Some say my recent articles are pessimistic about distributors, such as mentioning the orderly retreat of distributors. I disagree! Those who should grow big will grow big, and those who should disappear will disappear. This is optimism. Those who should grow big but don't, and those who should disappear but don't, this is pessimism. Over the past 20 years, distributors have basically not grown big, but they have lived well, which is not necessarily a good thing. In recent years, distributors as a whole have been struggling, but there are more big distributors than before, which is not necessarily a bad thing. Whether pessimistic or optimistic depends on one's standpoint. Big Distributors: Negation of Negation Since the reform and opening up, China has had big distributors, but the big distributors of that era were wholesalers. Early wholesalers were provincial agents. If they grabbed a good brand, it was hard not to grow big. The core of a big distributor's size lies in the large agency area. After the 1997 Asian financial crisis, China's channels entered the era of "cutting big households," that is, the miniaturization of distributors. I personally participated in this process. Why "cut big households"? Because wholesalers, despite their large scale, had incomplete functions, only having wholesale radiation functions, being big but not suitable. Around 2000, distributors finally settled into small regional agency with the county as the basic marketing unit, which has continued to this day with little change. How big can a county-level distributor become? Moreover, because head brands implement exclusive agency, distributors cannot take on more big brands. Small regional agency, coupled with exclusive brand agency, determines that distributors can only deeply cultivate terminals and find it difficult to scale up. An ordinary county-level distributor reaching 100 million yuan is already the ceiling. However, the small regional deep distribution system in channels makes head brand owners very comfortable. Distributors can fully cover terminals, cannot grow big, are obedient, and easy to control. Where in the world can you find such a good channel system? If it weren't for the FMCG industries moving from growth to shrinkage, causing overall difficulties for distributors, this system would continue to be maintained. Small regional agency has been around for 20 years, and deep distribution for 20 years, with basically no major changes, because it is hard to find a channel system that makes head brands so comfortable. Now, the shortcomings of the deep distribution model under the small regional agency system are obvious. The "small but complete" system is extremely inefficient. In the era of high-speed growth, efficiency was not a problem. After all, with growth, there is no fear of waste or inefficiency. But when the market shifts from incremental to shrinking, the new demands of the channel system change, mainly focusing on two points: First, channels need to be more efficient—since it's hard to increase revenue, we have to cut costs; second, the promotion of "three new and one high" (new brands, new markets, new products, high-end products) must be more powerful—old products don't make money, new products need to make money. Solving these two new demands requires a new channel system. Therefore, a new big distributor system and a new promotion system will emerge. Big Distributor → Miniaturization → New Big Distributor. China's distributors have undergone a negation of negation, a spiral upward process. This is also the law of development of things. The Big Distributor Is About to Reappear The emergence of big distributors must meet two conditions: First, a single distributor distributes more brands; second, a single distributor covers a larger area. Recently, I met a 10-billion-yuan distributor in Guangdong who meets these two conditions. The key is, what is the path for these two conditions? The emergence of platform-type distributors is the beginning of distributor scaling up. The development path of China's big distributors, due to the integration of digitalization, will definitely differ from that of the United States. The scale and efficiency brought by digitalization have become the inevitable choice for the rise of big distributors. Therefore, B2B has become an unavoidable hurdle for the development of big distributors. Don't doubt this, and don't expect to grow big under the traditional distributor model. I believe that the emergence of super distributors is promising in the future, roughly going through three steps. Step One: B2B platformization of category distributors and head distributors. First, the B2B platformization of category distributors succeeds. China has many long-tail categories with scattered brands, making it difficult for brand owners to do deep distribution. Therefore, brands gradually concentrate on big distributors, forming category merchants with many brands and many SKUs—a distributor represents quite a few brands in a certain category. This is mainly in snacks, condiments, daily chemicals, frozen products, etc. In long-tail categories, brand exclusivity is more difficult. For example, in the big snack category, distributors operate first-line head brands like Lay's, Want Want, Strong, Mondelez, and Orion, combined with a large number of long-tail brands, forming a brand portfolio that can control the regional category. For example, in the big daily chemical category, distributors operate first-line heads like Unilever, Blue Moon, Hengan, Jahwa, SC Johnson, and Yunnan Baiyao, combined with a large number of long-tail categories, forming a brand portfolio for the daily chemical category. For example, in the big condiment category, distributors operate first-line heads like Haitian, Chubang, Totole, Haorenjia, Wujiang, and Hengshun, combined with a large number of long-tail brands, forming a brand portfolio for the condiment category. Early platform merchants included not only category distributors but also some regional B2B platforms. The difference is: category distributors mainly focus on first-tier agency products, while regional B2B platforms mainly focus on second-tier distribution. In 2023, New Distribution led multiple B2B platform study tours, with a large number of head FMCG distributors participating, boosting their confidence. A large number of head distributors are trying or preparing to try. Because they know that missing out on platformization may mean missing the strategic opportunity to develop into big distributors. In the process of B2B platforms rising and falling, people found that the best performers were precisely these long-tail category distributors and regional B2B platforms. Therefore, the media platform New Distribution named these distributors platform distributors in 2023. Step Two: Big brands concentrate on platform merchants. No matter which B2B model, there is a common feature: direct supply to small terminals, eliminating the "second-tier wholesalers." Traditional deep distribution has a bug: it cannot distribute to 6 million small and medium terminals, only to second-tier wholesalers. Second-tier wholesalers will overdraw the policies of big brands to bring goods, profiting through brand combinations. Because B2B allows small terminals to order directly, and then centralized distribution to small terminals, B2B platforms truly achieve seamless coverage of small terminals, greatly increasing coverage rate. Therefore, a group of brand owners will be willing to hand over brand agency rights to B2B platform merchants. For category distributors, brand concentration brings category control, and more big brands concentrate on B2B platforms, prompting more regional head distributors to invest in B2B platform construction. The early effect of B2B may be to improve efficiency, but soon after, a trend of brand concentration appears. It is hard to imagine distributors growing big without brand concentration. If you only represent a limited number of brands and only operate in a small area, how can you grow big? From the development of category distributors, we have seen the following positive cycle: Because of the large number of SKUs, there is a strong demand for the efficiency brought by B2B orders; because B2B platforms increase terminal coverage, a large number of brands in the same category concentrate on B2B platforms, accelerating category control. This is an unexpected bonus of B2B platforms. And it is this unexpected bonus that becomes the flywheel for the reappearance of big distributors. In a communication with a head brand owner, the boss worried that if his agents did not become platform merchants, they might be marginalized if they entered other platforms. After all, when everyone is preparing to submit their letters of allegiance, it depends on who is earlier. Step Three: Capital merges platforms, and platforms develop across regions. The concentration of a large number of brands on platforms not only brings growth in distributor scale but also changes the characteristics of channels. Under the small-scale distributor system, terminals have dual trust in distributors, that is, the dual trust of [customer relationship + brand]. Customer relationship is very important, especially for the promotion of new brands, which mainly relies on customer relationship in the early stage. The process of stocking goods also depends on customer relationship. Customer relationship, that is, acquaintance relationships, requires time and long-term resource investment, but customer relationship is privatized. Long-term operation brings customer relationship, but operating in a different region means no customer relationship. Because of this, capital mergers and acquisitions of Chinese distributors are rare. A listed agricultural company once acquired regional big distributors in its industry, but it was generally unsuccessful. Because asset-based resources can be merged, but privatized relationships cannot. When the boss and employees leave, the customer relationship is taken away. The effect brought by B2B platforms is that the weight of privatized relationships in orders will decline, or even be negligible. Of course, customer relationship is still needed in the early stage. Therefore, capital will re-evaluate the value of distributors, and cross-regional mergers and acquisitions of B2B platforms become possible. As long as brands concentrate on B2B platforms, it is possible to grow big in a small area. As long as the logic of cross-regional capital mergers and acquisitions holds, it is possible to grow bigger across regions. Thus, big distributors, bigger than the "provincial agents" of the past, may emerge. The flywheel for distributors to grow big starts spinning the moment they move toward B2B platforms. Of course, affected by e-commerce, the offline share is getting smaller; affected by the supply chain revolution, manufacturers directly supply large terminals more and more. Then, with the rise of big distributors, the share of other distributors will get smaller and smaller. In the future, it may not be surprising if the number of distributors decreases by 10 times, especially transaction-based B2B platforms, which will be oligopolistic. A region does not need too many platforms. There is no way around it: one general's success costs ten thousand lives. Opportunities are equal, but results are not. If you cannot become a big platform merchant, either retreat or transform into a more professional service, not doing scale but doing professionalism. Those who should grow big can grow big, and those who can be professional become more professional. This is optimism. B2B Big Distributors and B2B Platform Merchants At the end of January 2024, at the Supply Chain Revolution Conference held by Midea's Ande Zhilian, B2B supply chain expert Zhang Yunchuan divided B2B into B2B big distributors and B2B platform merchants. I am very interested in this. His view is: B2B platform merchants are typical second-tier wholesaler matching transactions, while B2B big distributors, in addition to second-tier wholesaler matching transactions, also have first-tier agency. That is to say, B2B big distributors do both cognition and transactions, while B2B platform merchants only need to do transactions. China's channel system has always had dual functions, able to do brand (product) cognition and transactions. A large number of brands that rose through channels took advantage of the channel's cognitive (recommendation) function. If everyone only does transactions, then who will do cognition? It should be known that after entering the mobile internet era, although there are more cognitive means, the deterministic cognitive means are getting fewer and fewer. Therefore, terminals as deterministic cognitive scenarios become increasingly important. Especially for promoting new brands, new markets, new products, and high-end products, which I call "three new and one high" product promotions. In China's channels, the promotion function is indispensable. Even big brands need channel promotion. Distributors under the small regional agency system have four major functions: promotion, ordering, distribution, and capital. According to business logic, promotion → cognition → distribution → capital, promotion is still ranked first. I have repeatedly emphasized that if distributors have only one function left, it is promotion. The rest can be handed over to third-party platforms. The reason I am interested in Zhang Yunchuan's view is that when big distributors reach a certain scale, it is difficult to simultaneously undertake the promotion function. Especially B2B platforms. In the past, when distributors undertook four functions, although the promotion function was important, it was not the primary function. As long as there are orders and distribution, orders and distribution are more rigid than promotion. Without orders, the boss will be nervous; without distribution, customers will complain. But without promotion, it may not be visible in the short term, but once it shows, it is hard to save in the short term. The importance of the promotion function may appear in two forms in the future: 1. Independent promotion merchants, which already exist; 2. Independent promotion departments within platform merchants. Judging from the trend, the specialization and miniaturization of promotion, and the platformization and big-merchantization of orders and distribution, are two parallel trends. From March 14 to 16, 2024, during the Spring Sugar Fair, the Second China FMCG Distributor Conference, organized by New Distribution in conjunction with Zhoupu Data, will be held in Chengdu. We will invite 16 national benchmark distributor bosses and relevant industry executives to share their latest thoughts on distributor business. We hope to provide some direction and set up a lighthouse for the distributor community in the face of strong changes today, at least to ensure that business direction is not blurred or confused! At the same time, on March 15, a closed-door private sharing session for distributors will be held, titled "Low-price impact, manufacturer direct control, declining customer traffic, what are the options for distributors?" with one-on-one dialogue and discussion with excellent big distributors, sharing experiences, exploring business opportunities, and discussing the era's dividends. The Second China FMCG Distributor Conference is not only a grand ideological event of knowledge, cases, and methods, but also a conference that leads the future development of distributor business! During the three-day conference, centered on the theme of "Supply Chain Revolution," there will be a main forum, a China FMCG Hard Discount Conference, a China FMCG Distributor Conference, more than ten sub-forums and closed-door exchange meetings, and the first major debut of the [Extreme Supply Chain] Brand Factory Direct Procurement Fair, which will meet with thousands of FMCG brand owners, distributors, retail transformers, and industry service providers from across the country in Chengdu, continuously brainstorming, and jointly discussing the challenges and opportunities, changes and ways out in the era of supply chain revolution.