Whether you want to regain control, stay in the market or make a clean break, here’s how to manage a breakdown with your Chinese distributor, and how to avoid it becoming a full-blown disaster
If Part 1 of this series focused on what brands must do to prepare before signing with a Chinese distributor, Part 2 explores the more difficult scenario: what happens if that relationship breaks down?
As Zarina Kanji, Managing Director UK & Europe at WPIC, puts it: “The best thing is to avoid getting stuck in the first place.” But if things do go wrong, whether the distributor isn’t delivering, the market strategy has changed, or the working relationship has simply soured, brands must move swiftly, strategically and with clarity.
“Trust is absolutely fundamental in Asia,” says Kanji. “It’s a region where relationships matter. The number of UK brands and beauty partners is small, people talk. If you can keep things professional and polite, you’ll stand a better chance of exiting on good terms.”
That’s not always easy, but it’s critical. “If you’re planning to stay in the Chinese market, you’ll need to line up a new partner and manage the transition carefully,” she explains. “Platforms like Alibaba or an agency like WPIC can sometimes support the handover. The new partner might help with transferring stock, keeping the store live and downtime minimal. But this is only possible if the breakup isn’t acrimonious.”
If tempers flare or the relationship turns hostile, things can spiral quickly: stores shut down, sales data is lost, and customer reviews disappear. “In the worst-case scenario,” she adds, “it’s a reminder of why doing due diligence upfront— and retaining ownership of your store — is so important.”
A phased approach—not a scorched earth
Kristina Koehler-Coluccia, Head of Business Advisory at Woodburn Accountants & Advisors, has seen this scenario play out many times, including with long-established brands.
“I’ve worked with companies that started with wholesale, then expanded into e-commerce and even hired staff. When the time was right, they decided to set up their own company in China. But instead of cutting ties with their distributor, they took a phased approach.” In this case, the company drew up a list of everything the distributor controlled — logistics, warehousing, customs clearance — and identified what to take back in-house and what to leave in place.
“Just because the distributor’s no longer right for the e-commerce or brand management side, doesn’t mean they’re not good at operations,” says Koehler-Coluccia. “So rather than burn the bridge, keep them doing what they’re good at. It also avoids triggering hostility.”
This type of staged transition can be particularly valuable for brands that rely on physical stock management. “Distributors don’t always just run the store,” she says. “They may also hold your inventory, fulfil orders, or handle customer service. You need to think about the whole supply chain, not just the front end.”
If it turns ugly, get legal, get local
But what if the distributor won’t cooperate? What if they refuse to transfer ownership of assets – or worse, continue using your brand? “If it turns ugly, you need a Chinese lawyer,” says Koehler-Coluccia. “Don’t try to manage this through a UK firm. Chinese law, Chinese platforms – this is where you need expertise on the ground.”
The first step is to review your contract. Hopefully, it includes clear terms on asset ownership and an exit clause (as advised in Part 1). If the distributor has no licensing rights and doesn’t own the trademark, you have leverage. “If they’re still using your brand post-termination, you can stop shipping,” she says. “That gets their attention. Meanwhile, your legal team can engage directly with the platform—whether that’s Tmall, JD, or another.”
She also recommends reaching out to the platform itself. “Tmall and JD don’t want this conflict either,” she explains. “They earn off your sales. They want to keep your brand active. You can get a client manager, and in some cases, they’ll help you change usernames and passwords. But you need a lawyer to do this—it’s not a simple customer service job.”
Keep your company structure in mind
For brands with serious long-term ambitions in China, one option is to incorporate locally. “Platforms will only let you own your store directly if you have a Chinese entity,” explains Koehler-Coluccia. “So many companies we work with start by using a distributor, but then form their own local company to take over.” That local entity can then contract directly with the platform, manage invoicing, repatriate profits, and even hire staff. “You can still outsource warehousing and logistics, even keep the same partner in a reduced role,” she adds. “But you control the brand and the data.”
For brands exiting completely, the priorities are slightly different. “If you’re done with the market,” says Kanji, “then the key is to get everything closed as quickly and cleanly as possible. Connect with the platforms and ask to close the stores, retrieve any stock, reclaim your platform deposit and close contracts—especially if you’ve got months left and nothing’s happening.”
Think strategically, not emotionally
In Kanji’s experience, British brands often get caught up in the heat of a bad situation. “But think long term,” she advises. “If you might want to come back to China, then it’s worth leaving on good terms.”
She recommends again using the CBBC, DBT, or approaching platforms directly for guidance. “There are people who’ve done this before and can help. Don’t go it alone.” And ultimately, as Koehler-Coluccia points out, this is about thinking operationally. “Too many brands only think about the e-commerce channel. But if you’ve been doing wholesale too, that’s a whole different relationship. Do a SWOT analysis. What are your distributor’s strengths? Where are the weaknesses? How much can you do yourself—and how much do you need help with?” She concludes with a reminder: “If your distributor has done a good job with logistics, why change it? The goal is to regain control, not destroy what’s working.”
Part 1 Recap: What to do before engaging a Chinese distributor
Read the first feature in this two-part series for a full breakdown of how to choose the right distributor, avoid common mistakes, and ensure you retain control of your brand in China.
