From the office balcony, the traffic on the main road below has returned to its usual congestion, but foot traffic in stores remains sluggish... Just after the conference call, Lao Wang's face was full of worry. He had hoped to discuss reducing targets, but the provincial manager's words were resolute: "Headquarters requires that sales lost due to the pandemic be made up in the next two months..." Lao Wang lit another cigarette, took a few deep drags, and silently encouraged himself: "Fight! Must fight! No matter how hard, we must snatch sales from competitors!" If the pandemic had not occurred, many city managers in first-tier cities would still not have paid enough attention to new retail channels such as O2O, ERTM, community group buying, and home delivery services, mistakenly believing they were small-scale sales not worth much time and effort. The sudden outbreak left many city managers who had hoped for a strong offline start dumbfounded, suddenly realizing that channels like home delivery platforms, community group buying, and ERTM could sell products so vigorously! Although these new retail, new channels, and new scenarios have been developing for at least two to three years, many FMCG manufacturers still haven't given them enough attention. This pandemic is bound to become a landmark 'watershed,' accelerating the evolution of new retail and new channels, and establishing the 'omni-channel distribution' model in the FMCG industry. As a city manager in a first-tier city, perhaps before the pandemic, new retail didn't have a significant impact on your business. So most people were still in a wait-and-see mode, truly concerned only about monthly order fulfillment, estimating whether they could complete this quarter's tasks, and calculating how much bonus they could earn to support their families. But after the pandemic, proactive city managers should recognize that the evolution of channels has accelerated, and it's time to redesign and plan the 2020 target achievement expectations and progress allocation (How to adjust Q2 targets? Should the half-year targets be lowered or maintained? Should annual goals be adjusted accordingly?), while also laying out the business rhythm and growth points for 2021 and even 2022! Distribution! As the most fundamental infrastructure work for a city manager, it is essential to make short-term, mid-term, and long-term plans and layouts. Under the omni-channel distribution model, how can a city manager upgrade distribution strategy? It can be approached from three dimensions:
1. Ambition in distribution layout
2. Dedication in distribution upgrade
3. Meticulousness in distribution implementation -01- Ambition in Distribution Layout Take the prefecture-level city market that Lao Wang is responsible for as an example. This is a brief 2020 regional market distribution layout map. If the pandemic had not occurred, the previously designed growth expectations mainly came from local supermarket BC stores, convenience stores, and wholesale markets. After the pandemic, the growth expectations for each channel will inevitably undergo significant changes. The most realistic issue is that the pandemic directly caused two months (February and March 2020) of business losses, presenting every city manager with the most urgent and challenging task: How to complete the 2020 annual targets set by the company at the beginning of the year? Adjust channel expectations and rethink the layout! According to the annual business plan, old scenarios accounted for over 90% while new scenarios contributed only 10%. Without the pandemic, chain hypermarkets would have continued the trend of slight decline as in previous years. However, after the pandemic, home delivery business in hypermarkets suddenly surged. The rapidly developing home delivery business not only gained order growth during the pandemic but, more importantly, cultivated shoppers' consumption habits. Benefiting from the strong support of home delivery, the future channel expectations for hypermarkets may actually rise rather than fall. For example, more pure O2O platforms like PUPU Supermarket and Miss Fresh, which use front-warehouse models, have further unleashed growth momentum, and their growth expectations must be revised upward. Also, during the pandemic, thanks to efficient logistics systems, several leading B2B platforms saw impressive growth. It is more reliable to entrust them with the coverage and maintenance of completely scattered small stores, so the growth targets for the ERTM channel must be raised in a timely manner. In the era of omni-channel distribution, city managers need the speed of distribution strategy upgrade and the height of layout. Every city manager is the commander who knows the local market best, and should guide according to the local new retail development, adapting to local conditions. Analyze the growth expectations of various channels in the next 1-3 years from past sales data. Even if not precise, it is essential to make objective and proactive judgments, as this determines the focus of future market work and the implementation of detailed distribution. What is the ambition in distribution layout? It is to hold the bottom line of 2020 growth even after losing two months of sales! The purpose of omni-channel distribution is to grab share and seize the market. For city managers, it is necessary to conduct a comprehensive and detailed review of the rise and fall of business in old and new scenarios before and after the pandemic. They must even have a certain strategic height, daring to challenge high compound growth over the next three years, rather than just muddling through. An excellent city manager knows that deploying troops is key, and the prerequisite for deployment is a clear and accurate judgment of each channel. By decomposing business share through growth expectations, they can complete the annual business goals and aspire to become the number one growth in the local market by 2022! -02- Dedication in Distribution Upgrade Once a city manager has the distribution layout plan for the regional market and determines the 1-3 year expectations for each channel, the next step is to decompose and find existing and incremental volumes. Regarding the analysis of existing and incremental volumes, my suggestion is: As a city manager, you must take SKU as the unit for analysis. Business is sold box by box, pack by pack, piece by piece. Any sales plan that is not implemented at the SKU level is ultimately just talk on paper. 1. Old Scenarios & Existing Volume Analysis For the existing market in old scenarios, the first thing a city manager should do is conduct a ranking analysis and review of SKUs in each channel. Eliminate tail SKUs. Even if you don't replace them, retailers will ask you to remove them, as long-tail SKUs are also ineffective inventory occupation for retailers. "Eliminate tail SKUs, streamline mid-range SKUs, and strengthen head SKUs." For the existing market in old scenarios, maintain a competitive mindset and focus on competition. 2. Old Scenarios & Incremental Volume Analysis The source of incremental volume in old scenarios is the transformation and upgrade of old scenarios using new internet methods, thereby extending new business opportunities. Take Carrefour as an example: it has connected 4-5 O2O home delivery platforms, including Suning.com, Suning Xiaodian, Carrefour Mini Program, Meituan, and Ele.me. Each home delivery platform has its own private traffic, and each platform has high-viscosity sales. City managers need to consider what SKU combinations to design to match different platforms. At the same time, further think and analyze how to convert the head SKUs of offline stores into online head SKUs. Offline may have a dozen head SKUs, but the logic of online bestsellers may only have 5-6 SKUs. Here, city managers need to identify, judge, and make trade-offs. Looking at local supermarkets, many local small chains and individual supermarkets have not yet opened home delivery services. The incremental opportunity here is that you proactively help them connect. City managers have more or less connections and cooperation with various home delivery platforms, while small-scale and individual supermarket owners may not have such awareness or cannot find the right people and connections. If you help them connect, you have the opportunity to seize platform resources first and achieve 'first-mover advantage.' For convenience stores, incremental opportunities can be achieved through mobile payment or electronic coupons. Although the volume is not large, small amounts can accumulate. Currently, whether national chains like FamilyMart, 7-Eleven, and Meiyijia, or regional convenience store chains, all have implemented mobile payment, and electronic coupons with discounts can also drive some sales conversion. Regarding wholesale markets, many wholesalers are now trying to use digital tools to move offline transactions online. Through online ordering meetings and other methods, they can overcome geographical communication barriers. These explorations and attempts require support and assistance from manufacturers. Obviously, these are incremental opportunities for brand owners, and whoever does it early benefits. City managers can help them connect online, especially local major distributors, to upgrade digitally and improve management efficiency. Through assistance, they can also gain more resource allocation for their own product sales. In the group buying welfare market, past group buying welfare relied on waiting and phone calls. Now, with the social fission of WeChat business, incremental volume can still be achieved. For example, mobilize former promoters to use Moments posters for fission and activate previously connected group buying customers. 3. New Scenarios & Existing Volume Analysis New scenarios have appeared, some as early as three to four years ago, and some as late as over a year. Although their contribution to FMCG manufacturers' sales is limited, they face many problems. For current new scenarios, especially the ROI efficiency and price conflicts with offline markets, close attention and analysis are needed. What city managers need to do is conduct a comprehensive review of the distributed SKUs in existing scenarios. Compare data from the past year to determine which channels need increased distribution and which need reduced distribution. Similarly, do a ranking analysis, and make judgments and trade-offs based on the positioning of various new scenarios! 4. New Scenarios & Incremental Volume Analysis For new scenarios, do short- and mid-term diagnostics on existing volume, but for incremental volume, long-term planning is necessary. Through the above existing volume analysis, combined with growth expectations for each channel, determine where the incremental growth drivers are, how to optimize the cost-benefit ratio of incremental investment, and consider whether some channels have the potential for C2M (customized packaging). Note: The distribution upgrade strategy ultimately landing on each individual SKU is just the starting point; any plan must consider feasibility! City managers need to match the cooperation of local distributors, especially logistics capabilities and salesperson capabilities, and cannot do things beyond their capabilities. In summary, as a city manager, in the current omni-channel distribution environment, old scenarios and old channels are existing volume games, requiring share grabbing; new scenarios and new channels are incremental tracks, requiring seizing the first-mover advantage! -03- Meticulousness in Distribution Implementation From setting goals to analyzing and decomposing goals across channels, the final step is the implementation of distribution. All plans must be implemented, from strategy to specific actions. How to implement specifically? In my view, it is to refine to the distributed SKUs in each channel. Take a local chain hypermarket as an example: currently, there are 56 SKUs in distribution, divided by high, medium, and low price points and large, medium, and small specifications (Note: this division dimension is just an example; it can be combined with different product characteristics). Based on the analysis of existing and incremental volumes, decompose to specific distribution items. Based on such dimensions, the 2020 distribution item target may increase from 56 to 60 SKUs. For the home delivery channel of the chain hypermarket, which SKUs should be added? How many mid-to-low-end SKUs should be reduced? How many high-end SKUs should be increased? Similarly, how should SKUs of various specifications be adjusted? Distribution adjustment and optimization should refer to three dimensions: 1) Sales analysis of SKUs in the past channel;
2) Channel characteristics and the shopper profile and demands behind them;
3) Prediction of the channel's growth potential in the next 3-6 months. For example, the chain hypermarket has 56 SKUs, with 11 high-end SKUs. This year, due to the post-pandemic recovery, the chain hypermarket's business is improving. So the high-price-band SKUs should increase from 11 to 20. The 9 new SKUs might include 3 large specifications, 4 medium specifications, and 1 small specification. City managers must take the plan to this level, truly decomposing to each SKU in each channel, especially important and high-growth-potential channels. Only when it lands at this level can there be real execution. -04- Don't Think About Harvesting in the Planting Season In the era of omni-channel distribution, new scenarios are growing, and old scenarios are iterating. A proactive and ambitious city manager must have a three-year 'distribution upgrade' mid-term mindset. For manufacturers, the city manager of a market should not be changed too frequently. I've noticed that in recent years, the FMCG industry has popularized a horse-racing mechanism, where city managers have a one-year term and re-compete annually. After the term, whoever has a better plan for the next year, promises higher sales, or even has better PPT skills gets the job. This easily leads to a negative effect: more short-term behaviors, with the mindset of pushing inventory replacing the mindset of driving sell-through. As frontline FMCG professionals, we need to calm down and think, especially in the post-pandemic era of omni-channel distribution. This is the starting period, the planting period. If we pull up seedlings to help them grow, we may get short-term sales but ruin long-term development. New tracks that emerge should be laid out immediately, but not by pushing inventory immediately. Plant first, and when new scenarios become mainstream, that's the real time to harvest. Therefore, this is just the beginning of omni-channel distribution. In the initial stage, the corresponding organization must also have stability. Without organizational stability, there is no real implementation! If the organization changes every year, it is impossible to achieve long-term sustainable growth in the regional market. Organizational changes cause unsustainability. Each commander has their own playbook and logic, and the channel ecosystem in each regional market is vastly different. Avoid using old-scenario, old-retail inventory-pushing thinking and short-term target-achievement thinking in the new retail era; that is a dead end. Let go of anxiety and maintain stability. For each city and regional market, frontline city managers should have at least a three-year mid-term perspective to view and plan. Only with the ambition in distribution layout, dedication in distribution upgrade, and meticulousness in distribution implementation can they truly become the category champion in the local market! Lao Wang finally figured it out completely. The impact of this pandemic on the company is far greater than on individuals. As a city manager who has grown with the company for many years, he must not have any negative habitual thinking at this time. Instead, he should lead by example, take the team back to the market to fight, and more proactively grab displays, sales, and share! As the leader of the pack, even if injured in adversity, you must lick your wounds and get up to continue fighting! Cattle and sheep always flock together; only beasts walk alone! Resolutely refuse to be a 'sheep' that follows the crowd, and insist on being a 'wolf leader' that turns the tide! Lao Wang took out his phone and sent a WeChat message to the provincial manager: "The pandemic is ruthless, but people are compassionate. True skill is shown in times of crisis! Q1 losses will be made up in Q2, and the half-year target remains unchanged!" Bio: Xu Xiang, currently the Sales Director of Unilever South China, with 20 years of experience in FMCG daily chemicals, dairy, and condiments, deeply engaged in regional market management and customer marketing, willing to exchange and learn with peers. Tips will be paid 400-2000 yuan once the tip is adopted.