in personnel or other elements by any manufacturer is quickly offset by identical or greater investments by competitors. As in game theory's payoff model, "if you do it, I do it too" has the same effect as "if you don't do it, I don't do it either." Look at how they fight fiercely, only to end up back where they started. If they had known, why bother in the first place?
"If you do it, I do it too" and "if you don't do it, I don't do it" have the same effect, but we need to look at the ledger: the investment in "if you do it, I do it too" is vastly different from "if you don't do it, I don't do it."
With 30,000 to 50,000 mouths to feed, personnel costs alone amount to at least 1.8 billion to 3 billion yuan per year (assuming a variable cost of 5,000 yuan per person per month). This means the cost of deep distribution is 1.8 billion to 3 billion yuan, but the effect is no different from not doing deep distribution at all!
Six years ago, I predicted that deep distribution was a dying, decadent mode of production that would eventually drain the blood of enterprises and be crushed by the wheels of marketing history. Last year, I again firmly stated that deep distribution was a mirage, a game and a dream. But I never expected that such low-efficiency deep distribution could linger on until now, which is truly lamentable!

**A Bizarre Collapse**
**Competing on Refinement and Detail**
Perhaps readers will ask: Since deep distribution has no "first" to compare, no "depth" to compare, and no "quantity" to compare, can't it compete on "refinement" and "detail"? Whoever does it more refined and detailed can relatively achieve greater output, thus gaining greater benefits from deep distribution, right?
You're right; this is precisely why deep distribution has lingered on! In recent years, competing companies have spared no effort in refining and detailing deep distribution, not only competing to be more refined but also more meticulous. This has naturally improved the benefits of deep distribution to some extent and inadvertently extended its life.
Want to see how refined deep distribution is?
Just look at the multitude of key performance indicators (KPIs) and the complexity of management tools.
For example, familiar metrics include visit rate, closing rate, visit cycle, strike rate, distribution rate (further divided into numerical distribution rate and weighted distribution rate), penetration rate, share of shelf, activation ratio... To manage these performance indicators, they have also summarized the "Eight Steps of Dragon" (eight steps of a visit), CRC (Customer Relationship Card), supervisor joint visits, SMS/WeChat management systems, terminal distribution systems, and sales management systems.
In short, companies are all hoping to create "different" leading advantages through refinement!

**Employee Turnover: Cutting Off the Foundation**
Unfortunately, entering 2014, the "refinement" and "detail" of deep distribution became unsustainable, and deep distribution fell ill, perhaps even died.
The last straw that broke deep distribution's back is a reason that would make everyone's glasses fall off—the loss of grassroots employees.
The logic is simple. Deep distribution requires continuous improvement and meticulous attention. Without a mature and stable grassroots workforce, without hardworking and well-trained terminal distributors, and without fixed, periodic visits and maintenance, deep distribution is empty talk. And the loss of grassroots employees ruthlessly shatters the necessary conditions of "maturity," "stability," and "periodicity."
The actual situation in various companies is even more so:
In previous years, the monthly turnover rate of grassroots employees was around 3%, which could basically maintain the fine operations of deep distribution. But somehow, entering 2013, the monthly turnover rate for grassroots employees in many FMCG companies reached as high as 10%—meaning within about a year, all employees are new.
During special times each year, such as the Spring Festival, the situation is even worse, with monthly turnover rates reaching 30% or even 50% before and after the festival, making it almost impossible to resume deep distribution work after the holiday.
If you have personally led troops in hard battles, you know what these numbers mean:
1. A competent branch manager needs three to five years of training, but now many branch managers are greenhorns, having been with the company for less than a year. Their management level is imaginable, and those seemingly advanced management tools are mostly left unused.
2. Grassroots units are constantly losing people and constantly recruiting (there are even agency fees for introducing a grassroots employee), leaving no time to attend to those fine and tedious KPIs.
3. Every day, week, and month, they are training new hires; companies have become boot camps for new recruits.
4. Retail owners' complaints are increasing daily, citing no visits, no timely order follow-ups, no timely deliveries, and failure to fulfill promises like promotional activities.
5. Fixed routes are mostly paralyzed because there are simply no people, or new hires can't keep up.
6. Grassroots employee morale is low, either complaining about low wages or the work being too tiring.
7. Per capita productivity is declining, and the personnel expense ratio is rising.
...
So, what causes such a massive turnover of grassroots employees in deep distribution?
The macro reason is the well-known disappearance of the demographic dividend.
In 2012, China's working-age population aged 15-59 decreased by 3.45 million compared to the previous year. The figure for 2013 is not yet known, but it is said to have decreased even more. Many HR managers lament, "A thousand generals are easy to find, but one soldier is hard to come by!"
The micro reason is that the post-85s and post-90s have taken the stage.
These young people often have high or even unrealistic expectations for their career planning, and monotonous, repetitive physical work like deep distribution is unlikely to catch their eye.
For the post-70s, you can say, "Repeat simple things, and you become an expert; do repetitive things with heart, and you become a winner." If you say this to the post-85s or post-90s, you must be mentally challenged.
Not long ago, Yu Minhong also used New Oriental employees as an example. He pointed out that the older generation of employees would endure criticism and continue working after being scolded; "but some of the new 'post-90s' employees can be said to be 'touching a tiger's backside,' they will turn hostile or resign directly when criticized." Everyone should deeply resonate with this, right?
You might ask: Why did the turnover rate of grassroots employees start to be so high precisely in 2013?
My answer is: The rise and fall of anything doesn't happen overnight; there is a process from quantitative to qualitative change. 2013 might just be the first year of the qualitative change, that's all.
In summary, deep distribution did not die from the fusion and change of China's dual consumer market structure, nor from the return of marketing's core to products, nor from the vicious competition of monopolistic competitors, but from the massive loss of grassroots employees. This is perhaps another marvel in the history of Chinese marketing.

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