Many company executives understand: in today's market where products are largely oversupplied and competition is fierce, those who control distribution channels may win the market. In China, the role of distribution channels has never been more emphasized than now. Distributors are a crucial part of the channel. Opening any well-known financial newspaper or magazine, one sees various sizes of franchise advertisements. Companies use every means to attract distributors. From strong corporate strength, R&D capabilities, to comprehensive marketing support from marketing experts, to promises of strict market protection mechanisms, prevention of channel stuffing, generous year-end rebates, and complete return and exchange policies—the list goes on. In short, as long as distributors agree to sell their products, they claim it's a sure win with no losses, and they can just wait to become millionaires! These offers are indeed generous, making many distributors' hearts flutter. But be tempted and act slowly. There's no free lunch in the world; doing business is not just sitting and collecting money. Think thrice before acting. Distributors should pay attention to the following when choosing a 'boss'.
1. Actually Investigate the Company's True Financial Strength Often, some companies' franchise advertisements and materials claim: "XX Company is a high-tech subsidiary of XX Group, which has assets of tens of billions, and many nationally famous companies are its subsidiaries." Such companies seem to be backed by a big tree, and if distributors can join their system, they can enjoy the shade. But distributors should not blindly believe in so-called wealthy and powerful large companies. The parent company may have money, but it is a diversified enterprise group with large family and large expenses. How much money can actually be allocated to the subsidiary that directly deals with distributors? What distributors truly seek is the "big money" that can be invested in the products they intend to distribute and related business. Of course, as outsiders, distributors may not need to know the specific financial details at first, but they can get a rough idea by looking at the company's advertising expenditure, registered capital, and other distributors and customers it deals with.
2. Whether the Product Really Has a Market and Conflicts with Existing Products Although companies will boast about their products to the skies, the market is quite ruthless. Even if a company believes its product has reached a high level and is indeed a high-tech product, how suitable is it? Does it meet and satisfy consumers' real potential and actual needs? The extent to which consumers accept the product's price-performance ratio indicates the potential market opportunity. Of course, this is closely related to advertising, pricing, channel management, and other combined efforts. However, product quality and positioning accuracy are the foundation for all other marketing efforts. This requires distributors to have rich knowledge about the products, which is also the so-called "don't do what you don't know." Additionally, distributors should carefully weigh their existing product line against the company's product policies to see if there is a conflict. Some companies may want distributors to sell only their products and not competitive brands. However, many distributors, acting as "spokespersons" for consumers, distribute multiple similar best-selling products, which is not only a consumer purchase need but also the foundation of distributor profitability. In cases where distributors must choose one, they should weigh whether giving up the original product to introduce a new one is worth it. This involves evaluating the product's market prospects and expectations of the company's advertising, financial, and other capabilities. Of course, if the new product to be taken on has a mutually promotional relationship with existing products, it should be prioritized.
3. Whether the Company's Advertising Is Effective Whether a company spends big money on advertising has become an important basis for distributors to choose a partner, but distributors must pay serious attention to advertising effectiveness just like the company. Nowadays, advertisements for products, companies, and services are everywhere, filling CCTV, satellite TV, newspapers, magazines, and more. Advertising costs are astonishingly high. In an environment where audiences reject ads and ad message reach is declining, the effect of a company spending tens of millions on national advertising versus hundreds of thousands on city advertising is completely different. So distributors should not only look at how much money the company is willing to spend on advertising, but also how that money is used; more importantly, they should look at the effectiveness of the ad creatives—whether they attract the audience; the media mix—whether it can create a dense bombardment and ultimately carve out a clear path for the distributed product in the sea of advertising.
4. Detailed Examination of the Model Market To increase the chances of success, reduce risks, and make it easier to persuade distributors, companies often concentrate their marketing efforts in one region to create a successful model market. Distributors should not be impulsive when seeing the model market's distributor's warehouse bustling with pickups. They should view the model market calmly. First, the model market is the result of the company's intensive cultivation. Will the company invest the same amount of energy, manpower, and money in other regions? Second, to what extent can the successful experience of the model market be replicated in other markets, especially since different regions (particularly in a country like China) have different environments? Third, can the problems that arise in the model market be effectively overcome in the distributor's own territory? If, after considering these points, distributors are still confident they can do as well as or better than the model market, then boldly take it on. Additionally, distributors should be cautious of companies that have had successful products before and are now launching new products, trying to ride on the coattails of the original product's success. The success of previous products proves they have some successful experience, but it often leads to the new product heavily copying the original approach. This is due to reducing marketing costs and habitual thinking, which is very harmful in a rapidly changing market. Distributors who pay attention to the industry market should intuitively know whether the old methods will work and make their own choices.
5. Consistency Between the Distributor's Market Scope and the Company's Expected Sales Scope The market network a distributor possesses is the foundation of its survival and the prerequisite for bargaining with the company. When choosing a company, distributors should have a clear understanding of their market coverage. This market scope includes the geographical area covered by the network and the stable customer base the distributor has. If the company's expected sales scope in the region differs greatly from the distributor's market scope—that is, if the distributor cannot effectively cover the market areas the company hopes to cover—the company may consider adding more distributors in the region to better penetrate and refine the market and counter competitors. So distributors should fully assess their market scope from the beginning, including future network growth, to negotiate regional distribution rights and protections upfront, avoiding unnecessary channel conflicts such as cross-region selling and transshipment.
6. Whether There Is a Stable Price System Some companies, to attract new distributors, may promise: "We will offer you a lower supply price than other distributors." If you inadvertently receive such a promise, be wary. Because the lower purchase price you get will inevitably be reflected in lower wholesale prices downstream, and correspondingly, retail prices can be reduced. When small and medium retailers in neighboring regions are attracted by the lower prices and come to your area to purchase, you may unintentionally be accused of cross-region selling, leading to complaints, accusations, or even retaliation from neighboring distributors. Similarly, when other distributors get more favorable pricing conditions, they may also impact your distribution area. A stable price system is the guarantee of a win-win situation for both the company and distributors. A stable price system includes reasonable profit margins between ex-factory price, wholesale price, and retail price, ensuring basic consistency in final retail prices. Special attention should be paid to whether the company gives preferential treatment to retail giants or group purchase customers who deal directly with the factory, and whether price differences between regions will impact the price system. How does the company balance these aspects? Are these measures effective in ensuring the stability of the price system? A company with an unreasonable price system design and poor execution can cause great harm to its channel system.
7. Whether the Company Has Effective Measures to Prevent Cross-Region Selling Cross-region selling is the most common and troublesome issue for distributors, so they should pay close attention to the company's promises and measures to prevent it. First, check whether the distribution contract includes a "no cross-region sales" clause. Second, see if the manufacturer's general distribution price is a CIF price, with all in-transit freight borne by the factory, to ensure all general distributors have the same price benchmark. Third, see if there is a stable price system. Fourth, see if year-end rebates are linked to whether distributors engage in cross-region selling. Fifth, see if there are text or barcode identification systems, with different trademarks (at a subtle level) or different barcode labels for different regions, providing evidence for monitoring cross-region selling. Sixth, see if there is strict freight monitoring to ensure goods are basically shipped to designated areas, creating obstacles for cross-region selling. Seventh, see if the company has dedicated personnel to handle cross-region selling incidents and whether they are handled successfully.
8. The Company's Financial Policies Companies naturally hope distributors will pay in advance, even if it means giving more discounts. Distributors, on the other hand, hope the company will let them sell on consignment. In this game of capital occupation, the stronger party has the say. Distributors should carefully understand the company's settlement methods, rebate levels, weigh their own financial situation, expected sales volume, and choose a reasonable settlement method. Also, pay attention to how the company allows distributors to use advertising and promotional funds, and how distributors can reasonably utilize the company's financial benefits to maximize profits.
9. The Company's Market Service Status Being a distributor for well-known brands is often less troublesome than for unknown products from small and medium enterprises. Not only because well-known brands sell well, but also because they provide many market service supports to distributors, such as regularly sending personnel to work with distributors to collect and research market and consumer conditions, formulate new promotional plans to increase sales, promptly handle and coordinate conflicts among distributors, provide more consumer information, help distributors develop markets and establish new outlets, and help train distributor staff. The company's support for distributors to grow continuously is an aspect that distributors aspiring to grow should consider.
10. The Company's Channel Structure Distinguish whether the company implements a deep (i.e., traditional) channel structure of manufacturer → distributor → retailer → user, or manufacturer → distributor → retailer → user, or even manufacturer → retailer → user and direct sales forms. The company's different channel designs and combinations determine its price system and the degree of attention and support it gives to distributors. If the company focuses on developing the latter two sales channels, then distributors will only be transitional tools in the company's channel, indicating that the company wants to control the terminal and strictly enforce the price system. Only by understanding this design can distributors position themselves correctly in the short and medium-to-long term and choose a good retreat.
11. Identification with the Company's Corporate Culture and Management Style Although distributors prioritize profit, before cooperation, they should try to deeply understand the company's business philosophy and management principles to see if they can accept them, or at least not dislike them. Otherwise, once the contract is signed, if the distributor disagrees with the company's measures and ignores them, or even pays lip service, and the distributor's suggestions are shelved, then the manufacturer and distributor will not cooperate, conflicts are inevitable, and eventually they will part ways. For a pleasant cooperation in the future, distributors should deeply "collide" with the corporate culture.
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