In conversations with several business owners, they all shared three common puzzles:

  1. Why do many recent college graduates face employment difficulties but are unwilling to join the FMCG industry? Can I offer higher salaries to attract a better quality team?
  2. Why does Meituan Waimai manage tens of thousands of delivery riders seemingly well, while our company struggles to manage a few thousand salespeople? What model do I need for more effective management?
  3. Why do delivery and food delivery riders have low negative feedback rates, while the quality of retail outlets served by our salespeople varies greatly, with frequent customer complaints? What model can improve service quality at retail outlets? In summary, these are the three major challenges facing FMCG brands:
  • Difficulty in recruiting, especially quality personnel;
  • Difficulty in team management, and even harder to manage well;
  • Difficulty in maintaining current customer service quality, and even harder to improve it. Many brands try to improve by increasing salaries, refining management granularity, and establishing service evaluation systems for channel partners, but with diminishing returns. Let's think from a different perspective: 1. If we can't recruit quality employees, can we recruit quality "small bosses" or "partners"? Data suggests that the post-90s and post-95s generations, with their independent personalities, are more willing to start businesses and be their own bosses.
  1. If team management is difficult, stimulate self-management awareness; every "entrepreneurial boss" can self-manage.
  2. The core issue hindering service quality improvement is mindset: Are we serving customers for the boss, or are we serving our own customers? Thinking differently essentially means changing the model. This involves redefining and redistributing responsibilities, rights, and interests among brands (brand, product, supply chain), channel partners (distributors, sub-distributors, wholesalers, retail outlets), and frontline operations and management teams (manufacturer salespeople, supervisors). It's a significant topic. Today, let's first discuss why brands need to optimize their channel coverage model; I'll explore further later. When should brands start planning channel transformation? This is a diagram I shared during a forum on channel model transformation at the 8th China FMCG Innovation Conference on April 8, 2023. So when is it time to upgrade the channel model? Suppose we want to travel from Chengdu to Beijing as quickly as possible, and we have a horse-drawn carriage. To shorten travel time, we must make the carriage faster, which can be done by "adding horses." If one horse runs at 20 km/h, adding another increases speed to 30 km/h; adding another increases it to 40 km/h. At this point, the cost-effectiveness is optimistic, and the return on investment is acceptable. But if we need to go faster, we add more horses, but there's a limit. Adding another horse brings speed to 45 km/h, and another to 47 km/h. After adding two more horses, fixed costs remain unchanged, but speed improvement is not ideal; cost-effectiveness becomes less optimistic, and the return on investment becomes unacceptable. At this point, we should consider not "adding more horses" because excessive investment only increases costs without substantial speed gains. We should consider whether to replace the carriage with a high-speed train. The analogy of carriage speed improvement parallels the improvement in operational efficiency of FMCG channel models. As mentioned at the start, many brands try to improve by increasing salaries, refining management granularity, and establishing service evaluation systems, but with diminishing returns. Should we consider phasing out the old operational model? What are the most urgent issues to address in channel model transformation? I have provided digital transformation consulting and training to many companies, and the core point has never changed: All transformations must revolve around two dimensions: performance growth for the manufacturer and organizational efficiency improvement. Channel model transformation is no exception. Let's first discuss the case of Nongfu Spring's channel coverage model transformation, which led to performance growth and organizational efficiency gains. In 2013, I was an office manager at Nongfu Spring. That year, the company faced a huge bottleneck in sales growth. Mr. Zhong's speech after visiting the Jiangxi market left a deep impression on me. After the market visit, he asked: Why do our employees seem hardworking and doing things, and some urban areas are okay, but our market share has been declining for months? The key issue is the distributor structure in third- and fourth-tier cities. In urban areas, Coca-Cola is strong; they focus on control and intensive cultivation. Pepsi is strong in peripheral areas, doing channel, wholesale, and promotions one after another. We need to think about how these regional distributors should operate. Thus, Nongfu Spring's channel coverage model transformation began in earnest. After a series of iterations, the channel coverage model we see today emerged. Its core aspects include: 1. Distributors shift from followers to market operators. Previously, Nongfu Spring's salespeople belonged to the brand (the brand defined market expenses, channel costs, channel pricing, gross margins, etc.). Distributors mainly played supporting roles like warehousing and delivery (besides payment, shipping, storage, and timely delivery, they had little say in market operations; many people without FMCG experience became Nongfu Spring distributors because it was easy and profitable without much effort). Later, the market was returned to capable distributors, giving them distribution rights, market leadership, and operational suggestions, allowing them full play. At the same time, distributors assumed their obligations, including achieving targets, price maintenance, brand building, market expansion, etc., and accepted Nongfu Spring's systematic assessments, including performance achievement rates and basic market work execution. 2. Brands become behind-the-scenes coaches and referees. Their main responsibilities become: service and support to distributors (communicating policies and information, providing market and execution data, offering distributor training, mentoring sales reps, helping potential distributors), performance management (high performers: prioritize recognition, create model markets, set examples; low performers: support and rectify, warn or close accounts), supervision and inspection, and penalty for violations. This reallocation of responsibilities, rights, and interests between manufacturers and distributors effectively stimulates distributors' initiative. Previously, the brand had to invest heavily in managing distributors; now distributors manage the market spontaneously, improving organizational efficiency. Meanwhile, service quality improves, and sales steadily increase with the model change. Returning to the question at the beginning of this section: What are the most urgent issues to address in channel model transformation? On a macro level, we can understand it as: Raise your perspective on market bottlenecks, break out of narrow thinking, and consider the definition of manufacturer-distributor responsibilities, rights, and interests from a higher dimension. Precautions for Channel Coverage Model Transformation I personally experienced Nongfu Spring's channel coverage model transformation from 2013 to 2015, from the traditional distributor model to the current exclusive distributor contract model, and Jinmailang Beverage's transformation from 2015 to 2017, from the traditional distributor model to the "hitchhiking" model and finally the "four-in-one" model. I witnessed the entire process from 0 to 1 and from 1 to 100; the arduous journey is still vivid in my memory. Channel model transformation should follow at least four steps. Step One: In-depth Research, including:
  3. Selection criteria for target markets and market diagnosis planning;
  4. Field research on market channel partners (distributors, wholesalers, retail outlets);
  5. Competitive landscape analysis (sales, distribution, and sell-through of major competitors);
  6. Identification of market growth opportunities. Step Two: Model Market Creation, including:
  7. Determining selection criteria for model markets;
  8. Confirming seven operational strategies (product, channel, consumer, expense, organization, distributor, and time promotion strategies);
  9. Implementing the seven strategies;
  10. Running PDCA cycles for each strategy. Step Three: Empowering Middle and Senior Management Efficiency, including:
  11. Systematically reviewing the channel coverage model;
  12. Extracting model case studies;
  13. Developing practical training programs for middle and senior management;
  14. Replicating, correcting, and summarizing. Step Four: Rapid Replication Across All Regions - Model market creation should not be rushed, but regional replication should not be delayed. Finally, always pay attention to six key points in channel coverage model operation: 1. Gradually enhance distributors' operational capabilities; the enterprise team transitions from product sellers to brand promoters and distributor coaches; 2. Channel coverage enterprises must consider how to bear the pressure of market management and brand promotion; 3. Channel coverage must ensure orderly interaction and clear responsibilities across every link of the marketing channel, and strengthen the enterprise's ability to maintain market order; 4. The quality of channel coverage is reflected not only in guiding and controlling channel resources but also in terminal maintenance; 5. The advancement of channel coverage should emphasize rhythm and stage-specific priorities, establishing a marketing network and management model that matches market development stages; 6. The promotion of the coverage model should be based on objective market development needs and also on internal management capabilities and market control capabilities. Summary: Enterprise channel model transformation typically takes about two years to take shape; it cannot be achieved overnight. Each step must be correct to be effective. One wrong step may not lead to total failure, but it will certainly prolong the transformation cycle and multiply time costs. About the Author: Hai You: Special contributor to New Distribution, senior researcher, practitioner in offline channel marketing, and designer of enterprise channel coverage models. He has provided channel consulting to over ten first-tier brands, earning a good reputation.