I worked hard to build this market, and now I'm just going to hand it over to someone else? We're all in business, so let's think it over carefully.
When I saw this WeChat message, I was taken aback—was this a conflict between the manufacturer and the distributor?
Objectively speaking, Product A's quality was good, and the local market had been opened up; many customers specifically asked for it. But there were also many drawbacks, with cross-regional selling (channel stuffing) being the most serious. However, a message with such a resentful and accusatory tone made me consider what lay behind it.
Is the quality really problematic? Should I continue selling this product? A dozen question marks ran through my mind.
With these doubts, I went to talk to the distributor, Xiao Li. After a conversation, Xiao Li poured out his grievances.
Me: Just saw your post—what's going on? Is there really a product quality issue?
Xiao Li: Sister, we've been dealing with each other for a long time, so you should understand. I've been selling Product A for over four years, from nothing to now decent sales. I built it up bit by bit. I wouldn't just stop without a good reason. There must be difficulties.
It's not just me; many regions in the province have stopped selling it.
From Chinese New Year to June, after-sales feedback about allergic reactions increased a lot, and many customers said the quality difference between the old and new products was too great.
Look, this is the stock we got—the cream color differs between batches.
Since its inception, Brand A never had its own factory; all production was outsourced to contract manufacturers. This laid the groundwork for later quality issues.
Xiao Li said that cross-regional selling appeared in his area. He bought up that batch of goods and demanded an explanation from the manufacturer. The manufacturer claimed it was counterfeit, but all the anti-counterfeit codes showed it was genuine. To this day, the manufacturer has dragged its feet and not resolved the issue.
"It's not that I don't want to continue; it's that I can't. When I decided to stop, the manufacturer tried to retain me. Honestly, after all these years, I've made money, but the gray market and fakes are too rampant now. I can't bear the responsibility. Kids are precious these days; if something goes wrong, I could lose all the money I've earned."
As for deeper issues, Xiao Li didn't elaborate, but his tone suggested there were things he didn't want to or couldn't say.
"Sister Wang, try Brand B. It may not have the advertising fame of A, but the quality is better, and I'll give you full after-sales support."
Changing the subject, Xiao Li started promoting his new brand—and Brand B is a direct competitor to Brand A.
I thought the matter would end there, but recently new issues arose.
In September, Xiao Li posted several statements on his Moments:
"It's been three months since I terminated my contract with Brand A. Please don't contact me about any quality or after-sales issues with Brand A. I don't know this outsider named XXX. If he mentions me at certain stores and claims we have a relationship, don't believe him. A friendly reminder: if you trust him and problems arise, don't contact me. I know nothing, am not responsible, and will not bear any liability. I've reported this to the police and will resort to legal action if necessary. I advise those stores stirring up trouble to watch their mouths—the wind outside is strong."
The wind outside is indeed strong... As for the truth of the matter, I can't be bothered to ask. After I clear out my remaining stock of this brand, I won't continue selling it. There are plenty of alternatives.
As a retailer, quality is always the first criterion when choosing a product.
Passerby A's Take:
Where exactly the disagreement between Brand A and its distributor lies may not be explained in a few words, but from Xiao Li's reluctance to speak, we onlookers can glean some clues.
First, let's highlight the key points:
- Brand A had been in the local market for four years, the market was open, and the product was "selling well."
- Early quality was good, but later there was a significant decline.
- Brand A had no factory of its own; it relied on OEM production.
- The distributor made money.
- Cross-regional selling occurred, and when the distributor confronted the manufacturer, counterfeit issues surfaced.
- Brand A had advertising in the local market, more than competitors.
Putting these clues together, a parabolic growth trajectory appears before us.
1. Product.
It's true that the OEM model laid the groundwork for Brand A's quality issues, but it would be hasty to say OEM is unreliable, because early products were of good quality, and many customers bought them by name. If the OEM were poor, the initial supply would have been substandard. The inference that the client (Brand A) mismanaged the OEM, leading to shoddy work, is also weak—competition among OEMs is fierce; which factory would deliberately harm its own client?
Unless coerced or enticed.
Coercion, or more precisely, pressure. We all know OEM margins are thin. Even a luxury bag costing thousands of yuan might leave the factory with less than 10 yuan profit after layers of squeezing. Capital is like a fragile lifeline for OEMs; if it fluctuates—say, the client delays payment or forces price cuts—you can imagine how tough it gets.
A brand that has achieved some success, like A, might well have played the role of a heartless landlord. This isn't burning bridges; it's business. As the author noted, Brand A invested heavily in local advertising, and a mother-and-baby store owner said Brand A also advertised on CCTV. Such heavy promotion led to consumers buying by name, so the brand could afford to be tough. But as marketing costs rose, the money for production might have shrunk.
Building the brand and sales is also to gain more leverage in negotiations with upstream and downstream partners. That's understandable. The problem is that if you squeeze upstream profits, you must set up better management mechanisms to constrain upstream and avoid negative impacts, such as OEMs cutting corners or skipping quality control. IKEA has set an example: even if suppliers and OEMs complain, IKEA keeps defect rates extremely low.
As for enticement, it's not uncommon for contacts on either side to harm collective interests for personal gain. We won't speculate further here, just keep the possibility.
2. Channel.
According to Xiao Li, cross-regional selling appeared in his area. He demanded an explanation from the manufacturer and got the reply that the goods were counterfeit, but all anti-counterfeit codes showed genuine. The manufacturer never gave a clear answer to this obvious contradiction, nor solved the problem.
Cross-regional selling indicates a large volume of goods in the market. There are generally two reasons:
- Distribution is too dense, with multiple channels competing for the same consumer.
- Some market agents don't bother to work the terminals; they can make money through cross-regional selling, so why take the hard path?
However, given the manufacturer's ambiguous attitude, a dark thought occurs to me: could cross-regional selling be tacitly approved by the manufacturer?
There are two bases for this guess.
First, Xiao Li said all anti-counterfeit codes showed genuine. There are two possibilities:
- Brand A lied to cover up its tacit approval of cross-regional selling.
- The products are indeed counterfeit, but the counterfeiting is too realistic.
Considering Brand A's response and the cost of counterfeiting (including fake anti-counterfeit codes), the first possibility seems more likely.
Second, Brand A's recent quality issues are frequent. Based on the above, it's likely that Brand A squeezed prices too hard, so the OEM cut corners in production to reduce costs, and quality dropped accordingly, with both sides reaching a tacit understanding. At that point, to pursue sales growth or market share targets, when channel players started cross-regional selling, Brand A would turn a blind eye, partly out of guilt.
Although on the surface, quality issues were the direct reason Xiao Li gave up Brand A, his attitude suggests it's not that simple.
"I worked hard to build this market, and now I'm just going to hand it over to someone else? We're all in business, so let's think it over carefully. As for some stores asking about quality issues..." Clearly, quality issues were just a catalyst. The real reason for the split between distributor Xiao Li and Brand A likely lies in the manufacturer-distributor relationship.
All the hustle and bustle is for profit. Whatever the truth, it revolves around "profit."
The worst outcome is that former partners defect to competitors, as Brand A is experiencing.
For short-term gains, this rising star in the market may be about to fall.
Given limited information, we can't make an objective judgment. We're just speculating to satisfy our curiosity—no, to express our genuine concern for the industry.
To avoid unnecessary harm to the brand in question, we've omitted its name. Rather than figuring out who Brand A is, let's calmly consider: does this case reflect our own practices?
Source: Zhongtong Observation (ID: chinabaobbei)
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