Friendly reminder: Click the blue text above, “FMCG Distributor Professional Consulting,” to learn more about marketing and distributor internal management.
In today's channel-driven, terminal-focused market, distributors are strategic partners for manufacturers, and quality distributors are a scarce resource. Developing or replacing a distributor comes at a high cost. No legitimate manufacturer doesn't want to create win-win outcomes with distributors, and no legitimate manufacturer would casually drop a distributor. It's just that business is like a battlefield—there are no permanent friends, only permanent interests.
Recently, a reporter named “Zhang Zhang” called me: A distributor in Zhejiang was frustrated because, without any notice, the manufacturer transferred the agency rights to a new distributor after he had been representing the brand for just over half a year. Besides “raising a child” for someone else, he was also treated by retailers as a “fraud” without agency rights.
Then reporter Zhang Zhang recounted what the distributor, Mr. Wang (pseudonym), told her: Recently, when his salespeople visited stores, they found that retailers didn't believe he had the agency rights and were told that another distributor was already operating the brand.
Mr. Wang understands that as a company grows, it needs stronger distributors and may update its blood through a series of measures, survival of the fittest. But what angered him was that when he called the company's head to ask, the answer was denial. A few days later, the new distributor in the region told him to stop operating the brand. When he called the company again, they played “Tai Chi,” shifting responsibility, which made him doubt the company's motives.
“The company kept calling, demanding payment, and if we didn't pay, they'd replace the agency rights. The intention to raise money was obvious,” Mr. Wang said. He added that the agency situation in markets like Zhejiang and Jiangsu is very chaotic. In Zhejiang alone, there are five or six provincial and city-level distributors, covering Jinhua, Yiwu, Wenzhou, Taizhou, and Hangzhou, with overlapping regional markets.
Mr. Wang said that as early as March, during BXT's investment conference, the company had already “operated under the table” and signed a batch of new distributors. For old distributors, the agency policy was very harsh: the original region had to be handed over to the new distributor, and they could only operate a few areas in their city, with a monthly payment of 100,000 yuan. The new distributor also had to pay 100,000 yuan monthly for the larger region.
His reputation was damaged, and the tens of thousands of yuan he had invested earlier went down the drain. Mr. Wang planned to stop representing the brand, but another problem arose: he still had tens of thousands of yuan worth of goods, and the company demanded he digest them himself. “This isn't food that I can eat every day; I can't apply a bottle to myself every day.” With such poor after-sales handling, Mr. Wang was disheartened. Even one of his employees said, “With a brand like this, I have no confidence selling it.”
Miss Zhang Zhang posed a question to me: Why do manufacturers drop distributors? Generally, what are the situations?
Based on my years of experience as a manufacturer's sales manager, I've summarized that distributors being replaced or major distributors being downsized generally falls into six types.
1. Manufacturers paint a rosy picture to brainwash and raise money; distributors, greedy and gullible, lose money!
This point can be gleaned from the above case. To borrow Miss Zhang Zhang's words: I hope distributors and agents will be cautious and rational when choosing companies and brands, avoiding falling into the “money trap” designed by companies.
These manufacturers' sales managers think: “Whoever pays is the boss; I get commission only when I receive payments. Whoever gives me payments can be the distributor. Once the goods reach the distributor, I don't care how they sell to consumers. The company's idea is to raise money once, then switch brands, design a new investment policy, and raise money again. We don't care about the market's survival.”
2. The distributor has limited strength and slow progress; the manufacturer is “riding a donkey while looking for a horse,” wanting to latch onto a big shot.
This is a common practice of manufacturers that lack integrity and long-term planning. When many manufacturers launch products, they lack brand awareness and find it hard to attract ideal strong clients. To quickly achieve channel layout or complete payment tasks, they accept any distributor as long as they have money, which leaves hidden dangers for future cooperation. When the manufacturer gradually grows and the distributor can no longer meet the manufacturer's needs for local market development, and the manufacturer has the conditions to attract quality distributors, many dishonest companies won't support or help the outdated distributor but instead “go astray.”
These manufacturers' sales managers think: “Modern society values freedom of marriage. Following you has no future, so I have to pursue my own happiness, even if it means being Pan Jinlian.”
3. Channel optimization and integration: cutting off the distributor's weak channel.
General Manager Wei is the authorized general agent for G brand in Q region and has a good relationship with the factory's top management. He is optimistic about G brand and wants to make it the number one local brand, also hoping to use G brand to expand his distribution channels.
Wei's main strength is supermarkets, but G brand is a mass-market FMCG product, and wholesale distribution is its main channel. Since Wei took over G brand, all local supermarkets have entered, but the distribution rate in the circulation channel is less than 10%. The high costs of supermarkets have become unbearable for G brand.
To fully occupy the Q market, achieve deep distribution, and lower market costs, the G brand regional manager had no choice but to find another strong wholesale distribution channel agent, General Manager Li, and authorize Li the distribution rights for the Q market's wholesale channel. When Wei learned that his distribution rights for the wholesale channel had been cut, he felt his feelings for G brand were deceived and flew into a rage. To appease Wei, the manufacturer transferred the original regional manager (who had achieved rapid improvement after the channel split) and issued a public criticism.
The regional manager said: “If I let the client continue in the wholesale channel, I'm waiting to die; by cutting off the client's weak channel, I'm fighting for survival.”
Advertisement
4. Pursuing channel flattening or deep distribution: the manufacturer implements “feudal reduction.”
Company X's regional general distributor in Jiujiang market had monthly sales of only about 50,000 yuan, while in Pengze County, a small county with a population of nearly 300,000 under Jiujiang (the distributor there started early and cooperated directly with the manufacturer), monthly sales reached over 300,000 yuan. Huangmei County in Hubei, across the river from Jiujiang, had monthly sales of over 700,000 yuan. This shows that although the Jiujiang region had been operating for two years, it was no different from a blank market. The Jiujiang general distributor was a relatively strong local distributor with annual shipments of tens of millions. Initially, they were optimistic about X brand, but due to some leftover issues from earlier cooperation, the client refused to invest or build distribution channels. Even when the regional manager developed some sub-distributors, the general distributor's markup was high, and policies were not passed down, leaving sub-distributors with no room to operate and no motivation to work the market.
The regional manager, after multiple failed communications, got angry: “If you won't do deep distribution, then I'll flatten the channel!” Behind the general distributor's back, he opened county-level distributors one by one in the counties under Jiujiang, and within a short period, Jiujiang's market sales multiplied several times.
The regional manager said: “Manufacturers can't give up the whole forest for one tree.”
5. The pitiful must have something hateful: false expense reporting and market disruption—'cutting you is a no-brainer.'
QZ Trading is a relatively strong local company, representing strong daily chemical brands like Johnson & Johnson and Shanghai Jahwa, and is also a terminal channel distributor for BW Company. After a new regional manager from BW inspected the market, he revoked QZ's agency rights.
After visiting terminals, the regional manager found that QZ Trading reported 17 salespeople to the company, but only 10 actually existed. Of these 10 promoters, 7 were also working part-time for other brands. Moreover, the monthly reported salary for promoters averaged over 1,000 yuan per person, but the promoters actually received only about 600 yuan. Many stores applied for N-shelf and TG display fees, but the regional manager found only one store with a TG display, and according to the promoter, it had just been set up.
The regional manager also pulled sales data from some stores and found that actual sales were only one-third of what the distributor reported, and actual market sales were declining sharply. The regional manager wondered: where did the goods the distributor bought each month go? Only after calling the audit department did he learn that the distributor had been frequently complained about for cross-region dumping and had been punished multiple times by the company for this.
The regional manager said: “Smart distributors know how to better leverage manufacturer resources to build the market, but those who ignore the manufacturer's interests and sustainable market development, killing the goose for the egg to earn fees, can only be 'smart for a while.'”
6. Arrogant, not treating the manufacturer's manager as a “big shot,” forcing the manufacturer to “execute Ma Su with tears.”
Many experienced and strong distributors do not put the manufacturer's “spokesperson,” the regional manager, on an equal footing. They think the regional manager is just a factory worker, a young lad, or a woman with long hair and short insight. For the regional manager, the manufacturer's policies are not implemented, they don't receive respect, and distributors always use payments to demand policies, threatening not to pay unless given special support. If the distributor doesn't cooperate, the regional manager's work cannot proceed. When work becomes unsustainable, the regional manager will look for backup distributors, collect evidence of the existing distributor's violations and non-cooperation, and apply to the company for a change of distributor.
To borrow some regional managers' words: “Don't treat the village head as not a cadre!”
--------------------------------------
Like this article? Feel free to tap the top right corner to share it to your Moments;
About us: WeChat name: FMCG Distributor Professional Consulting Management Account introduction: 20 years of experience in FMCG distributor operations and management, professionally addressing distributor internal issues: We understand distributors better than manufacturers, and we understand internal management better than distributors. Senior marketing experts help your business grow.
Click “Read the original text” below to enter our micro-community for interactive communication and questions.
Learning and exchange QQ group: 344257092
Reply 1 to enter the micro-official website to view historical messages.
-----------------------------------------