A well-known marketing expert once said: "Those who engage in cross-regional selling are shameless, and those who suffer from it are incompetent." Regardless of how it is dressed up, cross-regional selling is a tumor in the healthy development of a company's sales, differing only in whether it is benign or malignant. Both types require early treatment to prevent harm to health and life. This is a troublesome but necessary issue to address.

Benign Cross-Regional Selling Benign cross-regional selling is normal market circulation with minimal price fluctuations. The solution is relatively simple: acknowledge the issue, state your position, but avoid coercive measures. The main types include:

1. Incidental Cross-Regional Selling. This occurs when a distributor with a wide product range serves end customers without the primary goal of price undercutting. For example, a truck carrying 500 cases might include 30-50 cases from outside the region, which generally does not harm the market.

2. Cross-Regional Selling into Undeveloped Markets. When a market is undeveloped or under development, goods may flow in from outside. Customers seek high margins from new products and do not maliciously undercut prices. Such cross-regional selling can spur the local distributor to improve, but it is not encouraged to happen passively.

3. Border Area Circulation. In areas close to each other, normal product circulation occurs with slight price differences within normal profit margins.

4. Short-Term Inventory Overstock. When a distributor has excess inventory tying up capital, they may sell off goods to recover funds or avoid expiration dates. This is not habitual or malicious, with prices slightly lower but not undercutting, and it is not a long-term behavior.

The above issues have minimal impact on the market. Depending on the reaction of the affected distributor, it is generally advisable to take a clear stance but act slowly, with appropriate control, depending on the manufacturer's management capability. Like removing a benign tumor, there is usually no aftereffect, at most a scar; if left untreated, it could worsen or remain harmless for life.

Malignant Cross-Regional Selling Wherever there are best-selling products, there is cross-regional selling; and among cross-regional selling, there is bound to be malignant forms. Malignant cross-regional selling is like corruption in government agencies; if not addressed, it will eventually damage the entire system. Similarly, if not controlled, it can become the "cancer" of the market. The main types include:

1. Boosting Sales to Earn Rebates. Distributors maintain normal prices in their own territory but disregard others, using direct or indirect (through second-tier distributors) cross-regional selling to boost sales and obtain special policies and rebates.

2. Vendetta Cross-Regional Selling. When two distributors have historical grudges and seek to harm each other, they may use the manufacturer's products as "cannon fodder." This is severe and must be addressed. Typical signs include: normal local prices but undercutting in the rival's market, or malicious quoting with small quantities far below the distributor's net price. This can involve the manufacturer and distributors, or the manufacturer's products being carried by distributors of other brands. This type requires senior management intervention and multi-region coordination.

3. Malicious Incidental Cross-Regional Selling. In territories not their own, distributors use the manufacturer's best-selling products at below-market prices as a wedge to bring in other generic brands, eventually sacrificing the price structure of the best-selling brand to introduce high-margin generic products and gradually replace them.

4. "Killing" Best-Selling Products. When a best-selling product holds a large market share, hindering the distributor's other brands, the distributor may disrupt the channel pricing of the best-selling product with the aim of "killing" it to promote other brands.

The above practices undermine distributors who genuinely want to do well and cultivate the market. For the healthy development of the market, these malignant practices must be resolved.

Why Does Cross-Regional Selling Occur?

1. Historical Issues, Especially Regional Ownership. Before market segmentation, some "old-timer" distributors refuse to accept regional divisions, claiming "this region has always been mine," acting unreasonably.

2. Geographical Proximity. The cross-regional selling distributor is close to the affected area, with close business ties to surrounding terminals.

3. Price Differences. The affected areas generally have higher prices.

4. Policy Differences. The affected areas do not enjoy the same favorable prices, policies, rebates, or hidden discounts as surrounding areas.

5. Habitual Cross-Regional Selling. Some distributors built their business on cross-regional selling, lack a down-to-earth approach, and do not stop when ahead.

6. The Manufacturer's Attitude. Does the manufacturer have the will to solve and govern the issue? Has the problem become severe enough to demand action? Has the contradiction between the shamelessness of the cross-regional seller and the incompetence of the affected party escalated to an irreconcilable level? If so, it must be resolved. To resolve a contradiction, one must first create it; the key to resolution is the manufacturer's attitude, which is the fundamental issue. Everything else is a false proposition.

Which Distributors Are Prone to Cross-Regional Selling?

1. Meritorious Contributors. These are the financial backers from the manufacturer's early stages. They believe they are indispensable and act with impunity, engaging in cross-regional selling without fear.

2. Tycoons. These customers have substantial capital, understand the manufacturer's tactics, and are adept at extracting policy resources. However, once they obtain favorable policies, they become "five-clawed golden dragons," selling everywhere without being pragmatic. They are the bane of loyal and terminal distributors; after others have cultivated the market, the tycoons come in with harvesters.

3. Vagrants. These customers are in transition to becoming regular players, using best-selling products to build their reputation, and are ruthless in undercutting prices.

4. Imperial Relatives. Those who enjoy privileges when systems are not yet sound, holding a "charter of immunity" to do as they please, harming ordinary people.

Wherever products sell well, there is cross-regional selling; wherever there is cross-regional selling, there is price undercutting; wherever there is price undercutting, there is profit; wherever there is profit, there is conflict. The cross-regional seller is shameless, and the affected party is incompetent. When the contradiction between shamelessness and incompetence escalates to an irreconcilable level, the manufacturer's role as referee is crucial.

How Should Manufacturers Handle Cross-Regional Selling?

When a manufacturer has grown to considerable strength, it can no longer ignore the disorderly development of cross-regional selling for the sake of market health. Solutions include:

1. Clear Attitude and Strict Regulations. Start with ideological education, publicize the manufacturer's determination to govern, educate the internal team first ("to conquer the outside, one must first secure the inside"), form a unified understanding, and then continuously instill this into the distributor network through the sales team, creating an atmosphere of strict governance. Use systems and clauses to deeply embed the rules: clarify territories, price systems, and rebate policies. From publicity to action, tell the story that doing the market well brings profit, while malicious cross-regional sellers face detention, imprisonment, life sentences, death with reprieve, or execution.

2. Team Adjustment and Position Swaps. Transfer internal cross-regional selling experts to undeveloped markets, removing the enablers for major offenders.

3. Prevent Major Distributors from Using Policies to Hold the Manufacturer Hostage; Adjust Regional Policies Positively. Cross-regional selling mainly occurs in mature markets. In such markets, total sales volume should be one of the assessment criteria, not the sole measure. Implement product differentiation and promotional rewards to keep cross-regional distributors busy promoting single products and earning money through hard work, rather than dumping goods to exploit major distributor policies.

4. Cut Off the Rotten Arm. Treat customers who have long-term malignant cross-regional selling affecting overall market health as tumors; make an example of them to deter others and eliminate future problems.

5. Establish an Inspection Team. Target the "imperial relatives" first to give ordinary people hope, and publicize the action widely to create a positive story.

6. Match Actions to the Manufacturer's Strength. For example, cancel credit limits, require cash on delivery, demand deposits or cross-regional selling funds, deduct rebates, reduce policies, cut off policies, cut off single products, or cut off supply entirely. Use whatever means are appropriate.

7. In the Age of Information, Collecting Evidence of Cross-Regional Selling Is Not Difficult; the Key Is Classification. In the initial stage, handle gently: if a cross-regional selling product is found, reduce its policy; if found again, cut off its policy; if found again, cut off its supply; if found again, reduce policies on all products; if found again, cut off several products. For those who refuse to change despite repeated warnings, when other distributors in the region can reasonably structure and better develop, let the offending distributor be "frozen out" and slowly "die of cold."

Cross-regional selling is difficult to resolve, but not impossible. The key lies in the manufacturer's attitude. Distributors ultimately do business to make money; they are downstream. If the upstream water is clear, the downstream will not be muddy.

Source: "Frozen Food" Magazine, July Issue -END-