---
title: "Distributors Face 'Internal and External Troubles' – Who Can Succeed Against the Odds?"
description: "Distributors today face a dramatically changed business environment, with most caught in 'internal and external troubles' that make survival difficult. This article outlines the pressures from manufacturers, competitors, terminals, internal operations, and their own limitations, and then identifies the strategies and capabilities needed for distributors to achieve a successful turnaround."
author: "戈军珍"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-03-17"
language: "en"
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# Distributors Face 'Internal and External Troubles' – Who Can Succeed Against the Odds?

> Distributors today face a dramatically changed business environment, with most caught in 'internal and external troubles' that make survival difficult. This article outlines the pressures from manufacturers, competitors, terminals, internal operations, and their own limitations, and then identifies the strategies and capabilities needed for distributors to achieve a successful turnaround.

Nowadays, the business environment facing distributors has undergone earth-shaking changes. To be realistic, most distributors are currently mired in "internal and external troubles," and their situation is very difficult.
**"Internal and External Troubles" – Hard Times for Distributors!**
**1F Pressures from Manufacturers: Half Joy, Half Sorrow**
**Task Pressure.** Manufacturers all set tasks for distributors. Let me give you an example: a certain company requires its cooperative distributors to achieve an annual (sales) growth rate of no less than 30%; if it falls below 30%, the company will drop the distributor. Many distributors are unwilling, but even if unwilling, they must comply with the company's demands. This is the way of powerful companies.
**Capital Pressure.** The biggest issue with capital pressure now is that manufacturers and distributors transact in cash, while distributors and terminal customers transact on credit, and wholesalers and second-tier distributors also transact on credit. This creates trouble – many of our distributors are essentially "loan shark companies," nothing more.
**Burning Bridges.** What does "burning bridges" mean? After a distributor has developed the market for a manufacturer, the manufacturer's sales staff says, "We're not playing with you anymore," because they've found something better. This is very infuriating. Such manufacturers abound in our industry, so everyone must be on guard.
**Channel Downward Extension.** For wholesalers, you'll find that the pressure they face also includes internal management pressure – second-tier distributors rebelling. What does "second-tier distributor rebellion" mean? Originally, when we supported them, they had few people, and we hoped to help them grow. But when their power grows, they start to "declare independence" and stop working with you, right? You can't stop it!
I remember the famous poet Wang Guozhen wrote a poem called "A Mother's Heart," which describes a mother's feelings toward her daughter. I think it also fits the relationship between wholesalers and their second-tier distributors: half joy, half sorrow; the hardest to express is a mother's love; hoping the fruit will ripen, but when it ripens, fearing it will fall. As you can see, many of our distributors have the same psychology – we hope our second-tier distributors will "grow up," but when they do, we fear they'll "marry someone else." There's no way around it.
Note that channel downward extension is a trend that no one can stop. What should your change be? You should also align with the trend, not resist it.
**2F Pressures from Competitors: Jumping into the Water, Half-Drowned**
**Promotion Pressure.** If you don't run promotions, competitors will target your market with promotions, so you're helpless and must follow suit, or you might lose your customers. Now there are endless promotions in the market, such as travel, meeting promotions, product discounts – travel goes from domestic to international, from Asia to Europe.
**Credit Sales Pressure.** If you don't offer credit, your competitors will, and once they do, you'll have to follow. So everyone "jumps into the water" and "half-drowns," or at least "chokes half to death."
**Service Capability.** When our downstream becomes stronger and more specialized than us, our original service capabilities start to fall short, and we can't meet the higher demands that our downstream's growth places on us. We can't cope.
**Product Pressure.** Various product concepts emerge endlessly. What does product pressure lead to? You'll find that the better a product sells and the longer it's sold, the more its profit declines. You can't not sell it (to customers) because they want it, but if you do sell it, there's no profit. Under the trend of standardization, product pressure has two aspects: first, selling branded products – mature products – where the product is transparent and profit is low; second, small-brand products, which offer high profit but carry great risk.
**3F Pressures from Terminals: This Year's Credit Sales, but the Market Is Gone**
**Service Failure.** Our original simple services were okay, but now we find that our services can no longer meet terminal needs.
**Terminal Rebellion.** Slightly "decent" large stores want to bypass distributors and deal directly with manufacturers.
**Capital Risk.** If you extend credit to terminals, the terminal might disappear. This phenomenon does exist.
Also, profit squeeze – no need to elaborate.
**4F Internal Pressures: Effort Without Results, or Passive Work**
**Distributor Team Building.** Many distributors lack people and teams. Some want to recruit but can't find anyone; some dare not recruit; occasionally a few are trained, but they end up starting their own businesses.
**Benefit Distribution.** I often say: training can hardly change any attitude. The effect of training on employee attitudes doesn't last more than three days. Team change relies on benefit distribution, not training. When benefit distribution changes, employee attitudes change. Due to unreasonable benefit distribution mechanisms, some employees put in effort without results, or simply slack off.
**Organizational Efficiency.** Organizational efficiency is achieved through division of labor and collaboration. That is, how distributors, especially wholesalers, improve team efficiency relies on organizational division of labor. No one can be a jack-of-all-trades. Social progress and division of labor aim to have everyone do what they're good at and leave what they're not good at to others – that's organizational division. Humans are creatures that seek benefit and avoid harm. You'll find that what they can do, they'll do better and better, and what they can't do, they'll simply give up. Trying to train everyone to be a generalist is doomed to fail. When someone becomes a generalist, they'll definitely change jobs or start their own business. Everyone should note this.
**Operating Costs.** Back in the day, hiring a salesperson ten years ago cost just over 1,000 yuan in salary, which was high then. Now, salaries have basically doubled or more. In short, operating costs are constantly rising.
**5F Self-Imposed Obstacles: The Wild Rabbit Dies from Experience**
**Empiricism.** I often tell the story of "trapping wild rabbits": wild rabbits don't dig burrows; only domestic rabbits do. So wild rabbits need to find a den, usually under bushes or in hidden places, which isn't easy.
To prevent predators from finding their den, wild rabbits typically travel two to three kilometers or more to eat grass. Their habit is to sleep during the day and go out at night to eat, avoiding predators. But wild rabbits have a very important trait: when returning to their den, they always take the same path back.
This trait has been discovered by clever humans. Especially in winter, after a thin layer of snow, we notice that when a wild rabbit travels a single path and hasn't returned yet, we set a snare on the path, and the rabbit gets caught. That's the basic principle of trapping wild rabbits.
Everyone knows "rabbits don't eat the grass near their burrow," but there's a second half: "rabbits always return by the same path." From this, the wild rabbit dies from experience. When it goes out, the path is safe, and it thinks returning the same way is safe too. But when it returns, the environment has changed because humans have set a snare on its return path, and the rabbit doesn't know, so it's doomed.
**Outdated Knowledge.** In the rapid development of mobile internet, our original knowledge can no longer face our current market. Because we used to rely on information asymmetry, but the future relies on knowledge asymmetry. I repeatedly emphasize that the internet has eliminated information asymmetry, and relying on information asymmetry to make a living will become increasingly difficult.
**Backward Concepts.** Not seeing the industry's future, not using the future to guide the present, but using past experience to guide the present.
**Herd Mentality.** What is herd mentality? Doing what others do. The most typical example: if we go to a tourist attraction and have lunch, with several restaurants to choose from, how do we decide? Don't we go to the one with the most people? It's that simple – that's herd mentality. In fact, we don't know if that restaurant is good, but "I think if it's crowded, it's good."
**Speculative Psychology.** This is also a very typical obstacle. Grabbing a product and monopolizing it, selling it aggressively, making a killing at once – such opportunities are increasingly rare. Earning reasonable profits and making what you should is the way to survive in the future.
**Which Distributors Can Succeed Against the Odds?**
**1F Five Development Strategies for Distributors**
**Maintain Good Manufacturer-Distributor Relations.** This is very important. Whenever there's conflict between distributors and manufacturers, it's very troublesome. A distributor switches manufacturers today, having served as a "pioneer," clearing mountains and bridging rivers, only to end up as a "dowry" for others. You develop the market, then have a conflict and stop working – the manufacturer is happy: "Whether you play or not, as long as the product is good, I can easily find someone else."
**Differentiated Business Strategy.** What is the core of a differentiated business strategy? As we know, differentiation means being different. Note my viewpoint: choose a product or solution that doesn't exist in the market, or that others do poorly, and make it stand out. Don't compare yourself to others as the leader in what you sell; instead, make your product solution the leader. You need to offer a unique product solution.
Our distributors are used to following products that others do well, but that will never lead to success. If I go for products that others haven't done, I can become the leader. Because when your product solution becomes the leader, your industry status begins to be established; once your status is established, selling any other product becomes easy. The market recognizes "first-mover advantage"; once there's a "leader," there's almost no room for a "second" or "third."
You need to make a product or product solution the "leader" – that's the differentiated business strategy. In terms of pressure, this means not competing with competitors on total pressure (total sales), but on pressure intensity. What is pressure intensity? It's simple: take a needle and prick an elephant's butt – that's pressure intensity.
**Build Business Reputation.** Everyone knows this, so I won't elaborate.
**Focus on Self-Improvement.** Note that the best way to improve yourself is to go out and learn; it's a shortcut that saves a lot of trouble. What is a dilemma? Being trapped at home is a dilemma. What is a way out? Going out to learn, finding a path, is the way out. Study industry changes and understand consumer preferences.
**Provide Excellent Terminal Services.** I've emphasized this repeatedly.
**2F Three Essential Capabilities for Distributor Operations**
**First, the ability to manage terminals well.**
1. Capital turnover capability. An important criterion for evaluating a distributor's operational capability is capital turnover.
2. Logistics and distribution capability. Historically, this was a problem, but not now. In the past, distributors built their own logistics, with their own vehicles for delivery. Now, logistics is so developed that we don't need to build our own; just find a logistics company.
3. Relationship maintenance capability. You need to maintain relationships with manufacturers and local governments.
4. Relationship with downstream, i.e., problem-solving capability. The so-called problems include the various operational issues mentioned earlier; the better you solve them, the stronger your capability.
5. Inventory management capability. Inventory management and capital turnover are closely related. The higher the inventory management level, the faster the capital turnover; if inventory is poorly managed, capital utilization suffers. So inventory management is also very important.
6. Terminal service capability. If you focus on terminal development for a day, there's a process and method.
At this point, I'd like everyone to think about a question: How do you gain the qualification to manage terminals? If we want to manage terminals, how do you get that qualification? Why should terminal stores listen to you? What conditions must you meet to make terminal stores listen to you?
**The second essential skill for distributors is promotion and marketing capability.**
No matter how the liquor industry changes, at least so far it can't escape terminal promotion; it must establish face-to-face contact with consumers. So we need to explore the patterns, integrate resources, make terminals willing to sell, and make consumers see, buy, and be willing to buy.
**3F Seven Characteristics of Excellent Distributors**
**Internal Organizational Coordination.** That is, your (the distributor's) internal personnel are very coordinated, with few conflicts and good management. Without a mature and stable team, you can't accomplish anything in this era.
**Business Process Optimization.** Whoever should do a job does it; the company runs smoothly even when the boss is away. The worst is when the boss leaves and "the sky falls."
**Effective Team Motivation.** That is, your team is willing to work and works hard – that's effective motivation.
**Stable Employee Team.** Many people follow you and don't change jobs.
**Sound Institutional System.** Various systems and regulations are in place.
**Reasonable Capital Utilization.** Capital can turn over; you have money when you want to do things, and capital liquidity is high.
**Stable Upstream and Downstream Relations.** Your relationships with manufacturers and second-tier distributors are very stable. Note: don't develop the market today, only to have the manufacturer stop working with you, or have downstream second-tier distributors run away. That won't work.
Source: Zhenmou Junlue (ID: gejunzhenygzt)
Ge Junzhen, founder and chief consultant of Zhenmou Junlue Enterprise Management Consulting; EMBA from Guanghua School of Management, Peking University; vice president of Hebei Animal Husbandry and Veterinary Society; visiting professor at multiple institutions; editorial board member of "Today's Animal Husbandry and Veterinary Medicine"; former CEO of several animal health companies, with unique insights into the animal health industry; specializes in agricultural and livestock enterprise marketing management, consulting guidance, and practical implementation. Has published animal health industry marketing monographs including "Stepping into the Door of Success," "Thoughts of a Veterinary Drug Person," and "Re-thoughts of a Veterinary Drug Person."
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