In early September, Nanjing enjoys crisp autumn weather. As the Mid-Autumn Festival and National Day approach, major manufacturers begin pre-season ordering promotions. Lao Zhang, one of many FMCG distributors in Nanjing, sits at his desk with a furrowed brow, chain-smoking. He is frustrated because half of his dozen or so stores have not paid their invoices on time.
The Heartache of Distributors Nationwide: Difficulty in Collecting Payments
Lao Zhang offers his stores a 30-60 day credit period depending on store size. Except for a few loyal stores that pay on time, the rest delay with various excuses. Lao Zhang once sent his salesmen to collect debts door-to-door, but with little success. He knows business is tough this year. Yet as a distributor, he also needs funds to purchase inventory. With the double festival approaching, Lao Zhang grows increasingly frustrated. Difficulty in collecting payments is a common problem faced by distributors nationwide. As the link between manufacturers and terminals, distributors play a crucial role in the circulation of goods, and cash flow is key to keeping their business running.
Manufacturers require distributors to pay upfront for goods, but distributors find it hard to do the same with their terminals. In today's fiercely competitive market, distributors offer different credit periods to maintain terminal customers, which alleviates the stores' financial pressure and effectively ensures the distribution of goods. However, chasing payments is very difficult.
The Shop Owner's Worry: I Don't Want to Owe Money
Xiao Wang, the owner of a medium-sized supermarket, is supplied by Lao Zhang. In his 300-square-meter store with over 1,500 SKUs, Lao Zhang supplies one-fifth of the goods, while four other distributors also supply his store. The distributors give Xiao Wang a 45-day credit period, meaning every 45 days he must prepare a significant sum to pay each distributor. Although business is decent, coming up with such a large amount at once is challenging for Xiao Wang.
Stores delaying payment is sometimes a last resort. Apart from a few malicious defaulters, most have their own difficulties. Poor business, slow turnover, the need for funds for new products, and the owner's other personal investments are the main factors leading to a lack of funds. Distributors and small shop owners, these two unfortunate partners, can only buy time by comparing their hardships when it comes to credit periods and payment collection.
Financing Channels for Distributors: Bank Loans and Online Lending
This situation plays out every day. But life goes on, and distributors constantly seek financing channels. For large distributors, bank loans are a good option, but with strict review processes and cumbersome procedures, it's hard to get a loan quickly, and even if approved, the amount is often limited. For small and medium distributors, when funds are tight, they may resort to online platform loans or even usury, but online lending has high interest rates and significant risks. The drying up of cash flow is the last straw that breaks the distributor's back. Credit periods are a necessary means for distributors to cooperate with stores. Some distributors say that the length of the credit period offered to stores is the basis for the relationship between distributors and stores. If they demanded cash on delivery, they would lose a large number of terminal stores.
How can distributors solve their capital pressure? What should be done about slow and difficult payment collection within the credit period? This is not only a question for distributors but also for the entire FMCG industry.
Can This Financial Product Turn the Tide for Distributors?
In early 2019, a team entered Jiangsu Province. Through visits and research with distributors and small shop owners across the province, they launched a product to help distributors solve capital pressure: Wenli-Shanghu Dai (Wenli Merchant Loan). They chose Jiangsu as the first promotion area for this product in China.
In the first half of 2019, Jiangsu achieved total retail sales of consumer goods of 1,747.92 billion yuan, a year-on-year increase of 7.0%. This achievement is inseparable from the efforts of tens of thousands of distributors. After several months of promotion, Wenli-Shanghu Dai has cooperated with distributors in Jiangsu in sectors including beverages, maternal and infant products, and daily chemicals, and has been well received by distributors. What kind of product is this exactly?
Three Steps to Win Over Distributors, 24 Hours to Help Shop Owners
At the end of August, a guest visited the office of Xu, a distributor in Suzhou, and immediately asked how to apply for Wenli-Shanghu Dai. This was one of Xu's terminal store customers, facing capital pressure for Mid-Autumn Festival orders. Having heard about Wenli-Shanghu Dai from Xu's salesmen a few days earlier, he was curious and decided to visit in person. Wenli-Shanghu Dai provides services such as quick reconciliation, credit, and settlement in the distributor-store transaction scenario. It helps distributors solve three major pain points: uncontrollable capital recovery, high risk in credit sales, and low store cooperation stickiness. The application process is extremely simple: just three steps—apply, get credit, and receive funds—and it takes only 24 hours from application to receipt of funds.
Unlike time-consuming and complex bank loans, Wenli-Shanghu Dai's application is relatively simple.
5 minutes: Distributor signs a letter of intent for cooperation 10 minutes: Join the enterprise system platform 10 seconds: Obtain data credit authorization
At this point, the distributor gains access to Wenli-Shanghu Dai. They can batch import terminal store information and invite customers to join the enterprise system. Then the distributor's sales team can recommend Wenli-Shanghu Dai to terminal stores. After a brief conversation, Xu's customer decided to use Wenli-Shanghu Dai to obtain funds for purchasing goods. On the Wenli-Shanghu Dai app, the customer spent 5 minutes registering the terminal store in the enterprise system. After passing the bank system's review, the bank-approved credit limit was quickly displayed. Based on the customer's purchase history, the system showed that the customer could get a loan of 150,000 yuan.
Dedicated Funds for Specific Purposes, Ensuring Fund Safety
The credit funds obtained by stores from the bank are used for settlement of loans with designated distributors. Stores can use and repay as needed. For distributors, they can freely control the credit period according to their collection needs, with the bank paying them promptly. Distributors no longer suffer from the pain of collecting payments on due dates. Currently, several of Xu's store customers have adopted Wenli-Shanghu Dai and have settled payments that previously would have taken a month. The first month's interest is borne entirely by the distributor as a concession, calculated daily, fully alleviating the stores' ordering pressure.
Tips will be paid 400-2000 yuan once adopted.