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I. Current State and Development Trends of the Retail Industry

Currently, China's retail industry is undergoing dramatic transformation driven by foreign retail giants. Since 1995, international retail heavyweights such as France's Carrefour, the United States' Walmart, and Germany's Metro have entered China, causing significant waves in the domestic retail sector. Simultaneously, domestic retail leaders like Lianhua, Hualian, and Nonggongshang, representing the development level of China's retail industry, have flourished across the country. (There are 390 national-scale hypermarkets, not counting regional ones; and over 55,000 C/D-class supermarkets we focus on.) This has led to wholesale markets and department stores in central cities gradually giving way to emerging formats like chain supermarkets, hypermarkets, and specialty stores. Within just a few years, chain supermarkets, hypermarkets, and specialty stores of various sizes have boomed, becoming indispensable in daily life. The emergence of new formats has strongly impacted traditional retail and accelerated its deep transformation.

Undoubtedly, supermarkets replacing some wholesale markets and department stores is realistic now and in the coming years, making them the focus of retail in provincial capitals and second-tier cities. Meanwhile, supermarket chains will move toward more specialized directions, such as fresh food supermarkets and grocery supermarkets. The potential of convenience stores should not be underestimated; they may become the retail format with the greatest network value in the future. Warehouse stores will become the main force for wholesale distribution. As these retailers strengthen their market position, suppliers face increasing operational difficulties. Additionally, their strong influence over downstream consumers elevates the status of terminal retailers.

II. Concepts, Classifications, and Professional Terminology of Department Stores and Supermarkets

(A) Supermarket Classification

Based on the business models and characteristics of various supermarkets:

  1. Department Store Shopping Center: Small and medium-sized department stores adopting supermarket practices. Within a large building, different sales departments operate their own purchasing, management, and operations, primarily meeting customers' diverse needs for fashion goods.
  2. Supermarket: The future modern "wet market." A retail format using self-service, primarily selling food, fresh produce, non-staple foods, and daily necessities, meeting customers' daily needs.
  3. Hypermarket: The main retail format. A self-service retail format primarily selling popular practical goods, meeting customers' one-stop shopping needs.
  4. Warehouse and Membership Stores: The main force for wholesale distribution. Based on hypermarket offerings, they select popular practical goods, integrate storage and sales, and provide limited services and low prices (some operate on a membership basis, serving only members).
  5. Convenience Store: The most promising retail format, focusing on meeting customers' convenience needs.
  6. Specialty Store: The epitome of specialization, focusing on one major product category, with knowledgeable sales staff and appropriate after-sales service.

Classified by actual business area and scale:

  • A-Class Terminal: Defined as hypermarkets, with an operating area of over 5,000 m².
  • B-Class Terminal: Defined as comprehensive supermarkets, with an operating area of 1,000–5,000 m².
  • C-Class Terminal: Defined as standard supermarkets, with an operating area of 200–1,000 m².
  • D-Class Terminal: Defined as chain convenience stores, with an operating area of under 200 m².

(B) Supermarket Professional Terminology

  1. Source Mark (Original Mark): Also known as the international product barcode, printed on packaging during production. It is a universal barcode used to identify product uniqueness, allowing goods to circulate freely across borders.
  2. In-Store Code: A barcode label created and printed by the store itself, used only within the store, forming a closed barcode system.
  3. POP Advertising: Point-of-purchase advertising in the store that promotes sales. It involves posting or hanging promotional information near products or in prominent areas using artistic or printed methods to attract customer attention and stimulate sales.
  4. DM Flyer (Direct Mail): Also known as a promotional leaflet or sales catalog, used as a promotional tool for supermarket products, typically distributed via mail, newspaper inserts, handouts, or in-store pickup. DM promotions are the most effective promotional method for supermarkets.
  5. End Cap: The position at the ends of shelves, which is the most frequently passed area by customers in the store. TG (Together): Refers to the concentrated display of products on shelves.
  6. Stack Display: A promotional area, usually built with pallets, wire baskets, or cut boxes, stacked on the floor. Manufacturers use stack displays as the best display and an effective promotional tool.
  7. Changeover: The replacement of products between two consecutive promotional flyers.
  8. Tidying: Arranging messy products neatly.
  9. Replenishment: The task of restocking shelves with out-of-stock items according to their designated display positions.
  10. Price Card (Price Tag): A label used to indicate the selling price and for positioning management.
  11. Deactivation: The process of deactivating anti-theft tags on products during checkout.
  12. Stocktaking: Periodically counting products in the store to accurately assess operational performance and inventory levels.
  13. Loss Compensation: When stocktaking reveals a discrepancy between actual and book inventory, suppliers are required to compensate for the difference.
  14. EDI (Electronic Data Interchange): A system for electronic data exchange, connecting computers of different businesses across industries for paperless, phone-free transactions.
  15. Order Number: The number assigned to each batch of orders placed with suppliers.
  16. Product Turnover Rate: Average sales / average inventory.
  17. Inventory Cycle: Average inventory / average sales, calculated in days. Supermarkets use this to control capital usage and payment to suppliers.
  18. Category: A group of products and services that reflect common or similar consumer behavior patterns.
  19. SKU (Stock Keeping Unit): The smallest unit of inventory control.
  20. SKU Management: A management method using computer systems to analyze sales information and trends for a specific SKU, including gross profit, purchases, returns, and inventory, to manage ordering and stocking.

III. Contract Signing and Negotiation

(A) Supermarket Fees

  1. Contract Fees: Include entry fees, rebates (unconditional and conditional, monthly and annual), new store opening sponsorship fees, festival sponsorship fees, new product listing fees, contract renewal fees, consulting management fees, advertising and promotion fees, display fees, product mix adjustment fees, single-item deposits, and other fees specified in the contract.
  2. Other Fees: Fees incurred during operations and promotions, including DM flyer fees, TG fees, stack display fees, promoter management fees, tasting area fees, tasting sample fees, centralized display fees, and tasting product fees.
  3. Which fees are mandatory? Which can be avoided?
    • Entry fees, store anniversary fees, and commissions are mandatory.
    • New product fees, stack display fees, DM fees, and promotional fees are optional.

Although supermarket fees have certain standards, they are flexible. Each fee varies based on market competition, brand influence, product sales, negotiation skills, product variety, quantity, position, relationships, and the supermarket's scale, operating conditions, and region.

(B) Contract Negotiation

Currently, supermarket contracts are generally divided into joint procurement, local procurement, and distribution contracts.

Pre-negotiation considerations:

  1. Thoroughly investigate competitors, market conditions, supermarket fees, and other supplier contracts. Collect supermarket information and set negotiation goals and direction.
  2. Carefully analyze data and present evidence.
  3. Prepare a quotation based on the price system. The quotation can be slightly higher than the price system, but not exceeding 5%, to leave room for negotiation.
  4. Prepare relevant documents: business license, health permit, quality inspection reports for each SKU, etc.
  5. Stay calm, be confident, and maintain a winning mindset.

During negotiation:

  1. Supermarkets often start with high demands and negotiations take time. Understand their psychology, use collected information, and present facts to persuade them to secure the most favorable terms.
  2. Read every clause carefully and renegotiate any disputed wording.

When signing the contract:

  1. Payment Terms:
    • Payment terms (15, 30, 45, 60 days). We require a 15-day term in principle, with a maximum of 30 days. Large accounts: 30 days; medium: 15 days; small: cash or prepayment.
    • Half-month settlement (15-day term): From the 1st to the 15th of each month is the settlement period; from the 16th, payment is due, and the first half's payment must be settled by the 30th. Similarly, from the 16th to the 30th/31st is the settlement period; from the 1st of the next month, payment is due, and the second half's payment must be settled by the 15th.
    • Monthly settlement (30-day term): From the 1st to the 30th/31st is the settlement period; from the 1st of the next month, payment is due, and the previous month's payment must be settled by the 30th.
    • Never sign contracts with payment due 30 or 15 days after delivery.
  2. In other contract terms, specify: If the supermarket fails to pay on time, we have the right to stop supply, and the supermarket bears all resulting responsibilities.
  3. Clearly define terms for returns, exchanges, or handling damaged goods. This is a common friction point. Suppliers should set conditions and deadlines in advance, e.g., products with a 6-month shelf life must be returned/exchanged one month before expiry; otherwise, no returns. Products damaged by rodents or breakage due to poor supermarket management are not returnable.

(C) Contract Negotiation Techniques

  1. Create a Positive Atmosphere: Maintain a positive attitude, show enthusiasm, understanding, and respect to foster a good environment.
  2. Be Flexible: Use conditional phrases like "if," "suppose," and "however" to create negotiation space, and keep a relaxed expression.
  3. Test the Waters: Before diving into the main topic, use body language to gauge if the other party has lowered their guard, e.g., changing posture, angle, or position.
  4. Be Patient: Show patience, avoid appearing eager to close the deal, and be bold in stating your demands.
  5. Apply Pressure Appropriately: Leverage your strengths and company policies to increase negotiation leverage and protect your interests.
  6. Know Your Authority: Avoid making commitments beyond your authority to prevent deadlock.
  7. Advance When Appropriate: Add topics and expand agreements (e.g., shelf space, payment dates) to secure the best interests.
  8. Retreat to Advance: Use concession techniques wisely—concede rarely and slowly, never reveal your bottom line at once, and reasonably present your demands.
  9. Be Elastic: If you cannot accept a demand, say "no" at the right time, but leave room for future discussions.
  10. Use All Techniques: Combine various negotiation skills comprehensively.

IV. Selection of Products for Store Entry

(A) Criteria for Selecting Products

Select products based on local market conditions and consumption habits, focusing on high-temperature and low-temperature leading products that are suitable and sell well.

  • A-Class Terminal: Total number of high- and low-temperature products on display should be no less than 60.
  • B-Class Terminal: No less than 40.
  • C-Class Terminal: No less than 25.
  • D-Class Terminal: No less than 8.

(B) Product Mix Optimization Standards

  1. The optimal ratio for best-selling products (leading), relatively best-selling (quasi-leading), general (assorted), and new products (e.g., corn hot dogs, sweet corn, Run Kou series) is 2:3:3:2.
  2. High-temperature products should account for 20%–40% of total products; among them, the ratio of high, medium, and low-end products should be 5:3:2; include pork, beef, chicken, and fish products.
  3. Low-temperature products should account for 60%–80% of total products; each series should have no less than 10% of the low-temperature products.

(C) Pricing Standards for Store Entry

High-temperature products should be marked up at least 15% above landed cost; low-temperature products at least 20%. Competitive products may be adjusted downward, but not more than 5%. New high-temperature products: at least 20% markup; new low-temperature products: at least 25%. For supermarkets and convenience stores that pay cash or prepay, prices may be adjusted downward, but not more than 5%.

V. Terminal Display Techniques

The importance of terminal display: Konosuke Matsushita said, "Constantly innovate and beautify product displays; this is one of the secrets to attracting customers." Product display is the last chance to drive sales. Only products that are visible and tangible will sell! Display determines the future of a product! 70% of consumers go to supermarkets without knowing what to buy; most are impulse buyers, spending an average of 15 minutes in the store and 15 seconds in front of a product area. 75% make decisions within 5 seconds. If they don't see the product they want, 40% will buy something else. In the era of the market economy, one key feature is the attention economy. Only by mastering display techniques can our products stand out and attract consumers' eyes.

(A) Product Display Techniques

  1. Maximization Principle: The goal is to occupy more shelf space and increase the number of products displayed. Only by having more space than competitors will customers buy your products.
  2. Full Range Principle: Display as many product variants as possible on one shelf to meet diverse consumer needs, increase sales, and enhance company image and product influence.
  3. Centralized Display Principle: Unless the store has special rules, display all sizes and varieties together. Each visit, remove other brands mixed into your display.
  4. Full Display Principle: Keep shelves fully stocked to increase visibility and prevent competitors from taking over space.
  5. Vertical Concentration Principle: Vertical displays capture consumer attention because they align with natural viewing habits and create effective, vivid displays.
  6. Heavy Bottom, Light Top Principle: Place heavy and large products at the bottom, and small and light ones on top, following aesthetic norms.
  7. Highlight Key Products Principle: When displaying a series, emphasize the main product's position to make it clear and easy to understand.
  8. Easy Access Principle: Place products where consumers can easily reach them, considering the age and height of the target audience.
  9. Uniformity Principle: All displayed products must have labels facing the consumer with the Chinese trademark visible, ensuring a neat and attractive presentation.
  10. Cleanliness Principle: Keep all displayed products neat and clean. As a consumer, you wouldn't buy dirty or messy products.
  11. Clear Pricing Principle: Clearly marked and prominent price tags increase purchase motivation. They serve as promotional notices, help consumers understand prices, allow comparison, and can highlight discounts to attract buyers. If consumers don't know the price, they may hesitate and lose a sales opportunity.
  12. Dynamic Display Principle: On a full shelf, intentionally remove a few products from the front to facilitate access and show good sales performance.
  13. FIFO Principle: Place products with earlier production dates in front and newer ones behind to avoid expiration. For special displays and stack displays, rotate products at least every five days, putting older products in front.
  14. Minimum Stock Principle: Ensure in-store inventory levels do not fall below the "safety stock line." Safety stock = average daily sales × replenishment lead time.
  15. Stack Display Standards: Stack displays are often prime locations, purchased at high cost for specific product displays. They must comply with the above principles, including overall coordination and standardization.

(B) Product Placement Standards

  1. Low-Temperature Products:
    • Cylindrical products: stack no more than 3 layers, labels facing out.
    • Block-shaped products: place horizontally, labels facing customers, no more than 2 layers.
    • Small cylindrical products: stand upright, labels facing out.
    • Sliced products: layer them with fronts staggered, facing customers.
    • Grilled sausage products: lay flat and together, no more than 4 layers.
    • Ball-shaped products: best at the bottom of the cold cabinet, no more than 2 layers, labels facing out.
  2. High-Temperature Products:
    • Single items: display horizontally, at 2/3 of shelf height, in a stepped arrangement, with text direction consistent.
    • Bagged products: display vertically, front text facing customers, neatly arranged.
  3. Leading Products:
    • Place in prominent positions, i.e., 15° below eye level.
    • Allocate at least twice the display area of regular products.
  4. Promotional Products:
    • Place at end caps or prominent discount areas.
    • Use stack displays or end caps with eye-catching POP ads.
    • Use TG or centralized displays.

(C) Criteria for Choosing Display Locations

  1. High-Traffic Areas: Entry points to the product category, next to best-selling brands, discount areas, near checkout counters, store entrances, shelf ends, and near main pillars.
  2. Optimal Shelf Positions: Sections 2, 3, and 4 of the category shelf; at a height of 1–1.6 meters from the ground; in well-lit areas.

VI. Promotional Activity Arrangements

Definition of promotion: Promotion, also called "promotion communication," strengthens the connection and communication with consumers. It is an important way for companies to launch new products, increase brand awareness, build a positive image, and enhance customer relationships. It is also the frontline of competition between companies.

(A) Promotional Activity Process

Market demand → Salesperson surveys market → Communicate with store personnel → Propose promotion to supervisor → Supervisor estimates effects and costs → Develop promotion plan → Submit promotion request → Company approval → Get store buyer/manager approval → Prepare for implementation → Implement promotion → Evaluate performance → Archive data.

(B) Promotional Forms

  1. Discounts: Temporarily reduce prices to attack competitors based on their sales.
  2. Buy and Gift: Use gifts to stimulate consumption. Requirements:
    • The activity name should be catchy, attractive, and easy to spread.
    • Gifts should be attractive, practical, or novel, e.g., kitchen items, small toys.
    • Set reasonable thresholds and provide multiple options. For example: Buy ¥9 get a transparent keychain; buy ¥15 get a fluorescent pen; buy ¥25 get a seasoning box set; buy ¥35 get a T-shirt.
    • Limited gifts as a catalyst: Consumers tend to buy when they feel scarcity. Seeing few gifts left and many empty boxes creates a sense of urgency, boosting purchase desire.
  3. Bundle Promotions: Use old products to drive sales of new ones, but ensure both are at the same level and positioning.
  4. Limited Time and Quantity: For buy-gift and discount promotions with supermarkets, clearly specify time and quantity limits in the agreement to avoid fines for insufficient supply.

(C) Selection of Promotional Products and Quantities

  1. Clarify the purpose: increase sales, cultivate leading products, or attack competitors.
  2. Focus on high-end and new products.
  3. For DM flyer promotions, generally 1 high-temperature product and 2 low-temperature products.
  4. For discounts, generally 1–2 high-temperature products and 2–4 low-temperature products.

(D) Discount Margins

  1. High-temperature products: no more than 10%; low-temperature: no more than 15%; sensational products: no more than 20%.
  2. Special cases require manager approval but must not disrupt the local price system.

(E) Selection of Promotional Materials and Gifts

  1. Design Principles for Promotional Materials:
    • POP labels should show both promotional and original prices to differentiate, minimize text so consumers can read within 3 seconds, and clearly state the promotion.
    • Clearly state restrictions, e.g., limit 5 packs per person, weekend promotion, limited quantity while supplies last, valid until ×× date.
  2. Gift Selection Principles:
    • Novel everyday items that feel practical and attractive.
    • High image, low cost: e.g., wall clocks, aprons, T-shirts, calculators, which have high perceived value but low procurement cost.
    • Preferably items with promotional value, like aprons, T-shirts, cups.

(F) Regular Follow-Up: Salespeople should visit every 2 days to ensure full supply of all products.

(G) Promotional Timing

  1. Statutory Holidays: Weekends, Spring Festival, New Year's Day, Women's Day, Labor Day, National Day, Teachers' Day, etc.
  2. Non-Statutory Holidays: Mid-Autumn Festival, Christmas, Dragon Boat Festival, Valentine's Day, Father's Day, Mother's Day, etc.
  3. Seasonal Customs: e.g., Winter Solstice.
  4. Ideal duration for single-product promotions: 15 days.

VII. Recruitment and Management of Promoters

Criteria for excellent promoters: 1. Professional dedication and good work ethics; 2. Promotional experience and skills.

(A) How to Find Promoters—Prepare in Advance

  1. Recruit from competitors' promoters. 2. Store recommendations. 3. Broad recruitment with careful selection.

(B) How to Train Promoters—Sharpening the Axe Doesn't Delay Cutting Wood

  1. Learn corporate culture, job responsibilities, and management norms.
  2. Learn product knowledge, sales skills, and competitor status.

(C) How to Manage Promoters—Within Rules

  1. Establish comprehensive promoter files.
  2. Provide pre-job training; only qualified individuals can start.
  3. Keep daily sales records and report at meetings.
  4. Hold weekly or monthly meetings for training, reporting, and exchange.

(D) How to Evaluate Promoters—Strict Discipline, High Performance

Develop comprehensive daily assessment systems and reward/punishment rules (attendance, loss reporting, returns, sales reports, etc.).

(E) How to Motivate Promoters—Spur the Horse to Run

  1. Set monthly sales targets and strictly assess at month-end.
  2. Compensation: base salary + commission, which maximizes motivation and is currently the best incentive, rewarding more work with more pay.
  3. Rewards: comprehensive ranking awards, sales progress awards, overachievement awards, special contribution awards, etc.

VIII. Financial Management and Cost Control

(A) Daily Sales Data Management

  1. Finance, sales, and warehouse must accurately verify daily deliveries and returns, settling accounts daily.
  2. Finance should categorize delivery documents, accurately count, establish ledgers, and assign dedicated personnel.

(B) Promotional Data Management

During promotions, salespeople must promptly notify finance of promotional prices and times; finance must update prices and file records.

(C) Accounts Receivable Management

  1. Establish accounts receivable ledgers:
    • Master ledger: Finance lists each supermarket's reconciliation time, payment time, method (cash, check, wire transfer), and document requirements based on payment terms.
    • Sub-ledgers: One ledger per store, including all master ledger details and supply prices, with original delivery documents attached.
  2. Reconciliation and Payment: 1. Reconcile on time; do not delay. 2. Investigate discrepancies promptly to avoid payment delays. 3. After confirmation, notify finance to issue invoices. 4. Require supermarket signature upon invoice delivery.

(D) Determination and Control of Fees

  1. Classification: Mainly a) contract fees, b) promotional fees.
  2. Determination: Although supermarket fees have standards, they are flexible, especially promotional fees, which can be high or low, more or less, particularly in small and medium supermarkets.
  3. Control:
    • Contract fees: Use public relations to "spend small to save big." Leverage customer relationships for maximum discounts.
    • Promotional fees: Improve salesperson quality and negotiation skills; know each supermarket's fee levels; build good relationships.

(E) Loss Control

  1. Standards: High-temperature products: 0.04% loss rate; low-temperature products: 1%.
  2. Classification: 1. Natural loss: due to product quality or normal distribution. 2. Man-made loss: due to negligence of responsible personnel.
  3. Control: 1. Strengthen order planning, control inventory, avoid blind ordering. 2. Strengthen management of store guides. 3. Establish loss responsibility systems and clarify responsible persons.

(F) Financial Analysis System

  1. Conduct monthly financial analysis for each supermarket, including sales, expenses, losses, gross margin, loss rate, expense rate, and collection rate.
  2. Analyze problems and formulate next month's action plan.

(G) Prevention and Avoidance of Payment Risks

  1. Strengthen financial operations and enhance salespeople's awareness of payment collection. Reconcile and settle promptly from the source.
  2. Gradually shorten contract payment terms, aiming for cash or prepayment whenever possible.
  3. For newly opened small and medium supermarkets, leverage Shuanghui's brand strength to require cash or prepayment.
  4. Monitor supermarket operations and take immediate action in special situations to minimize risk.

IX. Conditions for Distributors to Operate in Supermarkets

Transforming the business entity, reducing operating costs, minimizing enterprise risk, and promoting customer operations are our direction.

  1. Have a certain operational scale and general taxpayer status.
  2. Have substantial funds and strong distribution capabilities.
  3. Have modern business concepts, public relations skills, negotiation abilities, and strong service awareness.
  4. Have sound financial management and corporate operational capabilities.
  5. Have a long-term vision, not just short-term interests.
  6. Possess professional knowledge of supermarket operations.
  7. Have a lean and professional supermarket operations team.

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About Us: WeChat Name: FMCG Distributor Professional Consulting Management Account Introduction: 20 years of experience in FMCG distributor operations and management, specializing in internal distributor management.

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