---
title: "Why Is Channel Also a Core Competitiveness in China?"
description: "Philip Kotler, the \"father of modern marketing,\" once said that marketing channel decisions are the most critical decisions management makes, as they directly affect all other marketing decisions. This article explains why distribution channels are a core competitiveness for companies in China, using examples like Alibaba and JD.com, and provides guidance on designing effective sales channels."
author: "麦克"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2018-01-14"
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# Why Is Channel Also a Core Competitiveness in China?

> Philip Kotler, the "father of modern marketing," once said that marketing channel decisions are the most critical decisions management makes, as they directly affect all other marketing decisions. This article explains why distribution channels are a core competitiveness for companies in China, using examples like Alibaba and JD.com, and provides guidance on designing effective sales channels.

Philip Kotler, the "father of modern marketing," once said: **"Marketing channel decisions are the most critical decisions management makes; the channels a company chooses will directly affect all other marketing decisions."**

It is well known that the purpose of a company is to make a profit, and the way to make a profit is by selling products (tangible goods and services). Selling products, in turn, relies on channels. The importance of channel construction to a company's development is self-evident. To sell products, the channel is king!

So, what is the standard definition of a channel, and what does it consist of? Why is the channel also one of a company's core competitiveness? How can you build an unbreakable channel?

The standard definition of a channel is: the path through which ownership of a product is transferred, directly or indirectly, as it moves from the producer to the final consumer or industrial user. We can also vividly understand the channel as **a "bridge" connecting producers and final consumers**. Marketing channels are composed of "people," including "basic channel members" and "specialized channel members." The basis for distinguishing the two is "whether they bear marketing risk." Basic channel members consist of **manufacturers, wholesalers, retailers, and consumers**, and they play a decisive role in product sales; specialized channel members consist of **distributors, advertisers, warehousing companies**, etc., and they play an important auxiliary role in product sales.

Companies fail for different reasons, but the factors for success are generally similar. For example, the service industry emphasizes distinctiveness, the food and pharmaceutical industries emphasize formulas, the transportation industry emphasizes convenience, and the IT industry emphasizes technology. Technology can be a company's core competitiveness, distinctiveness can be a company's core competitiveness, and in fact, the channel is also one of a company's core competitiveness. Most people believe that only "technology" qualifies as a company's core competitiveness, that only technology can "disrupt the world and change society," and that only technology can build giant companies, just as the Windows system made Microsoft, the iOS system put Apple at the top of the world's tech companies by market value, and the Android system allowed Google to disrupt the mobile phone industry. This idea absolutely does not hold in China! In its early days, Alibaba, lacking strong technology, faced setbacks in financing, and even Lei Jun thought Ma Yun was a fraud at the time. Enduring countless ridicule and neglect, Alibaba successfully built a "bridge connecting producers and consumers." Relying on the channel it established (the e-commerce platform), Alibaba successfully proved wrong many Chinese entrepreneurs who only valued "technology." **Alibaba, which went public on the New York Stock Exchange by building a "channel," showed the world the importance of the channel!**

**Technology is not static, and neither is the channel. In any era, paying attention to channel construction and using "new plays" in channels can also build giant companies.** JD.com was founded in 2004, starting later than Alibaba in the e-commerce field. If it had imitated Alibaba's "channel construction model" to compete with Alibaba, it would have been doomed. But why has JD.com become the only domestic e-commerce platform that can compete with Alibaba? JD.com also built a sales channel between producers and consumers (a basic function that e-commerce platforms need to have). The difference is that JD.com created a "new play" in channels—JD's self-operated channel. By establishing its own warehouses in major cities, it shortened the channel length and greatly reduced the channel operation time ("211" limited-time delivery), and also created a good price advantage for products. Whenever a company's products face sluggish sales, it should look for a breakthrough in the channel.

**It is undisputed that tech companies take technology as their core competitiveness, but is it worth spending a lot of effort developing product channels and making the channel one of your "core competitiveness"? The answer is: very worth it.** If you only focus on product development and neglect channel construction, no matter how good the product is, there is a risk of being eliminated by society. Xiaomi Technology was founded in 2010. Xiaomi phones took three years to surpass other established domestic phone brands and reached the number one position in China's mobile phone rankings! Perhaps Xiaomi's domestic ranking has declined now, but don't ignore a fact: ZTE phones were founded in 1985, Huawei phones in 1987, Meizu phones in 2003, and OPPO phones in 2004! Why did Lei Jun create the miracle of Xiaomi phones in just three years? Perhaps it confirms what Liu Qiangdong, chairman of JD.com, said to the media: "Lei Jun is the best at marketing and the most knowledgeable about developing channels in China." Careful observers can see that while Lei Jun was making his own phones, he also developed his own four major sales channels: the PC-based Xiaomi.com, the Xiaomi Mall and Mijia Mall on mobile apps, and the offline Xiaomi Home. Xiaomi's "instant rise" was not because "Xiaomi phones were at the forefront of the wave"; Xiaomi's successful "rise" in China relied not only on technology but also on sales channels.

The Internet era has now transformed into the mobile Internet era, and information has become more "flooded." Most people's reading habits have shifted from "searching for information to read" to "resisting all kinds of information." The beautiful fantasy of "good wine in a deep alley" will be difficult to realize today!

**So, how do you design a reasonable sales channel?**

Before designing a sales channel, you should first understand the channel structure. The channel structure consists of three parts: "length structure," "width structure," and "system structure." According to the hierarchy, marketing channels can be divided into zero-level channels (no intermediaries between producers and consumers), one-level channels (short channels), and two- or three-level channels (long channels). The number of intermediaries determines the length of the channel, and the number of similar distributors at the same level determines the width of the channel. In general, the shorter the channel, the more price advantage the product can have; the wider the channel, the easier it is to sell the product. **Based on the relationships among producers, consumers, and intermediaries in the channel, channels can be divided into two categories: traditional channel systems and integrated channel systems.** In a traditional channel system, members at all levels act independently, each pursuing only their own maximum benefit. This is the root cause of sluggish sales and backward channels. Nowadays, traditional channel systems are being replaced by "integrated channel systems." In an integrated channel system, members at all levels operate efficiently, which can better reduce production costs and create price advantages.

When designing a channel, you should consider **product factors, market factors, competitors, manufacturers, and environmental factors.**

Product: For products with low prices and high sales volume, a multi-channel, long-route sales method should be adopted to reduce costs. Conversely, the shorter the route, the fewer the channels. For products with strong fashion appeal, high technical content, and comprehensive after-sales service, short channels should be adopted. New brands and new products should choose short channels for sales; mature brands should choose multi-channel, long channels to increase sales and expand brand influence.

Market: Understand customers' acceptance of product prices, seize potential customers, develop potential consumer markets, and pay attention to the seasonality, use, and positioning of products.

Competitors: If competitors have taken control of traditional sales channels first, then it is necessary to develop "new plays" in channels. For example, JD.com, competing with Alibaba, established JD's "self-operated warehousing marketing channel." Not all products are suitable for avoiding competitors; for example, food products generally replicate competitors' channel models because they often compete on price.

Manufacturers: Fully understand the width and depth of the "product mix" (the number of product categories and models). If the product width and depth are large (many categories and models), adopt short channels and direct sales as much as possible. Conversely, adopt long channels for sales.

Environmental factors: When designing a channel, fully consider social and cultural environments such as consumer lifestyles, aesthetic characteristics, and consumption habits; understand the consumption level, labor conditions, industrial structure, and other economic environmental factors of the areas covered by the channel; fully understand competitors' channel design methods in a competitive environment, and formulate short-term channel countermeasures and long-term channel plans.

The 2017 "Double 11" shopping festival once again refreshed the "world record for single-day e-commerce consumption," but while consumers enjoyed discounted shopping, they rarely appreciated the pain of some merchants: After Double 11 in 2017, JD.com sharply criticized Alibaba's channel hegemony—choosing to sell on Alibaba's e-commerce platform meant you had to stop business cooperation with JD.com! With the continuous development and upgrading of China's manufacturing industry, the era of supply falling short of demand and sellers "sitting at the dealer's table" is gone forever. **Companies that do not pay attention to channel construction and do not develop channels are destined to be eliminated by the times.**

To sell products, the channel is king! Online merchants must open offline channels; conversely, offline merchants must open online channels.

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