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Zhang Wei has been feeling particularly frustrated lately. Since leaving his original company and starting his own distribution business, he has struggled for over four years, growing annual sales from two to three million yuan to nearly ten million. Sales are rising, but management problems are growing, and recently they all seem to surface at once: the old subordinates he brought from his previous company now consider themselves heroes of the company, do little work but steal others' credit, and are increasingly hard to manage; in recent months, over a dozen cases of beer have gone missing from the warehouse, and the culprit is still unknown; reported breakage in the warehouse is mysteriously increasing; with more products, some are overstocked while others are constantly out of stock; previously, when he only did wholesale, old customers could just call, but now with supermarkets, he negotiates all day and feels passive... In short, these issues are troubling, and he doesn't know how to solve them. Zhang Wei is an old friend of mine, and he poured out his grievances over the phone.
This is actually a common management problem that emerges as many small distribution companies grow. They often have years of market experience, start small using existing business relationships, and boldly run their own businesses. But as the company grows, old veterans face new problems, and these management challenges trap them. When they try to act, they find themselves flailing, sometimes even hitting themselves!
Zhang Wei didn't give up; the "old hand" was willing to be a "primary school student" at a critical moment. He thought of gathering many old friends to help him brainstorm. After several on-site investigations and discussions, they formed a set of targeted solutions.
Product Line Issues
Zhang Wei started his business with mid-to-high-end beer, leveraging products he had operated for years, which made operations smooth and profitable. Seeing old customers happily buying from him and goods turning over quickly, he was encouraged. So he actively sought manufacturers of similar products, borrowed some funds, and gradually enriched his product line.
Initially, being cautious and believing in "stick to what you know," he only chose beers from other manufacturers that filled out his price range. But later, seeing other distributors make good profits from other products, he expanded into candy, baijiu, wine, beverages, and even slippers! Some products were not as guaranteed profitable as the manufacturers claimed, and some even lost money. By this point, he was bewildered, fully realizing the pain of aimless product line extension: baijiu brands have a "three-year cycle," and some once-famous brands were already hard to sell when he took them on; when he wanted to give up distribution, the manufacturers withheld his deposits and pressured him to continue buying; a beverage manufacturer, after heavy rain flooding, sent him drinks with rusty packaging, and the promised compensation never materialized; wine, despite heavy advertising, had no sales response, and his friends in the wine business said wine was no longer selling well and couldn't help...
After a few months, Zhang Wei was not only bewildered but also anxious! He had worked hard to become regional general agent for several products, but in the end, the policies changed, and whether they sold well or not, the manufacturer reps delayed, avoided, and did nothing. His funds were tied up in slow-moving products, and his main beer product couldn't be restocked due to cash flow problems, leaving him scrambling to raise money. His plan to move out of the house he'd lived in for over a decade fell through!
This is the most common problem for small distributors seeking product agencies. They don't know how to design their product line. With so many bestsellers and new products emerging, they don't know what to carry that is most reasonable and suitable. A company launching a new product goes through extensive research and analysis, but small distributors don't do this. The most deadly thing is that it's easy to add a product but hard to drop it! Small distributors' flexibility is not about arbitrarily adding products, but sadly, they all think it is!
This is the biggest misconception for small distributors! Reality proves that this arbitrary addition of new products drags many small distributors down, unable to get back up!
This can basically be solved by careful consideration and analysis.
First, what products do consumers currently like? Are they just trying them or truly liking them? Many distributors get on board because of flashy ads, but they don't understand what consumers in their area really want. Yes, consumers see ads, but the era when ads determined buying behavior is over; they are more rational. Zhang Wei's customer base includes second-tier distributors and supermarkets, but he communicates closely with second-tier distributors and knows nothing about supermarket shopping habits. So, it's important for him to visit supermarkets more, rather than getting excited about a product just because a wholesaler says it's selling well.
What should the product line structure be? Generally, it includes strong brand products, high-profit products, and high-coverage products. Currently, he only has one brand product, and its brand advantage is slowly eroding, but he hasn't found a replacement; he has many high-profit products, but none are consumer-recognized, so effectively he has no high-profit products; and he has no high-coverage products, so his customers don't even come to him for common products, losing his old customer advantage.
Also, his newly added products are ones his downstream customers already carry, aiming to enhance his distribution capability, but all existing products are from outside brands with limited shelf life, shipped by full truckloads, causing turnover difficulties. Moreover, due to pressure from baijiu and wine manufacturers, his inventory of baijiu and wine is large. He has transformed from a beer-focused distributor to one without a strong leading product, becoming like other distributors and losing his competitive edge. In this situation, he also failed to see the sales potential of chocolate products and cultivate them in the supermarket system.
Here, we find that the biggest mistake small distributors make in product line selection is: immediately adding high-profit products without considering whether they fit their product mix.
We can use this table to illustrate what products he should carry:
| Channel | Products |
|---|---|
| Supermarket | Strong brand products + high-profit products |
| Foodservice | High-coverage products + high-profit products |
| Wholesale | High-coverage products + strong brand products |
From the table, small distributors should rely more on strong brands and high-coverage products to gain long-term distribution status, and use these to drive sales of high-profit products. Since they lack brand advantages themselves, they should stand behind these products and leverage their service advantages to sell more high-profit products, increasing their chances of success.
Specifically for Zhang Wei, we designed the following product-channel lines:
| Channel | Products | Notes |
|---|---|---|
| Supermarket | Beer + chocolate + wine | Lowest cost, maximum profit |
| Foodservice | Beer + beverages + baijiu (or wine) | Table economy; maintain relationships and profit |
| Wholesale | Beer + beverages | Maintain relationships; status among peers |
With this allocation, Zhang Wei's previously chaotic product layout became organized. He dropped four of his six beer brands, keeping one first-tier and one second-tier brand, and strengthened the second-tier brand to gradually replace the first-tier. He completely stopped selling slippers and cleared that inventory. For beverages, he selected a juice drink, a carbonated drink, and a foodservice milk. For baijiu, he introduced a local favorite brand and cleared out all the miscellaneous brands, stopping cooperation with those manufacturers.
Personnel Management
"These old employees, they came with me to build the business, but now they're hindering my development!" Zhang Wei sighed. Indeed, this issue left him in a dilemma. Saying something is hard, not saying is also hard; firing them is not an option, but not firing leads to constant problems. They don't ask for high salaries, but they don't do much work, and they always claim half the credit for new employees' achievements.
Admittedly, Zhang Wei finds this hard to handle. So what to do?
We suggested using a method: if you can't manage them face-to-face, let a "third party" manage! Use boards, charts, and systems. He bought two whiteboards: one for numbers, one for charts. At the morning meeting, he doesn't say who did well or poorly; he has everyone take turns reading the sensitive numbers and looking at sales changes. On the chart, if someone's sales are poor today, a thick red line is drawn, which is a warning! The latter part of the meeting is mainly for everyone to discuss improvements. This changes from monthly, subjective, and leader-based assessments to daily, objective, self-assessments and incentives. Before long, those old salespeople with poor performance will have to explain themselves to the whole company every day, and this method will "torture" them until they can't hold their heads up, forcing them to do their jobs well!
Although this is fair, a few old employees still slack off, relying on Zhang Wei's inability to do anything, and "living off past glory" with old business relationships. At this point, we gave Zhang Wei another trick: incorporate these few into the team, leverage their strengths, eliminate their selfish habits, and form project teams! Make these old employees team leaders, responsible for sales in a certain area. This puts them in leadership positions. If they do well, everyone supports them, and they earn more bonuses, so they'll work hard. If they do poorly, they lose face and won't be so arrogant in front of new employees.
Finally, another trick: these old employees helped Zhang Wei build the business in traditional models and don't understand supermarket operations. So, Zhang Wei separated them by department: old employees handle wholesale, and new employees handle supermarkets and foodservice.
Of course, as a small business owner, Zhang Wei wants a stable team. He can't recruit widely like larger companies; if a key salesperson leaves, it's hard to find a replacement quickly. But these salespeople, with relatively low qualifications, also prefer stability and want a small boss like Zhang Wei to take care of them, providing a job to support their families. Considering this, we suggested Zhang Wei buy commercial health insurance for some outstanding employees to motivate them and encourage them to work more diligently.
Inventory Management
Zhang Wei is a diligent young man studying for a law associate degree on his own. He wanted to buy a computer for study and to go online for information. This time, we helped him fulfill this wish, encouraging him to buy a computer and install software to maximize its use. So, he installed management software like "Guanjiapo" suitable for small distribution companies.
During the day, the clerk enters each transaction into the computer. Every evening, Zhang Wei can see the day's purchase, sales, and inventory status, promptly identifying inventory issues. By analyzing transaction data over time, he can understand recent sales trends and necessary inventory adjustments. He discovered that some expired products from years ago, neglected due to oversight, totaled nearly 2,000 yuan—about the price of a computer! With the computer system, he can always check production dates and manage "first-in, first-out" for products, otherwise not accepting them. He can also set "warning lines" for products that might expire if not sold soon, prompting salespeople to boost sales. Another important finding: he figured out the patterns of various manufacturers' promotions, so he no longer uses all his funds to stock up on promotional products. He can buy just enough, take full advantage of promotional policies, and still have funds for non-promotional products.
Channel Division
Zhang Wei is now familiar with wholesale distribution; he's made some progress in supermarket channels over the years; later, learning that foodservice channels have higher gross margins, he hired a few salespeople to sell to restaurants, but it's still in its infancy. Since the company is small and he's afraid to invest too much, he hasn't hired professional managers. But managing all these channels himself is tough: wholesale is okay with old relationships and old salespeople, but he doesn't trust salespeople with supermarkets because they lack negotiation skills, and the nighttime consumption habits of restaurants exhaust him, causing problems like delayed payments and fears of restaurants running away with debts. So, he realized that multi-channel operations in a chaotic state are dangerous. Planning the multi-channel operations and focusing on one or two channels became urgent.
We suggested he separate the wholesale business and contract it out to three old salespeople. This doesn't require his management effort; he just needs to monitor. These old salespeople are familiar with the business and are motivated to be "bosses" while working. For beer and beverages, they get a fee of one yuan per case; for baijiu and wine, they get ten yuan and five yuan per case respectively, provided they meet monthly sales targets. Prices must follow company-set prices; unauthorized price changes result in fines of 500 to 1,000 yuan or even dismissal. Delivery trucks must refuel at the gas station near the company unless prior approval is given... With these constraints and incentives, Zhang Wei can confidently delegate business, saving effort and earning good returns.
For the supermarket channel, we suggested he hire professional salespeople from foreign companies. First, these salespeople have good relationships with buyers, saving costs like entry fees, anniversary fees, display fees, and securing prime positions for better display. Second, they have professional negotiation and business experience, avoiding losses from unfamiliarity with supermarket contract terms like delivery and product exchange requirements. They also understand supermarket promotions better, adapting to improve sales performance.
With proper arrangements for wholesale and supermarket channels, he can focus on restaurant sales! We suggested he classify restaurants by sales capability into A, B, C levels, create customer profile cards, and first integrate the newly established product line to build a comprehensive "table economy." This not only reduces costs but also facilitates one-stop purchasing for restaurants, leaving no room for other distributors to enter. Additionally, through exclusive agreements (not carrying other same-tier brands), he can squeeze out other brands; through table displays, he increases consumer impression; through point collection, he offers more prizes to owners; through cap recycling, he encourages waitstaff to promote...
With these adjustments, Zhang Wei finally breathed a sigh of relief. In just two months, sales showed noticeable growth. Most importantly, we believe Zhang Wei has truly grasped his development direction for the next few years, and his management level will greatly improve. All these measures not only solved immediate business, management, and talent issues but also left other struggling distributors far behind, establishing his own competitive advantage and gaining lasting competitiveness.
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