△2018 China (Luohe) Food Marketing Innovation Summit and the 3rd Leisure Food Manufacturers-Distributors Precision Matchmaking Conference Free registration is in full swing; scan the QR code for details. Every distributor must go through a process of growth from small to large and from weak to strong. As brands increase, channels expand, and teams grow, the distributor's business organizational structure must be adjusted in a timely manner to effectively reduce operating costs and maximize sales and profit contribution. Distributors generally establish their business organizational structure based on how they divide the market. There are four common market division methods: first, by geographic region; second, by product line; third, by channel type; fourth, by a combination of these three. In other words, a distributor's business organizational structure is determined by the regions, products, and channels they operate in, so it must be tailored to local conditions. Keeping it unchanged is certainly not viable, and blindly copying others is even less advisable. So, how should distributors design their business organizational structure for different development stages and operating conditions? "Regional" Business Organizational Structure

  1. Model One

Organizational Characteristics: The market is divided by region, with all products and channels managed uniformly by the regional salesperson. However, due to limitations in energy and capability, salespeople often tend to "sell old products rather than new ones, and sell fast-moving items rather than slow-moving ones."

Applicable Scope: Distributors with a single product, single channel, and small scale. For distributors, under what circumstances is business simplest and easiest? Of course, when the product line is most streamlined and the channel is most singular. Many distributors have this experience: at the initial stage, due to limited scale, they can only represent one or two products and operate in only one type of channel, such as circulation, supermarket, or catering. Dividing the market by region, salespeople can basically manage. But if another channel or a few more products are added, salespeople find it very difficult to cope. Why does this happen? Because different channels require different operational methods, and thus different skills for salespeople. Similarly, each product has differences in promotion methods and market acceptance. With more products, salespeople inevitably neglect one thing while attending to another. Of course, distributors cannot expect their salespeople to be able to promote all products and handle all channels, because "all-round" salespeople are either hard to recruit or hard to retain. Therefore, in a regional organizational structure, salespeople tend to rely on past experience and habits, only selling old products and focusing on main channels. The mindset of "selling old not new, selling fast not slow" is deeply ingrained, making it difficult to effectively solve the problem of expanding new products and new channels. In summary, the regional organizational structure is only suitable for distributors with a single product, single channel, and small area. If they attempt to promote new products or expand new channels under this structure, it will be difficult to succeed. Therefore, as the scale of products and the variety of channels increase, distributors must adjust and expand their existing business organizational structure to meet further development needs. "Product-Based" Business Organizational Structure

  1. Model Two

Organizational Characteristics: The sales team is divided by product, e.g., Team A for Product A, Team B for Product B, Team C for Product C. Several teams serve the same customer simultaneously, resulting in high sales volume per product but high operating costs.

Applicable Scope: Distributors with a single channel, multiple products, and a certain scale. After entering the growth phase, distributors inevitably need to add products or expand channels. If the goal is to increase operational scale through multi-brand operations based on existing channel customers, then the product-based business organizational structure can be considered. As mentioned earlier, a single salesperson does not have enough energy to successfully promote multiple products. Under the product-based structure, each brand or product has a dedicated sales team for maintenance, which can maximize the market sales potential and effectively solve the problem of poor new product promotion. However, this also gives rise to two drawbacks: first, several teams serving the same customer cannot achieve resource sharing; second, the number of sales personnel increases sharply, leading to a significant rise in operating costs and expenses. Therefore, many distributors who adopt this structure do see a notable increase in product sales, but overall profits decline instead. In fact, the product-based structure is built on large-scale operations. If product sales cannot support the expenses, then profits must be sacrificed. Therefore, before deciding to form a new product sales team, distributors must fully assess the potential cost risks, and while pursuing rapid volume growth, try to balance profits as much as possible. To this end, a phased operation approach can be adopted, organizing special activities during the new product expansion period. One method is personnel adjustment, such as mobilizing salespeople from five regions to focus on one area within two days, and then repeating for other areas. Another method is shifting focus, such as requiring all salespeople to promote old products for two days and new products for three days. The significance of special activities is to maximize the concentration of existing personnel's energy, quickly increase the distribution rate of new products, and solve the problem of standardized display. When the sales scale of new products reaches a certain level, a dedicated sales team can be formed, gradually transitioning from a regional structure to a product-based structure. "Channel-Based" Business Organizational Structure

  1. Model Three

Organizational Characteristics: The sales team is divided by channel type, e.g., one group for supermarkets, one for circulation, one for group buying. All products and related affairs are handled by one salesperson per channel, providing strong channel control but high operating costs.

Applicable Scope: Distributors with a single product, multiple channels, and a certain scale. The channel-based structure is similar to the product-based structure in that both aim to solve the problem of distributor scale development. The difference is that the latter starts from products, while the former starts from channels, ultimately establishing the entire sales team's organizational structure. Distributors adopting the channel-based structure usually represent only one or two products but operate in multiple channels, such as supermarkets, circulation, catering, and group buying. Since a single salesperson cannot effectively manage multiple channels simultaneously, dedicated sales teams are formed for each channel, thereby effectively improving service and control over channel customers. The drawbacks of this model are: First, it still cannot effectively solve the problem of new product promotion; second, it bears the dual pressure of channel costs and personnel costs. The issue of new product promotion has been mentioned earlier. As for how to alleviate the cost pressure of full-channel operations, the key is still scale support. However, in the early stage of channel expansion, what if scale advantages have not yet formed? Slow down; it is not necessary to achieve all channels at once. Instead, based on the operational characteristics of the existing team, gradually penetrate other channels. For example, if circulation is currently the main focus, first open catering outlets, then enter hypermarkets, and finally do group buying, progressing step by step. Additionally, for distributors with a single product and multiple channels, the brands they hold must be strong enough and have products that match various channels such as circulation, supermarkets, and catering. If the products a distributor represents are only suitable for circulation, then do not enter supermarkets; otherwise, the mismatch between product and channel will make it difficult to sell, let alone form a certain scale. In short, establishing a channel-based structure also has prerequisites. Distributors must find corresponding target customers based on their products and choose suitable channel types. "Combination" Business Organizational Structure

  1. Model Four

Organizational Characteristics: The sales team is divided by brand, with brand managers responsible for overall brand operations, then supermarket and circulation supervisors in charge of channel sales and promotion, and finally regional and system salespeople for execution. This organizational structure is very large, solving the problem of scale and large-scale operations for trading companies, but the corresponding management difficulty and costs are also considerable.

Applicable Scope: Distributors with multiple products, multiple channels, and a certain scale. When a distributor's scale develops to a certain level, organizing the business structure solely by region, product, or channel is no longer sufficient to achieve higher business goals. For example, some distributors have made a single product very mature with good sales in every channel, so they will certainly introduce other products to enrich their product mix. Others are very strong in the circulation channel and have successfully operated multiple brands, so they naturally do not want manufacturers to give other channels to someone else. At this point, it is necessary for distributors to adopt a "product + channel + region" combination structure to establish a multi-product, multi-channel operation model. In reality, distributors with operating scales of tens of millions or even hundreds of millions of yuan more often adopt this organizational structure. They are usually located in provincial capitals or prefecture-level cities, holding several strong brands that are top in their categories, such as Shuanghui, Haitian, and Master Kong. Each brand has considerable sales volume. Specifically, in each region, a single county can achieve monthly sales of over one million yuan, and urban areas may approach ten million yuan, enough to support an independent sales team for multi-channel development and management. Another situation is when a distributor represents enough products but lacks particularly prominent brands. In that case, departments should not be divided by brand but by product series combinations, such as establishing a leisure food division, beverage division, dairy division, etc., which can also maximize the market potential of products and increase sales scale. The "product + channel + region" business organizational structure model effectively solves the problem of scale and large-scale operations for trading companies, but it must be noted that due to the overly large organizational structure, management difficulty will inevitably increase. Whether the sales team can form strong execution often depends on the capabilities of professional managers and middle-level supervisors, and the role of the boss in the management system must also be adjusted accordingly. Additionally, operating costs and expenses become quite tricky. Imagine if a distributor has 5 brand divisions and 5 independent sales and delivery teams serving the same channels and customers, it will invisibly cause huge resource waste. Therefore, it is recommended that distributors, based on the "product + channel + region" structure, introduce a marketing department for brand planning and market promotion, while integrating terminal management and logistics delivery teams to effectively reduce personnel costs and channel expenses, thereby improving overall operational efficiency. -END-