In the era of shrinking volume, if one company grows, it must be the result of several others declining. No one will sit idly by; industry competition intensifies, and involution is inevitable, especially in mass consumer goods.

The result of involution is raising the industry's breakeven point until more companies die and industry concentration increases. In the FMCG field, quantitative growth has limits; only qualitative growth can extend infinitely.

For brand owners, currently and in the future, the manufacturer-distributor relationship is more about joint collaboration to seek growth. Therefore, to achieve brand-side growth, it is essential to value distributor empowerment and collaboration.

For distributors, under fierce market competition, only by becoming bigger and stronger can they survive. How can distributors grow more efficiently? How to navigate the shrinking era? Here are some suggestions.

Finding the Right Brand Owner is the First Step

1. Manufacturers and Distributors Must First Match

Here I mention "matching." Many distributors prefer "nanny-style" services from manufacturers, where they don't have to worry, with team support and after-sales guarantees. Is this necessarily the best approach? Not necessarily!

One core of business is creating profit. Nanny-style services essentially allocate more resources to organization building and after-sales. Due to cost and pricing constraints, the total expense space for products hardly changes, so expenses for market competition will inevitably decrease. This is not what all distributors want.

For example, if a distributor's own team has been well-honed over years, and the purpose of adding a new brand is to generate team income and improve marginal benefits, then they don't need the brand owner to provide organizational services; instead, they want these expenses to become their own profits.

The core of matching is mutual satisfaction. Distributors should choose brand owners based on their own situation. For example: mature trading teams can choose first-, second-, or third-tier brands, while less mature teams should preferably choose first-tier brands.

This also involves the distributor's own product structure, channel structure, profit structure, etc. You can refer to my previous articles on how distributors select products; I won't repeat that here.

2. Does the Brand Owner Prioritize Distributor Growth?

This year, my deep consulting work mainly serves two companies: Chongqing Baiya Group and Baixiang Food Group. I had in-depth discussions with both chairmen. They both proposed a common viewpoint: to achieve success for a batch of distributors, the process indicator is to improve distributors' operational capabilities, and the outcome indicator is to increase distributors' profits.

Let me briefly share a company's key work for distributors:

Key Work Point 1: Help Distributors Increase Profit by 5% Based on Current Situation

  1. Market segmentation, differentiated empowerment for distributors, business model matching, manufacturer-distributor integration, leveraging each other's strengths, and resource integration.
  2. Adjust structure (product structure, channel structure), stabilize price system, more precise expense investment, preserve existing volume quality, and seek incremental opportunities.

Key Work Point 2: Based on the Market, Increase Distributors' Sales Scale

  1. Sort out seven strategies (brand communication strategy, distributor growth strategy, product strategy, channel strategy, organization strategy, expense strategy, consumer strategy) to drive business growth.
  2. Three-dimensional operations (communication + coverage + KOC), category deep distribution model operations (high coverage + strong sell-through), key breakthrough model (effective coverage + guided display).

Key Work Point 3: Based on the Region, Comprehensively Improve Distributors' Operational Capabilities

  1. Improve omni-channel operational capabilities: modern trade, traditional trade, special channels, supply chain services, and sell-through support systems.
  2. Improve consumer operational capabilities: KOC recruitment and operations, etc.
  3. Improve localized brand communication capabilities: cross-industry cooperation, KOC video content, product experience scenarios, and branding.

So in the FMCG shrinking era, distributors must clarify the brand owner's attitude towards distributors. The foundation of manufacturer-distributor cooperation is win-win. Manufacturers that only manage without empowering are unacceptable.

Continuously Improve Operational Capabilities

For distributors, the definition of operations should be: how products flow smoothly and quickly from the brand owner's production line through various channel links to consumers.

Distributors need to solve various difficulties encountered in the product flow path. For example, common issues reported by distributors: high inventory pressure, essentially downstream channel problems; products not being distributed, essentially terminal outlet problems; products not selling, essentially consumer-side problems.

The solutions to these problems are the operational knowledge points distributors need to learn, forming an operational knowledge framework as suggested below:

The first category is learning product strategies guided by the brand owner and combined with the actual situation at the time, including:

  1. Product labeling; 2. Sell-through logic for each product; 3. Product channel chain grading system; 4. Product channel chain pricing system; 5. Last year's achievement by category and opportunity forecast; 6. Whether the first engine product is complete and whether to launch a second engine product; 7. How to standardize channel product age management, etc.

The above constitutes the knowledge system for product strategy.

The second category is learning channel strategies based on the distributor's market situation, including:

  1. Channel definition and required SKUs; 2. Channel breakthrough priority; 3. Channel outlet coverage requirements; 4. Channel execution standards; 5. Business area planning guidelines; 6. Scientific outlet visit planning; 7. Outlet management: rating system; 8. Clear regional battle map; 9. Achievement by channel and opportunity forecast;

  2. Distributor safety stock & product age management, etc.

The above constitutes the knowledge system for channel strategy.

The third category is learning organization strategies based on salespeople, including:

  1. Accurate team size configuration; 2. Establish regional market organization chart; 3. Salary and sales assessment linkage mechanism; 4. Recruitment and training of team members; 5. Marketing management team configuration, etc.

The above constitutes the knowledge system for organization strategy.

The fourth category is learning expense strategies based on terminal outlets, including:

  1. Plan expense categories; 2. Sort out expense management; 3. How to make expense sharing ratios transparent and rule-based; 4. Solutions to common expense problems; 5. Standard operating procedures for expenses.

The above constitutes the knowledge system for expense strategy.

The fifth category is learning consumer strategies based on consumers, simply put, the core is three points:

  1. Acquire new customers, repeat purchases, and average transaction value. In plain language: guide consumers to buy; 2. Drive consumers to buy again, multiple habitual purchases; 3. Find ways to increase the quantity or amount of consumer purchases.

The above constitutes the knowledge system for consumer strategy.

The sixth category is learning time node control for efficient implementation of the above five strategies. A good marketing strategy must be supported by a good time implementation strategy, including:

  1. Review problems encountered in last year's time implementation; 2. Ensure closed-loop work within each time period; 3. From stage to full year, ensure goals don't deviate; 4. For each strategy, create a time implementation chart, marking intersections, etc.

The above constitutes the knowledge system for time implementation strategy.

Reasonable Inventory, Fresh Product Age

When the external environment cools down, some manufacturers also put pressure on distributors.

In the stock market, brand competition intensifies. FMCG manufacturers, in pursuit of high growth rates, set annual sales targets for distributors that almost squeeze them to the limit. Along with this, inventory keeps rising and product age freshness keeps declining, which is extremely undesirable.

Many big brand salespeople, even managers, like to treat the distributor's warehouse as their own. Often, without the distributor's consent, they directly place orders on behalf of the distributor or force allocation. To complete tasks, they not only turn the company's inventory into distributor inventory but also force regional non-moving products into distributor inventory.

Facing this situation, distributors must firmly hold the ordering right in their own hands, strictly manage their warehouses, and have a clear understanding and judgment of product sell-through and inventory status.

At the same time, closely monitor the monthly inventory turnover rate and monthly product sell-through rate of products in the warehouse. Through comprehensive judgment of value and quantity changes, you can counter unreasonable allocations with evidence and reduce your inventory risk.

The Best Way to Solve Anxiety is Learning

The economic downturn and severe squeezing from upstream and downstream channels force distributors to self-reflect. Besides the courage and experience that made them successful, what other core competitiveness do they have to compete in the market?

To keep pace with manufacturers' development, continuously surpass themselves, and create greater market performance, distributors must learn.

Through learning, improve innovation; through innovation, improve brand power; ultimately form your own industry influence.

Because an excellent distributor not only focuses on sales growth but also on their own growth. What is the gap between a distributor boss with 100 million and one with 500 million? It's not scale, not team, but cognitive height. How much time do they spend learning outside? Does the company have a meeting room? Do they pay enough attention to training? You can earn money from sales, but you can never earn money beyond your cognition. The 2024 6th China FMCG Conference is definitely a feast of ideas to improve cognition and broaden horizons! From August 20-22, 2024, the "2024 6th China FMCG Conference" with the theme "Crossing the Shrinking Era" and the "3rd China FMCG Hard Discount Conference" & "3rd China FMCG Distributor Conference" will be grandly held in Shanghai.

At this conference, we will continue to implement "professional methodology" and "case growth theory," gathering all roles in the FMCG industry chain, top guest lineup, leading retail platforms, and national first-line excellent distributors. Multi-dimensional perspectives will interpret the truth of industry changes, deeply link upstream and downstream of the industry chain, and efficiently connect cooperation opportunities! Keynote speeches, roundtable dialogues, report interpretations, closed-door salons, and networking dinners—rich in forms. Join this conference and refuse to be a "frog at the bottom of a well"!

🔺Scan for ticket consultation🔺

Recommended Reading