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Economist Wu Jinglian's view on channels is: "Whether selling chips or potato chips, as long as you can make money, efficiency maximization is the essence." For distributors, channels are the most important resource and the greatest source of operational benefits. So how should they extract benefits from channels? In summary, distributors must consider the following seven strategic elements:
Strategic Element 1: Smoothness. Smoothness is an important basis for channel diagnosis, with several core indicators: gross profit, inventory, and payment difference. These indicators directly reflect on the distributor's cash flow and ultimately affect the smoothness of the entire channel.
Take a listed clothing company with sales of 2.8 billion yuan, for example. Its inventory reaches 700 million yuan, and it has 1,300 directly operated stores. Is the company's channel smooth? Another example: a company with half-year sales of 700 million yuan, with raw materials of 100 million, finished goods of 100 million, and accounts receivable of 100 million in inventory. Can this company continue to sustain itself? Perhaps we should ask: how long can it sustain?
Strategic Element 2: Efficient Operation. Channel smoothness ensures that distributors can smoothly digest inventory while having sufficient cash flow. High-speed inventory turnover enables distributors to maximize the use of their funds and improve the utilization rate of channel resources.
Suppose a distributor invests 1 million yuan in working capital for products. Annual fixed costs include: 8 personnel (average annual salary of 40,000 yuan, totaling 320,000), 3 vehicles (depreciation, fuel, and repairs cost 120,000), warehousing (annual expenditure of 50,000), plus other expenses of 50,000, totaling 540,000. With a gross margin of 8%, the return on capital can be calculated:
Turnover 12 times a year: Annual sales: 12 million yuan Annual gross profit: 12 million × 8% = 960,000 yuan Annual net profit: 960,000 - 540,000 = 420,000 yuan Return on capital: 42%
Similarly, with turnover 6 times a year, there would be no profit but a loss of 60,000 yuan. Only when turnover reaches more than 6.75 times can the distributor break even and achieve profitability.
Strategic Element 3: Rapid Development. For food distributors operating FMCG, their growth rate must keep up with the growth of consumer purchasing demand. In other words, if a consumer drinks 30 bottles of beverages this month, and 10 of them are yours, what about next month? If he wants to drink 60 bottles, you must ensure at least 20 bottles are sold to him.
This is only from a micro perspective. From a macro perspective, distributors must keep up with the pace of China's economic development, or more precisely, maintain balance with the growth rate of the food industry. This is an era of big fish eating small fish. Distributors must maintain a rapid and stable development momentum to stand out in industry competition.
Strategic Element 4: Efficient Coverage. Distribution rate reflects a distributor's regional influence. To achieve "omnipresence" of products, distributors must make every salesperson responsible. What is efficient coverage? First, affordability: consumers should feel value for money when purchasing; second, availability: the visibility rate after distribution should be greater than 80%; third, willingness: upgrade products from being accepted to being preferred by consumers.
To achieve efficient coverage, distributors must mobilize the power of secondary wholesalers. The distribution model of "distributor → secondary wholesaler → terminal channel" can greatly broaden channel coverage.
Strategic Element 5: Financing. Financing through channels can effectively solve the capital problems during enterprise development. Wahaha's annual ordering meeting can pre-collect 8 billion yuan, and during normal operations, it gives distributors 1% interest. If manufacturers can do this, why can't distributors? When a distributor has a mature distribution system, they can leverage its financing function, using policies to mobilize the funds of secondary wholesalers, thereby effectively avoiding the problem of secondary wholesalers' arrears and reducing their own capital pressure.
Strategic Element 6: Risk Diversification. To avoid operational risks, the most important thing for distributors is to achieve platform-based operations, allowing related partners to share operational risks, or in other words, making everyone a community of interests. The financing mentioned above is a way to diversify risks. The key lies in what conditions the distributor can offer to partners to attract them to share resources, inventory, and capital risks.
Strategic Element 7: Information Flow. In addition to logistics and capital flow, channels also carry a large amount of information. For example, through terminal data analysis, distributors can grasp competitors' promotional methods, promotional policies, and new product launches, enhance control over secondary wholesalers, and understand the trends of similar products. This enables timely information collection and accurate prediction, allowing them to take the lead. Ultimately, they become the constant victors in channel competition.
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