How Can a Cross-Regional, Multi-Category, Multi-Brand Distributor Set Up a Branch Company Within 2 Weeks?

As e-commerce impacts first-, second-, and third-tier cities, distributors in these areas face increasing difficulties, while fourth- and fifth-tier cities and county-level markets under prefecture-level cities are relatively less affected. Consequently, more and more distributors are turning their attention to county-level markets. How should one go about expanding into county-level markets? Is it necessary to independently set up a branch company? How can it be done in the shortest possible time? To address these questions, New Distribution invited Mr. Li Feng, Executive President of Anshan Hongye Hengda Trading, to share his practical experience on channel expansion for multi-category, multi-brand distributors, the necessity of opening branch companies, and the specific operational steps involved.

1. Is it necessary to open a branch company? 2. How to complete the construction of a branch company within two weeks? 3. How to formulate the initial sales strategy for the branch company?

-01- Opening a branch company is time-consuming, costly, and labor-intensive. Is it really necessary? Regarding channel expansion and opening branch companies, many distributor owners may think that the opportunity has passed. The brands they distribute may already have local distributors in the county, and competition in county towns is fierce. Some distributors even pessimistically believe that with the rise of e-commerce, distributors may no longer be necessary. They think they can only do business year by year, and one day they might be eliminated by e-commerce. However, I believe these doubts are unnecessary. First, regarding opportunities in county-level markets, compared to urban markets, competition in county-level markets has not yet reached a truly intense level. Opportunities can be viewed from two angles: one is blank opportunities, and the other is opportunities for seizing market share. Blank opportunities in county-level markets may be relatively scarce, but the potential for seizing share is significant. If you are a distributor thriving in urban areas, trust that your management and business capabilities are far superior to those of county-level distributors. Moreover, if a distributor only operates in a prefecture-level market, achieving sales of several hundred million is indeed difficult. Blank opportunities are limited, but through your management and business capabilities, the potential for seizing share is substantial. Although there are many local distributors, they are often "all show and no substance," unable to withstand market competition and pressure. This is one perspective on whether it is necessary to open a branch company. Another dimension is that some of your manufacturers will also require channel expansion to cover more outlets in townships. If you ship directly from the city to the county, logistics costs are not low. Without salespeople serving the local market, and only relying on large secondary wholesalers, the brand will eventually set up its own distributor. Furthermore, I believe that even if the brands you distribute already have local distributors, you should still expand channels and build your network. Every distributor should know that your core asset is not vehicles, not warehouses, and not even the brands you distribute; it is your network and channels. With a network, you have the possibility of business, and leading brands will seek cooperation with you. Regarding e-commerce, for FMCG, the advantages of online platforms like Tmall, Taobao, and JD.com are concentrated in first- and second-tier cities, where they are convenient and fast. However, in third-tier and below, FMCG orders are very few. Additionally, Alibaba's Retail Link and JD's New Channel currently derive their main sales from leading brands and category leaders, with relatively low brand diversity. They mainly sell mature, fast-moving products. This is not ideal for brand owners who not only want to sell more of their bestsellers but also want to promote their new products. Who is best suited to promote new products? The distributor. Distributors have customer relationships, service, and after-sales support, which online platforms cannot provide. Especially for brand owners' new product launches, they seek excellent service and on-the-ground brand promotion. Therefore, it is very necessary for distributors to open branch companies in lower-tier markets. Distributors will not be eliminated by e-commerce; brand owners rely on distributors for service, distribution, order taking, and terminal management. At the same time, e-commerce will not have a significant impact on county and township markets in the short term. Distributors should focus more on increasing sales volume, which is achieved by seizing share. If e-commerce impacts 10% of sales, distributors can seize 20% of competitors' sales. Channel expansion, direct control of terminals, and the transformation of distributors into service providers are future trends. Terminal small shops increasingly value service; making terminals feel well-served and increasing customer stickiness is the core of a distributor's future development. Service is something online e-commerce can never replace. In addition to lower competitive intensity compared to urban areas, a new round of consumption upgrades in county and township markets is rapidly beginning. Furthermore, the difficulty for distributors to increase sales by 10 million in urban areas is far greater than in county towns. In summary, if a distributor has the conditions and urban market growth is relatively saturated, hitting a bottleneck, do not hesitate. Channel expansion and opening a branch company are very necessary.

-02- How can a distributor complete the construction of a branch company within two weeks? Many distributor owners are hesitant and inefficient when opening a branch company. They might first arrange for someone to run business, then set up an office, and gradually progress. After a year, the county market remains untapped. Once you have made the important decision to open a branch company, you must act with determination. The market is like a battlefield; momentum is crucial. Hesitating left and right will not win battles. Therefore, I propose: complete the construction of the new company within two weeks. Here is how to implement it: 1. Secure a warehouse within 2 days: The warehouse is the foundation of the new company. The first step is to secure a warehouse in the shortest time possible. For a population of 500,000 to 1 million, a warehouse of 1,000 square meters is appropriate. Include a 100-square-meter office inside the warehouse to save costs and improve efficiency. The cost is 60,000 to 100,000 RMB per year (slightly higher in some southern county-level cities). Some distributors may question whether it is necessary to rent a 1,000-square-meter warehouse from the start. I believe the warehouse size should be based on a 2-3 year development plan. There may be 200-300 square meters of waste initially, but since you have decided to open a branch company, unlike previous entrepreneurial efforts, the goal now is to capture the market, not just to pick up some sales. 2. Place orders and stock up within 3 days: After securing the warehouse, start placing orders and stocking up. Based on your actual situation, estimate the number of effective outlets you can cover and the approximate quantity of goods. Avoid overstocking in the early stages. 3. Vehicles and forklifts in place within 10 days: One box truck and one motorized tricycle. The motorized tricycle serves the county urban area, while the box truck delivers to townships. If you have many categories, you can configure two box trucks initially. Configure forklifts based on actual needs. At the start, minimize fixed asset investment to avoid waste. As business grows, you can gradually increase. The warehouse must be modern to effectively reduce labor costs. Additionally, configure three computers: one for the general manager for sales analysis, one for the clerk/warehouse manager for product receiving, and one for salespeople for order entry. Alternatively, mobile ordering is also acceptable. 4. Salespeople in place within 2 weeks: Salespeople should be in place as soon as possible. Before recruiting, you can temporarily transfer staff from headquarters or use brand owners' salespeople. Recruitment can be done through local business circles; almost every region has business groups for each category. Recruiting from these groups is the most efficient way—pull them in and use them directly. 5. Design of the branch company's organizational structure: In the early stage, with a small business volume, one person should hold multiple roles to ensure a lean organizational structure. One general manager, who also handles business with local large supermarkets, purchasing, and external affairs. Later, when business matures, you can hire independent salespeople for large supermarket business. For frontline salespeople: for a population of 500,000-600,000, estimate 600 stores and allocate 3 salespeople; for 700,000-1 million, allocate 4 salespeople. One warehouse keeper, who also handles order review and cash custody. One warehouse delivery person, who also handles incoming goods loading and unloading. Head office personnel can handle finance and administrative work part-time. Additionally, a reminder for distributors: If you have been wanting to push through reforms, especially in performance and compensation, this is the best time to introduce them, as salespeople are more receptive to new systems. For example, a business dividend system: guarantee salespeople an income of 4,500 RMB/month for the first 3 months (the average level for local business). If the dividend system does not reach 4,500, the company makes up the difference; if it exceeds 4,500, the new system applies.

-03- How to formulate the initial sales strategy? 1. Before sales: conduct training and divide territories Once the sales team is formed, hold a business kickoff meeting to train on the company's sales policies. At the same time, it is essential to shout slogans and communicate the company's future plans in the county to boost morale. Also, allocate sales tasks, divide territories and routes by township population, and arrange regular route visits for salespeople. 2. During sales: set assessments, conduct large-scale distribution, and increase distribution The assessment design during the market startup phase is crucial. The new company's primary assessment should be on developing new customers, with a new customer development award. Moreover, conduct weekly PK competitions among salespeople, with extra rewards for the first place. Also, weekly sales PK competitions and weekly core single-product PK competitions. Get salespeople fully mobilized with quantified indicators and quantified rewards. At the same time, borrow excellent salespeople from headquarters for concentrated distribution to support the new company. Through distribution competitions, set an example for new salespeople and get the market moving. Let terminal shop owners in the county know that a certain brand has established a new company in the county, and it is very capable. Concentrated distribution will "bomb" the market. The distributor owner should also personally visit core customers and lock in key township customers. Lead daily team meetings to discuss difficulties encountered during distribution, how to solve them, and handle new market issues specially. Additionally, have other salespeople who secure large customers share their experiences. Create an internal atmosphere and set examples. 3. After sales: order meetings After 3 months of concentrated distribution, for example, if 500 outlets are developed, select 40% (200 or 150 customers) and organize an order meeting. The purpose of the order meeting is not only to promote new products but also to create momentum. Let terminal shop owners see that this distributor is proactive in the market and build customer confidence. For the order meeting design, the intensity of gifts and lucky draws should be high, but be careful not to promote the company's own products at a discount, as that would disrupt the price system. Through the order meeting, let terminal owners feel the new company's strength and promotional intensity are unprecedented.

Conclusion: The above are the thoughts, experiences, and methods for how a distributor can open a branch company within 2 weeks. To reiterate, when a distributor reaches a certain scale, has relatively standardized operations, and faces sales bottlenecks, in addition to adding more brands, deepening existing channels, and implementing refined management, channel expansion by opening a branch company is a good path to increase business and build network barriers.