Click 'Read Original' for details. Some secondary distributors, in order to complete sales tasks assigned by dealers and leverage dealer policies to drive sales of other products, repeatedly cut prices, sometimes even below factory cost, causing headaches for many beverage dealers.

The 'Two Sins' of Secondary Distributor Price Cuts Although price cuts can bring temporary benefits and profits to secondary distributors, their adverse effects and destructiveness are also obvious.

First, they disrupt the overall market order. The most direct result of unauthorized price cuts by secondary distributors is that the purchase price of the product for all retail terminals in the region generally drops. Consequently, terminals with low or no inventory will significantly reduce their retail prices, while those with large inventory, having purchased at higher prices, will have retail prices higher than others. This leads to chaos in the overall market price structure. 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, eventually spreading like a snowball and affecting a wider area.

Second, for the product itself, price cuts by secondary distributors can be devastating. Price confusion directly harms terminals with large inventory and surrounding secondary distributors. Profit margins are squeezed repeatedly, and when it reaches a certain level, many terminals and secondary distributors will reluctantly exit, shortening the product's life cycle in the market imperceptibly.

Three Unreasonable Factors Behind Price Cuts Many may believe that price cuts by secondary distributors are solely due to their unscrupulous pursuit of profit maximization, unrelated to manufacturers and dealers. In reality, it is precisely the loopholes in product price system design, sales policy formulation, and market control by manufacturers and dealers that allow secondary distributors to exploit opportunities for profit.

First, unreasonable price system design. If a product's price system has loopholes—for example, the manufacturer sets excessively high profit margins for secondary distributors—they will arbitrarily reduce their profit margins to expand sales and compete for retail terminals, resorting to price cuts.

Second, unreasonable sales policy formulation. In formulating sales policies, dealers often provide generous policy support to secondary distributors during peak seasons to boost sales, such as high rebates and substantial promotional expenses. This allows secondary distributors to freely reduce product profits or even sell below factory cost, as they can forgo product profits in favor of high rebates and promotional expenses, while also driving sales of other products. Why not?

Third, unreasonable channel width design. Another important reason is that dealers overly rely on secondary distributors, and the channel width is too broad, leading to competition and price cuts. Additionally, inadequate management and control over secondary distributors and the market, coupled with a lack of punitive measures and deterrence, only emboldens price-cutting behavior.

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

Control the source of profit. When designing product price systems, manufacturers should carefully consider and set appropriate price systems for different market stages, ensuring secondary distributors earn normal profits while preventing excessive profits that might tempt them to take risks. Dealers should also thoroughly consider promotional policies for secondary distributors during peak seasons, preferring in-kind rewards over cash or items convertible to cash, to prevent secondary distributors from using such funds or promotional items to discount sales. Reasonable profit margins and promotional policies serve to control the source of profit, making profit acquisition fair and transparent, and providing control 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 seize terminal resources. Second, dealers should not overly rely on secondary distributors; by channel sinking, they can appropriately reduce the width of secondary distributors, which also helps control the market. 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 price cuts by secondary distributors are discovered, dealers can impose penalties like deducting deposits according to the agreed system, serving as a deterrent.

From August 22 to 24, the '2018 China Digital Innovation Conference (2018FDIC)', hosted by the China FMCG Industry Association and organized by New Distribution, with the theme 'Finding New Engines for Growth', will be held in Shanghai!

This three-day conference will focus on two main themes: marketing and supply chain, with six parallel forums on brand, channel, communication, B2B, intra-city logistics, and innovative retail. We will invite industry experts, CEOs, and brand executives to deeply interpret the trends and drivers of digital transformation in the FMCG industry.

We will gather over 500 FMCG enterprise executives, 200+ B2B industry CEOs, and 1000+ major FMCG distributors to discuss how the FMCG industry can leverage digital tools to achieve renewed rapid growth in the digital era. This conference will build a bridge for brand owners, distributors, retail enterprises, and marketing agencies, helping FMCG manufacturers obtain the latest information, understand best practices, and master more practical transformation skills.

Invited Companies Conference Time August 22-24, 2018 Conference Venue Shanghai Baohua Marriott Hotel Conference Agenda August 22: Full-day registration Afternoon 14:00-17:30: Parallel forum on distributor intra-city logistics Evening 18:30-21:00: New Distribution Night Gala Dinner August 23: Theme: Marketing Digital Innovation Morning 9:00-12:00: Main forum on marketing digital innovation Afternoon 14:00-17:30: Parallel forums on brand, channel, and communication August 24: Theme: FMCG Supply Chain Digital Upgrade Full day: FMCG Supply Chain Conference Registration Method Registration is now open. Long press the QR code below or click 'Read Original' to register. Early bird tickets are limited to 50, with 50% discount, available on a first-come, first-served basis! Registration Consultation Ticket inquiries: Media cooperation inquiries: Highlights of Previous New Distribution Conferences Click the links below to review the first, second, third, and fourth FMCG + Internet Conferences: -END-