As the saying goes, "No one gets up early without profit." In today's trade and distribution channels, what ways can distributors, who are in business for profit, rely on to make more money?
As we all know, distributors' main profit comes from the price difference between purchase and sale, with buying low and selling high being the primary profit model. The information age is shrinking the space for buying low and selling high, so distributors will sooner or later return to the reality that "excessive profit is abnormal, and thin profit is the norm." In today's world where product price differences are getting thinner, as an independent group, where should distributors turn to maintain sufficient profit margins and live as comfortably as before? Of course, before entering this topic, let's first clarify two concepts.
First, the profit space discussed today mainly focuses on reducing capital losses and improving capital returns, to ensure a more abundant capital chain and more efficient capital use. This naturally excludes illegal and non-compliant behaviors such as reselling VAT invoices to earn tax points or keeping off-book accounts to defraud manufacturer subsidies. Although some distributors still live comfortably through these methods, business must return to business itself; cutting corners may eventually backfire.
Second, the distributors we discuss are mainly channel merchants with wholesale functions. Retail-focused stores mostly do not involve large capital flows, and their profits should mainly come from store efficiency management. Of course, interested retailers can learn from the methods we discuss.
Alright, money always seems insufficient. As a distributor, how can you make your money go further than it actually does?
Leverage manufacturer credit lines. With current bank loan annual interest at 5.6%, if you can obtain a certain credit line from the manufacturer, it will be a considerable potential profit. Although in a sluggish market, more and more companies will reduce or even close credit lines, and some companies seem to never have credit lines. In reality, for strategic customers, special periods, and key channels, companies always have special market support policies, including credit lines for special customers. Although these terms are sometimes not written in policy documents, whether you can apply for them depends on whether you are a strategic customer, whether it is currently a special period, and whether the channel you are about to enter is the company's current key channel. Therefore, some distributors who fail to obtain credit lines and conclude that the company's business focus is not on the business they are about to take over, and eventually give up cooperation, are half right. Why only half right? Because it is possible that the business you are about to take over is the company's key focus, but you are not the irreplaceable strategic customer.
Play with acceptance bills. Some grassroots business personnel lack basic financial knowledge and do not carefully study the company's sales policies. Many manufacturer salespeople, especially those from big brands, will tell distributors that the company only accepts cash payments or transfers. In fact, not all acceptance bills are rejected by manufacturers, including big brands. Bank acceptance bills are quite welcomed by companies, although commercial acceptance bills are not yet reassuring. There was a provincial customer in Anhui who used a 2.5 million yuan deposit guarantee to issue a 5 million yuan six-month bank acceptance bill each year, which was more than enough as operating capital for a 60 million yuan annual business of our brand.
Learn to bring in partners. Market development costs for promotions and development are now increasingly shared between manufacturers and merchants. Many distributors are hesitant to invest in market expenses because they worry about the input-output ratio. In fact, when it comes to cost sharing, distributors can also consider "cross-industry joint development," which means coordinating with other complementary brand manufacturers they distribute for, or finding distributors in the same regional market with complementary products, to jointly develop the market and share costs. In the early years, when I was developing a new lighting brand in the regional market, the Shenzhen distributor always felt that the designer promotion meeting costs were too high, although the company would provide some subsidies. So, we assisted the distributor in contacting Philips, persuaded Philips through a proposal to conduct joint designer promotions, and shared the costs among the three parties. Using the lighting design solution as a platform, we sold lamps, Philips promoted light sources, and the distributor earned the price difference by acting as an agent for our lamps and Philips light sources, achieving a win-win-win situation and expanding the platform.
Create a cash collection and financing platform. One of the key roles of distributors for manufacturers is as a financing and advance payment platform. As a distributor with wholesale functions, to some extent, you should also view downstream customers as financing and advance payment platforms. Regularly holding product or new product ordering meetings and collecting deposits or payments from downstream customers in advance is one way to reduce capital pressure. Secondly, all promotions and policies must be based on receiving cash: if full payment cannot be collected, can you offer cash discounts? If discounts don't work, can you ask for a deposit? Believe that only distributors who receive cash will be dignified distributors. Of course, some distributors will say that in our industry, distribution and monthly settlement have become industry practices; without distribution and monthly settlement, business cannot continue. Then I have another way to receive cash: through negotiation, for downstream customers with mature conditions, apply for a credit card with the customer as the cardholder, with your company as the guarantor. Keep the card in your company's finance office, and each month, the customer's payment is directly swiped from the credit card. Your finance staff only needs to remind the customer to repay on time next month. This resolves the contradiction between downstream customers needing monthly settlement and your need to receive cash. I had a provincial distributor in Hunan with annual sales exceeding 100 million yuan, who has gradually implemented this method for over three years, and currently there are basically no outstanding debts from downstream customers.
Value manufacturer volume rebates. In addition to market expenses, the expenses directly obtained from the manufacturer include rebates at various stages. Some distributors do not pay much attention to this, lacking the awareness to push volume at critical moments, resulting in failing to meet targets and missing rebates, and even thinking it doesn't matter. In fact, rebates during promotional nodes are a major expense for companies and a relatively standardized part of their spending. As long as the distributor's capabilities are suitable, they should try their best to obtain this part of the expenses. Some distributors say that if it is purely volume rebates, my warehouse will accumulate a large amount of slow-moving inventory, and the money earned will be tied up in the warehouse. In fact, there are techniques for volume rebates. Let me tell you the method: 1. Ensure sufficient funds in the company account; 2. Place orders yourself, not through the manufacturer's salesperson, especially for distributors of well-known brands. And only order your best-selling products, order enough according to the sales rebate target, rather than buying whatever is in the company's warehouse; 3. Generally, your best-selling products are also best-sellers in other regions, and companies usually cannot meet demand. In this case, if you fail to meet the sales target because the company has no goods to ship, you can ask the regional salesperson to make a special application for the rebate. Reasonably, the company will approve the normal rebate. Even if the company eventually ships the full amount, you still get the region's best-selling products, and there should be no major problems in product digestion.
A distributor once said to me: "Teacher Huang, actually, by now, for my company, the purchase cost of products doesn't require my own investment. From the beginning of my business, I insisted that downstream customers pay before delivery, and manufacturers ship after seeing orders, trying not to let payments stay in the manufacturer's account for more than three days. Although it was difficult at first, I spent a lot of effort on product mix and brand selection, which is the foundation of the business. I dare to be responsible to my downstream customers, and over time, everyone recognizes me. Today, my company's account has at least 1 million yuan in pending shipment funds every day!"
In fact, what I want to say is that if distributors want to truly make more money, among the five methods I mentioned, achieving one to the extreme will yield astonishing results.
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