How Should Distributors Survive in 2017?

2016 is about to fly by, and now distributors are preparing to face a new year. However, in the past year, due to economic downturn, existing markets have shrunk, and upstream companies' lack of innovation (introducing attractive new products) has led to insufficient growth. On the other hand, labor costs have been increasing, energy, raw materials, and various expenses have continued to rise, and over-competition has left many distributors in a state of imbalance between income and expenditure.

In the upcoming 2017, if distributors cannot find new profit growth points while costs continue to rise, to improve profits, they must reform outdated practices in all aspects and continuously promote organizational restructuring. If they continue to operate with the same management and sales methods, no matter how hard they try, profits will decrease year by year, eventually reaching zero or even turning to losses. So how should distributors face 2017?

Adjust Product Structure

During the period of rapid economic growth, every distributor's profit mechanism was roughly the same: they nurtured "cash cow products" and used their profits to cover losses from other products. In other words, distributors' product portfolios were mixed, with some profitable and some losing, but as long as the overall balance was profitable, everything was fine.

But now, the idea that "as long as the overall is profitable, everything is fine" may lead to losses. Because those cash cow products become the primary targets of other companies that are eyeing "profitable products" with red eyes. Under over-competition, profits decline rapidly and cannot cover losses from other products. Therefore, the idea that "if one area fails, another will succeed" will inevitably lead the company into overall losses. To solve the loss problem, products that should be cut must be cut, and at the same time, ensure company profitability by adjusting the product structure. More importantly, persist in this approach and ensure that every product is a cash cow. Therefore, it is necessary to adopt the management philosophy that "every product is a cash cow."

Management Creates Profit

During the period of rapid economic growth, because the business environment was good, sales continued to increase, and profits also continued to grow. Without special effort each year, the company's financial resources would roll in. Therefore, even if employees did not work day and night to increase revenue and reduce costs, just completing their daily tasks could ensure the company's overall interests.

But times have changed. Prices of various products have been falling, sales are hard to increase significantly, and the lack of attractive new products has led to stagnant or declining revenue. Meanwhile, employee wages continue to rise; raw material and energy prices rise like balloons with broken strings; and various expenses increase without reduction. In short, the company faces pressure from both revenue and expenditure. If they continue with previous practices, even using all their skills, they may face losses.

In summary, the era of waiting for profits to come to you is over. If you stick to old ways, losses are inevitable. To ensure company profits, you can only "create profits" through internal efforts.

Therefore, the company must divide work among all employees, streamline personnel (cutting those who are supported), reduce expenses; cut unprofitable products, reduce inventory backlog, and increase turnover. Also seize every opportunity to increase sales and profits, even if results are not obvious, do not give up. In short, everyone must create profits. For those who are supported, either cut them or transform them into profit creators. This is the operational state during low-growth periods.

Change in Management Style

During the period of rapid economic growth, it was important to listen to and adopt employees' opinions. When the external business environment was good and the company's direction was set, without worrying about profitability, distributors focused on how to motivate employees and boost morale to seek company growth and expansion. So, the driving force for the company was "bottom-up."

During the rapid growth period, as companies expanded, to ensure sufficient staff and prevent easy resignations, they gradually became overly considerate of employees' feelings; they only praised employees, never criticized, let alone reprimanded or warned; even when reminders were necessary, they were said over dinner with alcohol; work admonitions were given in very euphemistic tones. Such habits persisted for a long time. As the saying goes, "habit becomes nature." More and more distributors, even when they find problems among employees, do not directly and clearly remind them. It is no exaggeration to say that employees do not hear unpleasant words, and their problem awareness becomes increasingly blurred.

But now, there are more and more things that distributors must do personally, such as cutting unprofitable products, laying off unprofitable personnel, innovating sales methods... If these problems are not solved in a timely manner, the company will find it hard to be profitable. So the direction of the company's driving force has become "top-down." When the company cannot find new growth points and costs are rising, to improve profits, it is necessary to reform outdated practices and continuously promote organizational restructuring. In this context, distributors must be brave to be the first to try, take the lead in internal consciousness innovation and a second revolution, be determined to completely overturn deep-rooted old concepts within the company, and promote problem-solving with vigor and determination.

Therefore, for distributors to exert strong leadership, they must step out of their offices and engage in actual business. If they are too far from the "site atmosphere," even capable people will lose inspiration and head toward failure. Staying confined in a small room will make them half a beat slower than others, and they will not be able to discover and solve problems at their budding stage, thus missing opportunities.

Transform from Seller to Service Provider

Most distributors' original operation mode was "heavy on sales, light on service." They simply focused on delivery, payment collection, and other routine business tasks, with product sales volume as their only goal; they forgot about market development, maintenance, system and network building; they forgot about helping customers grow stronger and develop together; they forgot that the marketing terminal is the psychological recognition of consumers.

Therefore, distributors must transform from sellers to service providers, strengthening terminal and consumer services. Work with terminals to study how to quickly sell products to consumers; if terminals have no stock, they will naturally restock; jointly establish typical consumer profile archives with terminal stores to facilitate consumer service work, win consumer loyalty to the product (brand), and strive for repeat customers.

Update Concepts and Train Subordinates

One of the most important tasks for distributors now is to update subordinates' ways of thinking and values. One thing that is hard to understand is that despite such great changes in the business environment, the consciousness of distributors has not undergone fundamental changes. Now, sales growth is no longer an absolute indicator; the key is profit, profit margin, and profit growth rate. The view that sales below a certain level are meaningless is actually a remnant of the rapid growth period, when sales and profits were relatively stable. But now, regardless of sales volume, success or failure is not determined by it; what matters is the absolute amount of profit. If you do not change your original concepts, one day you will cause irreparable losses.

Today's value lies not only in maintaining daily business operations but also in completing the company's organizational reform, changing everyone's way of thinking and working methods, and creating tangible profits.

Therefore, distributors must become "devil" bosses, clearly understand their goals and direction, and as long as there is an opportunity, repeatedly preach with patience, and must spend time repeating.

In addition, distributors must clearly point out each subordinate's strengths and weaknesses, reward and punish strictly, remind twice if not corrected once, remind three times if not corrected twice, and point out tirelessly, training all subordinates in the direction of adapting to the new era. This is a task distributors must complete.

If it is a major change related to the company's survival, no matter how much resistance, distributors must persist without fear. On the basis of full preparation, completely persuade subordinates and make them take it seriously. To complete organizational reform, there will inevitably be resistance, misunderstanding, slander, and even personal attacks. But without going through this process, reform is hard to carry out; worrying about these will only lead to failure. Therefore, the team must never compromise with anyone; everything must be considered from a business perspective, and personal demands should be handled according to individual circumstances. In this way, after unifying the company's internal values, there will be no redundant personnel. If you are too considerate of human feelings, indirect management costs will increase, action difficulty will increase, actual combat effectiveness will decline, performance will drop significantly, and employees' potential dissatisfaction with the company will accumulate. From any perspective, it is unfavorable.

Whether you can win in the "long-term arduous struggle" is an essential capability for distributors' survival and development in the future.

But in reality, many distributors, when doing something, stop immediately if they see no effect, then switch to another method; if the new method still doesn't work, they switch again... Of course, it is hard to find measures that fit the current situation at once. Trying something first takes time to see results. Switching too early and too frequently will never grasp the key points, and the result will only exhaust subordinates and end in failure.

Therefore, distributors who are not good at persisting in one thing for a long time and making it succeed are not suitable for surviving in the low-growth period. Should they reform themselves, or choose a new path because they dislike persistence? This is the choice distributors must face in 2017.

-END-

★ Click the blue text below to view this month's popular articles ★ Click the blue text below to view this month's original articles

FMCG industry's most professional and practical knowledge base

[ Reply with the yellow number in the background to view the corresponding keyword content ]