Wahaha Group's annual sales revenue exceeds 10 billion yuan, making it the undisputed leader in China's beverage industry. Although none of Wahaha's products have high technical content or technical barriers, Wahaha has consistently led the market. Why? This is closely related to its unbreakable distribution network, and distribution is the most difficult part for enterprises to control and manage, especially the problem of cross-regional selling, which is a common challenge for all enterprises and is known as a "chronic disease" of distribution channels. Wahaha once had serious cross-regional selling problems, but now it has basically controlled them. So, how does Wahaha tackle this "chronic disease" in its distribution channels? In fact, from Wahaha's management systems and actual operations, we can see that Wahaha holds "ten sharp swords" that are highly lethal to cross-regional selling.
Implementing a Win-Win Joint Sales System Wahaha has selected over 1,000 distributors who can control their respective regions across 31 provinces and cities nationwide, forming a joint sales system that covers almost every township in China, creating a powerful sales network. Wahaha uses a deposit method, requiring distributors to pay advance payments. Distributors who pay deposits are much closer to Wahaha, greatly changing Wahaha's transaction organization. Zong Qinghou, Chairman and General Manager of Wahaha, calls this organizational form the "Joint Sales System." The deposits paid by distributors are also special: distributors who settle payments on time receive the deposit back plus interest higher than the bank deposit rate for the same period. Zong Qinghou said, "The significance of distributors paying deposits is secondary; more importantly, it maintains a unique credit relationship between the manufacturer and distributors. We require distributors to pay first and then we ship, but we give them interest so their interests are not harmed, and we also give them annual rebates. In this way, our working capital is very abundant, there are no bad debts, both parties benefit, and we achieve a win-win situation." Wahaha's "Joint Sales System" is guaranteed by financial strength and operational capability, premised on mutual trust and assistance, and aimed at mutual benefit. It has lasting market penetration and control, and can greatly stimulate distributors' enthusiasm and sense of responsibility, which is of great significance in preventing cross-regional selling.
Implementing a Tiered Price System Wahaha's current sales network structure is: Company – Special First-Level Distributors – Special Second-Level Distributors – Second-Level Distributors – Third-Level Distributors – Retail Terminals. If Wahaha does not implement a strict price management system, because there is price space at each tier, this provides conditions for distributors who prioritize profit over volume to engage in cross-regional selling. Especially if special distributors do their own retail, they can obtain substantial profits. To control cross-regional selling through the price system and protect distributors' interests, Wahaha implements a tiered price system management system. Wahaha has formulated flexible yet strict prices for each level of distributor. Based on different regional conditions, it has set total distribution prices, first-tier prices, second-tier prices, third-tier prices, and retail prices, forming a strict and reasonable price gradient at each sales link, ensuring that distributors at each level and link can obtain corresponding profits through selling products, ensuring orderly profit distribution at each link, thus blocking the source of cross-regional selling in terms of price.
Establishing a Scientific and Stable Distributor System Selecting appropriate distributors, regulating their market behavior, and creating an equal and fair business environment for them are very important for preventing cross-regional selling. Wahaha is very strict in selecting and managing distributors. In recent years, Wahaha has abandoned its previous strategy of recruiting distributors indiscriminately and has begun to carefully select partners, screening out those lacking sincerity, poor professional ethics, and weak operational capabilities, thus adding the first insurance against cross-regional selling. Although Wahaha implements the Joint Sales System, the relationship between the enterprise and distributors is independent legal entities, so Wahaha signs strict contracts with other members of the joint sales system. The contract explicitly includes a clause prohibiting "cross-regional sales," strictly limiting distributors' sales activities to their own market areas, and linking year-end rebates to whether cross-regional selling occurs. Distributors become proactive rather than passive, actively cooperating with the company's marketing policies and not daring to engage in cross-regional selling rashly. Wahaha's policies make them realize: the market is shared, the brand is co-owned by the manufacturer and distributors, interests are common, and cross-regional selling will harm both parties' interests.
Comprehensive Incentive Measures Many manufacturers use sales volume as the sole criterion for rebates; the higher the sales volume, the higher the rebate, leading those distributors who focus on volume and only earn year-end rebates to "invade" other regions by any means. Wahaha also has rebate incentives, but they are not solely direct incentives like sales volume rebates; instead, they adopt comprehensive incentive measures including indirect incentives. Indirect incentives mean stimulating distributors' enthusiasm by helping them with sales management to improve sales efficiency and effectiveness. For example, each regional branch of Wahaha has professionals who guide distributors and participate in specific sales work; each branch sends personnel to help distributors manage distribution, shelf stocking, and advertising promotions. Unlike other enterprises that often target promotional measures directly at end consumers, Wahaha's promotional focus is on distributors. The company regularly launches various promotional policies targeting distributors based on market changes and product configurations over a certain period to stimulate their enthusiasm. For a mature distributor, they prefer long-term stable cooperation alliances and income sources. With Wahaha's "free" full cooperation in sales and the implementation of various preferential policies from headquarters without discount, which distributor would be willing to use cross-regional selling to destroy this harmonious and rare cooperative relationship?
Regional Differentiation of Product Packaging Using different markings on identical product packaging in different regional markets is a common anti-cross-regional selling measure. In the contract signed with distributors, Wahaha sets strict sales areas for special distributors and implements a regional responsibility system. Products shipped to each region have a number printed on the packaging, printed together with the production date, which cannot be torn off or changed unless the packaging is replaced. For example, Wahaha AD Calcium Milk has three packaging styles in Guangzhou with numbers A51216, A51315, and A51207. This product packaging differentiation can accurately monitor the destination of products. Once company marketing personnel discover cross-regional selling, they can quickly trace the source of the product, providing concrete evidence for handling cross-regional selling incidents.
Enterprise Control of Promotional Expenses Some enterprises allocate promotional expenses to distributors based on a percentage of sales volume; the larger the sales volume, the more promotional expenses distributors can control. Some enterprises let marketing personnel control promotional expenses. Whether distributors and marketing personnel use all the promotional expenses allocated by the manufacturer for promotion is difficult for the manufacturer to control, so some distributors and marketing personnel often take part of the promotional expenses to engage in low-price cross-regional selling to increase sales volume. Therefore, when promotional expenses are controlled by distributors and marketing personnel, they become a disguised low price, creating new price space and giving distributors and marketing personnel opportunities for cross-regional selling. Wahaha frequently carries out promotional activities, but promotional expenses are completely controlled by Wahaha itself, never allowing distributors or company marketing personnel to handle them. Therefore, in the management of promotional expenses, Wahaha eliminates cross-regional selling.
Building Deep Relationships with Distributors The relationship between manufacturers and distributors is also very important for preventing cross-regional selling. For their own interests, distributors will maintain established relationships and will not easily engage in cross-regional selling to damage this relationship. Wahaha's relationship with distributors is very harmonious and deep; many distributors have grown up with Wahaha. The following systems and practices of Wahaha undoubtedly maintain and deepen the relationship with distributors. (1) Keeping promises to distributors. An important reason why distributors enthusiastically pay deposits to Wahaha every year is that Wahaha fulfills its promises, winning distributors' trust, which can prevent "retaliatory" cross-regional selling caused by the manufacturer not fulfilling promises or not fully implementing contracts, leading to distributor dissatisfaction or even anger. (2) Providing sales support to distributors. The company sends one or more sales managers and shelf stockers year-round to help distributors carry out various distribution, shelf stocking, and promotional work. Even in some counties, local first-tier distributors only provide funds, warehouses, and some laborers, while all other marketing work is completed by Wahaha's marketing personnel. (3) Holding annual national joint sales meetings. Wahaha always warmly entertains every partner at these meetings to strengthen relationships and consolidate cooperation. (4) Treating distributors as friends. In work, they are good partners; in life, they treat distributors as friends. At the 2002 Spring Festival Gala, CCTV gave Wahaha 20 tickets, and the company gave this rare opportunity to distributors; 17 distributors who had long-term friendly cooperation with Wahaha became guests at the CCTV Spring Festival Gala; at the CCTV Lantern Festival Gala, 80 Wahaha distributors witnessed the grand award ceremony.
Focusing on the Training of Marketing Teams It is not uncommon for internal sales personnel to participate in cross-regional selling. Some marketing personnel, lacking professional ethics and integrity, disregard the company's sales policies and interests and participate in cross-regional selling. Currently, Wahaha has only over 2,000 sales personnel nationwide. Why can such a small number of sales personnel help the company complete annual sales of over 6 billion yuan? This is inseparable from Wahaha's focus on the construction and training of marketing teams, mainly manifested as: (1) Strict recruitment, selection, and training systems to select the best candidates that truly meet requirements. Those with dedication, political quality, and business ability can be promoted regardless of seniority; those with weak abilities, poor quality, or who are unpopular are retrained, and if they do not meet requirements, they are eliminated. (2) Creating a cultural atmosphere in the enterprise that is conducive to talent development. Wahaha's development history is a history of continuously respecting employees and talents and continuously improving cohesion. (3) Formulating reasonable performance evaluation and reward/punishment systems, truly rewarding the diligent and punishing the lazy, rewarding the excellent and punishing the inferior. Regularly assess marketing personnel, and once violations are found, handle them seriously. (4) Implementing emotional management that cares for, understands, and considers employees. The company not only focuses on making the best use of people but also pays great attention to employees' lives. For example, Wahaha irregularly holds activities such as "Thousand-Person Concerts," "Employee Sports Meets," and "Thousand-Person Tours," reflecting the enterprise's "big family" atmosphere and enhancing employees' sense of belonging. Such a good corporate culture atmosphere attracts talents from all over, producing enormous cohesion, and Wahaha employees regard the enterprise as their home. Therefore, it is hard to imagine Wahaha's marketing personnel racking their brains to take risks in cross-regional selling.
Establishing Strict Reward and Punishment Systems In the face of cross-regional selling behavior, Wahaha has strict reward and punishment systems and includes relevant clauses in contracts. A very important reason why many enterprises cannot control cross-regional selling is that manufacturers are soft-hearted towards distributors; many distributors are long-term old customers, and it is hard to be ruthless. But Wahaha does not care about this; it severely punishes cross-regional sales without any mercy, and Wahaha's strictness in handling cross-regional selling is rare in the industry. At the end of the year, for distributors who do not comply with the agreement, the company will deduct their deposits to pay for breach losses, and in severe cases, even revoke their distribution qualifications. Under the constraints of deposits and the company's severe penalties, distributors dare not act rashly.
Establishing an Anti-Cross-Regional Selling Institution Wahaha has specially established an anti-cross-regional selling institution that tours the country, strictly inspecting distributors' cross-regional selling and market prices, and strictly protecting the interests of distributors in various regions. Wahaha treats the prevention of cross-regional selling as a routine task, with anti-cross-regional selling personnel regularly inspecting markets in various places, promptly discovering problems, and solving them together with relevant departments. Sometimes Zong Qinghou and his marketing managers in various regions also frequently inspect the market; the first thing they look at is the number on the product. Once they find that the number does not match the region, they strictly order a thorough investigation and handle it seriously according to contract terms.