“We spent the money, but the manufacturer said it couldn't be reimbursed. We faced various inspections and fines, worked hard all year, and still lost money,” complained a former dealer of a major manufacturer. Over the past year, I visited many dealers who gave up their brand agency rights, and most exits were caused by the manufacturers.

Manufacturer Policies Not Adapted to Local Conditions

Different markets have different realities, but manufacturers often apply a one-size-fits-all approach when designing policies. Especially for dealers in weak markets, even a slight change in manufacturer policy can have a huge impact on their business, even fatal.

1. A Word from a Manufacturer Leader Can Overturn the Market.

A beer dealer told me, “We are in a weak market. To cope with competition, the manufacturer gave us subsidies for sales staff salaries. Later, a new leader came and imposed a bunch of demands—sales volume, structure, and coverage of key products all had to grow. We couldn't meet them, so they canceled the subsidies. In a weak market with high investment and thin margins, after the subsidies were cut, we couldn't afford salespeople, sales declined, and we quit at the end of last year.” Now, that market has a new dealer, but sales still haven't improved. In weak markets, instead of supporting dealers to survive, manufacturers first impose idealistic demands, and dealers can only give up when they can't meet them.

2. Frequent Policy Changes Directly Harm Dealers' Interests.

To push a new product quickly, the manufacturer set a policy for Product A. “At first, they said they'd go all out to promote A, giving us various support like display fees and promotion fees. After three months, the promotion fees were suddenly canceled. Before Product A was even established, they wanted to push Product B. We had to absorb the cost of the A products piled up in stores and warehouses, and stores were complaining constantly,” a dealer for a major manufacturer said, getting angrier. “This business is impossible. I suffer the most losses and get blamed from both sides.” Policies are changed arbitrarily based on leaders' preferences, not market reality.

3. Manufacturers' Profit Targets Increase Year by Year, and Besides Cutting Market Expenses, They Also Raise Product Prices.

In 2021, a leading beer manufacturer raised prices on its main products by 20%. Dealers in some weak markets were stunned. The market was already weak, and they had finally gained a foothold, only for the company to suddenly raise prices, especially on main products. What's more absurd is that many weak markets saw direct price hikes: the dealer's purchase price went up, and they were required to raise the supply price to stores and retail prices within one month. Many store owners directly said, “If you raise the price of this product, I won't sell it.” Some dealers were forced to exit. “The company raised my price, and I raised it for stores, but they all switched to competitors. If I didn't raise it, I had no profit. This business is unworkable.”

Difficulty in Reimbursing Expenses

A dairy dealer got angry when mentioning expense reimbursement: “The company has all sorts of rules for reimbursement, but no one tells us. We spend the money, and when it's time to reimburse, they say documents are missing and it can't be done... Another time, we finally got reimbursed, but at year-end, the company reviewed and said it was non-compliant and deducted the money again. We barely make money supplying stores; we rely on the manufacturer's subsidies. But at the end of the year, the subsidies aren't paid, and we lose money. We really can't continue.” Reimbursement requires various documents, and if they are incomplete or don't meet the company's standards, they can't be reimbursed. Not to mention dealers, even many company salespeople can't figure it out. There are too many rules, most of which are thought up by office staff and don't reflect reality. For example, for a buy-one-get-one promotion at stores, the finance department required that every consumer who buys must sign and leave contact information, and then the free gifts would be reimbursed based on the number of signed consumers. Anyone who has worked in sales knows this is pure fantasy. Additionally, salespeople are indifferent to dealers' interests, causing dealers to miss out on company expense support.

At my previous company, there was a dealer in Shanghai, even 10 years ago, with annual sales of over 20 million for a single brand. He was very cooperative with company activities and even stockpiling. But after two years, he quit because he was losing money every year. A key reason behind the losses was that the salesperson at the time completely ignored the dealer's interests. That salesperson had a side business (running a milk station and reselling goods), and every time he communicated with the dealer, it was just about placing orders. The company set monthly rebate policies for dealers, which were tiered: achieving 100% and 105% gave different rebate rates. The salesperson never communicated the details to the dealer, as long as he could meet his monthly targets. The specialist responsible for reviewing reimbursement documents found that in one month, the customer achieved 104%, and just needed to order 50,000 yuan more to get a higher rebate, which would have meant tens of thousands more. It turned out the dealer had no idea the policy was tiered (it had been in place for over half a year), and the salesperson never communicated or reminded him. Isn't that equivalent to letting the customer lose tens of thousands? Additionally, it was found that the dealer was deducted fees every month, mainly due to missing photos of activity execution. If the salesperson had reminded the dealer to arrange for timely photo collection, many unnecessary deductions could have been avoided. Unsurprisingly, that customer eventually couldn't continue. If you don't care about your customers' interests, you will eventually lose their trust, and ultimately, your own and the brand's reputation in the industry will suffer.

Especially, some salespeople, to meet their performance targets, make empty promises to dealers that they can't keep. “The salesperson patted his chest and said he would apply for a policy for me, asking me to take the goods first. But then he kept making excuses and delaying. I never saw a cent of the promised expenses. Finally, the salesperson left, and those verbal promises couldn't be fulfilled,” the dealer said angrily. Many dealers with such legacy issues go directly to the company, but the company leaders have all changed and deny everything. Even if they go to court, it's usually futile. Now, dealers have learned to be smart: they won't execute any policy unless it's signed by a company leader.

Blind Stockpiling Without Considering Reality

Stockpiling can be reasonable under certain conditions. But blind stockpiling leads to a series of problems. As companies continue to cut expense investments, dealers bear the cost of handling near-expiry products themselves. In this situation, the risk of stockpiling increases exponentially. To relieve inventory pressure, dealers push stock to stores, exceeding their capacity to sell. Later, products near expiry require manpower, resources, and money to collect and handle, increasing operating costs. A county dealer shared: “At that time, stockpiling was to help the sales manager meet his targets. He promised to help me deal with it. I still have 1,000 boxes of expired products in my warehouse that never left. They expired right in the warehouse. It's not that I didn't want to ship them; stores were already full. The expired products have been sitting for almost a year, and still no one has handled them. I'm just waiting for a new customer to take over.” After stockpiling, the risk of cross-region selling increases. A dealer couldn't bear the company's fines for cross-region selling: “I've been an agent for Brand A for over 10 years and never actively engaged in cross-region selling. But now that online is so developed, secondary distributors put goods on online platforms. I was targeted: the same batch of products was reported by other markets 10 times, and the company fined me 200,000 yuan. I don't even earn that much in a year, so I quit.” Ignoring market reality and stockpiling more on dealers will kill them faster. Stockpiling leads to a dead end; not stockpiling and resisting the manufacturer offers a chance for survival.

Routine Inspections and Fines

Starting in 2017, a major manufacturer organized a “Thunder Action” to comprehensively review expenses reimbursed to dealers in the past three years. In the first year alone, they fined dealers over 300 million yuan, all converted into company profits. Since then, they conduct a comprehensive inspection every year. One dealer said the largest fine was over 1 million yuan, and he wanted to quit, but with such large fixed costs like volume, warehouse, and personnel, it's hard to find another brand to take over. Routine inspections also terrify dealers.

The market is dynamic, but inspectors view it with a static perspective. If the plan called for 20 boxes of display, but the actual inspection found only 15, it's non-compliant and expenses are deducted; if the requirement was to stock 3 products, but only 2 were found, expenses are deducted. “Last year, the manufacturer inspected my market over 10 times, and I was fined over 100,000 yuan in total,” the dealer shook his head. In fact, many major manufacturers' inspections have annual fine quotas, and meeting them brings rewards. So, inspections may seem impartial, but in reality, they just pick on some “unlucky soul.”

Final Thoughts

In the manufacturer-dealer relationship, dealers are the weaker party. A single manufacturer policy can determine a dealer's rise or fall. When dealers leave, there are no real winners in the local market: dealers lose money, and manufacturers lose reputation. In today's market environment, manufacturers should not just strengthen management over dealers. Instead, they should treat dealers as true partners, empower their development, and work together for win-win outcomes.

🔺Scan for ticket inquiries🔺