The incremental business based on demographic dividends in the consumer goods market has completely ended, replaced by stock business. Since it is stock business, it implies a zero-sum game among market players. For FMCG giants, stock business tests not only their own internal capabilities but also their external partners, especially the distributors at the frontline who face the market daily and assist in business competition. Therefore, in recent years, we have seen many leading FMCG companies discussing empowering distributors, hoping to enhance their operational capabilities, reduce costs, and increase efficiency in the context of stock competition, sluggish growth, and rising costs, thereby achieving growth against the trend. Based on New Distribution's practical experience in empowering distributors and the industry cases we have observed, this article discusses how FMCG manufacturers should correctly empower distributors.
As the saying goes, "Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime." At present, no matter how high the rebate policies or how much expense investment is given to distributors, they will consider it as the brand's due investment in the market. However, improving distributors' operational capabilities can strengthen the depth of cooperation. Based on the improvement of a specific business capability, regional business growth can be achieved. Based on the direction of empowering distributors, New Distribution proposes three key strategies for empowerment: 1. Categorized Empowerment, 2. Benchmark Empowerment, 3. Co-creation Empowerment.
01 Categorized Empowerment
In the past, brand owners had a "hierarchical management" approach for distributors, basically setting different levels and honors based on sales volume. Different sales level standards were used to provide different market expense investments and policy support. Categorized empowerment is not based on sales volume but on the characteristics of market channels, empowering distributors by category according to the business needs of different markets. For example, in the O2O new retail format, in first- and second-tier cities, in categories such as daily chemicals, condiments, grain and oil, dairy and beverages, O2O business growth is significant. After the pandemic, O2O in the NKA channel has been directly monitored by brand headquarters, and many deep cooperations have been initiated with platforms and retailers. However, in the O2O format of LKA local chain supermarkets, regional distributors have paid relatively little attention. This channel is a typical regional business increment. Based on this direction, by empowering distributors, we can strengthen their O2O operational capabilities in local chain supermarkets.
There are also capabilities based on BC store sales, TT small store coverage, group buying & special channel development, etc. From the perspective of channels and business, different types of distributors are empowered to improve corresponding capabilities. When many companies empower distributors, they either overemphasize their own business needs, completely dominated by the brand perspective, resulting in distributors being unwilling to listen, learn, or act; or they overemphasize distributor needs, completely standing from the customer distributor's perspective, such as how to design frontline employee KPIs or how to reasonably avoid taxes. Such topics solve distributor problems but do little to help the actual business of the product. Therefore, empowering distributors should fully combine the company's current actual business needs, take actual business needs as the direction, and use distributor practice cases as material. Only by combining the two can empowerment be effective and sustainable.
02 Benchmark Empowerment
Once brand owners clarify their current and future actual needs, how can they truly implement business needs into distributor empowerment? For example, taking store sales as an example, when the brand determines the business strategy direction for the next phase or year, based on this direction, select the TOP distributors in terms of store sales growth, and through professional case extraction, extract their store sales methodology using the distributor's language system. It includes not only methods but also measures, techniques, precautions for different stages and backgrounds, and corresponding results, so that neighboring distributors can fully feel that "the distributor next door did this and achieved 50% business growth, so I can try this method too." Let excellent benchmark distributors speak from experience, allowing distributors to fully feel the real business growth of peers, resonate in cases, reach consensus in learning, and ultimately implement it in their own regional markets and businesses.
What is benchmark empowerment? In short, through the practical cases of benchmark excellent distributors, using a language system that distributors can understand, articulate, and see through, and using real business growth results as evidence, guide and train distributors.
Empowering distributors must achieve: from the market, to the market!
03 Co-creation Empowerment
In past observations, New Distribution has found that many companies simply view distributor empowerment as a training task. They invite teachers or experts in related business operations to talk about general content, discuss business innovation, organizational management, compensation and performance, and then it's basically over. Such training empowerment has almost no value. The logic of co-creation empowerment is: First, the content of empowerment itself comes from the frontline market. Only with real business scenarios from the frontline can distributors truly resonate and reach consensus; Second, at the delivery site of empowerment, in addition to industry expert training and benchmark distributor sharing, there should also be group discussions, practical drills, and design plans. From the cases in the course content, ultimately to designing their own local market business plans. From "I say, you listen" to "you say, I listen" to "you do, I watch" to finally applying what has been learned. Business or operational training empowerment cannot simply become a one-way information transmission training, but should be based on actual business direction, combined with regional market distributors' implementable business plans, and two-way practical training.
Summary: The logic of empowering distributors mentioned above is to provide targeted empowerment in a specific business direction, to improve distributors' management and operational capabilities in a certain category, and to achieve the overall goals of expanding store coverage, strengthening product sales, and growing business. In fact, in summary, business-oriented empowerment is nothing more than the following two modules:
1. Operational Management Empowerment √ Digital distribution transformation path √ Downstream market expansion and construction √ Store classification and efficient management √ Frontline store sales methodology √ Product portfolio and expansion plan √ Data analysis to assist sales decisions
2. Coverage Expansion Empowerment √ Local O2O coverage plan √ Downstream market blank distribution √ Special channel & group buying expansion negotiation √ Store visit design and management
Other empowerment modules, such as distributor business development, organizational building, financial control, and warehouse and distribution cost reduction, are mainly for leading brands, especially category giants whose product business accounts for more than 50% of distributor business. Their regional business is deeply linked with distributors, and distributors rely on the product for survival. At this time, brand owners should not only empower distributors in business but also in their own internal operations!
Therefore, for the vast majority of mainstream brand owners (where the brand's business accounts for less than 50% of the distributor's total business), when considering distributor empowerment, they should stand from the perspective of actual business needs and from the perspective of a specific business capability, and not empower for the sake of empowerment!
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