Scan the QR code in the image to register Many distributors face a common question: why, after years of working in the market, is my business still not growing? Growth is slow or stagnant? At the same time, they often cite the example of their neighbor Wang, who has been in FMCG for just a few years and has already reached a business scale of over 100 million yuan. What exactly is the gap? Today, let's analyze this together. -01- It might be a product issue In the 4P marketing theory, product ranks first. Without good products or a good product mix, a distributor cannot grow their market share. A distributor typically covers an administrative area such as a county or city, where the population is relatively fixed, and the number of related outlets is also relatively fixed. There are only two ways for a distributor to increase their share: First, horizontal growth: continuously expand your outlets, getting more outlets to sell your products. However, as mentioned, outlets are limited, so horizontal growth can quickly reach its ceiling; Second, vertical growth: continuously increase the number of SKUs in your service outlets, getting them to sell more of your products. In theory, this can be expanded indefinitely until your outlets become exclusive stores for your products. Of course, both of the above require that the products have circulation attributes. We can summarize the details as follows: 1. Product structure: a. Does the product structure have complementary advantages between peak and off-peak seasons? For example, combining water and noodles, selling water mainly in summer and noodles in winter; b. Does the product structure have complementary price points across high, medium, and low tiers to meet the needs of different consumer segments? c. Does the product structure have channel complementarity to meet the needs of different channels in the region, including online and offline channels? d. Does the product structure have profit complementarity to meet the needs of generating traffic and generating profit? 2. Product itself: a. If it's an innovative product, does it have innovation? Is the differentiation obvious or worth cultivating? What is the overall strength of the brand owner? b. If it's a follower product, does it have brand power? Price advantage? Profit advantage? Service advantage? 3. Product attributes: a. Is the product capacity sufficient, including sales capacity and profit capacity? b. Is the product's growth value high, both in the past and in the future? c. Is the market share large enough to have a relative competitive advantage? d. Channel fit: for beverages, for example, restaurants are best for large packages, while commercial areas are best for exquisite small packages. 4. Target consumers: a. Does the product have good consumer awareness in the regional market? b. Is it easy to establish a good consumption scenario for target consumers in the regional market? 5. Consumption habits: China is vast and diverse, with significant differences in consumption habits between the north and south. Therefore, when operating products, special attention should be paid to these differences, just like farmers planting crops: in the north, it's better not to plant rice. Summary: Whether a distributor's business can grow big, product selection is the first priority. If you choose wrong, your efforts are in vain. Especially for regional agents, when you reach the bottleneck of sales growth (when regional outlets are basically covered), you must be more precise in product selection and operation, striving to achieve a basic monopoly in the categories of your service outlets. -02- It might be a model issue Model issues are a common problem for many distributors. Some distributors have used a fixed model since the beginning of their business, with an unchanged salary system. Some distributors operate several brands, all run by the brand owners, turning the company into a "mixed platter." Initially, growth is rapid, but later, it cannot expand for a long time. What are the ways to improve the business model? 1. Business model: From an operational perspective, the development trend of a distributor's business is usually: communal pot (everyone shares equally) --- regional contracting --- eventually a partnership model. The reason is simple: the distributor's business is characterized by regional market operations, limited by geography; secondly, revenue comes from trade profits (earning the difference between purchase and sale prices), so there is no need to plan company development like a brand owner. When the business is small, there is no distinction between boss and employee; everyone works together. The boss is both a leader, a salesperson, and a delivery person. When it reaches a certain scale, the boss focuses on management and gradually delegates distribution rights. To stimulate employee initiative, the market can be divided into blocks and contracted to sales staff. Finally, when the business reaches scale, the boss's core job is to distribute profits. How to distribute? A partnership mechanism must be established. So, each stage requires a different model; the approach of "unchanging to cope with all changes" won't work. 2. Product model: I put the main product line into the model category. My understanding is that distributor products can be simply divided into three categories: a. Coverage products: Without outlets, there is no sales. The main function of coverage products is outlet coverage. They are hard currency in the circulation market, matching the attributes of most outlets. They are also the link between outlets and distributors, making them the most suitable for the main product line; b. Balancing products: These balance outlet coverage and operating profit. They are a supplement to outlet reinforcement and also a supplement to operating profit; c. Profit products: The source of distributor profits. Distributors must clearly define the positioning of these products, especially the selection and purpose of the main product line. Otherwise, there is a major problem with the product model, affecting growth. 3. Profit model: If a distributor wants to grow big, money is essential. Profit is the source of money. Many distributors find that with the same sales volume, the final profit can be vastly different. Therefore, an unreasonable profit model is also one of the culprits that stifles business growth. To determine if the profit model is reasonable, one must study the return on investment (ROI): ROI can reflect the distributor's comprehensive profitability, help judge the performance of the distributor's operations, and help optimize resource allocation. A. Operating profit: Mainly includes: a. Gross profit = sales (two key points: sales growth rate and sales target achievement rate) * gross margin, b. Other income = brand monthly, quarterly, annual rebates + process indicator achievement rewards, c. Operating expenses = coverage expenses (sales staff salaries + vehicle and driver costs + transportation costs, etc.) + sales expenses (channel costs + activity costs + return/exchange costs + material costs, etc.) + fixed expenses (management and administrative staff salaries + office and warehouse rent) + financial expenses (taxes + loan interest), so A = a + b - c. B. Operating capital: Mainly includes: a. Working capital (payments to brand owners, reserve funds), b. Accounts receivable (some channels receive goods before payment), c. Inventory occupation (product inventory backlog funds), d. Accounts payable (bank loans, credit policies from brand owners allowing goods before payment, prepayments received from downstream networks), so B = a + b + c - d. ROI = A/B. The higher the ROI, the stronger the distributor's profitability. In this equation, distributors need to seek a business model that infinitely expands A and infinitely shrinks B to match their growth needs. -03- It might be a senior management coordination issue Personnel issues are complex; managing people is much harder than managing things. This involves attitudes, skills, motivation, performance appraisal, and many other factors. But all factors boil down to two people: the distributor boss and their professional general manager. As the saying goes, "A weak soldier is one, but a weak general is a whole army." If these two people in a trading company fail to coordinate, market growth is just a fantasy. Based on my personal experience, consider the following aspects. 1. Trust and delegate: After selecting a general manager through judgment and assessment, the distributor boss should fully delegate authority and avoid interfering in management unless necessary. Otherwise, it will affect the general manager's performance and disrupt market strategy implementation. 2. Each does their own job: Under normal circumstances, the distributor boss's responsibility is resource input, including maintaining good manufacturer relations to access more brand resources, finding products that better meet the company's operational needs, and solving funding, warehousing, transportation, etc., needed for normal operations. The professional general manager's responsibility is management input, including market operations, team management, etc. The two should each do their own job, can advise each other, but ideally avoid overlapping management. 3. Timely replacement: For the professional general manager, a certain protection period and assessment period can be given, but if the company's operations show no improvement within two years, adjustments must be made. It's not that they are incompetent, but that their abilities do not match the company's current development requirements. In principle, it should be replacement rather than demotion or transfer. The reason is simple and doesn't need to be explained. At this point, the distributor boss must not be soft-hearted; they must be responsible for the entire team. -04- It might be a closed-door policy issue Many traditional distributors are not interested in the new operational models of recent years, and some even reject them. This is wrong. First, let me state my view: the product supply chain is: brand R&D --- factory production --- distributor agency --- terminal store sales --- consumer purchase. Earlier, B2B tried to optimize the supply chain by eliminating the distributor link to improve product supply and demand advantages. Now, community group buying is trying to eliminate the terminal store link to improve product supply and demand advantages. Essentially, they are trying to take others' jobs. We cannot say whether they will succeed or fail; existence is reasonable. Even if distributors don't embrace them, they should not reject them. They should understand the business principles and the continuously optimized supply chain system under big data, which can greatly help their own business. Final thoughts: There is only one bottleneck in a distributor's business. Break through this bottleneck, and your business will have significant development. If you find a bottleneck and break through it but your business doesn't develop significantly, it means you found the wrong bottleneck, or it's not the most important and urgent issue at hand. Another point to mention: I once met a child of about ten years old who was obsessed with his favorite food, thinking about it day and night, even unable to sleep. When the opportunity came, he ate until he was sick. He loved scrolling through Douyin and could sit for hours without moving, scrolling until it was dark. If parents don't guide such a child during their developmental years to learn how to control their desires, the future is predictable. And many of us distributors need to learn to control our desires, especially those in the growth stage. The ambition to grow big is strong, leading some to sacrifice profits in bloody competition with rivals, take risks by selling across regions at low prices (channel crossing), or damage their reputation by defrauding downstream networks of prepayments. These are all manifestations of an inability to control desires. Remember, you can't become fat by eating one mouthful. To grow your business, being solid and steady is the key.