Traditional secondary distributors, due to their simple distribution function compared to dealers' market management and terminal's communication and sales platform functions, are often overlooked by manufacturers. However, as channel focus shifts downward, the marketing position and channel functions of secondary distributors are quietly changing. They gradually take on market management responsibilities, but the loose cooperative relationship between manufacturers and secondary distributors (no capital ties, no contractual constraints, driven solely by price differentials) leads to a lack of loyalty and cohesion, preventing them from executing market management as manufacturers wish. Therefore, the urgent task is to motivate secondary distributors to perform their market management functions rather than just distribution.
In practice, manufacturers and secondary distributors are in a state of mutual distrust. For example, secondary distributors often complain about thin margins while "repaying kindness with enmity" by discounting promotional funds into costs, wielding the "price knife" against peers and even brands. Manufacturers also fall into various misconceptions in managing secondary distributors. The regional manager in the letter believes that to motivate secondary distributors, they must make money, which is correct, but "thinking every day about what promotions to run and how much to invest" is a typical narrow-minded approach. To unlock the sales potential of secondary distributors, manufacturers' sales personnel must first avoid these misconceptions:
- Sales-Oriented Vicious Promotions. In managing secondary distributors, promotions are the most common tool and the easiest to fall into misconceptions. For instance, using promotions to drive sales leads to a vicious cycle of promotion, inventory pressure, more promotion, and more inventory pressure. Promotions become a long-term fixed sales tactic, and this disguised price cut directly causes channel price inversion, violating channel rules.
During rapid market growth, product turnover is high, and manufacturers' promotional discounts allow secondary distributors to sell without worry and without capital pressure, genuinely profiting and achieving the goal of motivation. However, in mature or sluggish markets, promotions often catalyze price cutting by secondary distributors. Their unique business model makes them sensitive to price differentials. "Selling at a lower price to achieve higher turnover and maximize profit is paramount. As for brand damage, it's not my concern." This is the typical mindset of secondary distributors. Therefore, after promotional inventory loading, if the market turns unfavorable, secondary distributors worry about slow sales tying up capital and quickly resort to price cuts to cash out, trapping manufacturers in a "promotion equals suicide" dilemma.
In such cases, motivating secondary distributors requires a shift in thinking, moving away from the trap of using trade promotions for immediate sales and toward market cultivation. For example, instead of trade promotions, manufacturers can allocate resources to help secondary distributors with basic market work, such as terminal maintenance and distribution, which improves channel turnover and operational efficiency. Moreover, unlike other companies that force secondary distributors to tie up capital for sales, this minimizes their operational risk. If manufacturers can explain this logic, they are more likely to gain secondary distributors' trust.
- Exclusive Focus Without Giving Secondary Distributors a Chance to "Seek Power". Having secondary distributors exclusively serve their brand is a dream for many companies, as it both suppresses competitors and boosts sales. Some companies invest heavily in buyouts to create closed channels for exclusive focus, but secondary distributors often exploit this to pit competing manufacturers against each other, reaping higher "buyout fees," further monetizing the relationship.
Even with a rich product line, a brand's sales growth in a region is limited. For secondary distributors to grow, they must horizontally represent more brands—it's inevitable. Manufacturers should not block secondary distributors from serving only them; this not only fails to motivate but also makes them more resistant.
Most secondary distributors follow this trajectory: entering the industry as "secondary distributors," gradually representing brands as they gain strength, and "seeking power" to upgrade to dealers. If manufacturers can capitalize on this psychology, guiding secondary distributors to scale up and grow faster, they will gain genuine passion and momentum for market expansion. Once motivated, manufacturers only need to guide them to create more value for their brands.
At this stage, secondary distributors urgently need to improve operational and market management capabilities, requiring help to mature. If manufacturers' sales personnel can leverage their expertise to act as consultants, they can decisively influence secondary distributors' decisions, fostering better cooperation.
If manufacturers provide help, even promoting secondary distributors to dealers at the right time to help them realize their "dreams," these distributors will surely cultivate the brand as a key brand because both parties are truly "compatible." After all, only win-win cooperation is positive.
- Direct Terminal Operations Cut Off Secondary Distributors' Lifeline. In deep distribution models, the first step is intensive terminal cultivation (mainly traditional terminals). After securing orders from terminals, companies often, considering their heavy investment in manpower and resources, don't want intermediaries to share the spoils, so they require terminal salespeople to deliver directly from the manufacturer or agent.
Direct terminal operations mean the company operates part of the terminal market itself. While shelf coverage and market share may improve, it also "steals" business from secondary distributors, directly reducing their sales and dampening their enthusiasm. Simultaneously, these secondary distributors will increase purchases from competitors, directly clogging the secondary channel. The indirect effect is accelerated channel push weakening. If market operations are mishandled and brand pull isn't effectively strengthened, the entire channel system may stall due to insufficient momentum.
From a channel coordination perspective, direct terminal operations should not aim directly at boosting sales; rather, the purpose should be to broaden terminal channels, increase secondary distributors' sell-through speed, and boost their confidence. For example, handing shelf-filling orders to secondary distributors strengthens their channel relationships with terminal customers and makes them feel the manufacturer is helping their business, increasing their cohesion.
- Excessive Density of Secondary Distributors. Deep distribution is a channel model adopted by many FMCG companies, characterized by numerous channel maintenance personnel. Manufacturers spare no effort to develop terminals and secondary distributors, believing that more secondary distributors mean wider channels and stronger control, even if some lack responsibility, ensuring coverage through redundancy. But in reality, this harms channel flow.
With too many secondary distributors, individual sales are diluted, absolute profits are negligible, and the brand fails to attract them. Moreover, high density leads to overlapping terminal networks, unclear customer affiliations, and frequent horizontal conflicts as secondary distributors compete for downstream customers. Without fixed terminal networks, their roles and responsibilities in the channel value chain are unclear, leading to a lack of accountability and effort in developing and maintaining terminals.
Excessive channel density creates latent crises. For instance, if market growth slows, secondary distributors, fearing slow sales, will cut prices to dump stock, further reducing profits, losing confidence and interest, and dumping again—a vicious cycle.
Therefore, manufacturers should appropriately control secondary distributor density, enabling them to achieve certain sales and profits, and help them build terminal networks and clarify channel relationships. For example, many secondary distributors are lax in management and don't print business cards. Manufacturers' sales personnel can proactively print cards for them and distribute to terminal customers in their territories. This serves two purposes: first, it "connects" terminal customers and secondary distributors, forming a smooth and clear channel network, with the manufacturer as coordinator assigning roles so each focuses on their own network; second, the manufacturer's attentiveness and respect can move secondary distributors. At this point, the manufacturer controls the smooth operation of the entire channel, not just isolated segments.
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