Recently, Wei Qing, a veteran in the training industry, shared his six points on the contracting system in his "Wei Qing Teacher Marketing Peer Group":

  1. Why I have never been in favor of the contracting system? Because it is actually "lazy governance". In the short term, the boss may seem worry-free, but in reality, it brings endless troubles.
  2. First, it stimulates employees' "greed". They don't see the pressure the boss bears, but rather think, "So the boss earns this much per box!" This can lead to improper thoughts.
  3. Second, once the contracting system is in place, the boss's control over employees weakens. It becomes even harder to require employees to do the "fine work" like visiting both large and small stores, making displays, maintaining price order, and executing promotions. These tasks will be completely neglected.
  4. Third, under the contracting system, the interests of the boss and employees are actually inconsistent. Employees' interest is to take this year's contracting profit; as for next year's floods—why should they care? For the boss, the market is their own, and they want the business to last forever, with high distribution rates, stable prices, good displays, and sustainable business.
  5. Fourth, once the contracting system is in place, the fundamental interests of the boss and employees are completely different, and the boss loses control over employees, while also stimulating their "greed". Problems are only a matter of time.
  6. In this case, employees also owe you money, which makes things even more passive. They hold your deposits, so you have to beg them, making it hard to deal with them.

As someone born in the 80s, I personally have great respect for Mr. Wei Qing. His courses have accompanied my career growth and progress. However, I have some different views on regional contracting:

  1. The regional contracting system and the management and constraints on contractors are not contradictory; they complement each other. Just like the main content of Chinese citizens' personal freedom rights: citizens have the right to act independently within the legal framework without interference, and are free from illegal arrest, detention, deprivation or restriction of freedom, and illegal searches of the body. Freedom is a right within the legal framework, a conditional freedom. Regional contracting is the same; it must be enjoyed within certain conditions. These conditions are the "laws" of the contracting system, including but not limited to "fine work" and "sustainable business". After all, contractors and distributors also want to establish a healthy ecosystem and seek long-term benefits.
  2. The contracting system is different from the "hands-off boss" system. Constrained contracting (with the help of terminal mobile systems) activates subjective initiative while firmly controlling the core elements of market operations.
  3. No system is perfect; adapting to circumstances and weighing pros and cons is the best strategy.

-01- First, understand the benefits of regional contracting

  1. Change in identity: from passive to active, increased motivation, and inevitably improved outlets and sales.
  2. What you save is yours: more thought will be given to input-output for display costs, returns and exchanges will be reduced through adjustment, product delivery routes will be optimized, and overall market costs will inevitably decrease (of course, this process requires supervision and management, with the bottom line being healthy market development).
  3. Control over accounts receivable will inevitably become stricter, and cash flow will increase.
  4. Team stability improves, turnover decreases, service strengthens, and terminal customer relationships stabilize and improve.
  5. Contractors earn the price difference, channel prices stabilize, and cross-regional selling decreases.

These are some advantages of regional contracting. FMCG is a labor-intensive industry, where workers need both mental labor (to close deals) and physical labor (to move goods, organize), but overall income is low (lower than couriers and food delivery riders). There are many practitioners, and career prospects are unclear, leading to high turnover rates. Many distributors face the contradictory situation of declining sales and rising sales and personnel costs. At this point, it might be worth trying regional contracting.

-02- Regional contracting should be adapted to local conditions, implemented step by step, and choose a pilot area Every market is different, and service personnel are different. The first step in regional contracting is to choose a pilot area to explore the methodology. Consider the following dimensions:

  1. Regional sales indicators: The purpose of contracting is market improvement, so the pilot area should first be one with poor sales, high potential, and a high success rate.
  2. Regional distribution indicators: It is recommended to choose areas with medium-to-low distribution rates, so that after success, the model can be easily promoted.
  3. Regional customer relationship indicators: Customer relationships are non-quantifiable; it is recommended to choose salespeople who have served for 2-3 years.
  4. Personnel stability: The stability of the contractor is an important measure and should be carefully considered.

-03- Initially set up the contracting model and calculate contracting costs

  1. Transparent prices, transparent costs, and shared policies Let contractors understand the product's payment price, the company's sales policies, cost details, and reimbursement methods, as well as warehousing, business and industrial taxes, logistics and office expenses, vehicle and fuel costs, damage and customer complaints, etc. (Some bosses may have concerns, but in reality, if salespeople want to know these things, they can find out most of them with a little effort, so it's better to be honest.) Through cost accounting, help contractors sort out cost issues in their operations, while clarifying the costs they need to bear.
  2. Clear goals, proactive work, and responsible actions Clarify each party's income and responsibilities, form documents (especially the profit-sharing model, which should be as detailed as possible), and sign them. For example: The distributor's responsibility is to ensure sufficient supply, smooth communication with the brand, and timely cost settlement. The contractor's responsibility is to ensure the quantity and quality of outlets, the quantity and quality of displays, the frequency and quality of visits, and the promotion and allocation of products. Both parties reach an agreement through meetings, sign a partnership agreement, and formulate penalty clauses for breach (the terminal mobile system can enable mutual supervision).
  3. Set up a startup guarantee fund to protect the early stages of contracting The first contractor is the first to eat the crab, so they need full guidance. The establishment of a startup guarantee fund can greatly reduce the contractor's entrepreneurial pressure. The guarantee fund can be set based on the contractor's average monthly income in the same period last year, with the rule: if the basic indicators are met in the first three months and income is lower than the guarantee fund, pay according to the guarantee fund; if income is higher, pay according to actual profit.

-04- The choice of contractor is key to regional contracting Things are done by people; choosing the right contractor is half the success. The choice of contractor includes subjective and objective factors.

  1. Subjective factors
  1. Full of passion to start a business, willing to endure hardship and take on challenges, not content with the status quo and wanting to surpass. 2) Stability: should be good, with the subjective desire to grow with the company.
  1. Objective factors
  1. Experience: about 2 years of work, familiar with the company, business processes, products, and market. 2) Performance: sales achievement ranking in the middle-to-lower range is best. 3) Age: unmarried post-90s are best. 4) Entrepreneurial deposit: accept the rules and amount of the deposit.

-05- Fully build a model contracting area Once the pilot area is determined, contracting costs are calculated, and contractors are selected, the next most important step is to build a model. The market needs to be sorted out, the manager in charge should assist, and the distributor boss should pay attention. The following common methods are for reference:

  1. Coordinate market visits to identify market problems. 2. Increase customer relationships by increasing visit frequency and service quality. 3. Increase basic sales through distribution in target outlets. 4. Seek special channels to digest products with large aging inventory. 5. Create market atmosphere through cost bias. 6. Increase profit space through new product promotion.

In short: Contracting is not about letting go; you need to help them get on the horse and then send them off.

-06- Achieve results and replicate quickly

  1. Extract successful experience: Once the pilot area succeeds, form a methodology. Let the first contractor fully recall the contracting process and mental journey, and form simple, easy-to-learn, replicable, and common written materials. The manager in charge should carefully study and formulate operating procedures and methods to solve process problems.
  2. Contractors share their experience and establish a training mechanism: After the methodology is formed, contractors use morning meetings, weekly meetings, and monthly meetings to train on contracting experience. Provide interactive opportunities to answer questions and resolve doubts.
  3. The second echelon of regional contracting should implement the "old with new" model: The second echelon contractors should first intern in the successful area for more than a week, equivalent to pre-job training, and then sign the contracting agreement after in-depth understanding.
  4. A special team led by the boss should provide timely guidance, solve practical problems, and continuously optimize and adjust.
  5. The key to regional contracting is people. Many people believe because they see; with successful cases, it becomes much easier. Choosing people is easier than training people, so it is recommended to dig out excellent salespeople from other brands in the market, inspire their dream of becoming a boss, and join the regional contracting team.

Finally, let me share a real case from 2016 at Jinmailang. In a county in Hubei, when the contracting system was first implemented, many employees jumped up, feeling that the distributor wanted to lay off employees in disguise. Resistance was strong, and the selection of the pilot area, calculation of contracting costs, and communication with contractors all progressed slowly. But the distributor was very determined at the time, and with the support of Jinmailang, they pushed forward through difficulties for three months. Of the first three contractors, two left, and one persisted. Six months later, the last one finally succeeded through his own efforts.

I remember at a morning meeting, that contractor said with emotion: "Being a small boss is different from being a salesperson. The effort is different, and the rewards are different. Earning over 10,000 a month is really not a dream. I want to recruit people and contract another area."

To this day, that distributor has fully implemented regional contracting, with performance doubled. Last year, they started implementing contracting mechanisms for modern channel promoters. There are mixed opinions about regional contracting. Generally, successful people say it's good, and failures say it's bad. Let me repeat what I said at the beginning: No system is perfect; adapting to circumstances and weighing pros and cons is the best strategy.

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