Seven Weapons for Distributors to Win Over Manufacturers

Almost all distributors now say that "business is difficult," and almost all attribute this difficulty to external factors such as competition, without examining their own internal issues.

Abandoning Unscrupulous Tactics

Almost all distributors now say that "business is difficult," and almost all attribute this difficulty to external factors such as competition, without examining their own internal issues.

Against the backdrop where manufacturers' marketing organizations and modern retail channel management have mastered advanced marketing methods, distributors still cling to outdated operational thinking from their wholesale days. The "unscrupulous tactics" used by distributors against manufacturers over the past 30 years were once their "profit models," but now they have become the "original sin genes" hindering distributors' growth!

Distributors commonly employ four unscrupulous weapons when dealing with manufacturers:

Stock or Payment Trapping:
- Direct demand for initial stock: When manufacturers need to recover funds, distributors claim they have also provided stock to channel customers and cannot collect payments if sales are poor; if sales are good, they fabricate a pile of "verbal promises" for sales expenses to offset payments.
- Cash on delivery with delays: Distributors request cash on delivery, but once goods arrive at the warehouse, they invent various excuses to delay payment, effectively obtaining stock on credit through deception.
- Bill trapping: Using the time difference in bank transfers and policies protecting depositors, distributors issue genuine bills of exchange, then calculate delivery times and intercept the remittance from the issuing bank during the gap between goods arrival and payment, using methods such as reporting loss, canceling orders, or even colluding with bank staff.
Skimming Promotional Expenses: Distributors routinely deduct sample goods, sell promotional items, inflate promotional expenses, and take media advertising commissions. During the golden era of liquor sales in the 1990s, manufacturer business managers often encountered advertising company bosses at distribution outlets. Some distributors even had their wives or mistresses set up advertising companies, earning product profits upfront and advertising fees in the back, enjoying the best of both worlds!
Cross-Region Dumping: Exploiting regional sales differences and promotional policy variations, distributors buy goods through the front door and sell them out the back door, easily profiting from price differences without much effort. As a result, product prices gradually decline, a process known as "stripping the plate," which compresses the product's profit margin until it becomes unprofitable and the brand collapses.
Price Undercutting: This is a common retaliatory tactic against manufacturers. For example, selling a product normally priced at 20 yuan for 12 yuan, suddenly dragging down the market channel price and making it impossible to sell at normal prices. This is called "smashing the plate," where distributors use relatively small losses to cause intermittent supply disruptions or even kill the product.

These unscrupulous tactics are generally not illegal but fall within the realm of business ethics. While some distributors still profit from these methods, opportunities are diminishing, and risks are increasing as legal systems and awareness strengthen.

These behaviors are actually signs of distributor immaturity. They are harmful to distributors' efforts to establish their regional brand and become leaders, and they are the "original sin genes" that have led many once-glorious and wealthy distributors to ruin!

Mastering the "Seven Weapons"

Sun Tzu said: "All warfare is based on deception."

Competition is not about feelings or emotions; it requires wisdom to achieve victory. Every battle needs weapons. We have crafted new "Seven Weapons" for distributors, which are both methods and wisdom—a great wisdom where knowing them brings strength, using them brings victory, and mastering them brings dominance!

First Move: Guide Through Compliance.

Sun Tzu said: "In war, move only when it is advantageous, and stop when it is not."

Distributors' most common mistake in dealing with manufacturers is being arrogant before cooperation and submissive after payment. This is negotiating with an ordinary mindset: arrogant when you have something others need, and humble when you need something from others.

If distributors shift their perspective and start negotiations from the platform of business opportunities, they won't exhibit such attitude differences. Distributors' goal is to pursue the final result: making money, not enjoying the process or satisfying pride.

Therefore, distributors must understand from the start: for any product, the initiative in sales and promotion always lies with the manufacturer, including seeking the first payment. From the beginning of negotiations, distributors should adopt a compliant attitude, carefully listen to the manufacturer's market analysis, plans, methods, and resources, and reduce investment risks by analyzing and validating the rationality of sales plans. At the same time, they should assess the manufacturer's true intentions, decision-making methods, and sales strategies to provide complete and symmetrical information for decision-making.

Distributors should spare no effort in market activities but must pursue one outcome: making money. This is the central focus when evaluating whether and how to cooperate with manufacturers. By examining the manufacturer's past sales performance or conducting simple market surveys to test channel and consumer attitudes, distributors can basically judge the product's vitality. Under this premise, the next step is to analyze the cooperation model.

Regardless of the cooperation model, seizing the initiative and controlling risks are distributors' inner subtext, while seeking profits is the public slogan—two sides of the same coin, like the yin-yang taiji diagram.

From the "Thirty-Six Stratagems," "Crossing the Sea by Deceiving the Heavens" says: "The hidden lies within the open, not opposed to it."

If distributors don't learn to comply, it will be hard to convince manufacturers to entrust strong brands, and they won't achieve their goal: profitable control. Trust may not last forever, but without trust, there is no foundation for business, increasing communication costs. Even if manufacturers temporarily tolerate, they will eventually find ways to change the situation.

Compliance within business rules is the foundation for guidance. If distributors fully understand this, they can basically ensure cooperation develops within controllable risks.

Second Move: Turn the Tables.

There are many reasons for conflicts and breakups between manufacturers and distributors, but the first crack usually starts with differences in market views. For example, when manufacturers shift from mass distribution to modern channels or require enhanced market services and channel refinement, if distributors fail to align with the manufacturer, the cooperation is bound to be precarious.

Distributors must analyze the manufacturer's market strategies and sales policies, including sales management systems, processes, and formats, and should know them even better than the manufacturer's sales representatives.

Since manufacturers are organized and planned according to modern marketing concepts and managed by professional managers, distributors must also implement professional management to smoothly interface with manufacturers. Larger domestic distributors typically set up market or brand departments specifically responsible for joint market analysis and planning with manufacturers.

These departments are responsible for negotiating and planning market promotions with manufacturers, while internally driving business departments to execute, serving as the general staff headquarters.

These distributor managers are familiar with modern marketing concepts and methods, have professional knowledge of manufacturers, and can communicate using different manufacturers' market operation philosophies, standing from the perspective of achieving win-win through the market, thus achieving professional alignment with manufacturers.

Only by being familiar with the manufacturer's market strategies and management systems can one turn the tables and seize the initiative.

Third Move: Create Dependence.

For manufacturers, the ideal distributor is a super "cash machine" that pays whenever required without demanding too many promotional policies—like a wife who can pay any bill at any time without any hobbies. Distributors have similar expectations: manufacturers always provide ample market support and never force payments or stock purchases—like a husband who wants his wife to be both a beauty and a rich woman, a virtuous wife and a homemaker.

Another reason manufacturers choose the distributor model is to avoid rashly investing resources, using distributors as pioneers. Since manufacturers lack local market knowledge, established channel relationships, and complete sales teams when entering new markets, they opt for agency distribution models to develop markets.

This is precisely the manufacturer's disadvantage in the relationship, which distributors must maintain as a balance of power.

Distributors should establish all channels for distributing the manufacturer's products, block the manufacturer's access to market channels, and be willing to break ties if the manufacturer interferes or deprives distributors of their original channel paths.

Fundamentally, if manufacturers are determined to invest resources and operate directly, distributors cannot stop them. Distributors should protect their channel resources and firmly oppose manufacturers implementing out-of-system distribution measures. However, there is no need for information blackouts; instead, distributors should proactively share brand channel sales data with manufacturers.

Therefore, creating manufacturer dependence on channels and cash flow is the decisive factor for maintaining a balance of power. Once this balance or its factors change, the manufacturer-distributor relationship will shift.

Sun Tzu said: "The momentum is created by adapting to advantages."

As authorized agents, distributors must turn passivity into initiative by grasping the balance of power to fully reap the benefits of agency!

Fourth Move: Use Barbarians to Control Barbarians.

This strategy refers to balancing the product portfolio, with three evaluation criteria: sales volume, profit, and brand influence.

Manufacturers often require distributors not to handle competing products or set exclusive sales awards to establish closed distribution systems. For example, beer distributors cannot distribute other beer brands but can distribute baijiu or wine for complementarity; liquid milk is typically direct-operated or exclusively distributed.

How should distributors choose product portfolios to reduce channel costs and enhance risk resistance?

Complementarity is absolutely necessary, mainly in three categories: off-season and peak-season complementarity, different tiers of similar products, and different categories within the same channel.

The strategy of using barbarians to control barbarians is more about distributors controlling their own operational stability than suppressing each other with different manufacturers' products. The principle for a reasonable product portfolio is that no brand's sales should exceed 40% of total sales, and the second brand in each category or seasonal product should not have sales below about 40% of the first brand. When distributors follow this rule, they not only achieve the effect of using barbarians to control barbarians but also maintain stable growth without the risk of all-or-nothing outcomes.

Fifth Move: Sacrifice Small for Big.

Distributors often give manufacturers the impression of haggling over small matters, such as frequently requesting support for fixed costs like channel salespeople and terminal promoters, while sacrificing profits on variable costs like trade promotions. They also avoid bearing market maintenance costs during off-seasons, leading to disproportionate manufacturer input and output.

In reality, the channel sales team and terminal promotion team are distributors' two magic weapons. Distributors should firmly hold onto them and not let manufacturers interfere, though they can request manufacturers to pay part of the costs by providing services.

During off-seasons when manufacturers face performance pressure, distributors should proactively plan market promotions, invite manufacturer business managers to participate, and share costs to earn trust and support. The absolute cost is negligible compared to peak-season profits.

Sun Tzu said: "The difficulty in military operations is turning the circuitous into the direct, and adversity into advantage."

If distributors have the insight to recognize product potential, they can handle conflicts with manufacturers well. Understanding the strategy of using small to gain big requires a deeper comprehension of conflicting interests.

Sixth Move: Emphasize Process.

In interactions with manufacturers, larger distributors tend to focus on contracts, often challenging the manufacturer's standard contracts, leading to difficult negotiations. Sometimes they feel complacent about securing seemingly favorable terms but then relax risk control during actual operations.

In fact, in dealings with manufacturers, process control should be emphasized. That is, regardless of whether the contract is favorable, distributors should operate according to normal business principles during cooperation. These principles include: determining order quantities based on distributable volume, setting safety stock based on consumption speed, clearly settling market expenses, avoiding excessive promotional spending to boost sales, and prioritizing capital safety.

New-type distributors are not traditional profit-driven "middlemen" but "channel bridges" that bear independent responsibility and profit through their own independent value. They are crucial links in helping manufacturers build brands at low cost and high speed.

New-type distributors are not carriers of manufacturer brands; rather, manufacturer brands can be seen as "dependents" of new-type distributors during specific periods. Therefore, handling the cooperation process according to business logic is key to achieving mutual development.

Seventh Move: Mysterious Presence.

In dealings with manufacturers, the distributor's biggest "bargaining chip" is not the channel network, capital, personnel, or vehicles, but the distributor boss himself.

The larger the business, the more distributors should rely on professional managers rather than their own instincts. Distributors' control over the initiative in cooperation with manufacturers largely depends on their self-management. That is, during negotiations, the distributor should "listen more and speak less," even letting manufacturers think they are merely a ceremonial presence, and let managers take the lead.

Since distributor decisions are autocratic without higher constraints, if the distributor gets involved in negotiations with manufacturer representatives, they are prone to lose rational analysis and allow company information (negotiation bottom lines) to be prematurely and quickly exposed.

Distributors should focus on self-management. For manufacturers, direct negotiation with the distributor is half the battle won, while for distributors, controlling the frequency of direct negotiations is an important way to maintain initiative.

This is not to encourage distributors to be mysterious or deliberately avoid manufacturers, but to make them understand their vulnerabilities. If this is not handled well, they will fall into a passive position.

The above seven weapons are the "open strategies" for distributors to abandon unscrupulous tactics and use wisdom to create favorable cooperative relationships.

Over the past 30 years, major manufacturers have conducted countless analyses of distributors to utilize and control them. Coca-Cola's "101 Model," P&G's "Distributor 2005 Plan," Ting Hsin's "Channel Refinement," Uni-President's "Co-selling Model," and Pepsi's "Direct Terminal Control" model—most channel management models to date are from the manufacturer's perspective, leaving distributors in a passive follow-up position. With such incisive analyses from so many manufacturers, distributors have few secrets or tricks left, losing not only initiative but also their own opinions. "Logistics distributors" is the formal term for these distributors. Now is the time for Chinese distributors to awaken and build their core competitiveness!

Distributor Art of War Part 2: Brand Selection Skills

Manufacturers have invented numerous theories and methods to select suitable distributors, while distributors' selection of manufacturers and brands relies mainly on the distributor boss's social experience. Compared to manufacturers' methods, distributors' methods for selecting manufacturers are almost nonexistent. The ratio of research literature might be 1000:1!

This knowledge asymmetry is detrimental to both distributors and manufacturers: if distributors cannot select suitable manufacturers and brands, it also means manufacturers cannot find suitable distributors. Therefore, distributors must elevate their decision-making mindset for brand selection to a theoretical level.

When marketing books, magazines, and websites are filled with literature on how manufacturers select distributors, and when manufacturers claim they choose suitable rather than the largest distributors, what do distributors think? Do manufacturers really not prefer strong, large distributors? In fact, manufacturers with such thoughts are simply lacking confidence in themselves and have insecure expectations about future market control!

Distributors' current "brand selection" methods fall into three categories:

Intuitive Type: The brand's design and product look good, so market potential should exist.
Safe Type: These people prefer well-known brands or products with heavy advertising, believing big brands are safer.
Business Type: Focus on manufacturer support, promotional policies, and trade terms (initial stock or credit periods).

All distributors will justify their choices as rational, shrewd, and correct based on their social experience, but essentially they fall into the above three types, and their irrationality is not much different from consumers choosing brands or products. How should distributors select suitable brands?

Just as manufacturers select suitable distributors, distributors must also select suitable brands and manufacturers. This is the first principle of "brand selection." This principle means that before selecting a manufacturer, distributors must understand their own strengths. Unless preparing for the future by using the manufacturer's brand to build new sales channels, they should generally prioritize brands that can leverage their advantageous channel sales potential.

There is also a strategic factor where distributors use the channel structures of different products to combine business structures and adjust team structures, but this article will not delve into that; it focuses on the decision-making methods for brand selection.

Manufacturers increasingly desire control over downstream channels in the business chain; only "intelligence" can find one's place in this chain. Manufacturers will neither cooperate with distributors lacking strength (capital, channels, equipment, personnel, relationships) nor with those lacking modern marketing awareness and sales systems.

The reason is that the Chinese market is undergoing unprecedented structural adjustments. Any market battle is first a battle between manufacturers and brands. The fundamental motive for a manufacturer's sales model is not to consider the interests of distributors but to defeat competitors in the market. Distributors must align with manufacturers to ensure the brand gains sufficient market share, thereby winning manufacturer support and protecting their own interests. This does not mean distributors should become "exclusive" (exclusive distributors are no longer independent channel links and, strictly speaking, are not true distributors).

Therefore, distributors must adopt a modern marketing mindset and communicate with manufacturers in modern marketing language to make high-quality brand selection decisions and achieve win-win outcomes. This is the "5W2H Decision Model."

5W2H is a basic method for brand design and a problem brands must solve. Therefore, distributors can use the 5W1H method to uncover the manufacturer's sales approach and market policies, making it the optimal decision model.

5W2H stands for WHO, WHEN, WHERE, WHAT, WHY, HOW, and HOW MUCH. It encompasses the complete brand operation system from strategy (WHO, WHY) to tactics (WHAT, WHEN, WHERE) and execution (HOW), plus another H—HOW MUCH (budget), forming a complete brand operation plan!

The distributor brand selection decision model (5W2H method) can be illustrated as follows:

This is also the model for negotiations with manufacturers, structured in this order:

The middle layer is the core negotiation content: from product (WHAT) to WHO (target consumers). This layer mainly addresses product sales issues, including product type, pricing, channel model, annual market promotion arrangements, and consumer acceptance. The upper layer (WHY) requires the manufacturer to provide convincing evidence that the middle layer is correct and feasible, addressing market risk.

The lower layer (2H) involves communicating how to do the market and budget for market investment, addressing market development potential. Negotiating these three layers and seven key points helps distributors establish a rational decision model. Through this model, distributors can significantly reduce the risk of brand selection and more accurately judge the brand's prospects, strength, and the company's ambitions and sales policies.

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