---
title: "How to Cure the Disease of Unauthorized Price Cuts by Secondary Distributors?"
description: "Some secondary distributors, in order to meet sales targets set by dealers and leverage dealer policies to drive volume for other products, repeatedly cut prices, sometimes even below the factory price, which troubles many beverage dealers. The unauthorized price cuts by secondary distributors disrupt market order and harm the product's lifecycle, stemming from unreasonable price systems, sales policies, and channel width. To address this, companies and dealers should control profit sources and strengthen market supervision."
author: "New Distribution"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-06-21"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/Cf2Qa07JyHcjTeq02io1Fg"
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# How to Cure the Disease of Unauthorized Price Cuts by Secondary Distributors?

> Some secondary distributors, in order to meet sales targets set by dealers and leverage dealer policies to drive volume for other products, repeatedly cut prices, sometimes even below the factory price, which troubles many beverage dealers. The unauthorized price cuts by secondary distributors disrupt market order and harm the product's lifecycle, stemming from unreasonable price systems, sales policies, and channel width. To address this, companies and dealers should control profit sources and strengthen market supervision.

Some secondary distributors, in order to complete the sales tasks assigned by dealers and use the policies provided by dealers to drive the volume of other products, have been cutting prices repeatedly, sometimes even below the factory price, which has caused headaches for many beverage dealers.

The "Two Sins" of Secondary Distributors Cutting Prices
Although cutting prices can bring temporary benefits and profits to secondary distributors, the adverse effects and destructiveness are also obvious.

First, it disrupts the entire market order. The most direct result of unauthorized price cuts by secondary distributors is that the purchase price of the product at all retail terminals in the region generally decreases. Then, terminals with low or no inventory will inevitably significantly reduce their retail prices, while terminals with large inventory, having purchased at high prices earlier, will have retail prices higher than other terminals. As a result, the overall market price system becomes chaotic. For surrounding secondary distributors, the price-cutting distributor poses a significant threat. To maintain existing terminal resources and develop new terminal customers, they are forced into the dilemma of whether to cut prices or not, and eventually, like a snowball, the impact spreads wider.

Second, for the product itself, price cuts by secondary distributors can be devastating. Price chaos directly harms terminals with large inventory and surrounding secondary distributors. The profit margin of the product is repeatedly squeezed. When it reaches a certain level, many terminals and secondary distributors will reluctantly abandon the product, and its market lifecycle will be shortened imperceptibly.

Three Unreasonable Aspects Behind Price Cuts
Many may believe that price cuts by secondary distributors are entirely due to their unscrupulous pursuit of profit maximization, and that companies and dealers have little to do with it. In fact, it is precisely because companies and dealers have many loopholes in the design of product price systems, the formulation of sales policies, and market control that many secondary distributors find opportunities to exploit.

First, the price system is unreasonable. If a product's price system has loopholes, such as the manufacturer setting excessively high profit margins for secondary distributors, then secondary distributors will arbitrarily reduce their profit margins to expand sales and compete for retail terminals, leading to price cuts.

Second, sales policies are unreasonable. In formulating sales policies, dealers often spend heavily to provide policy support to secondary distributors during peak seasons, such as high rebates and high promotional expenses. As a result, secondary distributors can arbitrarily reduce the product's own profit or even sell below the factory price, because they can forgo product profits in favor of high rebates and promotional expenses, while also driving sales of other products. Why not?

Third, channel width is unreasonable. Another important reason is that dealers overly rely on secondary distributors, and the channel width is too wide, leading to competition and price cuts. Additionally, there is inadequate management and control over secondary distributors and the market, lacking punitive measures and deterrence, which only makes price-cutting behavior more rampant.

Control the Source and Strengthen Management
Where there is profit, there is pursuit. Perhaps we cannot completely eliminate price cuts by secondary distributors, but we can curb them through effective methods and actions.

Control the source of profit. Companies should carefully consider the price system for products, formulating corresponding price systems for different market stages. While ensuring secondary distributors obtain normal profits, they should also prevent excessive profits that might tempt them to take risks. Dealers should also consider promotional policies for secondary distributors during peak seasons, preferably using in-kind rewards instead of cash or items convertible to cash, to prevent secondary distributors from using these funds or promotional items to participate in price cuts through discounting. A reasonable profit margin and promotional policy control the source of profit, making profit acquisition fair and transparent, and playing a controlling role from the source.

Once the source is controlled, the next step is to strengthen market control. First, when selecting secondary distributors, dealers should choose those with minimal overlap in terminal channels, because if multiple secondary distributors cover the same area, they will inevitably resort to unscrupulous means to compete for terminal resources. Second, dealers should not overly rely on secondary distributors; by channel sinking, they can appropriately reduce the width of secondary distributors, which is also conducive to market control. Finally, dealers need to establish a feasible supervision and punishment system and agree with secondary distributors, such as conducting regular visits to secondary distributors and terminals within a certain period. Once unauthorized price cuts are discovered, dealers can impose penalties such as deducting deposits according to the agreed system, serving as a deterrent.

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