Distributor Lao Zhang is an agent for a leading beverage brand, having been in the business for over 10 years. In 2009, he quit his job as a salesperson, borrowed money to buy a car, a computer, and a printer, rented a warehouse, and founded his own trading company. Along the way, it was not easy, but it was relatively smooth sailing. Thanks to his foresight, he grew together with the brand.
Now, in this second-tier city, he has achieved an annual sales scale of nearly 100 million yuan. But since last year, Lao Zhang's smile has gradually faded. He tells everyone that business is hard. What exactly is wrong with Lao Zhang's business?
-01- Fierce Category Competition, Limited Manufacturer Resources
The product category Lao Zhang deals in started to become popular around 2015. Consumers' growing focus on health rapidly advanced the development of this niche category. At that time, the manufacturer also made money and invested heavily in the market. In addition to the manufacturer's sales staff, Lao Zhang also hired many of his own salespeople to drive rapid market expansion.
But the FMCG industry has a bad habit: once a product becomes popular, major FMCG companies blindly follow suit to grab the dividends. Especially in Lao Zhang's market, where such products sell well, competitors flocked in, spending heavily to seize advantageous channels.
Seeing this, Lao Zhang repeatedly contacted the manufacturer's business supervisor, Xiao Li, hoping to secure more funds. Xiao Li enthusiastically agreed, but the funds were slow to arrive.
After several weeks, Xiao Li replied, "Competition is fierce across the province. The leadership's idea is to focus limited resources on strategic markets with more intense competition. Our sales scale ranks in the middle of the province, so the leadership says to wait and see. I'll have the sales staff visit more frequently and be more hands-on in the stores." Lao Zhang could only shake his head helplessly, "Business is like a battlefield; if you don't keep up, you miss the opportunity."
-02- Increased Terminal Investment, Diminishing Channel Advantages
Sure enough, before long, many of Lao Zhang's core outlets in the market began to be eroded by competitors. Previously, it was enough to do an end-cap display with 2 cases of product; now competitors are offering 4 cases, and at a lower price.
At the wholesale distribution level, competitors also continuously pressured prices, slowing down Lao Zhang's sales pace within a few months. Several high-volume core terminals were directly bought out by competitors.
Lao Zhang felt that the channel advantages he had worked hard to build over several years were beginning to waver. To understand the market situation, he accompanied deliveries for a few days. At the stores, he was most often asked why his product's promotional support was so weak, and they'd say, "Look at XX manufacturer, they're generous."
They joked that this end-cap used to sell for more, and teased Lao Zhang for being too stingy with profits, which made him quite unhappy.
-03- Neglecting One Market for Another, Deepening Manufacturer-Distributor Conflicts
Lao Zhang's market includes not only the central urban area but also county towns and townships. Over the years, he had diligently managed these areas, conducting weekly mobile sales and restocking by car.
Since competitors began aggressively attacking Lao Zhang's market, the manufacturer's business supervisor asked Lao Zhang to focus on the central urban area, having his own staff and the manufacturer's staff hold morning meetings daily, visit outlets, tidy up displays, and do visual merchandising.
The surrounding markets had been neglected for a long time. Lao Zhang thought those markets had great potential, so he arranged for his staff to spend two days a week doing mobile sales in the townships.
This upset Supervisor Li, who said that the urban area was the largest sales volume area and that people and vehicles should be concentrated there, not going to the townships so frequently.
Lao Zhang felt resistant. The manufacturer didn't provide much market funding but kept urging him to pay for goods. He had invested so much in people and vehicles, and now that the market needed ammunition, the manufacturer wasn't supporting him. Moreover, there were several big clients in the townships that he had to hold onto firmly; even if he stopped carrying this brand, he couldn't lose the hard-earned relationship network. Supervisor Xiao Li noticed Lao Zhang's frustration, and his payments became less proactive. He wanted to talk it through, but Lao Zhang insisted on speaking with their manager, so Xiao Li had to ask their manager for help.
The sales manager understood the situation and scheduled a meeting with Lao Zhang, promising to help sort out and resolve the issue.
When the sales manager met Lao Zhang, Lao Zhang poured out his grievances, starting from the hardships of starting his business, step by step to today's scale, and said he must get some support.
After listening, the sales manager shook Lao Zhang's hand, acknowledging and thanking him for his years of dedication. It was because of clients like him, who fought on the front lines, that the company had reached its current scale. Then the sales manager delved into the specifics of the market, carefully studying the sales reports provided by Supervisor Xiao Li.
After a moment, the sales manager spoke to Lao Zhang, gradually enlightening him.
"Lao Zhang, the FMCG industry today is different from 10 years ago. Intense competition is the norm, and there won't be a category with a single dominant player like in those years. So, first, adjust your mindset. Plan for the long term; you can't rely on a few funds to maintain your leading position.
To truly win, you need to adapt to local conditions, fully integrate the manufacturer-distributor relationship and division of labor, and cooperate to fight defensive, positional, and protracted battles. Resources must be planned rationally; you can't scatter your shots like a shotgun, wasting ammunition without focus."
The sales manager took a deep drag of his cigarette and continued, "I know something about the market situation here. Let me share my thoughts. What do you think?" Lao Zhang, sitting nearby, nodded in deep agreement. The sales manager's approach was outlined in the following five aspects.
-04- Complementary Manufacturer-Distributor Advantages, Strong Communication Through Business Reviews
Many companies today haven't figured out the manufacturer-distributor relationship and fail to leverage each other's strengths. On the surface, the manufacturer is the guardian of the brand's long-term interests, while the distributor is more concerned with short-term profitability. So there's a natural conflict, and if not handled well, it leads to many problems in cooperation.
Distributors operate locally, and manufacturers need to leverage their local network and personal connections to quickly expand channels. Therefore, tasks like distribution, new product launches, maintaining customer relationships, assisting with inventory pressure, and seizing resources should rely as much as possible on local distributors.
On the other hand, manufacturer sales staff have relatively standardized management and more professional advantages in business skills, sales techniques, and performance management.
So, in terms of division of labor, distributors should quickly professionalize their teams, not just focus on customer relationships and selling, while manufacturer sales staff should make their business practices more grounded, learning from distributor teams to deeply understand the ins and outs of core stores and wholesale clients—their preferences and connections.
Many manufacturer salespeople work hard visiting stores, but when asked, store owners don't even remember their names. How can they do business well like that?
Many manufacturer sales teams have fixed monthly meetings to summarize and set priorities for the next month, but few companies actually involve distributors in these meetings.
Manufacturers have their own annual and quarterly plans. During implementation, they must avoid just commanding distributors to do this and that; they need channels for distributors to participate in decision-making in a timely manner.
Share with them industry trends, sales data, and competitor information so they truly understand the manufacturer's intentions. Then, when seeking their cooperation, distributors' enthusiasm will surely be mobilized more, and manufacturers will gain more resource support.
-05- Focus Over Breadth, Adapt Strategies to Local Conditions
Lao Zhang's market includes central urban areas, county towns, and townships. Currently, product distribution covers about 20,000 outlets. But Lao Zhang wants to personally maintain as many of these outlets as possible to preserve his market influence, especially now with intense competition, fearing competitors will sneak in and gradually erode his share.
Actually, manufacturers like this kind of distributor because it flattens the channel and yields higher product profits.
But every model has pros and cons. The biggest problem with this direct supply model is high distribution and labor costs. It requires that the distributor's product mix not be single, that products don't have obvious seasonal peaks and valleys, and that daily sales rep visits generate enough output to cover daily wages, fuel costs, and profits.
Lao Zhang clearly doesn't have these advantages, so strategically, he needs to focus rather than pursue comprehensiveness. The sales manager suggested segmenting Lao Zhang's market into three tiers—core urban markets, second-tier county markets, and township markets—and implementing differentiated marketing strategies for each.
-06- Core Markets: Manufacturer Takes the Lead, Focus Resources to Build Barriers
For the central urban area, with dense outlets, diverse channel formats, and relatively high consumption levels, this type of market should be defended as a priority. Consumers from second- and third-tier markets should see the brand more when they visit.
At the awareness level, reinforce the impression that we are always the industry leader. Our strategy should revolve around this, pushing sales actions down to core channels and core terminals.
Leverage the manufacturer's sales staff's marketing skills for in-store opportunities, such as freezer displays, stack displays, end-cap displays, checkout displays, in-store KT board displays, exterior posters, 1.5x inventory, terminal purchase incentives, and standard response scripts. Focus on the top 20% of core outlets by sales share.
Channels should closely follow the life trajectories of the target consumer group. While increasing visit frequency and hands-on effort, build an absolute competitive advantage at all costs, even if the single-store investment ratio reaches 30%, hold on firmly.
Especially in locations with geographical advantages, like intersections or areas where the target audience gathers, during high-competition periods, increase visit frequency and maintenance, and use the manufacturer's mobile digital tools for real-time monitoring of these stores. These are advantages of the manufacturer's sales system and where the manufacturer's resources are currently directed.
So, in his home base core market, Lao Zhang should rely on the manufacturer's sales staff to follow a unified rhythm for inventory pressure and restocking, encircle competitors, seize key display positions, and for harder-to-crack outlets, actively cooperate with the manufacturer, leveraging his customer relationship advantages to assist, completing the defense of the central market efficiently within the planned timeframe.
-07- Second-Tier Markets: Collaborate, Focus on Big Stores and Strong Channels
In county markets, outlet distribution becomes more scattered, and the channel format is mostly mom-and-pop stores selling daily necessities and groceries. Brand appeal is significantly lower, and the distributor's customer relationship advantage is less obvious.
Given this market reality, Lao Zhang should leverage others to operate in these markets. Save on distribution costs and appropriately pass on profits to influential and reputable wholesale clients, using their strength to achieve quality service for more outlets.
Lao Zhang might feel he's losing some per-case profit, but it's important to recognize that in a highly competitive environment with limited resources, choosing to do the most important things is crucial.
Lao Zhang's sales team should first conduct a round of checks on core outlets in each county market, screening out the top 20% of outlets by single-store sales. Then incorporate these outlets into the daily visits of his sales representatives. Based on the number of core outlets, each sales rep typically serves 3-4 county markets.
Visit frequency should be at least once every two weeks. Sales reps should also act as inspectors for the local market. For the remaining stores under the distributor's sub-wholesalers, leverage the local wholesale clients.
When cooperating with wholesale clients, Lao Zhang should note a few points: profit sharing should be split into two parts—immediate purchase price discounts and post-verification process-based assessment discounts.
Set incentive indicators that can be adjusted periodically to achieve the desired market expectations, such as number of distribution outlets, activity rate, number of checkout counter stack displays, frozen display execution, or standard visual merchandising setups.
Keep the number of indicators to no more than two, and include them in the supply agreement. Overall profit should be appropriately higher than the gross margin of the products the client currently handles, so they find it profitable and are willing to provide good terminal service.
-08- Township Markets: Screen and Select, Periodic Mobile Sales to Build Models
In township markets, characteristics include sparse and scattered outlets, mostly daily necessities, high product margins but low retail prices, low consumer brand loyalty, terminal owners lacking systematic retail management concepts, and local customs and consumption habits.
For this type of market, the sales manager's advice is: "Rob the rich to feed the poor, create models," with mobile sales as the main method to control costs. Specifically, first focus on areas with factories, mines, or agricultural product planting bases. Residents in these townships have relatively stable incomes and higher consumption compared to surrounding townships.
Ensure at least one mobile sales visit per month. Prepare small gifts, product posters, banners, and price tags in advance. Create impressive shelf displays and multiple point-of-sale displays in stores.
Also, at traffic intersections or high-traffic areas, design catchy advertising slogans and find blank walls for wall advertisements. If conditions allow, request branded work clothes from the manufacturer to give to terminal owners.
For townships with lower consumption capacity, conduct mobile sales every two months, preferably during local market days or folk activities. Prepare promotional pricing in advance, hire local promoters for booth promotions, and organize games like spinning wheels or lucky draws to attract crowds.
After the sales manager finished outlining his approach, Lao Zhang expressed deep agreement, saying he wanted to immediately implement it with the manufacturer's sales supervisor Xiao Li and quickly restore his market position through this approach.
The sales manager reminded Lao Zhang to be meticulous and thorough, not to rush, and to continuously optimize the execution plan during implementation. He also invited Lao Zhang to attend the manufacturer's monthly meetings, where they could brainstorm together and win this battle collectively.
For many distributors, they are currently in a dilemma, caught between external pressures—sluggish economic growth and increasingly fierce market competition—and internal pressures—manufacturer sales staff who only care about payments and inventory pressure, rising operating costs, and the new retail models that are constantly disrupting traditional models.
Distributors don't want their hard-earned businesses to fall behind the times. They crave improvement and empowerment. If manufacturers can stand from a professional industry perspective and provide platform resources to help distributors enhance their market management capabilities, it would be an important way for both parties to build reputation and core competitive advantages.