The core of a distributor's business is first survival and development, ultimately achieving profitability, and profit is the only criterion for measuring whether a distributor is excellent. Nowadays, competition in the FMCG industry is increasingly fierce, and intensified market competition will inevitably lead to higher industry concentration and shrinking average profit margins. The opportunities and space for distributor development are getting smaller, and most distributors are facing difficulties in the market, reduced profits, and even elimination. Competition is eternal, but opportunities also exist. For FMCG distributors to survive and develop in the new industrial environment, they must find profit growth points and enhance profitability. Distributors need to have some prerequisites to improve their company's profitability. First, team matching: people first in everything, and performance management is very important. To seek benefits from the market, the compensation mechanism for the sales team should be the vanguard, which is the foundation of every distributor's business development. Second, data must be clear: 'No data, no decision.' Distributors should improve their business indicators to understand and diagnose their own operations, which is also an important prerequisite for improving profits. With these two prerequisites, improving profits can be considered from three dimensions:

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First Dimension: Increase Sales to Drive Growth

Increasing sales is obviously the most core method for performance growth. Many other methods to improve profits we will discuss today are also based on increasing sales. So how can we increase sales? What are the specific methods? Here we will discuss two from a broad perspective: First, from a brand strategy perspective, increase additional sales by representing new brands. Many distributors basically rely on representing new brands for sales growth. This is indeed a feasible method, but in the specific implementation process, it is often not considered thoroughly enough. When a distributor reaches a certain level, they need to consider adding brands that can help the company develop based on existing products. In fact, representing new products is essentially the utilization of channels. For example, when a distributor wants to further break through in performance, they may need to represent a well-known brand to open up network channels, drive their high-profit products, and establish broad network channels. Channels are important intangible assets. With sufficient terminal customer resources, brands will naturally come to you. Second, expand the region. There are mainly two ways: one is to expand to nearby areas based on the existing region, and the other is to find city partners. Both methods increase sales by expanding the breadth of channels. For example, a company originally only served as the general agent for a certain edible oil brand in its city. A few years later, they also obtained the general agency for the neighboring county. In just three years, sales reached tens of millions. Since the company's overall management is at the headquarters, the neighboring county branch only does marketing and is profitable, so average management costs have dropped significantly. Finding city partners is a more convenient method because city partners have existing network channels and products. The two parties can complement each other's resources and quickly improve profitability, but problems are likely to arise during cooperation. Here we have listed two relatively universal methods to increase sales. When relying on these methods to achieve sales growth, we should pay more attention to goal setting and strategy planning. First, set a challenging annual sales growth target. It is recommended to set a target plan of 15%-25% annual sales growth, and then formulate strategies to achieve the target plan. When sales increase, gross profit will increase, and the expense ratio will decrease. Second, we should learn from brand manufacturers' management models and target assessments, breaking down the overall growth target to the whole year, then to each month, each department, and finally to each salesperson. Many distributors often do not have annual goals, resulting in assigning tasks in March for April, and in April for May. This makes salespeople feel unfair, dampens team morale, and affects sales growth. Some bosses have the problem of setting growth targets that are not challenging. In both cases, it is impossible to formulate sales growth plans based on the targets, resulting in failure to increase sales and thus failing to achieve the goal of improving profits. After setting challenging goals, how should we break them down and formulate plans? For example, a company did 8,000 tons of rice in 2019 and wants to challenge 10,000 tons this year, so the company formulates strategies around the growth target of 2,000 tons. First, break down the overall task by product: Xiaomi rice increases by 600 tons, and Changli Xiang, based on industry trends, also sets a growth target of 400 tons. Plus natural performance growth is expected to be about 10%, which is about 800 tons of increment. Finally, some high-end products also increase a bit, adding up to just 2,000 tons of increment. The company in the case formulated targeted strategies based on these breakdown goals, including how to distribute to stores, whether to set additional assessments for personnel, etc., and finally achieved overall sales growth through the growth of different products. So methods are important, but the foundation of increasing sales is to set reasonable growth targets, then break them down to each product, each time period, and each person, and finally equip targeted strategies to achieve them.

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Second Dimension: Control Expenses to Reduce Costs

In addition to increasing sales, we also need to control operating expenses. Mainly consider from two directions: first, start with upstream manufacturers to obtain expense and policy support to reduce our own expense investment; second, adjust channels to reduce operating costs. First, as distributors, we sell products for upstream manufacturers, so generally manufacturers have expense support for the market. How to make good use of the resources given by manufacturers is very critical. As mentioned earlier, sales are the prerequisite for improving profitability. After completing the manufacturer's tasks, we can get support expenses, and even apply for additional expenses. In addition, we can leverage brand manufacturers to strive for special project markets. Once successfully applying for a special project market, the manufacturer's resources will be continuous, of course, provided you have a good plan. Distributors who can complete tasks excellently or even propose promotion plans are very popular with brand manufacturers, and special project markets are usually dominated by mid-to-high-end products with high profits. Applying for special project markets can not only strive for resource expenses but also improve profits, and brand manufacturers' satisfaction will be higher. It can be said to kill three birds with one stone. In the process of distributor operations, manufacturer support expenses and rebates are important components of profits. For example, a company I know had revenue of 50 million yuan last year, net profit of 1.27 million yuan, manufacturer support expenses of 350,000 yuan, and rebates of 150,000 yuan. It can be seen that the expenses given by the manufacturer account for nearly 40% of net profit. In fact, if we distributors leave the support of upstream partners, it will be very difficult to make money, do market, and fight competitors. To strive for manufacturer expense support, we must thoroughly study the manufacturer's policies. On the one hand, use manufacturer resources to help our own development; on the other hand, meet the requirements to get manufacturer support expenses, rebates, etc. To get manufacturer rebates for a long time, we need long-term reasonable planning, which reflects the importance of studying upstream policies. In addition to manufacturer support expenses, we can also directly reduce procurement costs through manufacturers. On the premise of doing the market well, we can try to submit an upgrade plan to the manufacturer, for example: next month's original task is 260,000 yuan, and the upgrade plan target is 300,000 yuan, for which we apply for some special prices. If the brand manufacturer approves, it is generally one or two points, and the profit improvement is considerable. For example, a seasoning brand has monthly rebates, quarterly rebates, and annual rebates. Generally, a prefecture-level city distributor can achieve more than 30 million yuan. Based on this, if all expenses and discounts add up to 3 points, there is at least 900,000 yuan. And distributor bosses ask themselves, how much net profit can you achieve in a year? 1 million or 2 million? Second, in addition to asking manufacturers for profits, we also need to manage channel structure well and improve profitability through channel management. I know some bosses do all channels, but they do not analyze the profitability of each channel through data, such as the payment period and profit margin. In addition, we need to analyze the sales proportion of each channel. For example, a boss's modern channel mainly consists of 6 large stores, with accounts receivable of over 1 million yuan, and after deducting expenses, the net profit is less than one point. Such channel investment should be reduced. Of course, it does not mean not doing it, but we should appropriately reduce resource investment. The same boss found through data analysis that his small stores basically have no receivables, cash flow is very good, and gross profit is as high as over ten points. Such channels should be the core focus. Some bosses also found that during holidays, group purchases are hundreds of thousands or millions, prices are higher than stores, and payment can be settled after invoicing. We should also tilt resources to such special channels. So the adjustment of channel structure is to analyze data and then adjust the channel proportion. Your resources and energy are limited. Where you make money, we should focus resources there. When the sales proportion of profitable channels increases, profits will also come. Another point is the shortening of channel levels. We should try to do direct operation of terminals and get rid of second-tier distributors. Many distributors still do business with second-tier distributors. Second-tier distributors often sell whatever makes money, products with fast turnover, and even sell counterfeit and shoddy products for profit. It is very difficult to get them to promote new products and cooperate in the market, and sometimes they even disrupt your price system. So we should get rid of second-tier distributors and try to do direct operation, especially now that many brand manufacturers require channel sinking. For example, a company originally shipped to a neighboring county 40 kilometers away from the city, but now they have established a branch in the neighboring county. The branch team is stationed locally, and personnel directly go down to townships every day. They developed more than 1,000 terminals, and profits increased by 4-6 points compared to the original second-tier distribution. In addition to profit improvement, doing terminals can also improve your control over channel resources. You have the final say in terminals, so risks become smaller. Therefore, shortening channel levels and sinking down is also very necessary.

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Third Dimension: Optimize Products to Improve Profits

In addition to the above methods, distributors can also improve profits through the management and optimization of product structure. Most distributors have many products with different profit margins, and increasing the proportion of high-margin products can significantly improve overall profits. Take a trading company as an example. In 2013, soybean oil sales accounted for more than 95% of the company's sales. By 2019, soybean oil sales accounted for more than 50%, and the rest was replaced by high-end products such as corn oil, sunflower oil, and olive oil. These high-end products accounted for more than 40% of sales but contributed more than 60% of profits. Some individual high-end products, such as a certain olive oil, accounted for only 2% of sales but 6% of profits. So how to adjust product structure? First, categorize products and use data to determine which products need adjustment; which are those that can further increase sales and profits through cultivation in the future. Second, we should design a table, classify products according to profit margin and sales volume, and then decide specific sales strategies. For example, products with a profit margin below 3% may be products with large sales volume. We should train the team to open up outlets and bring in high-margin products; products with low profit and low sales can be eliminated. Products with a profit margin of 3% to 8% and not too low sales are products that need strategies; of course, products with higher profit margins should be done more. When adjusting product structure, we should also do some special project markets, because high-profit mid-to-high-end products often require brand promotion and consumer cultivation activities. If we use conventional thinking to increase sales of high-margin products, it will be difficult, so we need to set up a special task force to do special project markets and set separate assessment plans. I suggest that when promoting high-margin products, distributors should first be willing to let the business team make money, and also allocate funds to do process indicators and regularly track process indicators. High-end products sell value, not price, so we need to educate consumers to understand the value of these products, so that there will be repeat customers. Similarly, to make money by widening price differences, in addition to increasing the proportion of high-margin products, we can also actively raise the price plate. Many distributors only raise prices when forced by upstream notices, and few distributors take the initiative to raise prices. Because raising prices is not easy, we need to analyze the missing price bands, analyze the resources matched with the represented products, etc., to determine which products have selling points, quality, and price space to support price increases. Raising prices is indeed a troublesome matter, but we cannot not do it because it is troublesome. There are not many shortcuts to improving profits. As distributors, we still need to find ways to actively raise prices. For example, a trading company found through data that a certain flour had a purchase price of 40 yuan and a normal selling price of 45 yuan, but the flour had excellent quality and selling points, so they decided to raise the price. Further analysis of their own product price bands showed that from the retail price perspective, there were mainly 39 yuan, 49 yuan, 69 yuan, and high-end products above 80 yuan. From this, they inferred that there was a missing price band at 59 yuan, so they raised the price of this 45 yuan product to 55 yuan, and the retail terminal sold it at about 60 yuan, increasing the gross profit per bag by 10 yuan. Moreover, because it filled the missing price band, product sales also increased. Of course, raising prices is not easy. For this price increase, the company gave promotion staff and salespeople a commission of nearly 6 yuan per bag, but overall profits still increased significantly. So we suggest that distributors screen products every year and dare to actively raise prices. In today's market, all successful brands are successful with high prices, and few successful brands take the low-price route. Of course, we must also be willing to share the benefits of price increases with your team. Only when the team moves first can profit improvement be promoted. That's all for today's sharing on methods to improve profits. Dear readers, if you have any other methods, welcome to share and discuss in the comment section.