---
title: "The Winter of Beijing's FMCG Industry"
description: "Initially, they continuously supplied nourishment to the city; now, as winter arrives, the cold forces them to leave. This article tells the story of dealers and distributors in Beijing facing challenges such as demolition, rising warehouse costs, and the rise of B2B platforms, leading to a decline in their numbers and profitability."
author: "刘少德"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2017-12-03"
language: "en"
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---

# The Winter of Beijing's FMCG Industry

> Initially, they continuously supplied nourishment to the city; now, as winter arrives, the cold forces them to leave. This article tells the story of dealers and distributors in Beijing facing challenges such as demolition, rising warehouse costs, and the rise of B2B platforms, leading to a decline in their numbers and profitability.

Initially, they continuously supplied nourishment to the city; now, as winter arrives, the cold forces them to leave.
1
**Escape**
The phone rang repeatedly, but Wang Wei no longer wanted to answer. Previously, his happiest moment was waking up each morning to see various orders. Wang Wei is a salesperson for a brand's distributor, having been in Beijing for two years. He walks over ten kilometers daily, through harsh cold and heat, without interruption. He has become accustomed to shuttling between small shops, chatting and boasting with various "big brothers, big sisters, uncles, and aunts." Besides selling his products, what makes Wang Wei reluctant to leave this industry is the feeling of being trusted.
A store in a village cleared in Daxing District
"In the past, when I went to a store, I'd see what was missing on the shelves and directly report to the company, without even greeting the store owner," Wang Wei said, with pride tinged with helplessness. "But now business is tough; there's demolition everywhere. Originally, there were three to four hundred stores in my area, but now there are only about two hundred left. I planned to work in Beijing for two years and then return home, but now the place I've rented for two years is also being demolished. I can't find a place to live temporarily; housing is hard to find, and agents are raising prices. So I might as well go back home."
There are many young people like Wang Wei in Beijing. They shuttle between mom-and-pop stores, using the distance they walk to continuously supply the city with nourishment, yet they are also the ones most easily overlooked by the city.
2
**Hesitation**
After that big fire, Beijing's special rectification work continues.
It is understood that most FMCG warehouses in Beijing are currently located in places like Jinzhan, Majuqiao, Heizhuanghu, and Dayangfang, where traditional distributors, second-tier distributors, and some B2B e-commerce platforms also have warehouses. Affected by the demolition, the uncertainty of warehouse locations has led them to reduce the number of SKUs in stock, keeping only fast-moving items.
"This business can't go on anymore!" Lao Ma is a distributor for a well-known instant noodle brand in Beijing. The manufacturer's strong brand influence once allowed Lao Ma to live well. When the market was good, the goods delivered by the manufacturer were snatched up without even entering Lao Ma's warehouse. In recent years, although the instant noodle industry has declined overall, Lao Ma still achieved nearly 100 million yuan in sales.
"The profit margin for instant noodles is already thin, and now, after moving so many times due to rising warehouse costs, we can no longer cover the costs," Lao Ma complained. "Previously, warehouse space could be rented for 1.2 yuan per square meter, but in the past two years, due to urban planning, warehouse prices within the Sixth Ring Road have risen to 2 yuan, and the warehouses are not even standard. Delivering to the city center is too costly due to the distance, plus personnel wages, so basically we're not making money or even losing money."
Regarding the future, although Lao Ma knows that traditional distribution will become increasingly difficult, he still wants to persist. "I've been an agent for this brand for so many years; after all, I've made money from it. If it really becomes unsustainable, I'll think of other ways then."
3
**The Impact Goes Beyond These**
Inconspicuous wholesale markets were once the preferred place for numerous mom-and-pop stores to stock up. Their existence was justified; in the era of scarcity, second-tier distributors entrenched in urban villages were also a standard for measuring the vitality of regional commodity circulation. Now, their days seem not as good as before.
On one hand, manufacturers are flattening channels to connect with retail stores; on the other hand, the rise of FMCG B2B platforms in recent years aims to compress distribution layers. Under this pincer attack, second-tier distributors have become targets, with both manufacturers and B2B platforms sharpening their knives.
"With one phone call, they deliver immediately, and they can also exchange products that don't sell well. Sometimes I don't even know what I'm missing, but they take one look and know exactly what I need, and they deliver right away," said Aunt Li, who has run a store for many years. Therefore, the second-tier distributors scattered in the city are affectionately called "capillaries of the city," supplying goods to numerous retail terminals with high frequency and efficiency.
Now, due to urban planning and rising warehouse costs, most second-tier distributors have to relocate their warehouses to beyond the Fifth Ring Road or even farther. This increases transportation distance, lengthens delivery time, and further raises delivery costs. The advantage of fast delivery that second-tier distributors once had is now gone.
Additionally, due to policy reasons, most wholesalers cannot obtain commodity circulation permits, which also forces some traditional wholesalers to leave this familiar industry. It is foreseeable that the number of traditional distributors and second-tier distributors in the Beijing market will continue to decline, and industrial upgrading is urgent for every industry participant.
4
**Future**
At this time, winter has long arrived in the north, and the cold this city brings is more impressive than ever.
Since the deep distribution model has been in operation, the profits obtained by distributors at all levels have dropped significantly. According to relevant data, a first-tier brand reported a net profit of $90 million in the first half of 2016, a year-on-year decrease of 66%. The profit margin for some city-level agents of this brand was less than 4%, far from the profits of previous years.
"A few days ago, Lao Zhang quit! His sub-distributors returned a large amount of goods to his warehouse," said Li Xing, an agent for a brand in Haidian District. The Lao Li he mentioned is another agent for the same brand in Haidian. "Coincidentally, his warehouse was also affected by demolition, so he sold all the goods to me at a low price."
A warehouse of a Beijing wholesaler
After unloading a truckload of goods, Li Xing lit a cigarette and turned to us, saying, "Business is not as good as before. In the past, without demolition, although profits were declining, we could still survive. But now with all the rectification, where is the money to be made? I no longer rely on selling goods to make money. If I can sell all the goods without them expiring in the warehouse, I'll be grateful."
During our national research, there are many distributors like Li Xing. The thin profit margins are no longer enough to cover their daily warehousing, operation, and other costs. What keeps them going, besides the incentive rebates from manufacturers, is the market fees deducted during the circulation of goods.
It is understood that another reason traditional distributors and second-tier distributors find it hard to sustain their business is the emerging e-commerce B2B platforms in the market. Besides early entrants like Zhongshang Huimin and Zhanghe Tianxia, new internet giants like Alibaba and JD.com have also entered. They advocate compressing distribution layers, but in the eyes of many distributors, B2B platforms are just wearing the cloak of the internet while doing the same things as wholesalers.
Once, the FMCG industry attracted a large number of gold diggers because of its large market, high ceiling, and low entry barriers. Now, because the entry barrier is too low and there are too many participants, many are forced to leave.
Beijing's winter continues, but we cannot see when spring will come!
(Names in the article are pseudonyms)
Do you have similar stories around you? Feel free to leave a message in the background.
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