---
title: "How Should Large Distributors Survive in 2019?"
description: "Large distributors, with annual sales of tens of millions in county markets or over 50 million in prefecture-level and provincial capital markets, face challenges such as being big but not strong, having unfocused product lines, unreasonable channel structures, and management deficiencies that erode profits. To thrive in 2019, they must optimize product and channel structures, strengthen inventory management, enforce process management, and enhance staff quality and service."
author: "师顺宽"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-01-03"
language: "en"
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---

# How Should Large Distributors Survive in 2019?

> Large distributors, with annual sales of tens of millions in county markets or over 50 million in prefecture-level and provincial capital markets, face challenges such as being big but not strong, having unfocused product lines, unreasonable channel structures, and management deficiencies that erode profits. To thrive in 2019, they must optimize product and channel structures, strengthen inventory management, enforce process management, and enhance staff quality and service.

This article refers to large distributors as those with annual sales of tens of millions in county markets, or over 50 million or even 100 million in prefecture-level and provincial capital markets. After years of development, they control numerous brand resources and have many vehicles and sales personnel. However, as their companies expand and sales grow, their actual profits do not increase correspondingly; some even face continuous losses despite rising sales. Their current situation is:

**1. Big but not strong:** This is mainly reflected in the fact that as the company scale expands and sales increase, actual profits do not grow with sales; they barely earn the equivalent of a搬运工's wages, and some even fall into losses as sales grow.

**2. Many but not refined:** The product line structure is unclear and cluttered, mainly referring to unreasonable combinations and promotion models of "high volume but low profit, high profit but low volume, and high volume with high profit" products.

**3. Unreasonable channel structure:** Terminal customers can be classified in many ways, not solely by overall sales or scale. By profitability, they can be divided into "high sales with high profit, high sales with low profit, low sales with high profit, and low sales with low profit." For many large distributors, they have numerous downstream customers, but due to a lack of refined management, the proportion of "high sales with low profit" and "low sales with low profit" is too large.

**4. Poor management leads to huge personnel and cost losses:** Poor management results in chaotic pricing systems, weak channel management, disorderly markets, rising costs, inconsistent execution, poor new product promotion, transparent profits on old products, and reduced company profits. Salespeople tend to visit large customers only, miss visits and orders, and neglect after-sales service (such as product display and customer relations)...

【Case】
Mr. Wang, a distributor in a county market in Anhui, originally focused on Nongfu Spring, with annual sales exceeding 10 million. With fewer employees and Mr. Wang's frequent market visits, management was effective, and profits were considerable. To expand the company, he later added Mizone, Coca-Cola series, and four other second- and third-tier brands. Now his company has a warehouse of over 2,000 square meters, nearly 40 employees, 18 delivery vehicles, and annual sales exceeding 50 million.

As sales grew, all operating costs rose simultaneously, but profits did not increase with sales. Costs increased at a rate far exceeding performance growth, making the business appear larger while net profits actually declined.

【Case】
Mr. Liu, a distributor in a county in Henan, primarily deals in Six Walnuts, well-known instant noodles, and beverage series, along with several other second- and third-tier brands. After years of development, he also has many products, vehicles, and sales personnel. However, as the company scale expanded and sales increased, actual profits did not grow; some even faced continuous losses despite rising sales.

Based on the cases of Mr. Wang and Mr. Liu, let's analyze the problems they encountered during development:

**1. Unreasonable product structure:**
Food distributors are well aware that "best-selling products are not profitable, profitable products do not sell well, and products that are both profitable and sell well are rare." Currently, distributors achieving tens of millions in sales mostly rely on distributing certain national first- and second-tier brands and categories. However, the profits these brands offer are usually calculated based on refined distributor operations. If distributors can achieve refined marketing, they can earn thin margins (equivalent to the cost of搬运工 and delivery).

For example, Mr. Wang's main brands, though channel-matched, are low-margin products. Before peak seasons, factory managers pressure him to stock up, forcing him to seek financing, which eats into his thin profits.

Additionally, during peak seasons, a vehicle with a driver and salesperson must deliver at least two loads per day. Imagine the physical effort required to load and unload two loads daily (some terminal stores have inconvenient unloading areas). Without extra wages and subsidies, it's hard to retain staff. If staff leave, failing to meet factory sales targets leads to fee deductions...

**2. Poor channel management leading to unreasonable structure:**
The sales network is not solid; management is limited to simple selling, visiting large customers only, missing visits and orders, and being busy with routine deliveries. Scientific channel management is not implemented, leading to frequent channel rebellion or usurpation.

In reality, terminal customers can be classified as: high sales with high profit, high sales with low profit, low sales with high profit, and low sales with low profit. Customers are not measured solely by overall sales or scale; small customers are also worth developing.

For instance, Mr. Liu's market has over 4,000 supermarkets and terminal stores, but only 1,100 cooperate with his company. To meet factory sales targets and ease cash flow pressure, he holds two ordering conferences annually. He must offer significant discounts, leading terminal owners to order less regularly and stock up for half a year at each conference. Since discounts vary by order size, large terminals have inconsistent retail prices, causing price chaos and weakening channel push.

Some terminals sell his products at low prices to attract customers, while others from last Spring Festival haven't even picked up their orders yet.

Due to price chaos, small customers who order small quantities often pay higher purchase prices than the retail prices of large customers, causing the other 2,000+ small customers to stop selling his products. As a result, his downstream customers are mostly "high sales with low profit" and "low sales with low profit," while "high sales with high profit" and "low sales with high profit" are fewer, impacting profitability.

**3. Poor new product promotion, transparent old product profits, and reduced company profits:**
Many large distributors continuously take on new high-value-added products, but due to a lack of effective promotion strategies and special incentives, these new products often fail midway.

**4. Lack of process management, leading to huge losses:**
They emphasize results over process, judging success solely by sales volume. Without process management, supervision, and inspection mechanisms, they cannot promptly identify defects in marketing. This results in weak execution, increased short-term behaviors, difficulty in price maintenance, weak network control, generation of large amounts of near-expiry and expired products, increased marketing costs, and reduced marketing efficiency.

**How Should Large Distributors Survive in 2019?** ▲▲▲

**"Structure determines function; function reflects the state of structure."** Technically, structure refers to the orderly arrangement of components. The function of anything is determined by its structure; what structure you have determines what function you get. Product, channel, and personnel structures refer to how a company's products, channels, and personnel are arranged. The combined effect of these structures determines the company's development.

**1. Optimize product structure:**
For large distributors, while reducing the number of products, they should also focus on product quality, optimize the product structure, increase the sales proportion of high-performing products, and strengthen the combination effect of the best products. Only then can they use product combinations to absorb marketing costs, ultimately securing a larger market share and survival space, and build a product structure suitable for their own survival and development.

For example, analyze the profit of each product. Based on sales volume, profit margin, and brand influence, treat them differently and combine them reasonably. Determine which products are "high volume but low profit" (to build the sales network and stabilize customers), which are "high profit but low volume" (sunrise products), and which are "high volume and high profit" (golden products). For products with large sales, low profits, and high capital occupation, appropriately control sales; for "high profit but low volume" sunrise products, make them key promotion targets; for "high volume and high profit" golden products, strictly control channel prices; and for products with small sales, low profits, and no future, resolutely eliminate them.

Additionally, update the product structure annually to make it more rational and maximize benefits.

**2. Optimize channel structure:**
Optimizing channel structure is an important way for distributors to improve profitability. It involves refined channel operation and classified management, then allocating support resources based on sales volume and profitability to further unleash channel potential. That is, place the right products in the right terminals and give the right promotional policies to the right terminals. For many large distributors, they mostly distribute first- and second-tier brands.

In regional market operations, these brands follow the principle: **"Grab large stores for sales; focus on image stores for publicity; build loyalty in specialty stores."** Capturing these three types of terminal stores is equivalent to capturing the opinion leaders of terminals. Other terminal stores will follow the market trend, which in their eyes is set by these leaders.

Classified by profitability, terminal customers can be divided into "high sales with high profit, high sales with low profit, low sales with high profit, and low sales with low profit." Often, these three types of opinion leader terminals are mostly "high sales with low profit" terminals. Capturing these three types, while ensuring stable terminal pricing, is to support the overall market and rely on other terminals for profit.

For example, a salesperson visits 25 terminals a day, of which 6 are opinion leaders. Due to their large order volumes, the company incurs higher costs, so the profit margin from cooperating with them is lower. If their price system remains stable, other terminals can also cooperate. Since other terminals order smaller quantities per cycle, the company's costs are lower, and the profit margin from cooperating with them is higher. However, in reality, many large distributors "run big but not small" and have chaotic terminal pricing, leading them to only capture opinion leader terminals, leaving many other terminals uncooperative, thus significantly reducing profitability.

**3. Strengthen inventory management:**
Large distributors often handle many categories. If inventory management lags, large amounts of near-expiry or expired products can arise, and many factory contracts stipulate no returns for non-quality issues. Additionally, poor management can lead to employee theft from the warehouse or collusion between employees and warehouse keepers. Therefore, distributors should implement proper inventory management, track purchase-sales-inventory data in a timely manner, strictly follow the first-in-first-out principle, prevent near-expiry products, eliminate expired products, and prevent internal theft. This will avoid unnecessary losses and increase profits.

**4. Focus on process management to improve profitability:**
As market competition intensifies, requirements for distributors increase. This demands that distributors invest heavily in organizational construction and management, practice internal skills, and manage strictly to derive benefits from management. For example, establish and improve various management systems, assessment systems, and reward/punishment systems, clarify job requirements, work content, and processes, and strengthen the completeness of the four links: "plan, execute, check, and feedback." Especially, establish an objective and effective inspection system to track execution in real time and on-site, ensuring implementation is in place. That is, set standards beforehand, control during the process, and summarize afterward, achieving standardized management that "restrains people with systems."

Because salespeople visit dozens of terminals daily, if they strictly follow the eight-step terminal visit procedure—pre-visit preparation, checking outdoor advertising before entering, greeting customers and filling out terminal customer cards, checking in-store product displays, checking inventory, etc.—the difference in order volume and improvement compared to a cursory visit is significant. Serious visits to dozens of terminals may result in higher transaction volumes, while superficial visits may lead to fewer transactions. Therefore, focusing on management is key to improving profitability.

**5. Strengthen sales personnel quality and capability to improve service quality:**
"The human factor is paramount." The quality and level of people determine the outcome of work.

Most services are provided by people, which presents complex issues for companies. Both service providers and recipients are specific individuals. Improving service quality is a process of enhancing the overall quality of service providers. When considering how to improve service quality, from top management to every ordinary employee, everyone should strive to improve their overall quality. To remain invincible in fierce market competition, a company must first deeply understand what customers want—their "prior expectations." After clarifying these needs, the company should formulate specific service standards and norms, compile them into an employee handbook, ensure every employee learns them, and strive to improve each employee's professional skills, gradually establishing a "customer-centric" philosophy in practice.

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