Click the image for details Since the Spring Festival of 2017, the message I've received from manufacturers is: abandon the pressure for incremental growth, focus on profits. This is both a tacit acceptance of the reality of three years of failed growth attempts and a response to pressure from channel partners, aiming to stabilize channels by forgoing growth targets. Channel stability is paramount In 2016, signs of channel instability emerged. First, a few major distributors collapsed, and some dealers gave up their businesses; second, there was a trend of dealers switching to major brands, which was rare before and is intensifying. Previously, it was manufacturers changing dealers; now it's the reverse, indicating channel instability. Why are channel partners unstable? First, major brands have lost their ability to drive sales; dealers used to follow the practice of "major brands bring traffic, small brands bring profit." Second, after three consecutive years of inventory pressure, dealers of major brands are generally not making money. While most dealers can tolerate one year of no profit, two or three consecutive years erode both strategic will and financial capacity. Third, major brands have not excelled in product upgrades, and traditional products are aging. Under these circumstances, major brands have become a "chicken rib" for dealers—dispensable but not quite. When a few dealers say they quit, manufacturers remain calm. But when it happens in numbers, manufacturers are forced to concede. Channel stabilization means stabilizing channel partners first, then seeking sales breakthroughs. The core is to reduce sales pressure and focus on dealer profits. Manufacturers are losing their leadership role I've always said that in China's manufacturer-dealer relationships, the customer is not God. Managing dealers actually places them in a subordinate role. Thus, the manufacturer-dealer relationship is not transactional but managerial, with dealers being passive. Manufacturers' strength in this relationship stems not only from brand scarcity but also from the fact that major brands have indeed led dealers' progress. While a few dealers have self-improvement capabilities, most rely on manufacturers to guide them, and dealers generally acknowledge this. Before 2013, manufacturers did lead dealers' progress. But from 2014 to 2016, this changed; manufacturers lost their direction. My assessment of manufacturers during this period: no direction, old methods. Although industry volume had peaked, manufacturers still pursued growth, pushing the distorted method of deep distribution—inventory loading—to its extreme. Here, I must emphasize that deep distribution and inventory loading are not inherently linked; inventory loading is a distortion of deep distribution. Deep distribution, by its original intent, does not support inventory loading, but the distorted method became the primary approach, leading so-called deep distribution to a dead end. That's the tragedy of deep distribution. Abandoning growth doesn't mean abandoning sales On one hand, manufacturers may indeed realize there's no room for growth, so in 2017, many companies no longer treat sales volume as the primary KPI, but there's consensus on preventing sales decline. Abandoning growth means significantly reducing pressure on dealers, which is the simplest measure to stabilize them. Of course, whether this translates to dealers is questionable, as frontline staff may resort to old methods if no alternatives are provided. Profit-oriented breakthroughs are key In the past three years: no direction, old methods; in 2017: direction, but no methods. I've shared this observation with many, and it resonates. Why do I say "direction but no methods"? In 2017, many companies have shifted to efficiency and profit orientation, which is correct. However, how to sell without sales pressure? As far as I know, there's no mature methodology yet. I've been following this since the second half of 2016, and while I see some signs, there's still a long way to go before a methodology forms. So, we see that in some companies, top management is changing, but the frontline hasn't. The change in direction at the top hasn't driven changes in methods at the grassroots. I've proposed that the industry still has a chance to turn around, as there's immense opportunity in new methodologies. How to stabilize? Finally, back to stabilization. Stabilization implies previous instability and no good solution yet; it's about maintaining the status quo passively. When will we no longer need to stabilize? Only when the new marketing system achieves a major breakthrough, making efficiency and profit orientation a reality. If there's no way to stabilize, we need stabilization. First, there must be channel profits—not necessarily making money, but at least not losing money, or not losing consecutively. Adjusting product structure is a long-term measure, unlikely to yield short-term results. That's a breakthrough tool, not a stabilization tool. To stabilize dealers, is it about manufacturers directly providing policies that turn into profits, or creating profit space? From my observation, without changing operational methods, manufacturer-provided profits will be used for more aggressive promotional activities, and policies won't become profits. I believe that rethinking sales methods can unlock huge profit space. Currently, dealer profits are eroded by three major areas: First, excessive promotional expenses, a result of long-term over-promotion; Second, excessive product return rates, also a result of long-term inventory loading; Third, excessive delivery costs (last-mile delivery). These three areas have significant room for savings. If done well, gaining a few percentage points of profit is quite possible. From what I know, some have achieved it. If you haven't found a way, it doesn't mean others haven't either. Where are the solutions? They're on the front lines. Positioning expert Trout said in Marketing Warfare: "Strategy is the consistent alignment of successful tactics." So, how to discover successful tactics? Top executives at the vice president level need to go to the front lines. A boss once said that when he lacks ideas, he has three options: go to a bookstore, consult experts, or go to the front lines. -END-