---
title: "Distributors Without Digitalization Won't Go Far!"
description: "Will online platforms gradually replace distributors? I think this is a false proposition; distributors exist because they have value. Online platforms and network marketing won't have much impact on distributors, but one thing is certain: the distributor community will accelerate its shakeout, leading to a winner-take-all phenomenon. As the distributor community develops, competition becomes increasingly fierce, and in this process, they encounter many obstacles: chaotic product management, severe warehouse damage; declining market stock, rising transaction costs; unclear job performance, increased labor costs; severe e-commerce impact..."
author: "袁健"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2020-09-19"
language: "en"
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# Distributors Without Digitalization Won't Go Far!

> Will online platforms gradually replace distributors? I think this is a false proposition; distributors exist because they have value. Online platforms and network marketing won't have much impact on distributors, but one thing is certain: the distributor community will accelerate its shakeout, leading to a winner-take-all phenomenon. As the distributor community develops, competition becomes increasingly fierce, and in this process, they encounter many obstacles: chaotic product management, severe warehouse damage; declining market stock, rising transaction costs; unclear job performance, increased labor costs; severe e-commerce impact...

Will online platforms gradually replace distributors? I think this is a false proposition; distributors exist because they have value.
**Online platforms and network marketing won't have much impact on distributors, but one thing is certain: the distributor community will accelerate its shakeout, leading to a winner-take-all phenomenon.**
As the distributor community develops, competition becomes increasingly fierce, and in this process, they encounter many obstacles: **chaotic product management, severe warehouse damage; declining market stock, rising transaction costs; unclear job performance, increased labor costs; severe e-commerce impact, leaving them defenseless.**
Especially in the mobile internet era, the best way to overcome these pain points is to transform and upgrade digitally. **What defeats distributors and replaces them is never those internet companies or various models, but higher efficiency! Lower costs! Better service!**
The essence of digital transformation and upgrading is to reduce costs and increase efficiency; the core business philosophy is always "increase revenue and reduce expenditure"! Why do I say this? Let's look at a set of data:
From the data, it's not hard to see that even a 1% improvement in increasing revenue and reducing expenditure brings huge profit increments. How exactly should we increase revenue and reduce expenditure? **-01-** **"Value" customers are the effective customers!** The traditional distribution concept is that the more customers, the better, but I don't think so; it's not about quantity but value. For example, a customer in the daily chemical business is very large, mainly operating in supermarket channels, which usually settle on credit. A certain supermarket has already delayed payments, but the boss still has a fluke mentality and continues cooperation, but in the end, the supermarket runs away with the money, and 3 million in accounts receivable cannot be recovered. Such customers are encountered in business; would we want more of them? Of course not, so we need to carefully analyze whether each customer is a value customer and worth cooperating with. **1\. Expanding new customers** In the past, traditional channel customer acquisition was basically street sweeping, which was not only inefficient and low-yield but also prone to management blind spots. Distributors didn't know how many new customers were added in their operating area, leading to management blind spots and untimely, inadequate resource allocation. Now, with digital tools, efficient customer acquisition and timely follow-up management are possible. Taking Hai Ruan Cloud as an example, through cooperation with Amap, it has recorded information on 12 million terminal stores.
Salespeople select a region via their phones, and based on the company's business type—for example, if they deal in grain and oil, the target customers are restaurants and community stores—they directly select the customer type, and the system automatically displays target customers within the area.
Through such scenario building, salespeople find it easy to acquire customers, and efficiency and output greatly increase. Secondly, distributors can also use their phones to see in real time the number of potential new customers in the area, assign tasks to salespeople based on data, and set sales targets and rewards. **2\. Customer management** With new customer resources, a new problem arises: how to manage customers. Nowadays, most salespeople are post-90s, who like individuality and freedom, are hard to manage, and even quit on a whim.
When newcomers take over, they don't understand the customer situation, leading to payment disputes and poor customer relationship maintenance. This eventually forms a vicious cycle, making distributors more passive. Therefore, distributors must treat customer resources as assets, entering all customer information into the system, including transaction data. No matter who leaves, the data remains, and even with new handovers, business can be transferred quickly.
**3\. Customer analysis** Salespeople have limited energy; one person can visit at most 30 customers a day, and beyond 30, the effect is not obvious.
At this point, distributors have two options: one is to increase sales staff to serve all customers, which is costly and the output ratio is unpredictable; the other is to analyze, based on existing staff, which customers are valuable and which need to be eliminated. I believe most distributors will prefer the second option, choosing value customers to maintain and serve. This can be analyzed from five dimensions to determine if a customer is valuable: **First, product dimension: analyze customer sales data to see which products sell well in their stores, i.e., main products.** If the main products align with the company's business direction, it's definitely worth investing resources to push. **Second, benefit dimension: analyze historical and same-period data to see if the customer is making money.** This data is not simply sales minus costs, but must include returns, discounts, gifts, and how much expense support the distributor gave, and the proportion of manufacturer support in those expenses, all included in the analysis to finally get the customer's net profit. Based on these values, distributors make corresponding decisions.
**Third, efficiency dimension: use the customer's order cycle for maintenance and service.** For example, if a customer orders every two weeks, the salesperson can do weekly visits to explore potential order opportunities.
**Fourth, account dimension: classify accounts receivable, distinguishing cash and credit.** If it's credit, set expected payment time for each order, and salespeople can follow up promptly.
**Fifth, expense dimension: compare with similar customers to analyze the expense input ratio.** Some customers have high sales but also high expenses, even higher than similar customers; such customers need to be judged as to whether they are effective. Moreover, not only the distributor's expenses but also the manufacturer's expenses should be considered, calculating the distributor's net investment to be valuable.
**-02-** **The key to making money efficiently: gross profit analysis!** Distributors do business essentially to make money efficiently, and since they want to make money, profit analysis is indispensable. As bosses, distributors look at many reports every day, and the massive data can be annoying. In fact, distributors only need to focus on one piece of data: the sales and gross profit trend. Sales gross profit analysis should be done from top to bottom, breaking down step by step: department gross profit analysis—for office, sales, finance, warehouse—based on each department's data, distributors allocate resources and personnel;
Salesperson gross profit analysis: compare data, reward excellent employees, and improve those who are lagging with corresponding corrective plans;
Customer gross profit analysis: screen out key customers for resource investment;
Product gross profit analysis: make corresponding promotion plans for different products.
Through detailed comparison, distributors can drill down layer by layer, and no matter which link has a problem, it can be discovered in time. For example, if a product promotion is too strong, or a salesperson makes a price mistake, it can be traced through data.
After gross profit analysis, there is still the issue of product selection. Some brands only move volume without profit, and even not only generate no profit but also increase operating costs; such brands must be cut.
This also requires distributors to do multi-dimensional data analysis: first, look at benefits—how much profit the brand brings; second, look at efficiency—specific situations in sales, inventory, and procurement; third, look at growth—month-over-month growth; fourth, look at expenses—details of manufacturer and distributor investments.
Distributors often complain to manufacturers that they don't make money, but manufacturers are also puzzled about the reasons. Through such multi-dimensional brand data comparison, distributors and manufacturers can analyze the reasons together, and manufacturers will view it fairly and proactively invest resources to help distributors do well in the market.
**-03-** **Digital empowerment management** In the last two years, the entire FMCG industry has been talking about digitalization. In my view, the best way out for distributors is to transform and upgrade digitally. As times develop, distributors need to do more than just sell goods; they also need operations. Relying solely on human drive makes it hard to achieve true refined management. Instead of wasting a lot of resources and personnel, it's better to put time and effort into digital construction and rely on digital channels for complex management. Through digital tools, customers, brands, business, and management become quantifiable and visual.
Digital upgrading for distributors is to integrate customers, brands, business, and management into one, creating a complete system loop to help distributors develop rapidly. **First, internal connectivity: establish an internal integrated management system, connect all people, finances, and materials, achieve data sharing, and eliminate information asymmetry.** Minimize unnecessary data integration between multiple systems, enabling mobile processing of business anytime, anywhere.
Because fragmented time will increase in the future, mobile processing is definitely more efficient than returning to the office to use a computer. **Second, external links: connect with upstream manufacturers, open some data query permissions, and strive for more market expense support.** Manufacturers definitely need our data, and they will greatly support distributors in doing this; of course, the extent of data permission opening is set by you.
Multi-dimensional, three-dimensional assistance helps enterprises comprehensively reduce operating costs, scientifically and reasonably purchase, optimize inventory occupation, quickly inspect and deliver, present goal achievement in real time, accurately calculate profits, focus on capital turnover, and use real-time data to predict the future, improving overall work efficiency.
Connect downstream terminals to achieve product online, order online, reconciliation online, and data online.
**Third, precise accounting: instant calculation: make data transparent and controllable, discover problems in time, solve them, and reduce business risks; accurate calculation: let data speak, providing a basic guarantee for enterprise development. Only by calculating accounts clearly and timely can decisions be made in real time.**
**Fourth, intelligent algorithms: pre-warning/suggestions: automatically push through data models, changing from "people looking for things" to "things looking for people"; in-process control: provide rich data analysis support when business occurs, making decisions easier.**
Find patterns through data, and compare with historical data year-on-year and month-on-month to help make decisions. Change from people looking for things to things looking for people; all work is completed by the system, and distributors transform into service providers.
**Final words:**
"The road is long and arduous, but if we keep going, we will reach the destination!" This applies to distributors as well. The process of digital transformation is bound to be full of obstacles and take a long time, but if we persist, we can secure a place in the wave. **Author bio**: Yuan Jian, founder of Hai Ruan Technology. Anhui Hai Ruan Information Technology Co., Ltd. is a software provider focusing on "internet technology + enterprise informatization." It has been certified as a national high-tech enterprise and dual-software enterprise, with more than 30 patents and software copyrights. The Hai Ruan Cloud system can help FMCG distributor enterprises deeply optimize comprehensive management of logistics, information flow, and capital flow, from PC to mobile, from offline to online, from front office to back office, from purchase and sales to joint operations, from promotion to distribution, as well as expenses, shopping guides, and all aspects of management.
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