---
title: "Why Is It So Hard for FMCG Distributors to Make a Living?"
description: "When the distributor business is no longer profitable, how many are willing to persist? In recent years, few newcomers have entered the FMCG distribution industry, leaving only companies that have struggled for years or decades. As market competition intensifies and profits decline, the industry faces challenges from macro factors, changing consumer demand, and internal management issues."
author: "刘永国"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-11-17"
categories: "Dealer Operations"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/why-is-it-so-hard-for-fmcg-distributors-to-make-a-living-4a42bbb3/"
markdown: "https://xinjignxiao.com/en/articles/why-is-it-so-hard-for-fmcg-distributors-to-make-a-living-4a42bbb3.md"
original_source: "https://mp.weixin.qq.com/s/O6ExljBHMCv0geAD0GycUQ"
translation: "https://xinjignxiao.com/zh/articles/%E5%BF%AB%E6%B6%88%E5%93%81%E7%BB%8F%E9%94%80%E5%95%86-%E7%94%9F%E6%84%8F%E4%B8%BA%E4%BD%95%E5%A6%82%E6%AD%A4%E9%9A%BE%E5%81%9A-4a42bbb3.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/why-is-it-so-hard-for-fmcg-distributors-to-make-a-living-4a42bbb3/"
citation: "刘永国. “Why Is It So Hard for FMCG Distributors to Make a Living?.” New Distribution, 2019-11-17. https://xinjignxiao.com/en/articles/why-is-it-so-hard-for-fmcg-distributors-to-make-a-living-4a42bbb3/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# Why Is It So Hard for FMCG Distributors to Make a Living?

> When the distributor business is no longer profitable, how many are willing to persist? In recent years, few newcomers have entered the FMCG distribution industry, leaving only companies that have struggled for years or decades. As market competition intensifies and profits decline, the industry faces challenges from macro factors, changing consumer demand, and internal management issues.

**When the distributor business is no longer profitable, how many are willing to persist?**
Have you noticed that in recent years, few newcomers have entered the FMCG distribution industry? The remaining players are companies that have been through years or even decades of market struggle. In the early days, the industry was glorious, and everyone wanted to strike gold. However, as market competition intensifies, when the distributor business is no longer profitable, how many are willing to persist?
> **Core Guide:**
>
> **1. Impact of macro factors**
>
> **2. Changes in the underlying logic of consumer demand**
>
> **3. Self-imposed limitations on development**
**Why is the distributor business not doing well now?**
In recent years, you may have noticed a problem: the FMCG distribution industry is becoming increasingly difficult. Perhaps three years ago, our annual sales were 5 million or 20 million, but after two, three, or even five years, we still cannot break through. Sales have not grown, and profits are declining.
Distributors have historically played a crucial role in the FMCG supply chain. Even domestic first-tier brands owe their great achievements to the hard work of distributors. Distributors have created immense value for many manufacturers.
Do you agree? Many new brands have grown thanks to everyone's promotion. Without you, no manufacturer could succeed; they would be building castles in the air.
At this year's Spring Sugar Fair, a survey report mentioned that 67.8% of distributors in China are unwilling to continue, or have lost confidence in the industry and see no hope.
**-01-
**Next, let's analyze the reasons:**
**First reason: Macro industry factors:** In previous years, B2B in this industry was prevalent, claiming they would eliminate intermediate links. But what happened?
Some B2B platforms either acquired the largest domestic distributors, such as Zhanghe Tianxia, Zhongshang Huimin, Lingshoutong, Xintonglu, etc., or some were eliminated.
Why were these B2B platforms eliminated? The reason is simple: distributors are crucial to manufacturers for brand building, brand maintenance, market activation, etc. These tasks are all completed by distributors.
Additionally, there is a saying: "A mighty dragon cannot crush a local snake."
The advent of 4G internet and the impact of e-commerce platforms are also significant factors.
Consumers used to go directly to stores to buy. Now, for things like snack foods, clothing, and many other items, they can order online directly, and prices are very affordable. Thus, e-commerce has siphoned off some sales.
Therefore, it is very difficult to break through and elevate our sales to a higher level.
**Second reason: The underlying logic of consumer demand has changed**
In the 1970s, people bought whatever was available.
In the 1980s, they began to pursue quality.
In the 1990s, they pursued brands and quality, leading to overcapacity.
Today?
Environment, experience, personality, appearance, and service—today is a watershed in the logic of consumer demand!
The purchasing power of the post-70s and post-80s generations is declining, while that of the post-90s and post-00s is rising.
**Another important factor currently affecting distributors is community group buying**
The main consumer force now is the post-90s generation. Consumer demand has shifted from going to stores to staying at home, with more diverse needs. Let's think: if customers are intercepted at home, will convenience store business be affected?
I visited over 1,000 stores, many of which sell vegetables to attract foot traffic. Now, customers buy directly at home. Won't convenience store business be affected? Community group buying eliminates many intermediate links, offering better prices. Won't the products we represent be affected?
Currently, community group buying is developing rapidly across the country. For example, as we all know, Xing Sheng You Xuan recently received over 70 million in financing to build front warehouses.
What is a front warehouse? For instance, if I build a warehouse in Zhengzhou, all consumers in Zhengzhou who place orders will be delivered from that front warehouse. Then consider ourselves: we represent snack foods, and they also sell snack foods. Perhaps their prices are lower than ours. Will we be affected? Certainly.
**At this point, we have two choices:**
First: Supply them.
Second: Compete against them.
If we compete, it's uncertain whether we can beat them.
These external factors are impacting our business.
**Now let's look at internal constraints:**
**Internal factors include two aspects: external and internal**
First, consider this: the manufacturer sells goods to us. The manufacturer is the seller, and we are the buyer.
Then a problem arises: the distributor's upstream is the seller, but the downstream is not the buyer. Representing products naturally involves significant risk.
See if this makes sense.
**The last factor is self-imposed:** We can conclude that if marketing methods, personnel management, financial management, and customer management are not up to par, we cannot build a cohesive team.
Only by finding the root of the problem can we find targeted solutions. The simplest question: when we choose products, if we represent a product and place it on the shelf, why should consumers buy ours instead of similar competing products?
Only when the manufacturer or we provide sufficient reasons should we consider representing it.
Many distributors have long been engaged in distribution or agency. They need to go through important stages from establishment to growth to success, and the key operational elements differ at each stage. Opening a store requires two to three years of accumulation because early on, customer trust is low and business is scarce. To attract customers, they often "lose money to gain reputation" for a long time. From purchasing and selecting goods to delivery and after-sales, including daily trivial matters, they have to worry about everything. There are no holidays or fixed schedules. Sometimes a customer's call must be resolved no matter how late!
Not only do they have to stay at the store all year round without enjoyment, but they also face anxiety during off-seasons, exhaustion before and after activities, and pressure from manufacturer tasks. It can be said that the effort and return for distributors are no longer proportional. Many companies close within a year or two, and now few are willing to enter this industry.
**-02-
**Making easy money in the distributor business is absolutely impossible!**
Distributors seem to make money, and even now are considered profiteers, but those in the industry complain bitterly. It's undeniable that there were good years in the past, but now? In a place, several or dozens of stores sell homogeneous products, all competing on price and market share. Vicious low-price competition has made the industry unprofitable.
The home improvement retail market, closely related to consumer housing, has experienced years of high growth. Now, competition methods are increasingly complex, with product wars, channel wars, and promotion wars becoming more intense; investment is increasing, but returns are decreasing. Due to fierce competition, various expenses are rising linearly, but profits are shrinking.
When products rise in price, customers don't accept it, and selling prices can't increase; when products drop in price, manufacturers don't care, and we have to sell at a loss. Sometimes, with rapid product updates, last year's new products become old products this year and must be sold at a loss. If customers are in a good mood, they understand the difficulties of business and buy quickly. But if they are picky, it's troublesome. Even if we talk until we're hoarse, they still think we earn too much, constantly haggling and comparing prices, hoping we sell at a loss.
**-03-
**The profits earned are just book money, temporary money!**
When purchasing, we need to pay in advance, but when selling, we often face credit. We borrow from banks with interest to operate, but then extend interest-free credit to customers and acquaintances. Some debts are uncollectible for years. After selling a product, after deducting delivery and ongoing service costs, we seem to earn one or two hundred, but after these expenses, how much is left?
Manufacturers of first-tier products often invest heavily in advertising, so distributors don't need to struggle to open markets. Therefore, manufacturers may not value distributors highly. After all, with high product awareness and many buyers, if you don't operate, many others will. Thus, even if first-tier product profits are thin, manufacturers can still control distributors firmly.
But well-known brands are few; the market has more unknown or less-known manufacturers and products. These manufacturers, with limited resources, cannot invest heavily in advertising, so they often give distributors more operational space and support, with profits several times that of well-known products.
In exchanges with many distributors, I found that some distributors fail to grow because they face capability shortcomings, especially management capabilities hitting a "ceiling."
As turnover increases and staff numbers grow, the four-in-one role of boss, salesperson, driver, and porter causes more distributors to face development confusion.
They want to break through but don't know how. Some know they should hire professional managers, but they are reluctant and uneasy about letting "outsiders" manage their company. They develop cautiously, even fearfully, moving slowly and becoming enterprises that never grow.
In fact, to make big money and do big things, distributors must transform from mom-and-pop individual businesses to standardized companies. They must shift from being a "general manager" who manages everything to a "helmsman" who only sets direction, not technology.
According to their development stage, they should introduce professional managers in a timely manner, letting professionals do professional work, making themselves "management experts" rather than "individual businesses" who manage everything but manage nothing well.
Management yields benefits. Only when distributors understand and are good at management, "govern by doing nothing," and skillfully use others' strength to achieve their goals, can they truly enter the standardized, corporate track, truly become "hands-off bosses," and reach the pinnacle of their careers.
Of course, to be a profitable distributor, one must continuously learn, build a learning-oriented enterprise and organization, continuously enhance core competitiveness, and actively participate in competition. Also, establish and build corporate culture to unite people and morale, thereby managing people and the market, continuously gaining competitive advantages and favorable positions.
Not everyone needs to become a famous entrepreneur to reach the peak, nor does everyone need to be wealthy to be a life winner. "First fate, second luck, third feng shui, fourth accumulating virtue, fifth reading"—the success of the sixth step is somewhat idealistic.
Among distributors who extend upstream in the supply chain, many are seen, but few succeed, although this goes beyond the scope of distribution. Conversely, those who made their first pot of gold through distribution and then speculated in real estate or stocks are still living comfortably, and there are many. Of course, this also goes beyond the discussion of distributors.
The success of this step: if you succeed, you become the next Zhong Shanshan; if not, you just flash briefly on the distributor path.
So, do you think being a distributor is just buying and selling, so simple?
Wrong, wrong, you all thought wrong!
To be a good distributor, you must not only be good at analysis and understand products;
You also need to learn some psychology, not only to figure out others but also to know yourself;
You need a team spirit that endures humiliation and an endless spirit of exploration;
Even more, you need a grand vision of "you're good, I'm good, everyone's good."
**-04-
**Quality and integrity in business are not difficult**
**But how many can persist?**
It's said that selling good things makes big money, but in this industry, it's the opposite: cheap things, regardless of quality, always have people paying high prices, while quality brand products often fail to yield profits. Many customers compare and finally choose a generic or counterfeit product to save one or two hundred yuan, then complain about poor quality when problems arise, forgetting the principle of "you get what you pay for."
How much profit can distributors give up now? Who would do loss-making business? Everyone says they want quality and integrity, but under the temptation of profit and sales, few can persist.
Someone asks, since the distributor business is so difficult now, why are you still persisting?
I've thought about this for a long time. After more than ten years in business, even with countless disappointments, it's not easy to give up. I persist because over the years, there are many old customers who trust and support us. If I stop, who will serve them? So, even though the distributor business is not very profitable now, no matter how tiring it is, I will persist!
I also hope all customers can understand us. Distributors don't seek excessive profits, but only reasonable profits can maintain our normal operations and allow us to continue providing services. Perhaps today you are pleased with saving money on online shopping and complain that physical stores are too expensive, but when you encounter unguaranteed product quality and troublesome after-sales service, when the familiar physical stores are gone, no amount of money can buy the convenience and peace of mind you once had!
Source: Liu Yguo Baijiahao
If the report is adopted, a reward of 400-2000 yuan will be paid.


---

## Citation metadata

- Publisher: New Distribution
- Author: 刘永国
- Published: 2019-11-17
- Canonical: https://xinjignxiao.com/en/articles/why-is-it-so-hard-for-fmcg-distributors-to-make-a-living-4a42bbb3/
- Original source: https://mp.weixin.qq.com/s/O6ExljBHMCv0geAD0GycUQ

## 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