Introduction: In the industry, many distributors work hard all year round, only to find that their efforts seem to be in vain. Where have their profits gone? Not to the manufacturers, nor to the consumers, but still in the hands of the distributors themselves! However, to secure these profits, distributors need to strive for excellence, manage diligently, and continuously explore profit-making paths that suit their own circumstances.
Distributors Lack a Concept of Profit Phenomenon: Some distributors only have a concept of the price difference between purchase and sale, leading to a weak awareness of costs and expenses. Often, profits are eroded by uncontrolled costs and gradually rising expenses. Profit is the sum of operating revenue minus all costs and expenses, but after deducting costs and expenses, they find that they are operating at a loss. As a distributor, having some financial knowledge is essential, at least to accurately grasp profits and expense expenditures; otherwise, how can one manage a business with daily cash flows of tens of thousands or even hundreds of thousands?
Distributors Prioritize Market Share Over Profits Phenomenon: Distributors are under constant pressure from their position in the market, squeezed by upstream manufacturers, peers (who are rivals), downstream customers (secondary wholesalers or retailers who are no longer loyal to a single source), and emerging channels. At the same time, due to their small scale and limited risk resistance, they often have to reinvest the profits they have earned back into competition. Few distributors look ahead, turn enemies into friends, and integrate resources from all sides for mutual benefit or alliances. Malignant competition disrupts the market, and without win-win outcomes, it is definitely a lose-lose situation. Comrades in the same trench, why not shake hands and make money together?
Distributors Reap Few Benefits from Management Phenomenon: It is often said that "efficiency comes from management," but many distributors fail to achieve this. Poor receivables management, not collecting what should be collected; poor price management, prices getting lower and lower, profits getting thinner; poor personnel management, income not proportional to expenditure; poor expense management, arbitrary spending without bookkeeping; all these management deficiencies lead to shrinking profits! Learning some management knowledge and hiring professional managers are essential.
Excessive Friction and Losses in Various Links Phenomenon: The internal system is not harmonious. Stocking goods that should not be stocked now ties up a large amount of capital and may cause stockouts of other best-selling products. Vehicles frequently need repairs, incurring significant maintenance costs, and if there is a major accident like hitting someone, it is even worse. Product damage is severe, with many breakages, and manufacturers do not provide subsidies. Products are often lost without knowledge, and there is no way to account for them. Slow-moving products have to be sold at a loss. Warehouses are not protected against fire and theft; a single fire could wipe out years of accumulated savings, and ten years of hard work would not recover the loss! With such occurrences, let alone profits, even costs may not be recovered!
Look one step ahead, think one step ahead. Pay attention to the coordination and thoroughness of internal operations.
- Limited Marketing Skills and Ignorance of Promotions Phenomenon: When the maximum investment should be one yuan, they impulsively invest three yuan; when they should wait and see without promoting, they slash prices; they do not know how to develop new markets but prefer to fight in the most competitive areas. Although distributors are flexible in operations, they often lack systematic approaches. They often make decisions by "shooting from the hip." Even when considering problems, they are one-sided. For example, when competitors lower prices, they do not know that blocking terminals might be a better strategy.
Learn from manufacturers and absorb advanced experiences, or participate in relevant marketing training.
- Lack of a Rational Product Portfolio Phenomenon: Without a rational product portfolio, there is no profit structure. Distributors search for new products every year, but even if they find a good product, it may not be the best match with existing products, nor a product line that maximizes profits. For example, selling high-end furniture while also selling essential mattresses; holding several famous brands but none are profitable, and there is no high-margin product (pure physical labor)...
Products are important, but the product structure is even more important. Find a golden combination of product portfolios.
- Inability to Extract Profits from Soft Services Phenomenon: This is the biggest reason for unsatisfactory profits! Current distributors have weak service awareness, with insufficient understanding of consumers and inadequate service to downstream customers. Either they are sedentary merchants who do not deliver, forcing secondary wholesalers or retailers to pick up goods themselves; or they do not accept returns or exchanges, causing economic losses to consumers or downstream customers; or they deliver untimely...
As intermediaries, service is the most basic business philosophy for distributors. Service is also a magic weapon for distributors to quickly gain a differentiated advantage.
Source: Distributor Trends