---
title: "Do Distributors Really Have No Value?"
description: "The sales position of distributors has been largely overlooked by marketing gurus, but it is often extremely important in actual market operations. This article argues that distributors still hold significant value and provides a step-by-step guide on how to develop and manage distributors effectively."
author: "海游"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-11-17"
categories: "Dealer Operations"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/84cofCaJrcYFNplQ01g_tQ"
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attribution: "New Distribution — https://xinjignxiao.com/en/articles/do-distributors-really-have-no-value-fe4a90ad/"
citation: "海游. “Do Distributors Really Have No Value?.” New Distribution, 2019-11-17. https://xinjignxiao.com/en/articles/do-distributors-really-have-no-value-fe4a90ad/"
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---

# Do Distributors Really Have No Value?

> The sales position of distributors has been largely overlooked by marketing gurus, but it is often extremely important in actual market operations. This article argues that distributors still hold significant value and provides a step-by-step guide on how to develop and manage distributors effectively.

**Foreword:**
The sales position of distributors has been largely overlooked by most marketing gurus, but in actual market operations, it is often extremely important. Over a decade ago, the concept of "channel refinement" emphasized improving service quality at terminal stores and removing intermediaries, that is, optimizing the channel chain and eliminating the distribution system. In recent years, the thunderous growth of online sales has further overshadowed the architecture of distribution systems. So, do distributors really have no value? Why do distributors remain active in the market?

Take our company as an example: we primarily deal in a single line of mineral water, with a strong direct sales team, robust logistics and delivery systems, and substantial customer resources. However, a few years ago, our business results did not reach the ideal peak. **Among the reasons, neglecting the establishment of a distributor system was the biggest loss.**

**-01-
Advantages of the Distribution System:**
**1. Distributors have better customer relationships.**
Distributors' sales force enables brand dealers to reach more small and medium-sized customers at a lower cost. Because distributors have a wider reach, they often gain more trust from terminal store owners than brand dealers do.

**2. Product sales are flexible and varied.**
By extensively contacting different brand owners, distributors can efficiently purchase and configure a variety of products, meeting all the product needs of terminal stores at once through "assorted goods" and "bundled sales," thereby improving the procurement efficiency of terminal stores.

**3. Efficient inventory transfer.**
Distributors maintain a considerable amount of inventory, reducing the storage costs and risks for brand dealers and terminal customers.

**4. Improved product delivery efficiency.**
Because distributors have ample inventory, they can deliver promptly to nearby locations and provide related transportation service guarantees.

**5. Reduced credit risk.**
For credit-based channels, distributors significantly reduce the risk of default through strong customer relationships and high-frequency visits.

**6. Better service.**
They provide services such as promotion, advertising, pricing, and market intelligence to terminal stores. "What exists is reasonable." Next, I will share the process of leading my team to develop distributors in first-tier cities.

**-02-
First, consider a question: What factors influence a deal? What is the subtext when a distributor rejects your product?**

**1. The need is not met for the distributor.**
For example, if the distributor already has multiple 2-yuan water products in their warehouse, your 2-yuan water adds nothing to their product mix. The distributor does not see any problem with their current products, so it is not worth buying yours.

**2. The fit is not right for the distributor.**
For example, whether in terms of price, packaging, or taste, your product is not what the target distributor wants, so they do not choose you.

**3. The trust is insufficient for the distributor.**
For example, for a distributor, taking delivery is not a one-off; they purchase hundreds or thousands of cases at a time. Products have shelf lives, and they fear taking risks, so they hesitate and find it hard to decide to buy.

The layout of distributors affects the full penetration of the market, especially for terminal stores that take only one or two cases at a time. These terminal stores account for about 20% of market volume. Their ordering pattern is low quantity and high frequency. Brand dealers, due to single product lines and delivery inefficiencies, cannot provide effective service. Thus, the short-cycle, high-frequency role of distributors becomes prominent, and the difficulty of developing them gradually increases.

**Based on my experience, the specific steps are as follows:**

**Step 1: Market distributor mapping phase, mainly to understand distributor needs and assess sales opportunities for your product.**
First, identify potential customers in the region based on your needs; second, follow up and visit to lock in customers who are willing to cooperate with you; then analyze the advantages and disadvantages of competing products and your own product to target customers; finally, strive to sign contracts. A careful inventory shows that distributors focus on only three points:
1) Whether your product's price, profit, taste, packaging, etc., are conducive to the smooth promotion of the terminal outlets they control. In other words, to what extent can your product meet my market needs?
2) Competitive analysis: What are the **differentiations and advantages** between your product and the distributor's existing products, and what is the market position of both? Simply put, by handling your product, what market position can I gain and how many terminal customers can I capture?
3) The customer themselves: **the ratio of input to output, operational efficiency, and personal gains**—what output and returns can I get from handling your product? The core of mapping is the distributor's focus points, which are also the entry points for product sales.

**Step 2: Provide practical product sales policies and a plan for subsequent assistance to distributors, alleviating their concerns.**
**Pay attention to these points during sales visits and communication:**
1) The economy is sluggish and business is difficult. When approaching distributors, be customer-centric, seek common ground while reserving differences, and address their sticking points.
2) Through communication about the distributor's current **product mix, profit structure, and terminal store structure**, discover or guide the needs that can create more profit in the future.
3) Based on your product sales policy and sell-through situation, provide follow-up solutions.
4) Establish common goals, obtain customer consent, and move to the next stage of sales. When providing product solutions to distributors, it is especially important to fully understand **the distributor's own customers, competitors in the market, and the distributor's own needs.**

**Step 3: Build mutual trust through efficient methods.**
Trust is what teams often call customer relationships. Once the relationship is good, as long as the price is not too far off, deals can be closed. A deputy general manager of our company once went to study a liquor company and said upon return: **"This company's sales culture is organized wining and dining."** This reveals the essence of customer relationships: ten conversations are not as good as one meal with drinks.

**So my suggestion is: To quickly build customer relationships, invite the target distributor for a drink. That basically solves 80% of the problem. If one drink doesn't work, then two.**

**Step 4: Reach an agreement, sign a sales contract, and specify sales target rewards.**
Here, I must first emphasize that all distributors dislike being constrained. That is, "I will try my best to sell, but don't set targets for me; however, I still want the corresponding rewards." In this case, you should first make a sale (close a deal), and then discuss the contract matters.

**In actual practice, negotiation generally has five outcomes:**
> 1) The product's brand power and product strength are too weak; you make complete concessions, only agreeing and giving, without gaining or demanding.
>
> 2) A compromise: when deadlocked, each side gives a little and settles in the middle.
>
> 3) Exchange conditions: meet the distributor's conditions while also obtaining your own demands.
>
> 4) Added value: for example, avoid the distributor's low-price demand, acknowledge the distributor's help in increasing sales volume.
>
> 5) No consensus reached; development fails.

**Negotiation generally has four stages:**
> **1) Full preparation.** Collect market information, assess the distributor's strength, set your ideal goals and bottom lines for price, policies, support, etc.
>
> **2) Exploration and mutual probing.** Seek common ground while reserving differences to narrow the gap in expectations.
>
> **3) Exchange of interests.** Do not easily agree to the distributor's interest demands; require a quid pro quo. Simply put, if the distributor asks for a price concession, in return you must require a certain level of store coverage, etc.
>
> **4) Closing the deal.** Seize the right moment during communication and immediately request payment and shipment.

**Step 5: Distributor risk control and long-term customer relationship maintenance.**
The two basic tasks of marketing are: **1. Develop potential customers by providing suitable products; 2. Maintain valuable existing customers by providing satisfactory service.**
Only by implementing long-term distributor relationship maintenance can you improve distributor loyalty and retention, and thereby enhance the company's profitability.

I believe this point is the most important: attracting distributors is easy, but nurturing them is difficult. Your product is just one of many that the distributor handles; they cannot devote all their energy to it. The risks in FMCG mainly stem from product shelf life and terminal relationship tension caused by slow sell-through.

**Therefore, after the distributor pays and receives goods, be sure to monitor whether the distributor follows FIFO (first in, first out), terminal display conditions, merchandising execution standards, and later implement in-store promotions to boost sales for outlets with slow sell-through.**

The core of distributor relationship management is managing the abnormal, not the normal. It is recommended to manage distributors from the following six aspects:
> **1. Establish a distributor database** to monitor the distributor's purchase, sales, and inventory at all times, even down to the terminal outlets they serve.
>
> **2. Through continuous follow-up visits,** fully penetrate the customers served by the distributor.
>
> **3. Build good interpersonal relationships with distributors** to ensure they remain loyal and are not swayed by competitors.
>
> **4. Continuously raise your service standards** to meet the ever-changing needs of distributors.
>
> **5. Handle every customer complaint seriously and properly** to resolve client issues and ensure they do not affect the distributor's business.
>
> **6. For lost distributors, be sure to thoroughly investigate and analyze the reasons** to ensure the same problems do not recur.

One more point: during the development of distributors, you must use industry knowledge and negotiation skills in a planned and prepared manner, so that distributors clearly recognize that they are dealing with a highly professional sales representative who understands the difficulties and solutions they will encounter in future operations, thereby winning their trust.

Shift the distributor's focus from price to the benefits they will gain. For example, your product can enrich the distributor's product mix, allowing them to earn more profit from limited terminal outlets, or through your product they can develop some channel customers, etc., thereby reducing excessive haggling over price during negotiations. Let distributors gain recognition and praise within the industry through communication with you.

**In conclusion:** The layout of distributors is actually the construction of a secondary market network. It is particularly important for the sales and maintenance of small terminal customers for first-tier products, as well as for the full coverage of brand owners and dealers for second- and third-tier products. It can be adjusted according to regional conditions to achieve market complementarity, ultimately leading to steady sales growth.

**Further Reading:**
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> ## **Defensive Battle of Strong Brands | Nongfu Spring's Dealer Reform**
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## Citation metadata

- Publisher: New Distribution
- Author: 海游
- Published: 2019-11-17
- Canonical: https://xinjignxiao.com/en/articles/do-distributors-really-have-no-value-fe4a90ad/
- Original source: https://mp.weixin.qq.com/s/84cofCaJrcYFNplQ01g_tQ

## Copyright and AI use

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Contact: zhaobo258@gmail.com · +86 158 5481 7671