---
title: "Major Distributors Are Giving Up on Top-Tier Brands: If There's Volume but No Profit, Why Should Distributors Keep Following You?"
description: "A major daily chemical distributor in Hunan recently gave up a top-tier brand despite it accounting for over 30% of his business, because it brought volume but no profit. This article explains why distributors abandon top brands and argues that brand owners must shift from management to empowerment, helping distributors improve their overall operational efficiency to increase profitability."
author: "袁来"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2023-05-04"
language: "en"
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# Major Distributors Are Giving Up on Top-Tier Brands: If There's Volume but No Profit, Why Should Distributors Keep Following You?

> A major daily chemical distributor in Hunan recently gave up a top-tier brand despite it accounting for over 30% of his business, because it brought volume but no profit. This article explains why distributors abandon top brands and argues that brand owners must shift from management to empowerment, helping distributors improve their overall operational efficiency to increase profitability.

Before discussing this topic, let me share a true story. Recently, during a market research trip in Hunan, I had dinner with a local major daily chemical distributor. We talked about his business in recent years. Although sales volume hadn't dropped much, he was extremely distressed. The pain came from two levels: first, the various exorbitant fees imposed by local system supermarkets, declining foot traffic, falling sales, and constant pressure on distributors; second, the top-tier brands he represented, which had sales volume accounting for over 30% of his total business, but were not profitable. Halfway through the meal, as conversation grew lively, the distributor kept emphasizing that business must make money; if it doesn't, it's not business. Last month, he finally, reluctantly, told a top-tier daily chemical brand: "I'm not doing it anymore." Of course, it's not that the brand is bad, but the distributor has developed to the point where he has built his own channel moat locally, establishing influence as a daily chemical category supplier through a horizontal multi-category portfolio. Therefore, at this stage, what this distributor needs is either brands that can bring growth or brands that can bring profit. After reading the above case, I think many distributors with a solid local business foundation will resonate and empathize. Top-tier manufacturers' sales managers are increasingly hearing that their gold distributors are about to give up. This article is written for sales managers of top-tier brands. Facing distributors who want to give up or are about to give up, what are they really thinking? When we can't increase gross margins, how should we manage distributors?
  * **Why do distributors give up?**
  * **How to shift the perspective of upstream and downstream management?**
  * **The logic and framework of empowering distributors**
**Why do distributors give up?** There are three reasons why a distributor would give up a brand: **1. Volume but no profit; 2. No volume, products don't move; 3. Frontline managers are inactive and make empty promises.** For top-tier brands, clearly, 80% is the first reason: volume but no profit. But that's not enough; there are many brands with volume but no profit, so why you? When a daily chemical distributor becomes a local leader, spanning multiple categories such as personal care, paper and hygiene, household cleaning, and oral care, through category combination, they have established relatively stable and long-term cooperative relationships with local supermarkets and BC circulation channel stores, including goodwill and connections. At this point, the distributor considers more about return on investment: less capital occupation, more capital return. At this time, the distributor no longer cares about the influence brought by business scale, nor does he worry about losing channel bargaining power due to dropping a top-tier brand. **If it's neither profitable nor growing, and they already have control over downstream channels, distributors will naturally give up top-tier brands.**
**How to shift the perspective of upstream and downstream management?** Facing such problems, what should top-tier brands do? Frankly speaking, the strategies and measures we used to manage distributors are becoming ineffective. Tiered management, gold/silver/bronze customers, differentiated by rebate levels, credit limits, credit terms, and personnel investment, is increasingly ineffective. **It worked in the past because top-tier brands were growing rapidly.** From top sales managers to local distributors, everyone was striving to achieve targets and earn rewards. But when top-tier brands enter a stable, mature, micro-growth stage, relying on tiered management alone can hardly motivate distributors. Coupled with low gross margins, distributors will care even less. At this point, how should we manage distributors? Besides routine rights-based tiered management, when gross margin rules cannot be changed, what else can we do to ensure the stability of distributors' basic business and their willingness to continue following our brand? **I believe there is only one method: shift the management perspective to an empowerment perspective, by improving the overall operational capabilities of distributor partners, achieving cost reduction and efficiency enhancement, thereby increasing profitability.** This is also why more and more top-tier brand RTM departments are proposing the slogan "empower distributors" and establishing distributor business schools. How to empower? **From the perspective of the distributor's own business operations, help distributors sort out how to design frontline sales personnel salary structures, how to manage promoters, how to further penetrate the market, data analysis and decision-making, new product promotion, etc.** Top-tier brands have professional management resources, talent, and courses. Based on their own professional accumulation, they can help distributor partners provide a package of professional management content. In the past, distributors followed top-tier brands to transform from individual business to corporate business, with the core benefit being business growth and win-win. Now, distributors follow top-tier brands, and the core benefit is professional management and capabilities.
**The logic and framework of empowering distributors** After determining the approach from management to empowerment, how to implement it specifically? What are the specific measures? Based on the distributor empowerment system built by New Distribution in past services for top-tier brand RTM departments, New Distribution has designed a complete distributor empowerment framework for your reference. Around the above empowerment framework, focus on two modules: core business model and business strategy management.
**Core business model** refers to division based on business channels and business models, such as supermarkets, circulation, catering, special channels, O2O, e-commerce, etc. In the past, brand owners only had tiered management for distributors, setting different grade standards based on sales volume and growth. Core business model empowerment is not based on sales volume, but on market channels, classifying distributors for empowerment based on business needs of different markets. From a channel and business perspective, improve the capabilities of different types of distributors accordingly.
**Business strategy management** refers to the distributor's own internal organizational management and external business management, which can be considered from the following dimensions:
Internal organizational management efficiency:
**√ Employee recruitment, management, retention, and development**
**√ Employee compensation and performance**
**√ Company finance, taxation, and law**
**√ Organizational systems and processes**
**......**
External business management efficiency:
**√ Digital business methodology**
**√ New product promotion methodology**
**√ Accounts receivable management**
**√ Business data analysis**
**......**
In terms of empowerment forms, build an online business school through WeChat public platform, establish a communication platform for manufacturer information empowerment, and build offline thematic sandboxes based on offline workshops and study tours, combining online and offline forms, oriented by actual business needs, and using real cases of distributor practices as material to empower distributors.
**Summary:** As top-tier brands gradually enter a stage of micro-growth, when they cannot provide distributors with more gross margin, brand owners must consider bringing continuous value to their distributor partners. This value includes not only the value of product distribution itself but also the value of professional management, further helping distributors achieve cost reduction and efficiency enhancement, and strengthening the depth of cooperation. Be of one mind with distributors, stand from their business perspective, help them, support them, rather than only caring about whether your own brand business has grown.
**\- End -**


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