Click to read the original article for details On August 24, Zhang Sheng, Vice President of Lawson (China) Investment Co., Ltd., stated that Lawson will no longer charge suppliers slotting fees, account opening fees, and related fees. Image source: Retail Circle Prior to this, Hema had announced in Shanghai, together with agricultural product and brand suppliers, a proposal for a "new type of retailer-supplier relationship" that does not charge slotting fees, promotion fees, or new product fees. Are traditionally dominant retail enterprises starting to "change their blood"? Removing the "unspoken rule" of slotting fees is a long and arduous task In the 1990s, foreign supermarket giants began entering China and, leveraging their channel advantages, gradually formed an unequal retailer-supplier relationship. By charging suppliers channel fees and occupying payment for goods, they earned backend profits and achieved low-cost rapid expansion. For years, products entering major supermarkets often faced various fees with complicated names, such as slotting fees, display fees, contract rebates, holiday fees, contract renewal fees, new store opening fees, barcode fees, and promotion staff management fees. As a chronic industry problem, this retailer-supplier conflict has long plagued both retailers and suppliers. Suppliers accuse retailers of using their channel advantages and monopoly position to impose unreasonable slotting fees, promotion service fees, barcode fees, logistics fees, and rebates, while retailers respond that this is purely market behavior conducted according to contracts. In fact, as early as 2003, Hunan Bubugao Supermarket attempted to break the slotting fee rule. Bubugao hoped that by canceling supplier slotting fees, suppliers would lower product prices, allowing the supermarket's selling prices to drop accordingly. The result did not go as hoped: after canceling slotting fees, Bubugao still received the same product quotes as other merchants. Within six months, Bubugao suffered huge economic losses and had to "surrender" to slotting fees. In 2011, six departments including the Ministry of Commerce and the State Council's Office for Rectifying Malpractice issued the "Notice on Further Strengthening the Cleanup and Rectification of Large Retail Enterprises' Unreasonable Charges to Suppliers", which strengthened the cleanup and rectification of arbitrary charges by large retailers to suppliers from seven aspects. The rectification included prohibiting unreasonable charges. Retailers using their market advantage to charge suppliers contract fees, handling fees, delivery fees, festival fees, anniversary fees, new store opening fees, sales or settlement information inquiry fees, card fees, barcode fees (new product entry fees), account opening fees (new supplier entry fees), and unconditional rebates were all considered unreasonable charges. Despite national policy advocacy, many enterprises have responded. In 2013, state-owned Zhongbai Warehouse proactively cleaned up slotting fees. In 2018, Hema also announced it would not charge slotting fees, promotion fees, or new product fees. Recently, Lawson also announced the abolition of slotting fees. Although national authorities have jointly cracked down on slotting fees, in actual business development and sales, this gray business model remains prevalent. To this day, this bad habit still exists in traditional supermarkets, with many supermarkets degenerating into "second-hand landlords" under a self-operated model, barely surviving on "rent collection." Abolishing slotting fees may be a form of "self-rescue" The emergence of slotting fees essentially reflects channel advantages. In the past, these supermarket and convenience store systems had huge sales volumes, making these channels crucial for suppliers, so even with high fees, they had to participate. But now, everyone can feel that under the intense squeeze from online channels, traditional supermarkets and convenience stores are not doing well. Significant sales declines and store closures are frequent. Let's look at some data: Lawson's full-year 2020 financial report shows group overall revenue down 8.8% year-on-year, with profit down 56.8% year-on-year; Yonghui's Q1 2021 operating revenue was 26.334 billion yuan, down 9.99% year-on-year; Sun Art Retail Group's revenue for the 15 months ending March 31, 2021, was approximately 124.334 billion yuan, down 2.01% year-on-year; Bubugao's Q1 revenue was 4.238 billion yuan, down 8.47% year-on-year ... Behind the sluggish performance, these once-powerful channels are now having a hard time. The continuous decline in market share has made it increasingly difficult to collect slotting fees in these systems in recent years. Most hot-selling products are from big brands, and even if they pay entry fees, they are not high. Small brands themselves do not have much budget and dare not invest. In such circumstances, abolishing slotting fees, deeply binding suppliers, and establishing a production-sales alliance to jointly solve and reduce distribution costs may be a new development direction. In conclusion: Slotting fees have existed in the retail industry for many years, and it is impossible for them to disappear overnight. Especially for listed companies, the profit contribution from slotting fees is still quite significant in their revenue models. For retailers, removing slotting fees brings great pain, but keeping them brings great trouble; decision-makers need the determination to cut off a warrior's wrist. PS: From September 23 to 25, 2021, the 2021 (4th) China FMCG Conference hosted by New Distribution will be held in Shanghai. Focusing on industry trends + practical cases + growth connections, 3,000 FMCG practitioners will gather for the event. The 11 themed forums cover new consumption topics such as snack era·light wellness, small categories·big explosion, Z generation·new wine and tea; new retail topics such as community e-commerce, halftime? final? interpretation, heavy investment in local retail (O2O), short video and live streaming commerce; and new marketing topics such as digitalization, BC integration, Martech, DTC and private domain traffic, distribution B2B, and major distributors and digital distribution, with operators from various segments bringing the latest case studies. Confirmed heavyweight guests so far include: 1. Tao Shiquan, founder of Jiangxiaobai; 2. Yao Xuhong, general manager of Meiyijia Holdings Co., Ltd.; 3. Lu Xiuqiong, global expert partner at Bain & Company and former vice president of marketing for Coca-Cola China; 4. Chen Xiaodong, senior vice president of Nestlé Greater China; 5. Zhang Fujun, president of Lee Kum Kee Sauce Group China; 6. Bi Chaojiao, general manager of China Resources Snow Breweries (China) Marketing Center; 7. Yang Hongbin, vice president of Junlebao Dairy Group; 8. Yang Shun, COO of Lipton Greater China; 9. Zhang Yipeng, general manager of Kuaishou E-commerce SKA Brand Operations Center; 10. Li De, e-commerce general manager of Gold Hong Ye Paper Group... A grand gathering for FMCG professionals, you must be there! Are you "watching" me?