---
title: "Market Research: Four Solutions to Dealers' Profitability Problems"
description: "Dealers are facing shrinking profits due to market saturation, price transparency, and rising costs. This article presents four strategies—deepening channel control, holding strong brands, adding profitable products, and forming alliances—to help dealers survive and thrive."
author: "左目大叔"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2017-02-25"
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# Market Research: Four Solutions to Dealers' Profitability Problems

> Dealers are facing shrinking profits due to market saturation, price transparency, and rising costs. This article presents four strategies—deepening channel control, holding strong brands, adding profitable products, and forming alliances—to help dealers survive and thrive.

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Dear dealers, if one day you suddenly find that the market is hard to navigate, your product margins are thin, your talent has joined competitors, and your business is in trouble... don't be surprised!
Because this is a "bad" era: big brands have thin margins, small brands are hard to sell, the overall environment is poor, there is overcapacity, e-commerce is impacting sales, and there is cross-channel dumping... At the same time, this is also a "good" era. As the saying goes, "without breaking, there is no establishing." As long as you can grasp trends, be willing to learn, and innovate, there are plenty of opportunities and prospects.
From February 16 to 18, Jiuzhou Sugar & Wine Network visited well-known distributors in the sugar, wine, and food industries in Changge, Yuzhou, Xiangcheng, Wugang, Wuyang, Linying, and Yanling. While learning about the post-Spring Festival market conditions in these areas, the author exchanged views and shared experiences with these "industry veterans," making it a journey full of practical insights.
**Thin Profits: Busy All Year, Yet Not Earning Money**
Generally speaking, a distributor's normal gross profit should be between 10-15%. If it falls below this standard, the situation is not optimistic. During the visits, the author found that many distributors' profit levels are far below this standard, especially for first-tier brand agents who focus on volume and have transparent prices, with gross margins as low as 5% or less. After deducting investments and expenses, there is almost no net profit.
In fact, the situation facing distributors is even more severe. With the development of the internet, the younger generation of distributors can access product information more easily, and prices for many second-tier brands are also almost transparent. On the other hand, costs such as rent, utilities, labor, and logistics are rising, so profit margins naturally decline.
During the visits, the author noticed an interesting phenomenon: when familiar distributors meet and greet each other, they often ask, "How much have you sold recently?" but rarely ask, "How much have you earned recently?"
Sister Jin, who has been in the food and beverage industry for over 30 years, is one of the top "industry veterans" in Yuzhou. She represents almost all of Uni-President's product lines. In 2016, her beverage sales alone reached nearly 30 million yuan, but she said, "I simply can't make money."
Sister Jin gave the author a quick calculation: in Yuzhou, distributors representing first- and second-tier quality brands with annual sales below 5 million yuan have a net profit margin of at most 3%, including the boss's own salary. If you exclude the salary, there is basically no profit at the end of the year.
In fact, situations like Sister Jin's have become common in the industry. Brands that have been represented for years or even decades have suddenly become "chicken ribs"—not worth eating but a pity to throw away. If they give up, the channels they built with their youth become meaningless, which is a real pity. If they continue, they work hard all year, only to end up exhausted with meager returns. It's not worth it!
To leave or to stay? This has become a lingering shadow over distributors. However, the problem must eventually be solved. Below, the author lists some representative views and solutions seen and discussed during the visits. You can "match" them to your situation; they are for reference only.
**Solution 1: Diligently Build Roads, Go Deep**
It is easy to conquer a kingdom but hard to defend it. With the downturn in the market, how to defend the "territory" you have painstakingly captured is crucial, and the relationship between distributors and manufacturers is of utmost importance.
During the visits, some distributors had just obtained the agency rights for a brand. In the early stages, when the manufacturer needed to promote the product, they treated the distributor as the main force. But once the market was developed to a certain extent and the manufacturer needed performance growth, these distributors faced the fate of being split up.
In this situation, it is very important to thoroughly penetrate the channels you control, deeply explore the brand's potential market, strengthen your "independent kingdom," and keep core advantages in your own hands, making the manufacturer recognize your importance, even uniqueness.
Admittedly, market segmentation by manufacturers brings great pain to distributors who are split, but for an industry to develop, this is an inevitable trend. From the manufacturer's perspective, distributors can only adapt to this trend. If distributors can do everything the manufacturer wants, extend channels well, and firmly grasp the terminal network, then even if the manufacturer wants to segment the market, no one can shake the distributor's position.
In this regard, Zhang Songmao, general manager of Qianli Zui Trading, the general distributor for Fupingchun Liquor in Luohe, has done very well. Through his and his team's efforts, Fupingchun Liquor's market in Luohe (especially in the urban area and Wuyang County) is very stable and solid. Because of his outstanding performance, the manufacturer not only did not "shear the sheep" but instead increased support for him. In his own words, "Among Henan liquors in the southern Henan region, not many can compete with Fupingchun in the market." Additionally, it is worth noting that with the decline of Baofeng Liquor, Zhang Songmao's team will also cooperate with the manufacturer to develop the Pingdingshan market.
Zhang Songmao believes that distributors should change their mindset: "Manufacturers that don't change distributors are not necessarily good, and those that do are not necessarily bad." Business is about win-win. If a distributor has weak channel control and is replaced or split by the manufacturer, it only shows the distributor's lack of capability. What distributors should do is strengthen channel control and build their own brand.
Cheng Yahui, general manager of Yahui Trading, the general distributor for Shaokanglong in Xiangcheng, agrees with this view. He mentioned, "Distributors represent the manufacturer's brand, which is like raising someone else's child. When the child grows up, it's normal for others to take it away." Cheng Yahui believes that the so-called distributor's own brand refers to personal visibility and reputation. Downstream second-tier wholesalers and retail terminals accept your goods not because of the products you represent, but because of you as a person. If you reach that level, you definitely don't need to worry about others' opinions.
Wang Kejiang, general manager of Hexing Department Store Trading, the general distributor for Tsingtao Beer, Changbaishan Spring, and Luzhou Fu in Yuzhou, holds the same view. He believes that the entire industry is transforming, and distributors are no exception. To take the initiative in their relationship with manufacturers, distributors must strengthen their internal capabilities and correctly view the transformation.
"When a typhoon hits outside, why do some houses collapse while others remain safe? Because good houses have solid foundations." In Wang Kejiang's view, from the country to small enterprises, transformation is a major trend, and distributors are no exception. The key is for distributors to understand where the focus of transformation lies.
First, strengthen internal capabilities. If you have strong strength, strong channel control, and good cooperation with the manufacturer, you don't need to worry no matter how the transformation goes. Second, choose a model that suits you. Different distributors have different models. Who is right and who is wrong is not absolute; the key is to choose based on your own situation.
**Solution 2: Occupy a Good Position, Wait for Opportunities**
If Solution 1 represents the "never abandon, never give up" warrior spirit of being diligent and not letting go until the last moment, then Solution 2 has the Taoist style of "waiting for the right moment to act." Taoism is China's naive materialism, studying change (Yi), and its strategy is to respond to all changes with the unchanging.
Simply put, it means firmly holding the trump card (the strong brand you represent) in your hands. When the situation is good or someone shares the burden, you can be dynamic and conquer all; when the situation is bad or unclear, you can bide your time and build up strength.
The principle is easy to understand and simple to say, but the difficulty of implementation is extraordinary. First, you must have the strength to withstand the consumption of a long period of dormancy. Expenses such as rent, utilities, logistics, and labor will not slow down because you pause, nor will they stop because you are in a difficult situation. In business, capital is the driving force; in the capital world, strength is the wheel of progress.
Therefore, having at least the strength to make yourself feel secure is the prerequisite for "waiting." Once the situation turns around, you will surely see a bright future. In this regard, Ji Lei, general manager of Ruixing Trading, the agent for Yanghe Blue Classic series in Changge, is highly representative. Ji Lei has been representing Yanghe Blue Classic for only 4-5 years, but his annual turnover is around 20 million yuan. Unfortunately, his profits are also extremely thin.
Regarding next steps, Ji Lei said that Yanghe is a very good brand, especially the Blue Classic series. He worked hard to obtain the agency rights and will not easily give it up. Facing the current embarrassing situation of thin profits, his choice is to seek stability and progress.
Specifically, he plans to maintain current sales and circulation without decline, not intend to increase investment in the short term, and invest idle funds in the recovering steel industry (he owns a steel plate factory) and the tertiary industry to ensure stable income. When the liquor industry improves, he will ensure sufficient funds are injected immediately to maximize profits. Additionally, investments in other industries are also to accumulate and reserve channel expansion for the future recovery of the liquor industry.
Liu Kui, a distributor in Wugang who once represented Fenjiu, has deep experience with this approach. Liu Kui is a "veteran" of over ten years. He once made Fenjiu very successful in Wugang and accumulated a lot of capital. However, under the impact of the industry in recent years, he decisively made a strategic contraction. Currently, in a prime location in Wugang, he owns a store with luxurious decoration and a full range of products, including not only Fenjiu but also famous liquors like Moutai and Wuliangye, as well as popular food and beverages. In his words, "As long as a product or brand sells well in the market, you can definitely find it in my store... Many brand distributors in Wugang have sunk. To develop, you must first survive."
**Solution 3: If the Path Doesn't Work, Float on the Sea**
Zhuangzi said, "If the path doesn't work, float on the sea." In simple terms, it means thinking about things in a different way.
As mentioned earlier, Solution 2 has a prerequisite: you must have strong strength to withstand consumption. Whether it's front-loading funds or cross-industry subsidies, without a source, it will eventually become stagnant water. Persistence is meaningless, and waiting is stubbornness.
If you don't have the perseverance and confidence of Solution 1, or the calmness and detachment of Solution 2, then consider Solution 3: use your existing brands as a channel foundation and quickly choose a profitable product. However, this solution requires tacit understanding with the manufacturer and your personal insight.
A distributor can have many products, but must have one big single product and one profitable product (sometimes the big single product is the profitable product). Otherwise, it's hard to grow big and last long.
Coca-Cola has 402 SKUs. Undoubtedly, the big single product is Coke, but Coke's profit is relatively limited. Master Kong has over 100 flavors, with only Braised Beef Noodles being the most classic, and it is also the one with the most transparent price. Uni-President has annual sales of 7.8 billion yuan, with Laotan Sauerkraut Beef Noodles alone exceeding 5 billion yuan... Whether it's Coca-Cola, Master Kong, or Uni-President, when the volume of the big single product increases, profits naturally follow.
But if your sales grow to a certain scale, the growth rate may not meet the manufacturer's requirements. Manufacturers often don't consider the distributor's actual situation and still demand growth, otherwise they will split the market. Distributors are forced to resort to cross-channel dumping, creating a vicious cycle that leads to mutual destruction.
How to solve this problem? "Besiege Wei to rescue Zhao" and "curve to save the country" are good approaches. For a distributor, selling 20 million yuan of one product and selling 40 million yuan of two products are completely different concepts. Your existing mature conditions such as venue, personnel, and channels will save you a lot of effort and investment when operating a second potential product. Lower costs mean a relatively higher chance of profit.
During the visits, in every county and city, some distributors expressed willingness, intention, or were already in the process of choosing a new potential brand to represent. This brand doesn't have to be a first-tier brand, but it must be a product with stable quality and a responsible manufacturer.
Wang Guiping, general manager of Changge Yirun Trading, is involved in both liquor and beverages. He represents first-tier brands such as Honghua Lang, Yili, and Red Bull, with annual sales exceeding 50 million yuan. Since last year, Wang Guiping adapted to the situation and decisively acted, representing Shuanggou. After a year of operation, the company's total turnover has increased to over 60 million yuan, and the Wuliang series liquor he leads generates several million yuan in revenue annually. It is worth noting that the profit from the Wuliang series is much higher than other brands.
Wang Jinbing, general manager of Chengjin Trading, the distributor for Daliyuan and Huahuaniu in Xiangcheng, also showed great interest in finding new profitable brands. He said he would "take a good look and choose products" at the 19th Zhengzhou International Sugar & Wine Fair to be held from April 21-23. Other first-tier brand agents planning to choose products at the Zhengzhou fair include Yang Shenwei, head of Weiwei Trading, the distributor for all Wahaha products in Wuyang, and Song Wenhao, general manager of Dashengchang Trading, the distributor for all Uni-President products in Yanling.
**Solution 4: Stick Together, Move Forward**
The first three solutions are about what individual distributors can do. If you read them and feel none suits you, then consider the fourth solution.
The current economic development has entered a new normal, with downward pressure on the economy. In such times, it is even more necessary to "huddle together for warmth," with an open concept to integrate resources, leverage advantages, and accelerate regional integration.
Huddling together is not only the way out for small and medium distributors but also for large distributors. Why? Once an organization is formed in an industry or region, there must be an experienced and insightful leader to steer the direction. This leader often comes from large distributors with good reputations and strong strength in the industry.
Returning to the topic of distributor-manufacturer relationships, after uniting, they will have more advantage in dialogue and benefit negotiation with manufacturers, provided it is legal and reasonable and does not violate normal market rules. This is more conducive to holding onto big trees, choosing trustworthy well-known manufacturers, and helping distributors secure the maximum benefits.
Li Changqing, president of the Linying County Food Circulation Association, has long been planning for distributors in Linying County to huddle together. In his view, although the white liquor market in Linying County consumes over 100 million yuan annually, there is still much room for growth. Currently, most distributors in Linying County operate alone, lacking professional training and guidance. Many distributors are "digging here and there" without long-term planning or awareness of sustainable profits. They chase whatever sells well and either switch immediately or stubbornly hold on when a product fails. As a result, cross-channel dumping is severe in Linying County, harming both distributors' and manufacturers' interests and hindering the healthy and sustainable development of the entire market.
To address this, Li Changqing decided to organize distributors to huddle together. At the same time, after extensively soliciting opinions from most members, they will select a few representative products to operate jointly and establish unified rules. Once rules are set, all members must unconditionally follow them. In his words, "The more traffic lights there are, the fewer accidents there are."
"If we can control 80% of the terminals in Linying County through joint efforts, our value will be reflected, and we will have more say. We could even ask companies to customize products for our channel," Li Changqing said. "Currently, manufacturers spend a lot on marketing for terminal displays and competing with rivals. In the future, if our market control is in place, manufacturers won't need to make these marketing investments, or even send salespeople. The saved costs can then go to distributors, benefiting both parties."
**Source: Jiuzhou Sugar & Wine Network**
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