Lao Chen has recently been losing patience with manufacturers' salespeople. Although he doesn't dare to lose his temper, he tries to avoid them whenever they come. Alas, the company wants him to distribute more and more new products. In recent years, he has accepted every new product that comes his way, yet his overall profits haven't increased! What's going on?

The company's salespeople always push new products with various reasons, saying that new products require high investment, have good competitive prospects, offer large expansion space, and promise high profit returns. You can't find reasons to refute them at the time, but in the end, things often don't turn out as expected!

Lao Chen feels it shouldn't be his fault: His network is already in place, and his expenses haven't increased significantly. Excluding factors like capital, transportation, personnel, and network, he thinks the main problem lies with the company's products!

Lao Chen once heard about the product life cycle theory. (I'm getting old and useless, in the decline phase of my life cycle!) Are the products I distribute also like me, in the decline phase or not in the profit phase? In other words, are they in the "useless phase"?

Maybe Lao Chen has a point? Let's first look at the product lines Lao Chen handles and then analyze them:

1. Beverages:

Facts: Lao Chen used to distribute several well-known international beverage brands. Although he never got rich from these products, they moved quickly enough to cover his expenses and leave a small surplus. This year, as the peak season approached, he introduced a new product from an emerging company (which everyone thought would sell like hotcakes because the advertising was bombarding consumers' senses and eyes!).

Thoughts: Lao Chen hoped to share costs among the major brands and use the new product to increase profits.

Analysis: The major brands only support costs and share some expenses, but they are not reliable sources of profit. In the beverage industry, it's fine to rely on one or two major brands to support the market network. However, these products are all of the same type; there's no need to distribute similar products from several companies simultaneously. One or two with good cooperation relationships are enough! Moreover, since they are not in the growth phase, they will never generate more profit. Also, because these are large companies, they demand higher sales targets, and the investment and expected profits are squeezed by competitors trying to meet sales targets, so profits may go even lower.

Additionally, large companies require distributors to operate more standardizedly, which increases distribution costs and invisibly cuts into profits.

As for the new product, it faced resistance from similar companies as soon as it launched. It never went through the growth and maturity phases and is already in decline. Profits haven't materialized, but all the investment is gone!

New product development in the beverage industry is endless, but few truly take off and have long life cycles in the growth or maturity phases. Recently, a product that was hot last year is already struggling this year. Distributors should understand the overall trends in the beverage industry. These products have short life cycles and are seasonal, so don't stock too much at once (companies always run promotions, so you don't have to worry about missing out if you wait). As the off-season approaches, clear out inventory in advance to avoid losses.

2. Beer:

Facts: Lao Chen distributes all categories from three international brands (over a dozen products) and over a dozen bottled products from two domestic brands.

Thoughts: For international brands, old products stabilize the market, and new products bring more profit. For domestic brands, new products help capture market share and gain advantages over competitors and better relationships with the companies.

Analysis: Let's talk about international brands first. They rarely launch new products, and when they do, distributors often have to pay for the initial costs and distribution themselves, then get reimbursed later. Also, these companies often set sales targets too high before launching new products. In fact, relying solely on distributors to promote new products is a mistake, and market results often fall short. Finally, because distributors' sales volumes are not large, the subsidies from the companies are very limited! So, even if new products are promoted, profits might actually decrease! Although international brand products have longer life cycles, whether in growth or maturity, distributors can't afford the hassle!

China's domestic beer market is volatile and unpredictable. A product that sells well today might be forced out tomorrow, making it difficult for distributors. One company might be promoting a product, but then it gets acquired by another, and expenses tighten! Distributors don't even know if another big company will come and acquire it later, causing chaos. So, the investment period for beer is getting longer and longer. When will the distributor's investment end? Also, domestic companies face fierce competition, and promoting new products is often a stopgap measure. If the companies aren't serious, can distributors afford to take the risk?

The life cycle of beer companies is a series of fluctuating curves, let alone their products! International brands take a long time to develop new products, and promotion is sometimes intermittent and unpredictable, so they rely on old products. Fortunately, competition for old products is not too intense. So, strengthen old products; for new products, work closely with the company, or you might fall into a trap. As for domestic brands, new products are often launched defensively in response to competition, and few succeed. Many die prematurely without a life cycle. It's better to stick with a few mature products and avoid new ones!

3. Baijiu (Chinese liquor):

Facts: Baijiu was originally sold as a sideline. Lao Chen buys from various general distributors.

Thoughts: Baijiu has high profit margins. When general distributors have new products, Lao Chen rushes to buy them, hoping to sell early and profit early.

Analysis: Major brands are monopolized by manufacturers who buy out stores, so there's little room for distributors to grow. As for new brands, although they boast high profits, they are actually unprofitable. They tie up capital, and after the salesperson visits once, they disappear, leaving a pile of promised invoices that no one will reimburse! If expenses and investments can't be reimbursed, it's a big loss! The life cycle of many new baijiu products can be described as "a flash in the pan." So, it's better for distributors to buy from other first-tier agents rather than directly from the manufacturer.

Summary: Distributors in the FMCG industry often sell beer, beverages, baijiu, and snacks. They tend to take on new products in a frenzy because they believe new products bring profits, and the more they take on, the more it won't affect their costs and expenses, and it might even improve their operational capabilities. In fact, they rarely think about whether each product has a reasonable product line and whether they should pay attention to and try to understand the new product's life cycle. Do all products follow a normal life cycle curve? Nowadays, new products are launched without rational market research and analysis. Many are like premature babies—malnourished or mentally deficient—and die prematurely. These products are endless and have harmed many distributors!

It seems that although Lao Chen distributes many products, his existing products are gradually reaching the "profit depletion phase," on the edge of profit decline. The new products he takes on either get eliminated before reaching the profit harvest phase or are "snail" products with high upfront investment and slow returns. So, more products, but profits don't increase!

So, how to solve this problem? Can we give Lao Chen a pair of "fiery eyes" to analyze and retain products that are at their profit peak? Product selection and retention is a huge project that can't be done arbitrarily, but we can offer the following for reference:

1. Product portfolio is important:

The product portfolio should consist of famous brands + profit products + coverage products, with no more than two products in each category. This is a product line system, and it should be planned in advance based on product life cycle analysis.

2. Try to distribute mature products from mature companies:

Even if new products appear in the market, it's better to start by distributing through other wholesale channels and observe market reactions before deciding whether to take them on. Don't be the "first to eat the crab." If you think you've gained an advantage by being early, communicate thoroughly with downstream customers before making a purchase decision.

3. Don't put all your eggs in one basket; cultivate products with potential:

Which products have potential? Don't just look at the current market; gather information from multiple sources and visit different market regions. Don't look for niche products, but rather discover "dark horse" products.

4. Shorten the investment period or push the time and resources back to the company:

Otherwise, don't take on such products (because if the company isn't responsible for product promotion, it's not responsible for the product's normal growth). The era of distributors single-handedly cultivating and promoting new products for companies is over. When taking on new products, involve the company more and seek more guidance.

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