Introduction: Digitalization is a double-edged sword. Author | Hai You Review | He Wen Layout | Wang Hai
With the proliferation and advancement of channel digital terminal software, more and more manufacturers are realizing the importance of terminal systems. Consequently, almost all brand owners require distributors to have their sales personnel use their own terminal mobile systems in daily work, and they enforce this through market expenses and personnel costs. Distributors are frustrated; representing a single brand carries high risk, and some brand owners can replace distributors as easily as changing clothes, with countless reasons for elimination.
Thus, the concept of "shared sales personnel" emerged. Under pressure from brand owners, distributors, favoring the brand's base salary and market expenses, require their subordinates to use multiple systems simultaneously. One salesperson uses multiple terminal system apps from different manufacturers on their phone. After entering a store, they spend more than half their visit time just taking photos, greatly reducing work efficiency. Salespeople suffer, distributors suffer, and brand owners suffer. Indeed, digital transformation has become a major burden for many FMCG manufacturers and distributors, and this must change!
Empathy is the foundation of digitalization
For brand owners, once the strategy and tactics for digital transformation are set, the most important next step is empathy between manufacturers and distributors. To achieve empathy, three issues need consideration:
1. Compatibility: Enterprise digital transformation is not just the brand owner's business; many aspects involve distributors. Regional mid-tier and above distributors also recognize the value of digitalization and have begun their own transformations. Can the two be compatible? If compatible, one plus one is greater than two; if not, they harm each other.
2. Distributor operational models: Distributors' agency brand businesses can generally be divided into three categories: First, exclusive operation, where over 80% of sales come from one brand owner's products; second, exclusive sales, where although multiple brands are represented, each brand has an independent operational team; third, mixed sales, where multiple brands are represented and one salesperson handles multiple brands simultaneously. Brand owners must fully consider the positioning of their products and the operational models of their distributors. Only by combining these can empathy be achieved. For example, some products have high coverage, high turnover, and high attention, like Nongfu Spring; some have high coverage, low turnover, and low attention, like daily chemicals and paper products. The digital empathy models for these products differ; blindly copying will cause problems.
3. Capacity: This includes sales capacity and profit capacity, which directly affect distributors' willingness to operate brand products. Digital transformation is a mutual agreement. If the brand owner does not hold significant weight in the distributor's mind, do not force additional workload; otherwise, not only will digitalization fail, but you may lose some distributors, making it not worth the loss.
Summary: Empathy is the foundation of manufacturer-distributor digitalization. I have seen too many brand owners unilaterally pursue digitalization, hiring industry experts for guidance, only to fail miserably. The problem lies here: for example, digitalization in beverages applied to condiments, or in alcoholic beverages applied to snacks. Failure is not a strategic or tactical issue, but an empathy issue—it does not fit the company's "national conditions," and it is not "empowerment" but "burden."
Balance is the means of digitalization
I have collaborated multiple times with several domestic digital system suppliers on brand owners' digital transformation. I provided the logic for digital implementation based on the brand owner's current situation, while system suppliers provided matching tools. During this period, I strongly felt that balancing the relationship, interests, management, and efficiency between brand owners and distributors is crucial for digital transformation.
1. Partnership: Establish a positive partnership where manufacturers and distributors cooperate, support each other, and are interdependent. Both parties should communicate effectively, share information and data, to ensure balanced interests and mutual trust. One thing is certain: digitalization is a common need for both. Cooperation is built on information sharing, and shared data can optimize production planning, inventory management, and supply chain distribution. Digital transformation requires all parties to share information and data to better understand market trends, consumer behavior, and supply chain conditions. However, in reality, there is always an invisible data "barrier" between manufacturers and distributors. Brand owners do not want distributors to see some data (distributors always see data that has been artificially "modified"), and distributors also need to keep some data confidential from brand owners (to justify expenses and meet targets, they "beautify" data). Over time, problems arise: mutual falsification, lack of trust, and digitalization goes astray. Therefore, balancing the partnership and achieving data transparency is particularly important. This involves not just opening data sharing permissions but also solving issues like assessment mechanisms and growth mechanisms.
2. Common interests: Manufacturers and distributors should seek common interests, such as deeply understanding market needs and jointly formulating and implementing digital strategies to promote business growth and market share expansion. Brand owners' interests are simple: stronger brand power, higher sales, and higher profits. Distributors' interests are also simple: better regional reputation, higher sales, and higher profits. At first glance, these seem highly aligned, but in reality, they are not. Regarding sales and profits, there is a game: brand owners want these to come from their own products (one-to-one), while distributors want them from all the products they represent (one-to-many). For example, a brand owner wants the distributor to cover more outlets with its products, ideally achieving single-brand channel intensive cultivation. The distributor also wants to cover more outlets, but this coverage differs from the brand owner's: the distributor wants to make outlets more refined, getting all their represented products into each store. However, salespeople have limited energy, so there is a need to balance the number of visits and in-store time. Single-brand operation can increase the number of visits (about 35 per day) but has higher labor costs; multi-brand operation can reduce labor costs but lowers the number of visits (about 20 per day).
So digitalization can dictate what distributors do, but how to balance the real interests between manufacturers and distributors is particularly important. If not balanced, there will be two sets of data: the distributor's own data and the data shown to the brand owner.
3. Efficiency and management: Digital transformation can improve production and supply chain efficiency. Manufacturers and distributors can jointly optimize business processes and systems, achieve synergy through digital technology, and reduce time and resource waste. They can also establish transparent management systems, appropriate communication channels, and management processes to ensure information transmission and problem resolution. Efficiency should not be achieved by sacrificing one party to benefit another. A common issue is that brand owners want certain data, which greatly increases the frontline work of distributor salespeople (APP operations rather than closing orders). Management should not be a zero-sum game (requiring distributors to strengthen management of your brand, thereby squeezing management of other represented brands). I will not elaborate further.
Summary: Laws cannot be violated, and human nature cannot be reversed. Manufacturers and distributors should establish long-term cooperative relationships, jointly advance digital transformation, set common goals and strategies, and support and cooperate with each other. Balancing the relationship, interests, management, and efficiency between brand owners and distributors is one of the keys to successful digital transformation.
Managing tasks, not people, is key to reducing distributors' digital burden
Many brand owners use terminal systems to constrain sales personnel to serve them, or to make "shared sales personnel" serve them more. This is a major misconception. The core of a terminal system is not excessive supervision and management (though people are inherently lazy, so supervision and management are necessary), but how to effectively improve performance. A common mistake by brand owners is that sales management departments spend too much energy on basic sales tasks like number of visits, visit success rate, transaction amount, working hours, in-store time, and travel time ratio, while paying insufficient attention to in-store actions, such as comparing current and previous in-store displays, which are crucial for product sell-through. When problems arise in the channel, salespeople report them upward, and then they solve them themselves. Once a real problem occurs, this becomes a vicious cycle with no solution. This is a common problem in the FMCG industry and a major flaw in management thinking. Managing people through terminal systems ultimately results in reporting outcomes; after spending a lot of money and energy, the conclusion is that you have confirmed your own failures and are falling behind. Managing tasks through terminal systems results in goal-oriented process management, identifying and solving problems in real time, and achieving ideal results. Of course, nothing should go to extremes; there must be priorities.
Summary: The logic of managing people through terminal systems is a tightrope for frontline workers, focusing on finding faults and preventing mistakes. The logic of managing tasks is a good helper for frontline workers, focusing on discovering and assisting with market operation difficulties, and achieving performance goals through effective incentives or policy support. The two are completely different in terms of frontline preference. The more rigidly personnel are managed, the more severe the manufacturer-distributor game becomes, the more frequent conflicts, and ultimately the heavier the burden on distributors.
Final Thoughts
Information technology has transformative power. Through terminal management systems, FMCG companies can significantly reduce communication costs, improve the accuracy and timeliness of channel and terminal data, and enhance sales forecast accuracy. They can also effectively control expenses and increase output. Additionally, they can help standardize operational processes, improve collaboration efficiency, and provide richer analytical bases for business decisions. These are all positive aspects of digitalization.
When implementing, it is important to emphasize empathy, balance, manage tasks more, and manage people less. Only then can we ensure that digitalization does not become a burden for distributors.