---
title: "Wholesalers/Distributors Will See a Wave of Transformation to B2B"
description: "Wholesalers/distributors are the smallest operating units in the commercial circulation field in China, supplying goods to millions of mom-and-pop stores. They face increasing difficulties due to rising labor costs, thin margins, and intense competition, but they hold unique value in proximity and customer relationships. The article argues that a wave of B2B transformation is inevitable, driven by brand digitization and platform education, and provides guidance on how wholesalers can adapt."
author: "赵波"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2022-01-28"
language: "en"
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# Wholesalers/Distributors Will See a Wave of Transformation to B2B

> Wholesalers/distributors are the smallest operating units in the commercial circulation field in China, supplying goods to millions of mom-and-pop stores. They face increasing difficulties due to rising labor costs, thin margins, and intense competition, but they hold unique value in proximity and customer relationships. The article argues that a wave of B2B transformation is inevitable, driven by brand digitization and platform education, and provides guidance on how wholesalers can adapt.

******What do wholesalers/distributors look like?**
In China, wholesalers/distributors are the smallest operating units in the commercial circulation field, supplying goods to the millions of mom-and-pop stores we see on the roadside.
Most of these entities are individually owned businesses, serving hundreds of retail points within a few kilometers of their warehouses. Their sales are not high, ranging from millions to tens of millions, but their numbers are huge. I talked with Mr. Wu of Caihua Trading, and roughly 80-100 mom-and-pop stores can support one wholesaler/distributor. Based on this data, there are at least 55,000 to 85,000 distributors with delivery capabilities in China.
This group often serves as the regional distributor for a first-tier FMCG brand while also wholesaling various food and beverages. We see that deep-distribution brands like Master Kong, Red Bull, and Coca-Cola basically rely on this large group of distributors/wholesalers for end-of-chain logistics.
This group has notable characteristics: **First, they are very close to the retail points**, often delivering goods within ten minutes or even a few minutes. **Second, most are individually owned**, with family members like wives and brothers-in-law pitching in. Third, they are highly flexible, selling whatever sells well and whatever is profitable.
This group is also the hardest-working, earning money through their own labor. Sales are limited; at most, they can hire a few drivers and loaders. The wife stays home to handle accounting and manage the warehouse, while the husband goes out to deliver and serve customers.
******In the past two years, these wholesalers have found it increasingly difficult**
Last summer, I visited some wholesalers' warehouses in Jiangsu. The large ones sold 20-30 million a year, and the small ones also made several million. In conversations with these small wholesaler bosses, they all shared a common feeling: business is getting harder and harder.
This mainly comes from the following aspects:
**1. People are increasingly hard to find; high wages can't be afforded, and low wages can't retain staff. 2. Profits are poor; prices for old products have been driven down, and they only earn hard-earned money. 3. There aren't many products that sell well; in the past two years, there have been few hit products like Genki Forest. 4. Terminal sales are sluggish; retail stores see fewer customers, which affects them. 5. Manufacturers' tasks are getting heavier, but support is decreasing. 6. They don't know how to do e-commerce; community group buying doesn't make money, but not doing it means no business.**
In essence, these wholesalers are trapped in a scissors-like squeeze between extremely low efficiency and extremely high costs, because they haven't broken through the scale bottleneck.
This situation arises partly from objective macro conditions and partly from a direct relationship with China's deep distribution model. The block-based operation of deep distribution locks these wholesalers firmly into limited grid spaces, where they can't earn much but won't die either. They have no room to develop, and profits are thin. Overall, it's very competitive.
******The unique value of wholesalers**
A while ago, I chatted with a senior executive from a major company doing B2B, and we discussed the relationship between wholesalers and joint warehouses. In the past two years, internet giants have strategically shifted from B2B to community group buying, mainly because they found it hard to use money to scale up this track.
Goods are in the hands of wholesalers, and customer relationships are also with wholesalers. For big platforms, integrating this traditional and ancient industry through technology and money is indeed difficult. In the end, they have to rely on these wholesalers, their goods, and the customer relationships they've built through years of service to small stores, to drive platform transaction volume.
So, although this industry is tough, it has unique value: low cost, speed, customer relationships, good service, and the ability to respond quickly to various needs of small stores. Big platforms still find it difficult to revolutionize them.
Wholesalers may have a hard time, but they are unlikely to be replaced in the short term. Therefore, in the big picture, wholesalers still need to further iterate themselves.
The next few years are likely to be a period of significant transformation for wholesalers.
On one hand, if wholesalers want to continue, they must **improve efficiency**; on the other hand, they also need to **reduce costs**. This requires wholesalers to adjust in two ways:
**One is to expand product categories, increasing the number of SKUs served to small stores, boosting sales, and lowering unit logistics costs. The second is to use B2B online ordering to increase the proportion of non-manual orders, reducing labor costs.** Only in this way can wholesalers break through the current involution limits.
******The timing is just right**
After years of education by major internet companies, small stores have generally accepted the habit of ordering online. Moreover, a large number of distributors have already integrated into the joint warehouses and shared warehouses of JD and Alibaba platforms, doing business for many years. They are already familiar with this model and are not unfamiliar with digital technology overall.
More importantly, in the past two years, some major brands have gradually promoted their own B2B mini-programs. The most typical is COFCO Coca-Cola's Coke Go, which reportedly covers over 1.5 million sales points in COFCO's network. This project also won a global innovation award within Coca-Cola, showing the global importance and recognition of this project.
Brand-driven B2B has certain limitations, but its advantages are also obvious. On one hand, with brand support, essentially financial and manpower support, a large amount of display and promotion expenses can be **directly invested in small stores through B2B, making them more willing to order online. This greatly supports brand owners in channel promotion and activation.**
Of course, not only brand owners, but also some self-operated B2B platforms like Kuaile Zhanggui and Zhongshang Huimin are promoting the POP model, i.e., franchise model, by integrating regional distributors/large wholesalers to penetrate certain markets.
There are also platforms like Fujian's "Youdehuo" that have been helping wholesalers with order referrals. Even under the pressure of big B2B platforms like Retail Link, Yijiupi, and Wanquan Supei, they have achieved over 100 million in sales in a single market, selling very well.
So, overall, the B2B order model for wholesalers/distributors is in line with historical trends. Looking back at previous discussions on various B2B models—whether self-operated, matching, hybrid, three-tier warehousing, or shared logistics—data from all platforms are improving. Small store stickiness is increasing, brand owners' personnel efficiency is rising, and they increasingly need B2B orders to complete distribution.
For wholesalers, **to develop, to scale, and to improve efficiency, they must complete their own informatization transformation**. This is not a question of whether wholesalers want to do it, but a must-do. Especially in the past two years, brand owners have been determined to digitize the supply chain, which will inevitably affect the transaction model of wholesalers/distributors.
So, from any dimension, the B2B transformation of wholesalers/distributors is inevitable.
******How should wholesalers/distributors do it?**
Some wholesalers or distributors might ask, "What should I do?"
First, this is a gradual process. One is to look at your own scale. If you don't have many retail points, a small region, and few brands you represent, just follow the main manufacturers you represent. There's no need to build your own system. When the manufacturer's program allows wholesalers to add their own products, you can slowly expand your product range.
Also, if you already have a certain scale and have previously joined JD or Alibaba platforms, but these companies are no longer making strategic investments in the platform, wholesalers should consider replacing them and find a suitable platform to continue. First, these technologies are not complex; the key is whether the company or technology provider behind them is reliable.
But wholesalers must understand that **the platform is just a trading tool, not the core. The core is products and services**, which are the real strength of wholesalers.
Whether your product mix can maximize the satisfaction of small stores' needs; whether your price mix can maximize your profits; whether your warehouse management and logistics route planning can maximize efficiency—these are all tests of a wholesaler's operational capability after scaling up. With these in place, which platform you use really doesn't matter that much.
| Founder of New Distribution
FMCG industry channel expert, author of over 400,000 words of FMCG industry research articles
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