Large distributors grow from small ones. As long as small and medium distributors keep working hard, formulate correct business strategies, improve their operational, management, and execution capabilities, and combine various marketing skills and techniques with the actual conditions of their markets, they will surely achieve rapid growth.
01 Current Situation of Small and Medium Distributors
The small and medium distributors referred to in this article are those whose companies have been operating for several years or even more than ten years, but whose sales have not exceeded 10 million yuan, or even remain below 5 million yuan, and who are still in a loss-making state or struggling on the brink of survival. Their actual situation is:
Outdated business concepts and single profit model. Their business positioning lacks differentiation, leading to homogeneous vicious competition. They have no core competitiveness or profit model. Some lack industry ethics and self-discipline, facing a credibility crisis. They are unable to cope with the industry's era of meager profits. For example, many distributors sell just for the sake of selling, making product sales and profit their only goal. They forget about market development, maintenance, system and network construction, and helping customers grow stronger and develop together. When they see a category selling well in the market, they immediately seek to represent a small product of the same category. If "Six Nuts" sells well, they go to distribute "Seven Nuts, Eight Nuts, or even All Nuts"; if "Under the Hawthorn Tree" sells well, they go to distribute "On the Hawthorn Tree, Under the Jujube Tree..."; if "Old Village Chief" sells well, they go to distribute "Old Captain, Old Branch Secretary, Old County Magistrate..."
Poor market promotion ability and lack of service awareness. They have insufficient research on the local market, leading to blind strategies. They simply sell for the sake of selling, resulting in poor follow-up service and lack of customer service and maintenance capabilities. They lack both software and hardware, making it difficult for services to meet customers' actual needs. They do little basic market promotion work, use single methods, mainly relying on price wars and slandering competitors. They have a serious "wait, rely, ask" mentality. They are unwilling to actively cooperate with manufacturers in various promotional activities, and even use the market to hold manufacturers hostage, constantly making unreasonable demands.
Extensive management and poor operations. They find it difficult to surpass themselves, improve management, or transform. They lack basic organizational management, unclear responsibilities, low efficiency, and poor management of stores, displays, customer relationships, information, and inventory. Their execution willingness and ability are limited, making it hard to leverage the synergy between manufacturers and distributors.
Lack of professional talent. They lack management tools such as recruitment, training, and assessment, making it difficult to attract, cultivate, utilize, and retain talent. Their workforce is mainly composed of family members or older employees, with low professionalization, making it hard to meet the demands of further customer and market development.
【Case】
In a county-level market in Hebei, distributor Boss Zhang manages the company with his wife handling finance and his sister-in-law managing the warehouse. He has 12 employees: 6 drivers and 6 salespeople, of whom 1 driver and 2 salespeople are relatives. They have 6 delivery vehicles and a warehouse of over 1,000 square meters storing products from more than ten small and medium enterprises, including baijiu, instant noodles, plant protein, purified water, and fruit juice drinks. Boss Zhang claims to be the distributor with the most product categories in the county. However, in the six years since starting the business, he has added products almost every year, yet annual sales have hovered around 10 million yuan. Not only have sales not increased, but last year he also lost over 100,000 yuan. Facing the future, Boss Zhang is at a loss...
Boss Zhang's company problems are quite representative (many distributors with annual sales below 5 million yuan, representing products from several small and medium enterprises, have similar situations). Let's take Boss Zhang as an example to analyze the problems small and medium distributors are prone to encounter during growth:
- In product selection, Boss Zhang made the mistake of "seeking quantity and completeness."
Boss Zhang worried that representing too few products would limit sales and make it hard to cover various expenses. Because he did not remain loyal to one or a few brands, he did not actively cooperate with the requirements of enterprises regarding distribution rate, visualization, price system, brand promotion, and other indicators. As a result, he did not gain recognition and support from enterprises, and no brand regarded him as a long-term strategic partner.
Moreover, whenever employees reported that a certain category was selling well in the market, Boss Zhang would seek a product from a small or medium enterprise in the same category to sell. This led terminals to fear that Boss Zhang would frequently change products, causing a disconnect in marketing services, so terminals were unwilling to cooperate deeply with him.
- Extensive management and poor operations
Sales personnel conducted sales extensively according to administrative divisions (these townships are the responsibility of salesperson A, those townships are the responsibility of salesperson B...). Although they had a certain sales network, the number of core terminal outlets was very small, and the average order value was also very low. Sales personnel ran through the market every day rather than working the market. At each terminal, they simply asked if they needed goods.
- No management system, lack of recruitment, training, and assessment tools, making it difficult to attract, cultivate, utilize, and retain talent, leading to a shortage of professional personnel.
Boss Zhang, his wife, and his relatives each gave orders, resulting in multiple sources of command, leaving employees confused about whom to listen to. Job responsibilities were unclear, and everyone worked together. When Boss Zhang's relatives did not work, other employees complained.
Lack of corresponding training meant that sales personnel had almost zero basic marketing knowledge. They did not know terminal visit steps, visualization, 1.5 times safety stock, and had no idea about the process of doing business. They never paid attention to market information or competitor dynamics, selling just for the sake of selling every day.
Lack of corresponding assessment mechanisms meant that employees' wages were basic salary plus commission. Regardless of whether it was a black cat or a white cat, as long as they sold more, they could get more commission. Due to the lack of process management and assessment, coupled with employees' lack of sales knowledge, they did not do market maintenance. Every day, when employees went to the market, they first calculated which store they could pressure into stocking goods. They rarely visited terminals with slow sell-through, and for terminals that requested returns or exchanges, if they could stock some goods, they would exchange near-expiry and soon-to-expire products; if not, they would avoid those terminals next time.
If employees were held responsible for near-expiry and expired products, they would resign. If not, they would continue running the market day after day, resulting in heavy losses for the company due to large quantities of near-expiry and expired products.
02 How Should Small and Medium Distributors Survive in 2019?
"If you want trouble, first derail." Every industry has its development laws. If you violate the laws of industry development, trouble is not far away. Large companies grow from small ones. I hope small and medium distributors will compare themselves with the following growth path of trading companies. If your company is not developing well, please check whether you have deviated from the following path.
Phase 1: Product Selection Growth Stage: Product selection; Product life cycle management
Phase 2: Channel-Driven Growth Stage: FMCG methods; Operating models; Operating systems
Phase 3: Product Portfolio Growth Stage: Product portfolio; Product life cycle management
......
Currently, the better-performing and larger distributors in the market have developed to their current state by relying on the growth driven by phases 1, 2, and 3. However, because many distributors lack knowledge of phases 1, 2, and 3, they have been operating for over ten years without breaking through 10 million yuan in sales. Even those above 10 million yuan currently have very low profitability.
Currently, trading companies with good profitability follow the following path for product portfolio in the new entry stage: few products, few regions; few products, many regions; many products, few regions; many products, many regions.
That is, in the initial stage of entering the industry, distributors choose a manufacturer's product, operate in a certain region or channel locally to establish their own base market. During the process of establishing the base market, they refine a model suitable for the local market, train a team, and then replicate this model to operate the entire regional market.
After operating a manufacturer's product to several million yuan in a county-level market, or to over ten million yuan in a prefecture-level city or provincial capital, they then add brands. After adding brands, they still follow the approach of establishing a base market in a certain region and channel to refine the model and replicate it.
For many small and medium distributors, 2019 should involve the following adjustments based on the above growth path:
- Change your business concepts and strategies
After conducting detailed market research, adjust the products currently represented by the company, adjust the personnel structure and channel structure, that is, cut off chicken-rib products, personnel, and terminal outlets. Then shift from mobile warfare to positional warfare; from running the market to working the market; from selling goods to providing services to terminals. Operate in a certain region or channel locally to establish your own base market. During the process of establishing the base market, refine a model suitable for the local market, train a team, and then replicate this model to operate the entire regional market.
- Train your salespeople well and build a sales team that can endure hardship and has drive
Employees do not need to be many, but they must be capable. The biggest cost of operation is not expenses, but putting untrained employees on the market. Because untrained employees not only fail to achieve results but also disrupt the market. You should carefully arrange a business training plan for employees, including five aspects: product knowledge, business skills, business processes, sales policies, and key points. If you lack experience in this area, you can ask the manufacturer's sales manager to provide training or participate in corresponding training courses.
- Formulate a stable sales policy to give employees a sense of purpose
The formulation of sales policies is very important. You must clearly inform salespeople in writing that if they achieve a certain performance, they will receive a certain reward. Because salespeople often calculate for themselves how much return they will get from a month's effort. Therefore, a good sales policy is very important for business. In this regard, two things should be done: first, formulate sales and commission policies for salespeople; second, formulate commission policies and implementation and inspection systems.
- According to manufacturer requirements, do a good job in terminal management, brand promotion, and promotional execution
The manufacturer's requirements for terminal distribution rate, advertising visualization, inventory management, price stability, brand promotion, and promotional plan execution are intended to help distributors earn stable and long-term profits. Distributors should not have any bargaining thoughts on these matters. As long as distributors actively cooperate with manufacturers and establish a refined terminal network, manufacturers will definitely provide strong support.
- Provide good service to terminal outlets
Strengthen terminal visualization, strengthen terminal customer relationships, consolidate and stabilize price systems, etc. That is, distributors should strengthen deep maintenance, study with terminals how to quickly sell products, and find ways to help terminals sell products to consumers. When terminals have no inventory, they will naturally stock up. Only in this way can distributors truly create value for terminal stores.