Preface: Recently, I conducted market research in Henan, Hebei, and other places, and talked with city managers, distributors, and salespeople of some brands about market changes and existing problems. "Do your brand people even care? Cross-regional selling is everywhere. If you don't deal with it, I'll stop carrying this brand first," a distributor complained to the city manager sitting nearby. The city manager looked helpless, "We've already reported the problem to headquarters. The whole North China region is facing this issue. Headquarters will definitely make a big effort to rectify it." But he seemed lacking in confidence. In fact, the city manager knew well that thoroughly solving the cross-regional selling problem is not easy. Cross-regional selling has always been a headache for brand owners and distributors. For most FMCG companies, offline distribution remains the mainstream. Each link in the chain—manufacturer, distributor, sub-distributor, store, consumer—needs profit support. The damage to the price system caused by cross-regional selling severely impacts the existing distribution system, causing distributors to lose confidence in the brand and ultimately abandon product sales. Some well-known brands have never succeeded in regional markets, and severe cross-regional selling is one of the reasons. Cross-regional selling is the source of market price system disruption, a chronic disease affecting product sell-through and even survival, and a problem that manufacturers must solve!

Cross-regional selling is still severe! Over the years, brand owners have devised many ways to reduce cross-regional selling, such as digital "one product, one code" traceability and channel-exclusive products. But the reality is that cross-regional selling remains severe. During market research in Kaifeng, Henan, and Handan, Hebei, "cross-regional selling" was the most frequently mentioned term by distributors and frontline salespeople. A paper products distributor in Hebei gave an example: Shortly after taking on a new brand, the distributor and salespeople were confident and had prepared distribution plans and market policies, ready to make a big push. But during the distribution period, all plans fell through. Just as they started building the market, cross-regional selling hit. A salesperson visited a store, confirmed the product, price, and profit with the store, and the store was ready to order. Before the order amount was confirmed, a wholesaler's salesperson from another region came in with a price list for the same brand's products, but at a much lower price. As an official agent of the manufacturer, the distributor couldn't break the price system, so the salesperson could only watch the store buy the cross-regional goods from the wholesaler. Similar situations occurred frequently during the distribution period, and the distributor lost confidence and temporarily stopped operating the brand. This scenario is not unique to the mentioned areas; it happens in many places across the country. Cross-regional selling is one of the most troublesome issues for distributors. Just as the market starts to pick up, goods from other regions flood in, often sweeping through like autumn wind blowing away fallen leaves, causing huge damage!

Why does cross-regional selling persist despite repeated bans? In the business world, the frequent occurrence of a phenomenon is always driven by interests. Why does cross-regional selling persist? This issue is also inseparable from interests. We can analyze it from two dimensions: channel differentiation and logistics evolution. Cross-regional selling has always existed, but in the past, the core was offline channel conflict: hypermarkets undercutting distributors, large wholesalers undercutting distributors, and distributors fighting across regions... Although it was like a sticky plaster, making distributors uncomfortable, due to logistics and warehousing costs, the price difference wasn't too large, and distributors who cultivated their markets carefully could still cope. But now, channel differentiation and the interwoven sales network have made cross-regional selling more active. E-commerce, B2B, new retail, etc., have all joined the fray, making the sources of cross-regional goods more numerous and prices lower. Currently, common sources of cross-regional goods include the following:

First, KA hypermarket cross-regional selling. Large chain KAs account for a large sales share and usually cooperate with brand owners through direct supply. They receive more promotional resources and lower supply prices. Therefore, when facing external competitive pressure or internal performance pressure, hypermarkets may resort to low-price dumping, incorporating the promotional resources and their own policies given by the manufacturer, and selling products to non-retail channels. The main targets of KA cross-regional selling are some large wholesalers, who then ship goods nationwide. The Zhengzhou market is a typical case. During exchanges with distributors, they mentioned that many goods flowing in came from Zhengzhou. Large wholesalers in Zhengzhou buy goods nationwide; for example, if the price is right, they will buy 50 million yuan worth of goods, then sell them with only a 2% markup (excluding logistics costs), making the price very low. A daily chemical distributor, using his brand as an example, said that large wholesalers can even obtain the brand's national market price list and the dates of each batch of products, which are highly confidential internal documents.

Second, cross-regional selling by distributors. Distributors usually engage in cross-regional selling due to performance pressure. Manufacturers' annual sales tasks are increasing, but the market environment is not that good, making it difficult to achieve sales growth. If distributors fail to complete tasks, their sales rebates and expense reimbursements are withheld. At the same time, regional managers' annual targets are also unmet, and they put pressure on distributors. Under dual pressure, distributors have no choice but to engage in cross-regional selling. During the research, we found that many distributors regard cross-regional selling as a common practice. This mentality can be understood as: other distributors will ship goods into my operating area, so if I can't complete my tasks, I'll ship goods out. This vicious cycle in the market also begins, and some well-known brands fail in regional markets for this reason.

Third, cross-regional selling through e-commerce platforms. With the development of mobile internet, e-commerce platforms have become one of the mainstream channels. To build channel competitiveness, brand owners have to participate even if they don't make money. Like KA hypermarkets, e-commerce receives more resources than traditional channels. Especially during platform promotions like 618 and Double 11, various discounts stack up, making retail prices much lower than offline, severely impacting the market price system.

Fourth, cross-regional selling through emerging channels like ERTM. A typical example is B2B platforms, which directly cover stores. During the research, cross-regional selling through such emerging channels was relatively severe. The reason is that over the past few years, education by B2B, community group buying, and other platforms has made stores familiar with online ordering processes and accustomed to comparing prices online. This phenomenon is especially common in stores with low sales volume.

From the channel dimension, the rapid differentiation of channels means wholesalers and stores have more sources for goods at lower prices, with more profit to be made, thus catalyzing the intensification of cross-regional selling. Another dimension is the evolution of logistics. In the past, logistics costs were a significant expense in cross-regional selling, especially for cross-province shipments. Therefore, even with cross-regional selling, prices wouldn't differ too much from those of distributors, and if demand was small, cross-regional selling could even lose money.

But now, China's logistics capacity has greatly improved, and logistics costs have been extremely compressed. A daily chemical distributor shared two examples: Taking Handan, Hebei, as an example, shipping 20 tons of shampoo from Handan to Tianjin costs only 1,200 yuan. Shipping a box of shampoo worth 400 yuan from Linyi, Shandong, to Handan, Hebei, costs 0.8 to 1 yuan in logistics. Moreover, logistics is fast: if goods are loaded before 6 p.m., they can be delivered by 10 a.m. the next day. From this perspective, the rapid development of logistics has, to some extent, facilitated cross-regional selling and reduced transaction costs. Driven by profit, unfair competition is inevitable, leading to cross-regional selling and price chaos.

Channels and logistics are objective factors. Additionally, some product categories naturally require wholesalers to help circulate goods. For example, planned consumer goods like cosmetics and hair care products do not need deep distribution; their core channels are mainly hypermarkets, so they need wholesale channels to help circulate goods.

Of course, for the vast majority of FMCG products, cross-regional selling and price chaos are not good phenomena. Especially in the era of omni-channel distribution, controlling market prices is a key condition for a brand to continue growing.

"Price Control and Anti-Cross-Regional Selling" Should Solve Problems from the Source "The source of goods is in the hands of brand owners. No matter which region or platform, ultimately, goods come from the brand owner. If the headquarters doesn't think of ways to control cross-regional selling, relying on regional intervention cannot solve the root of the problem," said a city manager of a daily chemical brand when discussing cross-regional selling. In the final analysis, the source of cross-regional selling lies with the brand. If brand owners don't take action, it's hard to solve the root problem. How to solve the problem from the source? The following aspects can serve as references.

1) Technology: "One Product, One Code" for Anti-Cross-Regional Selling The "one product, one code" technology is widely used in the FMCG industry, with most products mainly using box codes. All goods' receiving and shipping logistics can be managed through the system, reducing cross-regional selling by tracing logistics trajectories. Box codes still have some loopholes. For example, in some distributor warehouses, we saw dedicated personnel unpacking and repackaging products before shipping them out to circumvent the manufacturer's product traceability. Of course, some brands are already upgrading "box codes" so that each product has a QR code. This form was mainly used for B2B and B2C promotional activities in the past, but now it is gradually being integrated into anti-counterfeiting and anti-cross-regional selling. The difficulty in implementing single-product coding is not a technical issue, but if it is to be integrated into anti-cross-regional selling, it requires modifications to backend packaging, palletizing, and warehousing systems, involving production line changes. Currently, there are relatively mature cases of "one product, one code" application. For example, Dongpeng Special Beverage has achieved the integration of product code, box code, and pallet code, enabling precise product traceability and anti-cross-regional selling, which can help curb cross-regional selling.

2) Marketing: Gradient Pricing for Different Channels As mentioned above, the trend of channel differentiation is obvious. As brand owners, to maintain channel competitiveness, the more advantageous platforms receive more resource support. Therefore, compared with traditional distributors, KA hypermarkets, e-commerce, and emerging platforms often receive more resources. Taking online as an example, after deducting various policy resources, electronic coupons, and other support from the supply price, the final price is much lower than that of traditional circulation channels. Similarly, KA hypermarkets, with their contract advantages and various promotional expense investments, have even more obvious supply price advantages. In response to this problem, some brands have proposed solutions such as product specification differentiation, like KA-exclusive packaging, GT-exclusive packaging, and e-commerce-exclusive packaging. However, during market visits, this approach did not achieve the expected results. From the store's perspective, the core is to make money, and they won't refuse goods just because they are KA-exclusive. From the consumer's perspective, they are not very sensitive to the product itself. Moreover, in most cases, KA packaging is more affordable, and consumers prefer it. The core issue is still pricing. When formulating price strategies, the headquarters should fully consider price conflicts among mainstream channels and avoid the risk of cross-regional selling caused by supply prices. The headquarters can adopt a gradient pricing strategy based on the characteristics of different channels. For example, for the same specification product, the supply price to traditional channels is 40 yuan, to KA is 50 yuan, and to e-commerce is 60 yuan. Although the supply prices to KA and e-commerce are higher, with various preferential policies and promotional activities, the final prices will also be brought down. The gradient pricing approach is to maintain the stability of the national price ecosystem.

3) Management: Improve Systems and Crack Down on Cross-Regional Selling Technical means are for tracking cross-regional selling, price strategies are for reducing it, but to cure the root cause, a strong management system by the brand is needed: when cross-regional selling is caught, severe punishment must be meted out. For example, for the first offense, the distributor is fined and the products are bought back at a high price; for the second offense, the distribution agency qualification is revoked, etc. At the same time, cross-regional selling should be managed by dedicated personnel. Sales personnel have high daily sales tasks and don't have much time to handle cross-regional selling, so it's best to have dedicated personnel. For example, Wahaha has established a special institution that tours the country to investigate and punish distributors engaged in cross-regional selling. Another point to note is that when setting sales tasks for distributors, manufacturers should fully consider the distributors' operating conditions and market status, set scientific and reasonable sales tasks, and reduce forced inventory pressure.

Conclusion: Cross-regional selling is indeed a persistent problem in the market, but it is not unsolvable. The core lies in the manufacturer's attitude. Facing cross-regional selling, manufacturers must have the determination to cut off a broken wrist. Only when the upstream is clear will the downstream not be turbid.

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