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Controlling Terminals Achieves Market Position

Mr. Wu is a beverage distributor in a city in Guangxi Province. He has been distributing Brand A beverages for over a decade, primarily handling beverages, red wine, and snack foods. His coverage of catering and nightlife terminals exceeds 90%, but his main business remains Brand A. For over ten years, Mr. Wu has been the regional distributor for this brand. Through more than a decade of development, Brand A has become well-known among consumers, and Mr. Wu naturally became one of the company's core distributors, holding a high position in the minds of the company's executives.

Despite this, under the banner of deep distribution, the manufacturer has tried to shrink his sales area to achieve market refinement and expand sales share. Over the years, the office manager changed eight times, but Mr. Wu's position as general distributor remained solid, and he even expanded his sales area. The reason is his strong ability to control terminals: channel distribution rate over 85%, controlling 90% of the city's sales. Any rash move to shrink his sales area would mean uncertainty about meeting sales targets, and could even ruin the market! Although difficult to control, facing increasing sales volumes and market share year after year, the manufacturer could only turn a blind eye. So, how does Mr. Wu operate his terminals?

1. Cultivate Key Accounts. Mr. Wu started as a distributor of Brand A and, after over a decade, his sales are still supported by these "loyal friends." These clients hold important positions in the city: large businesses, good locations, extensive networks, and timely information. They are Mr. Wu's key support targets. By establishing a professional business team, he develops and maintains the market for key retail clients, stabilizes relationships with key clients and channels, and achieves steady sales growth. These major clients are the main reason Mr. Wu meets his sales targets and the capital for his stable position as the city's general distributor.

2. Enhance Channel Relationships. Mr. Wu has been distributing Brand A for over a decade, growing from a young man delivering goods by tricycle to a multimillionaire. Despite this, he personally handles every delivery and always brings small gifts or premiums for important clients. Through over a decade of interaction with terminals, he has gained the recognition of terminal owners, who naturally promote Brand A enthusiastically, stabilizing confidence in the sales channel.

3. Develop Special Channels. Facing the pressure of increasing sales targets each year, Mr. Wu has his own approach. He adds distribution channels and develops special channels. Using local network resources, he sells beverages and red wine to government agencies, high-end clubs, coffee shops, and other special channels. After years of operation, Brand A has achieved good results in these channels, and Mr. Wu has reaped significant benefits.

Market Pressure from Terminal Downstreaming

However, since 2008, the manufacturer has advocated channel downstreaming and refined management. Although Mr. Wu's sales area has not been reduced, his annual sales targets have increased significantly, coupled with economic downturn, pressure is growing daily. Sales from major clients have stagnated. Although market channels are stable, after reaching a certain level, sales growth slows and cannot be improved; small and medium clients are continuously lost. Due to over-reliance on major clients, attention to small and medium clients is low, and market investment is small, so these clients often complain about policy restrictions from the manufacturer.

Although Mr. Wu's sales area has expanded, the manufacturer, to better control, added restrictions in the contract, increasing extra costs. Mr. Wu found that the profit from the mature brand A is decreasing each year, and rising delivery and labor costs have made direct terminal control much more expensive. The main business of beverages not being profitable has led to a decline in overall company operating profit. These factors have brought unprecedented pressure to Mr. Wu. If left unchecked, his position as general distributor might eventually be lost.

Direct terminal control brought Mr. Wu substantial returns and established his strong leadership in the city. However, as competition intensifies and the manufacturer's channel downstreaming and market control capabilities strengthen, Mr. Wu's former terminal leadership is weakening. The main reason is his extensive management of terminals, which no longer meets the increasingly clear division of labor in society. Specific reasons are as follows:

1. Emphasizing results while neglecting process. Mr. Wu has always operated the market with early business thinking, focusing on sales volume and profit returns while neglecting terminal performance. Although sales have remained good, poor market performance naturally leads to poor results.

2. Neglecting the value of small and medium clients. In recent years, Mr. Wu found that key major clients have grown, but slowly, and can no longer meet the manufacturer's sales requirements. The main reason is that Mr. Wu focuses his main energy and resources on these major clients, giving them priority in policy and resource investment. Long-term neglect and poor service attitudes have led to increasing complaints from small and medium clients and their continuous loss, so sales naturally decline.

3. Inappropriate resource allocation. On one hand, relying on good relationships with major clients, he reduces investment in promotional gifts; on the other hand, he sells off intercepted gifts to increase profit sources. Unknowingly, when other manufacturers invest more resources, these major clients gradually shift their attention to other high-profit products, and small and medium clients, not receiving manufacturer benefits, naturally do not enthusiastically recommend the product. This is also an important reason for client loss and sales decline.

How Distributors Can Improve Channel Control

In today's increasingly clear division of labor, controlling channel terminals is crucial. Mr. Wu's direct terminal control strategy is a direction for us to learn from, but its shortcomings are worth reflecting on. So, how can distributors improve channel control? It mainly includes three aspects:

Reasonable Channel Planning

1. Planning strategies for circulation channels and modern channels. For the FMCG industry, reasonable channel planning is a prerequisite for market control. We can divide channels into circulation channels and modern channels based on specific market conditions, then find profit points within these channels and deploy globally based on these points to maximize terminal control. For example, in modern channels, chain convenience stores are a new retail terminal. To effectively control terminals and shorten the contact layer with consumers, we can choose convenience stores close to communities with good quality for terminal displays and relationship maintenance.

2. Development and maintenance of special channels. Special channels are very attractive to distributors because they have concentrated consumer groups, low development thresholds, and low maintenance costs, making them popular among distributors. If traditional channels are the regular army, special channels are the flanks of the army, playing a defensive role for the overall situation. For distributors or agents with strength, consider setting up an independent department or dedicated personnel to maintain and follow up.

Refined Management

1. Channel segmentation. This is a further division under the overall channel division. Based on specific market conditions, divide the market into A, B, and C class markets, and decide resource investment based on market performance. These markets can be classified as sales-oriented, investment-oriented, image-oriented, or sales-image-oriented. For example, chain stores are a mature channel for Brand A, i.e., a sales-oriented market. In this market, consumers already have a certain awareness of Brand A, so we can invest fewer resources, invest periodically, and maintain good relationships. By analyzing and effectively segmenting channels, resource investment becomes more effective and targeted.

2. Store management. Store management is the most important part of refined management. Many distributors think that good store management is just timely delivery and preventing stockouts. However, it is not that simple. Today's increasingly fierce competition requires distributors to continuously adapt to market development needs. How to do effective store management?

First, establish detailed customer profile files, including the store's operating history, owner, contact phone, address, operating area, and product items. By establishing files, you can effectively understand the store's overall operation. Second, conduct sales analysis, including item analysis, item sales, monthly sales, achievement ratio, and competitor ratio, to promptly understand market dynamics and adapt to market needs. Third, make replenishment plans. Often, we find that relying solely on the owner's replenishment plan can lead to stockouts affecting sales. We can remind owners to replenish at appropriate times to prevent stockouts from affecting sales.

3. Arrangement of promotional activities. Organize irregular promotional activities to attract terminal owners' enthusiasm and enhance brand influence. If it is a leading brand, consider the company's development plan and hold promotions for key items; if it is a follower brand, consider competitor investment for targeted counterattacks. Note that promotional activities must align with the annual market support budget, and effective supervision and feedback should be conducted to monitor channel dynamics.

4. Personnel allocation and division. In practice, we find that some distributors are casual about maintaining mature markets. The better the market foundation, the fewer personnel are often invested. Little do they know that because the market foundation is good, business personnel's work is relatively easy, and long-term relaxation often leads to sales decline or competitor counterattacks causing sales drops.

Logistics and Distribution

1. Choose an appropriate warehouse location. Controlling terminal distribution is key. The key to reducing distribution costs and ineffective distribution is choosing an appropriate warehouse location. After detailed market division and planning, the next step is distribution. Timely distribution not only improves terminal customer satisfaction and trust but also prevents losses from delayed delivery causing stockouts. How to choose an appropriate warehouse location?

First, set based on the demand of market stores, including the distance between stores, arrangement of key items, and placement of promotional items, for overall planning. Second, choose based on actual convenience for inbound, outbound, handling, and vehicle dispatch. For example, in wholesale markets, loading and unloading are extremely inconvenient, affecting delivery efficiency, so consider setting up a warehouse in a place with convenient loading and unloading.

2. Good inventory management. Whether inventory management is good or not directly affects the effectiveness of distribution. For distributors with direct terminal control, stockouts not only miss greater sales opportunities but also affect relationships with terminals. Distributors should pay attention to their own inventory changes and manage inventory well. On the other hand, they should also pay attention to terminal store inventory, replenish promptly, strive for greater sales opportunities, and win terminal trust.

Text: Sugar, Tobacco, and Wine Weekly

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