Small and weak dealers often feel helpless when facing cross-region selling (channel diversion). Asking the manufacturer for help often results in shelved feedback or empty promises, while retaliating against the instigator can lead to mutual destruction and a downward price spiral. So what should small dealers do? The following cases may offer some inspiration.
1 Case 1: Retreat to Advance Manager Li from City A was a small dealer for Brand X. While operating the market, he discovered that Brand X products from a neighboring market had flowed into his territory. After investigation, he learned that the diverted products came from Market B, which had been operating for many years, and its distributor, Boss Wang, was a very open-minded person.
Through his salesperson, Manager Li learned that Market B was under great pressure, with growth potential nearly exhausted. Boss Wang might be considering expanding outward to relieve sales pressure. Manager Li decided to take the initiative and solve the problem his own way. At an appropriate time, he called Boss Wang.
During the call, besides the usual pleasantries, he sincerely expressed his desire to learn from Boss Wang and proposed a visit the next day, but did not mention the diversion issue. Boss Wang agreed to meet and exchange ideas.
The next day, accompanied by the local sales supervisor, Manager Li arrived in City B and chose a coffee shop near Boss Wang's company. He called Boss Wang, who came quickly. After meeting, they discussed Boss Wang's "glorious history" of operating Brand X products.
Boss Wang spoke enthusiastically, and Manager Li indeed benefited greatly, nodding and taking notes, which gave Boss Wang a sense of accomplishment. When it was time for lunch, Manager Li had prepared a feast and warmly invited Boss Wang to join him.
During the meal, Manager Li took the opportunity to mention the difficulties of operating Market A. Seeing this, Boss Wang asked if there was anything he could help with. Manager Li then poured out his troubles, explaining that some products from Market B had flowed into Market A. Boss Wang immediately stated that he would investigate upon return and guaranteed that this would not happen again; if it did, he would accept punishment.
Finally, they shook hands and parted on good terms. From then on, no more Brand X products from Market B appeared in Market A.
Analysis Manager Li used a retreat-to-advance strategy, learning from the other party, respecting him, and successfully resolving the diversion issue. This shows that using "peaceful" means and a roundabout tactic can be an effective way to solve market diversion.
In reality, such examples are quite common.
The voice of a small dealer is often weak and easily ignored by manufacturers. In such cases, taking the initiative, flattering the diverting party, and addressing the issue over a meal can be a clever strategy. Respecting the other party rather than attacking them is sometimes the most effective way to subdue them.
2 Case 2: Attack the Mind Boss Zhao from City A had been distributing Brand D products for three years. Due to also representing other brands and having divided attention, his sales of Brand D in City A were not large. Recently, the Brand D market showed signs of growth, and Boss Zhao wanted to concentrate resources and energy to make a big push.
However, while delivering goods to the wholesale market in City A, he discovered Brand D products from neighboring City B. Investigation revealed that the distributor in City B was selling to wholesale market merchants at prices below the factory price, which troubled Boss Zhao greatly.
After inquiries, Boss Zhao learned that the distributor in City B, General Manager Lin, was a shrewd and slick person who often made small moves to get better policies from the manufacturer. What should he do with such a peer?
If he tried soft tactics, they would surely be useless against someone like Lin. If he complained to the manufacturer, he wouldn't gain any advantage either. After much thought, Boss Zhao decided to call Lin. Here is the transcript of their conversation:
Boss Zhao: Hello, General Manager Lin, I'm the Brand D dealer from City A. I need to trouble you about something. For some reason, I've seen Brand D products shipped from City B in the wholesale market here, and at lower prices. The merchants here are very upset, and some have even returned goods, causing my products to pile up.
Lin: Oh, really? Let me look into it. This shouldn't happen, right? Don't take it too seriously; maybe it's just normal circulation.
Boss Zhao: It's not normal circulation; I've already checked. We're both businessmen. Since the diversion has led to this situation, I need to make other plans. I'm thinking of giving up the distribution of Brand D, but I have a large stock in my warehouse. I need to find a way to dispose of it. My market is in the expansion stage, so I have no choice but to sell at low prices quickly in other markets...
Lin: Quick sale? This product is growing fast now. Don't even think about it. We can negotiate a solution to the diversion issue. I'll investigate, and if it's my goods, I'll take them back. You can't sell your products at low prices in my market.
Boss Zhao: I'm forced to do this. If you were in my shoes, you'd do the same. I have no other choice. Besides, I also represent other manufacturers' products.
Lin: How about this: I'll take back the products and guarantee that they won't appear in your market again. If they do, you can do whatever you want, okay?
Boss Zhao: Since you've said that, I'll consider it. But you must take back the goods in my market; otherwise, I really have no way out...
A week later, Boss Zhao found that the products from City B were indeed gone. Lin called to tell him that the products had been taken back, hoping for forgiveness, and suggesting they unify prices in the future to jointly grow the Brand D market. Boss Zhao finally got rid of his biggest worry.
Analysis As the saying goes: The best strategy is to attack the mind.
By seizing the "soft spot" of the diverting party's mistake and making moderate "threats" and "intimidation," the effect was quite good.
Clearly, no matter how well a market is doing, it fears "counterattack."
Boss Zhao gave Lin a psychological hint of "revenge" and intimidation. To protect his long-term interests, Lin chose to yield and compromise, agreeing to take back the products and guarantee no more diversion.
In this competitive market rule of the strong bullying the weak, sometimes being appropriately "savage" can have unexpected effects. This is what we often call "one thing conquers another," and "the soft fear the hard, the hard fear the reckless."
3 Case 3: Leverage the Manufacturer Old Zhang, a dealer in County N, had been distributing Brand Q products for over a year. The market had been lukewarm, making him a truly small customer for the brand. Yet, diversion still occurred here.
The diverting party was the distributor from City M, to which County N belonged. To obtain more rewards from the manufacturer, the City M distributor began invading surrounding markets, and County N was already the second market he had diverted to. Faced with this situation, what should Old Zhang do? Should he directly confront him or let it go?
After careful consideration, Old Zhang decided to use the manufacturer's power to curb the diversion. After thoughtful planning, he called Manager Ding, the Brand Q manufacturer's supervisor. Old Zhang first stated that due to fierce competition, the volume in Market N was not large, but he had been working hard, cooperating well with the manufacturer, and sales were steadily rising.
Then, Old Zhang revealed the purpose of the call: the City M distributor had started diverting to his market again, disrupting his normal operations and causing chaos. The City M distributor was a repeat offender.
Next, Old Zhang played his "trump card": Brand Q was a well-known industry brand, and diversion would harm dealers' interests and damage the manufacturer's reputation, credibility, and trustworthiness. If this continued, the consequences would be severe.
Sure enough, Manager Ding promised to investigate quickly. Half a month later, Ding confirmed the diversion and decisively punished the City M distributor. Old Zhang, by leveraging the manufacturer, ultimately achieved his goal of eliminating market diversion.
Analysis When you cannot solve or handle market diversion yourself, as a small dealer, you should consider leveraging the manufacturer's power, i.e., having the manufacturer intervene to resolve the issue quickly. This is especially true for major brands.
Of course, when leveraging the manufacturer, you need to use some techniques: make the manufacturer understand the harm of diversion, creating pressure and urgency to resolve it, while also showing your determination to continue, giving the manufacturer hope, so they act quickly to settle the dispute.
In summary, when facing market diversion, small dealers must combine their own situation and market conditions. Whether resolving privately or leveraging the manufacturer, they must grasp the right measure, be reasonable and flexible, so as to navigate the battle against diversion with ease and achieve the most satisfactory outcome.
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