The severe situation facing the retail industry is an indisputable fact. The main factors leading to this situation are as follows: 1. Intensified industry competition and the trend of consolidation. 2. Increased operating costs, including store rent, utilities, personnel, logistics, and management costs. 3. The surge in the number of stores diverting customers. 4. The dramatic changes in business models in the Internet era. 5. The conceptual impact of e-commerce. 6. The impact of specialty stores and local specialty stores. 7. Some regions are constrained by the migration of China's mobile population. These reasons have led to rising supermarket operating costs and sharply declining profitability. Many costs are inevitably passed on to suppliers. As suppliers, overall sales may not decline significantly, but how should they face issues such as increased fees, reduced per-store output, and higher service costs? First Move: Change the Contract Cooperation Entity to Reduce Fees Generally, supermarket contract deductions increase annually based on the cooperation period. That is, in the early stages of cooperation, the contract deduction rate for suppliers is relatively low. Based on this, suppliers can adopt the following strategies: 1. Re-register a new company and open a new account with the supermarket. 2. Put newly introduced brands under the new account first. 3. If the transfer cost is not high, directly transfer the original account's barcodes to the new account. 4. If the transfer cost is too high, seek manufacturer support to share the transfer cost. In this way, with a new account, you become a new supplier, and the contract deduction rate can be signed from a low point, reverting to the initial contract deduction rate, which can temporarily alleviate the pressure on suppliers' gross profit margins for a few years. Second Move: Use Special Conditions to Obtain Green Channels and Resources Most supermarkets have green channels for special products, temporary barcodes, special prices, special policies, seasonal products, and competitive procurement, such as low fees, no deductions, and short payment terms. Suppliers can communicate with buyers to understand needs, find such products, or coordinate with manufacturers to customize such products, entering the supermarket with temporary codes to gain free end-cap display resources, increase customer traffic, accelerate capital turnover, lower the expense ratio, and increase overall net profit. At the same time, this can strengthen cooperation with the supermarket and reduce the supermarket's exploitation of unnecessary fees. Third Move: Adjust Product Structure; Manage Individual Products Well The success of a supermarket system depends on the selection of terminal products. Choosing suitable individual products and forming a reasonable product structure is half the battle. When adjusting the product structure, consider the following points: 1. Focus on the natural sales performance of individual products and prioritize key items From products with good natural sales, select those with greater potential, concentrate resources, and create key items. With key items, you gain competitiveness and attract the attention of the terminal, because sales volume is the most important assessment indicator for buyers and stores, so they will provide more advantageous and cheaper resources. At the same time, in a region or system, if a product becomes a key item, it will also attract the manufacturer's attention and receive support and investment from all aspects. For yourself, if a product becomes a key item, the average order value for store delivery will increase, thereby reducing the logistics cost of direct store delivery. 2. Differentiation of individual products from similar competitive products Differentiation attracts consumers' attention and can increase product prices. Therefore, in a terminal with abundant products, to stand out, you need to differentiate from similar competing products. This difference can be in packaging, price, brand influence in the region, or the number of similar competing products. 3. For systems mainly based on convenience store chains, fully consider the adaptability of product packaging rates Many terminals operate mainly as convenience store chains, where store areas are small, and both display space and warehouse capacity are limited. Moreover, the turnover cycle of goods is much slower than in hypermarkets. Therefore, products with large packaging rates are often not favored by store staff. When goods arrive, they cannot all be placed on shelves, and the warehouse lacks sufficient storage space. This leads to either stores not ordering from the central warehouse even when out of stock, or slow-moving inventory with long dates or even dead stock. Therefore, when working with such systems, coordinate fully with the manufacturer to provide products with smaller packaging rates, increase the freshness of displayed products, facilitate store reorder rates, avoid stockouts, and promote product sales. 4. Pay attention to the gross profit margin of individual products Many suppliers have the concept that products with good sales can have lower gross profit margins, but I think this is outdated. Pay attention to sales volume, but also to the gross profit margin of products. The best result is to have both sales and profit. It's not that you can't use low margins to boost volume, but you should ensure sufficient gross profit margins during normal sales and use relatively low prices during promotional activities to impact the market and increase sales. 5. Cut off resource-wasting individual products Suppliers spend a lot on entry fees and barcode fees to introduce products into terminals, and of course, they don't want any product to die. But market performance is often uneven. The top 20% of products may account for most sales, while another 20% have dismal sales. For the dismal 20%, many suppliers have the mentality: even if it doesn't sell well, it still occupies a display space. Many suppliers spend a lot of relationship maintenance to avoid being eliminated temporarily, but due to poor performance, they eventually face death. During this process, supplier resources are wasted, and since supermarket display resources are limited, suppliers miss many opportunities to launch new products. From the supermarket's perspective, if a supplier has too many products that are being phased out, it will also cause buyer dissatisfaction, and they will no longer be willing to give you resources. It will also negatively affect your rating in the supermarket system. Therefore, from the above points, suppliers should dare to take action against themselves, quickly cut off poorly performing and resource-wasting products, and replace them with better product opportunities and lower service costs. Fourth Move: Focus on Single-Store Promotion and Display Suppliers have limited resources, so it is unrealistic to manage and take care of all stores. Instead, classify and grade all stores based on foot traffic, sales, and regional location, and concentrate resources on high-quality terminal stores. Through single-store promotions, focused displays, special displays, sampling, guided sales, and advertising, increase product output, improve the success rate of new product launches, and also win the favor of stores to gain more resources and closer cooperation. Fifth Move: Integrate Enterprise Resources and Adjust Cooperation Models with Manufacturers No matter how strong a supplier's own strength is, healthy and rapid development cannot be achieved without manufacturer support. This is true in good times, and when facing difficulties, seek more resources from upstream manufacturers, interact more with manufacturer personnel at all levels, and promptly convey market information to manufacturers so they support you. At the same time, consider seeking changes in cooperation models with manufacturers. Suppliers can think from the perspectives of solving terminal operational risks, cash flow, and investment in terminal promotion personnel to find a model that suits them. Sixth Move: Pay Attention to Traditional Channels and Add New Channels Most suppliers who work with supermarkets have a channel weakness: they don't pay much attention to traditional channels, or they don't do traditional channels at all, basically walking on one leg. Therefore, under the premise that supermarket growth has hit a bottleneck and the overall environment is poor, although profits are lower, traditional circulation channels still have their advantages. For example, fast product turnover, quick capital recovery, pre-collection of payments from secondary distributors during promotional periods, channel sinking to directly control some circulation channel customers, and handling products with long dates. In addition, suppliers have advantages in market layout and control, such as controlling the price system, resisting cross-regional dumping, and synchronizing new product promotions. Therefore, suppliers need to enter new channels based on their product characteristics, such as special channels like prisons, universities, and transportation, as well as industrial users (e.g., raw materials for fast-food chains) and internal supply for factories and mines. Seventh Move: Based on Product Type, Moderately Engage in E-commerce With the advent of the Internet era and the rise of e-commerce, suppliers cannot stay out of it. They should choose suitable products and moderately engage in e-commerce. However, e-commerce products have their own characteristics. You can't just take an offline product and sell it online. You can propose product design requirements to manufacturers and customize products and packaging suitable for e-commerce platforms to avoid price conflicts with offline distributors. I must remind that for most enterprises, operators, and ordinary store owners engaged in e-commerce, e-commerce is a beautiful myth. Not everyone can easily succeed in it. It requires substantial investment and time to exchange for space. Currently, among those engaged in related businesses, probably no more than 20% are profitable. Therefore, suppliers must not dive headfirst into e-commerce; they should assess the situation and be cautious. The Big Move: Ultimately Transform from Supplier to Logistics Service Provider Trends are unstoppable, and changes in business models are inevitable. Whether it's Wumart adopting bidding to eliminate small and medium suppliers and choosing direct cooperation with manufacturers, or Walmart changing its procurement model and reducing second- and third-tier suppliers, these are all results of changes in the internal and external business environment and industry competition leading to fission. Therefore, no supplier can stay out of this flood. Either die miserably and be ruthlessly eliminated, or choose to change and keep up with the irreversible trend. Transformation is inevitable, and you must have sufficient psychological preparation and courage to face it. If you don't do private labels, our suppliers now and in the future will transform into logistics service providers. Service fees, warehousing fees, logistics fees, and commissions will be the main profit sources for suppliers in the future. This is the general trend. Whether you can make a gorgeous turn depends on the strategic height and mindset with which suppliers view changes in the overall environment and their own future positioning and development goals. Source: Sales and Market (cnmarket) At the request of many distributor friends, the third B-end e-commerce inspection class of this public platform will visit Wanshang Yizhan, Yunbao Shangmeng, and Weijie Chengpei from July 9-12. Distributor friends interested in transformation can come and inspect with us on-site: Organization Form 1. Company visit 2. Actual market case visit 3. On-site explanation 4. One-on-one communication Participating distributor friends only need to pay a registration fee of 200 yuan. Time: July 9-12, 2016. Location: Changsha, Xiamen. Interested distributor friends can register by long-pressing the QR code below. When adding friends, please reply "Third Registration". Previous Inspection Enterprise Cases: Yishang Logistics Model Inspection (Second B-end E-commerce Inspection Group Yishang Logistics) Caiba Model Inspection Jinhuobao Model Inspection Beiquan Model On-site Inspection Piduoduo Model On-site Inspection -END- The best domestic FMCG distributor learning platform Focuses on providing professional, practical, and applicable tutorials for enterprises and distributors Committed to helping Chinese FMCG distributors grow rapidly The most professional and practical knowledge base in the FMCG industry Reply with the red number below to get the corresponding content Reply with number 1 to view the complete knowledge base | 001 Excellent article selection | 002 Distributor market operations | 003 Terminal visit management | 004 Sales supervisor skills | 005 Sales improvement techniques | 006 Channel expansion | 007 Managing distributors | 008 Distributor development | 009 Distributor internal operations management | 010 Team management | 011 Efficient distribution techniques | 012 Sales manager's eighteen skills | 013 KA operation methods and strategies | 014 First lesson for new salespeople | 015 Internet, brands | 016 Distributor B2B transformation | [Long press QR code to follow]