Distributors are having a hard time, which has become a consensus across the industry. When industry sales peak and external growth is constrained, internal cost reduction and efficiency improvement become the focus for distributors: 800,000 distributors/wholesalers correspond to 800,000 warehouses and millions of delivery vehicles. From both a commercial and economic perspective, this is completely unreasonable. In recent years, many local governments have also extended their reach into warehousing and distribution, planning logistics parks and encouraging business-minded distributors or entrepreneurial individuals to undertake unified warehousing and distribution (统仓统配) – intensive, scaled warehousing and distribution services. Many distributors, facing their own operational difficulties and seeing peers in other regions running such businesses with great enthusiasm, are also eager to enter the fray. But how is the actual operation? Only those involved know the true taste. A while ago, a distributor contacted me. After half a year of preparation, he joined forces with five other distributors (representing brands like Mengniu, Nestlé, Want Want, and Uni-President) in February 2019 to start a unified warehousing and distribution business in a county in Shandong. After three months of practice, a host of problems completely dampened their enthusiasm. After listening to this distributor's "complaints," I found a question worth exploring: Is unified warehousing and distribution really a good business? On a similar topic, there was a "heated" discussion at the China FMCG City Distribution Logistics Conference organized by New Distribution last October. Two opposing camps held completely different views: One side said the success rate for distributors transforming into unified warehousing and distribution is less than 1%; the other side argued that if distributors have less than 1% success rate, then others might have even less than 1%. While success and being a good business are not directly equivalent, it's clear that there is much controversy among industry insiders about distributors engaging in unified warehousing and distribution. A Good Business? What constitutes a good business? Although everyone has different criteria and bases, it can generally be summarized in three phrases: First, it can make money; second, it can make money sustainably; third, over time, it allows you to earn more and more, even creating greater value for society. Mr. Rong Jun, Chairman of Jiangsu Huashang City Distribution, told New Distribution, Unified warehousing and distribution is a good business, and it's a winner-take-all business. If distributors want to try it, they should do it sooner rather than later. But we must also recognize: if successful, it's a good business; if failed, they often become martyrs. Why is it a good business? In Rong Jun's understanding, unified warehousing and distribution is just a model, on which distributors can extend and differentiate into multiple business forms. For example, First, as a third-party regional warehousing and distribution platform, you can make money, but with thin margins, earning hard-earned money, often big but not strong. In the perception of distributors joining the warehouse, logistics providers earning one more cent means distributors earning one less cent. Second, as a fourth-party warehousing and distribution operation and management provider. Standardize the operational experience of unified warehousing and distribution into a system to help other distributors manage their warehouses and distribution better. Fourth-party warehousing and distribution services are win-win cooperation, not a zero-sum game. It's not about grabbing profits from distributors, but managing better on the basis of their original warehouses. We split the cost savings from warehousing and distribution with them; such a business can be sustainable. In short, distributors transforming into warehousing and distribution service providers can start with third-party services, polishing their own warehousing and distribution, cultivating talent, and then move to fourth-party warehousing and distribution operations, without touching distributors' warehouses or distribution, but by providing processes, systems, and personnel to truly reduce costs and increase efficiency. Rong Jun admitted that if distributors only provide warehousing and distribution services, it's not a good business and is hard to sustain. Moreover, without sufficient financial and psychological preparation, they can easily fall into the trap of losses. It is a good business, but not for everyone. The path is feasible, but the road is winding. As one of the earliest distributors to transform into unified warehousing and distribution, Mr. Liu Zhongmin, Chairman of Yantai Yishang Logistics, told New Distribution that unified warehousing and distribution is undoubtedly a good business. The more people are pessimistic, the more opportunities exist. But it will be difficult for distributors. Liu Zhongmin made an analogy: You are a first-class cook, and your friends praise you. But that doesn't mean you can run a good restaurant. You can manage your own warehouse well, but that doesn't mean you can manage other distributors' warehouses well. So for distributors, unified warehousing and distribution presents both opportunities and challenges. A Bad Business? "Good business" is from the perspective of warehousing and distribution development, while "bad business" is from the perspective of operational difficulty. Mr. Chen Siting, founder of Wanchaobang, told New Distribution that for distributors, it may not be a good business. Enterprise logistics and logistics enterprises are two different things. Originally, distributors were in trading, and warehousing and distribution served the business department. If business staff said this customer (terminal store) is important and needs delivery immediately, the logistics department would spare no cost. If you set up a separate unified warehousing and distribution company and also spare no cost, the result will be waiting for closure. Mr. Liu Jichen, Chairman of Tai'an Yunbang Warehousing and Logistics, told New Distribution that for distributors, it's not a good business. From a return on investment perspective, investing in other projects might be more reliable. Warehousing and distribution can easily lose money if not done well. If distributors do a local warehousing and distribution platform, the best way out is to hold their ground and wait for a national city distribution platform to acquire them, after all, it's good to have a big tree to lean on. Good business or bad business, opinions vary. But distributors must do thorough strategic thinking before considering entering. Unified Warehousing and Distribution: To Do or Not to Do? Let's return to the underlying logic of unified warehousing and distribution. In fact, most existing distributors are already doing "unified warehousing and distribution" in a sense; each distributor operates multiple brands, from as few as two to as many as dozens. Essentially, this is the same as recruiting distributors into a warehouse, except the number of items increases from a few or dozens to thousands. But why has it become a new business model? In short, behind unified warehousing and distribution is scaled commodity management; quantitative change leads to qualitative change, which in turn leads to changes in the entire operating system. For example, a distributor managing 5 brands with 20 SKUs, using manual handling and manual checking, in a 2,000m² warehouse, workers can memorize where each product is; for delivery, fixed periodic routes are no problem. But once managing 100 or 500 brands, with SKUs in the thousands, manual handling and checking in a 10,000m² warehouse cannot be done simply by workers. Drawing a line or paving a road is simple, but building a multi-story building is difficult. Warehousing and distribution for thousands of products requires management logic. Standard processes, standard systems, standard assessments, etc., which are exactly what distributors lack. Distributors transforming into unified warehousing and distribution should never think it's as simple as turning 10 warehouses into 1, or 50 vehicles into 5. Turning 10 warehouses into 1 means the goods from 10 warehouses are all in one warehouse; will the products get mixed up? How to adjust for peak and off-peak seasons? Turning 50 vehicles into 5 means the goods from 50 vehicles are all piled onto 5 vehicles; how to ensure timely delivery? How to plan efficient routes? Without even considering profitability, distributors first face the question of whether they have management thinking. If management capability lags or there is no management logic, no amount of money or resources can turn unified warehousing and distribution into a good business! Unified warehousing and distribution is ultimately a good business, but it often becomes a bad business due to distributors' "poor management" capabilities! Focusing on FMCG distributor new distribution / brand owner new marketing cases If you want to communicate with the author, you can add WeChat by long-pressing. When adding, please indicate your company, position, and name. Extended reading of the unified warehousing and distribution series: Once the tip is adopted, a reward of 400-2000 yuan will be paid. 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