"I've been working very hard, but why can't I still meet the manufacturer's targets? What should I do this year? If I fail again, they'll cancel my dealership!" This is what a dealer consulted me about over the phone last week. First, let's not judge the reasonableness of the targets; often it's meaningless. Let's focus on the business itself: what should we do? I've summarized three steps for the initial stage of market breakthrough, and I'd like to share them with you.

Sort Out Product Structure

The purpose of FMCG distribution business is profit, which comes from products or services carried by products. Therefore, dealers must adjust their product structure with profit as the core. Another key word: volume. "Volume" and "profit" are intertwined, interrelated, and mutually influential. "Volume" determines your market position, economies of scale, and cash flow support; "profit" determines your survival and growth, and shareholders' return on investment. Both are indispensable. For a dealer's business, there are three relationships between "volume" and "profit":

  1. Positive correlation: Within a certain range, sales growth usually brings increased profit. For example, by expanding market share and increasing product sales, a company can spread fixed costs and increase profit contribution per unit.
  2. Negative correlation: In some cases, over-pursuing sales volume may affect profit. For example, lowering prices, increasing promotional expenses, or expanding inventory to boost sales may lead to decreased profit.
  3. Balance relationship: A successful FMCG business needs to find a balance between "volume" and "profit." Companies need to formulate reasonable pricing, marketing, and cost control strategies based on market conditions, product characteristics, and competitive landscape to achieve dual growth in sales and profit.

With these basic concepts, let's look back at the dealer's product structure. At least four types of products need to be arranged:

  1. Traffic products: Undertake market penetration and channel coverage functions, attracting traffic through high cost-performance and high-frequency consumption characteristics. This is the main source of "volume" and the stepping stone for outlet breakthrough, while also bearing the task pressure from brand owners.
  2. Profit products: Focus on high value-added categories, increase gross margin through differentiated selling points, usually requiring refined display and terminal promotion. This is the main source of "profit," the foundation of survival and development, and the guarantee of business continuity.
  3. Strategic products: Lay out future trend tracks. Although short-term investment is large, they can build competitive barriers. Business cannot remain unchanged; all products have a decline period. Not cultivating new product strength leads to short-sightedness.
  4. Adjustment products: Adjust for off-peak seasons, channel types, festivals, etc., helping dealers earn "extra income."

Next, think about how to adjust product structure. I've compiled a set of adjustment methods: "6 Determinations and 1 Pursuit."

Sort Out Channel Structure

Here, channels have two meanings:

  1. Channel reach: At this time, the core competitiveness is in the process from dealer to consumer. It's always about high efficiency replacing low efficiency, low cost replacing high cost, scale replacing localization, and diversified consumer reach replacing single. Here, we need to consider the overall operational efficiency of the dealer. Take channel efficiency as an example: When a brand launches a new product, an efficient dealer can spread the new product across targeted channels and outlets within a month, reaching target consumers in a very short time. An inefficient dealer drags on for half a year without meeting standards. There are five questions here:
  2. Has the channel sorting work been done properly? Have you created a clear profile of your channels? Or are you grabbing everything at once, scattering the new product randomly? Remember, goods that are returned due to poor sell-through are the biggest killer of channel efficiency.
  3. Have you optimized your outlet levels? You can classify by purchase activity, sales volume per unit time, etc.
  4. Is the target consumer definition for the new product precise? Is the matching channel supply chain smooth?
  5. For channel efficiency, pay attention to the keyword "targeted." Only with "targeting" can products match channels, outlets, and target groups. This is the core of channel efficiency.
  6. The last meter of the channel is product sell-through. Have you achieved B2C integration? Operate the C-end, empower the B-end, so someone wants to buy and someone is willing to sell.

If you clarify these 5 points, the channel reach efficiency for new products will improve. Otherwise, if you distribute and then recall, efficiency is zero, and value is zero.

Take channel cost as another example: At a grain and oil brand's annual meeting, research found that Dealer A's total distribution cost (labor + fuel + vehicle wear + repairs + fines + insurance) was 55 yuan/ton, while Dealer B of similar size had a distribution cost of 45 yuan/ton. How much profit difference does that make over a year?

Upon deeper investigation, the problem between A and B was in the compensation system for the logistics team. A used base salary + commission, so the dealer spent more but the team earned less; B used a logistics contracting model, so the dealer spent less but the team earned more.

  1. Channel distribution: 4 offline channels and 4 online channels A diversified channel strategy helps dealers spread risk. When one channel is affected by market fluctuations, policy changes, or competition, other channels can still maintain business stability, avoiding overall business damage due to the decline of a single channel.

The article mentions the 4 offline channels that dealers must maintain to preserve volume in the era of overcapacity, and the 4 online channels necessary for growth. It also advises dealers that channel structure adjustment is not just about layout changes, but also an upgrade and evolution of the "middleman" identity. Whoever completes this evolution first will gain the upper hand in the era of overcapacity.

Next, think about how to adjust channel structure. I've compiled a logical model for channel structure adjustment:

Combine Organization, Execution, and Compensation

  1. If the dealer's organization is not well done, efficiency won't improve. First is the organizational structure. We emphasize that professionals do professional work, but many dealers don't care. As a result, salespeople are assigned to specific areas, covering both traditional trade, modern trade, special channels, and school outlets, and occasionally doing merchandising. They seem versatile, but they do a mix of tasks, and efficiency doesn't improve.

Second is the number of staff. Service coverage first requires outlet calculation. Dealers calculate the average outlet demand to achieve sales based on their current situation, then determine the relationship between population and outlet count in each region based on per capita annual consumption, and finally make staffing calculations. For example: A region has a population of 1 million, with an estimated outlet density of 1,000 people per outlet, resulting in 1,000 outlets. If one person can visit a maximum of 150 outlets based on visit frequency needs, then 1,000/150 = 6-7 staff are needed. It should be emphasized that different regions have different outlet coverage requirements, visit frequencies, and service outlet counts per person. Conclusions must be based on research, not guesswork.

Then there is the organizational hierarchy. As the business scale expands, the team will grow. You can appropriately allocate management personnel. The ratio of managers to grassroots staff is generally 1:(6-9). Consider this: If the gross margin of products is high, managers can be fully non-operational (pure management, ratio 1:9). If the gross margin is low, managers can also work as salespeople (management + area visits, ratio 1:6).

  1. If execution doesn't improve, efficiency won't improve. I always tell every dealer to seek efficiency from execution, but execution must be concrete! There's a formula: Execution = Knowledge * Skill * Attitude * Follow-up. Let me briefly share.

  2. Knowledge affects execution: Product knowledge, system content, methods, and processes. If you don't understand, you can't execute. These are basic knowledge reserves for every marketing worker. To improve grassroots team execution, basic knowledge is absolutely necessary. Improvement plan: Teach through training, check through exams.

  3. Skill affects execution: Proficiency in doing something. You need to be able to execute and execute quickly. For example: If a brand requires cut-case displays in every store, cutting the case is a skill. If you're not skilled, you might cut the product or take too long. How can you execute? Skill is not just about learning; the master leads you to the door, but practice is up to you. Skill improvement requires trainers to continuously guide grassroots workers to practice, ideally forming muscle memory. Improvement plan: Skills need constant training.

  4. Attitude affects execution: If attitude is not correct, execution will be incomplete or just perfunctory. Improvement plan: Communication and motivation. First guide correctly, then set up reward and punishment systems.

  5. Follow-up affects execution: Without follow-up, systems, processes, and incentive measures cannot be implemented as planned. Improvement plan: Continuous checking.

In summary: If execution has problems, either knowledge is insufficient to execute, skill is insufficient to execute, attitude is wrong, or follow-up is lacking, leading to laziness.

  1. Compensation is the driving force of business. With rising labor costs and gradually decreasing operating margins, dealers are paying more attention to compensation design. For employees, its value is reflected in: providing economic security, motivating work, reflecting personal value, and promoting career development. For dealers, its value is reflected in: attracting and retaining talent, improving work efficiency, promoting team collaboration, and enhancing company image.

Compensation has the following models:

  • First: Commission model: Base salary + Commission + KPI
  1. Lower commission for existing volume, higher commission for incremental volume. For example: A salesperson sold 1,000 units in February last year. This February, commission is 1.5 yuan/unit for up to 1,000 units, and 2 yuan/unit for units above 1,000.
  2. Design tiered commission: Commission = Commission standard * Achievement coefficient (capped at 120%). For example: Commission is 10 yuan/unit. If distribution achievement is 80%, commission is 1080% = 8 yuan. If distribution achievement is 110%, commission is 10110% = 11 yuan, capped at 12 yuan/unit.
  3. Base salary linked to distribution, commission linked to profit. For example: A salesperson's June distribution task is 250,000 yuan, profit target is 50,000 yuan, base salary is 2,500 yuan, commission base is 5%. If both targets are just met, income is 5,000 yuan.
  • Second: Profit-sharing model: Base salary + Profit sharing + KPI This model often appears in regional contracting trading companies, where employees are partners. It should be emphasized: Area contracting is not about replacing management with contracting, but turning management into incentives to stimulate the initiative of grassroots employees.
  1. Intensive areas: Profit sharing + KPI. Intensive areas are the strong areas of the trading company. Some dealers cancel the base salary for grassroots salespeople and directly assess profit.
  2. Non-intensive areas: Base salary + Profit sharing + KPI. Non-intensive areas are weak areas. Without a base salary, long-term stable team development is not conducive. Some dealers design a base salary of 2,000-3,000 yuan, but the profit-sharing ratio from price difference is relatively low, maybe only about 15%.
  3. One-step price difference: In some relatively mature areas, dealers and salespeople have a buying-selling relationship. The dealer sets a price for salespeople and outlets based on their own delivery price and operating costs (warehousing, logistics personnel, etc.), allowing them to operate independently.
  • Third: Hybrid model: Sales commission + Management profit sharing + KPI This model was learned from visiting a dealer in Shijiazhuang. Mr. Zhang's annual business scale is about 20 million yuan, with 6 salespeople and 5 brands. Salespeople operate by brand and area. Mr. Zhang said he is from the 70s generation, and his team is all from the 95s, under 30. He has a generation gap in directly managing the team, and hiring professional managers is not profitable enough to support. So he thought about the compensation model. Among the 5 brands, he selected the salesperson with the highest sales for each brand as the brand manager. Thus, among the 6 salespeople, 5 are both brand managers for one brand and salespeople for other brands, both managers and executors. Sales commission = Sales achievement in their area * Commission coefficient. Management profit sharing = Profit achievement of their brand * Profit-sharing coefficient. It's worth emphasizing: Compensation models are only about matching. Different market conditions, product competition landscapes, city tiers, and personnel situations all affect the effectiveness of the compensation system, so dealers should adapt to local conditions.