This year, I visited many distributors in person and found a general pattern: among large and medium-sized trading companies, distributors born in the 1980s and 1990s are significantly more profitable than those born in the 1960s and 1970s. In conversations with them, I also clearly felt the influence of the older generation's "taste marketing" approach. Times have changed, and if distributors keep their business models unchanged, even the best environment won't benefit them. Today, let's discuss this topic.
Common "Taste Marketing" Mindsets
- Grow big first, then strong; sales growth cures all ills Many distributors' first reaction to profit growth is habitual sales growth. This statement itself is not wrong, but times are different, and the difficulty is different.
- In the incremental era, if your regional business grows by 10%, competitors also grow by 10%; everyone is happy;
- In the stock era, if your regional business grows by 10%, competitors will inevitably drop by 10%. Everyone wants to survive, so competition is inevitable, and growth pressure increases sharply;
- In the shrinking era, if your regional business grows by 10%, competitors may drop by 20%. This growth data might be fatal to competitors. It's a survival battle, competition becomes white-hot, and growth pressure peaks. So the underlying logic of "sales growth cures all ills" has changed. Using old methods, even if you fight your way out, you'll be battered. At this point, the "taste marketing" approach doesn't work.
Trading companies operate as trading entities, with profits mainly from price differences In the shrinking era, price wars are inevitable. Even so, many terminal outlets try to bypass distributors and directly "huddle together" to get goods from manufacturers, or enjoy policies from platforms that burn capital, etc. The value of distributors to outlets is greatly diminished. When you're not needed, your profits also decrease. Distributors must transition from a price-difference mindset to a service and empowerment mindset.
Management mechanisms used for over a decade have not been significantly improved A distributor boss was puzzled: "I used this set of methods ten years ago to dominate the region. Why doesn't it work now?" I can only say that times are different, team members are different, channel complexity is different, and consumerism is different. Now, you need to seek profits from management.
The more brands, the more products, the higher the profits I saw a snack food trading company that took on more than a dozen brands, unwilling to let go of any. Many brands are like chicken ribs—tasteless to eat but a pity to discard—yet they hold on tightly, stubbornly believing that multiple brands can diversify operational risks, meet diverse market demands, and strengthen bargaining power with brand owners. These ideas are not fundamentally wrong, but the key is that they don't rationally assess their own operational capabilities, often burdened by greed.
Summary: Sometimes I can understand the difficulties of the older generation of distributors. They started from scratch, many relying on tricycles to pedal out sales, enduring wind and dew, and hardship. But times have changed. While hard work and simplicity are still needed, what's more important is the iteration of business models. Don't be constrained by experience. First, get rid of the "taste" mindset!
Suggestions for Improving Profits
How can distributors improve profits? This is a big topic. Let me elaborate a bit, and we'll discuss it slowly later.
- Category structure + brand structure + product structure
- First, category structure: Some trading companies operate in a single category, such as beverages, doing it well and finely. Some operate in multiple categories, such as beverages + snacks. Both are fine in essence. But categories also have large intervals, such as food and daily necessities. I generally don't recommend distributors to do both food and daily necessities, such as food and beverages plus washing and daily chemicals. Crossing large category intervals is like facing a glass wall—seemingly connected but hard to cross. If you don't invest enough energy, relying solely on a single advantage (capital, channels, team, etc.) to achieve profits is unrealistic.
- Next, brand structure: For trading companies, it's not that the more brands you represent, the better. The best choice is to form an organic structure with different brands. For example, under single-category operation, the brand structure should ideally include first-tier (maintain traffic), second-tier (resist changes + maintain profits), and third-tier (maintain profits) brands. Under multi-category operation, each added category should start with the head brand in that category. Head brands often lead distributors, reducing market exploration time and unnecessary resource investment.
- Finally, product structure: For each mature brand, products always have four stages: introduction, growth, maturity, and decline. Products also have four positions: traffic-generating, profit-generating, disruptive, and strategic. Distributors' profit growth is hidden within these. You need to think: for your market, considering factors like products, channels, team, and management, how should you adjust your product structure to maximize profits?
Channel structure + price structure Different channels have different price systems. Here we need to think: first, what is the coverage rate of all channels? How many outlets are there in circulation channels, modern channels, campus channels, and special channels? How many are cooperated with? Second, what is the market share of covered value outlets? For example, if a campus outlet has a monthly capacity of 100,000 for a certain category, and you sell 30,000, your in-store share is 30%. Finally, what is the fee rate for value outlets and the overall market? For example, if a campus outlet has a monthly capacity of 100,000 for a category, you sell 30,000, with fees of 3,000, the fee rate is 10%. With these three sets of data, we can analyze a brand's profit contribution and methods to improve profits. For instance, if a channel or outlet's fee rate exceeds the standard, focus on improvement; if a channel or outlet's market share is low, also focus on improvement. These are all closely related to profits. Price structure is also an old topic. We should pay attention to the brand positioning of the products we represent. Are its target consumers the general public or a specific group? If it's the general public, then consider whether the price structure is complete. For example, if you do instant noodles, consider whether the retail price bands from 1 yuan/pack, 2 yuan/pack, 2.5 yuan/pack, 3 yuan/pack, 4 yuan/pack, etc., cover the local mainstream price bands. Also analyze your sales share and profit contribution share in different price bands, then adjust your price structure's business direction based on channel structure to ensure profit maximization.
Team execution: improve per-capita efficiency Per-capita efficiency, plainly put, is how much goods can be sold in a day? How much profit can these goods earn? Essentially, distributors need to set scientific process indicators for the sales team, match them with a scientific compensation and performance system, and design career growth plans for salespeople. What are scientific process indicators? Whether route planning and zone building are reasonable, whether the daily number and quality of visited outlets meet standards, whether the number of orders, average SKU count per order, and proportion of high-margin products in orders are reasonable, etc., all need to be designed by distributors according to different business stages. What is a scientific compensation and performance system? Its core is how to use compensation and performance to transform the sales team from an employment relationship to a partnership. Is their income mainly based on sales volume or profit? What is the career growth plan for salespeople? Many distributors overlook this, leading to the departure of excellent old employees. Essentially, this is the biggest loss of profit because personnel costs are the largest cost for distributors, especially during the training and correction assistance stage for new employees. If well-trained people leave, it's the biggest killer of trading company profits. I generally suggest that the career growth of distributor sales teams be divided into four stages: employed salesperson (ordinary worker) — reserve partner (salary structure adjustment) — regional partner (participate in operations and profit sharing) — branch partner (manage regional partners).
Transition from trading mindset to service mindset Trading-minded distributors have existed for over 30 years. Even today, more than 90% of distributors still use this approach, essentially defining themselves as an indispensable part of the supply chain. But times have changed. Distributors' past scarcity as a necessary link in the supply chain is gradually diminishing. This is evidenced by the prevalence of snack stores, discount stores, and chain hypermarkets' direct sourcing. So the path of relying on trading mindset to earn profits will become narrower. So how to adopt a service mindset? First, clarify the service positioning of distributors, which can be roughly divided into three categories: One is serving brand owners, as an extension of the brand owner's sales team, accurately distributing, displaying, and providing after-sales service according to brand owner requirements. If you follow a promising brand owner, you can still survive and profit. The second is serving terminal outlets. There are about 6 million outlets in China, but less than 10% of store owners truly understand retail. They previously ran small stores simply to "make a living," almost not understanding what retail is (layout, product selection, pricing, promotion, etc.). In the past, they could survive on demographic dividends, but now they face large-scale closures. At this time, trading companies that understand retail are needed to empower outlets and guide their business. The third is supply chain distribution services. This requires trading companies to have the ability to optimize and integrate regional logistics systems with one-stop services. The goal is to earn profits from distribution efficiency. Digital warehousing and digital logistics are basic conditions. Currently, this is still difficult for most distributors, as the main business of trading companies is not logistics. One reminder: the higher the scarcity of distributor services, the higher the value of services, and the greater the profit space.
Finally, wield the three axes; cut when necessary Distributors must survive, so they must be profitable. Factors affecting profits must be cut. If you hesitate, you'll suffer! The first axe: cut brands that are not profitable. For distributors, brands are not their own. If they can't generate profit, decisively cut them. The second axe: cut employees who are not profitable. Turnover rate is important, and team stability is also important, but employees who habitually cause losses must be cut. Teams only grow through tempering. The third axe: cut outlets that are not profitable. Some outlets have long payment cycles, many near-expiry goods, and high fees. They must be cut because they are devouring your profits and pushing you step by step into the abyss. The trend is clear—distributor growth no longer relies on hard work alone, but on updated tactics, structural optimization, and customer management. Old experience is still important, but the days of relying on experience alone are over. Times are changing, and distributors' tactics must change accordingly.
In March 2026, New Distribution will hold the 11th China FMCG Conference and the 6th China FMCG Distribution and Retail Conference under the theme "Advance Towards the C-End." If you are also thinking about how to stabilize your business and thicken your profits, feel free to scan the QR code to inquire about the conference details. Come to the venue and discuss with us to clarify and calculate the new round of distributor business! Ticket consultation: Zhuang Jiting