---
title: "As Spring Festival Approaches, How Should Distributors Handle Inventory Pressure?"
description: "As the Spring Festival approaches, distributors face significant inventory pressure. This article discusses strategies for transferring inventory pressure, clearing channel inventory, and achieving a successful start to the new year."
author: "高级研究员 海游"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2024-01-12"
language: "en"
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# As Spring Festival Approaches, How Should Distributors Handle Inventory Pressure?

> As the Spring Festival approaches, distributors face significant inventory pressure. This article discusses strategies for transferring inventory pressure, clearing channel inventory, and achieving a successful start to the new year.

**导语****:**转移库存压力、打通渠道库存、做好开门红。******作者** 丨海游**校审** 丨何雯 **排版** 丨张雨薇
For most FMCG manufacturers and distributors, this time of year typically brings the greatest inventory pressure. On one hand, at the end of the previous year, they stock up to meet targets to secure brand rebates or renew distribution rights for the coming year. On the other hand, with the Spring Festival approaching—a major sales peak—they launch "opening red" campaigns, so shipments naturally remain high.
So, at this moment, facing such immense inventory pressure, what should distributors do? What should brands do?
**The immediate thought should be inventory transfer**
One viewpoint is: **Large inventory itself is not scary; a responsible brand plans distribution and sell-through costs for every unit. As long as inventory exists, costs remain. What is scary is when inventory remains but the budget to clear it is gone.**
How to transfer inventory to the channel is a common topic. Let's briefly apply the marketing 4P theory.
**1. Product:** Behind inventory is the issue of turnover rate. Only by ensuring turnover can you guarantee product sales and gross margin space. Now there's a problem: **If inventory is too high and products don't move, even high gross margins are useless.**
So we need to reflect: Are there planning issues? No product mix? Sales supervision issues? Are product sales, mix, inventory, orders, and payments disconnected? Is the warehouse department at fault? The warehouse has a supervisory role for abnormal products. Is the sales management department at fault? Lack of control over downstream customers, insufficient or misdirected product stocking. Is the sales team at fault? Poor sales skills, weak customer relationships, lack of confidence in the product, etc.
Reflection isn't just about assigning blame; it's more about exploring, from a product perspective, what other ways there are to move goods.
**2. Place (Channel):** The core of the channel is the quantity and quality of outlets. Improve the quality of existing outlets and increase the number of cooperative outlets. Common methods include the following four:
**a. Channel incentive programs:** Set reward plans for channel partners, such as additional discounts, rebates, or other incentives, to encourage them to purchase products in bulk. This increases channel partners' profits while also clearing large amounts of inventory.
**b. Channel cooperation:** Collaborate with channel partners on joint marketing activities, such as co-hosting promotions, trade shows, or other marketing events, to jointly increase product awareness and sales. Through cooperation, you can attract more channel partners to help sell inventory.
**c. Introduce new sales channels:** Find new channel partners to expand the sales network. For example, cooperate with e-commerce platforms, special channels, distributors, etc., to bring products into more sales channels, increasing sales and market coverage.
**d. Wholesale sales:** Directly sell products in large quantities to channel partners at lower but reasonable prices, letting them bear part of the inventory and then distribute. This speeds up product flow and reduces your own inventory pressure.
**3. Price:** Low pricing is the easiest and fastest way to clear inventory, but it's also the least recommended. Prices are easy to lower but hard to raise. Using price to clear inventory especially requires considering the long-term impact on the brand's price system.
**4. Promotion:** Through price reductions, bundle sales, gifts, etc., attract channel partners to purchase large quantities, stimulate their buying willingness, and quickly clear inventory.
It's worth noting that promotional clearing and price clearing are fundamentally different. Although both allow channel partners to gain more profit, they differ greatly in form and results. Promotional clearing requires more design, such as using high-premium first-line brands as promotional items, setting quarterly or semi-annual cumulative rebates, etc. It's effective and doesn't harm the price system.
**Long-term consideration: How to clear channel inventory**
Brands need to monitor distributor inventory to better understand product distribution. Distributors need to monitor outlet inventory to better understand product sell-through. How to achieve this is a challenge and a must-solve problem.
For distributors, there are two common ways to clear channel inventory:
1. One of the daily tasks of a distributor's salespeople is to regularly visit terminal outlets. **By having salespeople periodically count outlet inventory to obtain data**, this is the method most distributors currently use.
The main reasons for favoring this method are: low cost and relatively controllable salespeople; periodic physical counts improve data accuracy. The drawbacks are also obvious: salespeople can't count outlet inventory every day, so real-time data isn't high enough, and inventory data can't be obtained immediately. Also, it's necessary to effectively avoid data falsification due to performance evaluations.
2. **One part of channel digitalization: build a complete inventory-in, inventory-out, and stock data chain to achieve channel inventory visibility.** The prerequisite is to master both channel partners' purchase data and sales data, subtract the two to get inventory, and supplement with periodic checks by auditors for secondary verification. If there's a large discrepancy, problems can be resolved promptly.
The key necessary condition for implementing this solution is: **Design a salesperson incentive system that encourages them to use the channel inventory management system**, thereby achieving integrated system connectivity that breaks down data silos, making data closely linked, decisions error-free, and management more scientific.
To truly have a clear picture of inventory, distributors must have sufficient understanding of downstream channel partners' inventory-in, inventory-out, and stock levels. Distributors should quickly establish a data collection system to have enough room to release pressure when sales pressure arrives.
**With inventory, how to achieve a successful opening red**
The current situation and development are dilemmas distributors constantly struggle with. In today's market environment, only by doing difficult things can you survive. The keyword for 2023 was "eliminate" (elimination), and for 2024 it's "endure" (endurance). Here are four key operational points.
**1. Have a clear operational strategy**
**To alleviate the inner uncertainty when stocking up, you need clear distribution targets and execution actions for the opening red.** Know which channels you have, how many outlets, how much you distributed in the same period last year, what you expect this year, which channels can sell gift boxes, which can sell whole cases, which outlets can do stack displays, what terminal tier policies to implement, and then set realistic distribution targets based on this, reaching consensus and having a clear plan.
For example: Which core customers can gain share from competitors through increased investment and contribute more growth? Which channels that weren't successful in the past year can be recovered using CNY resources? As new channels grow, can CNY add more inventory as a growth driver? At the same time, objectively and rationally view the market: what risks haven't been anticipated? Are there contingency plans to prevent existing fires from spreading?
Generally, at this stage, brands have certain market or channel resources. **Distributors should proactively communicate with factory representatives about market investment to maximize resources. Never sit, wait, or rely on others, especially not asking for resources without a clear tactic, which brands dislike.**
**2. Identify difficulties affecting operational execution and seek brand support**
Here, difficulties don't refer to inventory, capital, or task pressure (these are hard to solve, and brands can't provide support), but rather operational difficulties encountered in actual operations.
For example: Difficulties from intensified channel competition—other competitors may also be running similar opening red activities, vying for the same target customer groups, leading to fierce market competition and price wars. Distributors face more competitive pressure. Difficulties from insufficient marketing capabilities—inability to effectively promote products, expand sales channels, manage customer relationships, etc., which may prevent the opening red activity from achieving expected results.
**3. Clarify the logic of distribution and sell-through for performance**
Distribution and sell-through refer to the formulation and breakdown of TP (Trade Promotion) and CP (Consumer Promotion). Let's briefly emphasize these two concepts.
TP targets channel partners, including two types: wholesalers, who mainly consider gross margin and flow speed; and terminal retailers, who, besides gross margin and sell-through speed, also importantly consider attracting foot traffic and related sales—the so-called customer-gathering effect.
**For terminals, the most important thing is gathering customers.** With foot traffic, everything follows; without it, even if you make money, it won't last. Popularity is arguably the most critical factor.
CP targets consumers, i.e., consumer promotions, also called consumer education or communication. In essence, it's about **changing their minds, explaining a logical cognitive system, or making them emotionally excited in a specific scenario.**
**The goal is to make them feel moved.** If they're moved, they might act, or the feeling plants a seed in their minds. Both effects are good. Of course, after clarifying the purpose and logic, formulate a plan and execute it perfectly.
Once you thoroughly understand TP and CP, the logic for distribution and sell-through becomes clear, and subsequent target breakdown becomes much easier.
**4. Reasonable assessment to ensure everyone shares the burden**
**Assessment should focus on rewards, including both process rewards and result rewards.** Some manufacturers and distributors pre-issue bonuses to the sales team and deduct them if targets aren't met, which doubles the incentive effect.
A common process incentive is the PK system, with weekly, ten-day, or monthly competitions, summary meetings, and rewards for encouragement. Champions and runners-up should be rewarded. During work, discover highlights and set examples at any time, and promptly praise them in the work WeChat group.
**For the Spring Festival peak season battle, you must match attractive and tempting rewards for achieving goals. Process + results, both are indispensable.** What you want, you reward accordingly. The more you invest in team members, the more they'll return.
**From March 14-16, 2024, the 9th China FMCG Innovation Conference & the 2nd China FMCG Hard Discount Conference & the 2nd China FMCG Distributor Conference will be grandly held in Chengdu!**
This conference will focus on the theme **「Supply Chain Revolution」**. Over 3 days, with 1 main forum, more than ten sub-forums and closed-door exchange meetings, we will gather with thousands of FMCG brand owners, distributors, retail transformers, and industry service providers from across the country in Chengdu to discuss the challenges and opportunities, changes and solutions in the era of supply chain revolution. It's worth emphasizing that **on March 16, the 2nd China FMCG Distributor Conference, hosted by New Distribution and co-hosted by Zhoupu Data, will also open as scheduled.** At that time, it will bring together 500+ outstanding distributors from across the country to comprehensively interpret distributor business from aspects such as enterprise growth paths and operational practices, helping distributors enter the next decade amid the supply chain revolution! **In this era of supply chain revolution, a new business era will be born. We hope every participant will still have a place in this wave, and we believe this will be a conference worth attending!**
**🔺Scan for ticket inquiries🔺**


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