---
title: "Zhao Bo of New Distribution: Moving Beyond the Wholesale Era, Reconstructing China's Commercial Circulation Industry"
description: "Starting from the 'Engel coefficient turning point,' this article examines the transformation of consumer society and its impact on retail and wholesale industries. It analyzes how developed markets have responded to retail restructuring and outlines four paths for China's wholesale sector to evolve from a relationship-based to a system-driven model."
author: "赵波"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2025-08-06"
categories: "Dealer Operations, Distribution & Channels"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/76NiAW9GRTc2nEwVo0aBTA"
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attribution: "New Distribution — https://xinjignxiao.com/en/articles/zhao-bo-of-new-distribution-moving-beyond-the-wholesale-era-reconstructi-c64c7c85/"
citation: "赵波. “Zhao Bo of New Distribution: Moving Beyond the Wholesale Era, Reconstructing China's Commercial Circulation Industry.” New Distribution, 2025-08-06. https://xinjignxiao.com/en/articles/zhao-bo-of-new-distribution-moving-beyond-the-wholesale-era-reconstructi-c64c7c85/"
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---

# Zhao Bo of New Distribution: Moving Beyond the Wholesale Era, Reconstructing China's Commercial Circulation Industry

> Starting from the 'Engel coefficient turning point,' this article examines the transformation of consumer society and its impact on retail and wholesale industries. It analyzes how developed markets have responded to retail restructuring and outlines four paths for China's wholesale sector to evolve from a relationship-based to a system-driven model.

**Starting from the 'Engel Coefficient Turning Point'**
**The Starting Point of Consumer Society Transformation**
Among all indicators measuring a country's consumption structure and economic maturity, the Engel coefficient (the proportion of food expenditure in disposable income) is a highly predictive indicator.
When the Engel coefficient is above 40%, it means residents' income is mostly spent on basic survival, and the market is dominated by 'satisfaction-oriented' consumption. When it falls below 30%, it indicates the country has entered an 'affluent society,' where consumption gradually shifts toward quality, convenience, and personal expression, leading to profound changes in retail and circulation systems.
Data shows that in the mid-1950s, the Engel coefficient in the United States fell below 30%, followed by a 'golden consumption era' over the next 20 years. Japan entered this stage in 1979, bringing about a pet boom, peak alcohol consumption, a convenience store explosion, and a wave of brand globalization. South Korea crossed this threshold around 1985-1990, and in the following 20 years, it saw a coexistence of 'convenience store dominance,' 'individualized preferences,' and 'low-desire consumption.'
What changes does a declining Engel coefficient bring?
**I. Consumption Structure Shifts from 'Subsistence' to 'Quality' and 'Emotional'**
As the Engel coefficient declines, residents shift consumption from 'quantity' to 'quality.' Specifically:
**Pet Economy Rise**: In Japan and South Korea, the number of pets surpassed the number of children under 15 for the first time around 2000, making pets a new center of family emotional companionship.
**Alcohol Consumption Evolution**: Typically, there is first an 'explosive growth,' followed by a gradual rational decline due to health and aging factors. Preferences also shift from spirits to wine and low-alcohol beverages.
**Smaller Family Structures**: 'Small and beautiful' single-person consumption products and single-serving ready-to-eat foods grow rapidly.
**Global Brand Awareness**: Brands expand from local satisfaction to international markets, with multinational brands completing global distribution during this phase, such as Sony and Toyota in Japan in the 1990s, and Samsung and LG in South Korea.
**Convenience Store Density Explosion**: Convenience stores like 7-Eleven and Lawson achieve high-density coverage in Japan and South Korea, with a 300-meter service radius becoming the basic unit of urban retail.
This 'diverse, small-scale, emotionally driven consumption' demands a completely different retail and circulation system—**not only multiple SKUs and fast turnover, but also visual tracking, ultimate convenience, and emotional resonance**.
**II. The Starting Point of Retail's Shift to 'Near-field + Instant + High-frequency'**
The transformation of the retail landscape begins at this consumption structure inflection point. The traditional 'weekend bulk shopping + stockpiling' model gradually gives way to:
> 1. Daily instant replenishment: Consumers no longer stockpile but buy nearby whenever and wherever needed;
>
> 2. Scenario-based convenience choices: Convenience stores are densely deployed in stations, residential areas, and office buildings;
>
> 3. The battle of time: Whoever can meet the demand for 'now, immediately, right away' wins user preference.
From the golden age of American supermarkets in the 1950s, to the deep penetration of Japanese convenience stores from the 1970s to the 2000s, to South Korea's recent one convenience store per 1,000 people and 'corner stores' on almost every street—these trends are all driven by consumption structure changes, transmitting to the reconstruction of terminal retail.
In 2024, the Engel coefficient for urban residents in China has fallen to around 30%, and in some cities like Shanghai and Hangzhou, it is below 25%. This means China's major cities are about to fully enter the transition period of a 'quality consumption society.'
However, China's economic structure, family structure, and demographic structure differ significantly from Japan, South Korea, Europe, and the United States, so China's consumption transformation path will be more complex and more 'multi-polar coexisting':
On one hand, residents in first- and second-tier cities pursue convenience, high-end, and emotional value; on the other hand, families in lower-tier markets are still in the 'basic needs + price-sensitive' stage; at the same time, trends like 'low-desire consumption among young people + aging + singlehood' are gradually becoming mainstream.
This means China is entering a 'dual-speed consumer society,' with both the quality leap of Europe, America, Japan, and South Korea, and the pragmatism of developing markets.
**From Terminal Evolution to the Reconstruction of Retail Organization Logic**
In an 'affluent society' where the Engel coefficient falls below 30%, the evolution of retail terminal forms begins to show highly convergent paths:
1. Convenience:
Emphasizing 'buy-and-go, scenario-as-sale,' convenience stores rise from 'supplementary channels' to 'main life nodes,' becoming infrastructure in Japan and South Korea;
2. Near-field:
Extending from transportation hubs to community streets, reachable within a 3-10 minute walk, meeting the 'last mile' immediacy;
3. Diversification:
Traditional convenience retail has been differentiated into multiple new species: flash warehouses, vending machines, unmanned cabinets, community hard discount stores, etc., each corresponding to different 'high-frequency, rigid demand' scenarios.
Europe's recent retail structure changes are the most representative: on one end, discount supermarkets like Lidl and Aldi continue to focus on 'low price and efficiency'; on the other end, near-field retail like Tesco Express, REWE To Go, and Żabka is experiencing explosive growth—the UK's convenience store density has reached 0.74 stores per 1,000 people, while France aims to create 'micro-community retail networks' with the '15-minute city' goal.
In South Korea and Japan, convenience store density reaches one store every 300 meters, supported by high-frequency consumption structures and highly vertically integrated backend systems.
**The 300-meter service radius** determines that a city's convenience 'grid' is limited; whoever spreads out in dense clusters first can use scale to dilute logistics and IT backend costs.
This forms a typical 'honeycomb model': whoever first divides a city into profitable grids and connects them into a network can build barriers with the lowest logistics costs. Eventually, the convenience retail industry in Japan and South Korea stabilizes with 3-4 oligopoly brands.
Behind this change in retail terminal forms is a comprehensive reconstruction of business organization logic.
The old retail logic emphasized 'points' and 'goods,' but the new generation of terminal retail emphasizes '**networks and chains**.'
**Stores are no longer isolated** but act as platform nodes, linked with supply chain systems, consumer digital systems, and brand interaction systems;
**Instant response mechanisms become core capabilities**, with the original 'upstream product selection' logic based on wholesale giving way to real-time demand sensing + algorithm recommendations + sales-based purchasing;
**Supply rhythm shifts from 'distribution-oriented' to 'data-oriented'**: store SKUs are streamlined, front warehouses replenish centrally, and restocking rhythms are dynamically adjusted based on algorithms.
The logic behind this is: **digital systems + organizational efficiency** gradually replace traditional human governance + experience-based decision-making.
Taking convenience stores as an example, the entire system—from product selection, pricing, replenishment, promotion, display, traffic flow design, data review, cross-selling—is embedded in algorithms and collaborative tools. Wholesale becomes increasingly marginalized in this system unless it can provide more efficient service coordination.
**Looking back, China's retail industry is at a crossroads of 'fractal explosion,' with several typical formats exploding:**
**Flash Warehouses**: For example, Meituan's front-warehouse system, 'no stores, heavy delivery, high SKU flexible turnover,' greatly surpasses traditional convenience stores with advantages in 'efficiency + rent costs + coverage radius';
**Community Hard Discount Stores**: Aldi-style minimalist SKU + low-price direct sourcing models are gradually localizing, with Miniso, outlet stores, discount fresh food, etc., exploding;
**Unmanned Retail and Smart Vending Cabinets**: Scenes like subways, buildings, hospitals, and universities gradually achieve 24-hour self-service;
**Snack Bulk and Specialty Stores**: New retail brands focusing on snack subcategories (such as Three Squirrels offline, Snacks Are Busy) are encroaching on convenience stores' core categories.
These formats share a common feature: **higher organizational efficiency, lighter backends, more flexible product mixes, and shorter circulation chains**.
The traditional wholesale logic of 'relationship-based distribution + account period control + price difference as king' is almost ineffective in all new retail forms.
**How Do Wholesale Industries in Developed Countries**
**Respond to Retail Reconstruction?**
When retail terminals undergo structural reconstruction, the wholesale industry faces not 'optimization' but 'transformation,' even 'nirvana-like reshaping.'
We can see different wholesale response paths from three typical regions—the United States, Europe, and Japan/South Korea—but they all essentially revolve around three things: compressing layers, enhancing services, and integrating systems.
1. United States: From 'Distributors' to 'Operating Platforms'
In the highly developed U.S. market with strong brands and fragmented terminals, traditional wholesale has long completed the leap to 'Broad-line Distributor' platformization.
The McLane model represents the high concentration trend in the U.S. wholesale industry: annual revenue exceeding $50 billion, serving over 90,000 convenience stores and fast-food terminals, with over 500,000 SKUs;
Core capabilities are standardized operations: one delivery can serve multiple stores, with a national DC network + automated sorting systems; major clients include 7-Eleven, Walmart, and fast-food giants. Wholesale itself has become an infrastructure service.
Key characteristics of the U.S. wholesale industry:
> Flat: basically only 1-2 levels;
>
> Highly standardized: shelf replenishment based on POS and forecasting models;
>
> Profit model: not relying on 'price differences' but on logistics efficiency, platform channel fees, and system service subscriptions.
Insight: U.S. wholesale wins not by 'buying cheap' but by 'delivering efficiently.'
2. Europe: Three Systems Coexist, Wholesale Evolves Toward 'Multi-path Services + Joint Procurement'
Unlike the U.S., Europe's retail system is more fragmented with strong national diversity, but the wholesale industry also shows a highly structured evolution trend:
Three wholesale models coexist:
Eurocash (Poland): Serving over 16,000 stores, it represents the upgrade of traditional commercial wholesale to platform-based distribution;
**Transgourmet (Central Europe)**: In 2024, revenue exceeded CHF 11.7 billion, with a focus on cold chain and digital collaboration.
European wholesale evolution logic:
> Discount supermarkets and convenience stores drive 'daily delivery + multi-temperature + flexible SKU management';
>
> ESG regulations and urban planning drive 'green electric cold chain' and 'micro DCs';
>
> Retailers drive 'brand-side data direct connection,' compressing dealers' bargaining power.
Insight: European wholesale 'de-commoditizes and strengthens platform attributes,' becoming a service coordinator between brands and retail.
3. Japan and South Korea: Wholesale Integrated by Brands, Becoming Part of the Brand Chain
**Typical characteristics of Japan's convenience store system:**
> 7-Eleven, Lawson, FamilyMart, etc., all build their own DCs + joint delivery + IT systems + fresh food factories;
>
> Four-temperature delivery (ambient/chilled/frozen/warm) + 3-5 daily deliveries;
>
> All replenishment, product selection, and data feedback are led by headquarters, leaving almost no room for traditional wholesalers.
**South Korea is similar:**
> GS25, CU, and other branded chains build integrated smart logistics parks;
>
> POS, ERP, membership data systems are coordinated with product selection, promotion, and replenishment systems;
>
> Wholesale 'outsourcing': becoming an outsourced segment in the brand logistics chain.
Insight: When brands become strong enough, wholesale no longer has pricing power or channel organization rights; it is merely a 'service node on the brand chain.'
**In summary, four keywords:**
**China's Wholesale Industry**
**Transformation Challenges and Path Choices**
China's commercial wholesale industry is still dominated by 'multi-level stacking + human governance + account period pressure + price difference profit.' Although there are signs of change in some regions, overall, we are facing a **delayed but must-catch-up structural reconstruction**.
The difficulties of China's commercial industry mainly stem from three challenges: the collapse of channel structure efficiency, the inability of system capabilities to support modern operations, and organizational models seriously out of step with the times.
1. The old multi-level wholesale chain structure can no longer adapt to the new era's terminal demands.
In the past, the 'provincial agent - city agent - wholesale-retail' chain achieved some efficiency through mechanisms like inventory pressure, account periods, and rebates. But facing today's terminal rhythm of 'instant delivery + fresh food + daily clearance + rapid SKU turnover,' its slow response, long chains, and data distortion have led brands and terminals to bypass intermediate links, shifting to platform warehouse direct supply and direct store connections. Traditional wholesalers have lost 'channel control.' This is especially evident in first-tier cities, where many wholesalers have been reduced to logistics distribution and promotion outsourcing roles.
2. System capability shortcomings make wholesale 'blind, unmanageable, and inefficient.'
Compared with mature markets like Japan and South Korea, China's wholesale system generally lacks standardized transaction and fulfillment systems: inventory information lags, SKU granularity is coarse, temperature-zone fulfillment is not differentiated, sales-based purchasing mechanisms are absent, and much warehousing and distribution rely on human experience rather than system algorithms. This 'information black box' state has gradually degraded the wholesale link from a chain leader to a passive appendage, marginalized in the digital collaboration logic of brands, terminals, and platforms.
3. The 'relationship + account period + tobacco/alcohol hospitality' human governance logic that wholesale organizations have long relied on is also unable to withstand the impact of platformization and systematization.
When facing digital terminals and system-based platforms with unified pricing, settlement, and operational standards, the traditional wholesale system's high flexibility and strong relationship networks turn into low efficiency, opacity, and coordination failure. Brands' willingness to cooperate continues to decline, and the relationship-based distribution system is losing its institutional comparative advantage.
Facing these structural challenges, China's wholesale system will differentiate into four paths in the future.
First, evolve into a system-based platform, building an 'operations middle platform' with commodity organization capabilities, distributed fulfillment capabilities, data transaction capabilities, and brand collaboration capabilities.
This model shifts profit from traditional 'price difference arbitrage' to 'system services + warehousing and delivery fulfillment + marketing collaboration + financial leverage.' Representative players include Xiaoxiang Zhanggui, Furong Xingsheng, etc. Their success depends on the coordinated construction of IT infrastructure, supply chain management capabilities, and scale operation density.
Second, focus on regional scenarios, serve local terminals, and transform into community-based fine operators. Typical examples include some regional joint warehouses and franchise convenience systems. Their competitive advantage lies in 'high-frequency response + local cold chain + customized product mix,' better adapting to the fragmented, seasonal, and fast-turnover demand changes in lower-tier markets.
This model relies more on team deep cultivation, density operations, and regional network construction, suitable for small and medium-sized wholesalers to improve survival space through operational capability transformation.
Third, deeply bind with brands to form a light direct-operated joint operation entity. These wholesalers gradually transform from the past 'general agent purchasing + rebate' model into brand operators integrating 'warehousing and delivery, display, sales promotion, and data feedback,' achieving organizational reengineering under brand authorization.
In this logic, brands value their terminal reach and execution capabilities, not simply 'how much goods they can pull,' and the cooperation relationship shifts from transactional to co-constructive.
Fourth, those wholesalers that fail to transform in time and continue to stick to the old logic of inventory pressure and rebates may be gradually marginalized by the market.
As brands directly connect with terminals, B2B platforms accelerate penetration, and account period dividends dry up, these wholesalers will lose bargaining power in efficiency competition, eventually becoming pure logistics movers or being eliminated due to inefficiency.
Regardless of the transformation direction, four elements are important.
In summary, China's commercial wholesale industry is undergoing intense structural reshuffling. This is both a reconstruction of business models.
The choice of path essentially depends on two variables: one is the depth of understanding of customer structure and trend direction; the other is the systematicness and execution of organizational capability building.
No path is absolutely superior, but each model has clear adaptation boundaries and resource requirements. The most dangerous thing is not choosing the wrong path, but when path differentiation occurs, still harboring illusions about the old order and delaying the timing of organizational evolution.
**Final Thoughts**
If we use one sentence to summarize the future of the wholesale industry today:
In the past 20 years, wholesale relied on channels to start; in the next 20 years, wholesale will rely on systems to survive.
Global experience tells us that wholesale is not eliminated but must evolve. China's wholesale industry today is at a critical window of 'redefinition'—**this is an era from a relationship society to a collaborative platform; an era from inventory pressure profit to service empowerment; an era for those with systems, organization, and foresight**.
The question is not 'is there an opportunity,' but:
**Are you ready to become a builder of the new generation wholesale system?**
In August, in Shanghai, the 【2025 New Demand · New Supply 7th FMCG Conference】 will bring together 2,500+ industry elites including retailers, distributors, and brands. Over 3 days, with more than 10 professional forums and closed-door meetings, we will deeply explore the construction of new demand and new supply systems.
For distributors, changes in the market environment have profoundly altered their roles and responsibilities. Amid cognitive gaps and transformation anxiety, how should distributors respond? We have invited Zhu Jun, General Manager of Chichi Holdings Group and founder of Zuolin YouShe / Shenghuo Yizhan convenience stores; Zhong Xiaoping, General Manager of Jiecang Wangou; Zhang Shicheng, General Manager of Tianjin Shicheng Bofa Trading, among others, to discuss how to find the direction for distributors to move forward.
For retailers, the discount storm and supermarket adjustments are just the tip of the iceberg of industry change. From production, circulation to terminal retail, the entire production-supply-sales system will face structural reconstruction. We have invited Li Jingyao, Deputy General Manager of China Resources Vanguard (Holdings) Co., Ltd.; Zhang Huiying, National Sales Director of Oishi; Lin Yongqiang, Chairman of Guanpai Ke; Zhou Xu, Vice President of Biyou Te Business Group; Zeng Cheng, CEO of Man Xiaobao; Su Hong, COO of Meitian 2B, among others, to provide direction for the collaborative ecosystem on the supply side amid major demand changes.
Strategic opportunities are waited for; tactical opportunities are found. There is always a way out; it depends on whether you see opportunities or problems.
If you are also looking for answers, we are waiting for you at the conference site!
🔺


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## Citation metadata

- Publisher: New Distribution
- Author: 赵波
- Published: 2025-08-06
- Canonical: https://xinjignxiao.com/en/articles/zhao-bo-of-new-distribution-moving-beyond-the-wholesale-era-reconstructi-c64c7c85/
- Original source: https://mp.weixin.qq.com/s/76NiAW9GRTc2nEwVo0aBTA

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