Recently, I read an article by Mr. Liu Run, which contained a viewpoint: In every industry, there are always dividends rising and falling; just because you don't see them doesn't mean they don't exist. This logic applies equally to the distributor industry. Online impact is significant, offline requirements are high, manufacturers' tasks are heavy, and distribution business is indeed becoming harder—that's a fact. But does difficulty mean there are no dividends at all? I think not. Market dividends have simply decreased, not disappeared. The market has shifted from incremental to existing volume; whoever captures more existing volume gains the dividend. There will always be a small group of distributors who, amid the 'harder' business, not only remain unaffected but grow their business and see profits rise sharply. Located in Nanchang, Jiangxi, Bajie Trading is one such 'small group' of distributors specializing in condiment distribution. Founded in 2014, it expects sales to exceed 100 million yuan in 2020, with net profits several times higher than typical distribution companies. Bajie Trading covers over 3,500 active offline outlets and represents more than 60 condiment brands. Recently, New Distribution had a conversation with Mr. Leng Wenjun, founder of Bajie Trading. Amid the overall challenging distribution environment, how did Bajie Trading rise rapidly in a short time and maintain high growth in both sales and profits?

-01- From Zero to 100 Million in Six Years Bajie Trading was founded in 2014, which is relatively late for a trading company. Most distributors were established around the 2000s, when the market was still in the stage of grabbing a share of the cake; basically, if you had money, you could do it, and with hard work, business would grow. Before starting his own business, Leng Wenjun was the KA manager at a condiment trading company. With the development of the internet, online channels increasingly impacted physical stores, and with soaring KA store costs, store business became difficult. So, at the end of 2013, Leng Wenjun decided to resign and start his own business. Because he was familiar with the condiment distribution business, he chose to continue in condiments. Based on market insights, he decided to focus on the circulation channel.

To excel in the circulation channel, Leng Wenjun studied many distributors in this channel and analyzed its characteristics. First, the circulation channel must have first-tier brands to increase customer stickiness and customer relevance. To this end, Leng Wenjun proactively approached brands like Lee Kum Kee, Hengshun, and Totole to discuss cooperation. Second, besides first-tier brands, it is essential to have second- and third-tier brands to increase profits and improve customer satisfaction. For example, some specific customers need functional condiments like yeast, wine starter, and rice flour, which have small volumes but are necessary. Third, for each sub-category, only one brand is represented to avoid overlap as much as possible. For instance, if representing Lee Kum Kee's soy sauce, they would not represent other brands' soy sauce. Through this product selection approach, Bajie Trading now represents over 60 condiment brands, nearly 800 SKUs.

At the same time, due to his experience in the KA channel, Leng Wenjun was well aware of the importance of online channels. In 2018, when community group buying was just emerging, he decisively seized the opportunity and entered the field. After careful consideration, he positioned Bajie Trading as a high-quality supplier for community group buying platforms. After two years of development, Bajie Trading became the regional condiment supplier for platforms like Xingsheng Youxuan, Shixianghui, and Kaola Select, with annual sales accounting for about 30% of the business.

In six years, Bajie Trading completed the transformation from zero to the 100-million level, maintaining over 30% growth annually. Leng Wenjun told New Distribution that the rapid growth is attributed to: First, refined internal organizational management, with different compensation methods for different scales; Second, digital management, shifting from human-driven to data-driven.

-02- Different Stages, Different Compensation Methods Leng Wenjun told New Distribution that he enjoys reading books by Kazuo Inamori, so his company's organizational management resembles the Amoeba model, fully leveraging employees' initiative, making everyone an operator.

Although he has only been running a trading company for six years, Leng Wenjun has his own way of thinking. At different stages of company development, he has different considerations for compensation plan design.

In the early stage, Bajie Trading adopted a profit-sharing system. Compensation plan: Basic salary (4,000) + profit sharing - business expenses The core part of a salesperson's income is profit sharing. The company sets a base profit amount, which is determined based on the usual sales in the region. For example, if the base profit for the region is 40,000 yuan, after the salesperson completes this base profit, the excess profit is split equally between the salesperson and the company.

It is important to note that business expenses include two parts: one is the in-store actions required by manufacturers, such as display fees and end-cap fees, which are covered by the manufacturer and later reimbursed to the salesperson; the other is discounts and freebies given by the salesperson, which are borne by the salesperson themselves. Using resources incurs costs, and since the salesperson controls these, they will not use them excessively because they know their income includes these costs.

The key to the profit-sharing system is price transparency; the boss must be open about purchase prices. As a boss, you must earn employees' trust. If data is not transparent, salespeople will feel uncertain and will not work hard.

The advantage of this compensation method is that profit sharing fully stimulates salespeople's initiative, prompting them to actively sell high-margin second- and third-tier products, because doing only first-tier brands yields little profit. This way, salespeople can earn higher wages, and the company can maximize benefits, achieving a balance between profit and sales.

Through this compensation plan, Bajie Trading's net profit in 2019 far exceeded that of typical trading companies, and the average salary of salespeople was more than double that of local peers.

Of course, this compensation method also has obvious drawbacks. With a monthly sales threshold of 5 million yuan, below 5 million, both the company and salespeople benefit, with business costs controlled at around 4 percentage points. Once sales exceed 5 million, business costs rise to 5-6 percentage points and continue to increase with sales, which is unreasonable.

Based on this background, Leng Wenjun decided to adjust the compensation plan: No base salary + 2.5% sales commission + gross profit difference bonus + additional rewards.

The most obvious change is that salespeople have no base salary; their main income is sales commission.

Gross profit difference bonus calculation: (Current gross margin - Last year's gross margin) * Sales * 20%

Additional rewards are set by the company with task targets; completing corresponding targets yields corresponding rewards. For example, if the task is 300,000 yuan in sales, achieving 300,000 yields a reward of 1,000; achieving 350,000 yields 2,000, and so on.

Through this method, additional rewards are fixed, variable costs decrease, the company's business expenses become stable, and sales continue to rise steadily.

The biggest resistance to compensation reform is definitely from salespeople, as this change may reduce their income. Leng Wenjun told New Distribution that the core for distributors is efficiency; higher efficiency leads to higher returns. Efficiency is also reflected in operating costs; if operating costs are too high, the company cannot sustain in the long run. After explaining the reasons, the salespeople eventually agreed.

Of course, Leng Wenjun is confident about the company's development. After the compensation reform, the average monthly salary of salespeople still reaches over 12,000 yuan, still far higher than peers, so their motivation does not decrease.

-03- Four-in-One Integration, Fully Embracing Digitalization Traditional distributors are called traditional because of rigid models and low efficiency. Distributors must complete digital transformation; otherwise, their living space will become increasingly narrow.

In internal organizational management, digital tools greatly improve operational efficiency.

First, accuracy and immediacy of business data. In the past, order collection was done by salespeople entering orders into the backend, causing delays and lag in data updates. Additionally, unclear order information from salespeople led to misunderstandings by clerks and subsequent disputes. After using the system, various receivable data became clear, and accounts could be settled on the same day or even immediately, greatly improving operational efficiency.

Second, real-time warehouse inventory monitoring. Before digital management, ordering relied on experience, either when customers requested or when manufacturers required. Now, through 'Zhoupu Data', warehouse ordering has shifted from human-driven to data-driven. The system analyzes data and places orders based on demand. Special circumstances like promotions require approval.

Moreover, salespeople can see real-time inventory, avoiding situations where they place orders with zero stock. If warehouse stock is zero, salespeople can immediately report to purchasing, who will then provide information on when the goods will arrive.

With data, Bajie Trading has an extremely low probability of stockouts. When shortages occur, they are usually due to upstream manufacturers, reducing the embarrassment of human factors.

Third, refined price management. The system backend sets a firewall; salespeople cannot issue prices below the firewall, preventing them from arbitrarily changing prices to boost sales. If a promotion is needed, salespeople must make a note, and the backend modifies the price; after the promotion, the price returns to normal. For example, if the invoice price is 10, the backend firewall price might be 9.8; below 9.8, the system cannot issue. For promotions, a note is required, and the backend modifies the firewall price to 9.5; after the promotion, it reverts to 9.8.

The application of digital tools is not only reflected in internal organizational management but also in external store management. Leng Wenjun told New Distribution that all of Bajie Trading's outlets are active. If a small store does not order for a month, the system alerts the salesperson responsible for that area, who then checks the store, asks for reasons, and reports back to the company. If it is determined that cooperation cannot continue, the store is removed.

The system can clearly show single-product sales in stores, allowing the company to infer from store sales and guide salespeople on how to work, deeply empowering them.

Through the application of digital tools, Bajie Trading has basically achieved the four-in-one integration of customer online, product online, employee online, and management online.

Final Thoughts:

When discussing the future development of distributors, Leng Wenjun shared some of his views: distributors will evolve into service providers, offering one-stop supply of all categories, reducing intermediate links, and lowering supply chain costs.

Leng Wenjun emphasized, Regardless of the direction, one thing is certain: digital transformation must be completed. Market competition is not between people but between data; whoever has finer data granularity has a better chance to grow.

From New Distribution's perspective, whether developing into service providers or undergoing digital transformation, the core is to improve operational efficiency. In today's market environment, incremental growth is limited, and everyone is competing for existing market share. Distributors can only ensure their continuous growth and strength by honing their internal skills, improving operational efficiency, and squeezing competitors' existing share.