Distributors' Real Difficulties

  1. Under Pressure from Manufacturers 1.1 Manufacturers' sales targets are getting heavier
  • They only know how to increase targets every year, often considering only themselves, not the many similar competing products in the market.
  • Manufacturers' products are increasingly homogeneous, sales growth is weak, while inventory and labor costs rise.
  • The main reason is that many manufacturers rarely put real effort into marketing; frankly, product upgrades are too slow.
  • In fact, distributors are closest to the market and know that many manufacturers' products are almost unable to keep up with actual demand, but every time distributors' innovative suggestions and detailed opinions never reach senior management. 1.2 Manufacturers often replace their distributors
  • A product in a certain region, the distributor builds it from scratch into a local major brand, like raising a child, but the manufacturer can turn against them at any time, even changing regional staff just to replace the distributor to meet targets.
  • Or some manufacturers quickly split the region, and the distributor's years of hard work is gradually carved away, until the advantage of controlling terminal channels that they thought they had is basically gone...
  • From the manufacturer's perspective, they are always bigger than the distributor (even if their actual assets are smaller), because the manufacturer holds absolute power over the product and brand. 1.3 Manufacturers' business quality and integrity often have problems; many prepaid expenses cannot be reimbursed, causing deep resentment, but when a new salesperson or senior manager visits, after a few drinks they promise a lot of "pits"
  • Distributors have no choice but to jump in because they lack initiative.
  • Even if you don't do this manufacturer's products, another distributor will immediately take over, even doing better than you, because when replacing distributors, the manufacturer often increases investment.
  • Even if the distributor is strong and no one else in their territory does this brand, think again: the manufacturer will increase sales in other regions, or after a few years, the product may "revive"...
  • No distributor can absolutely control the market.
  1. Under Oppression from Retailers and Channels Using the word "oppression" is just right, let me analyze. 2.1 Retailer fees increase year by year, both reasonable and unreasonable, like a flood. How can distributors' meager profits support 3-5 years? The main reason is that offline is impacted by online (retailers lack a closed-loop business ecosystem, such as scenario experience, thoughtful service, or entertainment needs; at least, how many retailers have many empty seats? Customers have no place to rest, who wants to visit often? So consumers go to IKEA to sleep). Offline is impacted, foot traffic and profits decrease significantly, labor and other costs remain high, so they can only ask distributors and manufacturers for money (for manufacturers, retailers slowly ask, often trying to skip distributors and cooperate directly with manufacturers because of the profit temptation in the middle). 2.2 Manufacturers want both sales and popularity, which distributors cannot satisfy, so they remain on the edge of elimination. The main reason is that distributors are not as professional as manufacturers and cannot operate the market professionally, but now even professionalism may not guarantee sales. Distributors buy sales to quench thirst with poison every year to meet retailer targets. Or some distributors rely on hiring more stock clerks or promoters to achieve sales growth. 2.3 Retailers will ruthlessly abandon distributors and cooperate directly with manufacturers. There are too many such examples, so I don't need to cite them. Because everyone knows that removing intermediaries maximizes profits. 2.4 Channel costs are rising; all stores, big or small, have learned to ask for fees. It seems fees are everything; the product doesn't matter. But manufacturers often default on these fees or don't support them. What should distributors do when facing their employees' "family livelihood" and manufacturers' "choking tasks"? Should they let their employees stubbornly fight in the channel with so-called "best-selling products"? Distributors' Shortcomings
  2. Capital How much money you have determines how big you can do. Many distributors are on the edge of life and death; if capital breaks, they may close tomorrow.
  3. Personnel and Team Personnel is a painful issue at the distributor level; today's young people are increasingly difficult to manage. Distributors themselves don't know how to lead teams. Some distributors find good professional managers, which is good. But if they can't find suitable ones, it's painful; many employees leave to start their own businesses after 2-3 years. Because the barrier to entry for distributors is too low. Even if you have people, it's hard to build a professional team; the root of this pain is not having their own brand to operate.
  4. Brand Selection This depends on luck; if you choose wrong, all efforts are in vain. Good brands won't easily be represented by you, and after representation, the task sales may not be immediately achievable. There are too many small brands, and it's hard to tell if they have development potential.
  5. Terminal Control Different product structures lead to different terminal control capabilities. The development and shrewdness of secondary wholesalers have exceeded distributors' capabilities, because manufacturers' goods actually fly everywhere, giving secondary wholesalers room to develop. Facing these, what should distributors do? 1. Steady progress, start by building a professional team, and gradually transform your role into a brand operator or service provider. Distributors have the shortest channel distance, making it easiest to build maintenance and control capabilities. In the future, the service provider model will replace today's distributor model. In the future, manufacturers and distributors will cooperate more closely, even becoming interest communities. For example, when seaweed companies face capital shortages when purchasing raw materials each year, many distributors help with funds. Over time, manufacturers can even share profits with distributors because distributors have capital, channels, and services. It's simple: just as companies give shares to employees, they can also give to enterprises. Even if the company only gives distributors dividend rights, that's very attractive. If distributors can professionalize themselves, then taking only a few brands each year will yield higher profits than taking many products now. This is entirely achievable. 2. The most counterattack path: create your own brand, secure your local market, then expand nationwide to reap the benefits of the big market. Make your own brand: register a trademark, find a contract manufacturer, or become a repacker (many distributors have already done this and succeeded; manufacturers' fees and profits are enough to develop their own brands). In fact, many brands have grown this way. How to do it?
  • First, truly master the terminal and truly understand terminal information. Many distributors who have reached a certain scale can first replace relatively small products in their region, then gradually carve away the market of big brands (this is time-permitted; big brands won't feel threatened). For a big single product, change the specification or packaging, adjust prices slightly, and gradually replace the market. There's a saying: "Don't beg for food with a golden bowl."
  • Second, the current consumption upgrade is prompting manufacturers to truly return to the product itself, but this response is slow. This will create a period of information asymmetry between the market and enterprises. This stage is the best time for private labels to survive and develop. The brands that have grown on Taobao and JD in the past 3-5 years are basically personal OEMs. Can you imagine that a single live stream by an internet celebrity can achieve sales equal to a small factory's annual sales? These products sell well precisely because they adapt to consumer demand. Facing this trend, "small enterprises" doing customization are instead receiving continuous orders and developing very well. Now a restaurant chain can customize 100 kg of seasoning each time (the currently hot self-heating hot pot is customized because no manufacturer can complete all steps and raw materials themselves - heating pack, rice, vegetables, meat, base, packaging box, small fork). Distributors face innovative soil every day.
  • Third, selling private label online products can also carve out a niche. Alibaba and JD have trained a large number of online sales talents. Most of them eventually want to start their own businesses. If distributors are generous and share more with such people, they can quickly grow. In this era, as long as you are willing to share money and delegate authority, many companies' performance will grow rapidly. Because working for yourself is different from working for others; why did you succeed in starting a business with a tricycle back then? Of course, the model and profit sharing need to be studied; top-level design is the most important core. JD has been losing money for years but still survives well because of its model and top-level design, just as we can't know how Microsoft makes money.
  • Fourth, your own team brothers and sisters. We have "worked hard" for enterprises for many years, with rich practical experience. With a little training and cultivation, team members can be stronger than manufacturers' salespeople; just change their roles. These employees may lack motivation because of insufficient "status" or development space. If you have your own brand, authorize a few key members, divide market regions and categories, and use the display, maintenance, and promotion knowledge taught by manufacturers; it's basically enough to build a solid fortress locally. If you agree with key members that they can sell products to markets outside the local area, give them 50% profit! I think they will work crazily, wishing they could use 3 days in one! If these still don't work, you can also pull in an excellent manufacturer salesperson to cooperate (manufacturer salespeople often start their own businesses as distributors to compete with you; why not bind interests in advance?). A more high-end method is to leverage the power of marketing planning agencies with practical experience and R&D capabilities, focusing on product, brand, packaging, market, region, personnel structure, salary system, incentives, etc. It's simple: treat it as creating a model market for the manufacturer! Many brands are driven by model markets to national markets, but manufacturers can't create every model market; distributors can! Manufacturers find it hard to build a team culture like distributors' brotherhood, which is an advantage. My article today may "offend" many manufacturers, but it will surely be welcomed by the vast number of distributors! I also believe this article will sound an alarm for many manufacturers. I prefer to think according to market development trends; perhaps the views I mention today will become mainstream in years to come; Because production is production; it should focus on products. Market is market; it should truly be based on consumer needs. Brand is brand; it can be built, just by capturing and expanding audiences, leading demand, and cultivating consumption habits and loyalty. Brands that are very strong now may not exist in 10 years, because brands need to build timely comparative competitive advantages. Isn't that right? Source: Xu Huizhou on Marketing (ID: xhz625545945) 2017 (3rd) FMCG + Internet Conference will be held in Chongqing in November 2017. The conference will closely focus on the theme "New Forces, New Ecology" and invite 1000+ distributors, 500+ brand owners, 200+ B2B platform founders, and 100+ investment and financing institutions to explore a new chapter of cross-border integration! Click the link below to review the highlights of the 1st and 2nd FMCG + Internet Conferences: 2016 "FMCG + Internet" Summit Forum -END-