The biggest threat to distributors today is near-expiry products, not stockpiling. Of course, some say that near-expiry products are caused by stockpiling, but I don't fully agree.
How harmful are near-expiry products? Let's put it this way: in FMCG, almost all categories face this problem, which shows the universality of near-expiry products.
- Near-Expiry Products Are Deadly
First, the severity of near-expiry products. A 5% exchange rate is normal, and 10% or more is not uncommon, especially for short-shelf-life products.
Second, the losses from handling near-expiry products are huge. In the past, handling was relatively simple: a few yuan off per item. Now, it's "buy one get one free," and some products even need to be destroyed. The volume is so large that some distributors organize large-scale events specifically to deal with it. Because handling near-expiry products incurs heavy losses, already thin profit margins are further compressed.
- Where Does the Harm of Near-Expiry Products Come From?
Near-expiry products are born from stockpiling. This view is widespread.
So, is it possible not to stockpile? No. Because if you don't stockpile, sales will immediately decline. Therefore, distributors would rather handle near-expiry products than stop stockpiling.
But why weren't near-expiry products so severe in the past, even though stockpiling existed? Because the relationship between manufacturers and distributors has fundamentally changed.
In the past, manufacturers and distributors also stockpiled at stores, but once goods entered the store, responsibility shifted to the store, and the store would worry.
Now it's different: no matter how much distributors stockpile, stores don't care, because they bear no responsibility.
On one hand, upstream is stockpiling; on the other hand, stores don't take responsibility. If upstream manages inventory improperly, near-expiry products will form.
I've also noticed that because stockpiling volumes are large, the cycle for manufacturer and distributor salespeople to visit terminals or make deliveries has greatly extended, leading to problems in terminal inventory management.
- What Are the Conventional Solutions?
Since stores don't take responsibility, the responsibility falls on upstream suppliers. Thus, conventional management methods generally include two measures.
First, require salespeople to strengthen terminal inventory management. For example, strengthen assessment of salespeople's exchange of goods, and enhance their sense of responsibility.
Second, handle near-expiry products well to minimize losses.
These two methods: the first is in-process management, the second is post-process management. They have some effect, but they are not fundamental solutions.
- New Thinking for Solving Near-Expiry Products
In the early days, occupying warehouse space and stockpiling had two main purposes: first, to occupy store funds; second, to occupy warehouse space. These were effective early on.
As promotional tier policies have grown, the scale of warehouse occupation has also increased. Therefore, we need to reflect.
I believe that occupying store funds is correct, but occupying warehouse space is no longer meaningful. Moreover, if a promotion occupies store funds, it's not necessary to push all goods into the distributor's warehouse at once, unless the product has an extremely long shelf life, such as baijiu.
The new thinking is: only occupy funds, not warehouse space. Through rhythmic delivery, ensure terminals don't run out of stock.
- New Thinking, New Methods
Before the 2017 Spring Festival, some distributors in a certain county accidentally discovered new thinking and methods for solving near-expiry products when using B2B.
The new methods have two key words: bus-style delivery, and only occupy the store, not the warehouse.
Bus-style delivery means scheduled delivery, such as once every 5 days or once a week.
Why bus-style delivery? Because bus-style means fixed-time, fixed-route delivery with a fixed cycle, allowing stores to accurately predict order quantities.
Only occupy the store, not the warehouse, is the new thinking. Because if you occupy the warehouse, stores don't worry. If goods are in the store, the store owner will worry about putting them on shelves; when shelves are out of stock, they will proactively restock.
Only occupy the store, not the warehouse, requires accurate prediction of order quantities. As mentioned earlier, because of bus-style delivery with a fixed cycle, order quantities are easier to calculate. This won't cause large volumes of goods to pile up in stores, and store owners won't allow it either.
The appearance of near-expiry products has always been a headache for distributors. How to handle them has always been a "long-standing problem."
In conventional methods, near-expiry products are mostly digested through bundling, special offers, square promotions, and other sales activities. These models are rigid and lack vitality, making it hard to get good market feedback.
Besides the above methods, during market visits, I've also found some distributors using creative approaches to handle near-expiry products, modifying conventional methods to complete inventory clearance more fully and effectively.
- Transform into promotional resources to enhance brand reputation
Product experiences like tastings and free samples, sponsorship as prizes for lucky draws, and charitable donations are common and effective marketing methods. These activities allow deep communication with consumers. Although they may incur some losses, the resulting brand reputation and potential customers are considerable.
- Strengthen terminal cooperation and deepen customer relationships
Distributors and terminals strengthening joint interaction not only achieves win-win results but also adds lubricant for subsequent cooperation, providing stronger guarantees for deepening collaboration. Transferring near-expiry products to terminals through activities not only increases terminal cooperation but also may lead terminals to offer discounts on store fees, compensating for the distributor's losses. Directly transferring near-expiry products at low prices to terminals in exchange for shelf fees is also a viable method.
- Enhance employee welfare and strengthen team cohesion
Handling near-expiry products through low-price internal purchases or holiday benefits can stimulate employees' sense of belonging, enhance their value and honor in front of family, and thus encourage them to integrate into the team psychologically, driving work forward with an owner's attitude and enthusiasm. Wu Bingdan introduced that distributors using their own brand's near-expiry products as substitutes for other welfare items is equivalent to promoting team development in a more standardized direction at lower cost.
- Expand sales channels, combining consumption and promotion
a. Introduce near-expiry products into closed channels.
The closed nature of special channels such as factories, military units, mining areas, schools, and unit canteens has become a unique advantage attracting distributors. The sales monopoly in closed spaces provides greater possibilities for rapid consumption of near-expiry products.
b. Pay attention to package deals suitable for products.
Many restaurants, bars, KTVs, and other venues now have package deals that bundle beer, beverages, and other food sales. Although consumers see this as "forced buying," for food manufacturers and distributors, it's also a new point for product promotion.
c. Explore consumer markets insensitive to production dates.
- Increase product profits and market share
According to surveys, the closed nature of special channels such as factories, military units, mining areas, schools, and unit canteens has become a unique advantage attracting distributors. The sales monopoly in closed spaces provides greater possibilities for rapid consumption of near-expiry products. "Once, we chose a high school to handle near-expiry Oriental Leaf products. The school had only one monopolistic supermarket. We transferred Oriental Leaf to the owner at a special price of 2 yuan per bottle, suggesting he sell at the regular price of 4.5 yuan per bottle."
Wu Ning said, "The generous profit drove the owner to move other drinks out of the freezer and only stock Oriental Leaf. Because of the hot weather, students only wanted cold drinks after class, so they had no choice but Oriental Leaf. In two days, 50 cases (750 bottles) were sold."
Besides ensuring large volume and fast speed, some closed channels can also reduce distributor profit losses to some extent. Wang Lei, a dairy distributor in Shanxi, introduced that because nearby mining areas provide workers with milk as a welfare benefit, the mining area became the best place for him to handle near-expiry products. Since prices were slightly higher than market promotional prices, it effectively increased his profits.
- Pay attention to package deals for suitable products
Currently, many restaurants, bars, KTVs, and other venues have package deals that bundle beer, beverages, and other food sales. Although consumers see this as "forced buying," for food distributors, it's also a new point for product promotion.
Jin Liming, a distributor in Nanjing, introduced: "We have long-term cooperation with fast-food companies because the meals ordered by companies often come with drinks. You can find suitable sales channels based on your product's target audience. For example, drinks targeting white-collar workers can find fast-food companies that deliver to office buildings. While handling near-expiry products, you also conduct precise promotion to the target audience, killing two birds with one stone."
Venues with package deals consume products in large quantities and at high speed, making them an effective way to solve near-expiry products. For many distributors, this is also a mysterious and attractive field.
However, it's understood that package deals significantly reduce distributor profits and are the last resort, not recommended as a first choice.
Yuan Yuchuan, a distributor in Xi'an, said that venues with package deals will press product prices very low, but the advantage is volume and speed, while also achieving centralized promotion to potential customers. Although different products have different attributes and target audiences, and sales channels may vary, the concept and approach of channel development are still worth learning from.
- Explore consumer markets insensitive to production dates
With the rise of health awareness and the increase in product choices, consumers' pickiness has soared rapidly, and production dates have inevitably become a focus. Therefore, exploring insensitive consumer markets is particularly important.
Cai Zhenwu, a distributor in Shenzhen, introduced: "Consumer groups in rural markets and wholesale departments are insensitive to production dates. You can quickly increase volume through promotional activities, and even sell at regular prices." In addition, there are stores specializing in selling near-expiry products that are very popular and have a loyal customer base. Cooperating with these terminals will also greatly boost the digestion of near-expiry products.
In summary, only through effective cooperation between manufacturers and distributors can the occurrence of near-expiry products be greatly reduced, and only then can efficient handling and profit maximization be truly achieved!
Source: Distributor's Home -END-