Recently, a distributor friend surnamed Ji from Shandong called to ask a question: "How should we go about establishing a distributor alliance in Jinan?" This is a topic of considerable interest. In recent years, due to the increasing complexity of FMCG operations, whether for mutual support or joint development, many insightful regional distributors have begun exploring and practicing the "distributor alliance" model. Whether a business model can succeed cannot be judged by logic alone. There are countless business models where logic holds but reality leads to total failure. The logic of distributor alliances does not need proof; what needs to be tested is how the alliance's rules and the distribution of rights, responsibilities, and benefits adapt to market realities and human nature.
01 Under what circumstances can distributors unite? Distributors who fail to understand this issue will see their alliance models eventually collapse. Why does Ji from Jinan want to establish a distributor alliance? Ji is an FMCG distributor in Lixia District, Jinan. Last year, he took on a baijiu brand that had some recognition but had not developed the Shandong market, and without much effort, he sold about one million yuan worth. Ji has many friends among Jinan's FMCG distributors, so in August this year, nine of them organized a trip to visit the distillery. They were very satisfied with the visit, and the nine planned to form an alliance to secure the Jinan general agency for the brand.
First, Ji's alliance has a reliable premise: opportunity. The essence of business is profit; alliances among distributors should not be based on sentiment, as sentiment-based alliances often end in "hurting money." Huddling together for warmth does not work; when sharing a blanket, everyone wants to pull it toward themselves. Therefore, only under the premise of a good business opportunity can distributors possibly unite. This is the foundation and prerequisite. I have yet to see a successful precedent of distributors uniting to overcome a crisis.
02 Several sufficient conditions for the success of a distributor alliance With the "business opportunity" premise, there is only a possibility. For the alliance to succeed, besides this necessary condition, at least the following sufficient conditions are required.
First, mutual familiarity, trust, and ideally prior transactions. In the same city, distributors generally know or are familiar with each other, and reputations are easily known. However, only character tested by money has reference value, so it is best to have had cooperation involving goods and payments. From a person's attitude toward cooperation, money, and promises, one can basically judge whether they have a spirit of cooperation.
Second, there must be a "leader" whom everyone respects. A snake cannot move without a head, and birds cannot fly without wings. Without a leader, everyone is just loose sand, lacking direction; if the leader is unqualified, they will quickly tire of each other and go their separate ways. When dividing assets, if "luggage" is not clearly sorted, they may end up never speaking again. What makes a qualified leader? First, they must have good character, so others are willing to trust; second, they must have strong abilities, ample resources, and sufficient boldness and magnanimity. The strong always earn respect and obedience; they have proven themselves through past successes, which is also human nature.
Third, the core business values of the allied distributors must be broadly consistent. For example, the spirit of contract, the spirit of equal pay for equal work, and the spirit of responsibility. Alliances with inconsistent business values will quickly part ways unhappily. Of course, if the alliance's business values are generally unified, a few inconsistent distributors are not fatal; a clear and scientific exit mechanism can solve this problem.
After communicating with Ji, he and the other distributors basically possess the above three sufficient conditions. Therefore, they enter the most critical step of the alliance: how to design and build a scientific, reasonable, and sustainable distributor alliance model?
03 How to design a successful alliance model? Here is the most fundamental design principle: always believe in rules, never test human nature. Deeply understanding this, you will know that the most critical part of alliance design is to use clear, scientific rules to leverage and integrate the best values of human nature, forming a huge commercial force to jointly create and share business benefits.
All distributor alliances, including Ji's, face the first direct issue: what to do with the existing businesses and interests of member distributors? The nine distributors are spread across various districts of Jinan, with varying regions, business volumes, terminal outlets, profits, and capabilities. How can they unite? For Ji's problem, the analysis process is omitted here; only one structure can achieve unity: nine or several companies jointly establish a brand operation company, which directly signs an exclusive agency agreement with the brand manufacturer for Jinan. The nine distributors keep their original companies and businesses completely unchanged, but they all become agents under this brand operation company for this baijiu brand. This structure can be implemented clearly, and member distributors can freely choose whether to hold shares in the platform company. These shares can also be freely traded and exited, as long as clear quantitative rules are established.
With this structure, the specific work of alliance design can proceed, as there are many details. This article only lists a few key, principled details for illustration.
First, the leader must be the absolute majority shareholder of the platform company. Shares must not be too dispersed, otherwise disintegration is imminent. It is important to understand that profit cannot be monopolized, and power cannot be shared. This means that power (management) cannot be shared, and benefits cannot be monopolized. This is very important and is a basic principle that everyone must abide by and agree to. Of course, the leader can show magnanimity, such as contributing 70% of the capital but only taking 50% of the dividends from the platform company.
Second, a business without investment is a fake business. This platform company must not be designed as a "shell company." It must be a standardized company with both long-term development plans and short-term key work. The platform company should undertake communication, negotiation, and market support with the brand; it should also help all its distributors with market guidance, market promotion, and terminal sales. Therefore, for Ji's desired alliance company, there must be a core team, led by the alliance's major shareholder and leader. The platform company must have startup capital, with each shareholder investing according to their share ratio. The money shareholders pay for goods is separate from this; do not confuse the two.
Third, the platform company's retained profit margin must be scientific and reasonable, and included in the rules in advance. Without profit, there is no team, and no one works. Many alliances fail because they think wrongly here: "I am a shareholder, I know the factory price, why should you add 15% to my purchase price?" In short, the principle is that shareholder distributors and non-shareholder distributors are treated equally in terms of status, qualifications, and policies. The only difference is that you have shares in the platform company and receive dividends, your distribution rights are more secure, and you have a stake in the platform's future development. In some regions, shareholder distributors do not position themselves correctly, and the platform company becomes a small business run behind closed doors by a few people. Other distributors do not sell your products, and the internal shareholders often get entangled, gradually leading to the alliance's demise.
Fourth, verbal promises are only for reference; always trust rules, documents, agreements, and financial data. This requires the platform company to take initiative, standardize finances according to company law, disclose financial data to shareholders, hold regular shareholder meetings, exchange opinions, discuss major issues, and form resolutions.
After communicating with Ji about the above issues, the thinking behind them, and the suggestions, he went from initial enthusiasm to rationality and calmness. But he did not lose confidence; on the contrary, he felt the path to the alliance was becoming clearer, and with awareness of various outcomes, he gained more confidence. Let us wait and see, hoping Ji's alliance succeeds.
Against the backdrop of "great changes and a new cycle," more and more insightful distributors are beginning to pay attention to and think about the distributor alliance path that Ji is taking. If you are also interested, welcome to the 7th China FMCG Channel Innovation Conference, where outstanding distributors and brand companies from across the country will share innovative products and business model experiences with you.
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