In a mature market, how can manufacturers ensure channel profits and keep products selling well over the long term? This is a challenge many companies face after their products go through the lifecycle of introduction, growth, maturity, and decline. So, how can we ensure that channel partners still make profits in a mature market?
Ensure channel pricing discipline. In a mature market, the reason channel partners often have no profits is frequently due to inadequate market control, leading to price chaos and conflicts in tiered price differences. Besides horizontal transshipment (transshipment among same-level channel partners), there is also vertical transshipment (transshipment among different levels of channel partners), and even abnormal phenomena like price inversion. Therefore, to ensure channel profits in a mature market, manufacturers and first-tier distributors must take strong measures, establish strict regulations against market flooding and transshipment, and through strict management and heavy penalties, make an example of violators to ensure that the price differences (i.e., profits) across the entire channel are effectively protected. For example, Wahaha's channel alliance system ensures long-term stability by signing agreements at each level, collecting deposits, and heavily penalizing violators, thereby ensuring that all channel customers follow the company's suggested prices.
Continuously launch new products. Just as humans go through birth, aging, sickness, and death, any product has its lifecycle. As consumer needs change, even the best-selling products will eventually decline. The process of product decline inevitably leads to shrinking profits. Therefore, from this perspective, in a mature market where products are transparent or even highly outdated, manufacturers must find new growth points for sales and profits. What is this growth point? It is new products. Manufacturers must develop one generation, promote one generation, reserve one generation, and phase out one generation. By continuously launching new products, they bring vitality to the market and profits to channel partners at all levels. Why is Wahaha's channel alliance system so solid and stable? Ultimately, it is because Wahaha's continuous introduction of a series of products meets the profit needs of channel partners.
Promote channel flattening. When product profits become transparent, or when long channels lead to chaotic price systems and thin profit distribution, manufacturers should consider whether to compress channel levels. Flattening the channel can effectively control the channel, manage the terminal market, save profit space, and promote reasonable profit distribution, ensuring that each channel link has a relatively larger profit margin compared to competitors. Channel下沉 (channel sinking) is the inevitable path to future market control, but it is also an effective way to achieve reasonable profit distribution. For example, Mr. Yang, the general manager of Suzhou Jiahe Trading, represents well-known brands such as不凡帝 (Perfetti), 箭牌 (Wrigley), 喜之郎 (Hsiang Lan), and 春光 (Chunguang). He continuously builds distribution systems, maintains customer relationships, and refines market levels, achieving annual sales of hundreds of millions of yuan.
Develop blank sales areas. Under the premise of a well-organized channel system, channel partners can also increase profits through the following methods: First, develop blank outlets. Even in a mature market, there may be blank outlets. For example, urban markets may be well-developed, but township markets may not; town markets may be good, but rural markets may be poor. Therefore, manufacturers should encourage channels to cover their designated sales outlets as much as possible, because every additional sales outlet means another sales opportunity. Second, develop new channels. If traditional channels are doing well, consider modern channels such as hypermarkets, chain stores, and convenience stores. If both are well-developed, then consider developing internet channels. A comprehensive, multi-dimensional channel development will make sales even better. The candy giant Wrigley, through long-term penetration, has fully covered urban, township, and rural markets.
Improve per-store sales performance. Scale can spread costs. By increasing per-store sales volume and sales revenue, channel profits can also be enhanced. When personnel wages, rent, freight, taxes, and other costs remain relatively unchanged, higher sales mean lower expense ratios, which implies more room for profit margin growth. Therefore, in a mature market, channel partners can increase the sales volume of individual stores by establishing model stores or model markets, thereby increasing profit space. For example, Hangzhou Die'er Wedding Supply Store established model storefronts to increase per-store sales, achieving steady progress and laying the foundation for future branches.
Adjust product mix in a timely manner. After the market matures, to ensure channel profits, candy manufacturers must also focus on product upgrades to ultimately achieve market upgrades. Channel partners can optimize their product mix by focusing on promoting profitable products and mid-to-high-end products, while reducing low-end products that do not generate profits. Products that sell well may not be profitable, and profitable products may not sell well. Channel partners must expand the proportion of profitable products to lay a solid foundation for profitability.
In summary, in today's world where "all the hustle and bustle is for profit," to motivate channel partners who "won't get up early without profit," manufacturers must ensure profits for channel partners at all levels. By establishing strict channel order, continuously launching new products, flattening channels, developing blank areas, improving per-store sales, and optimizing product mix, they can guarantee channel profits, thereby achieving win-win cooperation and long-term stability between manufacturers and channels.
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