---
title: "Under the Supermarket 'Bare Price Direct Sourcing' Storm, What Should the Cut-Off Distributors Do?"
description: "In March, Yonghui Supermarket's acting CEO Ye Guofu announced a 'bare price direct sourcing' strategy, eliminating intermediaries, which has shocked FMCG distributors. This move, along with the rise of private labels, is forcing traditional distributors to transform or face elimination."
author: "关关"
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published: "2025-04-13"
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# Under the Supermarket 'Bare Price Direct Sourcing' Storm, What Should the Cut-Off Distributors Do?

> In March, Yonghui Supermarket's acting CEO Ye Guofu announced a 'bare price direct sourcing' strategy, eliminating intermediaries, which has shocked FMCG distributors. This move, along with the rise of private labels, is forcing traditional distributors to transform or face elimination.

**Source**丨Frozen Food Headlines **ID**丨dptoutiao

"Promote bare price direct sourcing, eliminate all middlemen!"

In March this year, Ye Guofu, acting CEO of Yonghui Supermarket, blatantly shouted this slogan, which was like a thunderclap, shocking Chinese FMCG distributors.

What is bare price direct sourcing?

It means Yonghui requires brand owners (i.e., manufacturers) to supply directly at a bare price, with the purchase price consistent with the brand distributor's bottom price, and pricing power controlled by Yonghui. It is reported that this move reduced Yonghui's procurement costs by 15%.

Breaking industry rules and directly seeking "bare sourcing" from manufacturers, Yonghui also showed sufficient sincerity.

Previously, for suppliers' products to enter supermarkets, they had to pay deposits, entry fees, and barcode fees; to get a good position, they had to pay display fees; to promote, they paid promotion fees; if they sold enough, they even had to hire a promoter to manage the shelves at their own expense.

After bare sourcing, Yonghui eliminated all these fees.

A brand owner revealed that Yonghui's bare sourcing model has begun large-scale implementation. Yonghui's team is negotiating direct operation cooperation with major brand manufacturers. Brands unwilling to go direct will stop stocking, and after two weeks, their codes will be locked and sales stopped.

"Currently, it mainly targets non-food product brand owners and suppliers. Some washing and personal care brands that haven't reached agreements have already received relevant notices."

A supplier revealed that Yonghui previously cooperated with regional general agents. If it directly sources from manufacturers for all categories, it will inevitably affect a large number of distributors' businesses.

Looking only at frozen food, according to incomplete statistics from Toutiao Jun, currently a Yonghui supermarket in Zhengzhou has more than 40 frozen food brands, most of which are national or regional well-known brands:

Including Sanquan, Synear, Anjoy, Wan Chai Ferry, CP Group, Guangzhou Restaurant, Qianweiyangchu, Wufangzhai, Yili, Sunner, Bibigo, Wu Dashao, Tyson, Da Zhuang Yuan, Hai Tian Xia, Chao Ting, Kerchin, Li Kou Fu, Royal Little Tiger, Zai Qi, Chao Xiang Cun, Zun Le, Zhen Xiang, Dacheng, Pulmuone, etc.

Those who originally obtained general agency rights for these big brands were the best among local distributors, but now they are the first to be "cut off."

In fact, not only Yonghui, but Jiajiayue has also been exposed to be cutting middlemen. Many local small and medium supermarkets have been doing cash direct sourcing for years.

"Three years ago, we used cash settlement to push prices to the lowest, passing benefits to consumers. Our profit is not high, but we can persist," introduced the owner of a Tianjin-based life chain supermarket.

Retailers skipping distributors to directly operate with manufacturers is gradually becoming an unstoppable wave of supply chain reform.

**Supermarkets' Push for Private Labels: Another Blow to Distributors**

Yonghui Supermarket's recently announced private label strategy also worries distributors.

In 2025, Yonghui Supermarket plans to launch 60 new products and incubate at least 10 super strategic big items exceeding 100 million yuan. Through supply chain ecosystem construction, it is expected to drive private labels to account for 40% of Yonghui's overall sales in 3-5 years.

What worries distributors is that not only Yonghui, but almost all large supermarkets are pushing private labels, such as Hema, Pangdonglai, Aldi, RT-Mart, and Lianhua Supermarket.

The "2023 China Supermarket Private Label Case Report" released by the China Chain Store & Franchise Association shows that China's supermarket private labels started late but are developing rapidly. By 2022, private label sales of China's top 100 supermarket enterprises accounted for 5%. However, compared with nearly 30% in mature European and American markets, there is still considerable room for growth in China's chain supermarket private label sales.

Supermarket private label products are selected by supermarkets after analysis, choosing popular categories, and then finding factories for production. While basically ensuring the same quality, prices can be greatly reduced. Some private label products can even be about 50% lower than similar branded products because there is no intermediate circulation link; they are directly supplied by factories.

Obviously, the increasing number of private label products is also invisibly weakening distributors' position in the industry chain.

**Traditional Supermarkets Enter "Darkest Moment": No Reform, "Certain Death"**

Some say the rise of traditional supermarkets like Yonghui and RT-Mart relied on distributors' capital advances. Before stocking, fees were paid; after stocking, payment terms were extended. Traditional supermarket operations used a lot of distributors' real money.

However, "When gods fight, mortals suffer!" Traditional supermarkets are fighting e-commerce and discount supermarkets, but the most injured are distributors. Is this not like "burning the bridge after crossing the river" or being ungrateful?

Actually, there are more complex reasons behind this. Mainly, China's traditional supermarket industry is also in a cold winter, deeply mired in losses.

According to statistics, Yonghui Supermarket has lost a total of 9.4 billion yuan in the past four years;

RT-Mart's parent company, Gaoxin Retail, lost 1.6 billion yuan in fiscal year 2024, and was "sold" by Alibaba earlier this year;

Walmart China has closed more than 100 stores in the past four years;

Carrefour China lost a cumulative 7.4 billion yuan from 2021 to 2023...

Supermarkets themselves are like "a clay Bodhisattva crossing a river—unable to save themselves," let alone others. Facing brutal market competition, it is a helpless move to cut off the supplier brothers who once fought side by side.

In stark contrast, the "quality snack" players Ye Guofu mentioned—Pangdonglai, Sam's Club, Costco—are still developing rapidly.

In 2024, Pangdonglai achieved revenue of 16.9 billion yuan, a 58% increase, and profit of over 800 million yuan, a 470% increase. During this period, Pangdonglai also spent 83 million yuan in 2023-2024 to help Yonghui Supermarket, Hunan Bubugao, and Jiangxi Jiabaile, resulting in a loss of 380 million yuan in gross profit.

"We must learn from the winners," Ye Guofu bluntly said: "No reform, certain death."

It is understandable that supermarkets adopt bare sourcing from manufacturers to survive. But what about the cut-off distributors? How should they survive?

**What Should Cut-Off Distributors Do?**

To this day, we can still assert: no successful FMCG brand can exist independently of distributors.

Under the supermarket bare sourcing model, distributors have been excluded from the cooperative role. However, in terms of service, distributors often have cost and efficiency advantages over brand owners due to localization.

Facing the booming bare sourcing trend, what will be the fate of distributors?

1. Focus on segmented scenarios and transform into scenario-based supply chain service providers.

A frozen food distributor in Henan has been deeply cultivating the ability to organize goods in the past few years and is striving to transform into a supply chain distributor for supermarket cooked food scenarios. She knows the trend of supermarket reform is unstoppable. Due to advantages in goods and costs, she has not been eliminated but now holds more than 50% share of the frozen food category in that system.

A snack food distributor in Hubei helps supermarkets introduce internet-famous products. With insufficient gross margin and direct contracts with manufacturers, they only provide services and earn service fees, and also connect manufacturers and retailers to cooperate on innovative products. Now their business is also good.

2. With narrowing profits in supermarket channels, multi-channel distributors can still hold on.

A leading food distributor in Chongqing, representing many well-known domestic and foreign brands, said that negotiations on bare sourcing with supermarkets and related brands are ongoing. "If the supermarket can adhere to the three conditions it claims—canceling fees, no returns or exchanges, and ultra-short payment terms—this channel can still hold on even with only 5 points of profit. A distributor's business in a city is not limited to the supermarket channel."

A senior executive of a beverage brand also revealed that the procurement contract for supermarket bare sourcing is signed between the brand owner and the supermarket. Distributors participate as service providers with about 8% profit margin. Although not much, it is not a loss.

3. Many distributors forced to leave may eventually be eliminated.

In the wave of supermarket reform, distributors who can stay at the table still have room to maneuver.

But many distributors who have been delisted from supermarkets and forced to leave are in a very bad situation.

Cutting SKUs is one of the main means of current supermarket reform. Many local supermarkets now only want first-tier famous products, internet-famous products, and imported products. Poor sellers, especially second- and third-tier brands, are largely delisted. Some supermarkets directly replace 80% of their items; some previously had about 25,000 barcodes, now only 9,000.

By streamlining SKUs, some supermarkets have even cut at least half of their distributors, who directly lose a revenue channel.

In the foreseeable future, most distributors who lose supermarket business will find survival even harder in an already difficult market, and may inevitably face elimination.

Undoubtedly, this wave of "de-intermediation" reform initiated by Yonghui and others will accelerate the clearing of distributors and the trend toward larger distributors.

In 2025, traditional distributors must undergo self-revolution!


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