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Old Chen has recently been losing patience with manufacturer sales reps. Though he doesn't dare show his anger, he finds himself avoiding them at every turn. The companies want him to distribute more and more new products, and in recent years he has accepted every new product that came his way—yet his overall profits haven't grown! What's going on? The sales reps always push new products with various reasons: high investment, favorable competition, big expansion potential, and high profit returns. You can't easily refute them, but in the end, things often don't turn out as expected!

Old Chen feels it's not his fault: his network is established, and costs haven't risen significantly. Excluding factors like capital, transportation, personnel, and network, he thinks the main problem lies with the manufacturers' products!

Old Chen once heard about the product life cycle. (I'm getting old too, past my prime—in the decline phase of my life cycle!) Are the products I distribute also in the decline phase or the non-profit phase—the "useless phase"?

Maybe Old Chen has a point? Let's look at Old Chen's product lines and analyze them:

1. Beverages:

Facts: Old Chen used to distribute several well-known international beverage brands. While these never made him rich, they moved quickly enough to cover costs and leave a small surplus. This peak season, he just took on a new product from a startup company (which everyone thinks will sell like hotcakes because ads are bombarding consumers' senses and eyes!).

Thoughts: Old Chen hopes the big brands will share the costs, while the new product will boost profits.

Analysis: The big brands only support costs and share some expenses; they aren't a reliable source of profit. In the beverage industry, relying on one or two big brands to support the market network is fine, but these products are all the same type—there's no need to distribute similar products from several manufacturers simultaneously. One or two with good relationships is enough! Also, since they're not in the growth phase, they'll never generate more profit. Moreover, because these are large companies, they demand ever-higher sales targets, and the investment and expected profits get squeezed by competitors trying to hit their own targets, potentially driving profits even lower.

Additionally, large companies require distributors to operate more formally, which increases distribution costs and subtly reduces profits.

As for the new product, it faced immediate competition from similar companies upon launch. It never went through growth or maturity phases and is already in decline. Profits haven't materialized, but all the investment is gone!

New beverage products are constantly emerging, but few truly take off, have long life cycles, or reach growth and maturity phases. Recently, a product that was hot last year is already struggling this year. Distributors should understand the overall trends in the beverage industry: these products have short life cycles and seasonal peaks and troughs. Don't stock too much at once (manufacturers always run promotions, so you don't need to worry about missing out on promotions if you run out). Before the off-season, clear out inventory early to avoid losses.

2. Beer:

Facts: Old Chen distributes full product lines from three international brand companies (over a dozen SKUs) and glass-bottled products from two domestic brands (also over a dozen SKUs).

Thoughts: For international brands, the old products stabilize the market, while new products should bring more profit. For domestic brands, new products help penetrate the market, giving an edge over competitors and better relations with the manufacturers.

Analysis: Let's start with international brands. They rarely launch new products, and when they do, distributors often have to pay upfront costs and manpower for distribution, with reimbursement later. Also, these companies often set sales targets too high before launching new products. Relying solely on distributors to promote new products is a mistake, and market results often fall short. Finally, because distributors' sales volumes are low, the subsidies they receive are very limited! So, new products get promoted, but profits might actually decrease! Although international brand products have longer life cycles, with some in growth or maturity phases, distributors can't afford the hassle!

The domestic beer market is volatile and unpredictable. A product that sells well today might be forced out tomorrow, making it difficult for distributors. One company just started promoting a new product, but then it's acquired by another, and expenses tighten! Distributors don't know if another big company will come and acquire again, causing chaos. So, the investment period for beer is getting longer—when will it end? Also, domestic competition is fierce, and promoting new products is often a stopgap measure. If manufacturers aren't serious, should distributors take the risk?

Beer companies' life cycles are fluctuating curves, let alone their products! International brands take a long time to develop new products, and promotions are sometimes sporadic and unpredictable. They rely on old products, which fortunately face less competition. So, strengthen the old products; for new ones, work closely with the manufacturer, or you might "fall into a pit." As for domestic brands, new products are often launched defensively in response to competition, and few succeed. Many die prematurely without a life cycle. It's better to stick with a few mature varieties and avoid new ones!

3. Baijiu (Chinese spirits):

Facts: Baijiu was originally a sideline for Old Chen. He buys from various general distributors and resells.

Thoughts: Baijiu has high margins, and when general distributors have new products, Old Chen rushes to stock them, hoping to sell early and profit.

Analysis: Big brands are monopolized by manufacturers through store buyouts, leaving little room for manufacturer distribution. New brands, despite touted high profits, are often unprofitable. They tie up capital, and the sales rep comes once and disappears, leaving a pile of promised receipts with no one to reimburse them! If expenses and investments can't be claimed, it's a big loss! Many new baijiu products have life cycles that can be described as "a flash in the pan." So, it's better for distributors to source from other first-tier agents rather than directly from manufacturers.

Summary: FMCG distributors often sell beer, beverages, baijiu, and snacks together. They tend to "swarm" onto new products because they believe new products bring profit, and the more they take on, the less impact on costs and expenses, while improving their operational capabilities. But they rarely consider that, besides having a rational product mix, they need to pay attention to and anticipate the life cycle of new products. Are all products going to have a normal life cycle curve? Nowadays, new products are launched without rational market research and analysis. Many are "premature babies"—undernourished or weak—and die midway. Such products are endless and have hurt many distributors!

So, although Old Chen distributes many products, his existing ones are reaching the "profit depletion phase," on the edge of decline. New products either get eliminated before reaching the profit harvest phase or are "snail" products with high upfront investment and slow returns. Hence, more products, but profits don't grow!

How to solve this? Can we give Old Chen a "golden eye" to analyze and retain products at their profit peak? Product selection and retention is a huge project and can't be done arbitrarily. But we offer the following for reference:

1. Product mix matters: The product portfolio should consist of "brand-name products + profit products + coverage products," with no more than two products in each category. This is a product line system, and it should be planned in advance, even more than life cycle analysis.

2. Prefer mature products from established companies: Even if new products appear, start by distributing through other wholesale channels to gauge market reaction before deciding to take them on. Don't be the "first to eat the crab." If you think early entry gives you an advantage, discuss thoroughly with downstream customers before ordering.

3. Don't put all eggs in one basket: Cultivate products with potential. How to spot them? Don't just look at current market conditions; gather information from multiple sources and visit different market regions. Avoid obscure products, but actively seek "dark horse" products.

4. Shorten the investment period or push investment time and resources back to the manufacturer: Otherwise, avoid such products (because if the manufacturer isn't responsible for product promotion, they aren't responsible for normal growth). The era of distributors single-handedly nurturing and promoting new products is over. Involve the manufacturer more in new product distribution and seek their guidance.

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