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Just as between a man and a woman, from acquaintance, falling in love, to entering the palace of marriage, some couples grow old together, while others quickly reach the brink of separation. Many people like to compare the relationship between manufacturers and distributors to that of a man and a woman, and there is some truth to this analogy. The relationship between manufacturers and distributors also goes through a process of acquaintance, falling in love, and entering the 'marriage' hall. Some can continue to cooperate well, while others inevitably face a 'marriage' breakdown and part ways early. So, under what circumstances does the manufacturer-distributor 'marriage' break down?
Lack of thorough investigation and understanding before the 'marriage'. Many manufacturers lack strict standards and procedures for developing distributors. Under heavy sales pressure, many manufacturer salespeople will recruit any client who can pay for goods without deeper understanding, bringing them into the distributor network. Conversely, many distributors decide to cooperate with a manufacturer based on gut feeling and the exaggerated claims of the manufacturer's salespeople, without conducting proper research. After cooperation begins, they find they are not compatible, laying the groundwork for a future 'divorce.'
Resistance to change. Many distributors started their businesses early and accumulated rich experience that once helped them thrive in the market. However, as the market environment and industry landscape change rapidly, much of this outdated experience becomes an obstacle to their continued growth. Yet many distributors cling to their old ways, refusing to learn or adopt new business concepts and ideas, leading to a decline in their business and nostalgic laments about 'the good old days.' Manufacturers, however, cannot tolerate a distributor's business regression.
Lack of business planning and objective self-assessment. Some distributors operate on instinct, trying to do every kind of business, daring to take on any venture, and wanting to make money from everything. This results in scattered resources, and they end up failing at everything. When their main brand runs out of stock, they have no money to replenish it, ultimately frustrating the manufacturer beyond tolerance.
Inability to understand the manufacturer's strategic planning and market integration intentions. Due to intensifying market competition, many manufacturers are forced to restructure their distribution channels, segment markets, and compress channels, which creates conflicts for distributors. In the early stages of market development, manufacturers typically grant distributors large sales territories. However, due to resource constraints, distributors cannot execute fine market cultivation, leaving gaps for competitors. When manufacturers attempt to divide the territory, these distributors resist, sometimes even threatening the manufacturer's sales staff, leading to the loss of their distribution rights. For example, a distributor for Henan Baixiang Group in Fenyang originally covered the entire region with monthly sales exceeding 2 million yuan, ranking among the top three in Baixiang's customer sales. To counter the threat from Hualong, Baixiang conducted market research and found that the distributor's network could not cover the entire region, with many markets lacking product visibility. The manufacturer decided to split the territory, but the distributor refused to cooperate. As a result, he not only failed to receive compensation or retain any part of the territory but also lost the distribution rights entirely.
'Fickleness' or lack of brand loyalty. Some distributors lack loyalty to the manufacturer's brand. Even when competitors come knocking, they dare to take on additional brands, ignoring the manufacturer's warnings, which naturally displeases the 'main wife.' Some even try to be clever by using competing brands to pressure the manufacturer, saying, 'Look at what they offer me; if you don't match it, I can't sell your products.' They may also play both sides against each other. If their performance fails to meet the manufacturer's expectations, the end of the relationship is near.
Lack of legal and social responsibility awareness. In the early stages of market economy development, when the legal system was incomplete and market order was not established, some distributors accumulated capital by selling counterfeit and substandard products. However, as the legal system improves and the government intensifies market regulation, selling such products now carries significant risks. Yet many distributors, driven by profit, continue to sell counterfeit goods. If exposed, this can bring great uncertainty to the manufacturer's market in a region. If the distributor faces heavy fines or arrest, it could paralyze the regional market, and the manufacturer will not sit idly by. Therefore, in my training for sales staff, I always emphasize that clients lacking legal and social responsibility awareness should never be recruited as distributors. For example, in the Fuyang milk powder incident, many manufacturers' distributors were found to be selling blacklisted milk powder. The result was clear: these manufacturers' businesses in the Fuyang area suffered severe blows. Some distributors faced heavy fines, leaving them without working capital; others were arrested, halting business; and some went into hiding, causing business paralysis. The Fuyang milk powder market served as a harsh lesson for many manufacturers and distributors, influencing both the criteria for selecting distributors and how distributors should conduct business.
Failure to follow the rules. Main manifestations include: 1) Selling counterfeit versions of the manufacturer's products alongside the genuine ones; 2) Withholding or misappropriating promotional funds; 3) Bribing manufacturer's sales staff to jointly defraud promotional funds; 4) Malicious cross-region selling or dumping goods. Manufacturers typically do not show mercy to distributors engaging in such behaviors.
Disrespect towards the manufacturer's sales staff. Some distributors, having cooperated with the manufacturer for a long time and achieved certain results, may see the previous sales manager get promoted. They then show disrespect to the current sales manager, bypassing them to report directly to the boss or senior leaders, failing to communicate with the current manager, and even verbally abusing or attacking them, often saying, 'I'll talk to the boss or such-and-such leader.' This makes it nearly impossible for the current staff to work, and in desperation, they may resort to 'dragging you down with me before I go.'
Lack of risk assessment in business. Some distributors are attracted to high profits in other industries but fail to recognize that high profits often come with high risks. They blindly enter these industries, such as a snack food distributor venturing into liquor or beverages, or even pharmaceuticals, only to find themselves trapped. They fail to make money in the new venture and end up unable to run their existing business. For instance, a snack food distributor, frustrated by low profits and slow earnings, saw others making money in liquor and took out a loan plus his own 200,000 yuan to distribute a liquor brand. He sold the liquor but only recovered 50,000 yuan. The consequences are obvious. How could the original snack food manufacturer dare to continue doing business with him?
Lack of management awareness and poor management. Some distributors still operate in a state of ignorance: they don't know how much inventory they have, how much money they have, how many downstream customers they have, or where their money has gone over the years. I once joked to a friend in a market that I would work for free at a certain large, successful local business. The reason was that this business handled many manufacturers' products without any management: no warehouse keeper, and any salesperson could take the warehouse key, pick up goods, deliver them, and return the money based on their conscience. The boss had no idea how much stock came in daily, how much was sold, or how much should be collected. But from a manufacturer's salesperson's perspective, I would never choose such a client as our distributor. Later, I heard my words reached the boss, who then went to the opposite extreme: he and his wife moved their office from the storefront to the warehouse, becoming full-time warehouse keepers. In reality, how could a smart manufacturer continue cooperating with such an unmanaged distributor, or trust them to help win the battle?
As the market matures, the survival environment for many distributors is deteriorating. Not only are profits shrinking and manufacturers intervening more in the market, but manufacturers are also raising their standards for distributors, and new competitors are rising rapidly. Distributors face the risk of being eliminated by both manufacturers and competitors. This has made many distributors realize that having capital and experience alone does not guarantee a competitive edge; they too must undergo transformation. However, regardless of the changes, ensuring they have strong brands and the support of powerful manufacturers is a prerequisite for winning in competition. So, how can distributors coexist with manufacturers and grow old together?
First, before deciding to enter the 'marriage' hall with a manufacturer, conduct a thorough investigation and mutual understanding. Do not rush into it.
Eliminate yourself before others do; undergo transformation before being eliminated. This is an era of change, information explosion, and rapid knowledge renewal. Distributors must adapt to the times, proactively eliminate their shortcomings, learn advanced business concepts and ideas, and adopt modern management methods and thinking.
Learn to plan your business. I often discuss with friends that while there are many ways to make money in business, some money should not be pursued because we lack the capability to earn it. Just like corporate diversification, the desire to make more money in different industries often leads to scattered resources and premature failure. Distributors must plan their business carefully: determine how many brands their resources can support, how much working capital their main products need, how increased sales will affect transportation capacity, how much additional transportation capacity will reduce working capital, and under what conditions they can take on new manufacturers' products. Avoid overextending your resources, or you may find yourself unable to move before others eliminate you.
Learn to put yourself in the manufacturer's shoes and understand their strategic intentions and deployments. Fine market cultivation is an inevitable choice for manufacturers. Distributors must clearly understand market trends. On one hand, cooperate with the manufacturer in fine market cultivation; on the other hand, be willing to give up territories you cannot effectively operate. Do not bask in the pride of having a large territory. Many smart distributors now realize that with thin margins, the secret to making money is to focus on fine cultivation within a certain transportation radius, rather than driving hundreds of kilometers daily without cost accounting and then complaining to the manufacturer about losses. As a merchant, how to reasonably compress operating costs is your own business; the manufacturer is not obligated to bear your unreasonable costs that exceed the average.
Build loyalty to the manufacturer's brand. Manufacturers oppose distributors handling competing brands because competitors vie for the same consumer base. Many manufacturers explicitly state in distribution agreements or notices that distributors must not simultaneously handle competing brands, or they will face penalties up to revocation of distribution rights. Handling two or more conflicting brands inevitably scatters resources, which no manufacturer wants. It also leads to poor performance for all brands, leaving no manufacturer satisfied.
Strengthen legal awareness, social responsibility awareness, and risk assessment awareness. Strengthening legal awareness means, first, complying with relevant laws and regulations in business and not challenging legal boundaries; second, learning to use the law to protect your legitimate rights. Distributors must understand that a market economy is a legal economy.
Establish a good working relationship with the manufacturer's sales staff. Distributors must understand that a good relationship with the manufacturer's sales staff is a sign of healthy cooperation. Since distributors interact most with the manufacturer's salespeople, building good relations with them ensures they will do their best to provide service. Distributors who report everything to the boss or senior leaders will find themselves in a passive position, straining relations with the sales staff and gaining nothing, possibly even losing distribution rights. In large, well-managed companies, bosses and senior leaders do not interfere with the normal management activities of sales staff conducted according to company policies.
Follow the rules, build a trustworthy image, and establish your own brand.
Strengthen management, upgrade management practices, and quickly transition roles. Many distributors operate well when small but approach failure as they grow. The reason, like many manufacturers, is that management becomes a bottleneck; they fail to adjust management according to their scale. The management black hole acts like an invisible hand, mercilessly pushing distributors into rapid decline. When small, distributors play multiple roles: purchaser, warehouse keeper, driver, accountant, and salesperson. But when large, continuing this approach fails to meet development needs. In my work, I have consistently advised growing distributors to upgrade management and transition roles. Many distributors have reached the stage where they must operate like a company, even if not formally incorporated, and should establish necessary departments. Some distributors avoid setting up management departments due to concerns about labor costs, not realizing how much profit the management black hole has already consumed and how many opportunities have been lost.
Survival of the fittest will always be the theme of market economy development. China's unique national conditions mean that manufacturers cannot always bypass distributors to deliver products directly to end consumers, and distributors cannot survive independently without manufacturers. Therefore, both manufacturers and distributors must ensure they are the fittest to win. Distributors are relatively weaker than manufacturers in many aspects, so they must rely more on manufacturers. Thus, it is even more important for distributors to 'grow old together' with their manufacturers, especially the main ones whose products they handle. Do not wait until the 'marriage' breaks down to regret it.
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