--- title: "Curing the Chronic Problem of Unauthorized Price Cuts by Secondary Distributors" description: "Some secondary distributors, in order to meet sales targets and leverage distributor policies to boost other products, repeatedly cut prices, sometimes even below the factory price, causing headaches for many beverage distributors. This article analyzes the two major harms of such price cuts, the three unreasonable factors behind them, and proposes solutions to control the source and strengthen management." author: "远景咨询 朱涛" publisher: "New Distribution" email: "zhaobo258@gmail.com" telephone: "+8615854817671" published: "2014-09-29" language: "en" canonical: "https://xinjignxiao.com/en/articles/curing-the-chronic-problem-of-unauthorized-price-cuts-by-secondary-distr-467af18d/" markdown: "https://xinjignxiao.com/en/articles/curing-the-chronic-problem-of-unauthorized-price-cuts-by-secondary-distr-467af18d.md" original_source: "https://mp.weixin.qq.com/s/grB8bBKA4R3E8qL6voSRMQ" translation: "https://xinjignxiao.com/zh/articles/%E4%B8%93%E6%B2%BB%E4%BA%8C%E6%89%B9%E5%95%86%E7%A7%81%E8%87%AA%E9%99%8D%E4%BB%B7%E9%A1%BD%E7%96%BE-467af18d.md" attribution: "New Distribution — https://xinjignxiao.com/en/articles/curing-the-chronic-problem-of-unauthorized-price-cuts-by-secondary-distr-467af18d/" usage_policy: "https://xinjignxiao.com/ai-policy.txt" --- # Curing the Chronic Problem of Unauthorized Price Cuts by Secondary Distributors > Some secondary distributors, in order to meet sales targets and leverage distributor policies to boost other products, repeatedly cut prices, sometimes even below the factory price, causing headaches for many beverage distributors. This article analyzes the two major harms of such price cuts, the three unreasonable factors behind them, and proposes solutions to control the source and strengthen management. **Tip: Click the link above to follow "FMCG Distributor Professional Consulting" for more marketing and distributor internal management insights.** However, the reality is different. Some secondary distributors, in order to complete the sales tasks assigned by the distributor and simultaneously use the distributor's policies to drive sales of other products, continuously reduce prices, sometimes even below the factory price. This has become a major headache for many beverage distributors. **The Two Major Sins of Secondary Distributor Price Cuts** Although price cuts can bring temporary benefits to secondary distributors, the adverse effects and destructiveness are also evident. First, it disrupts the overall market order. The most direct result of unauthorized price cuts by secondary distributors is that the purchase price of the product for all retail terminals in the region generally decreases. Consequently, terminals with low or no inventory will significantly reduce their retail prices, while terminals with high inventory, having purchased at higher prices, will have retail prices higher than others. This leads to chaos in the overall market price structure. For surrounding secondary distributors, the price-cutting distributor poses a significant threat. To maintain existing terminal resources and develop new terminal customers, they are forced into the dilemma of whether to cut prices or not, eventually spreading like a snowball and affecting a larger area. Second, for the product itself, price cuts by secondary distributors can be devastating. Price confusion directly harms terminals with large inventories and surrounding secondary distributors. The profit margin is repeatedly squeezed, and when it reaches a certain level, many terminals and secondary distributors will reluctantly abandon the product, leading to a shortened product life cycle in the market. **Three Unreasonable Factors Behind Price Cuts** Many may believe that price cuts by secondary distributors are solely due to their unscrupulous pursuit of profit maximization, unrelated to the manufacturer or distributor. In reality, it is precisely because manufacturers and distributors have many loopholes in product price system design, sales policy formulation, and market control that secondary distributors find opportunities to exploit. First, unreasonable price system design. If a product's price system has loopholes—for example, the manufacturer sets too high a profit margin for secondary distributors—they will arbitrarily reduce their profit margins to increase sales and compete for retail terminals, leading to price cuts. Second, unreasonable sales policy formulation. During peak seasons, distributors often provide generous policy support to secondary distributors, such as high rebates and substantial promotional expenses, to boost sales. As a result, secondary distributors can freely reduce product profits or even sell below the factory price because they can forgo product profits in favor of high rebates and promotional expenses, while also driving sales of other products. Why not? Third, unreasonable channel width design. Another important reason is that distributors overly rely on secondary distributors, and the channel width is too broad, leading to competition and price cuts. Additionally, there is inadequate control over secondary distributors and the market, lacking punitive measures and deterrence, which only encourages more reckless price-cutting behavior. **Control the Source and Strengthen Management** Where there is profit, there is pursuit. While we may not completely eliminate price cuts by secondary distributors, we can curb them through effective methods and actions. Control the source of profit. When formulating the product price system, manufacturers should carefully consider and set appropriate price systems for different market stages, ensuring secondary distributors earn normal profits while preventing excessive profits that might tempt them to take risks. Distributors should also thoroughly consider promotional policies for secondary distributors during peak seasons, preferably using in-kind rewards instead of cash or items convertible to cash, to prevent secondary distributors from using these funds or promotional items to participate in price cuts. A reasonable profit margin and promotional policy serve to control the source of profit, making profit acquisition fair and transparent, and providing control at the source. Once the source is controlled, the next step is to strengthen market control. First, when selecting secondary distributors, distributors should choose those with minimal overlap in terminal channels, because if multiple secondary distributors cover the same area, they will inevitably resort to unscrupulous means to seize terminal resources. Second, distributors should not overly rely on secondary distributors; by channel sinking, they can appropriately reduce the width of secondary distributors, which also helps control the market. Finally, distributors need to establish a feasible supervision and punishment system and agree with secondary distributors, such as conducting regular visits to secondary distributors and terminals within a certain period. If price cuts are discovered, distributors can impose penalties like deducting deposits according to the agreed system, serving as a deterrent. --- **Like this article? 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