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Source: Teacher Liu's New Marketing Some say distributors will die. This implies that if distributors die, the channel tier they represent will also disappear. My view is: Middlemen will always exist, but distributors will die. The wholesalers of 20 years ago are dead, but distributors emerged. Distributors are a different type of middleman from wholesalers. The functions distributors now perform were not held by wholesalers. The current form of distributors will also die, but new forms of middlemen will still exist. After the market focus shifted downward from 1998 to 2002, and with deep distribution since 2003, there is no room to compress channel structures (channel tiers) in most regions. The so-called 'de-intermediation' is a false proposition. Even if one middle layer is removed, the replacement is still a new middle layer. 01 New Roles for Distributors The second half of the internet has arrived. From a traditional perspective, the second half is 'traditional + internet'; from the perspective of internet upstarts, it is 'internet + traditional.' Whoever talks about the internet imagines themselves as the natural subject. In the second half of the internet, from the brand's perspective it's new marketing, from the retailer's perspective it's new retail, and from the middleman's perspective it's B2B. When distributors combine with the internet, they must be able to connect with the brand's new marketing at the front end, connect with the retailer's new retail at the back end, and become B2B themselves. This role is somewhat difficult. Distributors are already sandwiched between brands and retailers, often pleasing neither side. If they could please both sides, distributors might not necessarily want to do it. For example, if the upstream is a small factory and the downstream is a small shop, the distributor has bargaining power. But this power may not have commercial significance. From the brand's perspective, distributors are still an extension of the brand's marketing and management, especially for big brands. This has been true in the past and will generally remain so in the future. This is a Chinese characteristic. From the new retail perspective, new retail will inevitably lead to new manufacturing. New manufacturing is actually 'reverse integration' from the retail angle. Whether it can be achieved or not, the dream of 'de-intermediation' among internet upstarts will always exist, but overall it does not affect the role of middlemen. Distributors will definitely change. Just as wholesalers died and distributors thrived, some wholesalers became distributors, and a new group of distributors rose. The world will not cease to exist because the traditional dies; it will only become more exciting. 02 Endgame Thinking In business thinking, there is endgame thinking. What is the final pattern under certain circumstances? If you don't have a place in the endgame, unless you find a buyer (acquisition) midway or stop in time (cash out), you will eventually end up 'working hard for years, only to return to square one overnight.' Endgame thinking does not mean the endgame will come immediately, but it will come in the future. The saying 'Don't overestimate the present, don't underestimate the future' means don't take the future lightly, and don't take the present too seriously. It's truly about not being too hasty, nor too slow. The best way to reach the endgame is not to 'break with the past' but to 'accumulate steps to reach a thousand miles, accumulate small streams to form a sea.' Strategy is not about starting a new stove outside of tactics. It's that when all tactics are achieved, the strategy naturally realizes itself. Once you have an endgame judgment, you should 'start early, take small steps, and walk slowly'—a 'slow marathon'—rather than waiting until you have no choice and then doing a '100-meter sprint marathon.' Channels are B-side, unlike C-side where rapid burning of cash leads to oligopoly. 03 Channel Endgame All endgames are endgames within a limited time frame. The endgame I talk about today is the endgame of 'traditional + internet.' Middlemen will not disappear, so what form will middlemen take in the endgame under the internet environment? This endgame judgment is very important, even though the formation of the endgame is a long process. China's current distributor form is a world exception and will transform into the norm, while also incorporating internet elements. The exceptional nature of Chinese distributors lies in: They are not large in scale, yet they concentrate all channel functions in the distributor unit. Simply put, they are small but complete, with low efficiency. Low efficiency was not a problem in the past because growth space was more important than efficiency. When incremental growth hits a ceiling, efficiency becomes the target. The world norm for distributors is: efficiency first, professional division of labor and collaboration. Key point: Division of labor creates efficiency; only with division is there collaboration. Chinese distributors typically undertake four functions: channel promotion, order processing, warehousing and distribution, and capital. Anything that can be integrated to form scale advantages will inevitably become a specialized third party. So, which functions have scale advantages? Mainly warehousing and distribution. Therefore, according to endgame thinking, warehousing and distribution will definitely become third-party and gradually be stripped from distributor functions. Of course, some distributors may become professional logistics providers. But when will this stripping happen? It's hard to predict accurately. Early warehousing and distribution, without reaching scale, may be less efficient than traditional methods. But that doesn't mean it doesn't represent the future. Does the order system have integrated scale advantages? This is highly controversial, as it involves the major issue of whether B2B platforms are viable. In traditional offline order systems, orders have integration advantages. A person making one trip for orders, whether for one SKU or a group of SKUs, has different order costs. However, with digital orders, orders may not have integration advantages. If there is an integration advantage, it is reflected in the delivery (warehousing and distribution) stage. Even for a brand's digital orders, as long as there is an interface with warehousing and distribution, the integration advantage can be reflected in the delivery stage. From this perspective, a brand's channel digitalization is also valid, even if it may not have scale advantages. Channel digitalization can be led by the brand, the middleman, or a third-party platform. In the past and present, distributors have undertaken the capital function. With channel digitalization, digital credit will inevitably emerge, forming supply chain finance. Therefore, capital may no longer be a prerequisite for distributors. To summarize, of the four major functions of distributors, warehousing and distribution, order systems, and capital may all be stripped away. If three functions are stripped, are they still distributors? A distributor who heard this conclusion immediately jumped up: Then what's the point of our work? 04 The Core Function of Distributors If distributors only undertake one function, what is it? Whether distributors can ultimately find their place in the endgame depends on their endgame function. As mentioned earlier, distributors have undertaken four functions in the past. Warehousing and distribution will definitely be stripped in the future, capital may be provided by third-party supply chain finance, and digital order platforms may be controlled by brands or third-party B2B platforms, but it's unlikely that distributors will have independent order platforms. That leaves only one function: channel promotion. If this function can also be third-party, then distributors (middlemen) will truly disappear. I believe this function is precisely the core function and endgame function of distributors. China's channel system heavily relies on interpersonal relationships. The emergence of communities has not diluted business interpersonal relationships but has strengthened them, such as social e-commerce, community group buying, and the 'connecting three-dimensional space' that new marketing has always talked about. The 'trinity' even places relationships alongside cognition and transactions. The world's business logic has two major variables: cognition and transaction. China's business logic has three major variables: cognition, transaction, and relationship. This is determined by the difference between China's long-term agricultural society background and Europe's city-state civilization. I won't elaborate here. Even if channels are digitalized, even if cognition can be transmitted through communities and networks, even if C-end is connected, strong trust endorsement based on interpersonal relationships still exists, and the sales force engaged in promotion still exists. It's just that the original ground-pushing 'army' has become an 'airborne marine corps.' In this sense, China will see distributors in the future who do not need capital, warehouses, or delivery vehicles, and only do channel promotion. Compared with the asset-heavy distributors of the past, future distributors may be light-asset distributors. 05 Channel Digitalization Whether it's brand-led channel digitalization, third-party channel digitalization, or distributors building their own digital platforms, channel digitalization is inevitable. Channel digitalization starts with the brand and ends with the retailer. For brands, the value of channel digitalization lies in C-end information, using big data to gain demand insights; for channel players, the value lies in B-end information, using big data to improve efficiency. As mentioned earlier, the core value of middlemen is channel connection based on interpersonal relationships; channels are human connections. So, what determines human efficiency? In the past, channel efficiency was either based on individual capability or channel management. After channel digitalization, data becomes the main basis for improving the efficiency of promoters. Channel digitalization will become standard for middlemen. 06 Transformation in New Marketing Distributor transformation mainly involves the extension of brand new marketing to distributors, as well as the splitting of channel functions after channel digitalization and B2B. 1. Salespeople change from 'army' to 'airborne marines.' No matter how digitalized, distributors still need salespeople. However, what was originally needed was ground-pushing personnel; now what's needed is 'airborne marines' who are good at both interpersonal relationships and communication. So, for distributor transformation, salespeople must move from purely offline work to connecting three-dimensional space. Changing from army to air force is something everyone does in daily life, like using communities and networks, but applying daily-life methods to professional work still requires organized play. 2. Operate localized IP Traditional offline relationships are one-to-one. Localized IP is a relationship that can be amplified in communities and networks. 200 terminal KOLs can activate a county-level market; 200 local IPs can activate a prefecture-level market. The spread and promotion of local IP follows the 1990 principle. One IP influences 9 fans; 9 fans influence 90 users. Localized IP may or may not be channel members, but they can definitely bring market promotion. The above two tasks require no asset investment; they are purely about changing people. And they are changes in sync with society. It's just transforming daily-life methods into organized professional methods. These two transformations are significant. Don't just see them as changes in gameplay. Traditional channel interpersonal relationships are B-end relationships; now they involve both B-end and C-end. Only by connecting with C-end does B-end become easier to deal with. Do it early! 3. Channel digitalization There are three forms of channel digitalization: brand-led channel digitalization, third-party channel digitalization (B2B), and distributor-built channel digitalization. Large brands will mostly build channel digitalization. Don't resist it. For B2B platforms, choose suitable ones and try them. Building your own B2B platform should be done cautiously. Multiple digital platforms can coexist; don't get tangled up. Channel digitalization: doing it has no downside, not doing it may be a major opportunity loss. Why not do it? 4. Unified warehousing and distribution With unified warehousing and distribution, some distributors may focus on warehousing and distribution, while others may strip it away and hand it entirely to third-party platforms. 07 Rhythm, Rhythm, Rhythm The future will definitely come, but the question is at what rhythm. The rhythm at which the future arrives is the valuable judgment.
Sales team from 'army' to 'airborne marines.' Don't hesitate; the sooner the better, since it requires no asset investment.
Localized IP building. As long as you do it, it will be effective. Even if the brand doesn't require it, it's worth trying.
Channel digitalization. This process may be long. When brands mature, you need to keep up. For third-party B2B, whichever is good, you can try cooperation, as long as you manage risks, such as receivables.
Unified warehousing and distribution. This still needs time; it must be preceded by successful channel digitalization before unified warehousing and distribution can succeed. Because scale is limited, the cost of unified warehousing and distribution is not low. Distributors should wait patiently. Distributors' current work involves significant investment in warehousing and distribution. Once warehousing and distribution are stripped away, the real test for distributors arrives. Distributors without core functions (promotion) will truly have nothing to do. -END-