Scan the QR code in the image to register "In the next 5-10 years, 70%-80% of small and medium enterprises will be cleared out" was a prediction made a year ago about market trends. Looking back, in the field of commercial circulation, we find that this statement is becoming a reality. In the past two years, changes in the commercial circulation field have been rapid, and traditional distributors are gradually being eliminated as they face increasingly complex environments. Especially under the influence of new retail, it is evident that many small distributors and wholesalers are being eroded step by step and disappearing from the market.

Correspondingly, another change is that large distributors are gradually rising; while small and medium distributors are being squeezed and eroded, large distributors are becoming bigger and stronger. Even many brand owners have begun to support large distributors. For example, China Resources Snow Breweries' channel partner conference signaled the trend of "large distributor-ization." Why is the trend of distributor large-scale becoming more obvious? Why do brand owners support large distributors? What is the value of the large distributor model? Today, the author will sort out the value points of the large distributor model.

-01- Current Forms of Distributors Distributors do not exist as isolated entities; they are born out of China's specific history, geographical environment, changes in the retail industry, and the combined effects of brand category characteristics and competitive factors.

China has a market of 1.3 billion people. Such a vast and complex market makes it impossible for products to directly cover all consumers from producers. Distributors are a key link connecting producers and consumers; their value lies in creating information, facilitating transactions, and reducing transaction costs. Over the past 30 years, the business model of commercial circulation in China has formed a relatively mature system. Different city levels, regions, economies, and industries exhibit different distributor business models, management models, and scales.

Broadly, they can be divided into several types:

Brand large distributor model: That is, acting as an agent for a brand across multiple cities and regions, or being particularly large in the local market, providing localized operational services for the brand. For example, P&G has only about 80 distributors nationwide.

Category large distributor model: Focusing on a specific category, representing multiple brands within that category, and operating deeply. Through product portfolio and brand portfolio, they gain more bargaining power upstream and downstream, becoming localized suppliers for that category. A typical case is Chengdu Rongcheng Yigou.

Distributor (delivery) model: For categories requiring deep distribution, the manufacturer controls the terminals and needs a large number of manufacturer personnel to operate; the distributor only acts as a delivery operator, and their autonomous management rights are weakened. Examples include Coca-Cola's 101 distributors and Master Kong's delivery distributors.

Wholesaler model: Representing a few brands but with a rich variety of products, mostly sourced from distributors, able to provide one-stop supply to small shops; this was the main model in the early commercial circulation field.

-02- Why Is the Large Distributor Model the Future Trend? Today's market environment has undergone significant changes: retail has moved from a single scenario to multiple scenarios. In the past, retail scenarios were basically two types: traditional offline circulation and KA hypermarkets. But with the emergence of e-commerce and the explosion of new retail, retail scenarios have become diversified. Three retail scenarios—traditional retail, e-commerce, and social retail—combined with N channel combinations, give rise to various new scenarios, new models, and new playstyles, with single channels having small volumes. This places new demands on organizations.

In this context, distributors with single-function roles in the past can no longer adapt to the diversified channel model.

The reason is that in the past, retail channels were relatively concentrated, with a single model of ultra-large-scale channels. Brand marketing business types were also relatively single-function, like large formations with single-type troops. This model certainly cannot adapt to the current diversified and multi-dimensional channels.

In such an environment, traditional distributors must match more capabilities to do business with faster speed, lower cost, larger scale, higher efficiency, and better experience to survive. In this process, distributors that do well will naturally become large distributors, while those that cannot adapt will be eliminated.

Additionally, among these four types of distributors, the two largest in number—delivery distributors and wholesalers—waste time on a large amount of low-level repetitive work. Their work is very complex but cannot generate creative premiums, resulting in low profits.

This causes these small distributors to fall into involution, unable to undertake large-scale reforms or explore new business capabilities. On one hand, they cannot afford idle personnel, leading to serious staff turnover; on the other hand, management cannot upgrade, the company is too small, and the platform is insufficient to retain excellent talent. Finally, the entire company falls into a vicious cycle, with diminishing marginal effects until they are eliminated.

Based on these two changes, it can be found that large distributor-ization is an inevitable next stage in the development of commercial circulation.

First, large distributors have a complete organizational structure. Traditional distributor organizations generally consist of three parts: sales, warehousing and logistics, and finance, with the capability only to sell goods. Large distributors not only have these basic functions but also have more functions such as digital decision-making, channel operation, marketing planning, and market trend control, with a more complete organizational structure, not limited to selling.

Because of this, when facing channel changes, distributors can respond and adjust in a timely manner based on the local retail format, taking a series of actions such as contacting, cooperating, operating, and promoting at the first opportunity.

Second, large distributors have the ability to overcome involution. The essence of the large distributor model is the organization's self-adaptation to the environment. Only a big pond can raise big fish. Large distributors have large market capacity and sales base, with sufficient room for sales growth and profits, enabling them to cultivate more new business models. This gives large distributors sufficient conditions to operate multiple retail scenarios in the local regional market, with high autonomy in operating the regional market. For example, they can build their own B2B platforms, gain priority supply rights for community group buying in the region, and have online authorized stores. At the same time, because of the platform, large distributors can attract more talent to join in the region.

In terms of organizational structure and scale, large distributors have formed their own management system with strong risk resistance.

Therefore, large distributors can form a virtuous cycle in the operation of the entire business system, thereby avoiding the formation of involution. While rapidly responding to changes in the retail environment, they can make the commercial business bigger.

-03- Under the Trend of "Large Distributor-ization," What Should Brand Owners Do? Since it has been determined that the large distributor model is the future trend, what should brand owners do in the face of this trend?

To sum up in one sentence: In the future, brand owners should support large distributors and complete functional division of labor.

Based on the diversification of channels, brand owners should learn to make trade-offs, focusing on the big and letting go of the small. For example, channels like KA hypermarkets, convenience stores, and national online platforms that can directly connect with headquarters and generate huge sales should be key focuses for brand owners, possibly adopting a direct operation approach.

However, some local regional fragmented channels can be fully covered with the help of excellent large distributors. For example, O2O home delivery, regional supply for community group buying, or circulation small shops and small and medium supermarkets. For such dispersed traffic, the cost of direct operation by brand owners is too high, so it can be entirely delegated to regional large distributors. They have sufficient operational capabilities to ensure better product sell-through and distribution at the terminal, achieving better results than brand owners doing it themselves.

On the other hand, the general trend of social division of labor is that professionals do professional work. For brand owners, not everything needs to be done by themselves. If they do everything themselves and have the final say, it becomes tiring and difficult. Terminal coverage and terminal sales management require a large investment of personnel and resources, with huge costs.

As the upstream, the core value of brand owners is not to do sales but to do product development, brand building, and standardization of marketing management. The value of large distributors as a platform lies in using professional operational skills and good customer relationships to help brand owners quickly open up the local market and seize market share.

In simple terms, brand owners and distributors have clear functional divisions: brand owners specialize in products, and distributors specialize in sales. Each has their own expertise, and only professionals can do professional work.

Of course, some categories are not suitable for this approach, such as beer and beverages. For these categories, any sales point that can sell goods can be an effective terminal. To achieve full distribution, deep distribution is indeed necessary.

For these categories, brand owners will further direct operation or atomize operating units. For example, Jinmailang's "small boss" model extends operational tentacles further to the distributor's salespeople. Because in the past, most distributors achieved financial freedom through market dividends and were unwilling to do more. Extending tentacles to salespeople and incentivizing them to "start businesses" can yield better results.

In conclusion:

Recently, while visiting some distributors in East China, I saw some new things. Some distributors, through cooperation with Alibaba, introduced some of Alibaba's operating models into their own management, using digital operations to do traditional business, and developing rapidly.

Similarly, in the past two years, manufacturers have also been undergoing digital transformation. For example, PepsiCo Foods' "Ru Hu Tian e" project uses an asset-light model for digital construction to empower their distributors. In the process of manufacturers exploring digital transformation, distributors must embrace and try it first, quickly follow up and change, and while learning new methods and models, they can also reap the benefits of corporate reform.

The evolution of "large distributor-ization" will definitely have a window period. Distributors, especially small ones, as the subjects of this trend, must leverage the digital transformation of brand owners to quickly improve their operating methods and iterate rapidly.

| Founder of New Distribution, expert in FMCG industry channels, with over 400,000 words of original research articles on the FMCG industry. For communication, you can add WeChat by long-pressing. When adding, please indicate your company, position, and name.