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Nowadays, a popular term among manufacturers' sales personnel is "channel control." Meanwhile, distributors often talk about "counter-control." The former refers to manufacturers controlling the market by controlling commercial channel members. For manufacturers, controlling large retailers is unrealistic, but controlling distributors and small to medium-sized independent retailers is feasible. Through such control, manufacturers accelerate product flow through channels and reduce their financial risk.
This is why "deep distribution" is so prevalent in China, and why "inventory pushing" has become the most common sales tactic.
Undoubtedly, through channel control, manufacturers lower their operational risk, but doesn't this increase the risk for distributors?
Therefore, manufacturers' behavior inadvertently triggers distributors' counter-control, where distributors seek to break free from control, or even reverse control over manufacturers and terminals.
For distributors, counter-control means seizing the commanding height of the distribution chain, thereby controlling manufacturers and terminals. This allows distributors to secure the most favorable policies and the most marketable products from manufacturers, and enables faster collection from terminals. Consequently, two key indicators for distributors—capital turnover rate and product turnover rate—can be maximized.
Why are distributors finding it increasingly difficult to survive? Sales are harder, and profits are thinner. How can this situation be broken? How can reasonable distribution rights be secured? How can balanced, mutually supportive business relationships be established?
Some classify distributors as "sitting merchants" or "traveling merchants," but this is too simplistic, analyzing distributors only by behavior.
I categorize distributors into two types: one is the "trader," who merely moves goods, taking on only the responsibility of "selling products" in the value chain of the entire distribution field. The other is the "integrator of regional market resources and sales resources," who not only distributes products but also integrates resources to "sell markets."
Only the second type of distributor is qualified to control manufacturers and terminals and to claim a "right to profit distribution" in the distribution chain.
Why do distributors often face pressure from both sides?
Manufacturers have products, and distributors rely on products to make money, so distributors are often controlled by manufacturers.
Why are distributors squeezed by both manufacturers and terminals?
The answer can also be found from consumers: when consumers purchase products, their choice of product determines that distributors are bound to be controlled by manufacturers; when consumers buy at terminals, it also determines that distributors will inevitably suffer from terminals' "temper."
Therefore, to escape this vicious cycle, distributors must create certain conditions.
To counter-control, distributors must be able to monopolize resources or reduce sales costs. This is the condition for the existence of the new "market-selling" distributor—the "integrator of regional market resources and sales resources."
Thus, the core value of distributors lies in their logistics capability, warehousing capability, and service level, bringing channel capacity, growth rate, exclusivity, and other indicators related to corporate market development under their control.
Let's look at some popular practices distributors currently use to break free from control:
Some distributors buy out products and engage in OEM private-label production, aiming to keep the most profitable products from being controlled by manufacturers. But can this guarantee market launch? Can it ensure the private-label products have enough survival time? If these questions cannot be answered, distributors have not won an independent position in the channel. This is why most bought-out products do not last more than three years.
Some distributors buy stores, using contracts to control terminals, directly facing consumers in a close manner, such as buying out hotel entry fees. However, this approach faces fierce competition. Moreover, many distributors, amid competition, use locally recognized "famous brands" to bypass entry fees. Expanding this way easily encounters scale bottlenecks and capital bottlenecks.
Some distributors integrate to jointly control over 60% of terminals in a regional market, aiming to increase scale and achieve monopolistic terminal control. This is an obvious oligopolistic counter-control, which can achieve the goal of reducing sales costs. However, it requires proper allocation of benefits and division of responsibilities among member distributors, which is a very difficult task.
Are these the only counter-control methods? Of course not!
There are logistics counter-control by covering and serving numerous scattered terminals, distribution chain inventory-pushing counter-control by mastering terminal inventory information, service counter-control by integrating promotional resources, customer-pull terminal counter-control, consumer-group aggregation terminal counter-control...
In the battle of control and counter-control, who ultimately has the final say depends on who is stronger.
If distributors lack resources, how can they "threaten" manufacturers and terminals?
What counts as resources? Is it how many people you have, how many vehicles? ... Such thinking still reflects the "selling products" mindset. Under this mindset, the only means for distributors to compete for control is to compare strength, to see who is "wealthier and more powerful."
For an integrator of regional sales resources, holding a "selling products" mindset is dangerous. At this point, it is difficult for distributors to instill a "sense of mission" within their enterprises, and direct marketing tools like price cuts and material incentives like commissions become the most common operational tools.
At this point, can the lifespan of the products they distribute hope to exceed three years?
At this point, do their internal employees truly have enough work enthusiasm?
Therefore, shifting from a "selling products" mindset to a "selling markets" mindset is a major challenge for distributor development.
"Selling markets" requires distributors to understand local consumer characteristics, while "selling products" does not.
"Selling markets" requires distributors to integrate channel resources, while "selling products" does not.
"Selling markets" requires distributors to plan profit distribution among channel members, while "selling products" does not.
"Selling markets" requires distributors to design the pace of market launch, while "selling products" does not.
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It is precisely because of these characteristics of "selling markets" that distributors who adopt this approach can secure better products, better policies, and better services from manufacturers.
It is precisely because of these characteristics of "selling markets" that distributors can engage in horizontal alliances and integration, rapidly expanding their strength.
It is precisely because of these characteristics of "selling markets" that terminals are no longer an opposing force but become one of the bargaining chips for distributors.
Control is not about dominating others, but about gaining more profit.
This is the biggest difference between distributors who "sell products" and those who "sell markets."
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