Few companies can do without distributors, but few are satisfied with the ones they have. Around us, too many enterprises see market after market become "half-cooked" or even fail because distributors don't value, don't cooperate, or don't follow market rules, causing our products to decline without ever thriving. But such problems are not solely the distributors' fault; many issues arise from our own side. For instance, why weren't our eyes sharp enough when selecting distributors?
When we meet the wrong person, we can't always blame their disguise or hidden fox tail. In fact, few companies can afford such turmoil: our "daughter"—the product—if remarried even once, easily becomes yesterday's flower in the market.
Indeed, what we discuss here is: how to find a good in-law's home and a "good son-in-law" for our "daughter"—the distributor selection that can determine our market success.
Entering a wealthy family is as deep as the sea
Doing market and marketing seems unrelated to romance and love, but there are connections. The celebrity gossip you're about to see about actresses marrying into wealthy families can offer insights for choosing distributors.
Take Taiwanese actress Alyssa Chia (star of "The Legend of the Royal Consort" as Wu Zetian and "The Heaven Sword and Dragon Saber" as Zhao Min), who was not only beautiful but also famous for her acting. A few years ago, she married into a wealthy family, having a child before marriage with rich playboy Sun Zhihao.
"I haven't seen my daughter for four months. Please (Sun) bring the child back. Whether we separate or stay together, we need to talk face to face. Don't deprive me of my right to be a mother." These were Alyssa Chia's tearful words to Sun Zhihao in April 2009, when her marriage was on the verge of collapse.
In fact, since Alyssa Chia and Sun Zhihao started dating, rumors never ceased: having a child out of wedlock, Sun driving drunk with a girl the night before Chia gave birth, her mother-in-law despising Chia's low education, and her mother-in-law seeing ambiguous text messages between Chia and a mainland actor. These rumors were like time bombs planted around Chia, ready to explode at any moment. No wonder the media summarized their love story as "entering a wealthy family is as deep as the sea."
Let's make an inappropriate analogy: if our product married into a glamorous "wealthy family" that everyone wants to cling to, and encountered a situation similar to Alyssa Chia's, what would happen? Li Zhengquan believes:
First, after marrying into the "wealthy family," the other side has many products and brands—like a squad or a platoon of concubines—each from prestigious families, with rich dowries, or packaged like fairies: good appearance, good support, good market. In such a case, our "daughter" would suffer endless exclusion.
Second, to avoid being sent to the cold palace, we need to gain attention and favor. But for most of us, our products are at best "small beauties"—not inferior to others, but lacking in background, family fortune, and "dowry." If we also lack political skills and the art of pleasing the "husband," we won't receive favor all year round, and our "daughter" becomes yesterday's flower while we age.
Third, if we don't gain favor, our precious "daughter" may only be fit for the kitchen, not the living room, and suffer worse than Alyssa Chia, who is a big star and beauty. Without special prenuptial agreements, Chia could still get a share of the Sun family's property; if no property, she has her child; if she wins custody, she gets alimony. Even if she gets nothing, the scandal wouldn't greatly affect her acting career or her chances of finding true love and remarrying.
But for us, it's different. Once we break up, not only is our "daughter's" youth wasted and "dowry" lost, but the market becomes half-cooked or even fails, leading to market exit. If we try to "remarry" our product, distributors, terminal retailers, and consumers will resist more than before. If the "marriage" leaves behind thorny issues like price cutting, cross-region selling, expenses, and inventory, the chance of market revival becomes even smaller. In the end, we realize that the "wealthy" distributor's big house, good cars, people, connections, and reputation—all that we valued—are not ours to use; they are but floating clouds.
In reality, many of us make recruiting "wealthy" distributors a principle, all wanting to walk Alyssa Chia's path, believing these distributors have channels, people, vehicles, big brands to "hitchhike" sales, and volume—everything. Once our product enters their system, we can rest easy.
Few ask themselves: Can you control such a distributor? Can you satisfy their desires and demands? Do you have enough capital to attract them to "favor" you and make your product a main push?
The vast majority of companies, especially SMEs, lack such conditions and abilities, so they end up worse than Alyssa Chia. Therefore, I offer several suggestions for distributors you should try not to "marry" (not that you can't)—these are the ones with the "most" among your candidates and local industry distributors.
1. The Richest
Dealing with such distributors, common situations include:
First, they have money but want more, not by growing the market together, but by preying on us. For example, they squeeze our profits, demand higher rebates and deductions, ask for more preferential policies, and request more advertising and promotion support, only to pocket those funds or inflate channel expenses for us to share.
Second, they have many products that make money easily or more than ours, so they're not in a hurry to earn from you. This "not in a hurry" is trouble: they either raise prices to affect market acceptance or are inattentive and slow.
Third, they have greater capacity to hoard inventory. If they're not pressed for cash flow, a neglectful and slow approach can concentrate pressure on meeting sales targets, increasing the risk of cross-region selling and price system collapse.
2. The Largest in Scale
Scale doesn't necessarily mean money, but often means more people, more product divisions, more segmented channel departments, larger warehousing and throughput, more delivery vehicles, and deeper, wider network penetration—such distributors are often the local market's "big shots."
Being a "big shot," they tend to be arrogant, leading us by the nose with an "I'm the boss" attitude, making cooperation difficult and limiting our ability to restrain them. For most companies, it's good enough not to be tightly controlled by them.
As "bosses," these distributors weigh many brands and products. If our product's overall conditions are slightly inferior, it may be sent to the "cold palace," our market plan shelved, and they may not cooperate or execute, ignoring us.
3. The Most Experienced
Experience is a necessary condition for choosing distributors, but three issues need attention:
First, channel operation has its philosophy; going too far is as bad as not going far enough. For example, using old methods like sitting and waiting for customers to operate in new market conditions will make our product hit a wall along with the distributor.
Second, experience comes in grades. Some distributors' experience may not suit our market philosophy. For instance, some are experienced in mass distribution, others in modern trade, others in special channels. If we don't differentiate, problems arise.
Third, the "most experienced" distributors hide traps. Some old hands take on our product not to build it up but to eliminate a competitor. Others use price cutting, cross-region selling, and other "tricks" to meet sales targets and earn rebates and support.
Deep courtyard, weeds grow
"Lend me a pair of discerning eyes, let me see this chaos clearly, distinctly, truly..."
These lyrics from Na Ying's song "Seeing Flowers in the Fog" resonate with many. We also need discerning eyes when dealing with distributors. In reality, many distributors seem excellent in network, capital, personnel, warehousing, delivery, company management, and business philosophy. We have pleasant talks, sometimes instant rapport, giving the illusion that we've found the right partner and the market will open easily.
But the greater the hope, the greater the disappointment. As we understand and cooperate deeper, we find we've either found a "brocade pillow stuffed with straw" or a "wolf in sheep's clothing." In short, we've entrusted the wrong person.
A snack food company was considering the Guangxi market. The boss, Mr. Wang, immediately thought of an old friend—a local distributor mainly dealing in beverages and snacks. This distributor's annual turnover ranked in the top five locally, with mature networks in both mass and modern channels. Mr. Wang thought, though they hadn't done business together, they'd dined and drunk together; the company's strength and channel resources were good. Better to do business with an acquaintance, so he "internally designated" the Guangxi market to that distributor friend.
The distributor was very agreeable. The boss patted his chest and said, "Mr. Wang, rest assured. I can't say for other manufacturers, but your product I will definitely value and do my best to build the market." But after cooperation, regional supervisors reported problems one after another: verbal commitment without action; after five or six months, shelf presence in target outlets, especially in supermarkets, was below 40%; accounts payable were delayed repeatedly.
What lay behind these issues? The distributor had been consciously transforming in recent years, diversifying investments: extending downstream to open specialty stores, upstream to manufacturing, and investing in real estate. The capital chain was always tight, and cash flow pressure was high.
To cope, the distributor made efforts like internal cost-cutting, notably layoffs, trimming sales staff in the food trading company. But no matter how tight money and staff became, key brands and products with high support, high sales, and high overall profits still needed priority attention. Thus, secondary brands faced insufficient investment. Unfortunately, Mr. Wang's product was among them.
"Are people who drive good cars necessarily good people?"
Those who've seen the movie "A World Without Thieves" may remember a scene: "thief" Andy Lau drives a BMW in and out of an upscale villa area. When leaving, he asks the gate guard who didn't suspect him: "Are people who drive good cars necessarily good people?"
Are distributors who look attractive and sound appealing necessarily good for us? The above example and many similar ones around us give a negative answer.
We need to sharpen our eyes. Here, Li Zhengquan offers three more suggestions: to succeed in the market, try to avoid distributors with the following "three many."
1. Many Industrial Expansions
Diversification and the resulting capital chain shortages are the fuse that leads many "successful" companies to the abyss, dragging along a string of partner companies. This applies to distributors too.
2. Many Debt Disputes
Behind debt disputes often hide credit issues and debt-paying ability problems. Be cautious with such distributors.
3. Many Competing Products
From traditional second-tier distribution to terminals, competition among competing products becomes concentrated and fierce. This concentration and intensity lead to higher demands for expense support and gross profit contribution. Most companies, lacking the ability to meet these demands, are forced to accept being ignored, sidelined, and eventually failing. If we look purely at product strength, many brands eliminated by "the times" might be superior to those thriving in the market.
Except for a few companies with exceptional resources and capabilities, almost no company wants to be such a brand. So from the start of distributor selection, we hope to join a distributor's system as a differentiated, gap-filling, or product-structure-enriching addition, not as a duplicate. But this is impossible to completely avoid. Even if our product doesn't directly compete in a specific segment with the distributor's existing products, there's still competition for the distributor's attention, manpower, and material resources.
Therefore, for many of us, a distributor with many brand resources, high product cluster resources, large sales scale, and strong negotiation power with downstream channels is not a good thing—because the harm of limiting our ability to gain attention and resources often outweighs the benefits.
A forced melon is not sweet
Every day, many couples marry and many divorce. In our country, in 2008, there were 10.499 million marriage registrations, about 28,800 per day, and 1.553 million divorces registered by civil affairs departments (excluding court-mediated or adjudicated divorces), about 4,400 per day (according to the Ministry of Civil Affairs statistics released on February 4, 2009). Reasons include infidelity, material and economic pressures, and incompatible personalities. The same applies to companies and distributors.
This reminds me of a typical experience from years ago.
A few years ago, I was the general manager of a snack food company. Within half a month of taking office, I received a sudden call from a woman—she was our distributor in Changsha.
"Mr. Li, hello. My surname is Xiao, and I'm your Changsha distributor. Some issues have not been well resolved by your regional supervisor Xiao Wang and Director Zhang, so I'm taking the liberty to disturb you..." She got straight to the point.
The call mainly concerned a request: she wanted us to remove price information from our company website and Taobao store. The reason was that our online retail price was 12% lower than the offline channel's suggested retail price. She worried that her customers, when checking product information online, would feel cheated, affecting her business. If we couldn't meet her demand, she would post negative messages online about how we don't respect distributors or protect their interests; she would also submit our products to the local quality inspection department, saying "they can always find some faults."
It's natural and necessary for companies to protect distributor interests. But selling online reduces costs, and a 10-15% lower online retail price is a normal price range. Offline and e-commerce channels also target different audiences. Moreover, our distributors mainly do distribution and service. Why did the Changsha distributor have such strong objections, make such demands, and issue such harsh threats?
It turned out that our regional supervisor, eager to complete recruitment tasks, ignored whether the distributor's network resources matched our main channel direction—supermarkets and OTC channels—and didn't care if the distributor agreed with our product and market philosophy. Seeing the distributor's interest and confidence, he granted the Changsha distribution rights.
But how did this distributor operate our product? In channels, she found supermarket and OTC thresholds too high and costly, so she abandoned the main channels and focused on the beauty channel where she had some foundation. But after two or three months, she was still testing the waters, showing no confidence or determination. In pricing, we left distributors a profit margin of 46%, with a suggested retail price of 25 yuan per bottle, targeting the mid-end consumer. She now focused on beauty salon lines, trying to gain high profits through "narrow circulation" and high pricing, raising the retail price to 68 yuan per bottle, and correspondingly raising her supply price.
We wanted to win big profits by expanding the market and share, but the Changsha distributor wanted to exchange high prices for high profits in a much smaller market with smaller volume. Clearly, our philosophies were completely incompatible—like east and west. The demand to remove online price information was a symptom of this deep divergence in brand operation, profit acquisition, and market operation.
Men fear entering the wrong profession, women fear marrying the wrong man, and companies fear choosing the wrong distributor. When we encounter such "different path" distributors, continuing to "plan together" often costs more than temporarily not having a distributor and shelving the regional market. Because we invest, but the investment not only doesn't add value but subtracts; because restarting a market with many leftover problems and barely alive is often harder than starting a fresh one; because if our brand and product can't succeed after a period, they become unwelcome among channel partners and consumers.
However, I think we can't blame the distributor. Who told us to prioritize quantity over quality, accepting any distributor as long as they place an initial order? Who told us to be so eager for quick success, rushing to start a market without stability? Who told us to have unclear selection criteria or fail to enforce them? Who told us to focus only on task targets without process review, failing to strengthen review of salespeople's developed distributors and their contracts?
So, combining the above, when selecting distributors, we must remember the "three wrongs" not to choose.
1. Wrong Brand Identity Philosophy
What kind of company we want to be, what cooperative relationship we have with distributors and each other's roles, what kind of brand we want to build for what audience and image, and through what safeguards to develop—these affect whether we and the distributor share the same philosophy and act in unison.
2. Wrong Market Operation Philosophy
What channels to operate, to what extent in each channel over what time, how to allocate resources, how to manage salespeople, warehousing, and delivery, what rules to follow for pricing and regional markets, and on what criteria to allocate advertising and promotion support—all these are included. Whether we can align philosophies affects whether we and the distributor can move in step and pull in the same direction.
3. Wrong Profit Philosophy
The earlier example of raising prices to ship goods is just one aspect. Price cutting, cross-region selling, and other behaviors that disrupt market order; withholding market support funds, deceiving for big customer preferential policies, trying to squeeze money from the manufacturer rather than earn from the market; only caring about shipping goods without market maintenance, doing one-off deals; sitting and waiting for customers, outdated concepts; only thinking of using other brands to drive sales without active promotion—these all affect our rise or fall, even life or death, in a regional market.
Beware of junk stocks
For those interested in stock investment, three concepts are familiar: junk stocks, blue-chip stocks, and growth stocks. Among these, the first refers to stocks of companies with poor industry prospects, bad management, and poor performance; the second to stocks of companies with high investment returns and value, good performance; the third to stocks of large companies with important positions in their industries, good performance, active trading, and generous dividends.
For us, whether finding a partner or developing distributors, we should avoid junk stocks. In the 2008 comedy "If You Are the One," Ge You, playing the protagonist Qin Fen, has a dialogue with stock woman Hu Ke during his matchmaking:
Hu Ke: Actually, I think matchmaking is like stock trading. You can watch several stocks at once, and finally decide which to buy based on their performance and calm analysis. For example, looks, figure, personality, education, economic conditions, family background, and so on...
Ge You: So what kind of stock would I be?
Hu Ke: Judging from age and looks, you'd be the kind that fell below the issue price!
In the movie, Hu Ke implies Ge You is somewhat "junk." Of course, Ge You isn't a junk stock; he eventually wins the beauty.
For us, we must avoid being junk stocks in distributors' eyes, and also avoid entangling with junk-stock distributors, lest we get "stuck" and fail in the market. So, we should remind ourselves not to choose distributors with the "eight withouts," as they are more likely to be junk stocks.
1. Without People
With just a few people, they're busy serving other manufacturers, leaving no one to fight with us for the market.
2. Without Facilities
No warehouse, no cold chain or product-related storage and transport facilities, no delivery vehicles—how can they ensure market success?
3. Without Money
No money to hire people, buy facilities, or make necessary market investments; accounts payable are delayed. What returns can such a distributor bring?
4. Without Experience
They don't know how to manage warehousing, personnel, or channel partners; don't know how to negotiate with supermarkets; don't know how to display at terminals; don't know how to plan the market. Cooperating with such distributors means more detours and harder to reach goals.
5. Without Network
We want to put our product car on their highway, but they have no road and need to build one. When will our car get on the road and maintain speed?
6. Without Integrity
They say they'll make our product a main push but don't; they say they'll achieve a certain shelf presence in target outlets in two months but don't; they say they'll pay within three days but don't. What they do is make us sink deeper into the mud.
7. Without Confidence
They accepted our product with a try-it-out attitude. Lacking confidence, they're timid, slow, and underinvest. Our product and market can't withstand such treatment.
8. Without Attitude
We assign dedicated personnel to help these distributors build teams and do distribution; we fulfill our advertising and promotion support, showing our attitude. But they remain indifferent and slow with our product. If this continues, the young lady will become an old woman.
Of course, many distributors look like blue chips or growth stocks, but behind the facade are junk stocks. We need to discern based on the above.
Testing the "quality" of distributors
So what kind of distributors are more likely to build the market with us? It's not enough to simply avoid the types mentioned above. That's an elimination method, telling us that if we marry such distributors, we're more likely to become playthings and enemies, with a higher chance of market failure.
(Table omitted)
Therefore, we should select distributors based on the above. For existing distributors, we can also review them to see how they affect our market's rise and fall.
For most companies, especially SMEs, if our distributor is associated with one or more of these items, our product, brand, and market are in danger. The more items, the less hope.
So, don't seek the biggest or the smallest; a medium-sized, well-matched distributor is just right!
Listen to distributors' opinions
We don't choose distributors like an emperor choosing a son-in-law, picking whoever we want. Whether we find a strong or weak, big or small distributor, to make them value and actively promote our product, we must also regulate and improve ourselves to meet the "parental home" standards in distributors' minds.
Below, a distributor holding major brands like Wahaha, Yili, and Bright, plus a few small brands, shares its standards for selecting and accepting new products, which may offer insights:
Does this product conflict with my existing product structure? Is it suitable for me? If it conflicts but can't replace the original product, I definitely won't take it.
Balance profit and sales volume. No matter how high the profit, if the prospects are dim and the chance of success is less than 50%, I won't take it. Some brands have low profit, but if they can ramp up volume quickly and become big, I'll take them.
"The wool comes from the sheep's back." I'm not the sheep, the consumer is. So I don't consider products just because the manufacturer offers various preferential conditions.
I absolutely won't cooperate with manufacturers with poor reputation, non-standard operations, or no management rules.
The manufacturer's salesperson's ability must meet my requirements. Their ability shows during communication. If problems arise in the market, their ability directly affects whether they can solve them effectively.
I won't easily refuse or easily decide. The sincerity of the manufacturer and the salesperson I deal with is important in changing the final outcome.
You don't need to say how good your product is; that's not my main concern. What matters is what your product can bring me, and the resources and capabilities needed to deliver that, and the ways to achieve it.
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