---
title: "Market Questions You Ask, I Answer"
description: "A distributor facing issues with regional and second-tier brands seeks ways to protect itself against inconsistent manufacturer policies. The advice is to grow the business to gain bargaining power, choose products with 'first' or 'unique' qualities, and manage promotions carefully. Another distributor asks how to handle cash flow when squeezed between manufacturers demanding cash and terminals demanding credit terms, with suggestions including avoiding overstocking, choosing reliable partners, and building core competitiveness."
author: "胡世明"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2015-04-20"
language: "en"
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# Market Questions You Ask, I Answer

> A distributor facing issues with regional and second-tier brands seeks ways to protect itself against inconsistent manufacturer policies. The advice is to grow the business to gain bargaining power, choose products with 'first' or 'unique' qualities, and manage promotions carefully. Another distributor asks how to handle cash flow when squeezed between manufacturers demanding cash and terminals demanding credit terms, with suggestions including avoiding overstocking, choosing reliable partners, and building core competitiveness.

Question 1: Our company primarily represents regional and second-tier products. Manufacturers often select different distributors for the same market based on different channels or regions, or they operate the product themselves. This leads to issues such as inconsistent pricing and policies for the same product in the market. In many cases, distributors end up compromising with the manufacturer. How can we build our own protective capabilities in such an environment?

Countermeasure: The company mainly represents regional or second-tier brands and has not obtained the exclusive distribution rights for the region, indicating that the business scale is still relatively small. In the game between distributors and manufacturers, the party with relatively stronger strength will ultimately have the say. For distributors in the early stages of business or those that started early but have developed slowly, the best way to 'protect' themselves is to grow and strengthen. Only when their scale and strength are sufficient to dialogue with the manufacturer will the situation naturally improve. For manufacturers genuinely wanting to do business, the main reasons for choosing a combination of direct sales and distribution, or multiple distributors in the same region, are either that the region is the manufacturer's base market or that the distributor's sales scale is insufficient to meet the manufacturer's expectations.

For manufacturers who do not truly want to do business and only want to 'make a quick buck' through channel recruitment, the best approach for distributors is to choose not to cooperate. However, for manufacturers with potential, distributors must keep pace with the manufacturer's development at each stage. In a market with oversupply, for any manufacturer, not developing means regressing, so development must be an eternal theme. To avoid being carved up or having their market reduced, the wisest approach for distributors is to adjust their business thinking and models with the times. When distributors form their own core competitiveness and their sales scale leads the manufacturer's expectations for the market, their market will definitely be safe.

Question 2: There are more and more products for consumers to choose from, so much so that in the face of dazzling choices, they choose not to choose—for example, buying Coca-Cola for drinks, or Mengniu or Yili for milk. How can emerging products make a mark in the market by exploiting the gaps of large enterprises? How should distributors handle the intensity of promotions? Promotions are everywhere, but sometimes too many promotions can lead to faster death. Trial activities seem to be in full swing, but some backfire. Should distributors promote or not? Because of poor business, they are forced to promote, but it easily puts them in a dilemma—promote and sales move, don't promote and sales die, but each promotion is a loss-making venture. What preparations should we make to ensure promotions are effective?

Countermeasure: This friend actually raised three questions: first, how should distributors choose new products? Second, should distributors carry out promotional activities? Third, how to carry out promotions?

For the first question, in summary, I believe that when selecting products, distributors should either satisfy the 'first' nature or the 'unique' nature. For distributors with mature channel networks, they can also choose products with solid quality but not much brand development potential, but such products must have sufficient profit margins and a clear advantage in channel profit distribution. Products with such advantages will definitely receive greater channel push and relatively objective sales.

For the second question, the answer is undoubtedly yes. But the key is how to carry out promotional activities, so I will answer it together with the third question. Before a promotional activity, it is essential to clarify the purpose of the promotion. For promotions mainly aimed at enhancing brand awareness, the primary indicator is the contact rate of the target consumer group; for promotions mainly aimed at sales, the primary indicator is, of course, direct sales. However, for any new product introduced to the market, the premise for good sales is high product awareness. Brands that rely solely on first-time sales to maintain sales volume will find it difficult to achieve much in the fast-moving consumer goods sector. But building brand awareness is a relatively specific and lengthy project, generally difficult to accomplish by a single merchant's efforts alone.

Of course, for a specific promotional activity, preparation work also significantly impacts the results. Specific preparations include: designing complete promotional policies and processes, recruiting and training participants (naturally varying with the scale of the promotion), selecting venues, preparing props and materials, preparing and rehearsing emergency measures (such as plans for dealing with urban management or other unexpected events), arranging transport vehicles and schedules, and summarizing after the promotion and rewarding or punishing participants. A well-prepared activity will definitely yield far better results than a hasty promotion.

Question 3: Manufacturers require cash on delivery, while terminals emphasize credit periods, making it easy for distributors to fall into a passive position. How can we control cash flow under such 'pincer attack' circumstances?

Countermeasure: This problem is typical, but for most distributors, it is also quite helpless. In fact, if we carefully look at the contracts signed between distributors and their partners, we can see that in front of manufacturers, distributors are definitely Party B; in front of large terminals, distributors are still Party B. This is actually determined by the ecological environment in which distributors operate and the role they play in that environment. To fundamentally change this situation, the ultimate path for distributors is to become stronger, at least relatively strong in front of their partners. Business is like warfare; it is normal for the strong to prey on the weak. As long as you can control the discourse, the situation will naturally change. If you cannot achieve this, other methods are only stopgap measures. Here are some suggestions from the following aspects:

First, do not easily stockpile large quantities of goods from manufacturers driven by short-term interests; determine payment and purchase quantities based on market demand. Manufacturers generally offer periodic channel incentive policies, promising distributors additional rewards if they pay a certain amount within a specified time. Many distributors, tempted by these benefits, pay large amounts to manufacturers regardless of market acceptance, eventually leading to inventory backlog and affecting cash flow. This is especially important to avoid for non-best-selling products or products with significant seasonal impact.

Second, try to cooperate with terminals that have good payment reputations. Different terminals have different credit periods, credibility, capital turnover, and business conditions. When selecting downstream partners, distributors should try to choose terminals with good reputations and business conditions for long-term cooperation, and gradually build their own brand image through their services and products. This way, even with credit periods, they can gradually achieve relatively stable business volumes, which is very helpful for controlling cash flow.

Third, strengthen maintenance visits to cooperative terminals. Some stores are prone to changing owners due to unstable operations. With credit periods, once the owner changes, it is easy to form bad debts. Therefore, for such outlets, once cooperation is chosen, it is essential to arrange salespeople to visit frequently to reduce the incidence of bad and dead debts.

Fourth, cultivate core competitiveness, form unique operational advantages, and enhance discourse power. For distributors, the downstream network is their lifeline. Once distributors can have relatively firm control over the downstream network, they can integrate better brand resources or cooperation methods upstream; and with abundant brand resources in hand, they can integrate better cooperation conditions downstream. Theoretically, we call this ideal state 'excellent value chain management' for distributors. Distributors who achieve 'excellent value chain' management can not only escape the passive situation of being 'pincer attacked' but also enter a virtuous cycle of 'benefiting from both ends'.

Question 5: The distributed goods are slightly higher in price compared to similar products. How can distributors sell well? Since last summer, I have been distributing a manufacturer's product. Just as I had expanded the market and monthly sales were rapidly rising, at the end of last year, the manufacturer raised the ex-factory price for some single items due to rising raw material costs. Originally, the retail price of this product was slightly higher than similar products, and now the manufacturer is raising prices again. How can I ensure the continued popularity and high-price sales of this small food product?

Countermeasure: First, solve the issue of terminal acceptance. If the manufacturer's price increase has a transitional phase, you can use the manufacturer's transitional policy to raise prices flexibly before the rigid increase. That is, increase the invoice price but maintain the original price level through bundled gifts, then gradually reduce the gift intensity to indirectly achieve the price increase. If the manufacturer directly raises prices rigidly, distributors can use their own resources, through combination with other brands or products, to achieve the same effect in a roundabout way, transitioning the main product to a higher price. Maintaining the terminal's sales enthusiasm is a key link to ensure continuous product sales. Of course, for responsible manufacturers, there is generally a communication process with distributors, especially key distributors, before price adjustments. Distributors can also provide more constructive suggestions on specific pricing strategies to ultimately achieve a smooth price transition.

Second, solve the issue of consumer acceptance. For products with high acceptance, when the price adjustment is not more than 10%, consumers' sensitivity is generally not too high. This is also related to horizontal comparisons among similar brands. When the industry as a whole adjusts prices, it is best to follow the strategy of adjusting prices about a week after the first brand of similar local products adjusts. When the price adjustment is an individual act of a single manufacturer, the pricing strategy design should be more cautious. You can adjust gradually through promotions, such as offering appropriate buy-and-gift policies when initially raising prices, giving consumers time to accept. At the same time, when formulating strategies, consider the brand awareness of the distributed product itself. For well-known branded products, strategies can be bolder, while for products with lower brand awareness, conservative strategies are safer.

Of course, for a product, the quality of the product itself is very critical. Products with subpar quality generally do not have good prospects, let alone sustained price increases. This is also the primary issue that distributors must pay attention to when selecting a product and formulating long-term strategies.

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