Click the image for details Introduction: Should salespeople push inventory? What if pushing inventory crushes the distributor? Pushing inventory exploits the distributor's reservoir function A recent article described a distributor who gave up a brand they had been operating as a main product for six years and had always been profitable. The reason was that the manufacturer's salesperson didn't care about their survival and just kept pushing inventory. This is a common situation. But should reality be like this? It is a fact. But the fact should not be entirely so. Since the enterprise is the product owner, it seeks distributor cooperation to distribute products. Distribution should have only one main function: the sewer function, which channels products to various places. But because the end of the sewer is the consumer, the flow (i.e., purchase) may not be smooth and might even be blocked, so another popular intermediary function emerged: the reservoir function. As enterprises use this sewer function more and more "smoothly," and some do not treat distributors as partners but merely use their value, they frequently, vulgarly, endlessly, and without regard for the distributor's survival, push inventory, eventually crushing the distributor. Why 1.5 times inventory? Coca-Cola has a 1.5 times inventory channel stocking principle. I believe colleagues in the FMCG industry are familiar with it, but at Coca-Cola, I never heard a precise explanation of why the inventory value is 1.5 times. It might just be an optimal value derived from global Coca-Cola operations. But 1.5 times inventory should basically reflect the distributor's acceptance, a reasonable market inventory level, and the enterprise's ability to alleviate some inventory pressure. Indeed, at Coca-Cola, although this basic standard exists, in practice it was not strictly followed. It was a natural result after both parties negotiated the purchase. Of course, for some major brand enterprises, even if there is inventory pressure, they will provide the maximum possible supporting measures from the factory side to promote and relieve the distributor's inventory caused by the pressure. Not SELL IN but SELL OUT Why can't enterprises push too much inventory on distributors? Because the real sale of goods and collection of payment ultimately depend on selling out (sell out), not on the distributor buying in (sell in), as the sign of sales success. This is also a basic sales common sense. Because many enterprises, regardless of whether the distributor sells, just in a "trade" form, push goods to the distributor and then ignore them, such cooperative relationships will mostly break down in the end. I remember the first lesson when I joined Coca-Cola was to instill this concept: cooperation with distributors should not be trade, not just a trade partnership, but a true partnership, jointly achieving sales performance and work goals through consumer purchases. In reality, many enterprises are actually doing trade relations under the guise of distribution and cooperation. As long as the distributor pays and goods are shipped, the enterprise basically stops caring, and the salesperson disappears. They consider it all done. Since it is trade, not asking about sell out, then at least they should give the trader more market operation fees or support. Once upon a time, Coca-Cola vowed never to push distributor inventory This is a true story. Back then, Coca-Cola already had a high market share and sales in China, and carbonated drinks were always questioned and sales were stagnant, so the sales team's pressure was quite high. The leadership always required monthly performance targets to be met; you couldn't say that if this month's sales weren't completed, next month you'd make up for it. This strategy, common in many other enterprises, was not possible here. This put even more pressure on frontline salespeople. Around the 20th of a certain month, the leadership held a meeting with the sales team, calculated the possible sales for the month, and after summing up, they saw that no matter how hard they tried, there would still be a gap in sales, and performance would not be met! (Of course, in Coca-Cola's sales process, there were supporting market and promotional measures; sometimes a salesperson even held five or six activity policies at once!) There was no way around it; Coca-Cola basically had to complete tasks every month, and we never saw a month where the monthly task was not completed. What to do?! In the end, the general manager, in order not to push unlimited inventory on distributors, rented a separate warehouse outside and issued sales orders, thereby achieving the task! (This means that in the closed loop of sales orders and delivery, the goods were sold out.) Although extreme and even a bit unreasonable, and costly to the enterprise, it was done to avoid damaging the friendly partnership with distributors, to avoid bursting the distributor's inherently fragile "reservoir" function, and to avoid destroying the truly capable channel. Afterwards, when some distributors learned of this, the management and sales teams of the regional Coca-Cola bottling plant earned the unanimous respect of the distributors and strengthened their confidence in cooperating with such a company. Pushing inventory on distributors without limits is like killing the goose that lays the golden eggs; it will definitely end in multiple losses! Even to the point of terminating the distribution cooperation as mentioned in the article, and the entire market collapsing. Although some frontline personnel take preventive measures in advance and have already prepared replacement distributors, such practices, once spread, will also harm the entire distribution channel. Imagine if this article is a true situation, and if the distributor knows it is the brand they cooperate with, wouldn't they be more cautious in future cooperation? In short, manufacturers should indeed not crush the entire channel for a little sales volume! New Distribution will hold the 2019 (5th) FMCG + Internet Conference during the Chengdu Spring Sugar and Wine Fair from March 16 to 18. This conference will focus on the topic "Breakthrough" and conduct in-depth discussions with many brand owners, supply chain service providers, distributors, retailers, and others. Compared to previous conferences, this summit will be fully upgraded. In addition to the original topics such as channel innovation, city distribution logistics, distributor transformation, it will add multiple parallel forums on new marketing cases, IP + FMCG empowerment, community group buying, innovative retail, etc. Through three days of ten high-density, high-quality expert sharing and exchanges, we believe every brand owner and distributor can learn the latest business models, expert opinions, and practical methods, find new tools and methods for their own breakthrough in 2019, and return to the track of rapid growth. Conference Time: March 16-18, 2019 Conference Venue: Chengdu Longemont Hotel, Longfeng Hall Conference Topics 2019 5th FMCG + Internet Conference Date | Time | Venue | Topic 3.16 | Morning | Main Venue | B2B Special Session Afternoon | Main Venue | Regional Market Digital Intensive Cultivation Main Venue | Brand Channel Digitalization Special Session 3.17 | Morning | Parallel Forum 1 | Social E-commerce Parallel Forum 2 | New Logistics, New City Distribution Afternoon | Parallel Forum 1 | How Does Community Group Buying Reconstruct the Value Chain? Parallel Forum 2 | IP Empowerment, Boosting Brand Growth 3.18 | Morning | Sub-venue | New Marketing Open Class Parallel Forum 2 | How Can Distributors Achieve Iterative Upgrades? Afternoon | Sub-venue | New Marketing Open Class Registration Method Registration is now open. Long press the QR code below or click "Read Original" to register. 66% off early bird special tickets are limited to 200 and are selling fast...!** Add the organizing committee staff to register Click "Read Original" for more information -END-