Recently, I have visited distributor companies across the country to help them with operational diagnostics and profit improvement. A growing feeling is that the industry's inflection point has arrived. Nine out of ten bosses I meet sigh, "Teacher Yang, business is really tough this year." This "toughness" is not the fluctuation of the off-season, but a deeper sense of powerlessness—unclear direction, no basis for judgment, and everything feeling like stepping on air. Inventory piles up, profits thin out; discount stores and live-streaming rooms continuously siphon away terminal customer traffic. What's more anxiety-inducing is that everyone knows change is needed, but no one knows how to change.

Some continue to frantically take on new products, hoping to catch fish by casting a wide net;

Some imitate discount stores by cutting prices, only to lose customers and gain nothing but losses;

Many more stare at warehouses full of goods and declining reports, at a loss... This situation underscores a point I have repeatedly emphasized: The biggest challenge distributors face today is not market shrinkage, but cognitive lag. In times of change, the greatest risk is never the turmoil itself, but that we continue to apply past logic to brand-new problems. Based on years of project experience and industry observation, I judge: In the next five years, 80% of distributors will exit the market. This is not alarmism, but a reality that is unfolding.

How Have Distributors Been "Locked In" by Past Success?

Many bosses habitually attribute difficulties to external factors: declining consumption, intensifying competition, reduced manufacturer support... But the real problem is: The logic of past success has completely failed today. Looking back over the past thirty years, how did distributors build their businesses? It relied on two words: saving money. With only a few yuan of profit per case, whoever could squeeze costs tighter and endure more hardship could survive. Driving to deliver, watching stores, negotiating settlements—all done with brute force to keep the business going. This logic worked because distributors had an umbrella overhead—the brand's regional agency rights. Getting a brand meant exclusive business in a designated region and channel, with no direct competitors. But now, that umbrella has been completely overturned. NKA (National Key Accounts) like RT-Mart and Carrefour were the first wave of impact. Through extended payment terms and channel control, they turned distributors' working capital into their own capital pool and their warehouses into cost centers. This squeeze diluted profits but was not fatal, because the umbrella and pricing system remained. What truly crushed the old model were "new species" like snack discount stores and live-stream e-commerce. They rewrote the rules of the game with extremely low costs, high efficiency, and speed. They are not competing with distributors; they are dismantling the very logic distributors rely on to survive. To help everyone intuitively understand this structural change, I often use an analogy: Past market competition was two-dimensional, like Fuji and Kodak competing on who could develop film faster. Then digital cameras (snack stores, hard discount) appeared, and everyone debated who would win. But the ultimate winner was the smartphone, which redefined the rules and jumped from two-dimensional to three-dimensional competition. No matter how much Kodak cut prices, it couldn't beat digital cameras; no matter how digital cameras improved products, they couldn't beat smartphones. Similarly, distributors' competitors are no longer the neighboring boss, but "cross-border players" (like Ele.me's Xiaoxiang Supermarket) who make money in completely different ways. While you're still thinking about how to save money, others are already making money with models you can't understand. So, we must admit: Past experience is becoming today's liability. The first step to breaking through is not learning new methods, but enhancing cognitive ability. Cognitive ability is the true ceiling of an enterprise. What you can see, you can achieve; what you can't see is where your company loses money. But cognitive ability is not just about insight; it must be embedded in concrete operational actions. The most critical step is to make operations "visible."

Reconstructing Business Logic with Data Thinking

Through years of projects, I am increasingly convinced: Many distributors don't actually understand themselves.

  • How much inventory in the warehouse has never moved?
  • Which SKUs are profitable and which are draining?
  • Salespeople visit a dozen customers a day—which customers actually contribute profit?
  • Are resources being used on good customers or eaten up by inefficient ones? If these questions have no answers, all actions are blind. So we insist: No data, no decisions. Operations are not about gut feeling or mood; you must first "illuminate" the business. To help bosses quickly see the structure, we condense the most complex operational issues into two charts: the Product Quadrant and the Customer Quadrant. (Subsequent articles will detail the application logic and methods of these quadrant charts; this article is just an introductory share.) Take the Product Quadrant as an example. Using "sales revenue" and "gross margin" as dimensions, all products can be precisely categorized into four types: star products, traffic products, profit products, and elimination products. Here's a real case. A distributor had 1,911 active SKUs in a month. The four-quadrant analysis clearly revealed the following structure:
  • Star products (high sales, high profit): 173 SKUs, 9.05% of total, contributing 2.12 million yuan in sales (18.55%) and 47.49% of gross profit;
  • Traffic products (high sales, low profit): 311 SKUs, 16.27%, contributing 6.28 million yuan in sales (55%) and 16.83% of gross profit;
  • Profit products (low sales, high profit): 854 SKUs, 44.69%, contributing only 1.73 million yuan in sales (15.13%) but 30.44% of gross profit;
  • Elimination products (low sales, low profit): 573 SKUs, 29.98%, contributing 5.52% of gross profit, almost no effective value. Why did sales rise but profits not grow? Because for every 100 yuan sold, 55 yuan comes from non-profitable products. At the same time, nearly 30% of SKUs are not just dead inventory; they are consuming storage, capital, and creating future return losses. The essence of operations is not "doing more," but "doing right." After seeing the structure clearly, the first step is not to add actions but to subtract. Cut SKUs, clear inventory, and make the business light again. Return rates will drop immediately, capital pressure will ease, and team direction will stabilize. What you save is real profit. But the deepest value of this chart lies elsewhere. It truly solves the problem of "master craftsman mode" not being replicable after scaling. With fewer than 500 SKUs, you can manage by feel and experience; once you hit 5,000, feel completely fails. The result is that the company is locked in by "old masters"—a mature salesperson takes two years to train, bosses dare not replace them, and newcomers can't get up to speed. Data analysis is precisely the tool to convert this master's intuition into standardized organizational capability. A new salesperson, with clear quadrant labels, can master product strategy in three months, knowing what to promote and what to abandon. This is the most fundamental and important capability data gives an enterprise—replicable growth capability. In projects already implemented, some distributors have reduced return rates from over 8% to 2.2%; others have achieved a 118% net profit increase in a specific department within six months.

Behind the data is not software, but profit—the confidence to navigate cycles.

What Will the Surviving 20% Look Like?

When a company moves from being blind to seeing clearly, and then to seeing through, its evolutionary path is set. Based on long-term industry observation and practice, the 20% that ultimately succeed will roughly take three forms: Type 1: Supply Chain Service Provider The core competitiveness of such companies lies in product capability. They are no longer mere movers of goods but have upgraded to professional product operation experts. They are not passive handlers of goods but deeply understand channel characteristics and regional consumption habits, providing one-stop, differentiated product solutions to different terminals. Type 2: Service-Oriented Operator The core of these companies is the perfect combination of product capability and marketing capability, jumping out of the execution layer of selling to become strategic partners of brands in the regional market. They fully take over the brand's work in the region, not only selling but also assisting in market building, price control, and consumer cultivation. They share market responsibility and growth benefits with brand manufacturers. Type 3: Brand Operator These companies demonstrate top-level cognitive capability. They upgrade from selling others' brands to becoming strategic partners that co-exist with brands or even create their own brands, deeply participating in localized brand operations—from customizing product specifications and flavors to jointly formulating regional marketing strategies. They also integrate channels to build their own terminal networks, firmly controlling consumer touchpoints. Ultimately, they are no longer distributors dependent on brands but core forces that can dialogue with brands on equal footing, grow together, and even dominate regional market rules. It should be clear that these three forms are not mutually exclusive; companies can choose a suitable path or combination based on their strengths. But regardless of the path, data analysis and information capability are the first hurdle that must be crossed. Final Thoughts In the past, distributors made money by saving; in the future, they will make money by cognition. Cognitive ability determines how far a company can go; information capability determines how steadily it can go. Data thinking is not about spending big money on fancy software, but about forcing yourself to change your way of life: reject ambiguity, embrace clarity. There is no shortcut. From today, throw away the phrase "I have a sense of it" and replace it with "What does the data say?" Start by inventorying your warehouse, your customers, and your SKUs. First, figure out how your company actually makes money and loses money. This step is the beginning of moving from that 80% to the 20%. With over a decade of deep experience in the FMCG industry, having served as a senior executive in terminal retail enterprises, general manager of marketing centers in production companies, and general manager/president of well-known distributor companies, I am one of the few practical experts in the industry with complete experience across the "production-distribution-terminal" chain. Since 2022, I have provided full-service consulting to clients including Chengdu Xinrenxing, Hefei Baili, Zhengzhou Jinguoyuan, Chengdu Yipin, Hubei Youwei, Bijie Shengyuan, Kunming Yunxing, and Xi'an Junwen. In 2023, I became the chief coaching officer for Yanjin Shop's business accompaniment, and in 2024, the digital consulting coaching officer for Leerle. Due to space limitations, many practical details about distributor transformation and digital management cannot be fully elaborated here. If you are interested in the content of this article or have specific confusions in business operations that you'd like to explore further, feel free to scan the QR code to add the editor of this article (please indicate your company, name, and purpose when adding).