---
title: "80% of Billion-Level Distributors Only Master 'Selling' Without Understanding 'Marketing'"
description: "This article discusses the common problem of large distributors who achieve high sales volumes but low net profits, described as 'strong outside but weak inside.' It offers practical suggestions across five areas: reducing return rates, implementing valuable promotions and ideal retail pricing, guiding unified consumer cognition, adjusting product mix toward new products, and refining operations to cut costs and increase efficiency."
author: "海游"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2020-03-26"
categories: "Dealer Operations"
language: "en"
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citation: "海游. “80% of Billion-Level Distributors Only Master 'Selling' Without Understanding 'Marketing'.” New Distribution, 2020-03-26. https://xinjignxiao.com/en/articles/80-of-billion-level-distributors-only-master-selling-without-understandi-ea7a88a3/"
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---

# 80% of Billion-Level Distributors Only Master 'Selling' Without Understanding 'Marketing'

> This article discusses the common problem of large distributors who achieve high sales volumes but low net profits, described as 'strong outside but weak inside.' It offers practical suggestions across five areas: reducing return rates, implementing valuable promotions and ideal retail pricing, guiding unified consumer cognition, adjusting product mix toward new products, and refining operations to cut costs and increase efficiency.

**Preface:**
*Zuo Zhuan, Duke Xi, 15th Year*: "Now using foreign horses for battle... their veins swell and they appear strong outside but are hollow inside." This means that when fighting with foreign horses, in an emergency the horses' blood vessels swell, making them look strong externally but actually weak internally. It is later used to describe things that appear strong but are actually weak.
Recently, I called several billion-level distributors and found that the term "strong outside but weak inside" fits them best. They do over a hundred million in business annually, but at year-end inventory, net profits are minimal.
**Most Chinese distributors prefer to grow big first, then strong, and with the pressure of brand tasks, everything is measured by 'volume.'** When the absolute sales volume in a regional market is large and per capita consumption is high, but profitability remains weak, how to escape this predicament? Here are several suggestions on this issue.
**-01-**
**Reduce Return Rates**
**Core Idea:**
Only by giving the sales team, store owners, and consumers a sense of security can they act boldly.
**1. Sales Team:**
Their biggest concern is the assessment of returns, leading to four levels of problems:
> 1) Insufficient stocking to create display momentum;
> 2) Reluctance to launch new products, fearing that if the company doesn't cover after-sales, customer relationships suffer;
> 3) Hesitation in building vibrant displays, such as not opening boxes for shelf placement or insufficient cooler space, all of which negatively impact product sell-through and thus cause returns;
> 4) Evaluate daily return rates and reward salespeople with low return rates.
**Suggestion: Set assessments based on execution standards and take responsibility for execution results.**
For example, if the brand or distributor requires a certain number of display stores and standards, reward compliance and penalize non-compliance. However, as long as the sales team's execution process is flawless, they should not bear responsibility for the results. This effectively unlocks the sales team's shackles, allowing them to act boldly.
**2. Store Owners:**
Sign after-sales agreements. In recent years, some irresponsible companies and distributors have harmed stores with verbal promises. The era of a promise being as good as gold is gone; written agreements show responsibility.
**Suggestion: After-sales agreements should have conditions:**
> 1) No returns of products from different batches; 2) No returns of expired products sitting in store warehouses; 3) If sales staff visit regularly, expired products should be reported and adjusted in time; no returns of expired products.
**3. Consumers:**
Consumers buy products based on a sense of security from the product, including brand endorsement, quality endorsement, trust endorsement, etc. Big brands are easier, but what about small brands?
**Suggestion:** Conduct more consumer engagement activities. Simple and effective methods include clear pricing, sampling drinks, and tasting. Only when consumers can experience the product and have a reference price will they buy boldly. Many overlook this step, which is a loss.
**Summary: Sales create profit, returns erode profit. In an era of oversupply, returns are inevitable. Instead of racking your brains to avoid them, it's better to push sales boldly, and the return rate will naturally drop. Also, make products visible, tangible, and consumable to alleviate consumer concerns and encourage purchases.**
**-02-**
**Run Valuable Promotions and Set Ideal Retail Prices**
**1. Run Valuable Promotions:**
The purpose of promotions is to build new consumer awareness, combat competitors, and increase sales for profit. If your promotion doesn't achieve any of these, it's worthless and actually erodes your profit.
**2. Set Ideal Retail Prices:**
Pricing is an art, especially in modern channels. We often see non-professional pricing like 29.2 yuan per unit or 49.6 yuan per unit, which neither boosts sales nor maximizes profit.
Introducing a pricing strategy: the left-digit effect, a type of irrational behavior in economics. Consumers focus more on the left digit (the smaller part) than the right digit (the larger part). Sensitivity increases to the left and decreases to the right.
Simply put, consumers pay more attention to the leftmost digit of the price. So pricing at 29.2 yuan vs. 29.9 yuan, or 49.6 yuan vs. 49.9 yuan, is the same to consumers and won't boost sales.
But for distributors selling hundreds of thousands of units a year, this is a huge loss. Additionally, when making price tags, it's suggested:
> **1) Make big numbers small and small numbers big.** For example, for "99 yuan for 2 items," make the "2 items" area larger and the "99 yuan" area smaller, creating a clear size contrast. Consumers will be attracted by "2 items" and feel they're getting a bargain.
> **2) Price tags should have warmth.** Don't write "Spend 100 yuan and save 10 yuan" but "Spend 100 yuan and save another 10 yuan for you." Same information, different effect.
**Summary: Promotion and pricing complement each other. Aimless operations are worse than doing nothing.**
**-03-**
**Guide Unified Consumer Cognition:**
In my market visits, I often find problems that brands and distributors overlook:
With many product SKUs, displays are chaotic, main promoted products have low or inconspicuous shelf space, price tags are inconsistent, promotional posters are unclear, and sampling is not standardized. Investing heavily in promotional items, samples, and materials actually confuses consumers and reduces purchase desire.
**Product sell-through is driven by awareness. Teacher Shi Wei once proposed the trinity of cognition, transaction, and relationship: cognition is transaction, and transaction is relationship. Therefore, guiding unified consumer cognition is key to product sell-through.** Here are three suggestions:
> 1) All visual merchandising materials like price tags, POP, and banners should be unified, standardized, and repeated extensively; 2) Continuously increase display stores to build consumer cognitive fluency; 3) Expand/increase shelf space or floor displays for main promoted products to strengthen consumer awareness.
**Summary: The sole purpose of all market displays is to strengthen consumer product awareness, enter the scene, repeat consistent exposure, familiarity breeds fluency, fluency breeds liking, and liking leads to purchase. If this core is violated, all resource investment is profit-draining.**
**-04-**
**Adjust Product Mix, Shift Focus to New Products**
**1. Characteristics of Old Products:**
1) Products are mature, market patterns are set, and profits inevitably decline. For example, Nongfu Spring 550ml water and C'estbon 555ml water are both 2-yuan waters, fiercely competitive, interchangeable, with transparent prices, leaving little room for distributor profit.
2) Old products have been successfully cultivated, and brands are reluctant to invest more resources in them; they need old products to generate profit.
3) Old products have mature channels and fast circulation, leading to occasional cross-region sales (channel conflict).
**Summary: If brands or distributors focus sales on old products, profits will inevitably decline.**
**2. Characteristics of New Products:**
1) One important purpose of new products is to supplement profit; high profit is their inherent attribute.
2) During new product promotion, brands provide ample promotional budgets.
3) New products play a crucial role in enriching product lines or categories, potentially impacting the distributor's business landscape.
**Summary: For distributors, to increase profit when absolute sales volume is large and per capita consumption is high, promoting new products is an important choice.**
**-05-**
**Refine Operations, Improve Every Aspect, Reduce Costs and Increase Efficiency**
This is a systematic project that can't be fully explained in a few words; I'll elaborate later. But the core ideas are:
1. Expenses that can be spent or not (no impact if omitted) are defined as waste; 2. Expenses that, from a long-term perspective, don't help sales growth are waste; 3. Expenses that, from a long-term perspective, don't help profit growth are waste. **All waste should be reduced or eliminated.**
**Final Thoughts:** Distributors that are "strong outside but weak inside" essentially only understand how to "sell" in the "marketing" trade, not how to "market." **The essence of business is to create a continuous stream of profit. I hope large trading companies will summarize and learn more methodologies to get their businesses back on track soon.**
If you wish to communicate with the author, tips for leads will be paid 400-2000 yuan upon adoption.


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## Citation metadata

- Publisher: New Distribution
- Author: 海游
- Published: 2020-03-26
- Canonical: https://xinjignxiao.com/en/articles/80-of-billion-level-distributors-only-master-selling-without-understandi-ea7a88a3/
- Original source: https://mp.weixin.qq.com/s/Fq_GeOV0Phs9CkZhBYkTYQ

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Contact: zhaobo258@gmail.com · +86 158 5481 7671