Click to read the original text for details Since 2003, China has entered the track of deep distribution. Deep distribution actually has two major premises: first, channel fragmentation. Only deep distribution can solve this problem, because the essence of deep distribution is to get as close to the terminal and consumers as possible. Second, deep distribution relies on a human-wave tactic, which is adopted because labor costs are low. When sales are growing, the increase in costs can be temporarily ignored, because sales growth can dilute costs. When sales stop growing, distributors find that profits are squeezed by both sales volume and costs. Sales volume doesn't grow, but the increase in promotional expenses eats into gross margins; the increase in costs further squeezes profits. In the past, the average profit for agents in the FMCG industry was roughly 3%, with average delivery costs of 7%-8%, not including promotional and management expenses. With such low profits, even a slight impact from sales volume and costs can push them to the break-even point. For some FMCG products with transparent pricing, gross margins are already quite low. Thus, you often hear distributors complain that their business is growing bigger, sales are increasing, but profit growth is extremely disproportionate, or even stagnant or negative. In fact, very few distributors in the FMCG circle can clearly calculate their accounts. A simple example: a distributor has multiple vehicles. Which vehicle is making money? How much? Which vehicle is losing money? How much? They serve hundreds or thousands of outlets. Which outlets are profitable? Which are losing money? Many distributors have a vague idea. They run their business based on gut feeling, roughly doing their business. In the FMCG industry, without vehicles, there are no outlets; without outlets, there is no sales; without sales, there is no profit. Today, we will help distributors calculate their accounts properly, focusing on the break-even points of vehicles and outlets. Only by calculating well can they better adapt to today's competition. -01- How to Calculate the Break-Even Point for Terminal Outlets Distributors rarely pay attention to the break-even point of their terminal outlets. In fact, your final profit comes from the outlets below. Which outlets are creating profit for you? Which outlets are eroding your profit? Which outlets, after cultivation, are initially loss-making but later profitable? How long is the cultivation period? Which outlets have been cultivated but continue to lose money? Is it really true that the more outlets, the better? If distributors don't calculate the break-even point for outlets, where does profit come from? Without effective profitable outlets, where does profit come from? 1. Measurement Dimension 1: Coverage Costs Coverage costs include: allocation of sales personnel wages, allocation of logistics and delivery costs. Allocation of sales personnel wages includes: average monthly wage per salesperson, average number of outlets covered per salesperson. Allocation of logistics and delivery costs includes: driver's wage per vehicle, average monthly depreciation per vehicle, average monthly fuel cost per vehicle, average monthly insurance cost per vehicle, average number of delivery outlets per vehicle. Designed as a table as follows: 2. Measurement Dimension 2: Sales Expenses 3. Measurement Dimension 3: Comprehensive Gross Margin of Products The calculation of comprehensive gross margin cannot be based on gut feeling. Note:
1. The overall sales proportion of each category of the brand;\n> 2. The average channel promotional intensity of each category;\n> 3. The support and rebates given by brand manufacturers for the categories;\n> 4. If conditions allow, it's best to use the business mobile terminal system to achieve one-store-one-plan, accurately calculating the gross margin of each store based on the receiving policies and detailed product quantities. Summary: With the above three data points clear, the break-even point for terminal outlets should be easy to calculate. As competition intensifies, market profitability will increasingly sink to each terminal store. Only by calculating well can you invest more accurately and maximize profits. -02- How to Calculate the Break-Even Point for Township Vehicle Sales Most distributors' understanding of vehicle profitability is limited to: if a vehicle sells a few thousand yuan in a day, it breaks even; below that, it loses money; above that, it makes money. But several questions are worth considering: 1. With the same sales amount, different product items sold lead to different profits, and thus different break-even results;\n> 2. With the same sales amount, different sales policies lead to different profits, and thus different break-even results;\n> 3. With the same sales amount, different delivery distances lead to different profits, and thus different break-even results;\n> 4. With the same sales amount, different base salaries for sales personnel lead to different profits, and thus different break-even results. So the same sales amount can have different break-even points, and different sales amounts will definitely have different break-even points. How to calculate? 1. Measurement Dimension 1: Coverage Costs 2. Measurement Dimension 2: Sales Indicators 3. Measurement Dimension 3: Records of Other Loss Expenses For example: the average gross margin of the products a distributor sells is 15 points; labor cost: 150 yuan/day/person, fuel cost: 150 yuan/day/vehicle, so the daily cost per vehicle is 300 yuan. Ideally: a vehicle's daily sales reach 2000 yuan, and the distributor basically breaks even. Reality is: a. On vehicle sales days, goods are sold the same day; salespeople often double as salesperson + driver + loader, so efficiency is obviously low, and they can visit at most 60% of the 25 customers per day; b. Daily costs such as damage reports, returns and exchanges, vehicle consumption, and entertainment expenses keep arising; c. After returning at night, they spend 1-2 hours checking inventory, staff complain about difficulty in retention, and recruitment costs remain high; d. Distributors with many product items often can't predict loading quantities accurately because they don't know what customers have and lack, so they leave with a full truck and return with more than half left, greatly reducing performance; e. During vehicle sales, salespeople manage both money and accounts, often change prices and divert goods, and every month there are losses of several thousand yuan... The above common expenses should be recorded in a ledger; otherwise, the break-even calculation will be off by a mile. Summary: If the above three data points are clear, the daily profit and loss of a vehicle can be calculated in detail, and distributors can then take targeted actions to improve underperforming vehicles. Final Thoughts: For distributors, it's not that more outlets are better; it's that more profitable outlets are better, and more outlets with cultivation value are better. For outlets that have no cultivation value and are continuously losing money, they should be decisively abandoned. At the same time, you can improve outlet profitability by adjusting investment and visit frequency. For example, for very small mom-and-pop stores, you can reduce coverage allocation by visiting once a month, and cancel all expenses like displays to reduce investment, making the outlet still valuable. As for vehicle profit and loss calculation, the purpose is to improve the loss of each vehicle, continuously reduce costs and increase efficiency, and enhance the distributor's overall profitability. In short, the sign of a mature distributor is not the amount of sales, not the size of the team, nor the number of vehicles and warehouses, but the distributor learning to calculate accounts, learning to measure the profit and loss of each vehicle and each outlet, and then continuously improving their operations to create stronger market competitiveness.