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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. Large amounts of retail terminal debt cause distributors' capital chains to break and cash flow to become difficult. However, the scattered, dispersed, and chaotic characteristics of these retail terminals lead to: first, difficulty in collecting debts; second, many bad debts due to closures, transfers, and bankruptcies. 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 suffer immensely.
Why does this phenomenon occur? After extensive visits and analysis, the author has drawn the following conclusions:
Causes
The reasons for distributor debt at retail terminals roughly include the following:
- Blind pursuit of channel flattening, deifying terminal success. Market competition is increasingly fierce, and upstream enterprises begin to pursue their own channel flattening. Under this major trend, enterprises do not guide distributor channel operations based on each market's specific conditions, but always command all distributors in all markets 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 kind of work not only fails to bring distributors good business performance and profits, but instead leads to declining performance and profits. More seriously, originally relying on second-tier distributors and sub-distributors for sales, after operating retail terminals, they offend 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 market operations into a deadlock.
- Distributors lack effective management capabilities 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 even more passive in operating super-terminal markets.
In addition, because retail terminal outlets have the characteristics of being numerous, scattered, and chaotic, development, operation, management, and utilization are very difficult. Distributors and their staff only 'run orders' for delivery, not collection and control. This causes a large amount of retail terminal debt to be lost amid closures, bankruptcies, and transfers.
- Distributors have not found the fulcrum to leverage retail terminals. Everyone knows the lever principle: if you can find a fulcrum, someone can lift the Earth. But distributors have not found the fulcrum to leverage in developing and operating retail terminals, causing passive operation of retail terminals. 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 limitations of the products they operate—that is, the products themselves are not suitable for retail terminal market operations—they end up shooting themselves in the foot.
During the author's visits, I encountered a distributor who complained bitterly. Because the second-tier brand he operated entered many supermarket terminals, he spent a lot on entry fees, display fees, and barcode fees, but within less than two months, he was squeezed out by first-tier brands. 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 a group of people to inspect and guide the retail terminals. As a result, even though the product packaging was worn out, the products still didn't sell. When he asked the retail terminal staff, they said: 'We can't not sell the goods from the top second-tier distributor; otherwise, the top second-tier distributor won't deliver other products to us anymore.' In the end, no matter how hard he worked, his products were still returned.
- Excessive pressure to stock retail terminals, exceeding their payment capacity. Pursuing distribution volume, thinking that distributing out means selling out, without recognizing that excessive distribution is actually a warehouse transfer; only products that are digested are 'net sales.' Distributors must thoroughly understand each outlet's actual product digestion capacity. Otherwise, they can only use two methods to force stocking: first, credit—'I unload the goods, you write an IOU, and I leave'; second, promotion—'If you want it, I'll give it to you, as long as you can take more of my goods.'
In fact, retail terminal operations mainly pursue distribution coverage, not the volume received by a single outlet, because only with a large distribution area and high market coverage can products quickly achieve circulation and consumption. No matter how many products are distributed, if there is not enough consumer exposure, products will hardly become bestsellers.
Prescription
In business, it may be impossible to have absolutely no debt, but it is definitely 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 possess the following three elements, they can proceed with retail terminal development and operation; otherwise, they must make a cautious choice.
The three elements are: 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 cost. The main reason retail terminals propose credit is that they are not attracted to the products you promote, or the sales policies outside the product are not attractive enough to capture their attention, failing to generate strong business desire. Only when you have no other measures or methods do you use credit as a trump card to attack retail terminals.
To be honest, it is often the person promoting the product who lacks confidence or cannot explore the product's own selling points, leading to continuous concessions. Otherwise, promoting the product would definitely ignite the retail terminal with passion, thereby resolving the opposition between buyer and seller and reaching a deal.
At the same time, positioning the product's consumer group is also a fulcrum to leverage retail terminals. If we can introduce the broad or unique consumer groups of our products to retail terminal sellers, and then tell them how to promote to these consumer groups, this itself is a good fulcrum.
Unload moderately, deliver less but more frequently. Since retail terminals mainly 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 follow the principle of less unloading and more frequent delivery, I think retail terminals will not owe you for ten or twenty yuan.
Establish a retail terminal account management system and responsibility system. Problems are not scary; what is scary is not being able to discover problems or find the causes 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 a retail terminal account management system and responsibility system, even if there are accounts, it will not cause losses or threats.
So, how to establish a retail terminal account management system and responsibility system? First, establish a 'prohibition' against retail terminal debt, eliminating arbitrary agreement to credit; second, establish a responsibility system of 'whoever owes, whoever collects, and collect within a time limit'; finally, establish a special retail terminal debt dynamic tracking system, dynamically managing debt objects and whether debts are recovered as agreed, urging daily and demanding constantly.
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