If you go to see a distributor and ask how business is this year, 99% of them might say business is not good. But recently, I met a daily chemical distributor. I thought that with the overall economic downturn and the impact of online e-commerce on daily chemical products, business should not be good. But this distributor's answer was unexpected: "Business is not bad; we completed the manufacturer's tasks ahead of schedule, and were just rated as a five-star customer (the highest) by Nice, and net profit has increased significantly." Xuzhou Jianxin Trading Co., Ltd. is an exclusive distributor for Nice, representing brands such as Chuangeng, Diao Pai, and Miaoguanjia. They have 18 frontline sales reps, covering Xuzhou urban and surrounding suburbs, directly serving over 4,000 retail outlets. In 2018, Jianxin Trading was awarded the title of "Nice Group Gold Distributor." Recently, New Distribution had a conversation with Mr. Wang Zhaoshu, General Manager of Jianxin Trading, to see how he continues to lead the trading company to growth and increase employee income amidst the general business downturn and the prevalence of online e-commerce. What did he do? -01- Net Profit Sharing System: Sales Reps Average Monthly Salary 10,000+ Yuan Wang Zhaoshu told New Distribution that frontline sales reps at Jianxin Trading have no base salary; their core income comes from three parts:
Part 1: Basic payment commission, i.e., commission on sales of regular products, 2% of sales amount; Part 2: Time-based and product-based commission, i.e., sales commission set during the promotion period of a new product, 5% of sales amount; Part 3: Net profit sharing, i.e., 30% of the net profit of goods. The calculation method for net profit: Net profit = (Sales volume * Gross margin) - Costs + Manufacturer support. Costs include supermarket display fees, shelf fees, sales rep salaries, vehicle fuel costs (all money spent by sales personnel), plus backend warehousing, administrative, and financial costs totaling 5%, and 1% for receivables. Through this assessment and incentive method, frontline sales reps at Jianxin Trading achieve an average monthly salary of 10,000+ yuan. Wang Zhaoshu said helplessly, "Now the confusion is that both manufacturers and distributors often come to me to poach people." To address this issue, simply increasing income is no longer enough. At this point, Wang Zhaoshu thought of the best way: through a 're-entrepreneurship' form, making them partners and shareholders, binding core backbone employees while promoting the further development of the trading company. Regarding the net profit sharing mechanism mentioned above, many distributors may have doubts: if assessed purely in this form, will it cause frontline sales reps to "visit big stores, not small stores; visit old stores, not new stores"? Wang Zhaoshu explained that our approach to the above situation is two-fold: First, use system tools to standardize sales reps' daily visit plans and in-store work processes; Second, set phased incentive measures, such as creating 'standard stores' and ranking rewards. Through daily standardized actions and phased action incentives, we ensure the density, frequency, and quality of store visits. In addition to the net profit sharing system for sales reps, for backend personnel (warehousing, distribution, administrative finance), Jianxin Trading's approach differs from conventional distributors. 1. Assessment for warehousing, administrative, and financial personnel In 2019, a new round of reform was implemented. In addition to basic salary, Wang Zhaoshu added an extra reward: incremental profit sharing. Set a base reference value, for example, using November 2018 gross profit of 500,000 yuan as the reference, if November 2019 gross profit is 600,000 yuan, the excess of 100,000 yuan is multiplied by 12%. Through the principle of "incremental reward", the work enthusiasm of warehousing picking and administrative functional personnel has been greatly improved. Wang Zhaoshu told New Distribution that warehousing personnel began to spontaneously save costs on promotional items and provide good service to sales personnel; administrative clerks also began to actively push sales reports to sales reps and urge them to complete scheduled sales targets. The efficiency of front-end and back-end work coordination is increasing. 2. Assessment for delivery personnel Around 2009, all delivery vehicles were owned by Jianxin Trading. After 2009, Wang Zhaoshu sold all vehicles to drivers at second-hand market prices and began implementing a contract system. Drivers transformed into independent operators, and Jianxin Trading pays them 1.6% of sales amount. Additionally, for each order completed, a 3 yuan reward is given, and for each carton recycled, an additional 1 yuan reward is given. Through this form, delivery personnel not only complete delivery tasks but also promptly place goods on shelves and spontaneously organize shelves, accelerating the sales process of goods. -02- A 'Promotion Card' Doubles Sales Volume Frankly speaking, daily chemical products, compared to beverages and alcohol, are more severely impacted by online e-commerce; at the same time, offline, Jianxin Trading also faces the problem of cross-regional dumping and price wars in surrounding markets. Facing dual pressure from online and offline, Jianxin Trading can only respond. But how exactly to respond? Wang Zhaoshu thought of "cross-industry cooperation." He told New Distribution that when facing pressure, most distributors might think of price cuts, full reduction, discounts, promotional gifts, etc., but we believe this is still a "resource consumption war." Today you offer a 1 yuan discount, tomorrow I offer 2 yuan... We need to change our thinking. The ultimate goal of all competition is to gain more consumers. How to make consumers choose me over other brands? It must be that we can provide more valuable things. Based on this consideration, Wang Zhaoshu put great effort into promotional items. In the past, promotional gifts were various practical small items, but the overall perceived value was not high. Besides small items, are there other possibilities? Wang Zhaoshu thought of meal vouchers and haircut cards. As shown in the figure below, Jianxin Trading cooperates with restaurants and barbershops for cross-industry alliance. How exactly? For example, Wang Zhaoshu takes a large supermarket as the core, selects restaurants and barbershops within 1-2 kilometers, and cooperates with them. Consumers who purchase Nice products reaching a certain amount can get a discount voucher. Through such cooperation, a win-win situation is achieved: First, consumers win. Consumers shopping in supermarkets are mostly nearby residents. Eating at restaurants and getting haircuts are inherently "rigid" needs. A 40 yuan discount voucher and a 50% haircut card are far more practical than a small promotional item worth a few yuan; Second, restaurants and barbershops win. Whether restaurants or barbershops, they face competitive pressure from peers. Promotions are something stores need to do themselves anyway. In the past, they had to specially hire people to distribute advertisements, and the target audience might not be precise. These problems are well solved through cross-industry cooperation, and costs are reduced; Third, Jianxin Trading wins. Promotion costs are greatly reduced, and effectively avoids direct price wars with competitors, focusing on the actual value consumers receive. Wang Zhaoshu told New Distribution that many internet e-commerce companies now emphasize this formula: Sales = Traffic x Conversion Rate x Average Order Value x Repurchase Rate. This formula can also be applied to the operation of a trading company. The above example actually shares Nice's consumers (traffic) with restaurants and barbershops. Can we import external traffic to Nice? It is also possible. In early October, Jianxin Trading made another promotion card: "Buy two items plus 1 yuan, get a bag of Nice Diao Pai laundry detergent worth 15 yuan." For the first wave of cooperation, Jianxin Trading chose to cooperate with Mengniu. In the same supermarket, when consumers purchased Mengniu products, Mengniu promoters would give consumers a promotion card. The consumers behind dairy and washing products are the same type of consumers (mainly families). Consumers seeing "free claim" usually won't refuse, and then walk straight to the Diao Pai display... According to Wang Zhaoshu, the activity only lasted one month, and sales doubled. This is about introducing "specific traffic" within the supermarket to our products. Next, we will bring in merchants around the supermarket. -03- Bad Business Varies, Good Business Is Alike Every year, distributors say business is getting harder, but there are always some distributors who do "thriving" business. When asked why business is difficult, distributors can list dozens of reasons: manufacturer issues, cost issues, competition issues, e-commerce issues, etc. But few distributors truly consider from their own perspective how to improve their management capabilities, how to effectively leverage the brand resources they distribute, and how to combine with the external environment. Regarding the management of Jianxin Trading, there are two points worth learning and thinking about: First, internal organizational compensation management: "Net profit sharing system" for sales reps, "incremental profit sharing" for warehousing and administrative personnel, and "contract system based on sales amount" for delivery personnel. Second, external business promotion methods: Sales = Traffic x Conversion Rate x Average Order Value x Repurchase Rate. Based on this formula, you can think about what adjustments your trading company can make for promotions.