---
title: "Online Encroachment, Offline Weakness: 'Sissy' Enterprises Will Die in 2016!"
description: "Traditional FMCG companies are facing declining sales as online channels disrupt offline dominance. To survive, they must strengthen offline channels while leveraging online engagement, using dual teams and key principles to drive sell-through."
author: "方刚"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2016-05-20"
language: "en"
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---

# Online Encroachment, Offline Weakness: 'Sissy' Enterprises Will Die in 2016!

> Traditional FMCG companies are facing declining sales as online channels disrupt offline dominance. To survive, they must strengthen offline channels while leveraging online engagement, using dual teams and key principles to drive sell-through.

***Content Summary:***
* Traditional enterprises: Stop complaining about weak performance!
* To gain online popularity, you need a powerful offline presence.
* Consolidating offline: effective strategies for growth.

Before discussing today's topic, let's look at a set of data from the FMCG industry, which might reveal that the current climate is not good! Wahaha's sales declined 7% in 2014 compared to 2013, and the decline was even steeper in the first half of 2015. Master Kong's first quarter of 2015 saw a year-on-year decline of 16.56%. In the first half of 2015, Uni-President dropped 2.9% year-on-year, and Shuanghui fell 14.53% in the same period. Coca-Cola declined 3% in the same period.

In the first three quarters of 2015, national soft drink sales volume was approximately 130 million tons, a year-on-year increase of only 4%. In 2014, this growth rate was 13%. And from 2001 to 2011, the average annual growth rate of national soft drink sales exceeded 20%.

In the past two years, we often hear two terms: online and offline! We also frequently hear claims that online will disrupt offline, or that offline is being robbed by online... Many times, it feels like online tactics are seen as high-end, while offline methods are looked down upon or abandoned, creating a divide between the old and new worlds.

Today, let's use the old and new worlds to describe online and offline: the new world represents emerging brands with internet attributes! The old world represents traditional brand camps.

Regardless of which world you exist in, there is a common factor for survival: sales volume!

**In fact, the logic for generating sales in the two worlds is quite different:**

1. Traditional sales are being hijacked.

**The basic logic for FMCG sales = number of outlets * sell-through rate!** In the old world's sales logic, outlets (channels) are paramount. Note: outlets (channels) come with their own traffic! Sales opportunities arise from the chance purchases of people entering the store.

Different consumer tiers lead to different outlet levels; different consumer groups enter matching outlets, and with stable outlets, sales naturally form brands at certain price points.

Sales generated by this logic are closely related to the quantity and quality of outlets, market territory size/wealth! This has led to many FMCG brands using deep distribution (co-marketing) models for urban fine cultivation, then expanding to rural areas with vehicle-based sales visits and fine cultivation!

In the traditional world's sales layout logic, to chase more sales, the sales system or team would lay out more outlets and territories. When expansion reaches a limit and there are no more territories to expand, not only does sales pressure increase, but they suddenly find themselves being robbed from behind!

At the 2015 annual meeting, Wahaha's Zong Qinghou grandly announced: "Youth accelerates, the king returns, re-attack first- and second-tier cities!"

How are traditional FMCG giants being robbed?

Traditional enterprises' sales logic is built on a channel dike constructed from outlets, built on the outlets that the enterprise's management reach can touch!

Today, the structure of urban and rural outlets has changed significantly: new types of outlets are emerging in various forms. Traditional small and medium outlets, represented by mom-and-pop stores, have gradually been eroded by new modern outlets such as KA, chain specialty stores, CVS, community outlets, e-commerce, micro-commerce, and O2O, especially in urban markets!

For example: In many cities, street-side stores are decreasing, while family service stores under every building (or even upstairs) in communities are increasing. These stores come with O2O functionality and cooperate with many city-level B-end distributed e-commerce platforms! They don't need to stock up themselves; store owners place orders on the platform, and wholesalers deliver directly!

Traditional outlets not only see their sales share decline, but their contribution to brand image also shrinks significantly!

Another example: Beer sales in restaurants once contributed up to 40% of total sales, but now it has dropped below 35%, and annual sales per store are unpredictable, with the possibility of closure at any time!

These emerging modern outlets often become blind spots in the management perspective of traditional brands, gradually creating ant holes in the channel dike!

2. The different logic of online marketing.

**The basic logic for FMCG online sales = number of fans (traffic) * activity level!** In the new world's sales logic, fans (traffic) are paramount! There is no place for outlets (channels) in this logic.

This approach, which penetrates and bypasses outlets to go directly to consumers, siphons off traditional outlet sales while using youthful, cute, and fashionable communication methods to differentiate from old-world brands! Many shout online slogans while doing offline channels! They use the internet's guise to distinguish themselves from traditional FMCG brands.

The two worlds will give rise to three types of brands: the first is internet-native brands, characterized by shouting online and selling online; the second is internet-composite brands, characterized by shouting online and doing offline; the third is internet-outsider brands, shouting offline and doing offline.

Regardless of the world, from a sales contribution perspective, offline outlets remain the main contributor to FMCG sales! Unless you are a native internet brand, traditional enterprises without strong offline outlet control will also have online popularity but no offline strength!

**Online gathers popularity, offline requires strength. How do you build a powerful offline channel?**

To date, almost no FMCG enterprise dares to abandon their existing outlets and directly transition to online! Of course, pure online sales FMCG brands almost don't exist either.

1. Two teams to conquer the world!

Traditional FMCG success is mostly built on channel outlet teams constructed through deep distribution or deep co-marketing models. For large brands, this team is often tens of thousands or even hundreds of thousands strong, guarding mainstream sales! Transforming this group is a massive project, and directly moving them to compete for incremental sales in the new world is extremely difficult!

For traditional FMCG enterprises, a safer approach is to have two teams: one to capture mainstream sales, and one to lay out future trend brands!

One team uses human-wave tactics in channels and outlets; the other is a special forces team for fans and mouse clicks! From a brand perspective, the marketing department has a team guiding online fan aggregation. From a sales perspective, one team captures mainstream sales, and another captures trend sales! From a channel layout perspective, incremental brands (varieties) re-lay out distributors!

Online gathers fans, offline captures outlets (channels)! Online can shout, offline can do! Trends attract attention, mainstream repairs the earth! Update your channel classification standards, sweep the streets offline, sweep the web online! Offline outlets still rely on deep distribution (co-marketing) street-sweeping iron army support; online outlets establish a supplementary network, with platform e-commerce, city distributed e-commerce, community e-commerce, and other new outlets handled by another team!

Quickly update your traditional methods and equip new tools! For example: Many FMCG enterprises play "open the cap and win a prize," often struggling with prize ratios, redemption processes, uneven distribution, etc. Now, QR code-based redemption not only allows instant redemption but also enables entertainment features like group red envelope splitting and lottery shaking at drinking venues, while still controlling redemption ratios for distributed products...

And many enterprises still use paper visit forms, POP, traditional visual merchandising props, etc...

When products or brands are activated, terminal operations or performance achievement will be helped! But the dream of ultimate products is often unattainable or not immediately achievable for the FMCG industry, especially for frontline salespeople who must face the reality: cursing the brand department while doing the sales department's hard work!

2. Execution often becomes a means to compensate for brand shortcomings!

From the frontline execution perspective, the three key factors affecting sell-through are share rate, control rate, and visit rate. Share rate is usually calculated by region; a brand's share rate is the ratio of its sales to the regional category market capacity. The higher the share and control rates, the easier sell-through becomes.

Among these three factors, visit rate is the most important. In the hot summer, even salespeople hope to work in a cool and comfortable environment. But after product distribution, maintenance is needed. Under such conditions, process management and incentive measures for salespeople are necessary. If salespeople neglect terminal visits, their products will inevitably be suppressed or covered by competitors.

Terminals are always in close combat; when you're not looking, competitors' salespeople have already damaged your terminal image and hindered product sell-through. Without these, achieving sell-through becomes even harder.

Visiting customers and maintaining relationships—fully implementing these three factors is not easy. If all can reach above 80%, the sell-through problem will definitely be solved.

"Our product is priced higher than competitors, has no advertising, and few market policies, so terminal owners don't want the goods." When a product faces sell-through difficulties, salespeople commonly complain like this. This is exactly when strong push from salespeople is needed, and they must adhere to the following four principles.

3. Four principles to insist on for sell-through.

The primary principle is the "point-line-plane" principle. First, do well in one terminal store or image store, then expand to a street, then radiate to a region, and finally build a national brand.

Second is the 80/20 principle. We usually think that 80% of sales come from 20% of outlets, but that's not the case. Large supermarkets emphasize pull, while mom-and-pop stores emphasize push. These 20% of outlets only serve to radiate the business district, influencing 80% of sales and profits.

Third is the matching principle (circle-layer capture). Channel layout should match product positioning. High-end products should appear in high-end venues to showcase their identity. Evergrande Spring Water's sell-through problems were caused by its distribution in circulation and convenience store channels.

Finally, the "mushroom strategy" principle. All strong brands have followed this principle: first, select and occupy the most attractive target regional markets, then select and occupy less attractive regional markets, and then gradually radiate nationwide. Wahaha, Master Kong, and Wanglaoji all developed along the route from advantageous markets to balanced markets to disadvantageous markets.

One last point: today's sharing focuses on the FMCG category, and may not apply to other industries! (For more exciting content, see in-group sharing and interaction)

Today's sharing guest, Teacher Fang Gang, currently serves as Marketing Director of a well-known beer company. He has many years of sales management experience and has repeatedly directed regional marketing battles such as "small to big, channel kill." He is also a contributing writer for several well-known media outlets.

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