--- title: "Why Are Distributors 'Losing More the More They Do'?" description: "A recent field study reveals that many distributors are anxious and tend to seek external solutions, but the key to success lies in 'seeking inward'—strengthening internal management and operations. Through contrasting stories of two distributors, this article outlines five directions for internal optimization, emphasizing that a solid foundation is essential before expanding outward." author: "张雨薇" publisher: "New Distribution" email: "zhaobo258@gmail.com" telephone: "+8615854817671" published: "2026-03-02" categories: "Dealer Operations" language: "en" canonical: "https://xinjignxiao.com/en/articles/why-are-distributors-losing-more-the-more-they-do-990aaaea/" markdown: "https://xinjignxiao.com/en/articles/why-are-distributors-losing-more-the-more-they-do-990aaaea.md" original_source: "https://mp.weixin.qq.com/s/FFkJD1cylvJvwBLXxADlwQ" translation: "https://xinjignxiao.com/zh/articles/%E8%B6%8A%E5%81%9A%E8%B6%8A%E4%BA%8F-%E7%9A%84%E7%BB%8F%E9%94%80%E5%95%86-%E9%97%AE%E9%A2%98%E5%87%BA%E5%9C%A8%E5%93%AA-990aaaea.md" attribution: "New Distribution — https://xinjignxiao.com/en/articles/why-are-distributors-losing-more-the-more-they-do-990aaaea/" citation: "张雨薇. “Why Are Distributors 'Losing More the More They Do'?.” New Distribution, 2026-03-02. https://xinjignxiao.com/en/articles/why-are-distributors-losing-more-the-more-they-do-990aaaea/" usage_policy: "https://xinjignxiao.com/ai-policy.txt" --- # Why Are Distributors 'Losing More the More They Do'? > A recent field study reveals that many distributors are anxious and tend to seek external solutions, but the key to success lies in 'seeking inward'—strengthening internal management and operations. Through contrasting stories of two distributors, this article outlines five directions for internal optimization, emphasizing that a solid foundation is essential before expanding outward. Recently, I've been visiting the front lines and talking with many regional distributor bosses. One deep impression is that distributors are very anxious, and when anxious, they tend to seek external solutions—without asking about results, they just start moving. Today's article begins with two distributor stories that struck me deeply, hoping to bring you some inspiration and food for thought. At the end of 2024, I met a distributor from a third-tier city, Mr. Wang (pseudonym). When talking about business, he kept sighing: **"Scale has gone up, but profits are getting thinner, and often we're even losing money."** Over the past year, to maintain market competitiveness, Mr. Wang and his team have been "going all out." **On one hand, they continuously develop new stores and channels, hoping to boost performance by covering more markets.** They even opened credit terms to expand into channels that previously paid cash, such as flash warehouses and snack stores; **on the other hand, to meet the needs of different terminals, they kept expanding SKUs, even introducing many low-margin or slow-moving products.** At first, this approach did relieve some pressure, but soon Mr. Wang noticed problems: > 1. Even though they did multi-channel, it was just doing—more but not refined, costs kept rising, and cash flow became increasingly tight; > 2. To accommodate terminal needs, they kept expanding products, **the SKU count in the warehouse surged from 2,000 to 5,000,** and a large number of near-expiry and expired products had to be written off; > 3. The expansion of credit terms further dragged down capital turnover; although business scale was growing, profits were repeatedly compressed. But in the same market environment, another distributor, Mr. Li (pseudonym), took a different path. Mr. Li's business scale is about 50 million. Facing performance decline, he didn't rush to expand SKUs or new projects, but chose to **"seek inward" and solidify the existing business.** It is understood that Mr. Li **spent two years cutting 70% of inefficient SKUs, reducing SKUs from 3,000 to 800,** concentrating resources on creating and promoting bestsellers; in terms of channels, he didn't rush to expand new stores, but instead **strengthened terminal services and improved sell-through rates, seeking quality over quantity.** Additionally, he used digital tools for real-time monitoring, successfully **reducing inventory turnover days from 80 to 50.** In the end, despite the overall poor market environment, Mr. Li's profit margin remained very stable, even achieving slight growth. Facing growth anxiety, Mr. Wang and Mr. Li's approaches form a sharp contrast: > One seeks outward, constantly adding to the business, but ignores the weak links in internal management, leading to "the busier, the more chaotic"; > The other seeks inward, focusing on existing resources, and by optimizing internal management and product structure, steadily holds the foundation of the business. During the exchange with Mr. Li, he mentioned a viewpoint: **"Distributors must seek outward only after stabilizing their own business. When your own business is still bleeding, rushing to start new projects is like drinking poison to quench thirst."** In today's increasingly competitive market environment, focusing and deepening resources is particularly important. **Only by first 'seeking inward' and consolidating the foundation can you better 'seek outward.'** Many distributors, in their anxiety, often rush to "make moves," but the premise of seeking outward is the perfection of internal management and operational systems. If the foundation is not solid, even if you expand new channels and add SKUs, it's easy to fail due to resource dispersion and low efficiency. Based on past exchanges with many regional top distributors, I'd like to share five directions for seeking inward for your reference. **Organizational Optimization** > **Case:** Distributor Mr. Yang (pseudonym) had annual sales of 80 million but was on the verge of collapse due to management chaos—salespeople had to both visit customers and handle returns, warehouse and delivery teams often argued over responsibility, and employee turnover reached 45%. > > In 2023, Mr. Yang formulated a job responsibility chart and a responsibility tracking mechanism, assigning responsibility to individuals and clarifying management division; at the same time, he reformed salary and performance, raised base salaries, conducted result-oriented assessments, and introduced a digital system. Within one year, employee turnover dropped from 45% to 12%, and per-capita efficiency increased by 30%. **Small scale can rely on personal connections, but large scale must rely on systems.** As business scale expands, the complexity of internal management increases, and the boss cannot do everything personally. It is necessary to establish corresponding organizational structures and clarify management division. Replace verbal instructions with systems to reduce execution deviations; activate employees' internal drive through interest binding. **Business Process Optimization** > **Case:** A dairy distributor had a 17% order omission rate due to manual order taking, leading to constant customer complaints. After mandating the use of an APP ordering system, orders were automatically generated, routes intelligently planned, and accounts locked within 48 hours. This combination not only reduced errors to zero but also shortened the payment collection cycle to 35 days. Many distributor teams still habitually rely on "feel" when working, but this is clearly no longer suitable for today's competitive market environment. **The essence of trading business is a cash flow efficiency battle, and the standardization of business processes is the foundation for improving efficiency.** From ordering, delivery, reconciliation to settlement, clear process templates should be established, which not only reduce information loss and improve operational efficiency but also allow new employees to get up to speed quickly. At the same time, be good at using digital tools to improve efficiency and accumulate experience. **Warehouse Optimization** > **Case:** A distributor adopted sales-based tiered management for products: S-level products are stored within 5 meters of the loading/unloading area, while long-tail products are moved to high shelves; introduced a digital system to improve picking efficiency; and monitored inventory status in real time, establishing a "30-day expiry warning" mechanism to promote bundled promotions in advance. This not only greatly improved warehouse picking efficiency but also reduced the expiry write-off rate to 3%, releasing a large amount of cash flow. **Warehouse management is an important part of a distributor's operational system and a key link affecting capital flow and profit margins.** If warehouse management is not in place, it can easily lead to inventory backlog or low turnover efficiency, dragging down the entire business system. In warehouse management, **space is cost**, and shelf placement determines capital turnover efficiency; **data is foresight**, and dynamic monitoring is better than firefighting after the fact; **efficiency is money**, and every day faster inventory turnover increases profit margins by 0.5%. **Product Optimization** > **Case:** Distributor Mr. Li (pseudonym) spent two years cutting 70% of inefficient SKUs, reducing SKUs from 3,000 to 800, and successfully created 3 bestsellers, with profits increasing by 15%. **The rationality of product structure is related to a distributor's profitability.** Many small and medium-sized distributors face the problem of having many but not refined SKUs, which seems to increase choices but actually disperses resources and increases operational burden. In product management, seek quality over quantity, **concentrate resources on products that can win battles.** It's not that more SKUs are safer, but that stronger bestsellers are more resistant to risks; regularly review the entire SKU list, screen out high-margin, high-sell-through products for key promotion; eliminate SKUs that don't make money or even lose money to reduce resource waste. **Channel Optimization** > **Case:** Distributor Mr. Chen (pseudonym) had a core customer churn rate as high as 20% due to scattered channels and rough management. Last year, Mr. Chen stopped cooperating with a dozen inefficient and debt-owing stores, focused resources on core channels contributing 80% of profits, and formed a dedicated service team. > > He also assigned merchandisers to key stores to provide "restock every three days, display every seven days" services to improve sell-through rates. Within a year, the core customer churn rate dropped to 5%, and channel sales increased by 20%. **The core of channel optimization lies in "focus and deep cultivation."** Many distributors easily fall into the trap of "wanting more" when expanding channels, thinking that more channels mean broader market coverage. But not all channels are worth doing; instead, you should do the right channels thoroughly. "Seek inward" or "seek outward"? There is no absolute right or wrong. The purpose of this article is not to dampen distributors' enthusiasm for "seeking outward," but to use the plight of "Mr. Wangs" and the breakthrough of "Mr. Lis" to tell everyone—**seeking outward is not wrong in itself, but in today's highly competitive market, if your own business foundation is not yet solid, blind expansion will only backfire.** Through continuous exchanges with distributor groups in recent years, "New Distribution" has found that most of those who successfully "seek outward" have a very solid business foundation and well-established internal organization and management, to the point where they have reached the ceiling of their own business. Every distributor's resources, capabilities, and market environment are different. Blindly imitating others' successful experiences often doesn't work. The key is to **deeply analyze your own strengths and weaknesses, and clearly know what you can and cannot do.** At the same time, after analyzing the business development paths of dozens of excellent top distributors, it's not hard to find a common pattern: **those distributors who thrive do not win by expansion speed, but by achieving excellence in operational quality.** In today's uncertain market, the greatest sense of security for distributors actually comes from their control over their own operations: **knowing the cost baseline of each link, clarifying the profit contribution of each product, and mastering the true value of each channel.** Only when the existing business operates healthily can the success rate and survival rate of new projects be greatly improved. Stop the bleeding where it's bleeding, and create blood where it's healthy. First, let yourself survive, then think about how to live better. Distributors' "seeking inward" and "seeking outward" are both choices, with no right or wrong, but through the essence we must see: the current market is undergoing tremendous changes, and the traditional business models of the past are gradually failing in the new environment. Against this backdrop, distributors really need to seriously think about what the future survival direction is, which development path suits their own enterprise, and how to implement specific landing strategies. Therefore, at the **CFC 11th China FMCG Conference and the 6th China FMCG Distribution and Retail Conference** held on March 16-18, 2026 in Chengdu, we have invited hundreds of outstanding distributors, manufacturer executives, and retailers from across the country to jointly discuss channel changes and distributor business opportunities in the new environment, with excellent distributors sharing practical cases of transitioning to retail! Confirmed speakers (in no particular order): * Chen Liping, Professor at Capital University of Economics and Business * Cai Peng, General Manager of Beverages at Panpan Foods Group * Wu Yihua, General Manager of NielsenIQ China Retail Business * Chen Jianfu, General Manager of Jiayuan Convenience Store, Corporate Coach * Zhou Shenghua, Deputy General Manager of Zhenshimei * Wu Jinghe, Deputy General Manager of Caihua Trading, Head of Manfen Retail * Liu Liang, General Manager of Shenzhen Guanduoduo Trading Co., Ltd. * Liang Bo, General Manager of Zhenshimei Supply Chain Zhenjiang Company, General Manager of Lianyungang Jiadefu Supermarket Middle Office * Guo Liang, General Manager of Chongqing Jihe Supply Chain Management Co., Ltd. * Zhang Jun, General Manager of Shaanxi Jiapin Yunshi E-commerce Co., Ltd. * Xu Zhen, Founder of Qingdao Jingcang Zhiku Logistics Consulting Co., Ltd. In March, let's gather in Chengdu to explore the essence of business together and put "principles" into practice! We look forward to meeting you and sharing this feast of ideas in the FMCG distribution field! --- ## Citation metadata - Publisher: New Distribution - Author: 张雨薇 - Published: 2026-03-02 - Canonical: https://xinjignxiao.com/en/articles/why-are-distributors-losing-more-the-more-they-do-990aaaea/ - Original source: https://mp.weixin.qq.com/s/FFkJD1cylvJvwBLXxADlwQ ## Copyright and AI use This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL. Contact: zhaobo258@gmail.com · +86 158 5481 7671