---
title: "Transforming into Local Logistics: Platforms Indeed Can't Replace Distributors, But They Can Swap Them Out!"
description: "In the early days of B2B, it seemed all-powerful, making distributors fear for their survival. Now that B2B has cooled, distributors take comfort in their irreplaceable value, but when local logistics platforms emerge, they resist change. At a recent New Distribution conference, we interviewed dozens of distributors and found that while they tout local relationships and service as core strengths, they are reluctant to outsource warehousing and distribution, fearing loss of control. This article explores why, using the case of Changyi Logistics, which successfully consolidated 38 distributors in Dingzhou within a year, and argues that platforms may not replace distributors but can certainly replace them with new ones."
author: "袁来"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-10-04"
language: "en"
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# Transforming into Local Logistics: Platforms Indeed Can't Replace Distributors, But They Can Swap Them Out!

> In the early days of B2B, it seemed all-powerful, making distributors fear for their survival. Now that B2B has cooled, distributors take comfort in their irreplaceable value, but when local logistics platforms emerge, they resist change. At a recent New Distribution conference, we interviewed dozens of distributors and found that while they tout local relationships and service as core strengths, they are reluctant to outsource warehousing and distribution, fearing loss of control. This article explores why, using the case of Changyi Logistics, which successfully consolidated 38 distributors in Dingzhou within a year, and argues that platforms may not replace distributors but can certainly replace them with new ones.

In the early years when B2B was prevalent, it seemed omnipotent, and distributors were terrified, fearing it would revolutionize their business. In recent years, the B2B trend has waned, and distributors have begun to gloat, partly because current B2B platforms seem to struggle, and partly because the industry constantly promotes that distributors have irreplaceable value in sales promotion, terminal relationships, and low costs—things B2B cannot replicate.

Recently, at the FMCG Digital Innovation Conference hosted by New Distribution, we interviewed dozens of distributors. When asked about their core advantages against giants like JD.com and Alibaba invading locally, the unanimous answer was: **local relationships and sales service**. Indeed, that is true.

But we can't help but ask: when local logistics companies emerge, hoping distributors will outsource warehousing to them and focus on core strengths, why do distributors say "no"? If they truly believe in their core value, why are they unwilling to move into warehouses?

Perhaps it's because they are too "familiar" with each other; the logistics companies know exactly what the distributors are capable of locally. To put it bluntly, their so-called core advantages are only for distant national B2B platforms. Facing local platforms, distributors are still wary, fearing their business might be hijacked. This further shows that many distributors only know how to "pick the fruit" but not "plant the tree"; their core advantages are just a paper tiger.

When facing local warehousing and distribution platforms, distributors lack the confidence to claim service as their core competency, fearing that once they strip away warehousing and distribution, their business will be lost.

To summarize why distributors are reluctant to enter warehouses: First, facing local platforms, service capability cannot become a core competitive advantage; without warehousing and distribution, they lose a leg. Second, they have a strong smallholder mentality, and traditional business concepts are hard to change.

We won't judge what the future B2B landscape will be—whether it's national plus regional or regional plus national—but one thing is certain: **warehousing and distribution will be centralized and scaled**.

If traditional distributors don't change, transform, or enhance their promotion (service) capabilities, they will be replaced even if warehousing costs are low. If they don't change, city distribution platforms will proactively innovate. For example, they might support a group of people to become distributors, using higher warehousing efficiency to pull brand owners to "appoint new masters."

Recently, New Distribution interviewed Ma Haichao, general manager of Changyi Logistics, a local city distribution platform in Dingzhou, Hebei. He completed the unified warehousing and distribution for 38 distributors in just one year. How did he do it? And regarding conservative distributors who are hard to change and refuse to enter warehouses, how does he plan to "appoint new masters" in the future?

**01 A Trade Show Brought 32 Distributors into the Warehouse**

Changyi Logistics was established on September 1, 2017, as a new business segment of a local group company. Ma Haichao told New Distribution that the group originally had an FMCG trading segment, mainly acting as an agent for brands like Shuanghui, Fenjiu, Shibajiu Fang, Laobaigan, and many others. In recent years, due to limited sales growth, rising labor costs, and high internal energy consumption, the group planned Changyi Logistics initially to reduce costs, increase efficiency, and boost sales for its own trading company.

But after implementation, they found that not only the group's trading business had such problems, but other distributors did too. After comprehensive consideration, Ma Haichao decided to spin off the trading company, establish a third-party logistics company, and partner with Zhongke Shangruan for system support.

After its establishment, Changyi Logistics faced the challenge of attracting distributors. Before May this year, only six distributors had entered the warehouse. To speed up recruitment, Changyi Logistics organized the **First FMCG Trade Show in Dingzhou** on May 17. The trade show included: 1. Launching the "91 Changyi Ordering APP" to provide an online ordering platform for small shops; 2. Partnering with the local ICBC to provide cloud POS hardware and software for small shops, along with financial loans with credit limits ranging from 0 to 50,000 yuan; 3. Providing space for distributors to set up booths (for ordering and promotions), allowing attending small shops to place orders on-site, similar to an ordering fair; 4. Inviting industry guests to speak on trends in FMCG distribution.

Ma Haichao told New Distribution that Changyi invited 600 local small shops (one per residential community, one per village, and one or two per township, in principle the best shops). Through such a "conference," they promoted the platform, encouraging distributors to enter warehouses and shops to install the app. On the day of the event, over a dozen distributors expressed willingness to try cooperation. In less than five months, as of now, **Changyi Logistics has 38 distributors in its warehouse, with daily in-warehouse turnover of 220,000 yuan per day. It covers nearly 3,000 outlets, has 22 delivery vehicles, and over 4,000 SKUs in the warehouse.**

**02 Abolishing Complex Warehousing and Distribution Settlement, Charging Based on Sales Commission**

Persuading distributors to enter the warehouse requires more than words; you need to prove it with action. Changyi negotiated with distributors: **list their products on the platform, and when orders come in, distributors deliver goods to Changyi's warehouse, and Changyi handles delivery.**

Ma Haichao told New Distribution that on the second day after the 91 Changyi Ordering APP was launched, small shops placed orders, and more followed. Initially, distributors delivered orders daily. After a while, they found it troublesome and simply placed "safety stock" with Changyi to cover a week's delivery volume. Many distributors find it hard to accept change; they've been traditional for decades, and stripping away warehousing and distribution at once is difficult. We understand them and gradually get them into the warehouse this way.

In this context, Changyi Logistics' warehousing and distribution fee structure differs from other platforms: it's not per piece or per weight, but based on sales commission (with tiers based on category, case vs. broken case, and product value).

Ma Haichao told New Distribution that they want to consider things from the distributor's perspective: how much they sell on the platform, the gross margin per item, and how much goes to Changyi Logistics, so distributors know exactly where they stand. They hope to help distributors grow incremental sales. Currently, distributors are indeed struggling. In Dingzhou, a distributor with a dozen salespeople is already quite good. There are about 3,000 small shops in Dingzhou. For a first-tier brand like Shuanghui, which does deep distribution, they can only cover 1,200 shops, leaving 1,800 uncovered.

Ma Haichao gave an example: last September, a small food distributor had monthly sales of about 120,000 yuan. After handing over warehousing and distribution to them, by year-end it reached 300,000 yuan per month, and by May this year, 400,000 yuan per month—nearly a fourfold increase in less than a year.

**03 Establishing a Platform Ground Promotion Team and Opening Self-operated Convenience Stores**

In the past, when distributors delivered goods to small shops, they also had to shelve and tidy products. For this, Changyi Logistics set up a merchandising department, initially following drivers to complete product delivery. In May 2018, Ma Haichao handed over product delivery entirely to drivers, including returns and exchanges, and converted the merchandising department into a market promotion department with 12 people, focusing on platform promotion and maintenance, teaching small shops to use the APP for ordering.

Ma Haichao told New Distribution that in the future, Changyi Logistics will invite regional managers of local brands to start businesses on the platform as distributor agents, including encouraging existing distributors to take on more products. The platform's promoters, besides daily store maintenance, will also handle some product promotion to support these "new distributors" in selling goods. This will also be a revenue segment for Changyi Logistics in the future.

Additionally, Changyi Logistics opened a 300-square-meter supermarket last month. Ma Haichao told New Distribution that they will operate several supermarkets themselves and later open franchising to the public. In the future, Changyi Logistics will treat warehousing and distribution as just infrastructure and extend to C-end B2C business, such as community group buying.

**Final Thoughts**

1. When facing peers who refuse to enter warehouses, the two most common solutions are: **either "handle" the distributors or "handle" the small shops.** Handling distributors might involve forming a local logistics company with them, aggregating traffic, and then gradually recruiting more distributors with relatively low cost advantages and warehousing efficiency. Handling small shops, like Changyi Logistics, involves establishing a promotion department, investing in personnel and trade shows, building traffic, and focusing on helping distributors grow incremental sales.

2. Based on New Distribution's observations of warehousing and distribution platforms, comparing the two approaches, **handling small shops is more reliable than handling distributors.** Handling distributors keeps the core business around warehousing and distribution, requiring fine-tuned operations. But handling small shops allows the platform to build stickiness with them, **upward** to support in-warehouse distributors or invite individual entrepreneurs to restructure regional distribution agents, and **downward** to extend to franchise small shops and B2C e-commerce.

If a distributor transforms into a warehousing and distribution platform without building its own ground service to connect with small shops, and only provides warehousing and distribution for distributors, it will have little room to grow; full warehouses mean bottlenecks. Therefore, New Distribution suggests that whether you run a self-operated B2B platform or a local warehousing and distribution platform, you must establish an independent promotion team or merchandiser under the platform system (whatever you call it, the core purpose is to connect with small shops).

3. New Distribution has previously expressed that warehousing and distribution platforms can only gain limited profits from distributors. Only by breaking the existing regional distribution hierarchy is there hope. Currently, some brand owners are piloting in regions, contacting local logistics companies to change product distribution levels. But based on New Distribution's observations, brand owners are progressing relatively slowly and are still in the exploratory stage. For platforms, waiting for brand owners to proactively change channel levels is a long wait. It's better for platforms to proactively innovate, support in-warehouse distributors, and contact more brands. Platforms can consider investing in the form of capital and warehousing support (establishing a new trading company), not touching operations, and participating in the flow of goods to enjoy dividends, expanding revenue possibilities.

**Therefore, traditional distributors should understand that platforms indeed cannot replace distributors, but platforms can "swap" distributors.**

Additionally, the "FMCG Trade Show" held by Changyi Logistics is worth learning from for other platforms. Gathering both ends, inviting successful external case companies to share, "brainwashing" distributors to recognize trends, and fully communicating with small shops through meetings saves the cost of one-on-one communication, establishes market influence, and promotes the platform—killing multiple birds with one stone.


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Contact: zhaobo258@gmail.com · +86 158 5481 7671