**Don't Fight the Trend—Give the Terminal Back to the 'Distributor' Excerpted from Mr. Wei Qing's upcoming new book "Regional Market Increment Model" This article is reproduced from Mr. Wei Qing's public account: Wei Qing Teacher I. Background: Three Upgrading Trends in the FMCG Industry Nokia, Kodak... too many cases have occurred in recent years. Don't fight against trends; trends are "God's will." Going against the will of heaven is doomed to tragedy; heaven will take you. In the FMCG industry, there are several trends to be careful about. 1. Sales Interface Upgrade: FMCG is temporarily less impacted by e-commerce, but... The trend is irreversible: e-commerce's transformation of traditional commerce has been magnificent. FMCG products, due to low unit price (leading to high distribution logistics costs, e.g., rice, flour, beer), short shelf life (e.g., fresh produce, frozen foods, short-shelf-life fresh milk), impulse buying (e.g., street-side beverages), and closed consumption scenarios (e.g., beer, more often consumed in catering channels), are relatively less impacted by e-commerce. This has led some FMCG companies to feel that "e-commerce will not pose a threat to us." But look at the proportion of e-commerce in retail sales in developed countries, and the "servile" terms offered to consumers by e-commerce in Japan, Germany, the US, and the UK: discounts, trials, 30-day unconditional returns, credit payments... Look at China's nationwide mobile phone addiction; even a fool knows that e-commerce provides new convenience, new market space, new shopping experiences, and new aesthetic pleasure. The trend is irreversible. Pan-FMCG products are more heavily impacted: paper products, diapers, sanitary napkins, milk powder—these "pan-FMCG" products (with strong purchase planning, long repurchase cycles, consumption scenarios at home, light weight & high unit price offsetting freight) will quickly become a split between online and offline sales. Convenience stores will instead see a boom: e-commerce hits hypermarkets hardest. Community convenience stores, on the other hand, will see a small peak. Suggestions:

  1. Regardless of the current e-commerce sales in your industry, companies should plan ahead; e-commerce traffic, conversion rates, sales, and influence, like Weibo followers, take time to accumulate.
  2. The more mature the industry, the less likely e-commerce will give you a miracle opportunity for speculation. Celebrities post a few Weibo messages and get tens of millions of followers. Losers spam their Weibo and get few followers, and even get reported and banned. Solidly do offline physical distribution, brand promotion, and product experience. If the brand is strong and the product is great, doing online e-commerce will yield twice the result with half the effort; otherwise...
  3. FMCG has high distribution rates, and the chain effect of price cuts can be deadly. Differentiate online and offline products as much as possible.
  4. Pay attention to the construction of small and medium terminal convenience store channels. But overall, online channels divert sales, offline per-store output decreases, and terminal costs rise. Therefore, for intensive cultivation of small and medium terminals and convenience stores, manufacturers must control costs. 2. Industry Upgrade: Moving Toward Health Concepts: Jack Ma said: "We believe that in ten years, China's three major cancers will plague every family... I worry that we work so hard, and in the end, all the money we earn will go to medical bills." I feel the same. Cancer was once a rare misfortune. But today, due to various well-known reasons, almost everyone's circle of relatives and friends has cancer tragedies. Consumers have become like startled birds; people's attention to "health," "non-toxic," and "safety" will be the primary consumption driver. At the same time, industries that sound unhealthy, or are "rumored to be unhealthy," such as high-sugar, high-salt, high-fat... like carbonated drinks, canned fruit, and even the traditional MSG industry... the decline of these industries cannot be reversed by a single company or a brilliant sales director. Suggestion: Industries must transform early and move toward health concepts. 3. Price Band Upgrade: Marketing Returns to Product Value Competition: Why are the dark horse brands that suddenly emerged in recent years all high-priced products in their categories? First: Fear of various product scandals has bred a consumer psychology of "judging quality by price, buying peace of mind." Second: Operating costs for terminal stores, such as rent, utilities, and labor costs, continue to rise. This has pushed the mainstream consumer price band up rapidly. Third: High prices can support marketing expenses: On a three-meter diving board, if you don't know how to dive, as long as you're bold, you can also do a somersault—there's plenty of space, right? If your product is still in the "low price band," it's not a question of whether you're doing well, but a question of life and death—perhaps soon you'll be abandoned by the market as that price band disappears. Suggestion: Products and price bands must be upgraded in tandem. Relying solely on marketing to create high-end product concepts is increasingly difficult. This is an era of self-media, an era where consumers can give you bad reviews, and even an era of no-reason returns. Price bubbles created by hype will burst quickly; the core competitive focus of marketing will tend toward genuinely good products and consumption experiences. II. "Reverse Gear": Give the Terminal Back to the Channel A very powerful MSG company said: "I saw it early on—we had to transform to terminal sales and upgrade products to chicken essence and compound seasonings. But most of our old distributors are 'circulation-oriented': they're best at waiting for the factory's promotional policies and then pushing inventory to the channel. They're not good at adding people and vehicles to improve terminal quantity and quality. They're even less good at new product promotion. E-commerce? They don't even know what e-commerce is." Another powerful canned food company said: "We know canned food won't last long, and we've already used our raw material and industry advantages to transform into healthy juices. But making high-concentration juice requires a new channel—catering. Our old distributors have no catering channels at all. As a result, we put products in supermarkets, but the outlet type is wrong, and they simply don't sell..." No matter how powerful e-commerce is, the FMCG industry cannot do without distributors' physical distribution. Companies grasp the industry trends mentioned above, enter e-commerce, launch new categories, or upgrade price bands. But performance is poor, so they train, "discipline" employees, change directors, hire consulting firms... a lot of fuss, but to no avail. Actually, where is the root? The old distributor team that grew with the company simply doesn't have the channel network/capital capability/visit operation capability/sales interface. To complete the upgrades mentioned earlier, companies must force the distribution channel to update, either by cutting off the distributor channel and replacing it entirely (which is obviously too risky), or by navigating a winding path to enhance the operational capabilities of existing distributor channels. In recent years, the training orders I've received have also changed. Previously, companies invited teachers to train factory personnel. Now, more companies are inviting teachers to tour the country to train distributor bosses, distributor operators, and distributor sales reps. The training topics that company sales managers are now interested in are "how to assess distributor employees to make them do well at the terminal." There's a reason for this. I have work experience at both Master Kong and Coca-Cola, and I constantly receive information from old colleagues that even big brother companies like Master Kong and Coca-Cola are controlling the staffing of their dedicated terminal sales reps, encouraging distributors to add people and vehicles, while also paying to assess distributor sales reps, hoping to "expand and incorporate the puppet army" and use distributor forces to do terminal work. Isn't this driving in reverse gear! Back in the day... Master Kong's channel intensive cultivation, Coca-Cola's 101 system... were similar: distributor regions and channels were subdivided, manufacturers sent sales reps on route visits to key terminals, distributors provided delivery services and did marginal network distribution. The market was "in the manufacturer's hands, in the manufacturer's heart, and in the distributor's eyes. The manufacturer controlled the commercial flow, the distributor provided capital flow and logistics, and if you didn't obey, you'd get 'people flow'!" Now times have changed. This "channel intensive cultivation model," once revered by the industry, started from humble beginnings and ended in the wilderness, gradually declining.
  5. Labor law... minimum wage... social insurance... labor shortage... corporate labor costs continue to rise. Online e-commerce diverts sales, and per-store output at terminals will be diluted. Relying on a human wave tactic with tens of thousands of sales reps running terminals will become increasingly unsustainable for manufacturers.
  6. The drawback of channel intensive cultivation is that the principal works while the subordinate is idle: the distributor is disabled—the distributor becomes a passive order-taker and delivery service, selling 1,000 boxes a month, of which 900 boxes are orders taken by the manufacturer's sales reps. In many markets, 1+1 is actually less than 1 (after the manufacturer sets up a sales office, sales and profits actually decline compared to the distributor era). This cost and sales loss is even harder for companies to bear. It seems that reversing gear is the choice of the times, and it's unavoidable. III. Current Situation: The Primitive Management State of Distributor Employees A distributor from a prefecture-level city boasted to me: "Teacher Wei, you can rest assured about my area. It's such a small area. I have 49 vans running. I'm not using a comb; I'm using a fine-toothed comb to comb the market. It's absolutely detailed." Is 49 vans running in a small city enough? It sounds absolutely enough. But think carefully: will these drivers go out and "run big stores, not small stores," "only run familiar old stores, not unfamiliar new stores"? Will they say "that place is under road construction, I'm not going"? Will they say "that place is too far, I'm not going; troublesome stores that need exchange or customer complaint handling, I'm not going"? Will they "cheat on fuel costs, repair costs, steal goods, do private jobs, carry their own goods to sell on the side"? Will they "misappropriate terminal payments, forge a terminal IOU and submit it, or even directly abscond with the money"? Will they "know in their hearts that if they sell 8,000 yuan of goods in a day, they can find a place to play cards? Do you really think they'll run around outside all day in the dog days of summer?"... During class, a student joked that these guys "are lazy, steal goods, steal fuel, and... steal people." "Nine out of ten drivers are bad, and one steals fuel to sell." It's not that we are cynical; management is, by nature, "assuming employees are bad." And the previous assumptions are not imaginary; except for "stealing people" as a joke, the other assumptions are widespread. In the FMCG industry, distributor salespeople and delivery workers are currently at the bottom of the industry, with low wages, poor benefits, uneven quality, and some have "a driver's license as their highest education." The vast majority are assessed by the boss on "sales commission," with little training and no follow-up checks. The result... The logic is simple: the boss says sell 1,000 yuan and I'll give you 5 yuan commission; if you don't sell, I'll "kill your whole family." I'm not stupid; I'll definitely sell old products that are easy to move, run big stores that can take goods, and old stores... Fully establish customer files? Visit terminal stores completely according to routes, not just cherry-pick big stores? Also do in-store merchandising and handle customer complaints? Also manage abnormal terminal prices and execute terminal promotions well? Are you crazy? How much money do I make a month? I have one goal: turn the goods on the truck into cash as fast as possible! And then? The manufacturer's channel intensive cultivation can no longer be pushed. If Foshan is assigned to a distributor, and Foshan has 5,000 terminal outlets, the distributor's people always run the 2,000 stores they're familiar with. There are 3,000 stores that have never been seriously visited. And then? Will those 2,000 old terminal stores close, shut down, change business, or stop selling your goods due to poor service, or be poached by competitors...? Old stores are being lost, and new stores aren't being developed. The terminal "plate" keeps shrinking, and that's "serious injury." This is not alarmist. This is the current state of management and assessment for 99.99...% of distributor employees in China's FMCG industry. IV. Path: How to Use Distributor People to Do Terminal Work. How many salespeople does a manufacturer have nationwide? How many salespeople do distributors have nationwide? In all FMCG companies, the ones who actually complete sales, delivery, and settlement are not manufacturer personnel, not distributor bosses, but distributor salespeople. However, these "frontline productivity" people have always received little attention. Their assessment and management state is primitively shocking. Improving the work efficiency of these people is a direct boost to sales. More and more companies understand this and extend their "claws" to these people. At first, distributor employees found it fresh, but after more, they got annoyed. Once after class, a student (a professional manager of a top-tier distributor at the time) told me: "Every manufacturer wants to brainwash my brothers. The lectures are vague and useless, and they delay our selling. My brothers are scared of listening to lectures. I'd rather become a stone bridge, enduring 500 years of wind, 500 years of rain, 500 years of sun, just to ask the manufacturers to stop making us listen to those crappy lectures!" Besides training distributor people, it's more important to manage the assessment of distributor personnel. Distributor bosses don't manage selling; they manage purchasing, and they manage the first purchase (whether a product sells well, bosses often only hear from their subordinates). The real sellers are distributor salespeople. Employees always do what you assess, never what you hope. This saying is 100% apt for distributor salespeople. Manufacturers are gradually reducing funds for channel intensive cultivation and using resources to assess distributor bosses and distributor employees, achieving the market indicators the manufacturer wants. This trend has not only appeared but is becoming common practice. How to improve the assessment of distributor employees? This topic is too big to detail here. It's nothing more than modules like "split-item sales assessment," "progressive achievement rate assessment," "period assessment," "expense assessment," "process assessment," "special project rewards and penalties," and "broadband compensation." These knowledge points have been well covered by predecessors. I won't elaborate, but based on my own operational experience, I'll highlight a few key points. 1. First, change the distributor's "sales commission" for employees to "split-item commission." Otherwise, new products will be hard to sell. This is an entry point that distributors are more likely to accept, and it's an urgent and important matter. 2. "Process assessment" sounds nice but is difficult to promote at the distributor level. Distributor bosses are necessarily short-sighted, and that's not blameworthy. The manufacturer's manager talks eloquently to distributor sales reps about process indicators and rewards, but when they go out, the distributor boss says, "If you don't sell 10,000 yuan today, don't come back." That ruins everything; the distributor's drivers and salespeople go out and behave as before. 3. The interest chain must be connected. The manufacturer sets up a terminal census team to sample or fully inspect terminal performance periodically (commonly quarterly), and issues a "terminal building reward and penalty special fund" to distributor bosses and manufacturer managers. Only when the interests of distributor bosses, manufacturer managers, and distributor sales reps are aligned, and all strive for process indicator rewards and assessment resources, can the interest chain be connected and process assessment be pushed through at the distributor level. 4. Terminal data census is cumbersome to implement. Some companies hire third parties to census terminal data (e.g., home appliance industry). Some companies have fewer terminal outlets, and the 28 principle is obvious; manufacturers directly inspect key terminal performance (e.g., diaper, milk powder industries). Some companies have many outlets (e.g., beverages), so manufacturers can't census everything; they let local areas self-check, and manufacturers spot-check and verify. This laziness can't be avoided; if terminal performance data isn't in the manufacturer's hands, terminals can't be done finely or well. 5. Step by step, cater to their preferences: Some manufacturers go crazy after listening to lectures and apply the full set of assessment plans to distributor employees. The result is definitely that everyone runs away—these people haven't been formally managed before; screws must be tightened gradually. Whether the distributor boss genuinely cooperates is the key to whether the "distributor employee assessment project" can be pushed through. Manufacturers and distributor bosses care about different issues. As shown in the figure: First quadrant: Both manufacturers and distributor bosses care about, e.g., sales, item structure, profit... Second quadrant: Distributor bosses directly care about, while manufacturers indirectly care or don't care, e.g., accounts receivable recovery, team stability... Third quadrant: Neither distributor bosses nor manufacturers care much about, e.g., distributor housekeeping, meeting discipline... Fourth quadrant: Manufacturers directly care about, while distributor bosses indirectly care or don't care, e.g., various terminal building, process indicators, market service... From which quadrant should manufacturers penetrate and gradually take over distributor personnel assessment? Of course, first cater to their preferences, starting from the first and second quadrants that distributor bosses care about, and gradually transition to the fourth quadrant. 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