Over the past year, the author visited more than 20 cities and had in-depth exchanges with dozens of distributors. These voices from the market frontline all indicate that the traditional distribution system is undergoing the pain of value reconstruction. Industry reshuffling and accelerated changes. The uncertainty of the market economy environment has intensified, and the impact of consumption downgrading, channel fragmentation, and emerging retail models has brought unprecedented challenges to distributors, the core link in the traditional supply chain. Declining product gross margins, falling per-store sales, rising operating costs, inventory backlogs, the impact of emerging channels, the bare procurement model of hypermarkets compressing market space, and increasingly fierce price wars... Multiple pressures are testing traditional distributors. But behind these challenges, we also see some positive trends and development directions. ****Chain Expansion, Supermarket Adjustments, Low-Price Impact Channel Challenges Distributors Must Face 1. The Impact of Snack Store Expansion On a main street in a county town in Hunan, two snack stores are 200 meters apart, their yellow signs glaring in the night. Opposite, the owner of a small supermarket, Sister Wang, is doing her accounts: "They sell lower than my purchase price. How can I do business?" Behind this "dimensional reduction strike" is the further increase in the penetration rate of snack stores and discount stores. Data shows that in 2024, the snack store market is expected to reach 104 billion yuan, a year-on-year increase of 28.4%. Among them, the "Mingming Henmang Group" has exceeded 15,000 stores, and the number of bulk snack stores under Wanchen Group exceeded 7,000 as of July 2024, with plans to achieve a 10,000-store target by 2025. Moreover, leading brands are further expanding market share through mergers and acquisitions. They expand rapidly through franchising, sinking from first-tier cities to third- and fourth-tier cities and even township markets. With scale procurement and supply chain optimization, they can attract consumers with lower prices, directly seizing market share from traditional distributors. A snack food distributor admitted: "Snack stores have many choices and fast new product updates, but we are limited by inventory and channels, making it hard to keep up. Customer loss at nearby outlets is severe, and many see sales drop by half." 2. Hypermarket Adjustments: Bare Procurement Compresses Middleman Space 2024 was a year of change for the retail industry. After experiencing the darkest moment, many supermarkets no longer sat idly by and embarked on the path of adjustment. Among them, "bare procurement" became a high-frequency term—supermarkets directly order from manufacturers, without paying display fees, entry fees, and other costs. The traditional distributor's "middleman" role is weakened, and some distributors are even completely bypassed. "In the 2024 adjustment, a certain supermarket chain reduced snack SKUs from 5,000 to 3,000, focusing on internet-famous snacks and private labels. The niche brands and regional products I represented didn't sell well and were directly delisted," said one distributor. Another distributor also told the author that a large chain supermarket in his region reduced the procurement cost of a certain beverage by 15% through bare procurement, but he could not match that price and ultimately lost the supply qualification. Bare procurement makes the supply chain of hypermarkets more flat, and the logistics, warehousing, and other functions of traditional distributors are gradually replaced by hypermarkets or third-party logistics. 3. Terminal Sales Remain Sluggish "Now customers are tight on money. They can't save on daily necessities, so they cut back on snacks and drinks. Store orders have nearly halved compared to a few years ago." This is the feedback the author heard when following several snack food salespeople in the market. On the one hand, it is affected by consumption downgrading and channel fragmentation; on the other hand, in the downward economic cycle, consumer confidence declines, and people save more money, unwilling to spend recklessly. Per-store sales generally decline, even triggering a wave of store closures. According to incomplete statistics, in 2024, at least nearly 800 supermarkets closed in China, including well-known brands such as Lotus, Yonghui Superstores, RT-Mart, and Maxvalu. The closure rate of traditional mom-and-pop stores is also 30% higher than in previous years. Many small stores closed due to losses. A snack food distributor said helplessly: "Stores that can't pay rent are everywhere. Some owners disappear before settling accounts." 4. Good Relationships Can't Beat Low Prices "No matter how good the relationship, it can't beat a box of instant noodles being 10 yuan cheaper. That's how realistic this year is," sighed salesperson Sister Liu when visiting the market. Recently, she found that some old customers with good relationships ordered less. Upon asking, she learned that the small store owner had joined a supply source exchange group on social platforms, where various discounted supplies were shared daily. A certain bucket instant noodle cost 60 yuan from the distributor, but only 50.9 yuan through the group link. The FMCG industry has entered a stage of stock competition, with price wars between brands and channels intensifying. Emerging channels such as e-commerce platforms and snack stores can offer lower prices through scale procurement and supply chain optimization, severely impacting the traditional distributor's sales model based on relationship maintenance.
Gross Margin, Cost, Inventory
The "Three Mountains" for Distributors 1. Declining Product Gross Margins According to the China FMCG Distributor Survey Report released by New Distribution in August 2024, among 302 surveyed distributors, 37.1% achieved revenue growth, but as many as 63.2% experienced profit decline. This indicates that increasing revenue without increasing profit has become a common industry phenomenon. The intensity of market competition is beyond imagination. Several distributors reported that several peers in the region switched industries this year. They see daily sales actually increasing, but when settling accounts, they find profits significantly shrunk. It's not exactly selling at a loss for publicity, but indeed earning less and less. "The distributor industry is like a 'besieged city': outsiders think you're doing well selling so much goods in a year and want to get a piece of the pie; but those inside are thinking about how to transfer the business out." This is the sentiment of a third-tier dairy and beverage distributor, shared by many peers. Especially for those representing first-tier brands, profit margins are further compressed. A dairy and beverage distributor revealed that a well-known dairy company has changed its regional agent almost every year in the past five years. "The reason is simple—profits are too low, and no one is willing to take over." 2. Rising Operating Costs Cost reduction and efficiency improvement have always been a core topic for distributors, but many distributors said that in 2024, costs not only didn't decrease but further increased. Behind the phenomenon of increasing revenue without increasing profit is not only the decline in product gross margins but also the rising operating costs, which continue to erode profits. The intense market competition forces distributors to significantly increase marketing investment. For example, a daily chemical distributor, due to declining sales in supermarkets, had to add sales promoters in each store. Although sales improved in the short term, the new labor costs have not yet been fully covered. Another distributor complained: "When renewing the warehouse lease this year, the rent actually increased by 10%, further eroding profit margins." To increase sales, some distributors tried to reform salary and performance systems to motivate employees to secure orders. However, with overall market demand sluggish, salespeople's enthusiasm was quickly worn down by low demand from terminal customers, and work efficiency actually declined. "Old employees lack passion, new employees have high training costs and high turnover, and team management is really hard to know where to start," said a distributor helplessly. 3. Inventory Backlogs and Clearance at a Loss In 2024, inventory backlog remained one of the main challenges for distributors. As per-store sales decline and sell-through slows, inventory pressure gradually emerges, and the proportion of returns and exchanges increases. Many distributors have to choose to clear inventory at a loss to alleviate cash flow tension. "During the Mid-Autumn Festival, because of the large inventory backlog, I had to clear nearly one million yuan worth of goods at a loss," a distributor complained to the author. Another distributor mentioned that some brands, to deal with inventory crises, sent a large amount of short-dated goods, which expired before they could be sold. "After finally getting rid of the inventory, I found the goods were hard to sell." To reduce losses, some distributors even set up self-pickup points in warehouses, publishing low-price promotions through social groups to attract customers to pick up goods directly from the warehouse. "This method is not efficient, but it's better than letting them expire in the warehouse," he said. There Is No Comfort Zone in Business, Only Continuous Evolution In 2024, the author visited dozens of regional distributors. When asked about their next steps, distributor bosses were generally "conservative." A daily chemical distributor admitted: "I originally planned to expand to neighboring provincial markets, but seeing the increased uncertainty in the market environment and declining consumer purchasing power, I decided to stabilize the local market first." Another snack food distributor, due to excessive hoarding of an internet-famous snack, ended up with inventory backlog and had to sell at low prices, suffering heavy losses. He decisively reduced the number of represented brands from 30 to 20, cutting 10 long-tail brands to concentrate resources on maintaining core brand sales channels. However, the author observed that while many distributors chose to shrink their fronts, some distributors bucked the trend. 1. Differentiate by Optimizing Product Structure For example, during a recent visit to Yunnan, a wine and beverage distributor, in a region with relatively weak consumption power, grew a single product from 1 million to 40 million yuan in just four years. Behind this is her deep optimization of product structure and precise layout of the high-end market. First is a breakthrough in thinking. Avoiding difficulty is human nature. She shared that many distributors tend to choose easy-to-sell regular circulation products rather than invest time and resources in cultivating high-end products. So she did the opposite. Focus on high-end products of leading brands, optimize product structure, meet consumer demand for high-end products, and form differentiated competitive advantages. Second is market cultivation. The path to high-end is not smooth; problems such as market non-recognition and difficult sell-through arise one after another. But she believes that contemporary distributors should shift from "passive dependence" to "active leadership." Consumer education is not only the responsibility of brand owners but also an opportunity for distributors themselves. She deeply studies local consumer habits and needs, continuously invests resources, treats the market promotion process as a practical opportunity for team training, and achieves more efficient market penetration. As she said, "This process is like shedding a layer of skin. Although the initial investment is large and returns are slow, after persisting, long-term competitiveness and profit margins significantly improve." 2. Integration of Supply and Retail The 2024 report by New Distribution revealed a trend: compared to the 5 types of distributor business models in 2023, a new type of [supply-retail integrated distributor] was added. This change reflects the proactive transformation of the distributor group amid industry upheaval. During field visits, the author found that many distributors with annual sales exceeding 100 million yuan, after their local agency business matured, faced the fierce impact of hard discount chains and snack stores, chose to actively embrace and explore. They are no longer satisfied with the traditional "porter" role but extend to the retail end, promoting the transformation of distribution and retail integration. Some opened fresh food supermarkets, some joined snack chain franchises, and others tried to create regional discount warehouses. These transformations are full of bumps. A distributor who opened 5 discount warehouses locally admitted: "I've been selling goods all my life, and now I have to learn product selection, manage store staff, and run promotions. It's a headache every day." From supply chain management to terminal operations, from inventory control to consumer insight, these skills that were once far from the core capabilities of distributors have now become compulsory courses. This model, by directly facing the diverse needs of consumers and directly participating in the operation of retail terminals, better understands consumers, better grasps market demand, simplifies the intermediate chain, and increases profits in fierce competition. Future distributors must have retail thinking, help terminal stores improve sales capabilities, and truly shift from being brand-centric to consumer-demand-centric. 3. Accelerated B2b Platformization In 2016, Alibaba Retail Link started with high profile, and in March 2024, it was shut down. This marked the end of the exploration of national B2b platforms. But the evolution of the industry never stops: when national platforms encountered "localization issues," a group of regional distributors opened new prospects through B2b platformization. Behind this transformation are three driving forces:
1. Lowered technical barriers: After 2020, the carrier of B2b shifted from web PC to APP and then to mini-programs, reducing the cost of building platforms. 2. Cultivated terminal habits: Most store owners have formed the habit of ordering online. 3. High attention from manufacturers: Brand owners began to open policies and customize single products for regional B2b platforms. Industry expert Teacher Yunchuan pointed out: "Now, the B2b process in China's FMCG industry has entered the second half, and the main players will be regional distributors." In a region, doing deep and thorough work, truly focusing on the underlying needs of small stores, and providing fast, accurate, and efficient one-stop supply of a full range of goods is definitely a sustainable good business with a moat. Public data shows that currently, more than 100 cities across the country have carried out B2b business. Teacher Zhao Bo also predicted in a live broadcast that in 2025, a hundred new B2b platforms may be added. These "small but beautiful" localized platforms are using digital capabilities to rebuild the "capillaries" of FMCG circulation, helping distributors achieve order digitization, supply chain transparency, and improve service efficiency to terminal stores.
Final Thoughts
"When many people want to eliminate distributors, it's exactly when we should evolve," said a distributor who transformed to open discount warehouses. The future of distributors is no longer about resisting change, but about redefining their own value: facing the complexity of regional markets, they must become 'regional service providers' that brand owners cannot do without, and also 'survival solution providers' that terminal stores cannot do without. In 2025, retail changes and channel changes will continue. How should FMCG distributors respond to these changes? How should they define their own value and functional changes? What evolution directions can they choose? From March 17-19, in Chengdu, at the 10th China FMCG Innovation Conference & the 4th China FMCG Hard Discount Conference & the 4th China FMCG Distributor Conference, more than a hundred outstanding national distributors, manufacturer executives, and retailers will be invited to discuss channel changes and business opportunities for distributors in the new environment. If you are interested, don't miss it! 【New Order · Symbiosis】 ****The 10th China FMCG Innovation Conference Time: March 17-19, 2025 Location: Chengdu, China