During the 2020 Spring Festival, did you sell your goods well? I think there is only one answer: not at all. The reason is clear: the novel coronavirus outbreak in China. As of February 12, there were 44,732 confirmed cases nationwide. Besides the hardest-hit Hubei Province, other provinces also reported confirmed cases. In addition to retail, hotels, tourism, catering, and commerce were severely impacted. For distributors, the restrictions on people, goods, and venues meant that their Spring Festival stock basically did not move. Anxiety is the true portrayal of distributors. But life must go on, and goods must be sold. Compared with the SARS outbreak in 2003, this epidemic is more contagious but less lethal, and government prevention and control efforts are stronger. Although the economic impact is greater than SARS, the duration may be shorter.
-01- Restrictions on People, Goods, and Venues: How Can Distributors Move Inventory? For FMCG distributors, the impact of the epidemic is enormous. To prevent the spread, provinces have introduced a series of policies. The purpose of city lockdowns, road closures, and reduced public transport is to minimize population movement and prevent the epidemic from expanding. In severely affected areas, such as Hubei, very few people go out to consume. Most shopping malls are closed, and only supermarkets are open. Distributors in these areas can try all they want, but the fact is there are no customers. In less affected areas, although local governments have also introduced policies, foot traffic has decreased significantly, but some retail outlets are still open. Distributors in these areas can run promotions to clear some inventory. But the premise is to assist terminals in epidemic prevention and avoid large gatherings.
-02- What About Short-Shelf-Life Foods? Besides empty terminals, distributors face shelf-life issues. We know that among Spring Festival bestsellers, dairy products have the shortest shelf life. Since we cannot predict when the epidemic will end, these distributors should, in addition to timely promotions, consider cross-industry collaboration if manufacturers do not provide policy support. For example, cooperate with distributors of masks, hand sanitizers, and disinfectants, or simply donate the products. Under the cloud of the epidemic, distributors must use every condition to reduce losses while ensuring the safety of themselves and their teams. But we must note that the epidemic is temporary, and difficulties are only transient. Distributors still have at least eight months of work in 2020. During this period, distributors of snacks, beverages, and dairy are having a hard time, but those of daily chemicals, rice, flour, oil, fresh produce, and frozen foods are still moving inventory. However, it is foreseeable that once the crisis is lifted, consumers who have been suppressed for a long time will return to the snack food camp. There may even be a small sales peak. Delayed resumption of work and road closures present an opportunity for distributors in third- and fourth-tier cities. For example, a dairy distributor in Jiayuguan said that during the Spring Festival, although fewer people went out, dairy sales were not affected and even increased slightly. The main reason is that the epidemic in his area was not particularly severe, but consumers still panicked and stocked up in advance. It is undeniable that most distributors have been significantly affected. Facing this force majeure, we can only accept it, but finding opportunities in adversity is what we must do.
-03- Multi-Category Distributors: Build a Product Moat In this crisis, the biggest losses are for single-category distributors, such as beer, dairy, and snacks. A single category may have brand endorsement, but in a crisis, if the products you represent are not essential, the blow can be devastating. In contrast, multi-category distributors have a higher probability of withstanding risks. For example, some distributors not only handle rice, flour, and oil but also daily chemicals and snacks. In a crisis, although snacks sell poorly, they suffer less because they have essential products like rice, flour, oil, and daily chemicals. A broad and deep product strategy can build a product moat for distributors, not only to cope with fierce market competition but also to protect you in times of crisis.
-04- Embrace the Internet: Integrate Online and Offline According to statistics, during the epidemic, online business grew significantly. Besides gaming and live streaming, online shopping, home delivery services, community group buying, food delivery, and WeChat business played crucial roles. This is because although consumers are confined at home, daily life must continue, meaning demand has not decreased; online channels have become the best way to meet consumer needs. For traditional distributors, this is undoubtedly an opportunity to re-examine online channels. We cannot only see the impact of online channels on offline, but also ignore the superiority of online platforms. Therefore, for distributors, the integration of online and offline is an inevitable trend. It is not necessary to do a B2B platform, but you must have internet thinking. Even a small WeChat business or community group buying can play a role at critical moments.
-05- Health Products Are About to Rise After the epidemic, we will pay more attention to health, and consumers will place greater emphasis on food safety. Low-sugar, low-fat, and zero-additive foods will be more popular. For example, plant-based meat, natural foods, and soda water. In fact, since 2018, giving health gifts has been included in New Year shopping lists. In addition, online sales of health products have maintained high growth rates, showing diversified characteristics and trends. Affected by the epidemic, it is believed that more health foods will appear this year. For distributors, focusing on health foods may be an opportunity. Those with the means can pay close attention and plan ahead.
-06- A Major Test for Distributor Supply Chains After the epidemic, all industries will recover. Besides restocking, distributors face a bigger problem: returns and exchanges, especially for gift boxes and short-shelf-life foods. A large volume of returns and exchanges in a short period tests the logistics capabilities of distributors. We must be prepared. If manufacturers do not provide return and exchange policy support, how can we meet terminal needs? Some distributors, because they represent essential products, saw a surge in orders during the epidemic, but due to imperfect supply chains, delivery was delayed and warehouse inventory checks had errors. In the future, distributors will transform into service providers, and supply chains will be a reflection of their service capabilities. Through this epidemic, distributors may gain a comprehensive understanding of their supply chains.
-07- Internal Management: Identify and Fill Gaps During the epidemic, distributors have an opportunity for deep reflection. What are the shortcomings in our product selection and channels? What about employee growth paths? How should our team develop? How are our logistics affected? Is our cash flow safe? We should not worry about the immediate difficulties, but rather think about the future direction. After resuming work, distributors should consider how to serve customers well, how to arrange employee work reasonably, and how to protect personnel during work.
In summary, during the epidemic, distributors should not panic. For force majeure, we can only accept it and minimize losses. Distributors should recognize the following points:
- The epidemic will pass soon. What we need to think about is how to efficiently handle returns and exchanges after the epidemic, how to provide good terminal customer service, and how to ensure stable cash flow.
- The severity of the epidemic varies, and its impact on distributors varies accordingly. Based on consumer demand, distributors of snacks and dairy are more affected, while those of rice, flour, oil, and daily chemicals are less affected.
- A broad and deep product structure not only allows distributors to earn more but also gives them stronger risk resistance.
- Online and offline are not mortal enemies; distributors need to embrace the internet.
- Don't worry about what to do with your goods; instead, worry about how to handle your customers' goods. Distributors need to find a balance between the two to maximize benefits. Protecting customers' interests is protecting your market. There will be more opportunities in the future.
- Is your supply chain efficient?
- This is an opportunity to test distributors' financial and management capabilities.
Finally, I want to say that after the storm comes the sunshine. We must firmly believe that the future will be better. 2020 has just begun.