Introduction: Regardless of the model, getting products to consumers always requires a process and space for product delivery, which we traditionally call the channel. So no matter how marketing evolves, channels are an unavoidable and important consideration in corporate marketing. If a company can grasp the laws of channel development and know the future of channels, it opens a life path to success. If a company fails to grasp the future direction of channel development, its growth will surely lose its way. In the past Chinese FMCG market, almost all sales models evolved in tandem with channel changes. Channel development directly influenced the entire industry's growth.

At the beginning of reform and opening-up, China had no concept of channels; as long as products could be produced, they were absorbed by the overnight surge in market demand. Transactions were simple, with wholesale and trading markets everywhere. Gradually, as the industry developed and productivity became more surplus, channels emerged, and the marketing world saw the concept of enterprises building pipelines. From wholesale markets to gradually mature channel formation, the supply-demand relationship changed significantly. The evolution of channels in different periods—chain convenience stores, e-commerce, etc.—created opportunities for some foresighted representative enterprises and brands. While everyone was accustomed to the wholesale market business model, chain supermarkets gradually stood out. These systematic supermarkets adopted direct cooperation with manufacturers, gaining obvious competitive advantages. So these supermarket systems would often raise their thresholds, requiring suppliers to meet demands, causing many new products to be unable to enter these systems. This gave rise to the development of e-commerce. The booming e-commerce opened growth doors for many small and medium enterprises. Meanwhile, traditional supermarkets, sitting on high thresholds, watched as young people who used to visit no longer appeared, and sales continued to decline. But because of the rapid development of China's real estate industry, rents kept rising, and systems like Walmart had increasingly difficult days after 2008. Instead of frequent store openings as before, they now constantly close stores. Originally, each new store forced suppliers to sponsor; now with continuous closures, do they compensate these suppliers? Tesco, Suguo, Walmart—these former industry leaders—their past expansion achievements have become burdens for survival today. This phenomenon will become more pronounced in the future. So, how will channels develop in the future?

  1. Decline of Wholesale Markets The decline of wholesale markets is inevitable. The transition from traditional sedentary merchants to itinerant traders has been continuously weakening the radiation function of wholesale markets. Wholesale markets are products of highly asymmetric market information. This supply relationship is bound to decline for three reasons:

  2. Urbanization has led wholesale markets to gradually move away from core business districts, making it too far for small shops to purchase, with high procurement costs. A trip to the wholesale market could take half a day, severely impacting small shops' normal operations.

  3. The supply-demand relationship has inverted. Originally, small shops came to wholesale markets to select products; now, due to competition, manufacturers send salespeople to door-to-door promote, so why go to the wholesale market when you can choose at your doorstep?

  4. The rise of supermarkets and hypermarkets, which directly do business with manufacturers, has significantly reduced the throughput of goods in wholesale markets. Now, cooperation between enterprises and supermarkets basically requires manufacturers to advance funds and provide credit periods. As wholesale market throughput declines, the price advantage of products disappears.

  5. The market structure where wholesale markets served as regional commodity warehousing, logistics, and capital platforms is gradually being segmented into finer service units due to market competition and refined marketing. This helps enterprises achieve more effective control over terminal networks.

  6. Factors Affecting Supermarket Development In the past decade, supermarket development was entirely in a golden period. Supermarkets continuously expanded, opening more stores, which gave them a better position in negotiations with manufacturers. So the past decade was also quite troublesome for Chinese manufacturers. Fee requirements increased, and the number of charges multiplied. Many enterprises lost money doing business with supermarket systems, but without them, sales seemed to stagnate. This business model directly impacted the entire food and beverage industry. Many enterprises developed good products but were marginalized due to high supermarket thresholds. This also contributed to the rapid development of e-commerce. However, after 2008, China's supermarket systems encountered major troubles. What are the specific reasons?

  7. E-commerce development has impacted the real economy. Alibaba, Taobao, JD.com, etc., through electronic platforms, have taken away trillions of yuan in retail market share annually. This impact on supermarket retail is devastating.

  8. China's soaring real estate market has pushed commercial real estate prices extremely high, leading to high operating costs for supermarkets.

  9. China's labor costs are gradually increasing. The state's requirements for social security for workers are rising, also escalating operating costs.

  10. The internet has changed the world, especially information and consumption habits. Many enterprises now feel that channel value is not as high as product value, so supermarkets are no longer an unavoidable channel. Many supermarkets, under previous operating conditions, have seen manufacturers gradually withdraw. As part of the channel, without product immersion, this channel will eventually be abandoned by manufacturers.

  11. Social structure changes: China is gradually entering an aging society. Consumers under 35 are accustomed to online shopping, while those aged 35-60 are in their golden years, with certain quality-of-life requirements, so they may choose higher-end environments for purchases. Older groups have basically no demand for snacks and ordinary foods. Given this consumer structure, we can imagine where China's supermarket systems will be in the next decade.

  12. Development of E-commerce Platforms The development of e-commerce is essentially a replication of traditional marketing in a different space. Establishing a platform is like establishing a wholesale market twenty years ago. But the market on e-commerce platforms has also become fiercely competitive; all registered merchants are fighting for search rankings, and store decoration and promotion have reached the point of burning money for attention. Enterprises and brands that stand out on e-commerce platforms also require huge investments. When a business model or method cannot quickly succeed through simple replication, many people try to break through the status quo. This has led many enterprises to build their own platforms, such as COFCO's "Womai.com"—enterprise-built channels.

E-commerce development has gone from nothing to something, from small to large. This process also involves a shift from extensive management to refined management. While many platforms help small and medium enterprises achieve performance, they have also seen rampant counterfeits and frequent fraud. These issues have negatively impacted e-commerce development, seriously affecting its reputation. Therefore, the future of e-commerce, from deep penetration into daily life to the emergence of brand flagship stores, is an inevitable trend.

  1. Closed Special Channels Food and beverages are closely related to daily life, so their sales are often completed through specific channels. Many channels appear natural, such as selling beverages in restaurant channels, convenience stores at Sinopec and PetroChina gas stations, and channels like internet cafes. Selling snacks and drinks in cinemas is also common. We can briefly categorize them:
  2. Internet cafes: Selling water and beverages in internet cafes is almost unquestioned. Coca-Cola was the earliest to recognize the value of selling beverages in this emerging channel. Now, with internet cafe chains, they have become a chain independent channel for beverage sales. However, internet cafes are a product of the computer popularization process, so as computers become ubiquitous, internet cafes themselves become a temporary channel; the industry's rise and fall produce short-lived energy.
  3. Restaurant channels: The restaurant channel contributes significantly to the beverage industry. Systems like KFC and McDonald's can make Pepsi and Coca-Cola successful, and China's restaurant industry has made Chinese herbal tea successful. But KFC-like systems are trying to cater to Chinese consumers' health and traditional culture needs by developing non-carbonated drinks. Meanwhile, Chinese restaurants have suffered from a nationwide campaign against extravagant eating and drinking, leaving the industry desolate, with many restaurants closing. This trend directly impacted the beverage industry's market demand. In 2015, JDB's performance saw a cliff-like decline. And GPHL, after painstakingly reclaiming Wanglaoji and earning substantial litigation compensation, is preparing to sell Wanglaoji. The restaurant industry's future rise and fall will adjust with normal social development, but for beverage sales, the next decade or longer is unlikely to see major disruptions.
  4. Cultural and entertainment venues like cinemas: Currently, food and beverages sold there are basically sold separately. Many venues have cultural business licenses but not retail licenses for food and beverages. So in the next five to ten years, management may become more detailed, possibly leading to these items being given away with movie tickets.
  5. With social progress and rising living standards, there will be more health and beauty service institutions, potentially forming influential chains. These institutions may also participate in selling food and beverages with health, nutrition, and wellness concepts, but they generally lack retail licenses, so they may adopt methods similar to direct selling.
  6. Small convenience systems like Sinopec's Easy Joy and PetroChina's Kunlun at gas stations and highway service areas. As cars become common in households, people get used to this kind of impromptu purchase, so these special convenience stores will mature. Perhaps one day, Easy Joy or Kunlun will become the largest beverage sales channel resource. Such resources won't disappear soon; their decline will wait until new energy sources emerge and enter daily life.
  7. School stores: Schools, military units, and other special spaces have relatively closed consumer groups. Many schools have their own logistics services. These special environment channels have survival opportunities for a certain period, but from China's perspective, after expansion, the student population is at its peak. In the next decade, as the school-age population declines, universities will enter a wave of restructuring and closures, and these school stores will also enter a decline after their peak.

What Will Channels Look Like in the Next Decade? For China's channel development in the next decade, we can predict:

  1. E-commerce will see a growing consumer base. This growth is not from an increasing number of consumers; according to China's population structure, the population will grow slowly, not explosively. Currently, about half of the population is still concentrated in rural areas. Rural development cannot advance as quickly as cities, so e-commerce cannot rapidly spread there. We can estimate that about 400 million people will complete daily purchases on e-commerce platforms, while the vast majority will still rely on traditional physical stores for a long time. This provides opportunities for wholesale markets to develop in third- and fourth-tier cities.
  2. In densely populated cities, the convenience of e-commerce will lead to the decline of traditional supermarket-based daily purchase systems. Fresh produce, fruits, and vegetables will gradually separate, moving to farmers' markets or community convenience systems. Supermarkets will gradually move out of core business districts. Farmers' markets and other public service venues will develop toward higher-end.
  3. Existing retail formats will develop toward specialization and high-end physical stores. They must meet consumers' needs for shopping atmosphere. Physical storefronts won't need to be thousands of square meters like supermarkets.
  4. Community convenience stores will mature quickly and gradually form systematic daily purchase venues.
  5. Smart shopping devices will gradually become popular, and vending machines will enter our lives.
  6. Community marketing will likely be the most fiercely competitive marketing concept for Chinese enterprises in the next decade.
  7. Channels with special resources like PetroChina and Sinopec will mature gradually.
  8. In the next decade, direct selling in China will shift from high-end elite groups to penetration into ordinary people's daily lives. Enterprise units will gradually shift from regional agents to community agent services.

In the next decade, China's reforms will continue in the direction of market economy development, pushing deeper into people's daily lives. Channel evolution will inevitably improve to adapt to changing living habits. The most fundamental competition among enterprises is for consumer groups. To win, mastering the direction of channel development is a basic skill that must be cultivated.

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