---
title: "Zhao Bo from New Distribution: Finding Growth Opportunities in a Shrinking Market"
description: "The article discusses the challenges facing China's FMCG industry amid economic downturn, including shrinking market demand, intense competition, and changing consumer behavior. It emphasizes the need for companies and distributors to adapt by finding incremental opportunities in new scenarios, channels, and consumer needs, while also optimizing existing business operations."
author: "赵波"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2024-06-24"
language: "en"
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# Zhao Bo from New Distribution: Finding Growth Opportunities in a Shrinking Market

> The article discusses the challenges facing China's FMCG industry amid economic downturn, including shrinking market demand, intense competition, and changing consumer behavior. It emphasizes the need for companies and distributors to adapt by finding incremental opportunities in new scenarios, channels, and consumer needs, while also optimizing existing business operations.

Tighten your belt, manufacturers and distributors face a prolonged period of sluggish business. Recently, I came across a description of China's economic conflicts and challenges on Douyin that struck me as particularly insightful: China's consumption has fallen into a Keynesian trap, where interest rate cuts fail to stimulate demand; investment is approaching a Minsky moment, with debt risks causing distress; the population has reached the Lewis turning point, shifting from surplus to shortage of cheap labor; China and the US are caught in a Thucydides trap, each believing conflict between the top two powers is inevitable; exports face trade protectionism, where it's not about the quality of your goods but their origin; housing prices can neither rise nor fall, as either direction spells trouble; holding cash leads to depreciation, while investing results in losses; starting a business brings losses, but not starting one leads to unemployment; action breeds anxiety, inaction breeds depression; tastes grow ever more refined while wallets grow ever thinner. These statements are not mere emotional expressions but a summary of economic realities. Recently, the central bank released April's social financing data, showing a year-on-year decrease of 198.7 billion yuan. On a month-on-month basis, household loans decreased by 2.36 trillion yuan, and corporate loans by 1.48 trillion yuan. What does social financing data mean? In summary, it represents the total loans borrowed by businesses and households from financial institutions. April saw a year-on-year decrease of 198.7 billion yuan, and the first four months saw a total reduction of 3 trillion yuan, indicating fewer people borrowing and many repaying loans early, with a net repayment of 3 trillion yuan to banks. What impact does this data have on our FMCG industry? Let me first explain the logic behind this data, which involves a crucial concept called the balance sheet. About 70% of Chinese households' assets are in real estate, and the vast majority have leveraged these assets. The decline in property prices has dragged down household investment assets, and due to leverage, asset values are accelerating downward—this is what's known as balance sheet recession. When a balance sheet recession occurs, it means households have less room for error in their lives and cannot withstand any fluctuations in work or life. However, market competition is fierce, work is highly demanding, and making money is increasingly difficult. Naturally, households become pessimistic about the future. To cope with future uncertainties, people are saving frantically, both as a precaution and to deleverage. This is why we see the significant drop in social financing data. More critically, both M1 and M2 have declined simultaneously, indicating that the money circulating in the market is decreasing, making it harder to earn money. Businesses are unwilling to invest, and consumers are reluctant to spend, leading the economy into a downward spiral. In such circumstances, the state will inevitably introduce various stimulus policies to drive consumption, with the most important tools being monetary easing and inflation. We see that utilities such as water and electricity are rising in price across regions, creating a temporal scissors effect where living costs increase but incomes do not rise in the short term. Even if incomes do increase, with insufficient consumer confidence, people will save and repay loans until commodity prices, such as real estate, rise through monetary easing to lift the previous debt burden. This will take a long process, so FMCG manufacturers and distributors should tighten their belts and endure a period of hardship. It's not just that consumers lack money; there are many other factors compounding the sluggish business environment. Of course, this involves both macro and micro issues. From a macroeconomic perspective, there are essentially three underlying problems:
> 1. Aging population and population decline mean no incremental dividends for any category. 2. Economic downturn hinders consumption upgrades, and opportunities for structural product upgrades disappear. 3. Retail channels are increasingly diversified, fragmenting consumer attention significantly.
****From a micro perspective:
> 1. Consumers have too many product choices, leading to intense homogenized competition. 2. People are afraid to spend, saving money and reducing non-essential expenses, keeping their wallets tightly closed. 3. Retail channels are overly competitive, transitioning to discount models, making life increasingly difficult for brand owners and distributors.
****Of course, these are objective facts. Under such intense competition, how much longer can distributors pick up spare change? During a recent market visit, I spoke with Mr. Zhang from Tangshan Yihe, who believes this market situation is an inevitable result of economic development. Essentially, distributors had it too easy in the past, making money without much effort. But as the market matures, shrinking volumes, intense competition, and price wars are inevitable. At this point, it's about who truly has the skills. **Undoubtedly, although the distributor industry is challenging, the barriers to entry are certainly getting higher. This is the inevitable outcome of a mature market.****The underlying logic of the market has also undergone profound changes** Let's not dwell on economic issues; the marketing logic has also changed profoundly. From a broad perspective, the focus of corporate marketing has been shifting. In the past, information asymmetry meant people trusted TV stations, so the core of marketing was communication. Whoever could afford advertising made money. Later, information became more accessible, but supply began to exceed demand, so whoever controlled the channels made money. Brand owners focused on channel development, bribing stores, buying shelf space, and controlling consumer choices to gain business. Then e-commerce channels rose, devaluing brand owners' channel monopolies. Now, companies are fiercely competing through discounts, price cuts, and larger packages to attract consumer attention. Essentially, **most companies have not established a brand position in consumers' minds.** As consumer choices multiply, awareness evolves, and consumption patterns shift, today's marketing must further evolve. We need to gradually **shift from focusing on communication and transactions to focusing on customer consumption scenarios and the jobs consumers need to accomplish in those scenarios.** Of course, we're not saying to ignore communication and channels, but the complexity, systematic nature, and depth of market operations are vastly different from before.**Viewing the market structurally to find incremental scenarios** The Chinese market is vast, deep, diverse, and complex. No one can occupy all market channels, and no brand can capture all consumer minds. By segmenting the market by people, channels, and products, there are always opportunities for growth. Here are 16 underlying marketing logics for today:
> Uncover the four consumer needs: emotion, addiction, social interaction, and health
>
> Understand the four consumer behaviors: buying, browsing, following, and stocking up
>
> Seize the four consumer opportunities: scenarios (jobs to be done), IP (following trends), content (being persuaded), and discounts (getting a bargain)
>
> Cover the four consumer channels: online, offline, social, and local O2O
**Old products have opportunities in new channels, scenarios, and customers; similarly, new products have opportunities in old channels, scenarios, and customers. The key is how to identify and propose solutions.**
  * **Incremental scenarios:** Camping, outdoor cooking, self-driving trips, nighttime consumption, sports, socializing;
  * **Incremental categories:** Niche, healthy, clean label;
  * **Incremental sizes:** Large packs, small packs, weighed packs;
  * **Incremental channels:** Food delivery, home delivery, snack stores, discount stores;
  * **Incremental demographics:** Children, elderly, freelancers;
  * **Incremental needs:** Emotion, IP, content.
The above is just a preliminary summary. There are certainly more incremental opportunities in the Chinese market; the core lies in how we view the market ourselves. In a negative environment, we must maintain a positive attitude. As long as we take action, opportunities will arise. Remember, **people's thoughts can be changed through action.**
**Deeply optimize existing business** Now that we've discussed incremental growth, let's talk about existing business. As mentioned earlier, the past market was about growth, and it was too easy—the pie was growing, and whether you ate fast or slow, there was always a piece. But today, the pie is shrinking, **and those who eat slowly will definitely go hungry.** Whether brand owners or distributors, competing for existing business has turned from a marathon into an octagon cage match—it's kill or be killed. The broad logic is **to grab existing business from competitors, dig out existing business from internal management, optimize existing business through technology, and squeeze existing business through operational methods.** Here, I'll focus on how to compete for offline existing business in the local market:
**1. Be specific about grabbing existing business:** In the existing market, you need clear targets—which brand, which price band, which product, and what are the advantages and disadvantages compared to your own products. First, conduct detailed research and market analysis.
**2. Focus on key stores and shelf space:** In regional markets, core sales often come from specific key stores. Visit these stores, check the shelf space of various products, product dates, identify what sells best, analyze customer traffic and demographics.
**3. Find methods and drive sell-through:** Identify competitors' weaknesses, use competitive displays, terminal interception, with clear tactics and means—whether through price bands, product differentiation, display interception, or proactive marketing outside stores. The core goal is to target competition based on competitors' strengths and weaknesses, combined with our budget and methods.
**4. Plan tactics in stages:** In regional markets, there should be an order to who to attack first. Should you attack the market leader or the second player first? Should you start with smaller categories as a flank attack or enter through non-core channels to continuously siphon traffic? How to fight in the initial stage and later stages should be well thought out.
**5. Targeted attacks with added value:** When attacking competitors, resources must be focused. Use a combination of methods flexibly: increase product quantity, grab shelf space, lower prices.
**6. Integrate and focus:** Market channels are diverse and multi-dimensional. Competitors didn't reach their current scale overnight. Don't focus on just one point in promotions; integrate joint promotions, cross-industry collaborations, and combine brand promotion with sell-through.
**7. Clarify profit vs. share goals:** Be clear about your objectives when attacking competitors: are you after profit or market share, monopoly or sales volume?
**The underlying drivers for distributors must fundamentally change** With no market growth, the value of distributors as movers of goods is rapidly diminishing. The internal driving forces of enterprises—**efficiency, momentum, and kinetic energy—must all transform.**
**1. Efficiency:** In operations, start focusing on labor productivity, performance, and various operational data. Begin refined management and pay attention to various metrics.
**2. Momentum:** Pay more attention to trends and hot topics. Mine business opportunities from shifts in market, consumer scenarios, needs, and pain points. Through research and operations, find incremental scenarios and uncover operational value.
**3. Kinetic energy:** Continuously learn, change your business thinking, and adjust and optimize your organizational issues. Keep your operations and team adapting to today's market changes. Only then can distributors avoid being eliminated. Only by changing the underlying drivers can distributors gain new growth possibilities in the fiercely competitive market.
**Do difficult but correct things** Today's market, whether viewed from the macro logic—population decline, economic downturn, channel fragmentation—or the micro logic—fragmented consumer attention, increased choices, limited spending power, and shifting consumption habits—no matter how complex, fundamentally follows patterns. Today's consumer motivations and behaviors, as presented in the market and channels, are extremely complex, but with the right methods and paths, you can still succeed in the market. However, we can no longer rely on a single method to solve all problems as we did in the past. **There are always more methods than difficulties. How to find them? As Luo Zhenyu mentioned in his 2024 New Year's speech: Act, and you'll innovate; be specific, and you'll be profound; when confused, go out and explore.** From August 20-22, 2024, the "2024 6th China FMCG Conference" themed "Navigating the Era of Shrinkage," along with the "3rd China FMCG Hard Discount Conference" and the "3rd China FMCG Distributor Conference," will be grandly held in Shanghai. **This conference will bring together all roles in the FMCG industry chain, allowing you to grasp industry trends at a glance, understand hot赛道 directions, penetrate industry resources, and precisely connect with leading brand owners, top retail platforms, and national top-performing distributors. It provides you with precise decision-making, efficient cooperation opportunities, and on-site learning of exclusive methodologies from FMCG giants! With keynote speeches, roundtable dialogues, report interpretations, closed-door salons, and networking dinners, this grand gathering of a thousand people is not to be missed!**
**🔺Scan for ticket inquiries🔺**
**Recommended Reading**


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