Under the epidemic, the backlog of gift box and channel inventory has become a hot topic in the FMCG industry after the Spring Festival, especially for dairy drinks, baijiu, snack gift boxes, and large-pack beverages, which are the hardest hit.
To address this thorny issue, on February 4 at 8 PM, New Distribution invited four experts from different fields to share and discuss "How distributors can solve gift box and near-expiry inventory problems" via live streaming.
This article is a compilation of the methods shared by Mr. Zhang Yu, a frontline FMCG researcher, during last night's live broadcast, for the reference of distributor friends.
At the same time, New Distribution has also compiled recent measures for solving gift box inventory and shares them at the end of this article, hoping to bring more inspiration to distributors, minimize losses, and help them persevere.
Given the current epidemic situation, it is not something that can be lifted in just a few days. The Lantern Festival (the 15th day of the first lunar month) traditionally marks the end of the Chinese New Year, after which migrant workers will gradually return to work. This means a large group of people with spending power and willingness to spend will leave home, while the remaining group (those staying in their hometowns, seeing each other frequently, and not in a hurry to visit relatives) will have reduced purchasing power.
Therefore, for distributors, it is crucial to start taking action immediately, as gifts have a shelf life. Those who act first can escape, while those who delay will be trapped. First, set the overall tone.
-01- Distributor's Personal Mindset
- Do not hold onto luck or illusions; face the problem directly.
- Do not expect to solve everything with a single method.
-02- You can rely on brand owners, but not depend on them
The situation during the 2020 Spring Festival is unprecedented in at least the past 30 years. For many brand owners, this is the first time they face such a situation during the Spring Festival sales period, with no historical experience to draw on and no immediate good solutions.
Yesterday, during a New Distribution live broadcast, a distributor from Mengniu in Zhoukou, Henan, said that the manufacturer gave them a certain quota to donate some products, but it was like a drop in the bucket, only reducing part of the loss. Some companies also issued notices that they could recall some products.
In general, some brand owners are doing their best, but more are still silent because the volume is too large, and they cannot provide a clear and feasible plan immediately. Therefore, distributors should not bet everything on brand owners.
However, brand owners must have reserved market promotion budgets during the Spring Festival sales period. Although not large, if focused, they can solve the urgent needs of some customers.
After all, the early bird catches the worm; it depends on how distributors communicate. My suggestion: communicate with the primary contact person at the brand owner, present a feasible product sell-through plan and reasonable cost estimate, and communicate and apply to the highest management you know. This way, the chances of success are relatively higher.
So, find ways to rely on brand owners by presenting feasible product sell-through or inventory handling plans plus reasonable cost estimates, rather than "crying and making a fuss," depending on them and waiting for the manufacturer to handle it.
-03- Self-reliance is always the key task
1. Key Customer Visits: Inventory Check and Negotiation
Market sales follow the 80/20 rule. Review historical distribution data from before the Spring Festival and list the top 20% of key customers by distribution volume in the region.
Where conditions allow, the distributor owner should drive around to visit; where not, the owner should personally call each one to understand the following:
- The key customer's inventory quantity and delivery date, to estimate product sell-through and whether the remaining inventory can be sold out within the first month of the lunar calendar.
- What are the store owners' thoughts? Do they have confidence in selling out the products?
Seek win-win solutions, screen customers with faster sell-through, understand the main reasons, and see if they can be summarized and replicated quickly.
For example: A friend runs a small supermarket in a county town. Before the New Year, he stocked over 100 boxes of eight-treasure porridge, over 200 boxes of walnut milk, and other New Year goods, all piled up in the store.
He came up with an idea: Now some mid-to-high-end residential communities are closed, and entry and exit require checks, which is inconvenient. He established contact with the property management through connections and moved the New Year goods to the community entrance for special-price sales, with reasonable profit sharing, allowing the property company to assist residents in purchasing.
At the same time, the property company also issued a notice in the resident group: "To meet the living needs of residents, reduce outings, and not cause trouble for society, the property management office now has some eight-treasure porridge, walnut milk, and similar products with fresh dates and prices lower than market prices for your selection." In this way, all products were quickly sold out.
Act as a bridge between terminal stores. As the saying goes, "competitors are enemies." Generally, terminal stores do not communicate much about a specific product. Some customers are conservative and stock less, while others are aggressive and stock more.
As an upstream supplier, distributors can balance market inventory among customers, provide certain incentives, and facilitate inventory transfer. This process can be guided by the distributor over the phone, with terminal store owners picking up goods themselves.
For some fortress customers who are confident in selling out, provide fees and obtain commitments via WeChat that they will handle unsold products themselves. Distributors should calculate the costs: the cost of taking products out of the warehouse and bringing them back, and the cost of secondary sales, which is significant. Invest this cost in advance to eliminate worries.
2. Recall Products as Soon as Possible and Handle Centrally
After the above methods, if many customers still cannot sell their products, recall them as soon as possible. At this point, it's better to act early than late.
I advise all distributor friends: The market is yours. Avoid losses from unsold products while also protecting customer relationships. Estimate the sell-through of each terminal store during the first month, and pull back excess products to the warehouse in one go. Then sell them in fresh food areas of supermarkets, wet markets, and other places related to people's livelihoods.
These places never lack consumers. With improved living standards, many families no longer stock up on fresh products but buy as they eat. Every market has such distribution centers.
Think of ways: where there are people, there is a market and sales. It can be in the form of renting a stall or selling on credit. It's best to increase profits, set sales rebates, and sell on credit.
3. Street Sales to Attract Group Buying
Many distributors have their own storefronts. It is recommended to use extraordinary measures in extraordinary times, such as setting up a ground display on the street outside the store. Although there are few people, there are still some. On one hand, build the brand; on the other, drive sales.
With luck, some group buying business may arise. During the epidemic, there is a demand for many慰问品 (condolence gifts). Offer special prices to attract group buying. Understand that market demand has not decreased.
4. Break Bulk and Bundle Sales
For New Year goods, many products are shipped in bulk cartons from factories, and distributors pack them into gift boxes. Now it's time to rework: as long as the gift boxes are stored properly, they can be used again next year.
Break the boxes and sell items individually, put them on shelves, create displays, bundle two or more for special prices, or "bundle" with popular products in the market, etc. Transform sales thinking and seek new opportunities.
5. Online Sales and Community Group Buying
Distributors with the capability can consider this direction. Good communities have pickup devices like Hive Box or Cainiao Post, which can effectively reduce person-to-person contact while achieving transactions.
6. Leverage Organizational Relationships for Group Buying
"Transform" accumulated gifts into welfare items. China is a country that values human touch. With the establishment and improvement of trade unions in various units, awareness of labor protection and welfare is growing.
The Lantern Festival is approaching. Special work groups such as medical workers, environmental workers, and transportation workers may receive condolence gifts from their units during the festival.
At this time, organize relationships—not just your own and your team's network, but also extend to the networks of your downstream fortress customers. As long as profit distribution is reasonable, New Year goods can directly enter consumption channels. This is one of the most convenient ways to handle and digest inventory.
7. Cross-Industry Combination and Joint Promotions
That is, unite with other non-competing companies, and on the principle of win-win, make the New Year goods the "promotional items" for the other party, ultimately achieving the goal of digesting backlogged inventory.
Here's an example from my own experience: Every year during the first lunar month, the property management company in my community runs a promotion: pay the full year's property fee within a specified time and receive a barrel of salad oil, a carton of milk, and a box of pastries.
8. Annual Planning and Product Exchange
Many barter companies on the market use this approach. For example, New Year goods can be exchanged for advertising fees with media for the coming year; or exchanged for other companies' products to be distributed as welfare items (e.g., rice, flour, oil); or exchanged for fuel cards at private gas stations; or even used to offset corporate debts. This is an effective way to cleverly handle New Year goods inventory.
-04- Prepare for the best, plan for the worst
Such a large volume of Spring Festival gifts cannot be digested in the off-season overall. Of course, crises can also turn into opportunities and create a group of outstanding performers.
Promotions by a single company are effective, but when all companies promote together, the effect is greatly diminished. Of course, promotions overall can increase sales, but the increment is limited.
Digesting Spring Festival gifts is not simply about promotion; it should be called building a bridge between supply and demand. There is no problem with supply or demand; it's just that the epidemic has blocked the channels. How to build bridges and establish relationships is crucial.
The attributes of FMCG are constrained by shelf life, destined to be "fast fish eat slow fish." For distributors, acting first is always better than acting later.
Many gifts won't see the next sales peak until the Mid-Autumn Festival. So the current goal is to quickly reduce risk. Don't expect to handle them in the off-season, as cash flow will drag you down. Accumulate small amounts into large ones, break bulk into pieces.
Sitting, waiting, and relying on others will lead to certain death. Take action, mobilize everyone. At the same time, assess how long your cash flow can support you, evaluate the task pressure from brands, and if necessary, optimize your product portfolio by dropping a few brands to travel light.
Supplementary Compilation of Gift Box Inventory Handling Measures:
- Brand owners take the lead to occupy the local public opinion high ground by giving back to medical frontline workers, thereby forming a home-field advantage and facilitating entry into stores for sales.
Specific operation example: In the form of doctors and nurses receiving a free carton of milk with their work ID, replicate and promote in communities, contact local TV stations to report and expand influence. At the same time, community residents can purchase products at a 30% discount, doing low-cost promotion and publicity.
- Inventory transfer: Keep an eye on foot traffic and digest on the spot. Immediately contact densely populated communities, leverage the brand effect of the brand owner, negotiate with community property management, set up distribution points within the community, and sell on-site.
This resource needs to be grabbed quickly; property companies won't let their communities become markets, allowing at most 1-2. Or occupy the most favorable positions at fresh markets or community supermarket entrances.
- Partner with community property for door-to-door delivery. A few days ago, a property management company in a Henan community issued a notice that they would uniformly provide purchasing services for residents in need.
Even if consumers are trapped at home, their consumption demand has not decreased; it has shifted from offline to online. However, during this special period, logistics and express delivery are also affected. At this time, door-to-door services highlight their superiority. Distributors can partner with surrounding community property to launch milk delivery to doorsteps.
Cooperate with pharmacies. During the epidemic, pharmacies have the best business. Consumers not only need masks, disinfectant, and hand sanitizer, but also need to buy large quantities of Chinese patent medicines to resist the virus. Milk has the attribute of improving immunity, so distributors can cooperate with pharmacies to launch a promotion: buy a certain amount of medicine and get a carton of dairy products free.
Cooperate with places for collecting suspected cases. Currently, to respond to the epidemic, each province and city has designated places to collect suspected cases, mostly in designated hotels and hospitals. Distributors can cooperate with such places to handle inventory through donations or low-price sales.