Friendly reminder: Click the blue text above, "FMCG Distributor Professional Consulting," to learn more about marketing and distributor internal management.
As industry competition intensifies, distributors' operations are becoming increasingly difficult. Operating costs are rising rapidly, and they face various expenses every day. Employee management is more challenging; recruiting is not easy, and post-90s employees are even more unpredictable, with turnover rates soaring. Market prices are getting lower, and consumers have too many choices, leading to a red ocean of price competition. Manufacturer support and rebates are declining sharply, and support from manufacturers is not what it used to be. Sales are not increasing, volumes are hard to grow or even declining, profits are as thin as paper or even negative. Online sales are increasingly threatening physical channels, and the e-commerce boom directly impacts survival space. Distributors are facing an unprecedented and deteriorating environment.
When the severe situation approaches, what should distributors do? Close immediately? That would halt or even destroy over a decade of accumulation, and the danger of permanent unemployment is unimaginable. Switch industries right away? The industry resources built up through hard work would be wasted, and the fate in a new industry is unknown. Continue to struggle on? Investment risks are greater, and it's unclear how long they can sustain, but it could be a bottomless pit of losing everything. Wait to be merged by competitors? Watching your own business fruits be taken over by rivals, losing your domain, and feeling deeply unwilling...
For years, the author has focused on distribution channel research. The era of physical-labor-based distributors is gradually ending, and they are being eliminated in struggle. The era of intellectual-based distributors is just beginning, embracing opportunities with wisdom! At this critical moment, how can distributors break through the status quo and stand out in the white-hot competition?
The key is to start by changing the mindset when facing competition. Abnormal mindsets lead to failure before even entering the competition, and many distributors are not even aware of this, still wandering in misunderstandings.
One dangerous mindset distributors have when facing competition: Immediately discounting or reducing prices when products encounter competition is equivalent to suicide.
What is discounting or reducing prices? It is a suicidal act. Most distributors allow salespeople to offer various discounts to boost order volumes. For a distributor with a gross margin of only 10% and a net profit margin of 2%, an additional 2% discount would force the gross margin to drop from 10% to 8%, and the net profit margin from 2% to 0, wiping out net profit. Therefore, for distributors, discounting is a suicidal act. For example, a liquor distributor ran a discount promotion during the off-season, attracting many customers but with almost no profit. In fact, many businesses like this are everywhere; they engage in price wars during major holidays or off-seasons. Although sales volumes increase, for a product priced at several thousand yuan, it is simply suicidal. However, if they don't discount, customers who were already negotiated might choose another supplier due to price issues, hurting both the business and the customer. In fact, discount promotions are not suitable for long-term implementation, but short-term can have a good effect. Facing such market conditions, is low price the only way to win?
Another dangerous mindset distributors have when facing competition: Choosing to switch industries when the industry faces competition, you immediately lose all the resources accumulated in the past.
What does switching industries mean? It means that the industry resources accumulated over the past few years or even decades have no value. Product knowledge, sales networks, customer resources, regional brands—these capitals built with time and effort instantly vanish. Rebuilding such resources is extremely difficult, almost impossible in a different industry.
Third dangerous mindset distributors have when facing competition: Not taking the initiative to attack but relying on manufacturers, you immediately lose the opportunity to improve your own capabilities.
Distributors often exhibit this phenomenon: relying on manufacturers for promotions, training, market development, advertising, subsidies... When reliance becomes a habit, they lose the ability to be independent. Distributors should not rely on manufacturers to solve problems because you cannot guarantee that manufacturers will actually solve them!
Fourth dangerous mindset distributors have when facing competition: Not actively learning to find solutions to problems, you will be eliminated by competition.
Jack Welch said: You can refuse to learn, but your competitors will not! Soros said: Learning is expensive, but not learning is more expensive! This actually illustrates the value of learning; only those who learn can appreciate its value. Is competition a danger or an opportunity for distributors? The answer is certain: competition is definitely a danger for the weak, but for the strong, it is a golden opportunity! It is the best chance to defeat competitors. As mentioned above, the arrival of competition signals the elimination of physical-labor-based distributors and the beginning of a new era for intellectual-based distributors! Product and price competition belong to physical competition, while service and brand competition belong to intellectual competition. When market price competition is fierce, it is the turning point from physical to intellectual competition. Once the turning point is reached, the number of distributors will decline rapidly, leading to a domino effect. In a competitive market, only by ultimately becoming a brand can sustained profitability be achieved. Distributors who master sustainable profit models will have a larger, more focused, and longer-lasting market with less competition and higher profits!
Distributors, do you have any of the above four dangerous mindsets? Changing your mindset may not be easy, but it is the first step to facing competition. Only by taking the first step can you transform into a new type of distributor and embark on the path to sustained profitability.
Like this article? Feel free to click the top right corner to share it to your Moments.
About us: WeChat ID: FMCG Distributor Professional Consulting Management Account Introduction: 20 years of FMCG distributor operation and management experience, specializing in distributor internal management: We understand distributors better than manufacturers, and we understand internal management better than distributors. Senior marketing experts help your business grow.
Learning and exchange QQ groups:
Group 1: 344257092 (full) Group 2: 231512457 Click "Read the original text" below to enter our micro-community for interactive communication and questions.