Author丨Yuan Lai
The business of distributors is very strange, the business of upstream brands can cover the whole country, and the business of downstream retailers can be done in one region and can also be done across regions. But 90% of the dealers do business locally, in one city.
Why?
The main reason is the authorization management of brand owners. Many dealers have acted as agents for several first-line brands, and the business has reached 30 or 40 million, and the good ones can achieve 70 or 80 million or even more than 100 million, thinking that there will be basically no increase in this business.
In this context, where will the dealer's business go in the future? 100 million, 5 billion or even 10 billion, how should it go, and where is the path?
The evolution of FMCG distributors in China
In the past 20 years, what is the development path and background of dealers?
The first stage is stallism.
From the 90s to 2000, the reform of the commercial circulation system, the emergence of the wholesale market, the opening of a stall in the wholesale market, the sale of goods all rely on customers to come to the door, in the era of supply less than demand, dealers are generally sitting in business.
The second stage is warehousing.
From 2000 to 2010, the brand owner demarcated an area to make this brand, covering two or three hundred outlets, and required continuous growth.
In 1998, the FMCG enterprises represented by Master Kong implemented the strategy of intensive channel cultivation, dividing the country into 1,500 districts, each of which has its own salesman.
The dealers who used to do the stall business changed from sitting merchants to merchants, and dealers began to distribute to stores, more precisely, warehouse distributors.
The third stage is branding.
From 2010 to 2015, represented by Farmer and Jinmailang, Farmer returned the market to dealers from 2013 to 2015, and put the right of distribution, dominance and business suggestions at the dealer level, transforming from the traditional distribution model to the exclusive dealer model. From 2015 to 2017, Jinmailang changed the four-in-one model.
Promote the independent distribution ability of dealers.
Around 2010, it was obvious that manufacturers began to require dealers to have the ability to distribute and promote, and dealers' salesmen began to take orders.
The fourth stage is categorism.
From 2015 to 2020, the typical representatives of rest, seasoning, and daily chemical distributors are the manufacturers who will not distribute direct control terminals as deeply as beverage categories because of low category turnover and limited market capacity.
At most, two people support and pay the basic salary, the dealer is responsible for the commission, the personnel are also managed by the dealer, and the manufacturer is responsible for doing some verification work on a regular basis.
At this stage, some dealers began to focus on a certain category, making their own budgets and setting goals.
It is also from this time that more and more big businessmen have risen, acting as agents for more than a dozen first-line brands, plus more than a dozen second- and third-tier brands, and the business scale can reach 100 million.
The fifth stage is channelism.
From 2020 to 2025, dealers with a specific channel as the core business goal, Hyundai KA stores & CVS convenience stores in provincial capitals or first-tier cities, and dealers with small and medium-sized stores as the main business channels in second-tier and below, or regional B2B platform providers.
At this stage, dealers changed their thinking and began to pay less attention to the upstream brand agency business and more attention to downstream stores.
The sixth stage is consumerism.
After 2025, as China's supermarket retail enters a period of differentiation, discount supermarkets and snack wholesalers will appear, and the supply will become more and more concentrated, with a supermarket needing 100 dealers to supply in the past, and only 50 dealers will need to be needed in the future.
Dealers will be hit by prices, and there will be fewer and fewer stores available. At this time, some dealers began to try to closely join and deeply bundle small and medium-sized stores to provide a one-stop commodity supply chain for stores and build their own moats.
Why is it difficult to do dealer business?
In the past, dealers were resource-based businesses, relational businesses, and individual businesses, and had a good relationship with upstream brands and downstream supermarkets for procurement, and business could be done.
But today we find it more and more difficult to do in this business, why?
The economic downturn is one thing, and what is even more cruel is the business grabbing of local counterparts. Dealers with core competitiveness are getting bigger and bigger, and the business has begun to change to professional and company-oriented.
In the early years, dealers were basically husband and wife, brothers, acting for two or three brands, with a warehouse of four or five hundred square meters, and the business was basically running.
There is no need to consider labor costs, warehouse and distribution costs, and no need to think about relying on allocation reduction to bring low costs and high efficiency. Because the cost is low enough, four or five employees, as soon as the boss speaks, the information can basically reach 100%.
But today, the cost is getting higher and the profit is getting lower and lower, forcing dealers to continue to evolve.
Based on such cost and efficiency, there is a core point of view: dealers do not create value, only deliver value; there is no small and beautiful, only scale effect!
When it comes to scale, how do you define scale?
Based on the more than 500 dealers visited by the new distributor in the past few years, we have made a summary and set a threshold for reference:
county-level cities with a population of less than 1 million, with an annual sales of 50 million;
Prefecture-level urban areas have a population of less than 2 million, with an annual sales of 80 million;
Prefecture-level urban areas have a population of more than 5 million, with an annual sales of 100 million.
If we can't make 100 million, won't we be able to live? No! This criterion is just a reference.
How to achieve this 100 million? There is also a premise and background, that is, the independent distribution ability of dealers!
At the same time, it should be emphasized that this is not a large-scale business of cross-regional integration, but a large-scale business operated locally.
Five paths to dealer development
Combined with the past visits and exchanges with dealers, the new distribution summarized and sorted out the development path of dealers, which was divided into five categories as a whole.
The first category is warehouse distribution dealers.
Dealers have reached regional distribution cooperation with several brands to provide warehousing and distribution, and financial support.
Limited to the manufacturer's model or individual ability, it does not have the ability to distribute independently. Typical brands include Mars Wrigley, Coca-Cola, and Master Kong, and they only need to be the core warehouse and distribution advances.
The second category is brand dealers.
70-80% of them are brand-based dealers, and have reached in-depth cooperation with 1-2 brands, such as Arowana, Yili, Mengniu, Nongfu Spring, etc.
Dealers regard it as the core brand, a brand can account for more than 50% of the dealer's business, and other distribution brands are attached and not the focus of daily operations.
The third category is category dealers.
Organize brands based on a category, first-line brands, second- and third-tier brands, and multiple brands are combined to form a distribution agent of the category.
Combine multiple brands under the same category to form a brand matrix to maximize the occupation of the shelf resources, display resources, schedule resources, and floor resources of this category in the store.
The top 5 brands in the same category must account for at least three in order to form the logic of category distribution! This is also the direction that the business of the vast majority of dealers should develop.
The fourth category, channel dealers.
It does not focus on categories and brands, but focuses on a certain type of channel, and more than 80% of business comes from this channel.
Focusing on the business characteristics and business model of the channel, we will build our own organizational structure and management concept to provide goods and services.
The fifth category is platform dealers.
Focus on small and medium-sized stores to do business, provide them with all categories of FMCG products that account for 60-70% of the business volume except tobacco and alcohol, and design an internal organization and management system based on the product demand of the stores as the core starting point of the operation, which is the so-called B2B.
The above five development paths are the five types of dealer classifications we see.
As a third-party observer, the new distributor hopes to help you find the right position and understand the development status of the dealer's business from a national perspective.
There is also a relatively simple assortment, brand-oriented distributor and retail-oriented distributor.
Brand-oriented dealers, dealers complete the indicators of the brand, and focus on the distribution of new products, including hanging strips, displays, tasting and other activities.
In essence, what is earned is the gross profit allocated by brand design, and the core competence is marketing and promotion, and the corresponding schedule resources are seized in the store.
In the past business circulation system, most of them were brand-oriented business models.
It is not because the scale of the brand is large, but because in the era of supply is less than demand, only one brand, the efficiency of reaching the store will be higher, and all the points are based on the brand grabbing more shelves and more schedules in the store.
With the evolution and change, some brand-oriented dealers will still be there, and the other part will begin to evolve to retail-oriented.
Retail-oriented, dealers put the perspective of business on stores and shelves, and supply goods to downstream stores.
For example, soy sauce in the condiment category, go to in-depth research on the price band, functional band, and scene of soy sauce, and go to the corresponding product. Essentially, he is the purchasing person in charge of category management under the retail store system.
The Future of Commerce:
Roll yourself to death and eliminate your peers
Some time ago, in a certain city, I met two dealer bosses, one for 300 million and the other for 400 million, both of whom were doing rest food.
After the two big businessmen carved up the food capacity, the 300 million dealers could not find room for growth, so they could only make some light bottle wine, and then make some daily chemicals after the wine was made.
In a city, the business of leisure food has basically been carved up, where is the opportunity for local food distributors?
In the past, when dealers had a business of one or two million, it was completely okay to choose a good brand, grow slowly with the brand, and achieve thirty or forty million business.
But today for dealers, a city is saturated with dealers, and the next thing is local grabbing business.
The path of the development of a regional distributor is to grab the business of local counterparts and become the TOP1 of the category or channel!
Write at the end
Epistemology determines methodology. Doing any business or any industry is like a traveler walking in a forest, not knowing where he is or where he should go.
When you feel lost, you can choose to stand in a higher dimension and look down, so that you can clearly understand your current position and environment, so as to make an action plan for the next step and find the right way forward.
PS: In order to better help dealers' business growth, we established the TOP500 China Dealer Supply Chain Alliance in June 2023.
Up to now, 272 dealer owners have participated, and the vision of our alliance is to build the alliance into a regional dealer information, capacity, and resource sharing center.
When faced with the confusion of business, it is often impossible to find the answer by looking inward, but will fall into more involution;
Dealers who are interested in joining can scan the code to contact the customer service staff: