Hello friends. I'm Yuan Lai from New Distribution. Recently, I met with several distributor friends to discuss current business difficulties and ways to break through. As we talked, and combined with past exchanges with other distributor bosses, I observed one thing: Many distributor bosses spend their time and energy on "brand owners" rather than "store customers." For example, completing brand targets, implementing brand activities, distributing to more outlets, etc. Of course, if you represent a brand, paying attention to these indicators and actions is understandable. But for a distributor boss, as an independent business unit, should the focus of your operations be on whichever brand has the highest sales volume? Distributors' Operational Inertia: Focus on Big Channels, Focus on Big Brands I have briefly summarized the business structure of current mainstream distributors. Here I want to emphasize again that this is the general business structure of mainstream distributors, not all of them. This is the proportion of business in terms of channel structure. Looking at channels alone doesn't tell the whole story, because channels with large category capacity naturally require attention. But from another perspective, look at the performance in brand structure. I roughly calculated that for current mainstream distributors, the TOP3 brands account for more than 50% of sales. Even for distributors with annual sales over 100 million yuan, representing more than 20-30 brands, the TOP3 brands still account for more than 50%. Such a business can basically be described in one sentence: Focus on big channels, focus on big brands. I'm not saying there's a problem with this kind of business; big ponds raise big fish, that's definitely not wrong. But every distributor boss should think deeply: In the business of big channels corresponding to big brands, in daily operations, is it you who takes the initiative, or are some core brands pushing you from behind? In the end, you'll find that often it's not that we distributors want to do business this way, but that certain brands require us to do so. Distribution coverage, shelf positions, display stacks, promotional schedules, in-store promotions, and a series of specific actions. Only by doing these can we get fees and rebates. We get exclusive agency resources for brands, and supermarkets seem to offer gross margins of 10-20%, but when you factor in the investment in special prices for supermarket stores, you find that sales are lively but not profitable. Additionally, with gross margins of 3-5 points, letting wholesalers do the work earns you money for capital advances and warehousing. In the end, the gross profit from price differences is directly negative, and the final net profit of one or two points relies entirely on quarterly and annual rebates. Maybe an audit comes, deducts some, and you've worked for nothing! Upstream Brands Are the Business Carrier Downstream Stores Are the Bread-and-Butter Customers In the past decade or more, due to demographic and economic dividends, store expansion dividends, and product demand dividends, brand owners led us to growth all the way. But this year, we see that natural growth dividends are almost gone. At this time, we should calm down and reflect: Who is our real customer? Upstream brands are the bread-and-butter customers, downstream stores are the business carrier. Upstream brands are the business carrier, downstream stores are the bread-and-butter customers. These two sentences are worth deep thought for every distributor. Maybe in your cognition, downstream stores are the company's bread-and-butter customers, but what about your daily operational actions? Who is leading and setting our frontline market actions? I remember visiting Mr. Jia of Jintong Food in Fengxian, Xuzhou (doing over 100 million yuan in a county town of 800,000 people). He told me his business philosophy: "In Jintong Food's brand agency, I absolutely do not allow any brand to exceed 25% of my total business. Dealing with brands without bargaining power is unequal." At this point, I want to emphasize that brands are not unimportant. Brands are very important; they are the carrier of business. Without agency for first-line brands, there can be no basic business, and supermarkets and stores cannot have sustained cooperation with us. But brand agency is not the guide for our daily operational behavior. Brand agency is the starting point, the beginning, while store building is the process, the continuous work. Brand agency is 1, but the size and quality of the business, the zeros behind it come from your daily, incremental service to stores. When it comes to store terminals, we extend further: what distributors need more is shelf space resources (traffic), but stores cannot sell only one or two brands on 12 shelves. Therefore, what we need to fight for is the shelf space resources of this category. Combined with store needs, distributors should provide more product combinations, brand combinations, and category combinations. Although stores don't want you to be the sole supplier for 100% of the category, can you achieve multi-category supply? If not, can you achieve single-category supply? If you can't achieve 100% in a single category, can you achieve 50% supply within that category? Based on the shelf space resources I've secured, then combine brands and SKUs. Fully consider product popularity, category price bands, gross margin levels, future cultivation value, and brand investment to design the number of facings, facing positions, special promotions, etc. The logical point for distributors' daily operational thinking is: Channel → Store → Shelf → Facing → Brand. Brands & SKUs are the result carriers for monetization, not the process of operational thinking and actions. This is what I want to share with all distributor bosses. Many distributors have been in business for 10-20 years, and it's because they represented one or some first-line brands that they built their business. It is precisely because of the influence and dominance of these brands that distributors have lost their thinking about stores, categories, and shelves. Two suggestions for distributor bosses:
First, spend time studying stores and categories, not one or a few brands.
Second, brands are important but by no means the foundation of business; deep cultivation of stores is. In the past, we always emphasized that the core competitiveness of distributors is not what brand resources you represent, nor whether you can shoulder the tasks set by brands. Brand agency is important, but it is only the carrier to achieve your business goals. Today you do brand A and complete sales; if brand A stops you, you can still complete tasks with brand B. The reason behind this is that you control the downstream channel outlets. The ability to distribute and move products based on stores is the true core competitiveness of distributors. Achieving factory tasks is just the final win-win result, not the core capability and action in the process. In Conclusion Distributors have experienced growth over the past decade or more due to demographic and economic dividends, store expansion dividends, and product demand dividends. With people, vehicles, and products, you could make money. But now, with the diversification and fragmentation of retail formats, more and more competition, this has led to the continuous dilution or even substitution of distributors' local value. Low-price impacts, manufacturer direct control, business diversion have become increasingly common. With the differentiation of retail channels and competition for existing demand, the distributor business has entered an era of meager profits. In daily operations, if you're not careful, you don't make money and do fake business. Can the business still be done, and where should it go? Many distributor bosses respond: Confused! We believe that in the current environment, in 2024 and for a long time to come, the work focus for distributors is: Survive, outcompete peers; go out, expand the survival radius. When facing business confusion, seeking answers internally often doesn't yield answers and instead leads to more involution; seeking externally, looking at the thinking and practices of more excellent large distributors, may bring you different inspiration and thinking. From March 14-16, 2024, during the Spring Sugar Fair, the Second China FMCG Distributor Conference, organized by "New Distribution" in conjunction with Zhoupu Data, will be held in Chengdu. At that time, we will invite 16 benchmark distributor bosses from across the country and related industry executives to share their latest thinking on distributor business. We hope to provide some direction and set up a lighthouse for the distributor community in the face of strong changes today, at least ensuring that business direction is not blurred or confused! The Second China FMCG Distributor Conference is not only a grand event of knowledge, cases, and methods, but also a conference that leads the future development of distributor business!