---
title: "Distributors: Seek Growth from the Market, Profit from Management"
description: "Amid economic downturn and demographic shifts, distributors face integration pressures. This article outlines strategies for growth and profit, emphasizing brand communication, product mix, channel management, organizational efficiency, consumer engagement, cost optimization, and time management."
author: "高级研究员 海游"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2024-08-31"
language: "en"
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# Distributors: Seek Growth from the Market, Profit from Management

> Amid economic downturn and demographic shifts, distributors face integration pressures. This article outlines strategies for growth and profit, emphasizing brand communication, product mix, channel management, organizational efficiency, consumer engagement, cost optimization, and time management.

Currently, with the domestic economy slowing and negative population growth causing structural consumption changes, the integration among distributors is beginning. In such an uncertain external environment, **how distributors can forge new survival and growth models** has become a key concern for the industry.

Regarding business growth, manufacturers and distributors have different needs. Brand owners often complain about distributors' sales growth, while distributors complain about profit issues. The market reality is that products with high sales volume have low profit, and products with high profit have low sales volume, creating contradictions and games.

In the first half of this year, I visited over fifty trading company owners, toured their markets, and had in-depth discussions. I've summarized some growth strategies from excellent distributors to share with you.

**Develop a Brand Communication Strategy**

Many distributors think brand communication is the brand owner's job, but that's a view from fifteen years ago. Back then, the media environment was simpler; brand owners could rely on mainstream media like CCTV's "big喇叭" and a few large consumer interaction events to complete the consumer awareness loop.

But times have changed. First, media fragmentation and even "dust-ization" have scattered consumer attention. Second, in an era of shrinking volume and intense competition, the bombardment of media from countless brands has created "information cocoons" for consumers.

**It's increasingly difficult for brands to penetrate consumers' minds. Relying solely on brand owners' efforts won't create effective synergy; distributors must take on the brand communication value.**

At minimum, distributors should do two things: **First, local brand communication**, such as event marketing and cross-industry marketing, to facilitate offline interaction between the brand and consumers. **Second, support the brand owner's offline media communication**, such as turning their valuable outlets into brand image terminals (flagship, diamond, gold terminals) to stimulate consumers' "forgetful" nerves.

**Develop a Product Strategy**

The era of a unified national product strategy is over. Previously, distributors followed the brand owner's product structure, but now **adjustments must be made based on actual market conditions.**

For example, a brand's main product in Henan Province is Category A, but in northern Henan, its main competitor is local product B, which has advantages in timing, location, and people. How should the distributor operate? Head-on competition or avoid the edge? This requires the distributor to have enough wisdom to design their product mix.

Generally, I suggest brand owners classify products into four types:
> 1. Strategic products (win the future)
> 2. Traffic products (win the present)
> 3. Profit products (foundation for survival and growth)
> 4. Disruptive products (improve market competition landscape)

**Each product has a unique mission. If you treat all products equally, next year's marketing will be chaotic.**

Next is product labeling. **The ideal product has "three highs": high coverage, high gross margin, high turnover.** You can **divide your products into eight quadrants based on these three dimensions, each with a different product layer strategy.**

Product sell-through logic: Without deep thought on sell-through logic, all product strategies are empty. What is sell-through logic? It's **finding, reshaping, or communicating product selling points based on product differentiation to give consumers a reason to buy.**

Product channel chain grading system: **The length of the channel chain determines profit margins and service efficiency.** The longer the chain, the thinner the profit margins at each level, and the lower the brand owner's control over outlet services. Conversely, shorter chains increase control, but it's not always better; it needs to match reality. All these require careful consideration by distributors.

**Develop a Channel Strategy**

For distributors, a simpler channel strategy is easier to operate. Define channels simply as: modern trade, traditional trade, and special channels. This granularity is sufficient; finer granularity would require corresponding organizational support, often not worth the effort.

At the outlet level, I suggest focusing on these points:

First, **pay attention to numeric distribution**, i.e., coverage of effective outlets. "Effective" means salespeople use limited energy to serve valuable outlets, not biting off more than they can chew.

Second, **pay attention to weighted distribution**, i.e., high-capacity and high-momentum outlets. Aim for over 50% share of in-store sales. The 80/20 principle is practical for sales; focus is key.

Third, **classify outlets into four categories**. **Basic stores are ATMs**; controlling more basic stores is the foundation for sales and brand power. **Standard store development is a magic weapon to improve single-store quality.** **No.1 store creation is the trend for grabbing valuable outlets.** **Core stores are market high ground**, enhancing the manufacturer's market position and competitive advantage, and driving long-term business development and stable growth.

Fourth, **fully utilize digital tools to improve outlet quality comprehensively.**

Regarding display, I suggest **emphasizing guided display and competitive display.**

What is guided display? In short, it's **reducing the time consumers spend making purchase decisions at the shelf**, quickly presenting the product's benefits to hesitant consumers. This requires brand owners to guide the design, and distributor teams to execute.

What is competitive display? It's an important feature of differentiated products. **How to show your product's uniqueness and advantages compared to main competitors** is a key question for distributor displays.

Regarding visits, I suggest **emphasizing visit efficiency**, designing scientific visit cycles and routes based on outlet sales levels, and improving visit success rates and average SKUs per order.

Regarding sell-through, I suggest **focusing on trial experience effectiveness**. Many distributors think this is the brand owner's job; these views need to change. Also, focus on promoter organization: how to differentiate and improve the efficiency of promoters (full-time, part-time, partner promoters) to enhance the primary productivity of sell-through is worth joint decision-making by manufacturers and distributors.

If you do the above well, the distributor's business foundation will be solid.

**Develop an Organizational Strategy**

Distributors face profitability challenges, and high labor costs are the biggest operational difficulty. So, organizational strategy is the first hurdle for distributor development.

First, for large and medium-sized trading companies, consider these dimensions for marketing management team configuration:

**1. Management perspective:** In FMCG, a mid-level manager effectively manages 3-5 frontline supervisors, and a frontline supervisor manages 6-9 salespeople.

**2. Business perspective:** A mid-level manager should be responsible for at least one region, with a relatively large business volume. Distributors can set this based on business volume and workload.

**3. Management organization setup:** A mid-level manager typically has assistants, usually three types: sales administration, sales planning (also called promotion specialists), and sales operations specialists. These increase gradually based on sales volume: 3 for first-level branches, 2 for second-level, 1 for third-level. In principle, the more management personnel, the more refined market operations and stronger regional competitiveness.

Second, the mechanism linking sales salaries to sales assessment: **Sales assessment determines salary, and salary determines organizational stability.**

FMCG sales team assessments differ from other industries, with more focus points and stages. The ultimate goal is **profitable sales**. The assessment mechanism determines the stability of the marketing organization. There's no absolute right or wrong; it's about matching the times.

**Develop a Consumer Strategy**

The core of consumer strategy is simple: **acquisition, repurchase, and average transaction value.** In plain terms: guide consumers to buy; drive repeat and habitual purchases; find ways to increase the quantity or amount of purchases.

**Four core points for consumer acquisition: acquisition, retention, activation, and conversion.** Let's elaborate on acquisition from three angles: product, market, and operations.

> a. Product side: Use product differentiation or development methods to achieve user acquisition.
>
> b. Market side: Coordinate with the brand owner's marketing or sales department on advertising, alliances, and market activities to achieve offline acquisition targets.
>
> c. Operations side: Coordinate with the brand owner's operations department on promotions and event planning for offline acquisition.

What should distributors specifically do? I think three basics are essential:

> First, **product & brand promotion activities**: Specifically, cooperate with brand owners to standardize consumer trial experience processes (materials, team, trials, costs). Second, **acquisition and repurchase in non-mature markets**: Continuously optimize deep interaction with potential consumers and loyalty of wavering consumers. Third, **increase average transaction value in mature markets**: Comprehensively raise consumer average transaction value (buy more & buy more expensive).

**Develop a Cost Strategy**

Many distributors habitually separate brand owner costs from their own, calculating each separately. They rarely ask about the value and direction of brand owner investments. This is wrong.

**FMCG today is no longer just competition among brand owners; it's more about integrated manufacturer-distributor competition.** Regarding costs, they should be used jointly and supervised together to avoid persistently low cost-effectiveness.

For example, avoid common problems in cost strategies:

> a. **Unreasonable cost allocation standards**: Some manufacturers allocate costs based on a uniform rate, not necessarily giving more to high-volume distributors. The key is to consider the value of the cost.
>
> b. **Low cost efficiency**: Distributors often focus on applying for costs but lack activity planning and process management. Often, money is spent but results are hard to see.
>
> c. **Delayed cost verification**: The current model where distributors advance market costs has issues with long verification cycles, affecting distributor motivation.
>
> d. **Lack of evaluation of cost effectiveness**: Many manufacturers lack effective evaluation of market costs, so there's little guidance for future activities.
>
> e. **Costs become gray income for some personnel**.

**Develop a Time Management Strategy**

Time management strategy is a type of resource control strategy. It's about planning time to implement various operational strategies more quickly.

People have limited time and energy, and tasks have priorities. How to do the right things at the right time is worth every distributor boss's consideration.

__PS: For those interested in the on-site speeches, follow the WeChat official account of New Distribution. We will compile and publish all speakers' speeches for readers.__

_Click **Read Original** to view more about the 6th China FMCG Conference & 3rd China FMCG Hard Discount Conference & 3rd China FMCG Distributor Conference..._


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