Zhang Wei has been feeling particularly frustrated lately. Since leaving his original company and starting his own distribution business, he has struggled for over four years, growing annual sales from two to three million yuan to nearly ten million. While sales have increased, management problems have grown larger and seem to have all surfaced at once: the old subordinates he brought from his previous company now consider themselves heroes of the company, do little work but claim credit for others' efforts, making personnel increasingly difficult to manage; in recent months, over ten cases of beer have gone missing from the warehouse, and the culprit has not been identified; reported breakage in the warehouse is mysteriously increasing; with more products being handled, some products are overstocked while others are constantly out of stock; previously, when he only did wholesale, it was easier—old customers could just call—but now with supermarkets, he is constantly negotiating and often on the back foot...
In short, these issues are troubling, and he doesn't know how to solve them. Zhang Wei is a long-time friend of mine, and he poured out his grievances over the phone.
Actually, these are management problems that gradually surface as many small distribution companies grow. They often have years of market experience, and when the time is right, they use their business connections to start small and boldly run their own ventures. But as the company grows, the old revolutionaries face new problems, and these management challenges trap them. They want to take action but find themselves flailing, sometimes even hitting themselves!
Zhang Wei is not discouraged; the "old hand" is willing to be a "primary school student" at critical moments. He thought of gathering many close friends to help him find solutions. After several on-site investigations and discussions, a targeted set of solutions was formed.
Product Line Issues
Zhang Wei started his business with mid-to-high-end beer, leveraging products he had operated for years, which made operations smooth and profitable. Seeing old customers happily buying from him and goods turning over quickly, he was encouraged. So, he deliberately sought manufacturers of similar products and borrowed funds to gradually enrich his product line.
Initially, being cautious and believing in "stick to what you know," he only chose beers from other manufacturers that could fill out his price range. But later, seeing other distributors making good profits from other products, he expanded into candies, white spirits, red wine, beverages, and even slippers! Some products were not as profitable as promised during recruitment, and some even incurred heavy losses. By then, he was bewildered, fully experiencing the pain of aimless product line extension: white spirit brands have a "three-year cycle," and some famous brands were already hard to sell by the time he took them on; when he wanted to give up distribution, the manufacturer withheld his deposit and pressured him to continue buying; a beverage manufacturer, after heavy rain and flooding, sent him drinks with rusted packaging, and the promised subsidy never materialized after six months; as for red wine, despite heavy advertising, sales showed no response, and his friends in the red wine business said it was no longer selling well and couldn't help...
After a few months, Zhang Wei was not only bewildered but also anxious! He had worked hard to become the regional general agent for several products, but in the end, the policies changed, and whether they sold well or not, the manufacturer representatives delayed, avoided, and did nothing. His funds were tied up in these slow-moving products, and he couldn't stock his main beer products due to cash flow problems, leaving him scrambling to raise money. His plan to replace his house of over ten years fell through!
This is the most common problem for small distributors seeking product agencies. They don't know how to design their product lines. With so many best-selling products and new ones emerging constantly, they don't know what products are most reasonable and suitable for them. A company launching a new product goes through extensive research and analysis, but small distributors don't study this seriously. The most fatal thing is that it's easy to add a product but not so easy to drop it! The flexibility of small distributors is not about arbitrarily adding products, but unfortunately, they all think it is!
This is the biggest misconception for small distributors! Reality proves that this arbitrary addition of new products drags many small distributors down, unable to get back up!
This can basically be solved by careful consideration and analysis.
First, what products do consumers currently like? Are they just trying these products or do they truly like them? Many distributors jump on a product because of flashy advertising, but they don't understand what consumers in their area actually want. Yes, consumers see ads, but the era when ads determined purchasing behavior is over; they are increasingly rational. Zhang Wei's customer base includes secondary wholesalers and supermarkets, but apart from close communication with secondary wholesalers, he knows nothing about people's buying habits in supermarkets. So, it's important for him to visit supermarkets more often, rather than getting excited about a product just because a wholesaler says it's selling well and wanting to add it.
What should the structure of the product line be? Generally, there are strong brand products, high-profit products, and high-coverage products. Currently, he only has one brand product, and its brand advantage is slowly eroding, but he hasn't found a replacement in time. He has many high-profit products, but none are recognized by consumers, so effectively he has no high-profit products. As for coverage products, he has none; his customers now go elsewhere for common products, causing him to lose his old customer advantage.
Also, his newly added products are all ones his downstream customers are already handling, aiming to enhance his distribution capability, but all existing products are from outside brands with limited shelf life, and shipments are full truckloads, causing turnover difficulties. Moreover, due to pressure from white spirit and red wine manufacturers, his inventory of these is large. He has transformed from a beer-focused distributor to one without a strong leading product, making him no different from other distributors and losing his competitive edge. In this situation, he also failed to see the sales potential of chocolate products and nurture them in the supermarket system.
Here, we find that the biggest mistake small distributors make in selecting product lines is: immediately adding high-profit products without considering whether they fit their product mix.
We can use this table to illustrate what products he should handle:
| Channel | Products |
|---|---|
| Supermarket | Strong brand products + High-profit products |
| Foodservice | High-coverage products + High-profit products |
| Wholesale | High-coverage products + Strong brand products |
From the table, small distributors should rely more on strong brand and high-coverage products to gain long-term distribution status, and only through these can they drive sales of high-profit products. Because their own brand is weak, they should stand behind these products and use their service advantages to sell more high-profit products, increasing their chances of success.
Specifically for Zhang Wei, we designed the following product-channel line for sales:
| Channel | Products | Remarks |
|---|---|---|
| Supermarket | Beer + Chocolate + Red wine | Minimal cost, maximum profit |
| Foodservice | Beer + Beverages + White spirit (or red wine) | Table economy. Maintain relationships and profit |
| Wholesale | Beer + Beverages | Maintain relationships, status among peers |
With this proportional sales approach, Zhang Wei's previously chaotic product structure becomes organized. He dropped four of his six beer brands, keeping one first-tier and one second-tier brand, and strengthened support for the second-tier brand to gradually replace the first-tier. He completely stopped selling slippers and cleared out that inventory. For beverages, he selected a fruit juice drink, a carbonated drink, and a foodservice milk. For white spirits, he introduced a famous local brand that consumers trust most, cleared out all the miscellaneous brands, stopped cooperation with those manufacturers, and ceased purchasing.
Personnel Management
"These old employees, they came with me to conquer the world, but now they've become obstacles to my development!" Zhang Wei sighed. Indeed, this issue left him in a dilemma. It's hard to say anything, and not saying anything causes problems. Firing them is not an option, but keeping them leads to constant issues. They don't ask for much salary, don't do much work, but always claim half the credit for new employees' achievements.
Admittedly, Zhang Wei finds this hard to handle. So what to do?
We suggested a method: if you can't manage them face-to-face, let a "third party" manage! Use boards, charts, and systems. He bought two whiteboards—one for numbers, one for charts. During morning meetings, he doesn't say who did well or poorly; instead, he has everyone take turns reading the sensitive numbers aloud, showing changes in sales. On the chart, if someone's sales are poor today, a thick red line is drawn, which is a warning! The latter part of the meeting is mainly for everyone to discuss how to improve. This changes from monthly, subjective, and leader-based assessments to daily, objective, self-assessments and incentives. Before long, those old salespeople with poor performance, who have to explain themselves to the whole company every day, will be "tortured" by this method until they can't hold their heads up and will dutifully do their jobs!
Although this is fair, a few old employees still rely on Zhang Wei's inability to act against them, become passive, and live off old business relationships. At this point, we gave Zhang Wei another tactic: incorporate these few into the team, leverage their strengths, eliminate their selfish habits, and optimize by forming project teams! Make these old employees team leaders, responsible for sales in a certain area. This puts them in leadership positions. If they do well, everyone supports them, and they earn more bonuses, so they'll work hard to lead the team. If they do poorly, they lose face and won't be so arrogant in front of new employees.
Finally, another tactic: these old employees helped Zhang Wei conquer the market under traditional models and don't understand supermarket operations. So, Zhang Wei separated them by department: old employees handle wholesale, and new employees handle supermarkets and foodservice.
Of course, as a small business owner, Zhang Wei wants a stable team. He can't recruit widely like larger companies; if he loses a key salesperson, finding a replacement is hard. But these salespeople, with relatively low qualifications, also want stability and hope for a small boss like Zhang Wei to take care of them, providing a job to support their families. Considering this, we also suggested Zhang Wei buy commercial health insurance for outstanding employees to motivate them and encourage them to work more securely and diligently.
Inventory Management
Zhang Wei is a diligent young man studying for a law associate degree on his own. He had wanted to buy a computer for study and to go online for information. This time, we helped him realize this wish, encouraging him to buy a computer and install software to maximize its utility. So, management software like "Guanjiapo" (Housekeeper), suitable for small distribution companies, was installed.
During the day, the clerk enters each transaction into the computer. Every evening, Zhang Wei can see the full picture of purchases, sales, and inventory for the day, promptly identifying inventory issues. By analyzing transaction data over time, he can clearly understand recent sales trends and necessary inventory adjustments. He discovered that some expired products, purchased years ago and neglected, amounted to nearly 2,000 yuan—about the price of a computer! With the computer system, he can not only check production dates at any time and manage "first-in, first-out" (otherwise not allowed out of the warehouse), but also set "warning lines" for products. If certain products aren't sold soon, they might expire, prompting salespeople to boost sales. Another important finding: he figured out the patterns of various manufacturers' promotional activities, so he no longer needs to use all his funds to stock up during promotions. He can buy moderately, take full advantage of promotional policies, and still have enough funds to purchase non-promotional products.
Distribution Channel Division
Zhang Wei is now very familiar with wholesale distribution. In supermarket channel development, after years of effort, there has been some progress. Later, learning that foodservice channels have higher gross margins, he hired a few salespeople to sell products to restaurants, but it's still in its infancy. Because the company is small and he's afraid to invest too much, he hasn't hired professional managers to handle this business. However, managing all these channels himself is tough: wholesale is easier due to old relationships and old salespeople, but he doesn't dare let salespeople handle supermarkets because they lack negotiation skills. The nighttime consumption habits of restaurants exhaust him, and problems keep arising—payments not collected on time, and some restaurants might run away with debts! So, he realized that multi-channel operations in a chaotic state would be dangerous. Thus, planning the multi-channel operations and focusing on one or two channels became a priority.
We suggested he separate the wholesale business and contract it out to three old salespeople. This doesn't require his management effort; he just needs to monitor. These old salespeople, familiar with the business, can work and be "bosses" at the same time, giving them great motivation. For beer and beverages, they get a fee of one yuan per case. For white spirits and red wine, they get a commission of ten yuan and five yuan per case, respectively, provided they meet monthly sales targets. Prices must follow company-set prices; unauthorized price changes result in fines of 500 to 1,000 yuan or even dismissal. Delivery trucks must refuel at the gas station near the company, not elsewhere, unless prior approval is given... Through these constraints and incentives, Zhang Wei can boldly delegate business, saving effort and still earning good returns.
For the supermarket channel, we still recommend hiring professional salespeople from foreign companies. First, these salespeople have good relationships with buyers, saving costs like entry fees, anniversary fees, display fees, etc., and can secure prime positions for larger displays and better visibility. Second, they have professional negotiation and business experience, avoiding losses from unfamiliarity with supermarket contract terms and requirements like delivery and product exchange. Also, they have a deeper understanding of supermarket promotions and can adapt, improving supermarket channel sales performance.
With proper arrangements for wholesale and supermarket channels, he can then focus on foodservice sales! We suggested he classify restaurants by sales capability into A, B, C levels, create customer profile cards, and first integrate the newly defined product line to build a comprehensive "table economy." This not only reduces costs but also facilitates one-stop purchasing for restaurants, leaving no room for other distributors to squeeze in. Additionally, by setting up exclusive store agreements (not selling other brands of the same tier), he can squeeze out competing brands; through table displays, he increases consumer impression; through point collection and card programs, he offers more prizes to store owners; through cap recycling, he promotes waiter recommendations...
Through these adjustments, Zhang Wei finally breathed a sigh of relief. In just two months of improvements, sales showed noticeable growth. Most importantly, we believe Zhang Wei has truly grasped his development direction for the coming years, and his management level will greatly improve. All these measures not only solved immediate business, management, and talent issues but also left other struggling distributors far behind, truly establishing his competitive advantage and gaining lasting competitiveness.
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