---
title: "Why B2b Is a Good Way Out for Distributors Seeking Transformation?"
description: "Recently, while visiting distributors across various regions, I observed that both sales and profits are declining. Distributors now face not only competition from peers but also pressure from retail competition. The reasons for the current difficulty include the severe downturn in the core channel of supermarkets and hypermarkets, and the rise of new retail formats such as discount stores, snack shops, and flash warehouses, which are eroding distributors' business."
author: "云川"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2024-07-20"
language: "en"
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# Why B2b Is a Good Way Out for Distributors Seeking Transformation?

> Recently, while visiting distributors across various regions, I observed that both sales and profits are declining. Distributors now face not only competition from peers but also pressure from retail competition. The reasons for the current difficulty include the severe downturn in the core channel of supermarkets and hypermarkets, and the rise of new retail formats such as discount stores, snack shops, and flash warehouses, which are eroding distributors' business.

Recently, while visiting distributors in various places, I have seen the current state of many distributors: both sales and profits are declining. Distributors now face not only competition from peers but also pressure from retail competition.
**Why is the distributor business difficult now?**
**First, the original core channel—supermarkets and hypermarkets—has seen a severe decline in business.** From the golden era when distributors could make money simply by becoming suppliers, now many distributors are losing money in the supermarket business.
**Second, the large-scale rise of new retail formats has reduced the business available to distributors.** Discount stores, snack shops, flash warehouses, and other new retail formats of various sizes are expanding aggressively, essentially competing for a share of the local trading business.
Such a market environment forces distributors to make changes, which is why "transformation" has been frequently mentioned among distributors in the past two years.
**Where is the direction of transformation?**
In previous articles, "New Distribution" categorized the development paths of distributors into five types: **warehousing and distribution distributors, brand distributors, category distributors, channel distributors, and platform distributors.**
This means there is not just one path for distributor transformation. However, today I will focus on the topic of this article and mainly share about platform distributors, which is what we call B2b.
**Why should distributors do B2b?**
Before answering this question, we need to think about what the endgame of offline retail is. I believe it is: **one endgame—chain operation, and two forces—distributors and retailers.**
As early as 2020, in the "2019-2020 FMCG Retail Small Store B2b Competitiveness Report," New Distribution made a judgment about the future of small retail stores: traditional small retail stores will not completely disappear, but **branding and chain operation will become an irreversible trend in the evolution of traditional small retail stores.**
We can refer to formats like milk tea shops and pharmacies. More than a decade ago, there were many independent milk tea shops and pharmacies, but today the market is basically dominated by chain enterprises.
The reason why the chain process in supermarkets has been slow is mainly because there are too many SKUs and too many non-standard products, making integration more difficult.
But today, this process is gradually accelerating for a simple reason: the business of small stores is getting harder. Online e-commerce is squeezing, and offline snack shops and flash warehouses are grabbing share. If it weren't for the sale of cigarettes and betel nuts, many small stores would not survive.
**The essence of retail is to continuously move towards lower costs and higher efficiency.** But clearly, most independent stores cannot compete with chains in terms of cost and efficiency. When the market is good, independent small stores can still do well, but when competition becomes intense, it becomes an elimination game.
**Therefore, in the traditional retail format, the trend of chain operation is accelerating, just at different stages of progress.**
According to the "2024 China Convenience Store Development Report" jointly released by the China Chain Store & Franchise Association (CCFA) and KPMG China in June, the number of convenience store outlets reached 321,000 in 2023. In 2019, the number was 132,000, and in 2015, it was 91,000.
It can be seen that from 2015 to now, the number of convenience store outlets nationwide has grown extremely rapidly. Moreover, the trend of going down to lower-tier markets is very obvious. In fourth- and fifth-tier cities, even county towns, convenience stores are appearing densely. Especially in Jiangsu, Zhejiang, Shanghai, Guangdong, Shanxi, and other places, the chain operation and branding of retail stores are becoming common.
Under the endgame of chain operation, **the two forces—distributors and retailers—** are essentially competing for the resources of 6.5 million small stores. Distributors need strongly controlled terminal resources to stabilize their business, while retailers want to encroach on small stores to grab locations.
Distributors have two paths to strongly control terminals. **One is to help small stores survive under the chain trend by providing complete supply chain services and terminal operation guidance, thereby strengthening control over outlets; the other is to enter retail themselves, whether through direct operation, trusteeship, or close or loose forms.**
Both paths have a prerequisite: **distributors need to have strong product supply chain services.** Simply put, if you don't have full-category supply chain capabilities, how can you strongly control terminals or open stores?
Returning to the initial question, **the ultimate purpose of distributors doing B2b is to complete full-category supply chain construction through B2b, and then rely on the full-category supply chain to strongly control terminals or build local chain brands.**
**Why can distributors do B2b?**
B2b is not new in the FMCG industry. The concept was proposed more than a decade ago, and many internet giants participated, but most did not succeed.
**From the development history of B2b, it can be divided into three stages:**
**Germination period (2012-2015):** The core carrier was PC, where small stores placed orders via computers, mainly done by small startup companies.
At that time, promotion personnel had to carry a computer when visiting terminals, but most small stores did not have computers, so it was difficult to scale.
**Bubble period (2015-2020):** The core carrier shifted to mobile (phones), where small stores placed orders via apps. The main players became internet giants, such as JD New Channel, Alibaba Retail Link, and many internet companies that received funding.
Starting in 2017, B2b began to decline from its peak. Many platforms that were once darlings of the capital market exited the stage, such as Dianshang Hulian, Zhanghe Tianxia, Yatang Xiaochao, Zhangshang Kuaixiao, and Best Dianjia.
**Maturity period (2020 to present):** The core carrier has become mainly mini-programs, supplemented by apps. Distributors have begun to become the main players in this field, and regional B2b platforms have gradually risen, such as Shaanxi Jiapin Yunshi, Chengdu Rongcheng Yigou, Luoyang Shendu Yigou, etc.
**Why can some distributors do well what giants failed to do?**
**First, after the market was educated during the germination and bubble periods, it has become highly mature, and small store owners have gradually developed the habit of ordering online.**
**Second, the underlying logic of national platforms is "business pushes platform," where business becomes a tool, but a successful regional B2b model should be "platform empowers business."** Because the service to small stores cannot be separated from business, and this aligns with the distributor's own trading business.
Moreover, B2B business is different from B2C. C-end consumers can be driven to repurchase through subsidies, gradually forming user stickiness, but B-end small store owners are business entities. Whether they are willing to continue ordering involves multiple dimensions such as price, service, and after-sales.
Simply put, if the market is built on subsidies, once subsidies stop, repurchase from small stores stops.
**Third, based on past sales networks and resource accumulation, distributors have lower costs for localized operations.** Distributors already have a basic business: warehousing, picking, distribution, business teams, products, and some manufacturer support, making them more efficient in starting and fulfilling.
This is also why the FMCG industry has been deeply distributed over the past few decades, with brand owners relying on distributors to reach the market.
**Is it difficult for distributors to do B2b?**
Distributor friends often ask me: Is there still an opportunity to do B2b now?
My judgment is: **First- and second-tier cities can accommodate 3-5 B2b platforms, general prefecture-level cities can accommodate 2-3 platforms, and county-level cities with more than 1,500 outlets can also do it.**
Compared with traditional distribution models, B2b may not have a price advantage in a specific category or single product, but when focusing on full-category supply, the entire supply chain has a huge advantage.
Today, all regional B2b platforms have a large business team and enough products to support higher-frequency visits, as well as high-frequency touchpoints through enterprise WeChat, WeChat groups, official accounts, etc., ensuring stronger user stickiness.
But I still emphasize that doing B2b is not a simple task. The construction of the entire B2b model involves multiple dimensions such as product organization, platform operation, sales management, and personnel management, which are quite different from the past management model of distributors.
Moreover, not all distributors are suitable for the B2b model. They need to have the ability to cover small and medium stores and have certain product management capabilities. For example, brand distributors with few SKUs will find it difficult.
Here, I would also like to share **several misconceptions about distributors doing B2b:**
**1. Distributors should not try the matching model.** In the matching model, each participating distributor operates independently, sells independently, and has independent finances, without unified management. The final result may be that a well-performing distributor expands across categories and begins to swallow others.
**2. The development path of B2b is: single category—multi-category—full category—open platform.** Distributors should not expand products, people, and warehouses all at once when starting B2b.
Large-scale investment does not necessarily bring good results. Blind investment without a foundation may result in products moving fast but people not keeping up, or products not selling and people leaving.
Distributors should start with a single category, first thoroughly understand the categories they are good at, let salespeople become familiar with the B2b business model, and only after the model is running smoothly consider adding people, products, and changing warehouses and equipment.
**3. Category expansion should be strategic. Even when expanding categories, start with related categories.** For example, for grain and oil, consider seasonings and frozen foods first; for washing and care, consider paper and daily necessities first.
Crossing categories is like crossing industries. The sales and management differences between categories are significant. Do not easily expand without thoroughly understanding the characteristics and experience of the category.
**4. Doing B2b is not about eliminating salespeople, but empowering them to visit and maintain more frequently.**
The functions that distributors originally had will not be lost in B2b, and they will be done better. The platform's role is to help salespeople simplify management. In the past, a salesperson could handle 1,000 SKUs; now through the platform, they can handle 4,000 SKUs.
More products mean that salespeople can produce more per store, and the number of stores visited can be reduced. In the past, they needed to serve 30 stores a day; now they only need to serve 15 stores a day. With fewer stores to manage, higher visit frequency, and longer stays, service naturally improves, creating a virtuous cycle.
**In conclusion**
Distributors doing B2b is a good business, but it is also a difficult one.
The good part is that, from the end, B2b is an inevitable product of market development, and there are already many successful cases across the country.
The difficulty lies in the fact that **doing B2b is not a simple transformation but a career change. The underlying logic is completely different from the past trading business, and distributors need to relearn.**
Teacher Yunchuan, founder of Shengyihao Consulting and B2b supply chain expert, has been engaged in B2b supply chain and terminal empowerment for 12 years. He has explored and practiced a new combination of B2b supply chain and terminal stores, was the first to propose the concept of retail terminal service providers, and created a complete training system to upgrade traditional FMCG salespeople into retail terminal business consultants. This article is the first in the "Yunchuan B2b Column" series. Next, I will share insights on the six modules of distributors doing B2b: **product organization, platform operation, sales management, development planning, organizational structure, and compensation assessment**, hoping to bring some inspiration and thoughts to distributor friends doing B2b.
**From August 20 to 22, 2024, the "2024 6th China FMCG Conference" with the theme "Crossing the Shrinking Era" will be held grandly in Shanghai. The "3rd China FMCG Distributor Conference" will be held concurrently. Teacher Yunchuan will be a keynote speaker at the conference, sharing the "Guidance Report on B2b Platform Strategy for FMCG Distributors," deeply interpreting the current situation and development paths of distributors doing B2b. Interested friends are welcome to scan the QR code to inquire about the details of this conference!**


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