---
title: "Why Are Second-Tier Distributors Getting More Exhausted but Earning Less?"
description: "As a crucial link in the distribution chain, second-tier distributors have for the first time drawn attention and reflection from industry insiders. This article argues that their role has long been overlooked and undervalued by brand owners and marketing scholars, resonating with many dealers and wholesalers. In fact, the fate of one million FMCG second-tier distributors is now a concern for both themselves and the entire FMCG industry. Hence, this article, \"Why Are FMCG Second-Tier Distributors Getting More Exhausted but Earning Less?\", is the second piece in the \"Focus on Second-Tier Distributors\" series."
author: "陈思廷"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2022-01-11"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/why-are-second-tier-distributors-getting-more-exhausted-but-earning-less-128087a2/"
markdown: "https://xinjignxiao.com/en/articles/why-are-second-tier-distributors-getting-more-exhausted-but-earning-less-128087a2.md"
original_source: "https://mp.weixin.qq.com/s/KKDclUv1qXvNWv6JzwZFSA"
translation: "https://xinjignxiao.com/zh/articles/%E4%B8%BA%E4%BB%80%E4%B9%88%E4%BA%8C%E6%89%B9%E8%B6%8A%E6%9D%A5%E8%B6%8A%E7%B4%AF-%E8%B5%9A%E9%92%B1%E5%8D%B4%E8%B6%8A%E6%9D%A5%E8%B6%8A%E5%B0%91-128087a2.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/why-are-second-tier-distributors-getting-more-exhausted-but-earning-less-128087a2/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# Why Are Second-Tier Distributors Getting More Exhausted but Earning Less?

> As a crucial link in the distribution chain, second-tier distributors have for the first time drawn attention and reflection from industry insiders. This article argues that their role has long been overlooked and undervalued by brand owners and marketing scholars, resonating with many dealers and wholesalers. In fact, the fate of one million FMCG second-tier distributors is now a concern for both themselves and the entire FMCG industry. Hence, this article, "Why Are FMCG Second-Tier Distributors Getting More Exhausted but Earning Less?", is the second piece in the "Focus on Second-Tier Distributors" series.

As a crucial link in the distribution chain, second-tier distributors have for the first time drawn attention and reflection from industry insiders.
The article argues that their role in the distribution chain has long been overlooked and undervalued by brand owners and marketing scholars, resonating with many dealers and wholesalers. In fact, the fate of one million FMCG second-tier distributors is now a concern for both themselves and the entire FMCG industry.
Hence, this article, "Why Are FMCG Second-Tier Distributors Getting More Exhausted but Earning Less?", is the second piece in the "Focus on Second-Tier Distributors" series.
This article will examine, explore, and analyze the inherent characteristics of second-tier distributors, attempting to find the "key to destiny" that might change their collective future.
We invite readers to follow and provide feedback.
**The Question of Second-Tier Distributors' Fate: Why Are They So Diligent Yet Struggle to Get Rich?**
The previous article mentioned that "second-tier distributors are the most resilient entrepreneurs; those who persist are a group who believe only in their own hands, not fate."
A second-tier distributor from Zhengzhou, after reading the article, posed a question that left me speechless: "Since we are the most diligent, resilient, and provide the most thoughtful service, why is it getting harder and harder for us to make money, and earning less and less? Has the saying 'diligence leads to wealth' become obsolete?"
Indeed, if people work harder but earn less, something must be wrong. Where is the problem in the second-tier distribution business?
It is a market consensus that the second-tier distribution business is tough and money is hard to earn. Many experts, including New Distribution, have offered many correct suggestions on how to improve and enhance the second-tier distribution business.
However, judging from the current survival situation of second-tier distributors, these suggestions are merely treating symptoms, not the root cause. Very few second-tier distributors can truly implement these suggestions and benefit from them.
For example, some second-tier distributors are not good at accounting, always thinking that since it's all family, it doesn't matter if the meat is rotten in the pot. But the sales policies designed by brand owners and dealers are very complex and are usually settled later. Many second-tier distributors either cannot calculate clearly or, over time, lose track and forget. At the end of the year, they are muddled, not even knowing whether they made a profit or a loss.
So, experts say to adopt information systems to manage accounts. The problem is that systems require learning, and using them incurs labor and technical costs. If the business is too small, who can afford it?
Some second-tier distributors lack a concept of product structure; bestsellers have low margins, while high-margin products have low sales volume. Therefore, many second-tier distributors use low-priced bestsellers to build goodwill and stuff hard-to-sell, high-margin products into terminals. But in reality, terminal customers are becoming increasingly savvy. Once or twice might work, but if the products you push don't sell well, they won't accept them anymore.
Second-tier distributors typically operate within a 3-kilometer radius. Where can they find products that sell well and have high margins? And how do they know that products pushed by door-to-door salespeople aren't traps set for them?
Other suggestions include opening online stores on Taobao or Pinduoduo, starting Douyin live streams, or using mini-programs. These are correct but useless suggestions, completely detached from the actual business model, learning ability, and talent team of second-tier distributors. They are like "let them eat cake" advice.
If we can step outside the second-tier distributor group and view things from a temporal and spatial perspective, we'll discover a startling fact: over thousands of years, today's second-tier distribution business model has hardly changed from that of historical peddlers.
The most core factor is that second-tier distributors, like historical peddlers, are not a commercial organization and do not belong to any commercial organization.
**Drifting Like Duckweed: Second-Tier Distributors Are Outside Commercial Organizations and Lack Their Own Organization**
How important is organization?
Textbooks say, "Organization is the basic way of human survival and the basic characteristic of human behavior."
In life, we often hear people say, "I've finally found my organization!" This is said jokingly, but the joy and comfort behind it are genuine.
Organizations have existed since the emergence of humans. In the brutal primitive society, people without organizations, or even groups without strong organizations, could not survive.
**1. Second-tier distributors without organization are lone primitive people.**
The so-called "second-tier distributors lack organization" means "second-tier distributors lack their own commercial organization." If the market is seen as an ancient forest, then today's second-tier distributors are undoubtedly the lone primitive people in this forest.
Second-tier distributors do not have professional, fixed teams; their business is basically run by family members. Trust cemented by blood is the only bond, making fine management impossible and preventing complete unity and consistency when facing problems.
Using a life organization form to run a business may not lack trust, but in today's commercial society, it has neither competitiveness nor risk resistance.
Second-tier distributors not only lack their own commercial organization but also are not part of others' commercial organizations.
Unlike dealers, dealers generally have fixed teams, sometimes even professional managers; moreover, dealers have fixed contractual relationships with brand owners, being an extension of the brand owner's organization.
Dealers fight for brand owners in the market, and brand owners ensure the improvement of brand competitiveness, creating profits for dealers. When facing strong competition, there is often a tacit understanding where brand owners provide funds and dealers provide effort to jointly operate the market.
This situation for second-tier distributors is no different from the most primitive peddler model that has continued in China for thousands of years. In the past, when the commercial society was not mature, product supply was not excessive, and market competition was not fierce, this family-workshop-style business model could survive, relying on their diligence to be well-fed and well-clothed.
**2. In close-quarters terminal competition, second-tier distributors' advantages are shrinking.**
What is today's market like? The supply of most goods has reached a state of complete sufficiency, and market competition is fierce to the point of close combat. Every terminal small shop faces multiple internet giants, multiple community group-buying platforms, and numerous dealers allied with FMCG giants, not to mention fierce competition from same-city second-tier distributors.
Many competitors come with capital advantages, team advantages, and technological advantages, and they fight in organized, coordinated campaigns. What about second-tier distributors? Apart from their families, they have no comrades-in-arms, no support. The only means they can use to counter is to run more diligently and faster.
In extremely asymmetric competition, there is no doubt that second-tier distributors cannot achieve final victory. Some second-tier distributors have begun to hope to align with one side or another. But this alignment is an instinctive reaction under survival crisis, not a well-thought-out choice, and often leads to wrong decisions.
The horror of long-term lack of organization and being outside organizations is not just the lack of survival and development capabilities, but also leads to indiscipline, not knowing how to produce and work within an organization.
We often criticize a person for being unorganized and undisciplined, meaning they lack organizational awareness, team spirit, rule awareness, and are free-spirited and sloppy.
This is a very scary thing. Once a behavior pattern of being unorganized and undisciplined is formed, it means they can no longer form their own organization, or even join other organizations to work.
**In Wave After Wave of Market Trends, Which Organization Can Be Relied On?**
In 2015, during the first wave of the B2b boom, many second-tier distributors, including dealers, attempted to find an organization or re-find one.
**1. Internet giants are all untrustworthy.**
They once believed in the internet. They witnessed the miracles the internet created in the e-commerce world. When internet giants finally moved from B2C to B2b, some of them thought this was the future and joined in.
But after a few years, their fate did not change; they were abandoned. After tasting the iron fist of the offline market, internet giants, unable to bear the losses, retreated. The second-tier distributors who had followed them were helplessly "abandoned" halfway, and all second-tier distributors, after this "catastrophe," found business increasingly difficult.
The remaining B2b platforms turned to self-operated models, becoming competitors with second-tier distributors from head to toe. They used the model of urban central warehouses, seizing on brand owners' desire to boost performance, specifically targeting FMCG products that account for the largest sales volume of second-tier distributors. They used cash bulk purchasing to gain price advantages and then used special offers to attract traffic. This is the area most affected in the second-tier distribution business.
The community group-buying that suddenly exploded in 2020 had no place for second-tier distributors in its model design at all.
Their products either come from production areas and factory sources, or from local brand dealers or urban wholesale center markets, and then use group leaders' networks to sell products to consumers. Logistics uses third parties to transport goods from central warehouses to front warehouses and then to pickup points.
In this design, there is simply no role for second-tier distributors. Who else can second-tier distributors rely on?
**2. Brand manufacturers are also unreliable.**
Once, second-tier distributors were also in the sight of manufacturers. Many brand owners had system designs for special dealers or special second-tier distributors.
It must be said that this design was indeed a win-win for a long time in the past. Brands used second-tier distributors' funds and warehouses as reservoirs, and second-tier distributors received some policy support from brand owners.
But today, this special relationship is becoming increasingly unreliable. On one hand, manufacturers use the special relationship to force shipments, and second-tier distributors' funds and warehouses are truly overwhelmed. On the other hand, after forcing shipments, brand owners still sell at special prices to some internet platforms, and these special-priced goods in turn impact second-tier distributors' existing customers and existing markets.
The internet is untrustworthy, brand owners are unreliable. It is said that all roads lead to Rome, but why is it almost impossible for second-tier distributors? Can the one million second-tier distributors only continue to survive in the most primitive commercial form, gasping until their last breath disappears?
Since second-tier distributors are the most resilient, diligent, and have the strongest last-three-kilometers service capability, is there no organization or model that can lead them to a new commercial world?
**The Way Out for Second-Tier Distributors: The Commercial Infrastructure of the City's "Last Three Kilometers"**
What is the true core value of second-tier distributors? Is it capital, customer relationships, sales, or service?
These are all things second-tier distributors are currently doing, but they are not accurate descriptions of their core value.
**The core value of second-tier distributors is their unparalleled distance advantage within a three-kilometer radius, which cannot be replaced or substituted by the internet, brand owners, or dealers.**
If we use the concept of "new second-tier distributors" to define their possible future commercial form, **the commercial infrastructure unit of the city's "last three kilometers" is the truly irreplaceable core value of new second-tier distributors.**
Why can we make such a judgment? It depends on a unique characteristic of the Chinese market: **For a long time, the commercial basic service system for the last three kilometers in Chinese cities has been weak.**
Reason one: Since the reform and opening up, the Chinese market has developed too fast. The construction of commercial basic service facilities has not kept up, and planning has also lagged, causing the market to drag commercial services forward.
In fact, it is the vast number of second-tier distributors who, in the most primitive way, have been undertaking the fulfillment service capability for the last three kilometers. In comparison, the value of customer relationships, capital, and sales seems insignificant.
Of course, even if we wanted to build a fulfillment system for the last three kilometers, it was impossible in the past. This is different from the United States, which is a country on wheels. Its cities and roads are designed based on automobiles, and there is basically no last-three-kilometers problem. Their shortest service distance might be 30 kilometers.
But China's reality does not allow this. Many old city roads cannot accommodate logistics vehicles and are not suitable for renovation. We have numerous terminal small shops with small orders and low volumes, which cannot be satisfied by planned logistics of large vehicles.
So, this is the true core value of second-tier distributors. Only they are closest to terminal small shops, enabling the fastest response for fulfillment.
Reason two: For a long time, the service for small shops in the last three kilometers in China has not been suitable for third-party logistics. Because fulfillment for small shops is not simply delivering goods; it involves many distinctive services.
These services include: unloading and carrying upstairs, returns and exchanges, redemption of sales policies, credit sales, etc. These services are so trivial and personalized that third-party logistics cannot handle or even manage them for a long time. Even if they eventually do, the cost would be extremely high.
But in the second-tier distribution link, transactions replace management, offering extreme flexibility. Good customer relationships and acquaintance networks mean they are not just business relationships with terminals but also semi-acquaintance relationships. Both sides will maintain an appropriate service boundary, allowing flexible handling without going overboard.
Therefore, looking to the future, **the greatest possibility for second-tier distributors to continue existing and developing is to become a member of the city's last-three-kilometers fulfillment organization.**
Only by focusing value on this point, on fulfillment and delivery, can the core value of second-tier distributors be truly irreplaceable.
**Can Second-Tier Distributors Unite to Build a "Last Three Kilometers" System?**
The increasingly severe urban problems in China also call for a more efficient, flexible, and better-serviced "last three kilometers" service system upgraded and transformed with internet technology.
The current second-tier distributor group may be the most suitable group to upgrade into the last-three-kilometers fulfillment system. But if second-tier distributors cannot complete this transformation and upgrade, other social forces will inevitably replace them in this role. For example, express delivery sorting service providers widely distributed in cities have this potential.
How can such a last-three-kilometers fulfillment system be established? Only by achieving the following three points can second-tier distributors complete such a transformation and change.
**I. There needs to be an emergence of organizations with the mission of establishing a "second-tier distributor joint organization."**
The organizers undertaking this mission can be internet entrepreneurs, major merchants in cities, or FMCG brand owners. In a sense, they all have different advantages.
But to establish such an organization, the most important thing is to form a partnership of mutual reliance with second-tier distributors, not to use and abandon them. Its business logic cannot include traffic thinking, and there cannot be a possibility of "breaking away" from second-tier distributors in the future.
The emergence of an organization with a sense of mission merely gives second-tier distributors the possibility to change their fate. But this is not enough; the second-tier distributor group still needs to make resolute choices and complete transformation.
**II. Second-tier distributors need to completely abandon the "peddler mentality" in thought and behavior, and cultivate organizational awareness and discipline.**
For a long time, second-tier distributors have been used and discarded by various forces, and there are practical reasons for this. Because their behavior often starts from themselves, they support the strong rather than the weak, and at critical moments, they are often unreliable. Therefore, various forces have a utilitarian attitude toward second-tier distributors.
**The first step of organizational awareness is to have a sense of unity.** The strength of an individual second-tier distributor is weak. There must be a group of awakened second-tier distributors who unite under a certain commercial organization, forming a joint operation or cooperation under some mechanism. They are both independent and share interests in certain aspects.
**The second step of organizational awareness is to abandon self-centered thinking.** Fully understand the interests of brand owners and terminals, establish a win-win mindset, and act under the rules of the joint organization.
Change is difficult for second-tier distributors, and it is especially difficult for everyone to form a joint force, a common vision, and values.
**III. Abandon business thinking and cultivate service thinking.**
What is the difference? For example, in the eyes of a courier, there are only tasks. No matter how much each order is worth, whether it makes a profit or loss, the only task is to complete these tasks. They never calculate small accounts when completing tasks. This is service thinking.
But our second-tier distributors often calculate profit and loss for every order. If an order earns less, they feel it's not worth it and don't want to serve. But these are orders under established rules; what reason do you have not to fulfill them? This is business thinking.
If business thinking does not change, second-tier distributors cannot change their habit of calculating small accounts, cannot survive in joint or cooperative organizations, and cannot truly undertake the fulfillment function of the "city's last three kilometers." Who would want to entrust a service to an unreliable service provider?
To this day, the business of one million FMCG second-tier distributors is still struggling in hardship, but the sun still rises every day. Historically, change has always been easier said than done, full of twists and turns, with failures often being the norm.
Is the second-tier distributor group willing to change? Can they change? Can their fate be changed? Everything remains unknown.
Focusing on researching and reporting excellent FMCG brand cases
For communication, you can add WeChat by long-pressing, and please indicate your company, position, and name when adding.
Are you "watching" me?


---

## 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