Click to read the original article for details Over the past year, the entire retail industry has undergone tremendous changes: the rise and fall of community group buying, the emergence of O2O new retail, the explosion of live-streaming e-commerce, and so on. It can be observed that in the past year of change, the biggest shifts have come from online channels, with online market share continuously expanding and offline living space being further squeezed. Based on this, New Distribution has visited a large number of distributors over the past year, covering different regions, categories, and scales, to take an in-depth look at how offline distributors are actually "surviving." We have seen that many top-tier distributors have not only been unaffected but have even seen growth, while others have been hit hard by online competition, with business declining significantly. In this process, we must explore a core question: What exactly are distributors earning? Undoubtedly, the answer should be singular: the price difference. Essentially, it is the value added in the process of satisfying demand from supply side to demand side. Every distributor has the ability to earn a price difference, but the key lies in who can earn more. Based on extensive visits over the past year, New Distribution has divided this capability into five levels for your reference. Transportation "Transport workers" have long been a true portrayal of distributors. Simply put, they are the manufacturer's delivery agents, requiring only delivery capability, and the money they earn is logistics fees. Delivery agents emerged under the background of manufacturers' intensive distribution, with typical examples being Coca-Cola's 101 model and Master Kong's channel refinement model. To directly control terminals and achieve intensive distribution, manufacturers separate "people" and "goods," with the manufacturer's sales personnel executing all terminal activities such as selling, visiting, displaying, and maintaining, while distributors only handle warehousing and delivery. Taking Coca-Cola as an example, in densely populated terminal areas, a county often has several distributors, and even a town may have one 101 customer. Each customer operates in a very small fixed area, with basically no task requirements, and only needs to deliver goods promptly on schedule. Under this model, most tasks are handled by the manufacturer, and it is the manufacturer that builds relationships with terminals, not the distributor. This means all terminal resources are in the hands of the manufacturer. Distributors under this model have no core capabilities; they do not operate, market, or manage the market. They earn purely "handling" money—hard-earned money. Cost-Saving The "cost-saving" mentioned here differs from the traditional sense; it is a phenomenon of extreme "saving money" by distributors under specific historical circumstances. In the early days, most distributors started businesses out of necessity, aiming to support their families. This stage had a common feature: most were self-made, unafraid of hardship, and many even borrowed money to start. It was under this historical background that many distributors became "family-style" enterprises, with couples or relatives working from dawn to dusk, gradually growing through the accumulation of boxes of goods. But the problem lies here: many distributors have continued this "hardworking" spirit. For example, instead of hiring people, they do the selling and delivery themselves to save on labor costs; instead of working 8 hours a day, they work 16; instead of using a box truck for delivery, they use an electric tricycle. On the surface, they save money and earn money, but in essence, they rely on their own time, physical strength, and a great deal of energy consumption, reducing costs at any cost, earning a bit of "low-configuration" money. Growth The growth mentioned here is not macro-market growth, but from the distributor's perspective, distributors seize opportunities from brand growth and category growth to rapidly expand their business and make money. When visiting the Jiangsu regional market, I saw many such phenomena: small distributors who picked up a rapidly growing brand found that, without much extra effort, their business suddenly improved, just like before. Essentially, this is brand growth, and the distributor seized the opportunity of that brand's growth. Another aspect is partnering with a reliable brand where the manufacturer not only lets you sell but also teaches you how to sell, guides distributors in precise market operations, and then invests in key markets. If distributors follow the manufacturer's path, business naturally grows. Early distributors of Yili and Mengniu were like this; basically, as long as you followed the manufacturer's requirements, business would not be too bad. This is brand growth. There is also the opportunity of category growth, which is more common in snacks and seasonings. Many distributors in snacks and seasonings have reached hundreds of millions in scale without handling first-tier brands. The main reason is that the category's market growth is relatively fast, brand concentration is low, and consumers have not formed fixed perceptions. Public data shows that in 2020, the CR5 concentration in the seasoning industry was 20%, while in the bottled water industry, CR6 exceeded 80%. The vast room for growth in the category gives distributors opportunities to make money and develop. Management Management is the enhancement of organizational capability, improving overall operational efficiency through a complete organizational structure, staffing, and tool application. The first is organizational management, where the boss transforms from a time-selling laborer to a capitalist earning surplus value. For example, in the past, it was a "motley crew" of two or three people fighting a chaotic battle; now, with 10 people, a well-defined organizational structure, and institutional constraints, you can charge forward with a model and method, and naturally the scale grows. The second is operational management: previously, it was "shouting" and extensive management; now it is refined and digital management. A simple example: previously, salespeople received a few percent to a few thousandths of sales commission and promoted extensively; now, with refined management, products are divided into new products, old products, high-margin products, bestsellers, traffic drivers, etc., with different commissions for different products. Stores are classified into key stores and ordinary stores, with key stores receiving more investment. With good management, output inevitably increases, and naturally you can make money. Value-Added Services In the past, everyone emphasized that distributors should provide services, but not all services are value-added. True value-added services are a series of scarce services centered on consumer purchase and aimed at driving sales. For example, terminal interception: in the same seasoning category, if other distributors do not have in-store promoters but I do, and my promoters have professional knowledge, then when consumers are choosing, I have the ability to intercept terminal traffic. This capability can directly lead to sales growth. A typical case is Shanghai Rongjin Industrial. Another example is display: no distributor cannot do display, but the market is so homogenized that in any store, you will find at least two bottled water cut-case displays at the checkout, often identical in style. Is there differentiation? Can it make consumers' eyes light up? Not long ago, I visited a snack distributor in Wuhan who did not handle first-tier brands. How did he do display? Combining the city's theme, in March and April when cherry blossoms are in full bloom, he created scenes and product displays around the cherry blossom atmosphere, and sales skyrocketed, even attracting imitation by major supermarkets. In retrospect, what are value-added services? They are scarce services that can directly bring sales and revenue, and that others have not done or thought of. The above five levels can be achieved by distributors through learning. So, the final question to explore is: What is the irreplaceable core competitiveness of distributors? We asked this question to a large number of distributors, and the answers were not uniform. Every distributor whose business has reached a certain scale has its own irreplaceable core competitiveness. For example, the boss's learning ability. Some distributors are indeed strong learners; they quickly grasp every new model that rises and even reap some dividends. A typical example is a beverage distributor in Jiangsu who made a fortune during both the B2B and community group buying trends. Another example is operational capability: some top distributors have strong operational capabilities in a certain region and category, able to independently operate brands and even sell unknown brands well. Shanghai Rongjin Industrial is a typical case, with absolute operational capability in the modern trade channel in East China, able to quickly build up a product in a short time. Other examples include organizational capability, logistics capability, service capability, and resource integration capability, which I will not list one by one here. This irreplaceable core competitiveness cannot be replicated; it is the embodiment of a company's most fundamental value. The key is whether your enterprise possesses one of these core competencies, giving you irreplaceable value based on that capability. Every distributor should ask themselves: where is your irreplaceable core competitiveness? PS: From August 24-26, 2021, the 2021 (4th) China FMCG Conference hosted by New Distribution will open in Shanghai. Focusing on industry trends + practical cases + growth connections, 3,000 FMCG practitioners will gather at the event. 10 themed forums cover new retail O2O, community group buying, short-video live e-commerce, distributor transformation, rise of new consumer brands, new wine and beverage interpretation, distributor B2B supply chain, omni-channel marketing, B2B2C new technology applications, etc., with operators from various segments bringing the latest case studies. Confirmed heavyweight guests so far include: 1. Tao Shiquan, founder of Jiangxiaobai; 2. Yao Xuhong, General Manager of Meiyijia Holdings Co., Ltd.; 3. Lu Xiuqiong, Global Expert Partner at Bain & Company and former Vice President of Marketing for Coca-Cola China; 4. Chen Xiaodong, Senior Vice President of Nestlé Greater China; 5. Zhang Fujun, President of Lee Kum Kee Sauce Group China; 6. Bi Chaojiao, General Manager of China Resources Snow Breweries (China) Marketing Center; 7. Yang Hongbin, Vice President of Junlebao Dairy Group; 8. Yang Shun, COO of Lipton Greater China; 9. Zhang Yipeng, General Manager of Kuaishou E-commerce SKA Brand Operations Center; 10. Li De, E-commerce General Manager of Gold Hong Ye Paper Group... A grand event for FMCG professionals—you must be there! Are you "watching" me?