---
title: "Will Same-City Unified Warehousing and Distribution Platforms Kill Fellow Distributors?"
description: "Traditional distributors transitioning to unified warehousing and distribution platforms may seem unrelated to your distribution business, but these platforms could actually disrupt your operations. While they promise efficiency gains, cost reduction is questionable, as seen in Jingmen where platform logistics costs are higher than traditional delivery methods."
author: "袁来"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-09-12"
language: "en"
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# Will Same-City Unified Warehousing and Distribution Platforms Kill Fellow Distributors?

> Traditional distributors transitioning to unified warehousing and distribution platforms may seem unrelated to your distribution business, but these platforms could actually disrupt your operations. While they promise efficiency gains, cost reduction is questionable, as seen in Jingmen where platform logistics costs are higher than traditional delivery methods.

**Introduction:** Traditional distributors transitioning to unified warehousing and distribution platforms may seem like a move into a different field, completely unrelated to your distribution business, so you might refuse to cooperate or embrace it. But little do you know, these unified warehousing and distribution platforms could very well disrupt your business!
One of the most common forms of transformation for traditional distributors is becoming warehousing and distribution service providers. Multiple distributors join forces, leveraging their existing distribution base (outlets) to integrate into a platform, then recruit fellow distributors to store goods in the warehouse, with unified warehousing and delivery. This helps distributors reduce costs and increase efficiency.
**Efficiency gains are possible, but is cost reduction truly feasible?**
According to conventional logic, if one outlet previously required 10 vehicles for delivery, now only 1 vehicle is needed, so costs should decrease and efficiency should improve. But what's the reality? Li Qiangyun told New Distribution, "That's not the case. Taking Jingmen, a fourth-tier city, as an example, the logistics cost per bottle of Yibao water on the warehousing and distribution platform is about 0.78 yuan, while distributors using tricycles for delivery only spend 0.6 yuan per bottle. After over 20 years of operation, distributors have already squeezed their costs very low. It's unlikely that warehousing and distribution platforms can convince distributors to join by offering 'lower costs'."
Pengdun Meiyitian Supply Chain Company, as one of the earliest distributors in China to transition to a unified warehousing and distribution platform, after nearly 3 years of operation, now houses products from dozens of distributors including Yibao, Red Bull, Wrigley, Nestlé, Vinda, and Jieting, with annual sales of nearly 400 million yuan.
Recently, New Distribution interviewed Li Qiangyun, co-founder of Hubei Pengdun Meiyitian Supply Chain Management Co., Ltd., to see how Meiyitian transformed into a unified warehousing and distribution platform in Jingmen, a fourth-tier city. From its establishment to now, what pitfalls and landmines did Meiyitian encounter, and how did it respond?
**1. Warehousing and Distribution Are the Infrastructure for Commodity Circulation**
In 2015, three distributors in Jingmen (representing brands such as Yibao, Nestlé, Wrigley, and Vinda) were in a weak position in cooperation with KA stores and were often "bullied." They therefore united with over a dozen local distributors to establish a local chamber of commerce, hoping to integrate the products represented by each distributor and negotiate uniformly with stores to gain more bargaining power.
But after its establishment, they didn't expect that the chamber of commerce would just collect membership fees and organize dinners, providing no help to their distribution business. Thus, the three distributors considered jointly establishing a supply chain management company. At that time, Li Qiangyun was the founder of a local group-buying enterprise in Jingmen.
Li Qiangyun told New Distribution, "Initially, we hoped to make arrangements and integration in the overall supply chain of goods, but considering that warehousing and distribution are the infrastructure for commodity circulation, after careful comprehensive evaluation, we finally decided to transform into unified warehousing and distribution." In June 2015, Pengdun Meiyitian Supply Chain Management Company was registered and established, and connected to the Maideline system. In September, the online ordering platform was launched.
In the second half of 2015, Meiyitian began its transformation. The businesses of the three distributors were merged, integrating over 80 sales staff, moving into a 10,000 square meter logistics park, and configuring 20 people for warehousing and distribution backend scheduling, sorting, picking, and shipping. After half a year of preparation, as the "first to eat the crab," with no reference cases for transformation, problems began to surface intensively by the first half of 2016.
**2. Distributors Not Joining, Internal Attrition Costing 300,000 Yuan per Month**
Problems were mainly reflected in three aspects:
**First: Distributors not entering the warehouse.** Li Qiangyun told New Distribution that the fear of business being intercepted is the key reason distributors are unwilling to join. In the past, the three shareholder distributors merged their sales teams and integrated sales into the warehousing and distribution platform. Sales, warehousing, logistics, payment, after-sales, and display were all handled by Meiyitian, which increased the difficulty of attracting distributors to the platform.
**Second: Severe manpower attrition.** The merger of sales teams not only created obstacles for distributors to join but also caused internal friction in business integration. Li Qiangyun said that due to differences in boss styles and distribution categories, including internal factions, sales operations were inefficient. Additionally, the reorganization of warehousing and distribution personnel was similar. Since the initial planning of backend capacity was to accommodate 20 distributors on the platform, but the reality fell far short, this resulted in wasted labor costs. We roughly estimated nearly 300,000 yuan per month in internal attrition costs.
**Third: Pressure from first-tier brand sales tasks.** The original plan was to merge the sales of the three distributors to improve efficiency and reduce repetitive visits, with Meiyitian providing unified sales services and charging a fee. But this did not go as expected, and there was a serious gap between the value of services provided and the revenue generated.
Moreover, sales directly affect the manufacturer's sales targets. Li Qiangyun told New Distribution, taking Yibao as an example, with annual sales of 60 million yuan in Jingmen, manufacturers typically require annual sales growth or at least stability. After integrating sales into Meiyitian, Meiyitian might work hard to sell Yibao, but market competition is unpredictable, and product sales decline with many uncertain factors. Meiyitian did not want to bear the responsibility and pressure of "creating something out of nothing" in this process.
To solve the above problems, in the second half of 2016, Meiyitian entered an adjustment period. Li Qiangyun told New Distribution, "First, we disbanded the sales team and returned them to their respective trading companies, repositioning our business to only provide warehousing and distribution services. To accelerate distributors joining the warehouse, we set up a same-city logistics subsidiary under Meiyitian Supply Chain Company. Based on different distribution categories (water and beverages, snacks, condiments, grain and oil, cosmetics, etc.), we brought in 18 distributors as shareholders to accelerate the formation of the platform's basic traffic, while supporting them to expand their respective distribution categories. In terms of internal attrition, we focused on optimizing the internal organization, achieving standardized management, process-oriented systems, and merit-based selection to ensure efficient backend operations."
At the end of 2016, a local modern agricultural group saw the potential of Meiyitian's unified warehousing and distribution project and invested. From then on, Meiyitian expanded its warehousing area from 10,000 square meters to 40,000 square meters. In 2017, Meiyitian's unified warehousing and distribution platform began to take shape.
**3. Establishing a Supermarket Chain Company to Force Distributors to Join**
In the second half of 2017, Alibaba's Tmall Xiaodian and JD.com's convenience store franchise models spread to the Jingmen area, which had no professional, chain convenience stores yet. To resist the invasion of new external species and further strengthen Meiyitian's supply chain system, in December 2017, Meiyitian joined forces with 17 local supermarket owners, totaling 29 stores, to establish the Lihuin Supermarket Chain Company.
Li Qiangyun told New Distribution that Meiyitian united with well-performing local supermarkets to establish Lihuin. For Meiyitian, this could leverage the chain supermarkets to force distributors who had not yet cooperated with Meiyitian to join the warehouse. Additionally, it would help Meiyitian expand online marketing in the future to C-end, such as community e-commerce. With the operational experience of these quality stores, Meiyitian could provide guidance and empowerment to traditional small stores. For the chain supermarkets, joint procurement by multiple supermarkets could improve bargaining power and secure more resources from upstream suppliers, including purchase prices and market expense investment.
"Currently, Lihuin Supermarket Chain not only needs to achieve the above short-term goals, but in the future, it will combine with Meiyitian's supply chain platform to build a complete B2B2C business. Through chain supermarkets, we acquire offline C-end users. For planned goods for C-end consumption, Meiyitian will achieve C-end delivery through the B2C mall and same-city logistics company. For instant goods, Meiyitian will allocate them to nearby small stores based on users' LBS positioning, and the small stores will complete offline delivery." Li Qiangyun told New Distribution that this is what Meiyitian intends to do by uniting with several supermarkets to establish Lihuin.
**Final Thoughts**
**1. Unified Warehousing and Distribution Will Accelerate the Rise of Head Category Distributors**
Many traditional distributors transitioning to unified warehousing and distribution platforms expect all distributors in the region to join. But in fact, for a single regional market, distributors transitioning to such platforms should not expect all local distributors to join, nor should they expect to earn substantial profits from warehousing and distribution services themselves (profits are not as good as distribution agency).
The essence of establishing a unified warehousing and distribution platform is to build a pipeline for commodity circulation in the region. The nature of warehousing and distribution platforms is handling plus service. If 50% of FMCG goods in a region are handled and served by you, you can establish market barriers. As warehousing and distribution deepens, the dependence on both ends becomes stronger, especially the downstream small stores.
The cake (profits) of commodity circulation is limited. Platforms with infrastructure and customer resources can redistribute it and aggregate scattered distribution businesses. In short, unified warehousing and distribution platforms will accelerate the rise of head category distributors, cause mid-tier distributors to fail, and even affect the relatively stable distribution of distributor power in a region.
**2. How Can Unified Warehousing and Distribution Break the Shackles of Non-Profitability?**
Traditional distributors transitioning to unified warehousing and distribution must have a platform mindset. Warehousing and distribution fees can only balance the costs of building and maintaining the platform. Distributors need to look beyond the concept of unified warehousing and distribution, stand higher, look further, and find the platform's value to identify profit directions.
Where are the future profit directions for unified warehousing and distribution platforms? There may be four: First, scale up by expanding the warehousing and distribution platform area. Second, data value and supply chain finance: warehouse receipt pledge to provide financial credit to distributors, data to provide credit to downstream small stores, and data can also be provided to upstream manufacturers. Third, using warehousing and distribution as a carrier, rebrand local small stores, extend to C-end, and become retailers, such as the recent "hot" social e-commerce. Fourth, return to distribution business, re-divide regional markets, allocate commercial flow resources, and integrate commodity circulation.
**Extended Reading: Review the exciting reports of "New Distribution 100 People" [Click to view]**
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