--- title: "A Real Case: The Rebirth of a Small-Scale Distributor After Business Difficulties" description: "Zhang Wei, a small distributor, faced mounting management issues as his sales grew from 2-3 million to nearly 10 million yuan annually. Through strategic adjustments in product lines, personnel management, inventory control, and channel planning, he overcame these challenges and regained competitive advantage." author: "张艳超" publisher: "New Distribution" email: "zhaobo258@gmail.com" telephone: "+8615854817671" published: "2017-09-20" language: "en" canonical: "https://xinjignxiao.com/en/articles/a-real-case-the-rebirth-of-a-small-scale-distributor-after-business-diff-9fe180a0/" markdown: "https://xinjignxiao.com/en/articles/a-real-case-the-rebirth-of-a-small-scale-distributor-after-business-diff-9fe180a0.md" original_source: "https://mp.weixin.qq.com/s/NLJkjZvkpfp42Cj1xsYR-w" translation: "https://xinjignxiao.com/zh/articles/%E7%9C%9F%E5%AE%9E%E6%A1%88%E4%BE%8B-%E4%B8%80%E4%B8%AA%E5%B0%8F%E8%A7%84%E6%A8%A1%E7%BB%8F%E9%94%80%E5%95%86%E9%81%AD%E9%81%87%E7%BB%8F%E8%90%A5%E5%9B%B0%E5%A2%83%E5%90%8E%E7%9A%84%E9%87%8D%E7%94%9F%E4%B9%8B%E8%B7%AF-9fe180a0.md" attribution: "New Distribution — https://xinjignxiao.com/en/articles/a-real-case-the-rebirth-of-a-small-scale-distributor-after-business-diff-9fe180a0/" usage_policy: "https://xinjignxiao.com/ai-policy.txt" --- # A Real Case: The Rebirth of a Small-Scale Distributor After Business Difficulties > Zhang Wei, a small distributor, faced mounting management issues as his sales grew from 2-3 million to nearly 10 million yuan annually. Through strategic adjustments in product lines, personnel management, inventory control, and channel planning, he overcame these challenges and regained competitive advantage. Zhang Wei has been feeling particularly frustrated lately. Since leaving his original company to start his own distribution business, he has struggled for over four years, growing annual sales from two to three million yuan to nearly ten million. Sales are rising, but management problems are growing, and recently they all seem to surface at once: the old subordinates he brought from his previous company now consider themselves heroes of the company, doing little but taking credit for others' work, making staff increasingly difficult to manage; in recent months, over a dozen cases of beer have gone missing from the warehouse, and the culprit remains unidentified; reported breakage in the warehouse is mysteriously increasing; with more products in his portfolio, some items are overstocked while others are constantly out of stock; previously, when he only did wholesale, old customers could just call, but now with supermarkets, he is constantly negotiating and often on the back foot... In short, these issues are troubling, and he doesn't know how to solve them. Zhang Wei is a long-time friend, and he poured out his grievances to me over the phone. This is actually a common management problem that emerges as many small distribution enterprises grow. They often have years of market experience, start small using existing business relationships, and boldly launch their own ventures. But as the company grows, "old revolutionaries encounter all new problems," and these management challenges trap them, making their efforts feel like wild punches, sometimes hitting themselves! Zhang Wei didn't lose heart; at a critical moment, this "old hand" was willing to become a "primary school student." He thought of gathering many close friends to help him find solutions. After several on-site investigations and discussions, they formed a set of targeted solutions. **Product Line Issues** Zhang Wei started his business with mid-to-high-end beer, leveraging products he had handled for years, making operations smooth and profitable. Seeing old customers happily buying from him and goods moving quickly, he was encouraged. So, he actively sought manufacturers of similar products, borrowed more funds, and gradually enriched his product line. Initially, being cautious and believing in "stick to what you know," he only added beer from other manufacturers to complete his price range. But later, seeing other distributors making fat profits from other products, he ventured into candies, white spirits, red wine, beverages, and even slippers! Some products were not as profitable as promised during recruitment, and some even incurred heavy losses. **At this point, he was bewildered, fully realizing the pain of aimless product line extension**: white spirit brands have a "three-year cycle," and some once-famous brands were already hard to sell when he took them on; when he wanted to stop distribution, the manufacturers withheld his deposits, forcing him to continue buying; a beverage manufacturer sent him water-damaged, rusted cans after a flood, and promised subsidies never materialized; red wine, despite heavy advertising, showed no sales response, and his friends in the red wine business said it was no longer selling well and couldn't help... After a few months, Zhang Wei was not only bewildered but also anxious! He had worked hard to become regional general agents for several products, but in the end, the policies changed, and whether they sold well or not, the manufacturers' representatives procrastinated and avoided responsibility. His funds were tied up in slow-moving products, and his main beer product couldn't be restocked due to cash flow problems, leaving him scrambling to raise money. His plan to replace his house of over ten years fell through! **This is the most common problem small distributors face when seeking product agencies: they don't know how to design their product line. With so many bestsellers and new products emerging, they don't know what to carry that is most reasonable and suitable for them.** A company launching a new product goes through extensive research and analysis, but small distributors don't do this. The most fatal issue is that it's easy to add a product but hard to drop it! Small distributors' flexibility is not about arbitrarily adding products, but sadly, they all think it is! This is the biggest misconception among small distributors! Reality shows that this arbitrary addition of new products has dragged many small distributors underwater, unable to get back to shore! This can be basically solved by careful consideration and analysis. **First, what products do consumers currently like? Are they just trying these products or genuinely liking them?** Many distributors jump on a product because of flashy advertising, but they don't understand what consumers in their area truly want. Yes, consumers see ads, but the era when ads dictated consumer behavior is over; they are increasingly rational. Zhang Wei's customer base includes secondary wholesalers and supermarkets, but apart from close communication with secondary wholesalers, he knows nothing about people's shopping habits in supermarkets. So, it's important for him to visit supermarkets more often, rather than getting excited about adding a new product just because a wholesaler says it's selling well. **What should the product line structure be? Generally, there are strong brand products, high-profit products, and high-coverage products.** Currently, he has only one brand product, and its brand advantage is slowly eroding, but he hasn't found a replacement in time; he has many high-profit products, but none are consumer-recognized, so effectively he lacks high-profit products; as for high-coverage products, he has none, and his customers now go elsewhere for common goods, causing him to lose his old customer advantage. Furthermore, although his newly added products are those his downstream customers are already selling, aiming to enhance his distribution capability, all existing products are from outside the region, with limited shelf life, and shipments are full truckloads, causing turnover difficulties. Also, due to pressure from white spirit and red wine manufacturers, his inventory of these is large. **He has transformed from a beer-focused distributor to one without a strong leading product, becoming indistinguishable from other distributors and losing his competitive edge.** In this situation, he also failed to see the sales potential of chocolate products and nurture them in the supermarket system. Here, we find that the biggest mistake small distributors make in product line selection is: immediately adding high-profit products without considering whether they fit their product mix. We can use this table to illustrate what products he should carry: | Channel | Products | |---------|----------| | Supermarket | Strong brand products + High-profit products | | Foodservice | High-coverage products + High-profit products | | Wholesale | High-coverage products + Strong brand products | From the table, small distributors should rely more on strong brand and high-coverage products to gain long-term distribution status, and use these to drive sales of high-profit products. Due to their own brand disadvantages, they should stand behind these products and leverage their service advantages to sell more high-profit products, increasing their chances of success. Specifically for Zhang Wei, we designed the following product-channel line for sales: | Channel | Products | Remarks | |---------|----------|---------| | Supermarket | Beer + Chocolate + Red wine | Minimal cost, maximum profit | | Foodservice | Beer + Beverages + White spirit (or red wine) | Table economy, maintain customer relations and profit | | Wholesale | Beer + Beverages | Customer maintenance, status among peers | With this ratio, Zhang Wei's previously chaotic product layout became organized. He dropped four of his six beer brands, keeping one first-tier and one second-tier brand, and strengthened support for the second-tier brand to gradually replace the first-tier; he completely stopped selling slippers and cleared inventory; for beverages, he selected a fruit juice, a carbonated drink, and a foodservice milk; for white spirits, he introduced a local favorite brand and cleared out all miscellaneous brands, ceasing cooperation with those manufacturers. **Personnel Management** "These old employees, who came with me to build the company, are now hindering my development!" Zhang Wei sighed, clearly torn. It's hard to criticize them, hard to fire them, and they keep causing problems. They don't ask for high salaries, do little work, but always claim half the credit for new employees' achievements. Indeed, Zhang Wei finds this difficult to handle. So what to do? We suggested a method: if you can't manage them face-to-face, let a "third party" manage! Use boards, charts, and systems. He bought two whiteboards—one for numbers, one for charts. At the morning meeting, he doesn't say who did well or poorly; instead, everyone takes turns reading the sensitive numbers aloud, showing sales changes. On the chart, if someone's sales are poor today, a thick red line is drawn—a warning! The latter part of the meeting is for everyone to discuss improvements. This shifts from monthly, subjective, and leader-based assessments to daily, objective, self-assessments and incentives. Before long, those old salespeople with poor performance will be "tortured" by having to explain themselves daily to the whole company, and they'll be too embarrassed to continue slacking off, so they'll get back to work! Although this is fair, a few old employees still rely on Zhang Wei's inability to punish them, becoming passive and living off old relationships. At this point, we suggested another tactic: incorporate these individuals into the team, leverage their strengths, eliminate their selfish habits, and form project teams! Make these old employees team leaders, responsible for sales in a specific area. This puts them in leadership positions; if they do well, they gain support and earn more bonuses, so they'll work hard; if they fail, they lose face and won't be so arrogant in front of new employees. Finally, another tactic: these old employees built the company under traditional models and don't understand supermarket operations. So, Zhang Wei separated them by department: old employees handle wholesale, new employees handle supermarkets and foodservice. Of course, as a small business owner, Zhang Wei wants a stable team; he can't recruit widely like larger companies. If he loses a key salesperson, finding a replacement is hard. But these salespeople, with relatively low skills, also prefer stability and want a small boss like Zhang Wei to take care of them, providing a job to support their families. Considering this, we also suggested Zhang Wei buy commercial health insurance for outstanding employees to motivate them and encourage them to work more diligently. **Inventory Management** Zhang Wei is a diligent young man studying law through self-study and has wanted a computer for learning and internet access. This time, we helped him realize this wish, encouraging him to buy a computer and install management software suitable for small distributors, maximizing its utility. During the day, a clerk enters each transaction into the computer; every evening, Zhang Wei can see the day's inventory and sales, quickly identifying stock issues. By analyzing transaction data over time, he can understand sales trends and necessary inventory adjustments. He discovered that expired products from years ago, neglected due to oversight, amounted to nearly 2,000 yuan—about the price of a computer! With the computer system, he can track production dates and implement "first-in, first-out" management, refusing to ship older stock otherwise. He can also set "warning lines" for products that might expire if not sold soon, prompting salespeople to push them. Another key finding: he identified patterns in manufacturers' promotional activities, so he no longer needs to tie up all funds in stockpiling during promotions; he can buy moderately, fully utilize promotional policies, and still have funds for non-promotional products. **Distribution Channel Division** Zhang Wei is now familiar with wholesale distribution; he has made some progress in supermarket channels over the years; later, seeing higher margins in foodservice, he hired a few salespeople for restaurant sales, though it's still in its infancy. Due to the small company size, he's cautious about investing too much and hasn't hired professional managers. Managing all channels himself is exhausting: wholesale is manageable with old relationships and old salespeople, but he doesn't trust salespeople with supermarkets due to their lack of negotiation skills, and foodservice's nighttime consumption habits drain him, causing issues like delayed payments and fears of restaurants defaulting. He realized that multi-channel operations in a chaotic state are dangerous. So, planning multi-channel operations and focusing on one or two channels became urgent. We suggested **he divest the wholesale business, contracting it to three old salespeople**. This requires no further management effort from him, just monitoring. These old salespeople, familiar with the business, are motivated by being both employees and "bosses" of their contracted areas. They receive a fee of one yuan per case for beer and beverages, and for white spirits and red wine, a commission of ten yuan and five yuan per case, respectively, provided monthly sales targets are met. Prices must follow company guidelines; unauthorized changes result in fines of 500 to 1,000 yuan or even dismissal. Delivery trucks must refuel at a designated station near the company unless prior approval is given... **Through these constraints and incentives, Zhang Wei can confidently delegate business, saving effort and earning good returns.** For the supermarket channel, we suggested hiring professional salespeople from foreign companies. First, these professionals have good relationships with buyers, saving costs like entry fees, anniversary fees, and display fees, and securing prime shelf positions for better visibility. Second, they have negotiation and business experience, avoiding pitfalls from unfamiliarity with supermarket contracts and requirements like delivery and product exchanges. They also understand supermarket promotions better, enabling adaptive promotional activities to boost sales. With wholesale and supermarket channels properly arranged, he can focus on foodservice sales! We suggested grading restaurants by sales capability (A, B, C levels), creating customer profile cards, and integrating the newly defined product line to establish a comprehensive "table economy." This reduces costs, simplifies one-stop purchasing for restaurants, and leaves no room for competitors to enter. Additionally, through exclusive store agreements (not carrying competing brands of the same tier), he can squeeze out other brands; through table displays, he increases consumer impression; through point collection cards, he offers more rewards to store owners; through bottle cap recycling, he encourages waitstaff to promote... With these adjustments, Zhang Wei finally breathed a sigh of relief. In just two months, sales showed noticeable growth, and most importantly, we believe Zhang Wei has truly grasped his development direction for the coming years, and his management level will greatly improve. All these measures not only solved immediate business, management, and talent issues but also left other struggling distributors of his type far behind, establishing his own competitive advantage and sustainable competitiveness. Source: FMCG Distributor Classroom The **3rd (CFIC) China FMCG + Internet Conference** will be held in Chongqing in November 2017. The conference will focus on the theme "New Forces, New Ecology," inviting **1,000+ distributors, 500+ brand owners, 200+ B2B platform founders, and 100+ investment and financing institutions** to explore new chapters of cross-industry integration! **Core Topics of This Conference:** > * **How can the FMCG industry leverage B2B for new growth opportunities?** > > * **How should the new supply chain behind new retail be built?** > > * **How can intra-city logistics help B2B achieve leapfrog development?** **Highlights of This Conference:** > * **The industry's first "2017 China FMCG B2B Industry Competitiveness White Paper"** > > * **Case sharing of excellent distributors undergoing transformation and upgrading** > > * **Upgraded conference and exhibition: Hall 6 Internet Technology Exhibition strengthens networking** > > * **Leaders from Alibaba Retail Link, Puhua Finance, Eternal Asia Supply Chain, Best Store Plus, Yijiu Pi, and Hdware will deliver speeches with pioneering views.** **Registration is now open. Long press the QR code below or click "Read Original" to register.** Add friend with note "Conference Registration" Click the links below to review the highlights of the 1st and 2nd FMCG + Internet Conferences: [2016 "FMCG + Internet" Summit Forum]() -END- --- ## Copyright and AI use This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL. Contact: zhaobo258@gmail.com · +86 158 5481 7671