---
title: "Why Are There More Major Distributors in South China, East China, and Southwest China, While Fewer in North China and Central-South China?"
description: "At a recent meeting, I sat next to a major distributor from South China with annual sales exceeding 10 billion yuan, which reminded me of the differences in major distributors across regions. In North China, a distributor with 100 million yuan in sales is already considered major, highlighting the significant disparity. The presence of major distributors varies greatly by region, influenced not only by individual capabilities but also by geographical factors. For instance, South China, East China, and Southwest China have more major distributors, while North China and Central-South China have relatively fewer, with notable differences in the ceiling of distributor scale."
author: "刘春雄"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2024-04-26"
language: "en"
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---

# Why Are There More Major Distributors in South China, East China, and Southwest China, While Fewer in North China and Central-South China?

> At a recent meeting, I sat next to a major distributor from South China with annual sales exceeding 10 billion yuan, which reminded me of the differences in major distributors across regions. In North China, a distributor with 100 million yuan in sales is already considered major, highlighting the significant disparity. The presence of major distributors varies greatly by region, influenced not only by individual capabilities but also by geographical factors. For instance, South China, East China, and Southwest China have more major distributors, while North China and Central-South China have relatively fewer, with notable differences in the ceiling of distributor scale.

At a recent meeting, I happened to sit next to a major distributor from South China with annual sales exceeding 10 billion yuan, which brought back memories of major distributors across various regions. This made me think of North China, where a distributor with 100 million yuan in sales is already considered major in FMCG. The difference is striking.

Every region has major distributors, but the proportion varies greatly. The emergence of major distributors is not only related to the individual capabilities of distributors but also to the region. For example, South China, East China, and Southwest China have more major distributors, while North China and Central-South China have relatively fewer. The ceiling on the scale of major distributors differs significantly.

**Major Distributors in South China**

**Case 1:** 15 years ago, I visited a distributor in South China with a manufacturer. Generally, I focus on four aspects: market area (through conversation), product lines (by inspecting the warehouse), personnel organization, and market opportunities.

When I asked which areas they covered, the boss replied, "a large area nearby."

How large? The answer was "a dozen counties."

This answer surprised me. Usually, people respond with administrative divisions, such as "we are the agent for this county" or "this city."

Fortunately, there was a map on the office wall, and indeed, the "battle map" showed a contiguous area that couldn't be easily described by city or county. **The market for this distributor was a dozen counties interwoven across several cities.**

How did they cover these counties? The answer was "by setting up branch companies." Not one per county, but one for several adjacent counties.

When I asked if the manufacturer sent salespeople to participate in distribution, the answer was yes, but the boss had "kept them" and shielded them from distribution.

Setting up branch companies didn't surprise me, but shielding the manufacturer's salespeople, not using the "free salespeople" provided by the manufacturer, and preferring to "keep them" rather than use them, really surprised me.

**The essence of deep distribution is that the manufacturer embeds itself into the distributor's business management system, making the distributor an "organizational cripple" who needs full cooperation with the manufacturer to be a complete, normal entity. The method of embedding is "support" and "free." Once embedded, the distributor becomes unable to act independently.**

**Case 2:** Around 2007, I visited a major distributor in South China with a manufacturer. At that time, the distributor had sales of about 200 million yuan, and I didn't know them before. When I arrived with the manufacturer, I found the salespeople in the meeting room, and they asked me to give a lecture to the salespeople first.

I asked the boss, "Aren't the salespeople delivering goods today?" At that time, it was still "vehicle sales," where salespeople drove trucks with goods to do business.

The boss said, **"Missing one day of delivery won't hurt business much, but poor training will hurt a lot."** Since the manufacturer's general manager and an expert were here, they should seize the opportunity to learn.

This boss's company was not large. Apart from the boss's office and the finance office, the largest room was the meeting room.

Later, I met the boss at a conference. By then, sales had reached 600 million yuan. I asked how he had time to attend the meeting. He said he had hired professional managers, so he could be a hands-off boss and spend a lot of time learning outside.

It was from meeting this boss that I started to care whether distributors had their own meeting rooms and whether they focused on training.

**An excellent distributor not only focuses on sales growth but also on their own growth.**

**Summary:** The characteristic of the South China region is that there are many city-level distributors, while county-level distributors are weak.

Why are there many city-level distributors? First, during the process of distributor miniaturization, they were relatively successful in "playing hide-and-seek" with manufacturers, meaning they succeeded in the manufacturer-distributor game.

After all, a major distributor must have **a large agency area and many agency brands**; second, they **solved the organizational management problem of scaling up**, especially with two-level management organizations. City-level agents must also achieve the manufacturer's terminal coverage rate; otherwise, the manufacturer will definitely go down the channel.

**Major Distributors in East China**

**Case 3:** About 20 years ago, when manufacturers were implementing channel sinking and deep distribution was not yet widespread, I was invited to speak at an industry conference. A city-level agent from Zhejiang asked: "Now manufacturers are looking for our downstream (county-level) partners. What should we do?"

At that time, the channel was sinking from "provincial agents" to "city agents," and some were moving to "county agents." This "city agent" was asking a common question.

I asked back, "What do you think?"

The boss replied: "The manufacturer originally came to me to distribute goods to the counties. Now they are looking for county-level agents to distribute to townships. If I directly distribute to townships, the manufacturer won't need county agents."

I could only give the boss a thumbs up. His answer was more brilliant than I expected. He understood the manufacturer's purpose of channel sinking very well. **Whether it's sinking the focus or deep distribution, the manufacturer's goal is to increase coverage.** If the distributor has already expanded coverage, why would the manufacturer spend so much effort to get directly involved?

**Case 4:** Manufacturers often invite me to train their distributors, but it's rare for distributors to pay for my lectures. However, there are a few in Zhejiang (I won't name them).

Some distributors in Zhejiang do business across the entire province, and some in other industries (non-FMCG) do business nationwide.

After China's commercial reform and the dissolution of traditional commerce, many people became self-employed and gradually grew. But some traditional circulation enterprises in East China successfully transformed as a whole during the restructuring process.

**The advantage of restructured enterprises lies in organizational management, which is a necessary condition for scaling up.**

**Case 5:** In 2001, I visited a county-level distributor in Jiangsu. When visiting distributors, I always inspect the warehouse. Inspecting the warehouse is a skill, as important as inspecting the store. The storefront and the warehouse are the two sides of a circulation enterprise.

On the wall of the distributor's warehouse, there were three large white papers with tables. The horizontal axis was time, and the vertical axis was stores. Every day, after salespeople returned from deliveries, they had to fill in the items and quantities delivered into the table.

What was the use of this table? The boss said, "Now that the company has grown, I can't deliver goods myself, but I still need to understand the situation."

How to understand the situation? **First, rely on salespeople's reports; second, look at reports.** Every few days, he would look at the tables on the wall to get a rough idea of each store's situation. If the data seemed unreasonable, he would call to ask or go check in person.

I once wrote this case in a book. Looking at data, many people look at the day's data, but it's not easy to look at data continuously, see trends, and spot problems.

How to look at data? Usually, you look at sales volume. The correct approach is: **Use data to predict sales, which in management is called regression forecasting; if the future matches the forecast, it's normal; otherwise, it's abnormal. Sales too good is abnormal, and sales too poor is also abnormal.**

**Normal matters are left to salespeople; abnormal matters must be handled by managers or the boss.**

**Summary:** In East China, city-level distributors are also more powerful, while county-level distributors are weaker.

**First, the original state-owned or collective circulation businesses transformed successfully as a whole; second, city-level distributors saw through the manufacturer's intentions earlier—when manufacturers sank channels, the goal was to cover more terminals, and city-level distributors acted early; third, East China's major distributors generally have higher education levels and possess the ability for corporate-style management.**

**Major Distributors in Southwest China**

**Case 6:** Around 2000, the company I served had a very powerful major distributor in the Southwest. How powerful? Generally, the top two or three companies in each industry are exclusive in agency (except for long-tail industries), but this distributor had agencies for all of them.

Usually, I could guide distributors in their work. But with this distributor, I was more often humbly seeking advice because they did everything exceptionally well.

Later, I learned that he came from within the system. At that time, the wholesale market still had some presence, but he had moved out of the wholesale market very early.

**If you're not in the wholesale market, you must have your own channel team to proactively contact business.** It was also inspired by this major distributor that I persuaded the manufacturer not to participate in the糖酒会 (Chengdu Sugar and Wine Fair) and persuaded distributors to move out of wholesale markets and establish their own closed-loop business systems.

**Case 7:** A few years ago, I attended a Southwest industry conference. The organizer adopted a special meeting mode: a meeting within a meeting. Provincial-level agents invited county-level and city-level customers to hold "meetings within meetings" to increase attendance.

Why are there provincial agents in the Southwest? Because during channel sinking, it was found that **in the mountainous Southwest, with sparse population, a county is hard to become a marketing unit. Therefore, wholesale markets are relatively developed. The situation is similar in the Northwest.**

There are two business modes for wholesale market merchants: one is "sitting merchants," who do wholesale from a fixed location; the other is to sink business, with personnel going to cities and counties to contact business. Gradually, the second mode can move out of the wholesale market.

**Summary:** The reasons for major distributors in the Southwest are roughly two: first, **channel sinking is difficult**, county-level distributors find it hard to scale, which instead benefited the original provincial or city agents, with more provincial agents and relatively larger sales; second, **the capability gap among distributors is large**, and I know several major distributors who have received organizational training, giving them a huge advantage over grassroots entrepreneurs. Thus, as long as there are a few powerful distributors, market concentration tends to be high.

**Fewer Major Distributors in North China and Central-South China**

**Case 8:** I once knew a super major distributor in North China, a provincial-level distributor who partnered with an international brand and was a key account for the brand. The manufacturer helped recruit many salespeople locally, and the manufacturer paid their wages.

Later, the manufacturer terminated the cooperation. When I met him, I only asked one question: "Did the salespeople stay with you or go with the manufacturer?"

Answer: Most went with the manufacturer.

That matched my expectations.

**Sales in North China emphasize both brand and relationships (acquaintances and regular customers).** If the brand cooperation ends, but the salespeople stay, there's still a chance to leverage the business relationships to build a new brand. If the salespeople also leave, it's very difficult to start over.

Was it the right choice for the salespeople to follow the brand? From the salespeople's perspective, of course!

**Case 9:** I visited a county-level distributor in Shandong (note: Shandong is administratively in East China, but its consumption habits are more similar to North China). Although the distributor had only been in business for three or four years, they had already become the No.1 in the same category in the county, with an absolute market share lead, showing exceptional capability. However, the problem was limited growth space, as a county's scale is small.

I asked the boss about the next step for development, and he was troubled. If he continued to develop within the county, he could only expand into other categories, which would definitely be difficult.

I proposed another idea: could he expand into nearby counties for cross-regional development?

The boss rejected it almost without thinking. When I asked why, he answered, "No connections." Anyone in marketing knows what he meant by "connections."

I said, "You'll build connections as you go," **connections are built over time, even through fines.**

**Business relationships are built by running around; the more you run, the more connections you have. For political-business relationships, if you don't seek them, they'll come to you. The more you seek, the more connections you have.**

I felt I didn't convince the distributor boss.

**Case 10:** This is a rare major distributor in the Central-South region, with sales of 600 million yuan 15 years ago. Of course, they dealt in long-tail categories, holding almost all brands in that category.

One sentence from this major distributor left a deep impression on me: **"To become a major distributor, the first thing is to fire your wife and sister-in-law!"**

That's an absolute maxim. For a while, I often quoted this in my lectures to distributors.

Those who can accompany a distributor boss through the startup phase are basically family and close friends, and at zero starting point, there's still hope. At the same time, trust among family and relatives replaces supervision in management. This is necessary for low-cost entrepreneurship.

However, **when the scale grows to the point where you need to hire people outside the family and friends, there becomes a distinction between "insiders" (family) and "outsiders" within the company, and sometimes an atmosphere emerges that outsiders cannot be trusted.**

This atmosphere can cross management levels. For example, a salesperson who is a "relative" may not trust a manager who is an "outsider." Especially in finance, where only "own people" are trusted, the discrimination against outsiders in processes is very uncomfortable.

The wife is trustworthy, but there's only one. The sister-in-law is trustworthy, but there aren't many. But **to grow, a company must use many capable people who are "less trustworthy than family."** If you don't fire the wife or sister-in-law in charge of finance, it may be hard to keep the accounts clear.

**Because meat can rot in your own pot, but not in someone else's.**

From this case in the Central-South region, I developed a concept: **The boundary of a company is the boundary of the boss's sense of security.**

**If you only trust yourself, you're a self-employed individual; if you only trust family, you're a mom-and-pop shop; if you only trust familiar people, you're a small boss. If you use people with suspicion but also trust them when they prove capable, and use a management system to make capable people trustworthy, you can become a big boss.**

**Summary:** There are fewer major distributors in North China and Central-South China, but they do exist.

There are three fundamental reasons: First, **the population density in North China and Central-South China is relatively high, and manufacturers have thoroughly implemented deep distribution**, with the county as the basic marketing unit, making it difficult to produce major distributors. Through deep distribution's embedded management, distributors are bound; Second, **the characteristic of relationships in business is too prominent**, and relationships have no scale. Third, **there has been no breakthrough in organizational management**, with many grassroots entrepreneurs and few from within the system.

**The Manufacturer-Distributor Game**

I always emphasize that marketing has a standpoint. The value judgment of right and wrong, good and bad (not moral judgment), depends on whose standpoint you take.

When I write articles, such as on distributor management, I take the manufacturer's standpoint, meaning "how manufacturers manage distributors." But this article is from the distributor's standpoint.

**For a distributor to grow big, three conditions must be met: First, a large market area and many agency brands, such as city-level or provincial-level distributors. Second, the importance of relationships in business; Third, organizational management capability supports the company's growth.**

The first issue, **the agency area and brand issue, is the most important issue in the manufacturer-distributor game, far more important than policy games.** But most distributors don't realize the importance of this issue. The major distributors in South China and East China are at least successful in the manufacturer-distributor game.

The reason there are fewer major distributors in North China and Central-South China is not only that distributors dare not play the game with manufacturers, but also related to high population density, especially in Henan, Shandong, and northern Anhui, where it's not easy to do well even in one county.

**Why do manufacturers engage in channel sinking and deep distribution? The purpose is to increase terminal coverage. If city-level distributors achieve this, manufacturers don't need to sink channels.**

The second influencing factor is the business environment. **The more emphasis on relationships, the harder it is to expand to other regions.** The business environment in South China and East China is somewhat better.

The third issue is the distributor's organizational management capability, which is also part of the business atmosphere. It mainly depends on whether elite talents are willing to leave the system and engage in business.

In the development of circulation enterprises, one type of person has an advantage: those who have received organizational training, including those from government agencies, public institutions, the military, the education system, and within enterprises. They have been trained in organization and have seen how large organizations operate.

**People with organizational training have an advantage in scaled operations, while grassroots entrepreneurs may face a lower ceiling.** Of course, there are also outstanding grassroots entrepreneurs, but they are more often exceptional cases.

Since the reform and opening up, FMCG has always been an agency system divided by brand and region, with brand owners implementing deep distribution. The result has been the creation of world-class brand owners, but at the cost of distributors and retailers not becoming world-class giants.

**New Major Distributors**

The current trend in channels is that **channel functions are gradually being deconstructed by third-party platforms**, with typical examples being the establishment of order platforms and warehousing and distribution platforms.

Order platforms have been established, becoming secondary distributors for all brands, completing "one-stop" ordering for terminals. Of course, they are welcomed by stores.

Warehousing and distribution platforms are even more powerful, completing integrated distribution of orders from all platforms, truly "one-stop distribution."

So, who will bear the last important channel function, "promotion"? This question is very important.

Currently, **there is a trend for brand first-level agents to concentrate into platform companies, but I don't think that's the endgame.** Because when all brands are represented by platform companies, these platforms will become like Taobao in its early days, first supporting "Taobao brands" and later charging traffic fees. This is inevitable, regardless of human will.

My view is: **Platform companies and warehousing/distribution platforms will become third-party, and in the future, there may be specialized promotion companies.** I'll discuss this topic in detail later.

The regional characteristics of distributors mentioned in this article are only based on my limited personal experience and may not be universal. They are for reference only. I have not conducted large-sample research. If there are any errors, please point them out.


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