In 2020, under the pandemic, the entire FMCG industry was affected to varying degrees. Especially daily chemical products, as a category with a long consumption cycle, were even harder hit during the pandemic. Consumption shifted online, squeezing market share for distributors operating traditional offline channels. However, in such an environment, many excellent daily chemical distributors still found business growth through new thinking and methods, while protecting their market from being eroded. Hongyang Trading, located in Zhoushan, Zhejiang, is a daily chemical distributor adept at finding growth in adversity. In Zhoushan, a fourth-tier city with a population of only one million, it represents over 30 daily chemical brands including Hengan, Jieyun, White Cat, Miaojie, L'Oréal, and Nivea, achieving annual sales of 55 million yuan and becoming the local leader in daily chemicals. Recently, New Distribution interviewed Mr. Wang Saiguo, General Manager of Hongyang Trading. From a small wholesaler to a trading company, with twists and turns, how did he step by step find direction, position precisely, and grow stronger?

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300万 Uncollectible Bad Debts Nearly Became the Last Straw Hongyang Trading was established at the end of 2003. Before that, Wang Saiguo had been working at the local supply and marketing cooperative, which was considered the earliest supermarket in Zhoushan. After graduating in 1995, he spent 8 years there, starting as a warehouse keeper, then working as a salesperson, store manager, purchasing manager, and finally as wholesale director before leaving. After leaving, with 100,000 yuan from his family, he started his own business. It was more like a small wholesaler; with two relatives and friends, they didn't dare to buy a car and started with a tricycle. Initially, the business had nothing to do with daily chemicals; they were wholesalers of unified noodles, pulling a few boxes to township markets, one store at a time, with profits of 0.3 or 0.5 yuan per item—painful work. The first contact with daily chemicals was in 2004 when Hongyang Trading became the agent for its first daily chemical product, Tianqi toothpaste. A year later, Wang Saiguo opened the first supermarket, called Huaqiao Friendship Store, and Tianqi toothpaste was the first daily chemical product to enter. From then on, Hongyang Trading began to get on track, gradually clarifying the company's direction: daily chemicals. Hongyang Trading successively took on more daily chemical brands, including Hengan, Jieyun, Kimberly-Clark, L'Oréal, etc. By 2015, Hongyang Trading's annual sales reached nearly 70 million yuan. But the good times didn't last; after 2015, Hongyang Trading faced a crisis. Previously cooperating LKA stores, Tiantianhui, Taikelong, Xinmao, etc., closed one after another in Zhoushan, causing sales to plummet. From 2015 to 2019, sales declined by several million each year, and by 2019, annual sales were only around 45 million yuan. Moreover, because these KA stores generally had credit periods, when they closed, nearly 3 million yuan in bad debts accumulated over five years, which couldn't be recovered. Funding issues, coupled with the sharp sales decline, led to bottlenecks in the company's operations. To address this, Wang Saiguo proactively went out to learn, borrowing strategies from excellent trading companies, and adjusted market strategies by analyzing his own problems. First, precise positioning and channel refinement; second, brand management and marketing planning.

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Precise Positioning and Channel Refinement In the past, although Hongyang Trading had been doing daily chemicals, it lacked core sub-categories; it did everything—tissue, skincare, general merchandise—but was not professional in any. Facing severe sales decline, Wang Saiguo's first adjustment was company positioning. He refined the company's positioning: Strengthen tissue paper, expand daily chemicals. Use the company's current advantageous category, tissue paper, as a breakthrough to become a professional tissue supplier. At the same time, use tissue paper to establish a foothold in the market and gradually expand other daily chemical categories. The effect of precise positioning was obvious; within just one year, Hongyang Trading's sales in the tissue sub-category exceeded the second-ranked player in Zhoushan by five to six times. After clarifying the positioning, how to achieve it? Wang Saiguo told New Distribution, the core is channel refinement. Although daily chemical products are necessities, their usage cycle is long; for example, a box of toothpaste or a pack of tissue can last over a month. The consumption cycle is long, so many small stores don't carry daily chemical products. Especially at the distributor level, fast turnover is needed, so few distributors do channel refinement; many daily chemical distributors do second-tier wholesale, and market dumping and price chaos are common. Some factory regional managers even asked Hongyang Trading to dump goods into other regions to meet their sales targets. But Wang Saiguo resolutely refused. In his view, dumping is only short-term business; for long-term development, market stability must be maintained. Therefore, Hongyang Trading has always insisted on one thing: channel refinement. 1. Single Category, Multiple Brands, Control Terminals In a single sub-category of daily chemicals, most distributors do exclusive distribution; for example, laundry powder only for Diao Pai or Liby, because most daily chemical brands don't allow carrying competing products in the same category. But Hongyang Trading did the opposite: in the tissue category, it used multiple brands and price band coverage to open terminals. Using price bands as a distinction, the first-tier brand Hengan as the main body, positioned high-end; second-tier well-known brands as supplements, positioned mid-range; third-tier local brands for profit, positioned low-end. The logic is simple: by distinguishing price bands, cover consumer groups comprehensively, meet the needs of different consumer segments, and while increasing sales, ensure profits. Another important reason for distinguishing price bands is to avoid conflicts between manufacturers; in the same sub-category, manufacturers certainly don't want you to represent competitors. For example, Hengan's competitors are C&S and Vinda, with similar prices, so Hongyang Trading only carries Hengan in the same price band. At the same time, this single-category, multi-brand strategy laid the foundation for opening terminals. For instance, in modern channels, with a single brand, even with resources, SKU numbers were limited, and monthly sales in supermarkets were only around 10,000 yuan. But now, by buying shelf space, floor displays, etc., multiple brands enter simultaneously, providing one-stop supply, and sales often double to 20,000-30,000 yuan. In medium-sized supermarkets, the need of operators is for a professional supplier in a specific category, and Hongyang Trading's deep cultivation in tissue exactly matches. So in such supermarkets, Hongyang Trading can enter in the form of a package deal, seizing terminal resources. In small stores, the demand for daily chemicals is small, making them tail products; this is why most daily chemical distributors don't serve small stores. Small stores' demand for daily chemicals is not brand power but cost-effectiveness. Hongyang Trading's low-end products exactly meet the needs of small stores, further expanding the sales network. 2. Point-to-Point Direct Delivery The main customers for daily chemical products are medium and large supermarkets, and these customers have purchasing departments and warehouses in their organizational structure. The normal process is that the supermarket's purchasing department aggregates orders to the distributor, who delivers to the supermarket's central warehouse, which then distributes to each store. In this process, the distributor only needs to deliver to the warehouse; the rest is handled by the supermarket. But Hongyang Trading has always insisted on direct delivery to supermarkets, distributing goods directly from Hongyang's warehouse to each store. This actually greatly increases logistics costs; for example, if a chain system has 10 stores and needs a dozen boxes, delivering to their central warehouse would leave distribution to the supermarket, but now direct delivery to stores adds costs for sorting, personnel, etc. But Wang Saiguo said that although direct delivery increases costs, it brings hidden revenue increases. First, better service increases stickiness with these big customers; they won't give up cooperation for short-term benefits. Second, direct delivery allows close contact with stores, so we can directly see their sales needs and uncover incremental opportunities.

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Marketing Planning Ability: Distributors Must Also Have It In addition to channel refinement, another important measure Hongyang Trading took was brand management and cultivating professional marketing planning capabilities. Wang Saiguo told New Distribution that distributors serve two customers: one is the upstream manufacturer, the other is the terminal store. How to connect these two customers is the core capability of a distributor. To this end, Hongyang Trading established a brand operations department and implemented a 1+1 model with manufacturers: Hongyang's brand department is responsible for marketing planning of promotional activities, while manufacturers send salespeople to execute. The role of the brand operations department is essentially a joint business plan between distributor and brand, including contract confirmation, annual target setting, annual business summary, terminal activity planning, product sell-through, distribution, etc. A brand operates nationally; even regional managers cover large areas, so they can't give detailed attention to every distributor. Therefore, distributors must have the ability to anticipate brand needs, proactively arrange promotional activities before manufacturers ask. For example, there are three major promotional nodes in the daily chemical industry: Women's Day, Hair Care Festival, and Double 11. A month before these nodes, we must communicate with various manufacturers in advance, confirm themes, plan activities, decide how much stock to allocate, set floor display standards in supermarkets, and prepare necessary materials—a complete plan in advance. After the activity, the brand department should conduct a thorough review: how many resources were used, what results were achieved, what shortcomings existed, etc. As Wang Saiguo said, manufacturers and distributors are like fish and water, but also a game relationship. If a distributor ends up just a fund advance and delivery service, they will gradually be eliminated by manufacturers. To survive, distributors must have their own marketing capabilities. Through the two key decisions of channel refinement and brand management, Hongyang Trading stabilized its turbulent business. After five consecutive years of decline, in the most difficult year of 2020, it achieved counter-trend growth, from 45 million back to 55 million yuan, and maintained good development momentum. Final Thoughts: In the past, distributors may not have been sensitive to the speed of industry changes, but through this pandemic, we can see that the industry is changing too fast; community group buying, O2O home delivery, etc., are all disrupting the retail industry. "When the times abandon you, they don't even say goodbye." The same applies to distributors. Wang Saiguo told New Distribution, the future for distributors is an era of resource grabbing; big fish eating small fish is the trend. Without core competitiveness, the final result is inevitable being eaten. Channel refinement and brand operations are Hongyang Trading's core competitiveness. Regarding future development, Hongyang Trading will focus on these two core capabilities, deeply cultivate channels, establish a complete sales network in the Zhoushan area, and based on daily chemicals, expand into snack foods, becoming a one-stop supplier for small stores in daily chemicals and snacks. In New Distribution's view, whether as channel operators or brand operators, these are the future directions for distributors. But to do both well, the root is inseparable from deep cultivation of the terminal market, which is also why brand owners have always valued distributors. Add author's WeChat for communication: Note namecompanyposition If a tip is adopted, a reward of 400-2000 yuan will be paid.