Since the day he learned about the internet, Old Qin never considered it a competitor. Old Qin is a typical businessman: shrewd, capable, and quick-witted. In his early twenties, he left his hometown alone and came to Shandong to start a building materials wholesale business. Starting from a small storefront, working from dawn to dusk, he built his business from scratch. Today, he runs a shop with annual sales exceeding 30 million yuan. Old Qin's role is more like the "profiteer" of the early reform era, buying low and selling high, though he is not an "official profiteer" but a "private profiteer." Because of this, many manufacturers label him as a "secondary distributor." His business has three characteristics: First, he doesn't aim for scale, avoiding bulk stockpiling for lower prices. Instead, he often buys from larger channel players to take advantage of secondary policies. Second, he avoids major industry brands, focusing instead on product categories and sales trends. His network rarely faces issues with manufacturers cracking down on cross-regional sales or price undercutting. Third, he excels at cost control, especially warehouse costs. With a team of only 8-9 people, a storefront under 100 square meters, and a warehouse under 500 square meters, he achieves 30 million yuan in annual sales with a profit margin above 10%. Old Qin told me two stories that made me see him in a new light. One story is about stockpiling. With a 500-square-meter warehouse and 30 million yuan in sales, he turns over his inventory three times every two months on average, which is very high for the building materials industry. How does he do it? He has strict rules for his warehouse: total inventory growth cannot exceed 5% of the year-end inventory from the previous year; if there's a risk of overflow, he would rather sacrifice sales than break the 5% rule. The warehouse can only store mature products, and monthly purchases cannot exceed the previous month's; if they do, he must approve it. For new products, the initial stock cannot exceed 20% of the total order quantity. The remaining 80% is confirmed with long-term downstream outlets before ordering, so many new products are transferred directly to outlets for distribution upon arrival, a practice called "new products don't touch the ground." If a new product doesn't sell well, he can quickly stop and clear inventory. I asked him where the 5% and 20% standards came from. He chuckled and said he made them up, but having standards is better than none. Another story also involves the warehouse. Old Qin invests minimally but gains maximally. For example, when a 1,000-square-meter warehouse in the market became available for rent, he called the market manager and said, "I don't need that much space; 500 square meters is enough. The market is slow now, and it's hard to rent out 1,000 square meters. You might as well split it up." The manager agreed, thinking idle space is wasted. After signing the contract, Old Qin took the manager out for a meal and said, "I'll give you an extra 800 yuan each month, as long as you don't rent the other space to anyone else. If your boss asks, say the market is slow and tenants find the space too big or too small. You've already rented half, so you can report that." With this trick, Old Qin occupies a 1,000-square-meter warehouse for the price of 500 square meters. In the age of the internet, wholesalers are a sensitive topic. With everyone shouting "channel flattening," buying and selling seems outdated. But many secondary distributors who thrive in this uneven market often outsmart the "old masters," which is an undeniable fact. The offline distributor community can be roughly divided into three types: One type is channel distributors focused on network development and brand maintenance. They have solid sales teams and market maintenance capabilities, making them favored by manufacturers. Another type is store retailers focused on terminal sales, relying on location, consumer promotions, and in-store sales skills to add value. The third type is like Old Qin: either vaguely defined in corporate customer management systems or completely outside the system, operating as middlemen who dominate the market through buying and selling. Distributors like Old Qin often use tactics that might be considered "unorthodox." For example, they use small deposits to secure special pricing, take advantage of first-batch deals, and even over-order because they don't stockpile, leading manufacturers to think products are selling fast. If the market reacts poorly, they cancel later orders, leaving many small manufacturers with empty promises after big promotions. Another example is renting a 1,000-square-meter warehouse for the price of 500 square meters by bribing the manager—tactics that aren't exactly above board. But Old Qin never thinks these methods will become obsolete. The internet only changes how information is transmitted, not human nature. As long as the domestic market isn't fully standardized, there will always be room for middlemen like him. First, even if FMCG B2B models are being tested on a large scale, and even if building materials eventually follow suit, local warehousing won't beat him. These platforms use subsidies to attract users, masking many costs. From an offensive standpoint, they'll target major brands to boost credibility. If they go after small brands, they won't be as nimble as he is. Even if platforms become dominant, they can't monopolize all brands because once they do, they'll raise prices, and small brands will be the first to flee. In wholesale, you must focus on small and new brands. As long as "Made in China" doesn't become "Created in China," patents aren't fully protected, and the environment for small enterprises doesn't improve, imitation and copycat products won't disappear. In an unregulated market, small and medium enterprises can only use short-term tactics like price to impact the market, so channel development can't follow the 4P model. The result is broad but shallow coverage, and that's where wholesalers find opportunities. Second, demand for low- and mid-end products will persist, especially in counties, towns, and villages. As long as the state doesn't fundamentally solve urban-rural and wealth disparities, there will always be space for secondary distributors in China's deep market. The slogan "consumption upgrade" is everywhere, but we need to ask: whose consumption is upgrading? Is it the elite white-collar workers in first- and second-tier cities, or the townships below third- and fourth-tier cities? Even today, China's urbanization rate has just passed 50%, and full urbanization will take considerable time. In a market as deep as China's—province, city, county, township, village—the lower you go, the more you need secondary distributors. Small and new enterprises can only reach the prefecture level at best; most expand through provincial operations. Can a provincial distributor cover townships? You know the answer. Third, wholesalers can make money doing the work, but platform companies doing the same work may not. This is the issue of "absentee ownership," or the "magic of the boss mentality." Secondary distributors can operate irregularly, but platform companies can't risk big losses for small gains, nor do they have the ability to exploit loopholes. The flexibility of individual operators is a key feature. The internet may equalize information, but it doesn't change human nature. Secondary distributors can use local rules to cut costs in various ways, while platform companies struggle to break corporate bottom lines and compete on the same footing. Platform companies must pay the cost of promoting market standardization, and they bear that cost themselves. Secondary distributors are the most resilient in chaotic environments. They thrive in irregular markets and excel at urban guerrilla warfare and swamp attrition. So, in my view, wholesalers will remain a resilient layer in our distribution system.
Further Reading:
Why Is It So Hard for Distributors to Transform and Upgrade? Source: YouShang Retail Supply Resource Integration Platform Distributor transformation is a necessary hurdle in the new era. Continuing to operate with old thinking is like a frog in warm water—your business may still grow 10%-35% in the first half, and you might feel good about gaining market share, but such growth can't withstand the macro changes. A new business model is quietly taking root in every city, and once it matures, it will be a devastating blow to traditional distributors. This new model is called the "platform-based distributor!" Many distributors start transformation with confidence, relying on years of experience, thinking they can quickly become platform-based distributors. But they find it harder than expected. Hard doesn't mean impossible; it's a systematic project that takes time—maybe 2 years, 3 years, or longer. Why? Because you need to break through several key points that make terminal stores abandon traditional distributors and follow you, which are also the essence that distinguishes you from traditional distributors. Just as Nokia was abandoned by consumers for Samsung and Apple, both have basic functions like calling and texting, but the latter have key highlights that make consumers follow them: "smarter," with the ability to download apps, send emails, write documents, take courses, navigate, and connect with other devices. This makes consumers feel "better," and they're willing to pay for that "better experience." Similarly, bicycles were disrupted by motorcycles. Both are two-wheeled tools, but motorcycles offer "more savings and speed"—saving time and effort, and faster. Consumers feel "better" with motorcycles, and even though they're more expensive, they're willing to follow. These two cases show that if the basic features of the original are preserved, whoever makes consumers "feel better" can destroy the original. Distributors' basic function is "selling goods," along with delivery, service, and capital, but these all serve selling. If someone can preserve this basic function while making terminal stores "feel better," they'll be willing to pay for that "better experience." The traditional entity is called a "distributor," so what's the new entity that provides a "better experience" for terminal stores? I believe it's the "platform-based distributor." A platform-based distributor has the basic function of selling for manufacturers, but also key highlights that make terminal stores follow: "more savings, faster, more variety, and smarter"—lower purchase prices, more items, faster delivery, and intelligent operations. This new entity that makes terminal stores "feel better" can destroy the traditional one. Whether traditional or new, industrial or internet age, all changes aim to make consumers "feel better than before." Only when consumers feel genuinely more comfortable will it gain market acceptance and drive social progress. Think about everything around you—isn't it the same? Why is it so hard for traditional distributors to upgrade to platform-based distributors? Because to make terminal stores "feel better," you must break through several key links. Only then can you achieve "more savings, faster, more variety, and smarter," and only then will terminal stores abandon tradition. That's what transformation success means. What are these key links? 1Rich product variety A distributor's product range is limited, and limited variety isn't enough to keep terminal stores engaged. There are many ways to enrich variety, but the best is to ally with other distributors. Initially, they may not trust you, so you need to build momentum through other effective means. Once the platform is lively, other distributors, manufacturers, and banks will come to you because no one wants to miss out on new things, but they need to see signs that you can make it work. Then, product variety will naturally enrich. There are many ways to build momentum, the most common being "burning money," but whether that sustains interest is questionable. The best approach is a "combination punch," using different methods at different times, scenarios, and customer moods. 2Timely delivery Delivery must be timely. If you treat the platform merely as an online ordering mall, it won't succeed. The platform is just an entry point from traditional distributor to platform-based distributor. Break the traditional "route" management, where visits and deliveries happen every 3-7 days. Now, you need to deliver whenever orders are placed. Over time, this makes terminal stores "very happy," but if it requires more vehicles and labor, it's unhealthy and a money-burning model. Instead, use vehicle alliances, richer product lines to increase loading rates, and financial services. When terminal stores can order anytime and get delivery anytime, they'll be tempted by this "better experience"! 3Cost reduction Traditional distributors have been in the market for decades, and through continuous management improvements, they've cut costs and optimized processes. They've hit a "ceiling," especially for top local distributors, with little room for further cost reduction. Every traditional distributor feels warehousing and delivery costs rising. By upgrading to a platform-based distributor with centralized warehousing and unified distribution, logistics costs can drop another 30%-50%, something traditional distributors can't achieve. Passing some of these savings to terminal stores can lower their purchase prices, making them "feel better." 4Better service Traditional distributors rely on "people," mainly sales reps. Without them, terminal stores have little other service. Platform-based distributors add an "air service team" through the ordering platform. While maintaining the original "people" service, they add an "air force" service. For example, within a 3-kilometer radius, which products are hot in other stores but slow in yours? Tell the terminal store immediately. When a product promotion is launched, all terminal outlets can see it within a minute. New product information can be shared within a minute. When out-of-stock items arrive, notify terminal stores within a minute. There are many services that sales reps can't provide, but the "air service team" can make possible. Imagine a platform-based distributor keeping the "people" service and adding the "air force" service—terminal stores will definitely "feel better." 5More benefits Terminal stores can order without capital, and distributors sell for cash, benefiting both. Terminal stores can earn beyond product sales, such as community activities and manufacturer ads. They can also learn daily how to run their small shops better. These experiences are things traditional distributors can't offer. Conversely, these are the key points where the new entity makes terminal stores feel better. Platform-based distributors are definitely the direction for traditional distributors to transform, because they make terminal stores feel better. Transformation takes time because any new thing takes time to be adopted. So, if you're not successful yet, it's just a matter of time. "With the right direction, persistence leads to victory." Overcome difficulties in transformation, break through the key points, and success is within reach! Once a platform-based distributor is established, how can traditional distributors survive? Where is their way out? -END- The best FMCG distributor learning platform in China Focusing on providing professional, practical, and actionable tutorials for enterprises and distributors Committed to helping Chinese FMCG distributors grow rapidly The most professional and practical knowledge base in the FMCG industry Reply with the red number below to get the corresponding content Reply with number 1 to view the complete knowledge base | 001 Excellent article selection | 002 Distributor market operations | 003 Terminal visit management | 004 Sales supervisor skills | 005 Sales improvement techniques | 006 Channel expansion | 007 Managing distributors | 008 Distributor development | 009 Distributor internal operations | 010 Team management | 011 Efficient distribution techniques | 012 Sales manager's skills | 013 KA operation strategies | 014 First lesson for new sales | 015 Internet, brands | 016 Distributor B2B transformation | [Long press QR code to follow]