KA Stores: What's the Best Way to Digest This Big Cake?
I often hear colleagues say that entering KA stores requires caution: enter and you're seeking death, stay out and you're waiting for death. Yet, due to the fortress mentality, tens of thousands of companies still fight to enter the red ocean of KA every year.
National large-scale KAs (NKAs) have lost their former glory in recent years under the impact of e-commerce. However, small-format retail stores represented by Suning Xiaodian and Mini Yonghui are expanding rapidly. In particular, local KAs (LKAs) that focus on third-, fourth-, and fifth-tier cities are springing up like mushrooms and gradually rising, almost rivaling national KAs.
For the vast number of small and medium-sized enterprises, it's difficult to manage national KAs. How can they thrive in local KAs? In the post-pandemic era, how can companies use their own resources to make a difference on the local KA stage, especially in the rapidly rising fresh food KAs?
-01- Choosing Suitable Exclusive Products is the Foundation
Product exclusivity is the first step in preparing to enter local KAs.
Without a certain level of product exclusivity, using a universal product line to cover all channels may seem cost-saving, but due to the different characteristics of each channel, the results are discounted and prices become fragmented, leaving a mess.
To establish an overall product image, it's of course necessary to include some public products for support. Public products serve as image products or main push products, keeping prices consistent with other mainstream channels, and must not affect the benchmark of price leadership.
Exclusive products, as volume drivers and sniper products, can be priced more flexibly within the system. Only through product differentiation can each channel get what it needs and coexist harmoniously. Exclusive KA products should also focus on high aesthetics, striving to create bestsellers that give a fresh impression.
-02- Partnering with Suitable Distributors is a Shortcut
For small and medium enterprises, I suggest starting by testing the waters with local KA distributors, leveraging distributor resources to begin cooperation.
Local KAs, compared to national KAs, rely more on the supply-purchase relationships established during their founding. Most local KA distributors I've encountered in the Sichuan-Chongqing region have grown alongside the growth of a particular KA system, forming strategic partnerships.
As KA systems expand, distributors with existing relationships naturally have the advantage. By researching and sorting out these KA distributor relationships, it's not difficult to find ways and means to enter.
Remember, in KAs where there are pitfalls everywhere, don't dive in blindly.
Distributors not only have years of relationship accumulation but also the comprehensive advantage of combining first- and second-tier brands, which is the key. Relying on a single brand or a manufacturer with limited strength gives little chance of success in negotiations.
-03- Converting Momentum into Sales through Activities
In the eyes of many salespeople, doing KA is all about merchandising.
They know the ten tools for creating a vibrant atmosphere, the ten principles of display, etc., by heart and implement them. But I think this is only superficial, aimed at creating product momentum; converting momentum into purchasing power is the core.
This requires companies to have top-level design when entering KA, elevating it to a strategic action, not just a stopgap measure. It needs systems and processes to support it.
Activities are the catalyst for momentum conversion.
Companies should have a comprehensive annual activity plan. The KA department should design personalized promotional plans based on the overall plan and the characteristics of the store, and supervise execution. Activity design should establish a tone of entertainment, especially fun. Promotional activities embedded with products and usage scenarios are the boosters for sales.
Without an effective activity plan guide, blindly following the store's price cuts or entering KA just for the sake of merchandising will likely result in a large number of products nearing expiry or being delisted.
-04- Dedicated Maintenance is the Guarantee of Efficient Operation
For SMEs operating in local KAs, handing over to distributors is not the end; it's only the first step of a long march. Companies must arrange dedicated personnel for efficient maintenance and operation.
1. Squeeze distributor resources for your own use. Since most distributors handle many similar products, it's crucial to get them to invest more resources (time, energy, capital, customer relationships, etc.) in your product, maximizing customer value.
2. Manage relationships with key store personnel. Relationship management and maintenance are key topics in KA operations. Companies should leverage distributor power to maintain normal cooperative relationships.
3. If conditions allow, hire in-store promoters; if not, arrange part-time promoters (commission only, no base salary). For products without much fame, the final push is especially important.
4. Activating the store atmosphere is key to maintenance. Use various merchandising materials, embed scenario marketing, continuously launch various themed activities, and use activities to drive sustained sales.
5. Classified management improves ROI. Relationship maintenance should be judged by ROI. KA maintenance personnel should evaluate cooperation based on dimensions such as activity cooperation, product fit, trade area influence, and sales volume. Classify A, B, C, and allocate resources precisely to continuously improve output.
6. Use core KAs to drive surrounding stores. Doing KA is not just about focusing on KA itself; more importantly, use KA's momentum to extend its influence to surrounding channels. Methods like roadshows can be used to gradually extend, truly achieving the goal of one KA activating a business district.
7. Find solutions for near-expiry products. Besides buy-one-get-one and discounts, more solutions must be found for near-expiry products in KAs. For non-exclusive products, besides internal adjustment, prepare multi-channel disposal. For example, beverages can be placed in buffets, used as gifts for bestsellers, or even sold at stalls in large rural towns or urban-rural fringes, fundamentally removing worries at all sales levels.
-05- Enrich Store Experience and Use Differentiation
Experience in KA store operations can be gradually accumulated.
For example, in terms of product fullness on shelves, deliberately leave some gaps to create the illusion of fast sales. Also, for prices, if the price department doesn't allow marking original/discounted price comparisons on posters, you can keep the original price on the hardest-to-sell items and mark discounted prices on the products for promotion, using a contrast technique to achieve the goal.
Especially in the use of differentiation strategies, aim directly at competitors' pain points.
I work in beer, so let me use beer as an example. You should amplify your own strengths and externalize the quality of beer. The difference between draft beer and pasteurized beer due to different processes is like fresh fruit versus canned fruit. Draft beer manufacturers can fully display this on pallets or shelves with special packaging or KT boards.
Also, differences in raw materials can be highlighted. Using rice versus syrup, or craft beer versus industrial beer, can be moderately exaggerated and externalized on display boards or special giant bottle models. This way, in the beverage section, it attracts consumers' attention, easily changes consumer perception, and with the help of promoters or part-time promoters, it's easy to close the sale.
-06- One Product, One Code: Enabling Interactive Marketing
We know that the cost of acquiring online traffic is increasingly high. Opening new traffic entrances is an urgent need for many companies, and local KAs are excellent places to obtain traffic.
Traditional marketing methods are costly, increasingly ineffective, and product and promotional information is communicated one-way. Products sold daily in KA stores lack data association with consumers, so huge traffic is wasted, making it difficult to analyze consumers and retain users.
Introducing "one product, one code" marketing not only allows interaction with consumers but also, after scanning the code to enter relevant entrances, they can participate in turntable games, points games, and obtain coupons or prizes, enhancing customer stickiness, guiding repeat consumption, turning every product into a distribution channel, and achieving precise marketing.
With "one product, one code," companies can quickly read consumers' "identity codes" through interfaces, using the "code" as a carrier to enable users to scan and jump to mini-programs or official accounts. Through big data analysis, traffic can be precipitated for company use. This should gradually become the driving force for more and more SMEs to develop local KAs!
In summary, operating local KAs is a systematic project. SMEs must comprehensively consider their own resource situation and plan before acting to win the initiative in the KA market.
Source: Sales and Market, Author: Xiao Youwei