---
title: "How Can SMEs Respond to Declining Sales in a Potential Market?"
description: "The three years of the pandemic served as a cover for many companies' declining sales and profits, allowing management to blame the pandemic. As the tide recedes, it becomes clear who is swimming naked. After the Spring Festival, I visited the market and saw a thriving restaurant industry, crowded hypermarkets on weekends, and long queues for leisure activities during holidays. It seemed that recovery was swift, and Chinese consumers' spending potential remained strong. Later, I learned that some companies achieved rapid growth in Q1 sales, with some brands even surpassing their 2019 performance. However, other companies performed poorly and seemed at a loss. Recently, two companies discussed with me their ongoing sales declines, and I have summarized some improvement measures to share."
author: "高级研究员 海游"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2023-05-06"
language: "en"
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# How Can SMEs Respond to Declining Sales in a Potential Market?

> The three years of the pandemic served as a cover for many companies' declining sales and profits, allowing management to blame the pandemic. As the tide recedes, it becomes clear who is swimming naked. After the Spring Festival, I visited the market and saw a thriving restaurant industry, crowded hypermarkets on weekends, and long queues for leisure activities during holidays. It seemed that recovery was swift, and Chinese consumers' spending potential remained strong. Later, I learned that some companies achieved rapid growth in Q1 sales, with some brands even surpassing their 2019 performance. However, other companies performed poorly and seemed at a loss. Recently, two companies discussed with me their ongoing sales declines, and I have summarized some improvement measures to share.

The three years of the pandemic have been a cover for many companies' declining sales and profits, allowing management to say with a clear conscience that it was due to the pandemic's impact. When this wave recedes, it becomes clear who is swimming naked. After the Spring Festival, I visited the market and saw a thriving restaurant industry, crowded hypermarkets on weekends, and long queues for leisure activities during holidays. It seemed that recovery was swift, and Chinese consumers' spending potential remained strong. Later, I learned that some companies achieved rapid growth in Q1 sales, with some brands even surpassing their 2019 performance. However, other companies performed poorly and seemed at a loss. Recently, two companies discussed with me their ongoing sales declines, and I have summarized some improvement measures to share.

**What is the essence of declining sales?**

A simple truth: without consumer pull-through, there is no channel distribution, and thus no brand sales. Therefore, sales, distribution, and pull-through are interdependent and indispensable.

**1. Sales correspond to product competitiveness:** Here, setting aside the product's inherent attributes, from a marketing perspective on product positioning, I found a fundamental issue: many SMEs have unclear product marketing positioning. They treat all products indiscriminately, spreading resources evenly, resulting in no product having a clear mission. How to create a traffic-driving product that gives the frontline team a door-opener for channel partnerships? How to create a profit-generating product for the channel? After the channel is smooth, how to selectively match the best SKUs? How to create a competitive product to effectively counter major competitors' promotions? Without clear product positioning, efforts are scattered, leading to weak regional brand power, underutilized differentiation, and lack of competitiveness against rivals. Channel partners operate under extreme frustration, and the results are predictable.

**2. Distribution corresponds to channel competitiveness:** This is a broad topic, so let's briefly discuss two points: the starting point—dealers—and the endpoint—outlets.

**Starting point—Dealer level:** How to classify and empower dealers? China's market is vast, so a one-size-fits-all approach won't work. My suggestion is to first classify dealers into four quadrants based on capability and willingness (high capability/high willingness, high capability/low willingness, low capability/high willingness, low capability/low willingness), then match them with three dimensions based on product operation type (exclusive, mixed, or specialized). Finally, outline empowerment measures to achieve precise empowerment. Note: it's empowerment, not management; management is best reserved for the moment you decide to replace a dealer.

**Endpoint—Outlet level:** Brand sales growth can be divided into horizontal and vertical growth. Horizontal growth refers to the number of outlets, but these outlets must be targeted—each product has its inherent outlet affiliation. Vertical growth refers to outlet quality, including the number of matched SKUs, shelf share, diversified displays, vibrant merchandising, and diverse marketing scenarios. Without mastering the basics of outlet quantity and quality, sales are impossible.

**3. Pull-through corresponds to consumer competitiveness:** This is also a broad topic. Let's briefly discuss the difficulty of acquiring new customers due to low consumer brand awareness. Take a daily chemical company as an example: its product matrix includes laundry detergent, washing powder, soap, toothpaste, bar soap, dishwashing liquid, etc. For SMEs, it's possible to put all categories on shelves, but not to promote all categories, because resource limitations cannot support building consumer awareness across all categories in a short time. Instead, it may backfire, making consumers perceive you as a copycat or a generic brand. Once this impression forms, it's hard to change. My suggestion is to temporarily select one category to represent the brand and one potential product to represent the category, establishing a regional brand-category-product association. This can quickly enhance the brand's regional consumer competitiveness.

**Some suggestions for short-term sales improvement**

The following is for brand marketing executives. When sales continuously decline, the marketing executive is most prone to errors; immense pressure can cause panic, and the more urgent the situation, the easier it is to mess up. There is no smooth sailing in marketing. Let me share my past experience: when sales decline, you need to do two things:

**First: Stop losses (apply brakes to sales decline) + Seek growth (protect growth in potential regions).** Thoroughly investigate the declining markets, find the reasons in competition, and halt the downward momentum. Also, investigate markets with growth potential, push them to unleash their potential to compensate for losses elsewhere.

**Second: Preserve existing volume (current markets) + Create incremental volume (blank markets).** SMEs often have long-standing blank markets, and existing markets lack stable systems. The second core is to explore methods to maintain volume in existing markets and plan for distribution in blank markets.

How to do it specifically? I once told a brand's marketing executives the story of Tian Ji's horse racing. In an era of stock and shrinkage, to grow sales, we cannot ignore market competition. Discussing growth without considering the competitive landscape is essentially irresponsible. The story teaches us how to maintain a competitive advantage. Compared with competitors, as long as we achieve two wins out of three in the minds of consumers or channel partners, and deeply embed those two points, we gain sufficient advantage, and victory will come soon. For example, if the regional top competitor competes on brand, quality, and channel profit, we should focus on two of these dimensions and penetrate deeply, achieving unexpected results. Of course, winning on all three is ideal, but resource limitations often prevent that.

Now, let's discuss the principle of total score. For instance, in the college entrance exam, universities admit based on total score ranking. The ranking is determined by the competition of total scores. For marketing executives, you need to increase total market sales and compare with competitors on total sales across all markets. How to improve? Each market is different; which to improve first? There is a technique. Take the college entrance exam: total score is 750, with Chinese, Math, and English each worth 150. If Math is usually around 130, English is poor at around 40, and Chinese is around 80, with two months to go, how to sprint? My suggestion is to focus on Chinese, because Math is near full marks with little room for improvement, English is too weak with no foundation, and short-term gains are limited. Only Chinese has a foundation and can yield significant score increases. Similarly, by analogy, we can identify which markets are our growth targets.

Next, how to judge market foundation and growth potential? A simple method is to compare regional per capita consumption with internal company data and external competitor data. For example, if Brand A's per capita consumption in the region is 7 yuan/year/person, the company's high-quality market data is 12 yuan/year/person, and the main competitor's data in the region is 8 yuan/year/person, comparing these three numbers reveals the market's "score." Then, our task is to unleash the potential of these markets with a foundation, from easy to difficult, to achieve a breakthrough in total sales.

**How to stimulate markets with foundation and potential?**

I have summarized an execution tool: Four-Have Markets + Four Major Strategies.

**1. Market has potential (growth can be quickly realized) + Channel operation strategy:** This involves 10 dimensions:
a. Channel definition and required SKUs
b. Channel breakthrough priority
c. Channel outlet coverage requirements
d. Channel execution standards
e. Business area planning guidelines
f. Scientific outlet visit planning
g. Outlet management: rating system
h. Clear regional battle map
i. Achievement status and opportunity forecast for each channel
j. (The original text cuts off here; based on context, the 10th dimension likely relates to channel partner capability or similar, but as per instructions, I will not add content not present in the original.)

**2. Market has foundation (existing sales base) + Dealer empowerment strategy:** This involves 4 dimensions:
a. Dealer supply chain capability (warehouse area & logistics vehicles)
b. Financial capability (capital strength & capital utilization)
c. Channel coverage capability (quantity and quality of outlets)
d. Operational efficiency (operating capability and efficiency)

(Note: The original text appears to be cut off after listing these dimensions. The remaining strategies (3 and 4) are not provided in the source text, so I have only included what is present.)


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