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Debt between manufacturers and distributors, including "triangular debt," has largely been curbed with the development of the market economy and the improvement of the national financial system. However, distributor debt in the channel, especially at retail terminals, is increasingly spreading, and this phenomenon has become a threat to distributor development. Because a large amount of retail terminal debt causes distributors' capital turnover difficulties, even breaking the capital chain. But these retail terminals are numerous, scattered, and chaotic, leading to: first, difficulty in collecting debts; second, many bad debts due to closures, transfers, bankruptcies, and absconding. At the end of the year, when distributors calculate their accounts, they either earn a pile of IOUs or find that the money they thought they earned has gone down the drain. As a result, our distributors are suffering terribly.

Causes of Distributor Debt at Retail Terminals

Why does this phenomenon occur? After extensive visits and analysis, the author believes that the reasons for distributor debt at retail terminals are roughly as follows:

Blindly Pursuing Channel Flattening and Deifying Terminal Victory

With fierce market competition, upstream enterprises begin to pursue their own channel flattening. Under this major trend, enterprises do not guide distributors' channel operations based on each market's specific conditions; they always command all market distributors to start their own channel flattening, the so-called downward shift of market operation focus. As a result, distributors' workload becomes overwhelming and operating costs rise daily.

This work not only fails to bring distributors good business performance and profits but instead leads to declining performance and profits. More seriously, the original sales from second-tier distributors and sub-distributors are lost because operating retail terminals offends the original second-tier distributors or sub-distributors, causing sales to decline. This "monopolistic" approach violates the basic model and path of commercial circulation, ignores the irreplaceable role of each circulation link, and leads to a deadlock in market operations.

Distributors Lack Effective Management Capability for Retail Terminals

Through long-term channel operations, most distributors have developed the ability to manage second-tier distributors and sub-distributors. However, due to a lack of direct communication and understanding with retail terminals, most distributors have insufficient understanding of retail terminal characteristics, resulting in single methods and wrong approaches in developing, operating, and managing retail terminals. With changes in commercial circulation models, distributors are especially passive in operating super terminal markets.

Additionally, because retail terminal outlets are numerous, scattered, and chaotic, development, operation, management, and utilization are very difficult. Distributors and their staff only know how to "deliver goods alone" and do not know how to collect accounts and control. This causes a large amount of retail terminal debt to be lost amid closures, absconding, and transfers.

Distributors Have Not Found the Fulcrum to Leverage Retail Terminals

Everyone knows the lever principle: if you can find a fulcrum, you can lift the earth. But distributors have not found the fulcrum to leverage retail terminals in their development and operation, causing them to operate retail terminals passively. This blind operation can be said to be difficulties created by distributors themselves.

Due to a lack of analysis and judgment of retail terminals, or because of the limitations of the products they operate—that is, the products themselves are not suitable for retail terminal market operation—they still operate retail terminals, ultimately shooting themselves in the foot. During the author's visits, he encountered a distributor who complained bitterly because the second-tier brand he operated entered many supermarket terminals, and he spent a lot on entry fees, display fees, and barcode fees, only to be squeezed out by first-tier brands within less than two months. What made him even more painful was that he developed more than 400 retail terminals in the urban area, gave display awards and display fees, and hired people to inspect and guide retail terminals. As a result, even the product packaging was worn out, but the products still did not sell. When he asked the retail terminal staff, they said: "We have to sell the goods from the top second-tier distributor; otherwise, they won't deliver other products to us anymore."

The final result was: no matter how he tried, his products were eventually returned "in a mess."

Excessively Pressuring Retail Terminals with Stock, Exceeding Their Payment Capacity

Excessively pursuing distribution volume, thinking that distributing means selling. Not recognizing that excessive distribution is actually a warehouse transfer. Only products that are digested are "net sales." Distributors must understand each outlet's actual ability to digest products; otherwise, they can only use two methods to pressure stock: first, debt—"I unload the goods, you write an IOU, and I leave"; second, promotion—"I'll give you anything, as long as you accept more of my goods."

In fact, retail terminal operation mainly pursues distribution coverage, not the volume received by a single outlet, because only with wide distribution coverage and high market penetration can products quickly achieve circulation and consumption. No matter how many products are distributed, if there is not enough consumer contact surface, products will find it difficult to sell well.

Prescription for Distributors' Retail Terminal Debt

In business, it may be impossible to have absolutely no debt, but it is certainly possible to ultimately have no bad debts. Distributors must do the following work well to prevent retail terminal debt:

Do Not Blindly Develop and Operate Retail Terminals; Act According to Your Capabilities

Before deciding to develop and operate the retail terminal market, distributors must ask themselves: Can I, or should I, develop and operate the retail terminal market?

To answer this question, distributors must take stock of their resources. If they have the following three elements, they can proceed with retail terminal development and operation; otherwise, they must make a careful choice. First, the products they operate have an advantage in retail terminals, or the products they operate are first-tier brands in the industry; second, they have sufficient manpower, transportation, operational capability, and management capability; third, the products promoted and operated have sufficient profit margins.

It is worth reminding: no distributor operates retail terminals for long-term development and operation, especially our large circulation wholesalers. We develop and operate retail terminals more to form terminal retail prices and to achieve product consumption awareness, recognition, and purchase as quickly as possible.

Find the Fulcrum to Leverage Retail Terminals and Eliminate Debt as a Price

The main reason retail terminals propose debt is that they are not attracted to the products you promote, or the sales policies outside the product are not enough to attract their attention, and cannot generate strong business desire. In the absence of other measures and methods, they use debt as a killer move to attack retail terminals.

To be honest, it is often the person promoting the product who lacks confidence or does not know how to dig out the product's selling points, leading to continuous concessions. Otherwise, they would absolutely use their passion to ignite retail terminals, thereby resolving the opposition between buyer and seller and reaching a deal.

At the same time, the positioning of the product's consumer group is also a fulcrum to leverage retail terminals. If we can introduce the broad or unique consumer group of our products to retail terminal sellers, and then tell them how to promote to these consumer groups, this itself is also a good fulcrum. Because there is no salesperson who does not hate those who only unload goods and collect money.

Unload Appropriately, Less Each Time, More Frequent Deliveries

Since retail terminals focus on retail and have limited strength, we must decide how much to unload each time and how often to deliver based on their actual sales capability. Never impose excessive inventory pressure on them. As long as we adhere to the principle of less unloading and more frequent deliveries, I think retail terminals will not owe you ten or twenty yuan.

Establish an Account Management System and Responsibility System for Retail Terminals

Having problems is not scary; what is scary is not being able to discover problems or find the cause of problems. Similarly, having retail terminal debt is not scary; what is scary is not having a complete retail terminal account management system and responsibility system. If we can establish an account management system and responsibility system for retail terminals, even if there are debts, they will not cause losses or threats.

So, how to establish an account management system and responsibility system for retail terminals? First, establish a "prohibition" against retail terminal debt, eliminating casual agreement to debt; second, establish a responsibility system where whoever owes collects, with a deadline for collection; third, establish a special dynamic tracking system for retail terminal debt, dynamically managing the debt objects and whether debts are collected as agreed, urging daily and demanding constantly.

(The author is the General Manager of Shanghai Guanfeng Enterprise Management Consulting Co., Ltd.)

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