Click the image above for details Recently, I've noticed a very interesting problem: the market environment is poor, and distribution business is hard. That's the truth. As distributors who have深耕 the FMCG industry for years, we are well aware of the market situation, yet we still follow the old path. In the 1990s, others began to intensively cultivate the market, going door-to-door to deliver goods and building close ties with small terminal shops; while you sat in your store, waiting for customers to come and place orders. In 2012, Tmall's Double 11 transaction volume exceeded 10 billion yuan in a single day. Others started online small shops, seeking new breakthroughs; while you just sighed that online business is profitable, still sticking to the old ways. In 2016, B2B platforms like Alibaba Retail Link and JD New Channel were in full swing. Others either transformed or joined; while you were just surprised that small shops could order so easily, still following the old route of vehicle sales. ...... Why does this happen? Many distributors have lost the courage they had when starting their first venture. Facing a volatile market, they only want to avoid risks. Every time a new change comes, they adopt a wait-and-see attitude. By the time they want to seize the opportunity, it's already gone. During this period, I've come into contact with many successful distributors. In a market where "business is hard" has become a catchphrase, their businesses are getting better and better, rising against the trend. They all share a common trait: the courage to seek change. They have ideas and thoughts, dare to act, and even dare to start a second venture. A few days ago, New Distribution interviewed a distributor who "started a second venture": Li Xingyou, general manager of Dongguan Hongguan Food Trading Co., Ltd. In just 3 years, he achieved nearly 7-fold growth. How did he seize the opportunity in the market gap and become a major distributor? I hope his experience can bring some insights to other distributors.
-01- Seizing the Short-Shelf-Life Trend, Starting a Second Venture Before starting his own business, Li Xingyou was a salesperson for manufacturers and distributors, working on the front line for five or six years. 2012 was a turning point for him; he started his own business and established Dongguan Hongguan Food Trading Co., Ltd. Li Xingyou told New Distribution that in the first few years, Hongguan Food was just going with the flow, doing whatever was easy, without a clear direction. Annual sales hovered around tens of millions, stagnating. Although the business was not small, he clearly felt that this kind of business could not sustain growth; it wouldn't see significant increases. Whether for company growth or industry development, you must find a new growth point. Coinciding with the rise of short-shelf-life products, Li Xingyou, with his market insight, believed that short-shelf-life products would definitely be a future trend and a new starting point. So in 2016, Li Xingyou began his "second venture," concentrating the company's energy, resources, and time on short-shelf-life products. When he first started, he faced skepticism: the shelf life was too short, prone to near-expiry products, and many terminals were reluctant to accept them. He had to constantly explain the trend and provide after-sales guarantees. Li Xingyou told New Distribution that there are three key issues to note when doing short-shelf-life products well: First, choose the brand. The market for short-shelf-life products is highly homogeneous, so choosing the right brand is crucial. There are three criteria for brand selection: 1. Aligned goals, optimistic about the short-shelf-life direction; 2. Excellent product quality; 3. Brand power that can endorse. Brand promotion is very important. With the brand endorsing, plus Hongguan's professional advantages, the synergistic effect is very obvious. Second, choose products carefully, not blindly chasing bestsellers. Starting with packaging, taste, and quality, only when all three aspects meet the requirements will Hongguan operate them in the market; Third, prioritize, have main push products, and then extend to other products. Establish benchmark products and shape the image of being a pioneer in short-shelf-life products. Through this product selection strategy, Hongguan Food has now established strategic cooperation with more than ten brands, including Haoshi, Jinguan, Paoba, Falizi, Danfu, Laiyikou, Peppa Pig, Maidelong, etc., with 1,900 SKUs. In addition to strict product selection, the key to winning the market for short-shelf-life products lies in efficiency and service, so Hongguan Food has also put a lot of thought into product sell-through. In terms of timeliness, the company is equipped with 60 logistics vehicles and 12 delivery vehicles, agreeing on delivery times with terminals and delivering on time to ensure the timeliness of the logistics process. In terms of orders, salespeople calculate an estimated quantity with customers and ship according to that estimate. Li Xingyou told New Distribution that in Hongguan Trading, there is no situation where salespeople force inventory on customers. Customer orders are always based on demand. If an order exceeds five pieces, the reason must be reported, and he signs off, greatly reducing returns and exchanges. In terms of promotion, provide customers with the best visual merchandising. When there were no display cabinets in the market, Hongguan started making its own display cabinets, actively creating consumption scenarios and attracting a large number of customers. In terms of service, in addition to daily visits and organizing displays, they also record in detail the restocking time, product shelf life, terminal issues, and the salesperson's problem-solving methods and customer feedback. By implementing a focused strategy, in just three years of the "second venture," Hongguan Trading's sales achieved a 7-fold leap, becoming a major distributor in the local short-shelf-life category.
-02- Cross-Industry Cooperation and Refined Management The固化 of thinking and models has led many snack food distributors into a misunderstanding, thinking that snack food has boundaries and that selling to small shops and supermarkets is the best choice. But Li Xingyou has his own unique view: Under the influence of the internet, the channels for selling goods are increasing and becoming more fragmented. Fragmentation gives distribution business more imagination, and channels have no boundaries. Hongguan cooperates with a cosmetics company that has 3,000 offline stores, relying on its self-built beauty APP to sell snack foods. The cosmetics company's consumer group is young women, who mostly like to eat snacks, so the consumer groups match. At the same time, this consumer group is not very price-sensitive and has a large demand, requiring 5-10 shipments per month, with each shipment exceeding 5,000 pieces. But it's worth noting that for such users, products must be changed regularly; young groups like products with a sense of freshness. Not only that, Hongguan also cooperates across industries with tea shops and restaurants. Through tea shop staff's daily customer maintenance, they promote our products. For example, when customers are tasting tea, they serve pastries for customers to taste, and when staff post on social media, they include our products. Tea shops can sell hundreds of pieces a day during peak times, and they can also earn the price difference. The same goes for restaurants, especially Western restaurants and bakeries, where short-shelf-life products can be used as desserts. Many hotels have breakfast, and the bread and toast they use are often industrialized. Distributors in the catering channel can definitely dig deeper. They can even make customized gift boxes; as long as there is demand, distributors can treat it as an opportunity. In Li Xingyou's view, the snack food category has no channel boundaries. As long as you seize opportunities, you can spark with any industry, such as beauty, catering, etc., creating great imagination and new ways of selling. In addition to cross-industry cooperation, Li Xingyou has also established a mechanism for internal organizational management. He established a bonus system, set stage goals, and corresponding reward ratios for different stages. In addition, Hongguan has established a key account system, segmenting channels and setting benchmark key accounts. Dedicated personnel are responsible for these key accounts, providing services according to customer needs, and becoming a one-stop supplier for the snack food category. Through this approach, Hongguan Trading covers more than 3,000 outlets, including small shops, KA supermarkets, convenience stores, and several cross-industry cooperation channels.
-03- Aiming at Segmented Fields, Doing Category Distribution! When the business reaches a certain scale, in addition to business management, internal management must also be grasped. Talent pipeline construction, financial performance visibility, departmental process linkage—these become top priorities at a certain scale. To this end, at the beginning of 2020, Hongguan Trading introduced "Zhoupu Data" to digitally manage business, warehousing, distribution, and finance, making the entire business process visible and quantifiable, using data as a lever to improve the company's overall operational efficiency. Regarding the future development direction of distributors' business, Li Xingyou's thinking is also clear. Hongguan Trading's positioning is to be a pioneer in the short-shelf-life field and a category distributor in the snack food field. A category distributor, based on a specific vertical category, deeply cultivates the terminal market, obtains more profits through the product structure under the category, and becomes a localized supplier for that category. The advantages of category distribution are: First, through brand portfolio, gain more say with manufacturers and terminals, reducing operational risks. Many distributors do not have alternative brands. Once manufacturers introduce policies unfavorable to distributors, distributors can only bear the losses. Similarly, relying on only one brand makes it difficult to have influence at the terminal. Second, doing one-stop category distribution makes customer stickiness stronger. When you achieve coverage of a certain category, customers have to cooperate with you; they cannot completely abandon a category. Third, use multi-brand matching to achieve large-scale distribution. Use product matching to drive sell-through and distribution, using one fee for promotions of multiple brands, greatly reducing cost investment. In New Distribution's view, there are two paths for category distribution: One is the path Hongguan Trading is currently taking: by insight into market trends, targeting the segmented field of short-shelf-life products, deeply cultivating with a segmented product, gradually opening the market, and then becoming a pioneer in the short-shelf-life field, driving sales of a series of snack food products. The other is the path most mainstream distributors are taking: representing multiple well-known brands, opening channels through multiple first-line brands, and then doing deep distribution. Then, by adding peripheral category brands, they establish barriers for category distribution. In the category, others cannot replace you; manufacturers must enter the market through you for distribution. These two methods have their own advantages and disadvantages. The former has relatively higher operating costs, requiring continuous investment of personnel, resources, and energy in the early stage, but after the market opens, customer stickiness is strong; the latter's advantage is that it can quickly and efficiently achieve network coverage, but the disadvantage is that customers recognize the brand, not the distributor.
In conclusion: Li Xingyou told New Distribution that in his view, business expansion is nothing more than three directions: First, expand channels, deeply explore distribution areas, and strengthen outlet development. Outlets are not limited to circulation small shops; anywhere that can sell goods is an outlet. The channel boundaries of the FMCG industry can be broken, and cross-industry cooperation may generate greater sales space. Second, increase brands, focus on a specific category, and operate deeply. Through product portfolio and brand portfolio, gain more say upstream and downstream, and become a localized supplier for that category. Third, increase categories, and become a full-category supplier around network channels. Deeply cultivate channels, gradually seize shelf space, and become a one-stop supplier for all categories in circulation stores. Whichever direction, it is an opportunity worth exploring for distributors. Today's distribution industry changes every year, with new platforms emerging constantly. Especially under the impact of internet new retail, distributors must find a direction, continue professional operation, and survive the industry's "winter."