Opening emphasis: The core purpose of this article is to assist brand owners in establishing the underlying logic for channel coverage design and planning in 2022.

The two diagrams below were presented by Mr. Zhao Bo, founder of New Distribution, at the China FMCG Conference in September, illustrating the changes in FMCG distribution channels over the past decade.

Both the number, types, and transaction structures of channels have changed. This is the channel environment we see today after abstractly categorizing the complex retail landscape. What are the unchanged factors?

1. The endpoints of the channel remain unchanged: from brand to consumer. 2. Existing channels have not disappeared; new channels are continuously added. 3. Channels are segmenting, and 2C channels are growing, but the primary and secondary positions have not changed significantly. 4. Channels are always driven by people and cannot be automated.

We can draw the following conclusion:

The unchanged core competitive factors of channels are: From brand to consumer, high efficiency replaces low efficiency, low cost replaces high cost, scale replaces localization, and diversified consumer reach replaces single-channel reach.

The human factor is that under the distribution mechanism of supply chain benefits, the subjective initiative of personnel at all levels replaces the lower with the higher. Let's analyze each factor.

High Efficiency Replaces Low Efficiency in Channel Coverage

What determines the level of channel efficiency?

Example: When a brand launches a new product, a highly efficient company can achieve full coverage of targeted channels and outlets within a month, reaching target consumers in a very short time. Inefficient companies may drag on for half a year without meeting targets.

Here are five key points:

1. Has the brand done its channel sorting work? Have they created a clear profile of their channels, or are they casting a wide net indiscriminately? Remember, products that are pulled back due to poor sell-through are the biggest killer of channel efficiency.

2. Has the brand optimized its outlet tiers? This can be based on purchase activity, sales volume per unit time, etc.

3. Is the target consumer definition for the new product precise? Is the matching channel supply chain smooth? For example, if distributors are not cooperating with new product promotion, it indicates your channel is stuck at the first regional stop.

4. Channel efficiency must focus on the keyword "targeted." Only with targeting can products match channels, outlets, and target groups. This is the core of channel efficiency.

5. The last meter of the channel is product sell-through. Have you achieved BC integration, operating the C-end and empowering the B-end, so that some want to buy and some are willing to sell?

Summary: How can companies test their channel efficiency? Here's a simple method.

When launching a new product, organize a targeted outlet distribution PK. Define outlet attributes, initial order quantity, display requirements, and SKU mix. See how long each market takes to complete the quantitative indicators. Lagging regions should be rectified.

Channel efficiency is one of the core competitive advantages of a brand, as it effectively reflects the brand's ability to control the market with agility.

Low Cost Replaces High Cost in Channel Coverage

What determines the level of channel cost?

Example: For the same truckload of goods, Distributor A spends 1,000 yuan to reach consumers, while Distributor B spends 800 yuan. Distributor B's channel cost is lower than A's. Here are several issues:

1. Focus of channel expenses

For example, if a company supports 0.5 yuan per case in channel expenses, Distributor A spends it on channel partners, while Distributor B spends it on personnel incentives. For channel partners, 0.5 yuan is of little value; the difference between buying 10 cases and 5 cases is not significant, so it doesn't stimulate purchase desire.

For field staff, the cumulative sales from all outlets can be a substantial amount, boosting morale and communication efficiency, with obvious results.

2. Precision in channel distribution

For example, Distributor A distributes to 100 outlets, but 40 fail to sell through and need returns. Distributor B distributes to 100 outlets, and only 5 need returns. The back-and-forth significantly increases channel costs.

3. Channel flattening

For example, Distributor A reaches consumers through sub-distributors, wholesalers, and outlets, while Distributor B directly serves retail terminals. Each additional layer adds a share of profit, naturally increasing costs.

4. Channel service

Every outlet visit by sales personnel incurs costs. For example, a salesperson earns 100 yuan a day and visits 20 outlets, costing 5 yuan per visit.

Is the 5 yuan worth it? The measure is outlet output. So, spend the 5 yuan on high-output outlets as much as possible. Low-output outlets can be served by wholesalers as a "side service."

5. Route planning

Reasonable route planning can minimize delivery costs and improve team efficiency.

Summary: Why are many companies now abolishing the "human sea tactic"? It's not that it has no value, but rather they seek a low-cost channel model to replace it.

As society develops, labor costs will become the largest expense for companies. Channel coverage cost is also a core competitive advantage for brands, as it effectively improves profitability and reflects the brand's control over market cost-effectiveness.

Scale Replaces Localization in Channel Coverage

What is channel scale?

Example: A distributor initially reaches consumers through traditional channels, then expands to sub-distributor and modern trade channels, adds B2B, community group buying, O2O home delivery, and finally live-stream e-commerce and social e-commerce.

The process from single-channel to omnichannel consumer reach is the scaling of channels. Only through scaled channel reach can you break through the final defense line of consumers who are "impervious" to buying products.

Here are five key points:

1. Channel scaling is not the goal

Manufacturers should not scale for the sake of scaling. The purpose is to reach consumers more comprehensively, at lower cost, and with higher efficiency. This balance must be maintained.

2. Online expansion must watch for price system conflicts

Expansion should be incremental, not affecting existing business. Common practices include: different capacities or products online vs. offline, or using online for price anchoring and content seeding, and offline for traffic monetization.

3. Prioritize expansion order

Consider product attributes, regional market competition, channel category share, brand building and profit margins, etc. Start with easier tasks, larger market capacities, and larger profit margins before moving to harder, smaller ones.

4. Only two metrics determine success or failure

Is business incremental? Is the organization more efficient? If both answers are no, the channel expansion has violated the principles of high efficiency and low cost.

5. Survival of the fittest

High-cost, low-efficiency channels should be decisively abandoned or served by other institutions. Focus on quality channels.

Summary: Common channel models are four:

a. Traditional channels: Brand → Distributor → Outlet → Consumer b. Social channels: Brand → KOC → Community → Consumer c. E-commerce channels: Brand → KOL → Platform → Consumer d. AI channels: Brand → Content Seeding → Algorithm Push → Consumer

In the information age, "people," "goods," and "scenes" have fundamentally changed. Consumption habits have become more spontaneous and casual.

Therefore, channel scaling can better reach consumers' all-scenario, all-channel, all-weather, all-category, and freely satisfied consumption needs. Brands shift from passive to active sales: wherever consumers' attention is, your product appears.

Channel scaling is also a core competitive advantage for brands, as it effectively improves the manufacturer's ability to manage customer relationships.

The End of Channel Coverage is Diversified Consumer Reach

What is diversified consumer reach?

Example: If you run out of rice at home, ten years ago you would go to a grain store or supermarket. Now you might still buy from the original channels, or from Tmall and JD Super, or in a Douyin live stream, or through a recommendation from a big influencer or a friend.

Purchase methods are diversifying, so brands must achieve diversified consumer reach to meet different consumption needs. Common reach methods include:

1. Passive reach

Whether electronic or physical shelves, attract consumers through shelf placement elements. The core is how to stand out among many products.

2. Media reach

Use local Douyin accounts, WeChat official accounts, local bus ads, elevator ads, etc., to convey brand or product information to target consumers. The core is content or brand story.

3. Recommendation reach

KOC recommendations, in-store salesperson recommendations, special group recommendations (doctors, teachers, etc.), friend circle recommendations, etc. The core is product experience sharing, including function and effect.

4. Active reach

Consumers find products through search, discovery, etc. The core is that consumer education on brand philosophy and product features must be thorough.

Summary: The core of reach is to use every possible means to accurately deliver brand philosophy or product information to target consumers, so they can think of, see, and buy your products anytime.

Diversified consumer reach is also a core competitive advantage for brands. It is the last meter of the channel and the most critical link in verifying channel success.

Final Thoughts:

After describing channels, let's summarize the three forces of brand operations:

1. Product force: High quality, low price, total cost leadership, differentiation, focus, and reshaping selling points. 2. Channel force: Scale, low cost, high efficiency, and diversified consumer reach. 3. Brand force: Content marketing, brand story, and communication models.

A brand's success cannot be separated from the mutual matching of these three forces. They must be developed simultaneously and integrated into daily operations. Only then can a company maintain strong competitiveness in the existing market.