“Even a delivery guy like me can tell something's wrong with this year's market!” Recently, while conducting market research at the frontline, a salesperson I know, Sister Wang, said this. When I asked why, she simply invited me to tour the area she covers. And it was this visit that revealed another side of the market.
Cold Before Peak Season Stores Struggle to Clear Old Stock Walking into a supermarket, it was clearly the weekend, yet only a few customers were inside. Judging by the production dates on the beverages on the shelves, the products had been in storage for over six months, with the newest date on the entire shelf being from January this year. A store clerk explained that many of the items currently being sold were stocked in the second half of last year. For example, products with a September production date were typically brought in around October or November. As the weather turned cold, beverages stopped moving, so they remained in the store. In previous years, they would have been sold out by this time, but this year, business is slow, so it's taking longer.
When I walked into a mom-and-pop shop across the street, I saw beverages on the shelves with production dates from May of last year, with less than half a month until expiration. The store owner revealed that these beverages were purchased from a wholesale market—cheap, but without after-sales service. When they noticed the old dates, they considered discounting them, but after a few days of trying, the results were poor. “Customers are savvy these days. They pay extra attention to dates when they see discounted drinks. My plan now is to put them in the cooler and see if they sell. If not, I'll have to drink them myself. ”
After leaving that store, Sister Wang told me that this street had the best sales movement in her area, but in her daily visits, she often faced situations where she'd beg to unload goods, only to find no space in the store's warehouse or on the shelves. Even in the best-performing small shop on the same street, many “old goods” from last year were visible on the shelves, but the owner said they weren't the store's inventory but the distributor's. “In the past two years, the market has been slow. It's common for beverages, condiments, and paper products to sit in warehouses for six months without selling. After a certain date, they get returned. Plus, many distributors face inventory pile-ups, so sometimes the goods they deliver aren't the freshest. ” Sister Wang explained.
Credit Sales Turn into Bad Debts, Stores Fear Tying Up Cash “Collecting payments is especially hard this year. A supermarket of 700-800 square meters can't even settle a 1,000 yuan bill!” Sister Wang revealed that due to poor market feedback, many stores' profits are declining. Sometimes even after selling goods, they can't cover rent, utilities, and wages, let alone pay suppliers. Payment terms that used to be three months now often drag on for six months to a year. If a store closes or changes owners and refuses to honor debts, the salesperson has to absorb the loss and pay out of pocket. But to meet targets, not offering credit is impossible, and stores also lack a sense of security. “Big stores might dare to order more, but small stores only order one box at a time. Sometimes, even two boxes of milk are sold on credit.” Analyzing the reasons: first, due to poor market conditions, turnover among trading company staff is high. When experienced salespeople leave, new ones don't honor past agreements, so after-sales service for stores isn't guaranteed. Second, foot traffic is declining, and terminal sales are slow. Even with after-sales support, in an uncertain market, it's safer to hold onto your cash. A convenience store owner told me that because he's familiar with a certain beverage brand's salesperson and his store's sales have been decent, the salesperson sometimes brings slow-moving goods to his store. Recently, he's been coming almost every day. “To clear out old-dated products, they've offered many incentives. For example, a case with more than six months of shelf life is discounted by 6-8 yuan, and if less than six months remain, it's 10-14 yuan cheaper.” But even with such attractive prices, the store owner only dares to take two cases at a time. “The quantities are too large. The store can't sell them all at once. Even with manufacturer after-sales, the thought of tying up cash makes me hesitate, no matter how cheap! ”
Warehouses Bursting, Manufacturers Keep Pushing Stock “Half the month is spent dealing with old-dated products. The inventory is about to explode! To store it all, the boss had to rent a bigger warehouse.” Sister Wang told me that many distributors are facing warehouse overflow. She attributes this to two main reasons: first, after three years of the pandemic, consumers have tightened their wallets, reducing spending power; second, manufacturers keep raising targets, pushing goods into distributors' warehouses. In the past, distributors would go all out during holidays and peak seasons, but now, layer upon layer of stock-pushing has turned the so-called peak season into a curse, trapping distributors under immense inventory pressure. After Chinese New Year, when inventory is mostly cleared, shouldn't you restock? The first quarter is ending; don't you want to catch up to avoid pain in the second half? Statutory holidays and store anniversaries are coming; shouldn't you seize the promotional window? Peak season is near; if you don't stock up, you might run out and not get more... But the reality is, the market is cold. Often, before the first batch of inventory is cleared, the second batch arrives. “In the past, it was cash before delivery, but now brands are gradually offering credit lines, and the amounts are getting larger. They'll do anything to get goods into distributors' warehouses. If you refuse to unload, they'll just stall. Having drivers block the gate every day isn't a solution. ” Want to push stock down to retail stores? Store owners aren't buying it! If you want to push stock, sign an agreement: if it doesn't sell, the distributor buys it all back. Or, just deliver according to actual store needs. With downstream distribution blocked and upstream still pushing goods, many distributors are collapsing under the weight of mountains of inventory. During my research in the Sichuan-Chongqing region, I met a paper products distributor who was trapped by a brand's stock-pushing, sinking deeper and deeper. It's said that this distributor moved about 600,000 yuan worth of goods per month for the brand, but due to the manufacturer threatening to withhold expense reimbursements and tempting with territorial divisions, repeated stock-pushing led to inventory worth over 10 million yuan. On the surface, he seemed successful, but in reality, he had mortgaged his house and car and was borrowing money to stay afloat.
Note: The situations of stores and distributors mentioned in this article are based solely on the author's observations during market research and are somewhat regional. They are for reference only. How is market movement in your area this year? What's the real state of distributor inventory? Feel free to leave comments and discuss!