In recent exchanges with distributors, first-half sales generally fell short of expectations, leaving many anxious. Market pressure is also forcing distributors to attempt changes—whether in organizational structure, compensation and performance, business models, or system software... But the process of change is indeed painful. "After adjusting the organizational structure and compensation, we lost three or four salespeople," a distributor friend shared with me a couple of days ago. Some distributors even told me that employees don't support the changes, the business model hasn't turned profitable, and they've begun to waver in their commitment to change. Drawing from discussions with distributors, I'd like to share the problems they encounter when changing themselves and some good solutions, hoping to bring thoughts and inspiration to distributor bosses.

Distributors Should Not Be Held Hostage by Employees In Guizhou, I talked with a distributor who shared his problems: He wants to improve digitalization but the finance department disagrees with changing software; with over 300 orders daily, he needs two clerks to review them, but the clerks disagree with a pay raise to have one person do it; with over 30 million in sales, he's hiring more people but efficiency is declining, and he wants to adjust compensation and performance, but the sales team disagrees. Why do they dare not adjust when facing employee resistance? Distributors worry that if staff becomes unstable, the business can't operate normally in the short term, causing losses. This leads to distributors being somewhat held hostage by employees. During transformation, short-term employee discomfort is normal. For those who can't adapt, distributors should be resolute: If ability is insufficient, you can spend time training, but if thinking is not aligned, resolutely cut them. Employees focus on immediate interests, but distributors must look at long-term business development. Distributor reform is about balancing the two, but it must not be compromise.

Sales Compensation Is Not Given by the Company It's Given by the Market A distributor asked me what to do if salespeople are lazy and unwilling to do more work. I asked back, how much do salespeople earn each month? The distributor said about three to four thousand yuan. With a salary of three to four thousand, a salesperson can get the same or even more by switching to another trading company or job. With no attractive salary, why would salespeople do more? Many distributors say it's hard to recruit and retain people; essentially, the compensation isn't enough. Recently, Zhang Zong of Xiangyang Kaitai shared in the Tower Alliance community: When sales compensation is 50% higher than local peers (using Xiangyang as an example), salespeople won't leave even if you try to drive them away. Distributors only don't want to share profits, not that they don't know how. To stimulate wolf-like spirit, you must give more meat. Salespeople's wages are essentially not given by the distributor but by the market; the extra money must come from market growth. Let me share a regional big distributor's sales compensation structure: Base salary (no responsibility) + sales commission + gross profit bonus + monthly target bonus + quarterly target bonus + annual target bonus + PK bonus. All salespeople's goals, actions, and processes are clearly priced, like playing a game to level up; each well-done task brings corresponding income. How much a salesperson earns depends on how much they sell and how much profit they generate. This way, salespeople's income is fully tied to company performance; the more they earn, the more the company earns. At the same time, salespeople's abilities improve invisibly, with both sales and business awareness. All business is based on people. As a boss, cultivate employees' business awareness; the stronger the employees, the higher their income, and the better the company's revenue and profit. Don't be stingy with sharing profits. A good sales team, like channels, is a moat.

It's Hard to Eliminate Secondary Wholesalers But Reduce Their Share Secondary wholesalers are a special role in the FMCG industry; they buy from upstream or distributors and sell to downstream terminal retail stores. They are not controlled by manufacturers and are big brand killers; any best-selling big single product's price is disrupted by them. So secondary wholesalers have always been suppressed and flattened by FMCG manufacturers. Basically, every channel reform brings up the "secondary wholesalers will die" argument. Distributors both hate secondary wholesalers but can't shake them off. When distributors need to complete manufacturers' stocking tasks, secondary wholesalers can help quickly digest tasks and recover funds, but the downside is they have no loyalty, only recognize price and policies, and often engage in cross-region selling. From the small store's perspective, why are they willing to buy from secondary wholesalers? Small stores' demands: complete goods, small order quantities, good prices, fast delivery. Secondary wholesalers are undoubtedly a good option; they don't do distribution, source from the market, have enough variety, cover a small area, and respond quickly. In exchanges with distributor friends, everyone generally knows that a business dependent on secondary wholesalers is unhealthy. But the dilemma is that even if you don't supply them, they can still get goods from the market, and in the end, distributors suffer. It's hard for distributors to completely eliminate secondary wholesalers, but what they can do is reduce their share in the business as much as possible. Only when terminals are in your own hands do you have a moat and voice.

It's Not That You Can't Do Small and Medium Stores It's That You Can't Manage Them Why do many distributors not want to do small and medium circulation stores? First is the management issue. Large stores have high sales and few in number, making management relatively simple; with dozens of stores, distributors can manage with their energy and time. Small and medium stores have low output per store, scattered locations, many in number, and demand low prices, making management complex. Frontline salespeople may exploit loopholes, embezzle accounts, and expenses. Without a complete management, inspection, and institutional system, it's easy to be taken advantage of, and the cost is too high. So, for small and medium stores, organizational and management systems need to be more complete and refined. Second is the issue of sales volume and price. Many distributors say small and medium stores don't have high sales and demand low prices, so it's not profitable and meaningless. There are two logics here.

First, is the store valuable—can it sell goods? If it can't sell, supplying it is meaningless.

Second, it can sell, but demands low prices. Stores demand low prices mainly on big single products, essentially big brands at low prices. Many big brands have only 10 points of profit; relying on these brands to make money is basically impossible. It's better to give low prices directly to stores to gain the boss's trust, exchange "conditions for conditions" to get display and shelf resources, and use second- or third-tier brands or white labels to earn profits. If small stores source outside, there's no guarantee; if they can't sell, they lose money. At the same price, small stores still prefer to buy from distributors. Don't think about making money from big brands; instead, make money from the product mix.

Distribution Is Important But Sell-Through Is More Important As mentioned in previous articles by New Distribution, distributors need two core capabilities: distribution capability and sell-through capability. Distribution capability means deep coverage of regional retail outlets, not distribution through wholesale. Clearly identify which stores contribute sales and which contribute profit, and accurately distribute products to suitable stores. Over the past decade or more, under the influence of deep distribution by FMCG manufacturers, many distributors have gradually built their distribution capabilities. Sell-through capability, however, is what many distributors truly lack. In times of supply shortage, goods are scarce resources; distributors only need to place goods on shelves, do displays and visual merchandising, and sell-through can be accomplished well. But now, the market is oversupplied; stores don't lack goods, and consumers don't lack choices. Placing goods on shelves is only the first step; you also need to help stores guide consumers to buy your products. This is the sell-through capability distributors need. Developing sell-through capability as soon as possible is an urgent matter for distributors. On one hand, the trend of store chains is increasingly obvious; powerful chain systems are accelerating the removal of distributors, and some are even expanding to supply terminals outside their systems. On the other hand, some mature B2B platforms and convenience chain systems are starting to renovate mom-and-pop store fronts, both outputting product assortments and business strategies to empower stores. This means if distributors don't quickly develop the ability to help terminals sell goods and bind quality stores, the business available in the future will shrink.

Having Digitalization Is Not the Goal Using Digital Well Is Key Distributors now generally value digitalization and are willing to spend money on it, buying software and systems. But often, after spending money and installing full software suites, business doesn't grow much. The reason is simple: some distributors use software as a simple inventory tool, and some even use it as a surveillance tool to monitor salespeople. Installing software gives a digital "shell" but doesn't truly use digitalization well. The essence of using digital tools for distributors is to improve efficiency. How to achieve efficiency? First, optimize business processes through software, simplifying tedious work with tools, improving fulfillment efficiency and accuracy. For example, order management, financial management, product management, etc. Second, obtain systematic data through software to help distributors and employees make better decisions. For example, business data, store data, etc., using data to assist decision-making, making decisions more efficient. Having digital tools is not the goal; the real goal is to use them well—whether they can bring sales improvement and cost control.

B2B Is Not a Universal Solution Recently, in exchanges with many distributors, everyone is quite positive about doing regional B2B, and a considerable number have already started trying. Let me emphasize: doing B2B is indeed a good business for distributors, but you must have a clear understanding that not all distributors are suitable for B2B. For distributors, doing B2B is not a transformation but a career change. In agency business, distributors serve brands, doing localized operations and coverage, helping brand owners do marketing; in B2B, distributors serve stores, helping them with product selection, operations, and services. The underlying logic is completely different. From single-category, full-scenario, full-channel to multi-category, single-channel operations, the difficulty coefficient of cross-category operations increases exponentially. Distributors' experience in agency often cannot be applied to B2B. So, never treat B2B as a universal solution; before doing B2B, be prepared for a career change and a loss period.

The Era of Shrinking Volume Is Cruel and Cold But Also a Rare Opportunity I've discussed with some distributor friends: after the market enters shrinking volume, how much survival space can distributors have in the future? Distributors will enter a knockout process: the strong get stronger, the weak are eliminated. In exchanges with distributors, we found that some regional big distributors are not anxious; instead, they believe they still have growth opportunities. Why are there growth opportunities? When the market shrinks, the business available to distributors inevitably decreases, but it also inevitably leads to changes in the trade landscape. Most distributors without moats will be eliminated by the market, and their market becomes the source of growth for big distributors. Marketing expert Zhang Xuejun shared a sentence on his Moments: The era of shrinking volume is an era of powerful clearing; the vast majority feel cruel and cold, but a very few are overjoyed because a rare big opportunity has come. The important thing is not to defeat opponents but to continuously and firmly strengthen yourself. For distributors, it's the same.

From August 20-22, 2024, the "2024 6th China FMCG Conference" with the theme "Crossing the Era of Shrinking Volume" will be grandly held in Shanghai. Concurrently, the "3rd China FMCG Distributor Conference" will also be held, where more than ten regional benchmark distributors will deeply discuss the following topics: Survival Guide for Distributors in the Era of Shrinking Volume / 4 Evolution Directions for Distributors / B2B Transformation Practical Cases / Application and Implementation of Digital Tools / Efficient Operation Experience in Product Management. Interested friends are welcome to scan the QR code to inquire about conference details!