Distributors' Business Efficiency If you ask distributors now how their business is going, the two most frequent responses are: Business is getting harder and harder, not as easy as in previous years. If you ask why, again two responses: E-commerce is impacting more severely, and consumers are shopping online. (If one more sentence: pandemic impact, no foot traffic, consumption reduced.) This is the most genuine feeling of distributors; 9 out of 10 would say this. But if we take a longer view, the reasons for offline distributors' difficulties are not only e-commerce but also the disappearance of demographic dividends and stable consumption supply. In fact, difficult business is not caused by a single factor but by changes in comprehensive internal and external factors. When comprehensive factors change and the external environment becomes more complex, distributors must think about the underlying logic and essence of their business. Famous business consultant Mr. Liu Run once said: "No matter the era, the laws of business have never changed: either use 'innovation' to create something others can't, gaining 'pricing power'; or use 'efficiency' to achieve prices others can't, reducing the 'fixed multiplier'. "** Distributors' business, buying and selling goods, cannot innovate, and pricing power is not in their hands. The only thing distributors can do is 'efficiency'—achieving prices others can't. What does it mean to achieve prices others can't? From warehouse to store shelf to consumer purchase, if other distributors' costs in logistics, distribution, and sales promotion are 20 points, you can do 15, 10, or even 5 points. When it comes to efficiency and cost, many distributors immediately think of warehousing, logistics, personnel, and display or end-cap grabbing. Fewer vehicles delivering more goods, fewer people doing more work. But in fact, the most critical factor for efficiency is not simply the cost of people, vehicles, or warehouses, but the business model. What is a business model? For example, are your customers the brands or the stores? Who is the center? Is it serving the brand well or serving the store well? Is it serving a single brand or multiple brands, forming product, brand, and category portfolios, continuously occupying shelf space, and seizing brand or category discourse power? Or is it based on store needs, providing one-stop selection, shelving, and sales promotion services? What Lies Behind Efficiency? Currently, 99% of distributors belong to the first type: serving brands well. But looking further, most distributors serve no more than 10 brands, with two or three first-tier well-known brands plus three to five non-first-tier brands. First-tier brands are the core of sales, while non-first-tier brands are the source of profit. Since it's brand-centric, why not serve 100 brands (as an example)? Two reasons: First, they are bound by brands; with limited funds and resources, focusing on three to five brands is already challenging. Second, serving 100 brands means the current business structure must be redesigned. What does that mean? Serving 10 brands versus 100 brands is not just a numerical difference; it's a change in business structure. Serving 10 brands: one system suffices. Warehousing and logistics—store operations—finance and accounts: one chain for 10 brands. Whether 20 or 50 people, focus on two or three key brands, plus three to five marginal brands. Serving 100 brands: at least three systems are needed for normal operation. One for warehousing and logistics, one for finance and accounts, and one for store operations. Because with 100 brands, it may span three to five categories. Each category has different requirements and standards for warehousing, logistics, and finance, and distributors need to evaluate the profit contribution of each category or business unit. Only with independent accounting systems and independent systems can 100 brands truly operate well. For many distributors, managing one system for 10 brands is already good; how can they manage three systems? Many distributors, after succeeding in one category, try to cross into another. But they fail. Why? Not to mention category differences leading to operational differences in store operations; the backend systems are not configured properly, so how can it not be chaotic? For distributors to grow big, even to regional monopoly, personnel and vehicle efficiency are only tactics. **What is the strategy? It's the change in business structure and the structural adjustment of system elements behind the business. An Old and Fragmented Industry The current difficulty in distributors' business is fundamentally an efficiency problem. The past operational efficiency model cannot achieve current profit targets. Improving personnel and vehicle efficiency through digital tools might barely increase sales and meet profit targets, but it's still linear growth. Only by changing the business structure can sustainable development in trade and commerce be truly achieved. In the past three years, New Distribution has seen benchmark distributors who achieved significant growth through business structure changes and system element restructuring, such as Chengdu's Rongcheng Yigou, Shanghai's Kuaile Zhanggui, Xi'an's Baihui Commerce, Chongqing's Lingyu Supply Chain, and Shenzhen's Yataixuan. FMCG trade is an old and fragmented industry, with little research on trade and circulation. New Distribution hopes to bring a light to distributors through our research, observations, and interpretation of cutting-edge cases. This industry is not unprofitable or without prospects; it's just that the right path hasn't been found. Hisense's chairman once said about the difference between doing business and running an enterprise: "Doing business only considers how to increase revenue and profit today, not tomorrow's development; running an enterprise means considering the unity of today and tomorrow, focusing on the long term and the future." We hope that future distributors will not just do business to make a living, but one day run enterprises, using an enterprise mindset to do distribution business. An old and fragmented industry needs evolution and iteration. What evolves is not only the business structure but also the business thinking of the people behind it! Focusing on FMCG distributor new distribution/innovative consumer brand cases For communication, you can add WeChat by long-pressing. When adding, please indicate your company, position, and name. _**-END-_