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Distributor Transformation Path 6: Branding
Without a brand, there is no core competitiveness, and everything falls into speculative or opportunistic business confusion.
Branding here refers to how distributors build their commercial brand and market position.
The issue of distributor branding is not new; it's a common topic. However, for many developing distributors, how to actually implement brand management and operations remains vague and confusing.
1. Branding Development Cannot Be Separated from Core Competitiveness Positioning
When distributors engage in branding, they must first determine what they can and cannot do, their competitive advantages, and the value and services they can provide to partners, based on their own strengths and weaknesses as well as external opportunities and threats. A clear positioning of core competitiveness can help distributors quickly enter the fast track of branding development, rather than lingering in confusion. It can also promote rapid resource integration, create a unique and differentiated business platform, and highlight the organization's core competitiveness, thereby winning the attention and trust of partners and consumers, and maximizing value in the industry value chain.
Let's share a few cases:
Case 1:
Hebei Shunxin Famous Liquor City is impressive due to its unique advantages in the group-buying channel. When this liquor city was established, it had no products to sell and no network. Should it become a second-tier distributor or a general agent for a second-rate product? When determining the development direction, General Manager Xu faced a choice. "If we had chosen one of those options, we probably wouldn't be where we are today," he said. After careful consideration, Xu did not choose the traditional distribution model but instead opted to build a famous liquor city, entering through the group-buying channel. Under this positioning, all activities of Shunxin Famous Liquor City revolved around group buying. Within two years, Shunxin Famous Liquor City became a special distributor for Wuliangye, Moutai, Jiannanchun, Luzhou Laojiao, and regional famous liquor brands. In his view, building the famous liquor city was the first step, laying the foundation for the company's development. In the future, they aim to become agents for mainstream brands, and current achievements will be future capital.
Case 2:
Hefei Xiqingfang's business model and core competitiveness revolve around the wedding banquet market. General Manager Zhang Zhichun is an outsider with limited financial resources and connections. He focused on a market that others were unwilling to invest in: the wedding banquet channel became his core entry point. He started by collecting resources from hotels, then wedding photography studios, then wedding planning companies, and also posted information on websites. Within just one year, Zhang Zhichun achieved that in the Hefei market, any newlywed couple knew that buying liquor at Xiqingfang was convenient and cheap. To date, daily sales of liquor products from his stores amount to around 100,000 yuan. Zhang Zhichun said that due to the effective preliminary work, he is now very relaxed. To facilitate delivery, Xiqingfang has opened three stores in Hefei, and Zhang plans to have five in total. Zhang is very clear that his target is the 50,000 couples who get married in Hefei each year, so attracting their attention is his full-time effort.
For successful companies, successful models cannot be replicated, but the concepts that drive success can be borrowed. There are three lessons from the above successful companies: First, give the company an accurate positioning at the initial stage, and choose the entry point and sales model under this positioning. Second, in the small environment of regional distributor patterns, choosing to become strong first and then large makes it easier to stand out and build a commercial brand. Third, pay special attention to service; in their view, service is the focus of competition among distributors. Whoever has better service gains a competitive advantage and can quickly build brand influence.
2. Branding Development Cannot Be Separated from the Boost of Famous Products
For trading companies, branding development cannot be separated from product brands. It is essential to secure major brands and strong local brands. Major brands bring many intangible values, such as innovative brand management models, excellent management methods, broad connections, and unlimited network resources. Therefore, if there is an opportunity to work with major brands and large enterprises, one must seize it, even if it means suffering some losses or grievances initially. There are two advantages to cooperating with large enterprises: first, market stability, without worrying about drastic fluctuations; second, large enterprises have standardized management and will not harm distributors. Although the factory representatives of major brands may be arrogant, it is not worth worrying about. There is a saying in the industry worth pondering: "If you don't follow manufacturers, you won't grow big; if you follow manufacturers, you won't make money." In fact, without following manufacturers, you indeed cannot grow big; once you grow big, following manufacturers always makes money. Many distributors who became major or super distributors often quickly achieved their dominant position based on strong product brands. For example, Jinliufu Liquor Industry cooperated with the liquor giant Wuliangye, leveraging Wuliangye's momentum to quickly embark on a successful path from OEM agency, brand building, to owning a famous brand. Now, Jinliufu's positioning is to be the best liquor merchant, and it has established Huaze Group, extending upstream and downstream.
Fujian Jima leveraged the momentum of Huaxia Great Wall to quickly establish over 200 offices nationwide, set up tens of thousands of terminal outlets, and achieve sales revenue of over 2 billion yuan. It built four major marketing networks in South China, North China, Southwest, and East China, forming a three-tier marketing system with provincial capitals as centers, prefecture-level cities as key points, and county-level cities as radiation points.
Xi'an Tianju initially cooperated with Anhui's Kouzijiao, targeting the Xi'an market, focusing on intensive cultivation, and becoming strong before large. Now, Xi'an Tianju is a nationally renowned distributor brand with annual sales revenue of several billion yuan.
3. Branding Development Cannot Be Separated from Scale
Small fish are always easily eaten by big fish. The market law is survival of the fittest. Only by becoming stronger and larger can one discover broader development space.
So how to achieve scale? Use the platform foundation built by core competitiveness, use core competitiveness to create platform visibility and influence, transform from a single-channel model to a multi-channel model, from a single brand to multi-brand and multi-category operations, and from single profit to structural profit. This is the necessary path for distributors to achieve scale development. In other words, distributors must fully utilize the operating platform created by core competitiveness, maximize its functions and value, and promote continuous extension of the platform. It should be able to distribute brands, release special distributor brands, even agency brands, or self-developed brands, making network resources stronger, service functions more systematic, and brand value greater, thereby facilitating distributors to more easily and quickly embark on the path of scale development.
For mature major or super distributors, they used strong brand agency as a foundation in the early stage, completed control of network channels and market scale, basically completed the process of platform, scale, and branding within their region, and the advantages and competitiveness of their corporate brands continue to expand. Many other distributors are still in the process of building platforms. When distributors have strong networks, they lay the foundation for building their own brand system. In the development process of major and super distributors, there is a clear concept: try to occupy as many well-known brands as possible to form brand series of different categories, such as famous liquor series for white liquor, and Great Wall, Changyu, and Dynasty series for wine. In this process, they do not exclude introducing second-tier brands. Their development approach is, on one hand, to act as agents for high-profile national brands, using their strong brand power to develop and expand existing network channels; on the other hand, to act as agents for national second-tier brands to ensure profits for downstream distributors and themselves, forming effective resource complementarity. Therefore, in the process of distributor scale and platform development, some distributors with imperfect channel networks, less prominent competitiveness, and no advantage in brand products are gradually eliminated in competition. As these merchants decrease, a situation gradually forms where super and major distributors monopolize regional markets, making their scale development increasingly large.
4. Branding Process Cannot Be Separated from Ownership of Downstream Channels
Ownership of downstream channels generally includes three aspects:
Self-built terminal networks, such as Jima's Jima Chain Supermarkets based in Zhangzhou, Fujian. Its advantages are: first, it can obtain higher circulation profits; second, when negotiating with manufacturers, it has more and more specific resource strength.
Joint distributors, uniting to conquer the world, such as Shangyuan's "Gonghao" model. This "Gonghao" model can be seen as a way for super distributors to strengthen terminal channels. This model can be implemented, but it must have strong backing support, that is, upstream enterprises can provide stable products with sufficient profit margins and give strong market support. The first-level agent needs to use this to attract distributors. Shangyuan has this advantage in operating Yilite liquor. Shangyuan controls a large number of terminal stores in the urban area of Hangzhou, but to radiate to a wider area, it needs to rely on distributors in peripheral markets. In addition, the cost increase caused by intensified terminal competition and the restrictions on market operation methods after the establishment of corresponding rules and regulations have all affected distributors' direct control of terminal networks. Therefore, establishing alliances with distributors through capital is a way to extend direct control of terminals.
Direct communication with consumers, such as many distributors setting up public relations and group purchase departments, building clubs, experience stores, flagship stores, and providing VIP services for major clients. To achieve regional market monopoly, the fundamental lies in occupying the mindshare of local consumers for the brand.
5. How to Build Proprietary Brands in the Branding Process
Not all distributors have the ability to develop proprietary brands. Why do some distributors easily succeed in developing proprietary brands, while others find themselves in trouble?
What kind of distributors have the ability to develop proprietary brands? Basically, they must meet the following three elements: first, good relationships with upstream manufacturers; second, strong channel networks with powerful distribution functions; third, the ability to independently operate the market. If you do not yet have these basic elements, it is best not to follow the trend and put yourself in a passive position.
For distributors, there are two successful experiences worth learning from in developing proprietary brands:
First, in the short-term plan, agency brands are the main focus, with developed brands as a supplement, at a basic ratio of 5:1; in the long-term plan, distributors will gradually increase the proportion of developed brands, expanding to a basic ratio of 5:4. Of course, this is for distributors who started with agency brands, not including those like Qiaoxi and Shijia that started with brand development from the beginning.
Second, the path most distributors take in developing brands is to first develop from regional agents to cross-regional agents, and then do proprietary brands. Practice has proven that this approach is more likely to succeed.
Distributors with commercial brands, relying on their leadership position in the region, integrate brand resources, social resources, and market resources, gradually building liquor operation platforms. With the core role of this platform, distributors have the capital and conditions to extend outward, have the conditions and capabilities to successfully build proprietary brands, and can more easily ensure the success of proprietary brands.
To build a commercial brand, distributors should also pay attention to the following two points: First, determine a logo that represents their enterprise, a unique and easily identifiable corporate logo; second, form visibility, reputation, and loyalty in their business field. To achieve the latter, they need to improve two capabilities: First, service capability. They must deepen systematic service capabilities, including comprehensive building of service capabilities for customers, partners, and internal systems; second, systematic management capability. To achieve a commercial brand, business scale is necessary, and to form business scale, the enterprise itself must have systematic management capability; otherwise, it is easy to form internal friction, which at best stagnates the enterprise and at worst quickly leads to destruction.
Distributor Transformation Path 7: Diversification
Many distributors also face this confusion: when the company develops to a certain scale, to achieve a leap, it is necessary to do multiplication. If doing industry is seen as addition, then capital operation is multiplication. In the short term, many industries still have many opportunities to make money, and it seems foolish not to take them. So facing one opportunity after another, distributors begin to invest in other industries, including real estate, energy, tourism, printing, media, etc. As a result, some succeed and become super-large distributors, while others fail and go from super-large distributors to small and medium-sized distributors. Thus, confusion arises: must distributors diversify?
In 2007, a media outlet evaluated influential liquor distributors nationwide, selecting 10 super distributors, 50 most valuable distributors, and 20 most promising distributors. Among the 10 super distributors, 8 were involved in other industries; among the 50 most valuable distributors, 14 were involved in other industries; among the 20 most promising distributors, 5 were involved in other industries.
From the above comparative analysis, we can interpret two meanings: First, the proportion of distributor enterprises involved in other industries is gradually increasing and becoming scale, and diversification has enhanced the competitiveness of these distributor enterprises. This can be seen from the sales scale of well-known distributor companies in the liquor circle, such as Shanghai Haiyan and Beijing Chaopi, whose annual sales are in the billions, and there are also a large number of distributor enterprises with annual sales exceeding 100 million. Second, successful diversification is focused. Those excellent distributor companies mostly involve industries related to the main business of liquor sales, such as logistics, hotels, chain supermarkets, tourism, etc. Fujian Jima Group Co., Ltd. is a typical example. Whether it is involved in logistics, color printing, retail, and commercial real estate, or building four major liquor culture centers in Shanghai, Beijing, Chengdu, and Zhangzhou, and developing international liquor gallery chains, it all revolves around the core of "expanding the related liquor industry chain."
Therefore, my understanding of diversification is divided into two levels: First, diversified extension within specialization; Second, specialized operation within diversification.
Diversified Extension within Specialization
The biggest advantage of diversified extension within specialization is the ability to fully integrate various resources, fully utilize enterprise resource capabilities, and leverage enterprise capability advantages. That is to say, as distributors develop their trading business, their capital and social resources become strong. At this time, they need to reutilize money and social relationships, and thus begin to look for an investment project. With this project or platform, distributors can integrate various resources, which not only does not dilute the main business but strengthens it. For example, if they engage in real estate, they can recommend their high-end liquor to customers; if they engage in tourism, they can directly communicate with consumers and sell their foreign liquor or yellow wine one-on-one; if they engage in advertising consulting, it is beneficial for liquor marketing and promotion, thus integrating multiple industry chains. Many Japanese trading companies are comprehensive enterprises, such as Mitsui and Mitsubishi. I believe that for our distributor enterprises to reach that scale, they must also take the path of diversification and comprehensive development.
President Lin Jianguo of Jima Group innovatively proposed a new strategic approach of "introducing externally, linking internally, following the example of superiors, and moving forward and backward": determining the strategy of extending the industry chain up and down with the liquor industry as the core.
With the liquor industry as the core, extending the industry chain up and down based on this is what Lin Jianguo has been exploring and striving to build. Currently, Jima Group relies on its five major advantages of network, brand, talent, management, and scale, gradually realizing the extension from the liquor industry to agricultural planting, production, development, sales, and terminal construction. It has built Beijing Jima Manor, carried out grape agricultural planting and wine research and development, invested in Beijing Longhui Brewing Co., Ltd., built four major logistics and liquor culture exchange centers nationwide, established Galloway Wine Company in the UK, and invested over 10 million yuan to acquire a grape plantation in California, USA, for production.
At the same time, Jima Group saw another business opportunity in liquor products: the unique culture of liquor. Therefore, Jima Group proposed building the "Jima International Liquor Culture Center," a grand plan to forge an aircraft carrier of the liquor industry. Since the millennium, the Jima International Liquor Culture Center, with a total investment of several billion yuan and covering over 5,000 mu, has broken ground, and its scale and height are unmatched at the time.
The Jima International Liquor Culture Center is composed of four locations: Shanghai Jima International Liquor Culture Center, Beijing Jima Manor, Fujian Jima International Commercial Plaza, and Chengdu Jima Logistics Plaza. From the beginning, it established the grand ambition of "competing in China, aiming for the world." It aims to integrate upstream and downstream liquor enterprises to form an industry chain, promote the establishment of a liquor circulation credit system, and achieve liquor modernization. It is committed to regulating the liquor market and promoting the national liquor industry, creating a never-ending liquor culture expo and a world liquor canon.
With a forward-looking systematic expansion strategy, the Jima International Liquor Culture Center plans to integrate six major functional centers: cultural exhibition center, leisure and entertainment center, commercial center, commercial management center, logistics distribution center, and comprehensive service center, building a three-dimensional liquor culture experience center from multiple levels, realizing a new consumption and marketing model.
The Jima International Liquor Culture Center is not only a service platform for industry insiders, investors, and consumers of liquor products but also a place where world liquor cultures collide, converge, and blend. Here, you can experience the profoundness of ancient and modern Chinese and foreign liquor culture and the unique charm of liquor culture.
President Lin Jianguo has always been trying and exploring innovative services in channel construction. One is forward expansion, entering the product production field, realizing the production of proprietary brands or proprietary products, and upgrading oneself to a manufacturer; the other is backward extension, building terminals and directly controlling them. Jima Group achieved forward expansion by cooperating with Beijing Longhui Brewing Co., Ltd. and becoming its largest shareholder; and achieved backward extension by establishing Jima-featured international liquor culture and international liquor galleries, gradually transforming from serving terminals and controlling terminals to self-built terminal operation models.
Self-built terminals are nothing new, but many terminals opened by distributors are mostly medium-sized supermarkets. Obviously, this form of terminal has deviated from market development trends and is difficult to participate in international competition. President Lin Jianguo has always had a dynamic development view on terminal construction, pursuing sustainable terminal operation. Jima will build four major liquor culture centers and 3,000 Jima-featured international liquor galleries on the basis of having tens of thousands of terminal outlets nationwide. This is unprecedented in the history of liquor circulation in China and is a great attempt at a new marketing model with international awareness in the same industry. Its emergence will break the old pattern of competing for terminals and buying out terminals, solve the chronic problem of capital detours and waste in the old model, greatly save liquor circulation costs, and bring a perfect new liquor circulation window to the liquor industry, merchants with liquor business resources, and consumers.
Specialized Operation within Diversification
Specialized operation within diversification means that when distributors face market opportunities and have surplus capital for diversified investment, they must have a professional team for specialized operation.
Fu Jun, president of Xinhualian, once said about diversified investment: "Investing rashly without finding an excellent, professional team is doomed to fail. Professionalism is always the core and basic issue of management." In his view, even if you want to do unrelated diversification, you must do it professionally. As long as management is professional, diversified investment will not be risky.
Professional management involves two aspects: First, the management of the distributor boss, because moving from one industry to another tests the boss's ability and energy. As the leader of a company, the distributor boss needs to be familiar with the industries involved, so as to select and use people well and ensure that the strategy does not deviate. Second, if you don't understand it yourself, you need to hire professional personnel. Of course, these professionals are responsible for a project. This requires the distributor boss to discover externally and cultivate internally. At this stage, whether to delegate authority and dare to delegate authority is a challenge for distributors and also the key to determining the success of diversification.
Liu Jifen, general manager of Anhui Yili Group, based on personal experience, proposed three basic conditions for cross-industry diversification:
First, there must be sufficient idle funds. If your funds are barely enough to maintain the main business and you cannot find more financing channels, do not act rashly; otherwise, you will face a broken capital chain.
Second, talent preparation must be sufficient. The highest level of any market competition is talent competition. You can lack experience or even funds, but you cannot lack corresponding professional talents. Without corresponding talent reserves, if you blindly enter unfamiliar fields, you will definitely suffer a big defeat.
Third, the company's main business must have scale. Diversification is risky. Only when the company reaches a certain scale can it have the ability to resist risks. At least you need some capital to make a comeback! Yili Group's first attempt at diversification was entering the steel field for real estate supporting. At first, they made several million yuan. They thought it was easy, so they entered heavily, but unexpectedly, steel prices fell rapidly, and they lost over ten million yuan at once. If they didn't have a family foundation, they would have been down and out at that time. After that, they learned a lesson, adjusted their operation approach, separated businesses, and let professional teams operate professional business segments, which put the new business on track and made it bigger and bigger.
Is Diversification a Pie or a Trap?
For distributors, whether to diversify or specialize is not a question of right or wrong, but only of suitability. As long as it meets the needs of enterprise survival and development, it is suitable. However, in the process of diversification, distributors must have a degree, avoid spreading too thin, too many opportunity factors, and risks that are difficult to control, and avoid dying in the process of diversification.
Any industry that seems profitable also follows the 80/20 principle: 20% make money, 80% don't. Why do many distributors fail when entering other industries? Because they only see the superficial things and not the underlying factors of the industry. For example, many people think real estate is profitable now, but entering the real estate industry requires not only funds but also government resources, connections, and media resources. As Li Jian, general manager of Tianjin Qiannianxi Liquor Co., Ltd., said: "If you do not yet have the ability to integrate various resources, do not easily enter other industries." Although Qiannianxi Liquor is also involved in retail and entertainment, first, they do liquor specialty stores, which are related to the main business; second, they have sufficient preparation and understanding for the entertainment industry. Li Jian believes that this success is inevitable because they did preparatory work in the early stage, based on strong research data, and there is no reason not to succeed. In addition, even if you are familiar with an industry, you still need to see if you have a professional team to operate it. But even with a professional team, if the distributor boss lacks the ability to control the team, it will be even worse.
Therefore, for distributors investing in new fields, they should pay attention to the following four points: First, find industries that you are interested in, passionate about, and fully prepared for; second, find industries you are familiar with; third, invest in industries that can match or echo the current main business and form an industry chain, such as hotels, chain stores, printing, advertising, logistics, etc.; fourth, invest in fields with low technological content that are suitable for general staff to operate; fifth, have a professional management team to operate. Otherwise, facing the temptation of opportunities, blind investment may lead to an investment trap. (End)
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