Distributor bosses have never been as pessimistic as they are today!
Since 2024, all the distributors I've met, regardless of size, have been asking: Is business really too hard? Do distributors still have a way out?
Some distributors really can't continue.
For example, an extreme case I saw: monthly sales of only 600,000 yuan, but the manufacturer forced over 10 million yuan in inventory. The distributor boss mortgaged his house and borrowed money to barely survive.
The manufacturer's people are also trying various ways to prevent his collapse. It's like an ICU patient who is terminally ill but kept alive with various tubes.
There's also the situation of increasing revenue without increasing profit.
"Sales are actually increasing, but profits are declining severely!"
When peers can't continue, distributors with scale advantages in the region see their business grow, but without profit growth. This situation makes distributor bosses feel very uncertain.
In such a market environment, having such pessimistic thoughts is very normal. Especially when the impact from retail ends like snack stores, discount stores, and supermarket adjustments comes wave after wave, each pointing to revolution against distributors.
But do distributors really need to be this pessimistic?!
Over the past six months, I've been visiting markets, and I've found that in every industry—yes, every industry—no one says business is easy.
The market is extremely competitive, and every role in the industry chain is struggling. Distributors are just one group.
Why does it seem like only distributors are going to be eliminated, while others have a way out?
Upstream manufacturers: if your products don't match market needs, you'll be eliminated.
Retailers: if you can't compete with peers, you won't survive.
Even the currently hot discount and wholesale supermarkets: if your prices aren't competitive, your products lack differentiation, and you don't operate well, even if you're on the trend, you'll eventually have to close!
No matter what industry you're in, being eliminated is only because your products or services have no buyers, or the market doesn't need you. Having no way out is not because you're defined by a specific market role.
That's the truth.
But why are FMCG distributor bosses so pessimistic?
Because you're trapped by your role!
Distributor, who are you really?
The vast majority of distributor bosses have never asked themselves this soul-searching question.
In 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 might come from their 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 the manufacturer.
That seems right, doesn't it?
But think one level deeper.
Manufacturers make 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, after-sales—these are all transaction costs.
Trade circulation seems to add layers of markup, but the entire chain operates as the lowest transaction cost method for the business system.
The existence and development of distributors are ostensibly due to the needs of upstream manufacturers, but in essence, they are due to the needs of market transactions.
So the truth is: The money distributors earn has always been given by the market! Distributors are a role assigned by manufacturers, but their essential identity is a market enterprise.
What is an enterprise?
An enterprise is a solution that solves problems in the market through the products or services you provide.
Whether an enterprise should exist and develop depends on whether the market needs your services!
It's that simple.
Why is business hard for distributors now?
In the past, due to the division of labor in the market, a large number of distributors were needed to fulfill the function of distributing goods to retail outlets.
But now, due to changes in supply and demand, retail transformation, and the emergence of new channels, the profit margin left for distributors is declining.
The era of obtaining brand agency rights and making money by simply distributing products to retail outlets is over.
In other words, the market doesn't need as many distributors anymore.
What to do?
Break free from the old role's constraints and return to market logic to view your own way out.
Since your essential identity is an enterprise, and your past development was because the market needed your services,
Then in the future, of course, it's the same: you can only survive and develop by continuing to provide services that the market needs.
So if you ask "Do distributors have a way out, and how should they transform?", you're still trapped by the role!
What you should really ask is: What services does the market need that my 'enterprise' should and can provide?
Based on the distributor role, you see only problems; but based on the enterprise identity, you see various opportunities.
On this, I want to say two things:
First, the market always has room for middlemen.
Is the statement "The market is revolutionizing middlemen" correct?
No, it's eliminating middlemen who are inefficient and lack advantages in goods and costs.
What remains are middlemen with scale and efficiency advantages.
China's vast territory and diverse retail formats mean it's impossible for manufacturers to cooperate directly with all retailers; middlemen are definitely needed. Even discount stores, Sam's Club, and Pang Dong Lai have middlemen serving them.
Second, the future market needs service-oriented suppliers.
Low-price competition, discounting, and supermarket adjustments—from the distributor role, you see problems, but from the enterprise perspective, you discover market opportunities.
This opportunity is—service-oriented suppliers.
What does that mean?
Retail changes come one after another. Who lives and who dies, we won't discuss for now, but one thing is clear: The past model of selling shelf space has hit a dead end. For future retail to gain competitiveness, it must return to the product itself, and must work on supply chain efficiency and product differentiation.
When retail enterprises shift in this direction, focusing their main energy on professional matters like products and operations, a demand for professional service-oriented suppliers arises.
In the past few months, communicating with different industry roles, I've found that the market is far from being summarized by a few concepts.
Delving deeper, through the complex market, I've seen several truths:
Truth 1: Supermarkets have been used to good times and don't know how to operate shelves at all.
Truth 2: Small merchants are being cleared out, and large merchants will integrate regional supply chains faster.
Truth 3: Community retail stores outside brand chains need upgrading and renovation.
Truth 4: Products are extremely homogeneous, and the ability to organize quality product portfolios is scarce.
Through these truths, what do you see?
These are all market problems that need enterprises to provide solutions.
I want to say that truly capable distributors, this is the opportunity given to you by the era's transformation!
But you must transform, from the role of distributor to the role of professional service-oriented supplier!
Distributor: Distributing goods for brands—helping brands with distribution, shelf placement, order taking, and delivery. Supply chain: Supplying goods for customers—providing channel customers with cost-advantaged product combinations.
Service provider: Serving customers—helping retail enterprises find the best solutions for product composition, pricing, display, and promotion.
This is the market demand, and it's what distributors as enterprises can and should do.
But your role must change, and your functions must also change. In the past, you helped upstream brands sell better; in the future, you must help downstream customers buy better!