◎ Author | Liu Chunxiong

01 Recently, several companies asked me to speak at their distributor conferences about manufacturer-distributor relations, and I found it difficult. It's really not easy to talk about. Anyway, when discussing manufacturer-distributor relations, I have never talked about trust or sincerity. Anyone can sing high-sounding tunes, but does it help? In the past, it was easier to talk about manufacturer-distributor relations because the industry had incremental growth; now it's harder because not only is there no incremental growth, but internet commerce is also carving up existing market share. To talk about manufacturer-distributor relations apart from common interests and fair distribution of benefits, I think it's purely "political and ideological work." In the past, the worst manufacturer-distributor relations in China were presented in the most harmonious way. For example, the manufacturer-distributor relations of industry leaders were presented as "managing distributors." "Managing distributors"—how is that a manufacturer-distributor relation? Some people euphemistically call it: treating merchants as internal staff. They really don't treat distributors as outsiders. However, such manufacturer-distributor relations were actually the most harmonious, because in the past, leading enterprises could make money for merchants. Only profitable manufacturer-distributor relations are harmonious. Creating common interests and distributing benefits fairly can produce harmonious manufacturer-distributor relations.

02 Someone once asked me to talk about manufacturer-distributor relations in developed countries, and I said there is no comparability. In developed countries, manufacturers and distributors are equal in scale, and some merchants are even larger than brand owners. Most agents have networks covering vast regions. In China, agents operate with the county as the basic business unit, and their scale is completely unequal to that of well-known brand owners. Marketing work is divided into front-end and back-end. Back-end work includes product, brand, communication, public relations, etc., which mostly belongs to the Chinese brand department (marketing department); front-end work includes channel, promotion, etc. Brand owners do back-end work, and agents do front-end work. This is the developed social division of labor between manufacturers and distributors. Chinese enterprises have to do both front-end and back-end work. "Sales and Market" magazine once counted that China had 80 million marketing personnel. I once accompanied a mid-sized enterprise (with over 200 sales staff) to visit the largest counterparts in Japan and Australia. They basically don't have marketing personnel like China's; fewer than 20 people are engaged in frontline work, mainly responsible for after-sales service. In Chinese enterprises, only small enterprises fully delegate front-end work to agents. Truly successful large enterprises undertake much of the work that agents should do. For example, in central cities, FMCG agents' work has been marginalized, mainly serving financing (purchasing goods) and distribution functions.

03 The complexity of manufacturer-distributor relations in China lies in the special manufacturer-distributor structure. Who is the contact point of manufacturer-distributor relations? Before 1997, the manufacturer-distributor structure was: Marketing VP → Salesperson → Provincial Distributor → City Second-tier Wholesaler → County Third-tier Wholesaler. Now, the manufacturer-distributor relationship structure is: Marketing VP → Regional Manager → Provincial Manager → City Manager → Salesperson → County Distributor → Terminal. Manufacturer-distributor relations always have a contact point. In the above structure, the red parts are the contact points. Often, the contact point determines the manufacturer-distributor relationship. More often than not, the manufacturer is a virtual concept because the manufacturer has many levels, while the merchant is a concrete concept—the merchant refers to the boss. Is the manufacturer-distributor relationship between the manufacturer and the distributor, or between the manufacturer's boss and the distributor's boss, or between the manufacturer's salesperson and the distributor's marketing personnel? Any relationship cannot be separated from the relationship between specific contact persons. Before 1997, manufacturers were easier to control because there was only one level within the enterprise. However, because there were many wholesale links, the channel was not easy to control. Now, manufacturer-distributor relations are difficult to control because there are many levels within the enterprise. The more levels, the more distortion. On one hand, the situation and demands of agents cannot reach the headquarters; on the other hand, the intentions of the headquarters cannot reach the agents. Some people describe that no matter how the headquarters adjusts marketing strategies, by the time it reaches frontline salespeople, there is only one requirement for agents: pay and ship. Because China is vast and agents are fragmented, the flattening of channels in China brings about multi-layered internal management levels in enterprises.

04 In the past, the complexity of manufacturer-distributor relations in China was roughly determined by four factors. First, personnel structure. Manufacturers have many management levels, while merchants have few. The so-called manufacturer-distributor relationship is often determined by the manufacturer's salesperson and the distributor's boss. Such a relationship has two inequalities. One is scale inequality: the manufacturer is large, the merchant is small; the other is position inequality: the manufacturer's salesperson versus the merchant's boss. Such a relationship is difficult to harmonize. For example, the issue of inventory pressure: is the responsibility on the manufacturer's boss or the salesperson? Any strategic or tactical decision by the manufacturer's boss, after passing through more than three management levels, usually reaches frontline personnel with only one KPI: pay and ship. Second, goal misalignment. The manufacturer's goal is to "grow bigger," while the merchant's goal is to "make money." These two goals are not contradictory in the long run, but often conflict in the short term. "Growing bigger" may mean front-loaded expenses, which in the eyes of the merchant means losing money. Third, functional overlap brought by deep distribution. In deep distribution, does the merchant do the deep work, or does the manufacturer? For large enterprises, manufacturers often do deep distribution. Agents were originally supposed to "each manage a segment": manufacturers do "value creation," and merchants do "value delivery." If manufacturers participate in deep distribution, it's fine if the effect is good, but if not, whose responsibility is it? Fourth, business model. The business model of Chinese merchants is generally a bundled business model: using big brands for traffic and small brands for gross profit. Although this business model is common, it is also the root of manufacturer-distributor conflicts. Now many agents say that big brands don't make money, but it's actually determined by the business model. The manufacturer-distributor relations determined by the above four factors are destined to be tangled and hard to sort out.

05 In the internet era, will manufacturer-distributor relations change? Yes, they will change. The changes brought by the internet to manufacturer-distributor relations affect four aspects: First, manufacturer-distributor relations are simplifying. Current agents are all-around merchants, undertaking all channel functions, belonging to "small but complete." This is not normal. With the rise of B2B, the functions of agents will be decomposed. For example, "unified warehousing and distribution" will see professional companies. It should be noted that warehousing and distribution functions take up the most energy of agents, yet they are the simplest functions. Currently, agents have roughly four functions: promotion, ordering, warehousing and distribution, and financing. In the future, they will be simplified to two functions: promotion and ordering. Manufacturer-distributor relations will also be simplified as a result. The benefit of simplifying agent functions is that they can focus on core functions, making manufacturer-distributor collaboration easier. Second, the structure of manufacturer-distributor relations is bound by technology chains. In the past, manufacturer-distributor relations were mainly human chains. The contact points were generally the manufacturer's salesperson and the distributor's boss (except for corporatized distributors). Human chains determined the relationship. In the internet era, manufacturer-distributor relations will become "technology chains as the main, human chains as the supplement." Manufacturer → Agent → Retail Store. This is the B-chain formed by internet technology. Manufacturer-distributor relations are bound by technology chains. The B-chain is not only a technology chain but also means that through technology platforms, the contact points between manufacturers and agents increase. The technology platform is shared. In addition to the contact point between frontline salespeople and agents, every node in the technology link can become a contact point at any time. This turns the manufacturer-distributor relationship decided by individuals into a relationship at all nodes. Third, C-end technology systems determine that manufacturers and distributors create common interests at the technical level. The common interests of manufacturers and distributors must come from consumers. Only the final transaction link is the real "thrilling leap from commodity to money," completing all links of value creation, delivery, and realization. In the past, deep distribution could create incremental growth. Now, incremental growth can only be obtained from the C-end. The development of internet technology makes it possible for manufacturers and distributors to jointly face the C-end. One is a C-end connection system, such as apps, mini-programs, and communities, which can be a system jointly controlled by manufacturers and distributors. Both parties' common interests come from the C-end system. Another is a C-end transaction system. In the past, FMCG transactions were mainly long chains, sold through retail terminals. Now they can be short chains (such as mini-programs), medium chains (such as B2C), or traditional long chains. Fourth, the distribution of common interests between manufacturers and distributors has become transparent. C-end connections solve the problem of common benefit distribution, while B-end connections can solve the problem of responsibility division and benefit transparency. In traditional manufacturer-distributor relations, although manufacturers could set channel price systems, once products entered the channel, prices were actually difficult to control. B-end connections link manufacturers, agents, and retailers simultaneously, determine a unified price system, complete transactions on the B-end connection, and policies can go directly to terminals.

06 Marital conflicts often escalate from small matters. Manufacturer-distributor relations often get entangled in small details. The reason for entanglement in small details is mostly "picking quarrels" or "finding fault." The core is the lack of common interests, or problems in benefit distribution. When merchants don't make money, inventory pressure becomes a problem. When merchants are making a lot of money, isn't there still inventory pressure? When there is money to be made, conflicts don't turn into disputes. On the surface, there are more problems when the market is not doing well. In fact, because the market is not doing well, problems become apparent. Whenever there is a marketing transformation, it is a time when manufacturer-distributor relations intensify. In fact, it is because common interests are damaged that benefit distribution seems unreasonable. The internet brings changes to manufacturer-distributor relations. First, the relationship formed by human chains becomes a coexistence of human chains and technology chains. The contact points of manufacturer-distributor relations increase, the relationship structure changes, and both parties are bound. Second, internet technology makes the circulation of products in the channel transparent. Transparency means problems are more likely to be discovered by both parties in advance, avoiding mutual blame. Third, there are technical means to obtain incremental growth, and they are technical means for manufacturers and distributors to jointly face the C-end. Productivity will eventually change production relations. The internet is no exception. Of course, if business is not done well, no technology platform can change the fate of separation. Source: Teacher Liu's Forum (ID: liuchunxiong1964) -END-