---
title: "With New Retail Here, Does the Industry Still Need Wholesale Markets?"
description: "At the 2020 (3rd) China FMCG Conference, Chang Junjie, founder of Pidao, shared his views on wholesale. He argues that wholesale markets act as a battery for the market, remain essential despite retail channel evolution, and will transform into data-driven, decentralized operations."
author: "小批"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2020-08-28"
language: "en"
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# With New Retail Here, Does the Industry Still Need Wholesale Markets?

> At the 2020 (3rd) China FMCG Conference, Chang Junjie, founder of Pidao, shared his views on wholesale. He argues that wholesale markets act as a battery for the market, remain essential despite retail channel evolution, and will transform into data-driven, decentralized operations.

The 2020 (3rd) China FMCG Conference, hosted by New Distribution, was grandly held from August 24-26 at Shanghai Fuyue Hotel. The event attracted 3,000 industry practitioners, including distributors, manufacturers, and internet companies, from all over the country, with a full house and unprecedented scale.
The following is the speech content delivered by Chang Junjie, founder of Pidao, at the parallel forum "China FMCG B2B Industry Forum," organized and published for readers.
Dear guests, hello everyone!
Today, I'd like to share my views on wholesale. Amid the frenzy of new retail and new consumption, does the industry still need wholesale markets? Does a traditional business like wholesale still have meaning?
How do you view wholesale? Excitement? Goods reaching the world, selling far and wide? Disgust? Disrupting the market, breaking the price system? Familiarity? A traditional business of orders, earning small margins through hard work?
Let me share my perspective on wholesale.

**-01-**
**Wholesale is the market's battery**
I see wholesale as a battery in the vast market. Before entering the FMCG industry, I spent 7 years researching lithium-ion battery materials, working in Japanese and Hong Kong labs, and then entered the FMCG industry for nearly a decade. Seeing the huge potential in the FMCG wholesale sector, I founded Pidao in 2017, focusing on the wholesale trading segment to improve circulation efficiency.
Why do I see wholesale as a battery? First, let me briefly introduce lithium ions. Lithium ions are the least dense metal units in nature. Driven by electrical energy, they charge from the low-potential side (graphite material) to the high-potential side, embedding into the material structure. When discharging, these lithium ions naturally de-embed to the low-potential side, releasing an electron, forming electrical energy.
Wholesale markets are exactly like this! Each wholesale merchant is a location, storing goods, buying and selling! The potential energy conversion is price!

**-02-**
**Brand channel strategies differ, but the wholesale scenario remains unchanged**
**Different brands have different channel focuses**: for example, personal care products need to focus more on modern retail hypermarkets (e.g., P&G with Walmart and Watsons); food and beverages cannot abandon offline distribution; beauty products focus on e-commerce and private domain traffic (e.g., HFP's successful WeChat marketing).
But all channels face issues like inventory overstock, capital turnover, and channel service costs. These issues charge the wholesale market, which acts as a super battery to regulate them. In the new retail scenario, supply and near-expiry sales often cannot escape wholesale.
Another crucial wholesale scenario remains unchanged: providing supply and services to the vast number of offline stores.

**-03-**
**Retail channels evolve, but wholesale remains young**
From 1990-2000 was the Warring States era of channels; those who controlled channels ruled the world! Some well-managed, well-funded wholesale merchants became agents for well-known brands, gaining more brand authorizations. Consumer circulation rose, and people thought distributors would replace wholesalers, but wholesale kept selling goods.
From 2000-2010, this decade was the golden age of modern retail. As major international chain stores entered China, domestic modern retail followed, and regional chain stores sprang up like mushrooms. People thought wholesale would lose its position again, but wholesale kept selling goods.
From 2010-2020, this decade saw the explosion of e-commerce and new retail, with B2B developing rapidly. This time, everyone thought wholesale would lose its status, but wholesale kept selling goods.
**As retail channels continue to evolve, wholesale remains unchanged, still young!**

**-04-**
**Retail small stores are numerous and widely distributed**
Let's peel back the layers to understand why wholesale remains unchanged. China is vast with deep reach! China has over 600,000 villages, over 40,000 townships, over 2,800 counties, over 360 cities, over 30 cities with populations above 8 million, and 5 super metropolises. Below second-tier cities, there are over 4 million small stores, serving a base of 700-800 million consumers. Wholesalers are the supply chain for this system!
As long as the urban-rural structure doesn't fundamentally change, this system won't change; it's the most suitable system.

**-05-**
**The wholesale model is the most lean coverage**
**Retail is detail!** Every retailer is a "Virgo"; details determine growth. How shelves are arranged, how promotions are done, how promotional content is created—in limited space and with limited people, do the most infinite detail processing to boost per-unit output! Brands and distributors want to directly cover points to capture per-unit output!
**Wholesale is efficiency!** Getting information fast, finding goods fast, finding suitable customers fast, handling inventory fast, capital turnover fast, logistics fast... Fast! It's about continuously leveraging information asymmetry to profit and increasing that profit potential. That's the essence of wholesale.

**-06-**
**Circulation is non-linear**
**Product sales cycles differ**: for example, Lulu's golden period is Mid-Autumn and New Year; mosquito repellent sells in summer; diapers sell better in autumn and winter. **Market competition is uncertain**: brands in the same category invest differently to gain market share. These non-linear uncertainties exist, but factory capacity is relatively fixed. **At this point, wholesale's role as a market battery becomes evident, constantly charging and discharging to stabilize market supply and demand.**

**-07-**
**Brands should leverage wholesale patterns in product development**
Brand development is a cognitive process for consumers and the market. Sales volume and time form a two-dimensional curve. When a brand is born, it needs to quickly establish awareness directly with consumers. Entering the **expansion period**, finding offline agents is difficult.
When reaching the **sweet spot**, channels enjoy brand dividends, and wholesale emerges, entering the **first stage** of wholesale. As brand sales grow further, channel partners need to cover more people and require more efficient coverage, leading to a large number of wholesalers. Their motivation is profit, and they are the most efficient form of downward coverage, entering the **second stage** of wholesale.
The **third stage** of wholesale is a brand transition period. Sales get squeezed by new brands, but the market still needs it, and wholesale is still needed, entering a market-driven period.

**-08-**
**Wholesale operation models and trends**
Wholesale roughly consists of **large sedentary merchants, medium sedentary merchants, secondary wholesalers, wholesale-retail combined, and mobile salesmen**.
Large sedentary merchants often have geographical advantages, concentrated in logistics hubs like Linyi, Yiwu, Zhengzhou, Changsha, Chengdu, etc. They have high throughput, relatively low gross margins, and buy in batches. Medium sedentary merchants are usually in prefecture-level cities with limited warehouses, suitable for turnover. Secondary wholesalers buy from sedentary merchants for distribution. Township wholesale is typically wholesale-retail combined, with front stores and back warehouses for delivery. Finally, village-level stores are served by mobile salesmen.
**As the scale decreases, gross margins increase, and service attributes strengthen.**
With urban renewal and continuous informatization, the functions of traditional wholesale markets are gradually weakening, but the functions of wholesalers remain. **In the future, wholesale markets will shift from physical agglomerated markets to decentralized, data-driven operations.** For example, import goods wholesalers often aren't in fixed wholesale markets; they operate in office buildings, corporate-style, no longer in clustered shop formats.

**-09-**
**Opportunities in wholesale**
In the future, the wholesale industry will become more compliant, with scientific management to increase revenue and reduce costs. Data-driven management improves efficiency, and data-driven business operations eliminate vague accounting. Gradually, corporate-style operations will form, leading to asset-based operations, including information assets and financial assets.

**-10-**
**The value of data in wholesale channels**
**The value generated by informatizing and datafying the vast wholesale channel is explosive. For brands, it enables better down-market strategies, quickly capturing more market share. For retailers, it allows better inventory and cash flow management, greatly avoiding overstock and speeding up capital return. For circulation, it improves efficiency, accelerates turnover, and earns more!**
Finally, returning to the conference theme "With New Retail Here, Does the Industry Still Need Wholesale Markets?" I've redefined the topic: it should be "With New Retail Here, Is New Wholesale Far Behind?"
Wholesale has immense value, and what it needs to do is better arm itself through informatization and datafication, adapt to the times, and continuously improve circulation efficiency!


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