---
title: "The Laws of Transformation, Manufacturer-Dealer Relations, Family, and Fate That Most Distributors Can't Escape"
description: "This article outlines key laws governing distributor transformation, manufacturer-dealer relationships, family businesses, and the fate of distributors. It emphasizes that business-oriented distributors have growth limits, while entrepreneur-oriented distributors can scale without limits, and that success depends on adapting to market changes and building robust systems."
author: "刘春雄"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-04-27"
language: "en"
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# The Laws of Transformation, Manufacturer-Dealer Relations, Family, and Fate That Most Distributors Can't Escape

> This article outlines key laws governing distributor transformation, manufacturer-dealer relationships, family businesses, and the fate of distributors. It emphasizes that business-oriented distributors have growth limits, while entrepreneur-oriented distributors can scale without limits, and that success depends on adapting to market changes and building robust systems.

**Transformation Laws**
**Law:** Business-oriented distributors have growth limits, while entrepreneur-oriented distributors have no limits. If a distributor reaches a certain scale without transforming, they will hit a "ceiling."
Business-oriented distributors can go from "nothing to something," but only entrepreneur-oriented distributors can go from "small to large."
Business-oriented distributors can become millionaires or multi-millionaires, but only entrepreneur-oriented distributors can become billionaires.
Business-oriented distributors may manage a team of dozens, but only entrepreneur-oriented distributors can manage thousands or tens of thousands.
Most distributors start as business-oriented, but those that survive are typically entrepreneur-oriented. Without transformation, distributors inevitably face a growth "ceiling."
The difference between a businessperson and an entrepreneur is not shrewdness, scale, capital, or profitability. It is the difference in marketing models, organizational systems, management systems, the boss's mindset, and management philosophy.
**Law:** Distributors that never grow have a "standard face."
If the main business relies on the boss to close deals, the company will struggle to grow.
If customers only recognize the boss and not the employees, the company will struggle to grow.
If a few sales stars account for the vast majority of sales, the company will struggle to grow. A company with too many marketing heroes is doomed.
If the workforce is mainly composed of relatives and friends or children, the company will struggle to grow.
If the wife and sister-in-law personally manage finances, the company will struggle to grow.
Distributors that don't grow often scold their subordinates as idiots, but don't think about why they are idiots.
**Law:** Business-oriented distributors focus on results, while entrepreneur-oriented distributors focus on process.
Businesspeople often say, "No matter how you do it, as long as the result is good." Whether it's a white cat or a black cat, if it catches mice, it's a good cat.
Entrepreneurs often say, "The quality of the result is important, but more important is whether the good result can be repeated. Only results that can be repeated are truly good. In other words, a cat that catches mice is not necessarily a good cat; a cat that can summarize the rules of catching mice is a good cat."
**Law:** Business-oriented distributors want "capable people" but also fear them. Entrepreneur-oriented distributors can use both capable and ordinary people.
Many distributors have experienced "raising a tiger from a cub, only to be hurt by it later," and have a contradictory attitude of both craving and fearing capable people. They crave capable people because they feel their own abilities are insufficient, and they fear them because they worry about capable people starting their own businesses or becoming uncontrollable.
Why do business-oriented distributors fear capable people? Because they see capable people as "their own shadows"—people as capable as themselves. Such capable people are strong in solo combat and can easily start their own businesses.
Why don't entrepreneur-oriented distributors fear capable people? Because they recruit professional capable people, each excelling in a specific field, and through their combination, they can leverage these professionals. Since entrepreneur-oriented distributors don't rely on solo-combat talent, even if they leave, it won't have a devastating impact.
**Law:** Businesspeople often "reward according to merit," while entrepreneurs typically "don't use positions as a reward for meritorious officials."
How to reward meritorious officials? One way is material rewards, called "compensation." Another is positional rewards, promoting them to leadership, called "empowerment."
Using positions as rewards for meritorious officials may result in "losing a capable doer and gaining an incompetent manager." We see that business-oriented distributors often have meritorious officials holding power. In entrepreneur-oriented distributor teams, positions are given only to those with ability, not to meritorious officials. Even if someone was once a rival, if they have sufficient management ability, they may be given an appropriate position.
**Law:** Business-oriented distributors love to experiment, finding a path through constant "trial and error." Entrepreneur-oriented distributors often adhere to the belief: "Be cautious before choosing, and persist after choosing."
Business-oriented distributors love to experiment and have many ideas, often resulting in "not dying, but not growing either." Because they love to experiment, they always find a way to survive. Because they can't persist, they can't perfect one thing.
Entrepreneur-oriented distributors are very cautious before choosing a path, but once they choose, they go all out and persist.
**Law:** Business-oriented distributors trust loyal and reliable people, while entrepreneur-oriented distributors trust the power of systems.
"Use people without doubt, and doubt people without using them." This is a typical characteristic of business-oriented distributors. Because they do this, they can develop rapidly even without sound systems and processes. To achieve this, the founding team must come from a small circle of past life, because mutual familiarity allows for trust without doubt.
When the scale expands, the small circle of past life can no longer meet the needs of development, and it becomes necessary to recruit from a wider range. When people come from all over, if you require "don't use those you doubt," you may have "no one to use."
To achieve "use those you doubt," you need to establish systems and norms, using supervision, avoidance, and processes to "make it impossible for bad people to find opportunities to do bad things," thus making them de facto good people.
**Manufacturer-Dealer Relationship Laws**
**Law:** The source of cooperation is common interests, and the foundation of cooperation is common philosophy.
Distributors represent manufacturers' products to make money, but the profits promised by manufacturers are just "a pie in the sky" that can't really "satisfy hunger." Some manufacturers promise anything to distributors, but in the end, distributors get nothing.
What truly makes promises come true is the cooperative philosophy. Only when manufacturers and distributors have similar business philosophies can they cooperate smoothly. With a common philosophy, although there may be disputes, there won't be principled differences.
**Law:** Without manufacturer support, distributors find it hard to grow. If they don't grow, manufacturers support them even less.
Excellent manufacturers can drive the rise of a group of excellent distributors, but excellent distributors cannot save a failing manufacturer. In local markets, distributors may play a decisive role, but in the overall market, manufacturers are decisive.
Distributors often feel that when they haven't grown, manufacturers don't support them, and when they have grown, they don't need manufacturer support. So, what is the key to manufacturer support? It should be "the momentum of market development." Only when manufacturers see hope for success will they support. "The momentum of market development" gives manufacturers hope, so they won't fear wasting money.
**Law:** The distributors manufacturers are most interested in are not the big ones, but those with the most potential.
"My territory (market scope) is large." "I have many customers." "My sales are high." "I distribute many product lines." These "boasts" may intimidate small manufacturers without vision, but truly strong and thoughtful manufacturers will question: "Is the territory large, but is the market cultivated finely?" "Are the customers numerous, but are they high quality?" "Are sales high, but is it due to channel stuffing or intensive cultivation?" "Are there many product lines, but is the structure reasonable?"
Manufacturers look not at the present but the future when seeking distributors. Because the present is the result of handling other manufacturers' products, while the future may be the result of handling their own products. That is, the existing volume belongs to others, and the incremental volume is their own. Only if distributors have potential can they build up their products; otherwise, even big distributors are useless. Therefore, when manufacturers communicate with distributors, they should talk less about the present and more about the future. The future is the weight to attract excellent manufacturers.
**Law:** Big companies look for small distributors, and small companies look for big distributors.
Big companies have strong market operation and control capabilities, and they want "obedient" distributors. They don't require distributors to have particularly innovative ideas, but they must implement the manufacturer's policies without compromise. Truly thoughtful distributors are always a bit "disobedient." Their main requirement for distributors is capability, because this is work that manufacturers cannot do themselves; other tasks like new product promotion, market control, and advertising can be handled by the manufacturer. For example, P&G's main requirements for distributors are only three: provide downstream customers, manage downstream customers, and deliver to downstream customers.
Small manufacturers, on the other hand, hope to find big distributors because their market operation capabilities are weak. They want to hand over products and policies to distributors and then do nothing else, with all other work done by distributors.
**Law:** Whenever a manufacturer visits a distributor, the distributor instinctively thinks: If you can't become a comrade-in-arms with the manufacturer, you will inevitably become an opponent.
If you represent the manufacturer's products, you and the manufacturer are comrades-in-arms. If other distributors represent the manufacturer's products, the manufacturer is your opponent.
Every distributor doesn't want a strong manufacturer to become an opponent, because the success of a strong manufacturer means your business space is compressed. Therefore, whenever a manufacturer's salesperson visits a distributor, the distributor should thoroughly understand the manufacturer's strength and operational thinking. If they think the manufacturer will definitely succeed, they must recruit that manufacturer under their wing. If for various reasons they cannot align with the manufacturer, they must not let that manufacturer combine with local excellent distributors; otherwise, you will have no peace.
**Law:** Dealing with excellent manufacturers is the hardest, and dealing with poor enterprises is the easiest.
Distributors often face these confusions: Look down on small enterprises, can't stand big enterprises. Hope manufacturers will agree to their conditions readily, but if they agree too readily, they feel afraid.
Ordinary manufacturers, because they lack bargaining power, are easy to compromise with distributors. Excellent manufacturers compare distributors against standards, so dealing with them is hard.
Ordinary manufacturers dare to promise anything, just to get the money first, while excellent enterprises may not give many promises.
Ordinary manufacturers dare to give any policy, not fearing market chaos, while excellent enterprises have many rules and regulations, and policies require processes.
Ordinary manufacturers have seemingly high gross margins, but can they last? Excellent enterprises focus on the long term, with low but stable gross margins.
Ordinary enterprises sell on credit if they can't sell. Excellent enterprises rarely do credit sales.
Excellent enterprises have their own moral bottom line, being responsible not only to themselves but also to distributors.
Excellent enterprises won't harm consumer interests for short-term gains (like reducing quality or price), because cheating may earn a small profit but can't make you big.
**Law:** Excellent manufacturers are "mentors" for distributors. By handling excellent enterprises' products, you can become an excellent distributor.
Manufacturers are the most important resource for distributors. Changsha Yuanda, when purchasing raw materials, always chooses the best suppliers, because the best way to learn from excellent enterprises is to "become their customer."
Excellent manufacturers don't just sell products; they provide "market solutions" and profit models.
Excellent manufacturers not only use distributors' customer networks but also help expand them.
Excellent manufacturers not only rely on distributors' capabilities but also focus on improving them.
Excellent manufacturers not only assist distributors in sales but also in management.
Excellent manufacturers not only provide sales method support but also export marketing thoughts and concepts.
**Law:** To truly gain long-term manufacturer support, you must establish a "good citizen" image.
Using abnormal means may gain short-term manufacturer support, but only "good citizens" can gain long-term support.
The most important support from manufacturers is not policies, but sending people who can obtain policies from high levels. Therefore, distributors must persuade manufacturers to send their best employees to the local market. Excellent salespeople are more likely to get high-level support than ordinary ones.
Distributors who often "reach the sky" may get some support from high-level pressure, but given the principle that "those in charge" are not as good as "those who manage," the truly decisive supporters may not be at the high level.
In fact, gaining manufacturer support is relatively easy if you meet two conditions: First, don't withhold policies; use them genuinely for market development, not turn manufacturer policies into your own profits. Second, when the manufacturer gives "input," give some "output." Because manufacturers are not afraid of spending money, but they are afraid of spending money without results, falling into the distributor's "policy trap."
**Law:** As long as distributors dare to spend 20% of the money to activate the market, manufacturers dare to spend 80%.
Policy investment is often not about the amount of money but about confidence. High-level managers always want to invest in promising markets. If distributors invest money in market development with action, manufacturers will think distributors have confidence and are willing to invest accordingly. Therefore, as long as distributors dare to invest 20%, manufacturers dare to match with 80%.
**Family Laws**
**Law:** Family businesses are not scary; what's scary is family management.
The history of distributors' rise is basically the history of their families. Family entrepreneurship has the following benefits: First, family members can work without regard for cost, even without salary, as long as they have food to eat, which outsiders cannot do. Second, family members trust each other, so supervision and restraint are not needed, saving management costs. Third, in the early stages when funds are scarce, human resources replace capital to complete primitive accumulation.
If the family tendency at the start is "unavoidable," when distributors reach a certain scale, the family flavor may become a "growth obstacle."
Family business refers to equity issues, while family management refers to internal management system issues. Equity issues may be difficult to solve, but management issues are relatively easy.
If it's family management, family members often have "exclusivity," distrusting outsiders. Outsiders often lament that they can never break into the family circle, "even pouring out their hearts won't gain trust."
Family members often operate outside the system, such as "appealing over the head" if dissatisfied with external hires, which may happen through pillow talk, at family dinners, or during family time.
**Law:** Relatives may be the most reliable people, but if they lack ability, they are the most terrible.
Distributors like to use relatives mainly because they are reliable, but what annoys bosses is that these reliable relatives often do terrible things. If they lack ability, what's the use of reliability?
To grow, you must start by learning to use capable people who are unreliable. Because they are "unreliable," you need to establish management systems, supervision, and restraint. Those who only dare to use reliable relatives will find it hard to establish a truly effective internal management system. Without the support of an internal management system, you can't truly grow.
**Law:** Distributors may find it hard to establish a truly modern enterprise system, but it's entirely possible to build a "family business with a modern flavor."
It may be difficult for distributors to completely transform from a family business to a modern enterprise. The transformation process is not only painful but may also cause internal turmoil. Therefore, establishing a family business with a modern flavor might be a better transition. That is, you can attract family members to participate in management, but you must impose "systemic restrictions" on their participation: First, evaluate and appoint family members on the same merit-based system as others. Second, require family members to operate within the system, prohibiting outside-the-system operations, especially paying attention to the family discipline of "don't talk business in private settings."
**Law:** Distributors' transformation often begins with dismissing the wife and sister-in-law.
This is the personal experience of many big distributors. Although it's a metaphorical statement, many distributors have indeed done this. As long as the wife and sister-in-law are in the company, the management system is easily undermined.
**Fate Laws**
**Law:** The growth process of manufacturers is a process of continuously eliminating "meritorious distributors."
The elimination of "meritorious distributors" is a heavy topic, but when manufacturers don't eliminate them, they may be eliminated by the market, so they may have to take drastic measures.
A meritorious official in one period may be a criminal in another. Aren't "meritorious managers" and "meritorious salespeople" who have made significant contributions to enterprise development also continuously eliminated? This seems heartless but conforms to the laws of market development. A food company I closely followed replaced three batches of distributors in 10 years, almost eliminating a batch every 3-4 years. In fact, this is also the cycle for eliminating "meritorious distributors" in other industries.
Mengniu has a famous "three-stage rocket" theory: the first stage rocket is discarded after boosting the satellite into orbit, and the second stage continues. After entering space, the second stage is discarded, and the third stage pushes. Although Mengniu's point is not as blunt as "eliminating meritorious officials," the essence is the same.
Before 1997, the FMCG industry was mainly dominated by provincial-level distributors. After 2000, "provincial agents" nearly disappeared. Now, it's mainly "county agents." If manufacturers don't lower the market center of gravity, they will disappear. To avoid disappearing, manufacturers will definitely eliminate "provincial agents" and "city agents." But when "county agents" grow, "provincial agents" and "city agents" are hollowed out, and their previous sales of tens of millions or hundreds of millions suddenly vanish.
**Law:** Work hard for twenty years, and overnight return to "before liberation."
The elimination and mortality rates of distributors are very high. How many distributors from 20 years ago still exist? Accumulated wealth often "comes from somewhere and goes somewhere." Is this the fate of distributors?
Every commercial revolution first revolutionizes distributors. Every time manufacturers lower the market center of gravity, it means a large number of distributors are eliminated or restricted in their distribution scope. Is this an unavoidable "calamity" for distributors?
The industrial concentration of every industry not only eliminates a large number of manufacturers but also a large number of distributors, which is also an unavoidable "calamity" for distributors.
Some distributors say they are in a "five-year cycle." Indeed, from the reform and opening up to now, there have been about five generations of distributors. At a manufacturer's distributor conference, a distributor said, "We top distributors were not in this industry five years ago, and the top distributors from five years ago either can't be found now or are not qualified to stand on the podium."
**Law:** The growth process of distributors is a process of continuously "crossing thresholds."
Every 3-4 years, distributors must cross a threshold. Those who succeed will have smooth sailing for the next 3-4 years, while those who fail will disappear.
Chinese marketing has a marketing change cycle of about 3-4 years. The market environment undergoes qualitative changes every 3-4 years, forcing manufacturers to comprehensively adjust their marketing systems. During the adjustment, marketing directors, regional managers, and salespeople are adjusted in turn. Based on the principle of "new emperor, new court," distributors also experience a 3-4 year adjustment cycle.
**Law:** As individuals, distributors may be able to control their own fate. As a whole, the fate of distributors is determined by the times.
Although distributor associations are being organized across the country, compared with strong manufacturers and strong terminals, distributors are still a "vulnerable group." Distributors lack their own spokespersons, their own research experts, and their own voice in the media. In the rise of strong manufacturers and strong terminals, distributors always survive in the cracks.
Before the emergence of national distributors, no matter how large the scale of local distributors, in the eyes of manufacturers, they were just a low-level problem to solve.
Although the absolute scale of the distributor group is increasing, the decline in relative scale is an irreversible trend.
**Law:** The core value of channel distributors lies in their distribution capability. As long as distributors lack distribution capability, they will eventually exit the business stage.
The "distributor uselessness" theory appeared in the United States in the 1920s, in Japan in the 1960s, and continues to appear in China. The "terminal sales" and "direct sales" trends in China are manifestations of this theory.
Manufacturers need distributors because they have the following values: familiarity with local markets, downstream customers, providing financing (cash purchases), political-business relationships, and product distribution. The most important and irreplaceable capability is low-cost distribution. In the information age, many things can be achieved through remote control, and anything that can be achieved through remote control can be replaced by manufacturers, but only distribution cannot transcend time and space and must be executed by distributors. This is why manufacturers' terminal sales are noisy for a while but ultimately must rely on distributors. Therefore, to survive the continuous elimination of "meritorious distributors" by manufacturers, the most important capability for distributors to strengthen is distribution capability.
**Law:** Direction determines the future, and model determines success or failure.
Marketing is not always a one-way street. Today's successful experience may be tomorrow's failure lesson. Therefore, distributors need to adjust their direction periodically.
Only by turning direction into methods and methods into models can you find a shortcut to success. A marketing model is the popularization of marketing methods and their standardization and proceduralization. Its role is to enable ordinary people to achieve extraordinary results, not to let salespeople cross the river by feeling the stones.
Models always have prerequisites. When the marketing direction changes, previously effective models become ineffective. Therefore, once a new marketing direction is determined, the old model should be abolished and a new model sought.


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