Deep distribution has faded from view. Deep distribution was popular in China for over a decade. Professor Bao Zheng's concept of deep distribution was a marketing weapon for local enterprises for a long time. However, even Professor Bao Zheng now says deep distribution has come to an end. As deep distribution fades from traditional marketing, e-commerce ground promotion has become popular. What is ground promotion? I think it is deep distribution in the internet context. The difference is that deep distribution aims at stocking products, while ground promotion aims at attracting traffic. Deep distribution targets retail stores, while ground promotion targets consumers (though B-end now also targets retail stores). Why has deep distribution faded? Because costs are too high, management is too difficult, and performance evaluation is challenging. In short, the early adopters of deep distribution benefited, but later imitators often abandoned it due to poor management. Because deep distribution has faded, second-tier distributors are making a comeback. Why do e-commerce companies engage in ground promotion? Because online traffic is more expensive, and in the early stages of a startup, online traffic generation is nearly impossible. Many people may not realize that Jack Ma was likely the pioneer of ground promotion. Of course, ground promotion has now also changed, just like deep distribution, with high costs, difficult management, and poor stickiness. In my opinion, there are two main reasons for the decline of deep distribution: first, costs are too high and management is difficult; second, the terminal stocking process for major brands has basically ended, and deep distribution is largely ineffective for upgraded or replacement products. When deep distribution fades, we must ask: What tools can now play a role similar to deep distribution? Without deep distribution, can we achieve smooth channel distribution? I have noticed that after deep distribution, there are two trends in channels: one is the continued deepening of deep distribution; the other is the shift toward visit-based selling or B-end orientation. Deep distribution continues to deepen. There are two classic cases of continued deepening: one is Laocunzhang, a low-end bottled liquor brand; the other is Huarong Jinmailang, a instant noodle company. However, their approaches are quite different. Laocunzhang has taken deep distribution to the extreme: taking photos before entering the store, after entering, during shelf restocking, and after restocking. Everything follows procedures, standards, and time records. Salespeople have dedicated cameras for taking photos. Laocunzhang's methods are understandable but hard to replicate. Even those who left the company cannot replicate them. Its success is based on strong management. Laocunzhang's management is simple: if you fail to meet standards, you are fined, and the fines are huge—not a few yuan, tens of yuan, or hundreds of yuan. Salespeople are fined in thousands, and supervisors in tens of thousands. Of course, fines work because employee income is high; otherwise, fines would drive people away. High income is a result of extreme deep distribution. This is a mutually reinforcing positive cycle that ordinary companies cannot learn. Because of its extreme deep distribution, Laocunzhang has become the absolute leader in low-end bottled liquor, with unmatched control over terminals. Jinmailang's approach is to digitize deep distribution, allowing the boss to see everything on the backend. Many companies have adopted similar systems, but most are useless because of how results are handled. Jinmailang's salespeople fear the boss Fan Xianguo calling at night because he checks the backend data—not occasionally, but every day. This is something professional managers cannot do. It shows that management technology is only effective if the right people use it. It is said that many companies have Jinmailang's deep distribution management system, including major competitors, but they cannot implement it. Laocunzhang's management is different: the boss does not call or check backend data. Because deep distribution is not digitized, the boss cannot see backend data. But Laocunzhang has inspectors who check market stocking rates. If they do not meet requirements, distributors may face fines of hundreds of thousands of yuan. Deepening deep distribution is not the main topic of this article, so I will not elaborate further. Deep distribution shifts to visit-based selling. The decline of deep distribution, rising labor costs, and excessive promotional policies due to industry decline have combined to cause the resurgence of second-tier distributors and a decline in terminal coverage for major brands. Declining terminal coverage leads to lower sales, prompting even stronger promotional policies. This is a vicious cycle. If companies do not break out of this cycle, they will face serious problems. How to break out? I believe platform-based visit selling is deep distribution using the internet as a tool. The biggest difference between visit selling and traditional deep distribution is that deep distribution is a vertical management tool led by manufacturers, while visit selling is a platform-based management tool with distributors as the main body. Visit-selling software is generally called a SaaS system. Before visit selling, distributors had two inefficient methods. One is vehicle selling, averaging 4-6 orders per day. The other is the "dedicated person and vehicle" required by major brands. A dedicated person ensures focus, but a dedicated vehicle is highly inefficient. This method is essentially unified warehousing without unified distribution within the distributor, so efficiency is naturally low. Visit selling brings three benefits: First, visit efficiency increases, reaching 15-20 orders per day, sometimes higher. Second, distributors can implement unified warehousing and distribution, saving delivery costs. Third, terminal coverage increases, reducing dependence on second-tier distributors. In summary, visit selling is a sales system that increases sales and reduces costs. From my understanding, most excellent distributors in the south have already implemented visit selling, while the north is promoting it. There are two major obstacles: whether there are products with rigid demand, and the non-cooperation of distributor salespeople. Deep distribution shifts to B-end. If visit selling targets individual distributors, then B-end e-commerce should be a shared platform. B-end e-commerce should actually be a collection of three systems: a visit-selling system, a unified warehousing and distribution system, and a B-end payment system. Among these, the easiest to implement is the visit-selling system. Some B-end e-commerce platforms, when used by a single distributor, are essentially reduced to visit-selling systems, just under the name of B-end e-commerce to attract traffic. The visit-selling function of B-end can also be shared by multiple distributors, each visiting their own customers and delivering separately. The more difficult part of B-end e-commerce is unified warehousing and distribution, which saves costs, but requires investment in three-dimensional warehouses. Currently, there is no wave of third-party investment, and it is difficult for distributors to invest jointly, so this is a current challenge. Whether or not to do B-end e-commerce, visit selling is a must. Initially using B-end as a visit-selling system is also a temporary measure. The decline of deep distribution is not because deep distribution is flawed, but mainly because costs are too high and management is too difficult. The internet-based transformation of deep distribution is the visit-selling system and B-end e-commerce, which achieve the goals of deep distribution without increasing costs or management difficulty. Extended Reading:
"Second-tier" Resurgence: Deep Distribution Fails
Text: Liu Chunxiong Case Study Let me share a case. Recently, I visited a relative who is an agent for a well-known brand in a county town. On that day, there were 11 delivery vehicles, but only 40 orders were completed, though they were large orders. The salespeople worked very hard; I saw some return at 10 PM. After returning, an important task was to sort out "promotion cards." There were piles of them because promotions had become routine. When loading the vehicles for daily sales, promotional items sometimes outnumbered products. I was surprised that 11 vehicles only made 40 orders a day. Upon further investigation, I found that if a distributor uses vehicle selling, the average is only 5-6 orders per day. The main work of distributors now, as one of my group friends "Pei Ni Kua Jie" put it, is "exhausting all possible channel methods." What do they rack their brains to do? In fact, almost all work can be summed up in two words: promotion. The result of long-term heavy promotion is: the resurgence of second-tier distributors and the failure of deep distribution. Why are "second-tier" distributors making a comeback? In the past, we often said that "second-tier" distributors are brand killers. They focus on categories rather than brands, using famous brands to attract customers and generic brands to make profits. Therefore, one important role of deep distribution was to break through the barriers of second-tier distributors and reach terminals directly. In the eyes of deep distribution advocates, "second-tier" distributors were opponents, but now they have changed. I believe there are two factors for the resurgence: 01 First, it is the result of tiered promotional policies. With tiered policies, the more you purchase, the greater the policy benefits. Terminals that focus on retail cannot enjoy large tiered policies, especially small terminals that may not even reach the lowest tier and are unwilling to purchase without policy benefits. Second-tier distributors share their tiered policies with small terminals, thus becoming distributors again. 02 Second, the current "second-tier" distributors are not the same as before. The original second-tier distributors were mostly full-time, mainly earning wholesale-retail price differences. There were many generic brands in the market, forming a price combination of famous and generic brands, which overdrew the value of famous brands. Therefore, manufacturers hated them. Now, second-tier distributors operate both wholesale and retail, with retail as the main business and wholesale as a sideline. Also, due to the reduction of generic brands, they no longer overdraft famous brands, no longer disrupt prices, and no longer incur manufacturers' wrath. Moreover, they are welcomed by distributors for their distribution function. From these two perspectives, the resurgence of second-tier distributors is not necessarily a bad thing. Some distributors even reasonably use them to reduce their sales staff. It may be time to change our prejudice against second-tier distributors. Although we no longer have prejudice, because it is the result of long-term tierless promotion, the channel still has problems, especially the decline in terminal stocking rates. Manufacturers spend promotional expenses, but terminal stocking declines. Although the resurgence has some rationality, it may not last long. Deep distribution fails In the field of channel sales, before 2003, the basic approach was "sinking the center of gravity," until a distribution system based on "county agents" was formed. Then deep distribution began, whose essence was to break through the barriers of second-tier distributors and reach terminals directly (including small terminals). After 2008, although there was a period of "small terminal promotion," it was not mainstream. In terms of time, deep distribution has been implemented the longest and has had the greatest impact. If the early deep distribution was to open up channels and achieve terminal stocking, later deep distribution had unclear purposes. In fact, deep distribution later became the norm. As a result, costs increased, but sales contribution was minimal. Because deep distribution became a chicken rib, when industry sales peaked and promotional tiered policies led to the resurgence of second-tier distributors, the failure of deep distribution did not attract marketing attention. It happened quietly. Channels need a new round of deep distribution Let me return to my relative's case. Last year, he was also frustrated by routine promotions. He maintained sales but seemed to lose money. This year, he is doing well because he did one thing: promoting new products and stopping promotions on old products. Without promotions on old products, profits are guaranteed, as consumers buy them anyway. New products have high gross margins, so they naturally need promotional support, which also drives sales growth. This year, his sales are expected to double, and profits will be good. 2013 must be a watershed for Chinese marketing. That year, almost all industries saw sales peak, reaching historical highs. In 2014, sales began to decline, and companies thought it was abnormal. To maintain sales, almost all companies adopted promotional measures, resulting in a "double decline" in sales and profits. In 2015, some companies persisted with the 2014 views and practices, still experiencing "double decline." Others believed the decline was normal and began taking new measures, such as promoting "mainstream replacement" new products. To promote new products, deep distribution becomes valuable again. It is difficult to distribute new products through second-tier distributors, so deep distribution is needed. In addition, new products should use internet tools to build KOLs, which also requires deep distribution as a prerequisite. Low-cost deep distribution In the past, deep distribution worked because there was incremental growth; now it fails because that premise is gone. Some people see deep distribution as "wasteful and exhausting," relying on a human wave strategy with high costs. In the eyes of the post-90s generation, it is too hard and they are unwilling to do it. Now, the new type of deep distribution, I believe, is the visit-selling system, which can achieve deep distribution without being too hard or costly. The primary value of B-end platforms is that they are also visit-selling systems. The emergence of visit-selling systems may again threaten the position of second-tier distributors. Traditional deep distribution may have failed, but a new type of deep distribution has begun. The methods are different, but the goal is the same. -END- The best FMCG distributor learning platform in China Focusing on providing professional, practical, and applicable tutorials for enterprises and distributors Committed to helping Chinese FMCG distributors grow rapidly The most professional and practical knowledge base in the FMCG industry Reply with the red number below to get the corresponding content Reply with number 1 to view the complete knowledge base | 001 Excellent article selection | 002 Distributor market operations | 003 Terminal visit management | 004 Sales supervisor skills | 005 Sales improvement techniques | 006 Channel expansion | 007 Managing distributors | 008 Distributor development | 009 Distributor internal operations management | 010 Team management | 011 Efficient stocking techniques | 012 Sales manager's eighteen skills | 013 KA operation methods and strategies | 014 First lesson for new salespeople | 015 Internet, brand | 016 Distributor B2B transformation | [Long press QR code to follow]