---
title: "Qince Liu Zhao: How to Use Digitalization to Cut Costs Without Reducing Efficiency?"
description: "At the 5th China FMCG Conference, Qince CEO Liu Zhao delivered a keynote on using digitalization to reduce costs without sacrificing efficiency. He emphasized the importance of fine-grained management of personnel, customers, and expenses, and highlighted the need for data-driven decision-making in a challenging market."
author: "刘昭"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2023-10-18"
language: "en"
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# Qince Liu Zhao: How to Use Digitalization to Cut Costs Without Reducing Efficiency?

> At the 5th China FMCG Conference, Qince CEO Liu Zhao delivered a keynote on using digitalization to reduce costs without sacrificing efficiency. He emphasized the importance of fine-grained management of personnel, customers, and expenses, and highlighted the need for data-driven decision-making in a challenging market.

From October 9 to 11, the 5th China FMCG Conference and the 1st China FMCG Distributor Conference were successfully held at the Shenzhen Denghui International Hotel. Over the three days, more than 1,500 FMCG industry professionals from across the country attended, and over 80 speakers delivered insightful presentations.

On the afternoon of October 9, Mr. Liu Zhao, CEO of Qince, was invited as a special guest and delivered a keynote speech titled **"How Can Digitalization Cut Costs Without Reducing Efficiency in Today's Enterprises?"**

To this end, New Distribution has compiled the highlights of Mr. Liu Zhao's speech (with edits) for our readers.

At the conference, everyone asked about new opportunities and growth points. September data looked decent, and there seemed to be signs of recovery, but don't rush—wait a bit longer.

Our stance is that during market booms, you should be energetic, seeking new markets, new consumption, and new channels. But at this stage, we need to focus on market share, sales volume, and securing shelf space and displays.

**As the tide rises and falls, when it rises, it's about who gets up early; when it falls, it's about who has deeper internal skills.**

**In other words, deeper internal skills mean achieving cost reduction without reducing efficiency.**

Qince has worked across many industries, and FMCG is not the most competitive. If you don't believe me, look at this year's digital 3C and home improvement materials sectors—you'll see how fortunate you are in this industry. Of course, the overall environment is getting more competitive, so we might as well start competing with ourselves.

There are several issues that weren't given much attention during growth but must be addressed now.

**Three Questions for Fine-Grained Personnel Management**

First, regarding personnel management, there are three questions.

**Question 1: How many people do we actually need?**

Many companies repeatedly ask us: How many people should we deploy in the market? Is there a scientific basis?

How did we calculate manpower before? If this year's performance is expected to grow 15%, we increase labor costs by 15% too. But is that method scientific? Clearly not.

With economic downturn and increasingly tense labor relations, every hire must be justified—is it worth it?

**Question 2: If performance indicators are set but not met, is there attribution analysis and how to improve?**

Many companies set goals arbitrarily—the boss says a number, like doubling this year.

When performance targets aren't met, in our digital field, we call it attribution. Is the task set scientifically? If the task is scientific, is there analysis of why it wasn't achieved? Many sales directors just throw up their hands and say, "The market is bad this year."

**Question 3: Is the simple base salary + commission model sufficient to drive personnel?**

The base salary + commission model is becoming less effective in motivating frontline employees. You think you're giving high commissions, but employees think, "Maybe I'll do less and earn less—that's fine too?" They'd rather slack off if possible.

What are the solutions to these three questions?

This is Qince's answer based on actual conditions in different industries. Different industries have different indicators; we need to understand the meaning of each indicator more scientifically, and how to attribute and improve each one. A complete indicator system helps enterprises achieve comprehensive fine-grained management, truly enhance internal skills, reduce costs and increase efficiency, and save unnecessary expenses. How many regions does one employee cover? Are there boundaries between regions? Which tasks are assigned to individuals, and which are not? We had a client with 20 people in one city; after dividing regions, 15 were enough. The company saved the cost of 5 people while performance remained unchanged—that's what we mean by cutting costs without reducing efficiency. The base salary + commission model is correct, but what does the commission look like? For different categories, new vs. old products, different prices, different tiers, shouldn't bonuses differ? Can salespeople clearly calculate their earnings? What products should they sell to earn more? This requires more fine-grained management and more complex systems to support it.

**Three Questions for Customer Management**

Besides personnel, customer management also has three questions.

**What is your store coverage rate?**

**In different stores, how many shelf facings do you have, and in what positions?**

**Stores change 10-20% annually—are your store records updated accordingly?**

Here's an example. We once served a very large brand company. Once, we accompanied headquarters leaders to a small town to check outlets. The system showed 20 paid outlets, but after visiting, we found none existed. The stores had closed long ago, yet fees were still being paid every year. This is a very real case.

How many outlets does a company cover? What are the profiles of these outlets? In different outlets, how many facings do you have? More importantly, retail outlets change every year—have you updated your data? Are you still investing in stores that have closed? We use third-party data to estimate market share for companies. In a given area, how many outlets sell snacks, beverages, condiments? How many outlets do you have? Which regional director is doing well? Which region has more potential? You should judge based on market share, not absolute sales volume.

Digitalization has reached a new stage. All brand companies and distributors know that retail outlets are their true customers, and they all incorporate this data into their systems, but they still need salespeople to visit customers on-site. In tech and internet fields, the term "sales" is no longer used; instead, "operations" is used. What is operations? Behind operations is data accumulation: What kind of store is this? What tags does it have? What operational actions will I take for users matching certain tags? We often see ads in our WeChat Moments—ads there are more precise than those on Toutiao because WeChat has over 30,000 tags, tagging each person with different profiles. We call this operations. Using a digital system to tag your outlets and perform operational actions is what we do.

**Three Questions for Expense Management**

Besides personnel and customers, there's also expense management.

**Are you still simply allocating expenses to distributors based on sales volume, while deliberately delaying expense reimbursement?**

**Are all expenses actually spent on the market, and how real are they?**

**Are expenses invested in different stores and projects at different times reasonable and effective?**

Only after working in the FMCG industry did we realize how easy life is here, because expense management is extremely simple. Most companies manage expenses by saying, "You bought this much last year, so we'll allocate this much this year." That's basically it. If these expenses are truly invested, they can bring good returns; cutting unnecessary expenses is cost reduction and efficiency improvement.

This year, most brand companies' digitalization focus is on expense management. For example, flexible, rolling budget models—managing expenses monthly rather than quarterly or annually, and allocating next expenses based on actual conditions. Many brand clients have double-digit growth, but distributors haven't paid for goods; it's credit extended by the company. Shouldn't you approve available budgets based on actual received payments? Have we refined and made scientific our expense classification, categories, and entire activity management process? Can we speed up distributor reimbursement? Many companies still see business growth this year, but how much inventory have they pushed onto distributors? Distributors are already struggling—can we give them more expenses in such difficult times? With hundreds of market activities daily, which should be done and which shouldn't? Is there system and data support for development? We served a company that hired 60 young women to manually review photos one by one—can this cost be reduced? Managing expenses well and ensuring on-site activities are executed truthfully and effectively is a major focus this year.

After managing personnel, customers, and expenses, I'd like to talk about IT investment. China's software spending accounts for about 0.1% of GDP, while the US is about 10 times that. It seems Chinese companies prefer spending on employees rather than digitalization—that's the current situation. But from a development perspective, this trend is changing. From 2021 to 2023, China's software spending grew at an average rate of 18%. This growth rate is very fast globally; the global rate is 12.5%. If your growth rate isn't 18%, you're below China's average. Even at this growth rate, it would take 40 years for China's IT investment level to reach the US proportion.

How useful is digitalization? KFC started opening stores in China in 1987 and now has over 9,000 stores. Luckin Coffee was founded in 2017 and this year surpassed 10,000 stores. Luckin recently launched a 9.9 yuan coffee. Look at Luckin's financials—both revenue and profit are growing. How? Because the 9.9 yuan coffee has low gross margins, while high-margin coffees haven't been discounted. A customer buys a 9.9 yuan coffee and also brings a 20 yuan coffee for a friend. Luckin uses digitalization to perfect the 9.9 yuan coffee. It seems they're selling coffee cheaper, but actually they're making more money—that's cutting costs without reducing efficiency.

Finally, I'll leave you with a sentence. What's this year's theme? I think it's not growth, **but how to rely on digitalization to build a solid foundation for your business in this market environment.** Manage people well, manage customers well, manage expenses well, reduce costs, and increase efficiency.

**Add the assistant to get Liu Zhao's presentation PPT**

_PS: For those interested in the on-site speech content, please follow the WeChat official account of New Distribution for recent posts. We will compile and publish all speakers' speeches for our readers._

_Click **Read Original** to see more about the 5th China FMCG Conference and the 1st China FMCG Distributor Conference..._


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