Many company executives understand that in today's market, where products are largely oversupplied and competition is fierce, controlling distribution channels is key to success. Open any well-known financial newspaper or magazine, and you'll see recruitment ads of various sizes. As dealers are a crucial part of the channel, companies go to great lengths to attract them. They tout their strong corporate strength, R&D capabilities, the charisma of their leaders, product performance and quality, broad market prospects, strong support like TV and online ads and celebrity endorsements, comprehensive marketing planning support from experts, strict market protection mechanisms to prevent cross-region selling, generous year-end rebates, and complete return and exchange policies, among other things. In short, they promise that if you just agree to distribute their products, you're guaranteed to make money and become a millionaire. These offers are so attractive that many dealers are tempted. But before you act on that impulse, remember: there's no such thing as a free lunch. Business isn't about sitting back and collecting money. Think twice before choosing your partner. Here are some points to consider. 1 Thoroughly Investigate the Company's True Financial Strength Some companies' ads and materials claim: "XX Company is a high-tech subsidiary of XX Group, which has assets of tens of billions and owns many nationally famous companies." Such companies seem to have strong backing, and dealers might think they can benefit from being under their umbrella. But dealers shouldn't blindly trust these claims. Even if the parent company is wealthy, it's a diversified conglomerate with large expenses. How much money actually trickles down to the subsidiary you'll be dealing with? What you really want is substantial investment in the product you'll be distributing and related business. Of course, as an outsider, you may not need to know all the details initially, but you can get a rough idea by looking at their advertising expenditure, registered capital, and talking to other dealers and customers they work with. 2 Does the Product Really Have a Market, and Does It Conflict with Your Existing Products? Although companies will talk up their products, the market is ruthless. Even if a product is high-tech and reaches a certain level, how applicable is it? Does it meet consumers' real potential and actual needs? The extent to which consumers accept the product's price-performance ratio indicates the potential market opportunity. Of course, this is closely related to advertising, pricing, channel management, and other factors. But product quality and positioning are the foundation of all marketing efforts. This requires dealers to have rich knowledge of the product category—the so-called "don't do what you don't know." Additionally, dealers should carefully weigh their existing product line against the company's product policies to see if they conflict. Some companies may want dealers to exclusively carry their products and not competitive brands. Many dealers, however, act as "representatives" for consumers, carrying multiple similar bestsellers, which is not only a consumer need but also the basis of dealer profitability. If you must choose between the two, weigh whether dropping existing products to introduce new ones is worth it. This involves assessing the product's market prospects and the company's advertising and financial capabilities. Of course, if the new product complements your existing ones, prioritize it. 3 Is the Company's Advertising Effective? Whether a company spends big on advertising has become a key criterion for dealers choosing a partner, but dealers must also seriously consider advertising effectiveness. Today, ads for products, companies, and services are everywhere—on CCTV, satellite TV, online, in newspapers and magazines. Advertising costs are staggering. Given that audiences are increasingly resistant to ads and message reach is declining, spending tens of millions on national ads versus hundreds of thousands on city ads yields completely different results. So dealers should not only look at how much the company spends on ads, but also how the money is used: the quality of the ad creative, whether it attracts viewers, the media mix, and whether it can create a dense bombardment that cuts through the advertising clutter to pave a clear path for the product. 4 Thoroughly Examine the Sample Market To increase success chances, reduce risk, and make it easier to convince dealers, companies often concentrate their marketing efforts on one region to create a successful sample market. Dealers shouldn't be impulsive just because they see the sample market dealer's warehouse bustling with pickups. Look at the sample market calmly. First, the sample market is the result of intensive cultivation. Will the company invest the same effort, manpower, and money in other regions? Second, how much of the sample market's success can be replicated in other markets, given that regional environments differ (especially in a country like China)? Third, can the problems that arose in the sample market be effectively overcome in your own territory? If, after considering these points, you're confident you can do as well or better than the sample market, then go ahead and take it on. Also, be cautious of companies that had a successful product before and are now launching a new one, hoping to ride on the coattails of the old. The previous success proves they have some winning experience, but it often leads to simply copying the old playbook for the new product. This is due to lower marketing costs and habitual thinking, which is harmful in a rapidly changing market. If you pay attention to the industry, you should be able to sense whether the old approach will work and make your choice accordingly. 5 Alignment Between Your Market Coverage and the Product's Expected Sales Area Your market network is the foundation of your survival and your bargaining chip with the company. When choosing a company, you should have a clear understanding of your market coverage, including the geographic area your network covers and your stable customer base. If the company's expected sales area in your region differs greatly from your market coverage—meaning you can't effectively cover the area they want—the company may consider adding another dealer in your region to better penetrate and refine the market and block competitors. So from the start, fully assess your market coverage, including future network growth, so you can negotiate regional distribution rights and protections upfront, avoiding unnecessary channel conflicts like cross-region selling or unauthorized product movement. 6 Is There a Stable Pricing System? Some companies, to attract new dealers, may promise to offer you lower supply prices than other dealers. If you inadvertently get such a promise, be wary. Because your lower purchase price will inevitably be reflected in lower wholesale prices downstream, and retail prices can also drop. When small retailers in neighboring areas are attracted by the lower prices and come to your region to stock up, you'll unintentionally get a reputation for cross-region selling, drawing complaints, accusations, or even retaliation from neighboring dealers. Similarly, if other dealers get better price terms, it can impact your territory. A stable pricing system ensures a win-win for both the company and dealers. It includes reasonable profit margins between factory price, wholesale price, and retail price, and ensures the final retail price is basically consistent. Pay special attention to whether the company gives preferential prices to retail giants or large group consumers who deal directly with the factory, and whether price differences between regions could disrupt the pricing system. How does the company balance these? Are their measures effective in maintaining price stability? A poorly designed or poorly enforced pricing system can severely damage the channel. 7 Does the Company Have Effective Anti-Diversion Measures? Cross-region selling (diversion) is the most common and troublesome issue for dealers, so you should pay close attention to the company's promises and measures to prevent it. First, check if the distribution contract includes a "no cross-region sales" clause. Second, see if the general dealer price is a CIF price, with all freight costs borne by the factory, to ensure all general dealers have the same price basis. Third, check if there's a stable pricing system. Fourth, see if year-end rebates are tied to whether the dealer has engaged in cross-region selling. Fifth, check if they use text or barcode identification, printing different trademarks (at a subtle level) or different barcodes for different regions, providing evidence to monitor diversion. Sixth, see if they have strict freight monitoring to ensure goods are shipped to designated areas, creating obstacles for diversion. Seventh, check if the company has dedicated personnel to handle diversion incidents and whether they handle them successfully. 8 The Company's Financial Policies Companies naturally prefer dealers to pay in advance, even if it means giving more discounts. Dealers, on the other hand, hope the company will let them sell on consignment. In this game of capital occupation, the stronger party has the say. Dealers should carefully understand the company's settlement methods and rebate levels, weigh their own financial situation and expected sales, and choose a reasonable settlement method. Also, pay attention to how the company allows you to use advertising and promotional funds. How can you reasonably leverage the company's financial incentives to maximize your profit? 9 The Company's Market Services Dealers of well-known brands often have an easier time than those dealing with unknown products from small and medium enterprises. Not only do famous brands sell well, but they also provide many market services to dealers, such as sending staff to work with dealers to collect and analyze market and consumer data, develop new promotional plans to boost sales, promptly handle and coordinate conflicts among dealers, provide more consumer information, help dealers expand markets and establish new outlets, and assist in training dealer staff. The company's support in helping dealers grow is something ambitious dealers should consider. 10 Identification with Corporate Culture and Management Style Although dealers are primarily profit-driven, before cooperating, try to gain a deep understanding of the company's business philosophy and management approach to see if you can accept it, or at least not dislike it. Otherwise, once the contract is signed, you might not take the company's measures seriously, or even pay lip service, while your suggestions are ignored. If the manufacturer and dealer don't cooperate, conflicts are inevitable, and the partnership will eventually dissolve. For a smooth collaboration, dealers should deeply "collide" with the corporate culture. In late August, the "2018 China Digital Innovation Conference (2018FDIC)" with the theme "Finding New Engines for Growth" will be held in Shanghai, hosted by the China FMCG Industry Association and organized by New Distribution. This conference will have over 5,000 companies participating. It brings together outstanding explorers and promoters of digital transformation across industries, sharing case studies of digital transformation from companies and partners, discussing trends and cutting-edge applications of digital technology, and building a bridge for brand owners, dealers, retail companies, and marketing agencies. It helps FMCG manufacturers get the latest information and understand best practices, and helps brand owners and dealers find new momentum for digital growth in the internet era! Conference Time August 22-24, 2018 Conference Venue Shanghai Baohua Marriott Hotel Conference Agenda August 22: Full-day check-in 14:00-17:30: Parallel forum on dealer same-city logistics 18:30-21:00: New Distribution Night Gala Dinner August 23: Theme: Marketing Digital Innovation 9:00-12:00: Main forum on marketing digital innovation 14:00-17:30: Parallel forums on brand, channel, and communication August 24: Theme: Digital Upgrade of FMCG Supply Chain Full day: FMCG Supply Chain Conference Registration Registration is now open. Long-press the QR code below or click "Read Original" to register. Early bird tickets are limited to 200, with 50% discount, available on a first-come, first-served basis! Registration Inquiries Ticket inquiries: Media cooperation inquiries: Highlights of Previous New Distribution Conferences Click the links below to review the highlights of the 1st, 2nd, and 3rd FMCG + Internet Conferences: -END-