During a period of weak demand, some Chinese FMCG distributors continued growing and even added tens of millions of renminbi in annual sales in ordinary prefecture-level cities.
The results looked similar, but the sources of growth were very different.
A distributor needs to know not only whether it grew, but what type of growth produced the result.
The article described three types: dividend, wage, and profit.
Type One: Growth from a Temporary Dividend
During the pandemic, some distributors multiplied sales after joining government supply-guarantee lists.
That growth came from a temporary imbalance between supply and demand. Supply became difficult while demand remained and sometimes increased because consumers stocked products.
A distributor capable of entering the supply system still demonstrated relationships and execution. But the growth should not be mistaken for a permanent capability.
Every new platform or model creates similar windows.
Early sellers on Taobao, Pinduoduo, Douyin, or Kuaishou benefited from lower competition and easier exposure. A distributor that obtained the rights to a rising brand could grow as the brand and market expanded naturally.
The underlying advantage was a dividend created by temporary scarcity.
Dividends can last for years, but new supply eventually enters and reduces the gap. A business built only on the dividend becomes vulnerable when the market normalizes.
Type Two: Growth That Is Really a Higher Wage
Another distributor grows by adding categories and representing more brands.
The core brand may already cover most of its regional potential, so expansion appears to require more products.
The added revenue can be meaningful, but the economics resemble additional labor.
Suppose a product offers a ten-point gross margin. Warehousing, delivery, salaries, capital, loss, and promotion can leave only two or three points.
To earn that return, the distributor must carry inventory, complete manufacturer targets, execute policies, and expand the team.
The distributor functions as an outsourced sales, storage, and delivery organization for the manufacturer.
Representing more brands is similar to receiving wages from more employers. The business works harder and becomes larger, but its underlying role remains replaceable.
This distinction separates earning income from creating economic profit.
Accounting profit may still exist. Strategically, however, much of the return is compensation for labor, assets, and risk that someone must provide to complete distribution.
Type Three: Growth from Structural Efficiency
The highest-value growth in the article came from distributors that changed the traditional model.
One built a B2B platform connecting thousands of outlets. The platform aggregated demand, worked with more upstream manufacturers, and distributed thousands of SKUs across hundreds of brands.
The advantage came from efficiency.
Consider a product for which the manufacturer leaves RMB 5 to cover warehousing, transport, and delivery.
If most distributors spend RMB 4.80, the remaining RMB 0.20 is essentially the market wage for performing the service.
If standardized processes, detailed management, scale, and digital tools reduce the cost to RMB 4.60, the additional RMB 0.20 is true structural profit.
It exists because the company can perform the same work more efficiently than competitors.
Efficiency Creates a Reinforcing System
Efficiency-led profit can finance better service.
Better service attracts more business and greater scale.
Greater scale reduces unit cost and generates more data.
Lower cost and better data strengthen efficiency again.
This positive feedback loop creates a real competitive barrier.
B2B is only one possible implementation. The deeper principle is scaled coverage, standardized distribution, and digital coordination that allow the distributor to create more value with fewer resources per transaction.
Mature Markets Demand Commercial Rationality
When the market expands naturally, even a weak business can grow.
In a mature market, companies compete for a limited pool of demand. The distributor must improve the supply side of its own operation.
That requires commercial rationality:
- understand the actual economics of the business;
- measure cost, expense, cash, and profit clearly;
- replace owner-dependent decisions with processes and institutions;
- build organizational capability;
- use digital tools to improve productivity;
- create value customers cannot obtain as efficiently elsewhere.
Many distributors remain locked into intuition, relationships, and informal management.
Their financial planning is unclear, processes are weak, and the organization depends entirely on the owner.
The strongest distributors differ in background and personality, but they share a rational operating approach. They study the underlying business, design governance, invest in internal management, use frameworks for decisions, and apply digital tools to efficiency.
Consolidation Is a Threat and an Opportunity
The article's claim that 90 percent of distributors would disappear was intentionally provocative, not a precise forecast.
Its strategic argument was that low-efficiency, easily replaced distribution layers would face consolidation.
For capable distributors, that consolidation creates opportunity.
As weaker operators exit, professionally managed companies can acquire brands, customers, talent, and territory.
The durable winner will not be the distributor that temporarily ships the most products. It will be the company that can explain where its growth comes from and prove that its operating system creates an efficiency competitors cannot easily match.