---
title: "Which FMCG Channels Will Disappear in the Next Five Years?"
description: "Over 30 industry experts, 100+ B2B platform founders, and 800+ manufacturer and distributor friends gathered in Fuzhou to discuss the internet transformation of the FMCG industry. The article argues that service-oriented channels will disrupt product-based channels, e-commerce will replace traditional channels, and department stores will decline, driven by changing consumer demographics and preferences."
author: "点拾"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-09-23"
categories: "Industry Trends, Retail Formats"
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---

# Which FMCG Channels Will Disappear in the Next Five Years?

> Over 30 industry experts, 100+ B2B platform founders, and 800+ manufacturer and distributor friends gathered in Fuzhou to discuss the internet transformation of the FMCG industry. The article argues that service-oriented channels will disrupt product-based channels, e-commerce will replace traditional channels, and department stores will decline, driven by changing consumer demographics and preferences.

Over 30 industry experts, 100+ B2B platform founders, and 800+ manufacturer and distributor friends gathered in Fuzhou to discuss the internet transformation of the FMCG industry.

Over the past decade, the most important factor in the growth of consumer goods companies has been channels. Channels and brands resonate and influence each other. My neighbor, Lao Wang, often tells me to buy Haitian soy sauce and Bright or Yili milk. When I ask why, he says because they are good brands, and they are everywhere in supermarkets and small shops. This shows how much influence channels have on brands. Previously, when we studied consumer goods, we could never ignore the importance of channels. The growth stories of giants like Yili, Master Kong, and Wahaha all involve strong channels. However, as the post-80s generation becomes the main consumer force, I believe there will be new changes in consumption channels in the future.

**First Type of Change:**
Service-oriented channels will disrupt product-oriented channels. I once posted a chart showing the Engel coefficient for urban households in China. We see that this index began to decline rapidly around 1990. What does this mean? Simply put, from that period on, the proportion of Chinese people who "went hungry" declined. Corresponding to today, this basically refers to the post-85 and post-90 generations. They grew up in relatively affluent environments and are far less price-sensitive than the post-60 and post-70 generations.

So in recent years, I have seen service-oriented channels replacing product-oriented channels. Consumers care more about service when they visit a place, not just the price of the product. Let me give an example. The front gate of my residential community has Kedi and Haode convenience stores, while the back gate has Lawson. Over the past few years, I have observed that Kedi and Haode stores have little business, but at Lawson, there are always people buying something at any time. I have compared some products; although Lawson has some private-label snacks and pastries, most products are more expensive than those in state-owned convenience stores. Why do so many people go to Lawson? The reason is better service. The store is very bright, the staff are friendly, and they wear gloves when handling food. They also have coffee machines, and in summer you can buy ice cream cones. In contrast, in traditional state-owned convenience stores, the tea eggs seem to have been simmering for days. The staff are usually laid-off middle-aged women, and sometimes they deliberately miscalculate the price. Sometimes there are old men smoking inside, making the experience very poor. Conclusion: simple product-selling state-owned convenience stores, and even mom-and-pop shops, will fade from view in the future. Comparing with Japan and South Korea, we also find that large chain convenience stores like 7-Eleven, Lawson, and FamilyMart dominate. In the United States, due to its vast territory, large supermarkets (Walmart, Costco, BJ's) are the main channels.

Another thing I think will be disrupted is the traditional wet market and fruit stalls. Once, I happened to go to the wet market near my home to buy vegetables, and I found that bargaining was possible. But I had no idea how much scallions should cost, how to buy them, or which part of the meat to cut. The information asymmetry was severe. Moreover, the environment in the wet market was poor, with water and garbage on the floor. For most young people, such an environment and information asymmetry are definitely not appealing. Similarly, at fruit stalls, you have to pick the fruit yourself. Now we are already seeing some supermarkets with service features. Their vegetables, meat, and fruit are not only clearly priced but also quality-assured. Everything is excellent. At the same time, they offer on-site cooking and freshly cut fruit packaging services. This new type of channel will definitely replace traditional channels. In short, users are increasingly willing to pay for the service part. Similarly, when we look overseas, we rarely see wet markets and fruit stalls in residential areas. Moreover, as the post-80s generation ages, there are fewer elderly people at home to cook for them. The lifestyle will gradually shift to the overseas model of weekly grocery shopping. This will lead to fewer people visiting wet markets that emphasize "freshness."

**Second Type of Change:**
E-commerce will replace traditional channels. We have already seen this in department stores. In the past few years, physical retail growth has slowed significantly, while e-commerce sales have continued to grow. After the first wave of traffic dividends, e-commerce sales have entered the 2.0 era. In the 1.0 era, e-commerce mainly relied on removing intermediate links. At that time, mobile internet traffic replaced physical traffic. The initial traffic segmentation has basically been completed. At this point, consumers know what they want; they go to physical stores to observe and experience, then place orders online. This is why Best Buy, Suning, and Yongle became experience stores for JD.com customers. Now, for 2.0 e-commerce, I believe it will have social attributes. That is, users do not know what they want; they need influencers and social media to tell them, or even brainwash them. This behavior pattern comes from two characteristics of the post-90s generation:

1) The way they obtain information has shifted from search engines to reliance on social networks. In the past, we knew what we wanted and what to look for; now the post-90s generation does not know their needs. But their "admiration" for various experts leads them to rely more on information input from social networks. In essence, this is a more precise and efficient content distribution mechanism.

2) Increasingly personalized, even niche, consumption tendencies. In the past, the post-70s generation was afraid of using something different from others and pursued mass brands. Now the post-90s generation is afraid of using the same things as those around them. This characteristic is especially evident after long-term flat economic growth. For example, in neighboring Japan and South Korea, there are obvious niche consumption cultures.

So the replacement of comprehensive channels by the internet will continue. New e-commerce models will gradually emerge. I have recently seen many first-tier market companies doing this; I will discuss this in detail next time.

**Third Type of Change:**
De-departmentalization. This will be the same as the United States over the past decade. According to data from the American Apparel & Footwear Association, department store sales in the U.S. fell 35% from 2001 to 2013. During the same period, specialty store sales increased 52%. This is also an inevitable result when the economy reaches a certain stage. The value of department store channels declines, although they solve the one-stop-shop pain point, but the internet and new channels are rising. In the future, department stores will fully transform into places for eating, drinking, and entertainment. This can also be seen from the changes in Shanghai's department stores. Every year, new comprehensive shopping malls rise, while old Pacific Department Store, Shanghai No. 1 Department Store, and Parkson are gradually declining. Yaohan will probably also fail one day...

Looking ahead, as new demographics rise, traditional consumption channels will be gradually transformed. Service-oriented channels, social e-commerce, and de-departmentalization will be the future development paths. For retail products, we should also avoid companies whose channels will be de-rated.

Source: Dianshi

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10:25-10:45 Opportunities and Challenges Brought by FMCG Channel Reform - Liu Zhao, CEO of Waiqin365
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13:30-14:00 Dealer Transformation: City Distribution Trends - Wang Qi, CEO of Weijie City Distribution
14:00-14:30 Roundtable Forum - Why Should Dealers Transform into Logistics?
14:30-15:00 Detailed Explanation of Zhongshang Huimin's One Machine, Two Wings Strategy - Su Xiaoxin, VP of Zhongshang Huimin
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15:30-16:00 Supply Chain Finance as a Lubricant for B2B to Drive Traditional Business - Chen Xian, CEO of 51 Order
16:00-16:30 Principles and Thoughts on 2B Investment - Xu Xiaoping, Founder of ZhenFund (Guest TBD)
16:30-17:00 Small Retail, Big Business Opportunities: Transformation and Upgrading of China's Retail - Wang Jianfeng, GM of E-commerce Division, Yurun Group
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## Citation metadata

- Publisher: New Distribution
- Author: 点拾
- Published: 2016-09-23
- Canonical: https://xinjignxiao.com/en/articles/which-fmcg-channels-will-disappear-in-the-next-five-years-1ac2c75e/
- Original source: https://mp.weixin.qq.com/s/aihojkwhTOCbWIRFzF9yxg

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