Few companies can do without dealers, but even fewer are satisfied with the ones they have. Because around us, too many companies have seen one market after another become "half-baked" or even fail due to dealers who are indifferent, uncooperative, or break market rules, causing our products to decline without ever thriving... But such problems are not solely the dealers' fault. The reason we and our dealers become "happy enemies" often involves issues on our side, and sometimes the manufacturer is the primary cause. For instance, who told us to be less than sharp-eyed when selecting dealers?! Indeed, what we're going to discuss here is: how to find a good "in-law's family" for our "daughter" — that is, dealer selection that can make or break our market.
Once You Marry into a Wealthy Family, You're in Deep Water Doing marketing may seem unrelated to romance and love, but there are parallels. The celebrity gossip you're about to see about actresses marrying into wealthy families can offer some insights into dealer selection. Take Taiwanese actress Jia Jingwen (star of "The Conqueror's Princess" as Wu Zetian and "The Heaven Sword and Dragon Saber" as Zhao Min, among other hit dramas). She was not only beautiful but also famous for her acting. A few years ago, she married into a wealthy family, having become pregnant before marriage with Sun Zhihao, a rich playboy. "I haven't seen my daughter for four months. Please (Sun) bring the child back. Whether we stay together or part, we need to talk face to face. Don't deprive me of my right to be a mother." These were Jia Jingwen's tearful words to Sun Zhihao in April 2009, when her marriage was already on the verge of collapse. In fact, since Jia Jingwen and Sun Zhihao started dating, rumors never ceased: giving birth out of wedlock, Sun driving drunk with a girl the night before Jia gave birth, her mother-in-law looking down on Jia's low education, and her mother-in-law seeing ambiguous text messages between Jia and a mainland actor. These rumors were like time bombs planted around Jia, ready to explode at any moment. No wonder the media summarized their love story as "once you marry into a wealthy family, you're in deep water." Let's make an inappropriate analogy: if our product "marries" into a seemingly glamorous "wealthy family" and encounters a situation similar to Jia Jingwen's, what would happen? Li Zhengquan believes: First, endless exclusion. After "marrying" into the family, the other side has many products and brands, like concubines of various ranks — not a platoon but at least a squad. Each one is either from a prestigious family, well-matched, or brings a rich dowry, or is packaged like a fairy — good looks, support, and market presence. In such a situation, our "daughter" would suffer endless exclusion. Second, hard to win favor, becoming a faded flower. To avoid being sent to the cold palace, we need to gain attention and favor. But for most of our companies and products, we're at best a "modest family's daughter." Even if our "daughter" is no worse than others, we lack pedigree, family fortune, and a substantial "dowry." Our confidence is already lacking, and if we're also poor at political maneuvering and pleasing the "husband," we won't receive much favor all year. Our "daughter" becomes a faded flower, and we grow old and near death. Third, what we value is not ours. If we don't gain favor, our precious "daughter" may only be fit for the kitchen, not the living room, and suffer a worse fate than Jia Jingwen, who is at least a big star and beauty. Without a prenuptial agreement, Jia could still get a share of the family property, and if not property, she has her child. If she wins custody, she gets child support. Even if she gets nothing, the scandal wouldn't greatly affect her acting career or her chances of finding true love and remarrying. But for us, it's different. Once we part ways, not only is our "daughter's" youth wasted and our "dowry" lost, but the market becomes half-baked or even fails, leading to market exit. If we try to "remarry" our "daughter," distributors, retailers, and consumers will resist more than before. If the "marriage" leaves behind thorny issues like price cuts, cross-region sales, expenses, and inventory, the chances of reviving the market become even slimmer... In the end, we find that the "wealthy family" dealer's big house, nice cars, people, connections, and reputation — all the things we valued — are of no use to us. They are all floating clouds, not ours. In reality, many companies treat recruiting "wealthy family" dealers as a golden rule. They all want to follow Jia Jingwen's path, believing these dealers have channels, people, vehicles, big brands to "hitch a ride" on, and sales volume. They think once their product enters such a system, they can rest easy. Few ask themselves: Can you control such a dealer? Can you satisfy their desires and meet their requirements? Do you have enough capital to attract these dealers to "favor" you and make your product a priority? Most companies, especially SMEs, lack such conditions and capabilities, so they end up with a fate much worse than Jia Jingwen's. Therefore, Li Zhengquan offers some advice on dealers you should try not to "marry" (not that you can't, but avoid if possible) — these are the "most" types among your potential dealers and local industry dealers.
1. The Richest Dealing with this type of dealer often involves three common situations: First, they have money but want more, and they don't earn it from the market together with you but by preying on you. For example, they squeeze your profits, find ways to demand higher rebates and deductions, ask for more preferential policies, and request more advertising and promotion support, only to pocket those funds. They may exaggerate or fabricate channel expenses to share with you... Second, they have many products that are profitable or easy to make money from, or more profitable than yours, so they're not in a hurry to earn from you. This "not in a hurry" is trouble for us, because they either raise the selling price to affect market acceptance, or they don't take us seriously, aren't proactive, and take it slow. Third, they have a greater ability to hoard inventory. If they're not in a hurry to turn over capital, a lack of attention and slow pace can put excessive pressure on meeting sales targets, increasing the risk of channel cross-selling and price system collapse.
2. The Largest in Scale Scale doesn't necessarily mean money, but often means more people, more product divisions, more segmented channel departments, larger warehousing and throughput capacity, more delivery vehicles, and deeper, wider network penetration. Such dealers are often the local market's "big shots." Being a "big shot," they tend to be arrogant, leading us by the nose with an "I'm the boss" attitude. This not only makes cooperation harder but also makes it difficult to restrain them. For most companies, it's good enough if they aren't tightly controlled by these dealers. Being the "boss," these dealers will weigh various brands and products. If our product's overall conditions are a bit inferior, it may be sent to the "cold palace," our market plans shelved, and they may ignore us, not cooperate, or not execute.
3. The Most Experienced Experience is one of the necessary conditions for choosing a dealer. But there are three issues to note: First, channel operation has its philosophy; going too far is as bad as not going far enough. For example, using old methods like being a "sitting merchant" to operate in the new market environment will cause our product to hit a wall along with the dealer. Second, experience comes in different types (A, B, C, D). Some dealers' experience may not suit our market operation philosophy. For instance, some dealers' experience is in mass distribution, others focus on modern trade, and others specialize in special channels. If we don't differentiate, problems are likely. Third, the dealer's "most experience" hides many traps. For example, some savvy dealers, when taking on our product, aren't thinking about how to build it up but just take it to reduce competition. Other dealers' experience is to complete sales tasks and earn rebates and support through price cuts, cross-region sales, and other "tricks."
Deep Courtyard, Overgrown Weeds "Lend me, lend me a pair of discerning eyes, so I can see this chaotic world clearly, distinctly, and truly..." These lyrics from Na Ying's song "Seeing Flowers in the Fog" resonate with many. When dealing with dealers, we also need discerning eyes. Because in reality, many dealers look good on the surface — in terms of network, financial strength, personnel, warehousing and delivery, company management, and business philosophy. We have pleasant conversations, some even hit it off immediately, giving us the excitement and illusion that we've found the right partner and the market will open up easily. But the greater the hope, the greater the disappointment. As we get to know each other and cooperate more deeply, we find we've either found a "brocade pillow stuffed with straw" or met a "wolf in sheep's clothing." In short, we've entrusted the wrong person. A snack food company was considering the Guangxi market. The boss, Mr. Wang, immediately thought of an old friend — a local dealer mainly dealing in beverages and small snacks. This dealer's annual turnover ranked in the top five locally, with mature networks in both mass distribution and modern trade. Mr. Wang thought, though they hadn't done business together, they'd had meals and drinks. The company's strength and channel resources were good. Better to do business with an acquaintance. So he "internally designated" the Guangxi market to that dealer friend. The dealer was also very agreeable. The boss slapped his chest and said, "Mr. Wang, don't worry. I can't say for other manufacturers, but I will definitely take your product seriously and do my best to build the market." But after cooperation began, problems surfaced one after another from the regional supervisor: paying lip service but not acting. After five or six months, the target network's distribution rate, especially in supermarkets, was below 40%. Accounts payable were also delayed. What was behind these issues? The dealer had been consciously transforming in recent years, with investments and industries becoming diversified. They were expanding downstream into specialty stores, upstream into manufacturing, and also investing in real estate. The capital chain was always tight, and cash flow pressure was immense. To cope, the dealer had made efforts like internal cost-cutting, one typical example being layoffs, streamlining the original food trading company's sales staff. But no matter how they tightened money and personnel, key brands and products with high support, high sales, and high overall profits still needed priority attention. So other secondary brands faced insufficient investment. Unfortunately, Mr. Wang's product was in that category.
"Does driving a nice car make you a good person?" Those who've seen the movie "A World Without Thieves" may remember a scene: "Thief" Andy Lau drives a BMW in and out of an upscale villa area. As he leaves, he asks the gate guard who didn't suspect him: "Does driving a nice car make you a good person?" Does a dealer who looks attractive and sounds good necessarily fit us well? The above example and many similar ones around us give us a negative answer. We need to sharpen our eyes. Here, Li Zhengquan offers three more suggestions — to achieve market success, try to avoid dealers with the following "three many" characteristics:
1. Many Industrial Expansions Diversification and the resulting capital chain shortages are the fuse that leads many "successful" companies to the abyss, and along with them, a string of partner companies. This applies to dealers as well.
2. Many Debt Disputes Behind debt disputes often lurk credit issues and debt-paying ability problems. You must be cautious with such dealers.
3. Many Competing Products From the traditional second-tier distribution to the terminal, competition among competing products becomes concentrated and fierce. This concentration and intensity lead to higher demands for expense support and gross profit contribution. Most companies, lacking the ability to meet these demands, are forced to accept being ignored, sidelined, and eventually failing. If we look purely at product strength, many brands eliminated by "the times" might be superior to those dominating the market. Except for a few companies with exceptional resources and capabilities, almost no company wants to be such a brand or product. So from the start of dealer selection, we hope to join a dealer's system as a differentiator, a gap-filler, or a product structure enhancer, not as a duplicate. But this situation is impossible to completely avoid. Even if our product doesn't directly compete with the dealer's existing products in a specific market segment, there's still competition for the dealer's attention, human resources, and material resources. Therefore, for many of us, a dealer with many brand resources, high product cluster resources, large sales scale, and strong negotiation power with downstream channels may not necessarily be a good thing — because the harm they can do in limiting our ability to win their attention and resources may outweigh the benefits.
A Forced Melon Isn't Sweet Every day, many couples marry and many divorce. In our country, for example, in 2008, there were 10.499 million marriage registrations nationwide, about 28,800 per day, and 1.553 million divorces handled by civil affairs departments (excluding court-mediated or adjudicated divorces), about 4,400 per day (according to statistics released by the Ministry of Civil Affairs on February 4, 2009). The reasons range from infidelity to material and economic pressures, to fundamental incompatibility. The same issues exist between companies and dealers. This reminds me of a typical experience from years ago. A few years ago, I was the general manager of a snack food company. Less than half a month into the job, I received an unexpected call from a woman — she was our Changsha dealer. "Mr. Li Zhengquan, hello. My surname is Xiao, and I'm your Changsha dealer. Some issues that your regional supervisor Xiao Wang and Director Zhang haven't been able to resolve for me, so I'm taking the liberty to bother you..." She got straight to the point. The call was mainly about this: she demanded we remove the price information from our company website and Taobao store. The reason was that our online selling price was 12% lower than the suggested retail price for offline channels. She was worried that her customers, when checking product information online, would feel cheated, affecting her business. If we couldn't meet her demand, she threatened to post negative messages online about how we don't respect dealers or protect their interests, and she would submit our product to the local quality inspection department, saying "we'll find some faults." It's natural for a company to protect dealers' interests. But selling products online reduces costs, and a 10-15% lower online retail price is a normal price range. Offline and e-commerce channels also target different audiences. Moreover, our dealers mainly do distribution and service. Why did the Changsha dealer have such strong objections and make such demands and threats? It turned out that when our regional supervisor developed dealers, he only cared about completing recruitment tasks quickly, completely ignoring whether the dealer's network resources matched our main channel direction — supermarkets and OTC channels. He also didn't care whether the dealer identified with our product and market operation philosophy. Seeing the dealer's interest and confidence, he granted the Changsha distribution rights to this dealer. But how did this dealer operate our product? In terms of channels, she felt the supermarket and OTC channel thresholds were too high and costs too great, so she abandoned the main channels and focused on the beauty channel where she had some foundation. But after two or three months, she was still testing the waters, showing no real confidence or determination. In terms of pricing, we left dealers a profit margin of 46%, which is not low. The suggested retail price nationwide was 25 yuan per bottle, targeting the mid-range core consumers. Now she was focusing on beauty salons, trying to exchange "narrow distribution" and high pricing for big profits. So she raised the retail price to 68 yuan per bottle, and accordingly, her supply price also rose significantly. We wanted to win big profits by expanding the market and market share, but the Changsha dealer wanted to exchange high profits in a much smaller market with much smaller volume through price increases. Clearly, the two philosophies were completely incompatible — like east and west. Behind the demand to cancel online price information was this serious divergence in brand operation, profit acquisition, and market operation philosophies. Men fear entering the wrong profession, women fear marrying the wrong man, and companies fear choosing the wrong dealer. If we encounter such a "different path" dealer and still try to "plan together," we often lose more than if we temporarily didn't find a dealer and left the regional market aside. Because we will invest, but that investment not only doesn't add points but subtracts them; because restarting a market with many leftover problems and barely alive is often more difficult than starting a fresh market; because if our brand and product can't succeed after a period, they'll be unwelcome among channel partners and consumers. However, I think we can't blame the dealer. Who told us to prioritize quantity over quality, to accept any dealer as long as they place an initial order? Who told us to be so eager for quick success, rushing to start a market without stability? Who told us to have unclear dealer selection criteria or fail to enforce them? Who told us to focus only on task targets without process review, and not strengthen review of the dealers developed by sales staff and the contracts they bring back? So, in light of the above, when selecting dealers, we must remember the "three mismatches" to avoid:
1. Mismatch in Brand Identity Philosophy What kind of company we want to be, what kind of cooperative relationship we have with dealers and the roles each plays, what kind of brand we want to build for what target audience and with what image, and through what safeguards the brand will develop — whether these are aligned affects whether we and the dealer can share the same philosophy and act in concert.
2. Mismatch in Market Operation Philosophy What channels to operate, to what extent in each channel within what time frame, how to allocate resources, how to manage sales staff, warehousing, and delivery, what rules to follow for pricing and regional markets, and on what basis to allocate advertising and promotion support — all fall under this. Whether we can align our philosophies in these areas affects whether we and the dealer can move in step and work together.
3. Mismatch in Profit Philosophy The price increase mentioned earlier is just one aspect of profit philosophy mismatch. Price cuts, cross-region sales, and other behaviors that disrupt market order; withholding market support funds, defrauding preferential policies for big customers, and thinking only about extracting money from the manufacturer rather than earning from the market; focusing only on shipping goods without market maintenance, doing one-off deals; sitting back and waiting for business with outdated concepts; only thinking about using other brands to drive sales without proactive promotion — all these affect our rise or fall, even life or death, in a regional market.
Beware of Junk Stocks For those interested in stock investing, three concepts are familiar: junk stocks, blue-chip stocks, and growth stocks. Among these, the first refers to stocks of companies with poor industry prospects, bad management, and poor performance; the second refers to stocks of companies with high investment returns and value, with excellent performance; the third refers to stocks of large companies that hold important positions in their industries, with excellent performance, active trading, and generous dividends. For us, whether finding a partner or developing dealers, we should try to avoid junk stocks. In the 2008 comedy "If You Are the One," Ge You, playing the male lead Qin Fen, has a conversation with Hu Ke, who plays a stock investor, during a blind date: Hu Ke: Actually, I think blind dating is like stock trading. You can watch several stocks at once, and in the end, you decide which to buy based on their performance and careful analysis. For example, looks, figure, personality, education, economic conditions, family background, and so on... Ge You: So what kind of stock would I be? Hu Ke: Judging from your age and looks, you'd be the kind that fell below the issue price! The implication is that Hu Ke thinks Ge You is somewhat "junk." Of course, Ge You isn't a junk stock; he ends up winning the beauty. For us, we must avoid becoming a junk stock in dealers' eyes, and also avoid getting entangled with junk stock dealers, lest we get "trapped" and fail in the market. So, we should remind ourselves to avoid dealers with the "eight lacks" , because they are more likely to be associated with junk stocks.
Lack of People With just a few people, they're already busy serving other manufacturers, so they have no manpower to fight alongside us.
Lack of Facilities No warehouse, no cold chain or product-related storage and transportation facilities, no delivery vehicles — how can they ensure good market performance?
Lack of Money No money to hire people, buy facilities, or make necessary investments in the market, and they delay accounts payable. What returns can such a dealer bring?
Lack of Experience They don't know how to manage warehousing, personnel, or channel partners; don't know how to negotiate with supermarkets; don't know how to display at terminals; don't know how to plan the market. Cooperating with such a dealer means more detours and harder to reach goals.
Lack of Network We wanted to put our product vehicle on their highway, but they have no road and need to build one. When will our vehicle get on the road and maintain speed?
Lack of Integrity They can't make our product a priority, can't achieve a certain distribution rate in target outlets within two months, can't pay within three days. What they can do is let us sink deeper into a quagmire.
Lack of Confidence They accepted our product on a trial basis. After taking it on, due to lack of confidence, they're timid, slow, and invest little. Our product and market can't withstand such dithering.
Lack of Attitude We send dedicated personnel to help these dealers build teams and do distribution. We fulfill our advertising and promotion support and show our attitude, but they remain indifferent and slow. If this continues, the young lady will become an old woman.
Of course, in reality, many dealers look like blue-chip or growth stocks, but behind the facade, they are junk stocks. We need to discern this using the content discussed above.
Testing the "Quality" of Dealers So what kind of dealers are more likely to build the market with us? It's not enough to simply avoid the types mentioned above. That's actually an elimination method, telling us that if we form a "marriage" with such dealers, we're more likely to become playthings and enemies, and the chance of market failure is much higher. Therefore, we need to select dealers based on the relevant content above. For dealers already developed or in cooperation, we can also review them to see how they affect our market's rise and fall.
Dealer Type Testing Model
| Problem Dealer Type | Judgment (Yes/No) | Remarks |
|---|---|---|
| "Three Most" | Richest | |
| Largest in Scale | ||
| Most Experienced | ||
| "Three Many" | Many Industrial Expansions | |
| Many Debt Disputes | ||
| Many Competing Products | ||
| "Three Mismatches" | Brand Identity Philosophy Mismatch | |
| Market Operation Philosophy Mismatch | ||
| Profit Philosophy Mismatch | ||
| "Eight Lacks" | Lack of People | |
| Lack of Facilities | ||
| Lack of Money | ||
| Lack of Experience | ||
| Lack of Network | ||
| Lack of Integrity | ||
| Lack of Confidence | ||
| Lack of Attitude | ||
| (Dealer Type and Quality Testing Table) |
For most companies, especially SMEs, if our dealer matches one or more of these items, our product, brand, and market are in danger. The more items involved, the less hope. Therefore, don't seek the biggest or the smallest; a medium-sized dealer, or one that is well-matched, is just right!
Listen to Dealers' Opinions Choosing a dealer is not like an emperor choosing a son-in-law; we can't just pick anyone. Whether the dealer we end up with is strong or weak, big or small, to make them value us and proactively promote our product, we also need to regulate and improve ourselves to meet the "natal family" standards in dealers' eyes. Below, a dealer who handles big brands like Wahaha, Yili, and Guangming, along with several small brands, shares their criteria for selecting and accepting new products, which may offer some insights:
Does this product conflict with my existing product structure? Is it suitable for me to do? If it conflicts but cannot replace an existing product, I absolutely won't take it.
Profit and sales volume must be balanced. No matter how high the profit, if the prospects are dim and the chance of success is less than 50%, I absolutely won't take it. Some brands have low profit but can ramp up volume quickly and achieve large sales, so I'll take those.
"The wool comes from the sheep's back." I'm not the sheep; the consumer is. So I don't consider products just because the manufacturer offers various preferential conditions.
I absolutely won't cooperate with manufacturers with poor reputation, non-standard operations, or no management rules.
The manufacturer's salesperson's ability must meet my requirements. Their ability shows during communication. If problems arise in the market, their ability will directly determine whether they can effectively solve them.
I won't easily refuse, nor easily make a decision. The manufacturer's sincerity and that of the salesperson I deal with are important factors in changing the final outcome.
You don't need to say much about how good your product is, because that's not my main concern. What matters most is what your product can bring me, the resources and capabilities needed to deliver those benefits, and the ways to achieve them.
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