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I. Product Structure Without matching products, it is extremely difficult for a distributor to develop. A well-matched product line or brand can enable a distributor to grow rapidly from weak to strong, while an ill-matched product line can quickly plunge the distributor into a passive or difficult situation.
Whether operating a single brand or multiple brands, a distributor must distribute or create a super product that can build and maintain the network and circulate quickly. Otherwise, no matter how strong your capital, how capable your team, or how advanced your concepts, you will ultimately remain stuck in stagnation and anxiety.
Some say that distributors must operate multiple brands or categories. I neither confirm nor deny this. If operating a single brand, you must create a super single product. According to the product structure rule, the ratio should be 1:3:6—that is, image products should account for only 1, high-profit products no more than 3, and fast-moving products no less than 6. This minimizes risk. If operating multiple brands or categories, the combination rule should roughly match the 2:3:5 ratio: no more than 2 cultivation-stage products/brands, no more than 3 growth-stage products/brands, and no fewer than 5 mature products/brands. This brand combination model is the safest, ensuring that any internal or external changes will not cause severe damage to the enterprise.
Currently, many distributors, whether large or small, do not understand this principle. They treat profit products or self-developed products/brands as their lifeline, resulting in slow product circulation and slow brand growth. They are forced to constantly recruit or switch distributors, ultimately causing profit products to fail in their intended role and become a burden to the enterprise. We see many large distributors that appear large and impressive on the surface, but the quality of their downstream customers is poor. Constant recruitment and switching of distributors, along with volume growth, has harmed countless small distributors.
II. Channel Network What is the distributor's responsibility? It is to cover the market's retail terminals with the products they distribute and serve them well. The sales network controlled by the distributor is the primary condition for manufacturers to choose a distributor. The more complete and systematic the channel network within the distributor's operating area, the higher their status in the manufacturer's eyes, and the greater their sales potential.
When building their channel network, distributors should carefully consider the following four questions:
Is a larger area always better? Many distributors, just starting out, are eager to position themselves as general agents, without considering their economic strength and operational capabilities. They think that expanding the distribution area increases sales opportunities. They believe that even if the yield is low, they will still gain something. However, the actual effect is not so. If the distribution area exceeds what they can control, first, it easily leads to waste of limited resources and low efficiency. Second, it is difficult to achieve the targets set by the manufacturer, making it hard to gain strong manufacturer support. Third, as the manufacturer's market operations advance, they will carve out the half-developed markets operated by the distributor, leaving the distributor to work for others.
Is a more complete network always better? A distributor's distribution system generally falls into four types: modern channels (supermarket systems), traditional channels (circulation systems), catering channels, and special channels (or group buying).
Many distributors are accustomed to developing all systems simultaneously, but the effect is counterproductive.
The main reasons are threefold: First, insufficient capital reserves lead to a shortage of working capital. Second, the characteristics of the product structure determine that operating certain channels is too costly and not worth it. Third, distributors have varying social and public relations capabilities, and some channels require social resources that they lack.
Is thinner profit always better? Many distributors, in order to win over sub-distributors, keep their own profits increasingly low, even selling at cost, just to earn manufacturer rebates. Their purposes are twofold: first, small profits but quick turnover—even if profit per unit is thin, they still make money if volume is large; second, this product may not be profitable, but sub-distributors help sell other profitable products. However, in practice, this approach has many drawbacks: First, distributors should seize opportunities to earn what they should. For products on the rise, pressing down distribution profits too much will miss profit opportunities. Second, it trains sub-distributors to bargain and use price as leverage. Third, it may cause manufacturer dissatisfaction and disrupt product pricing, leading to penalties from the manufacturer.
Is stronger control always better? Whether in the early stages of network construction or later maintenance, it is not that stronger control is better, but that the network is more stable. Especially in the initial point placement stage, where each point is placed is crucial. This requires the distributor to have a big-picture view. Points should be appropriately spaced, and lines should connect points. The distributor's net must be cast out and then pulled back in. This requires establishing stable cooperative relationships with each sales point.
Network control does not come from strong coercive power, but from balanced distribution of points, product matching, profit distribution, and service quality.
The downstream network is simple: whoever offers higher profits, easier-to-sell products, and better customer relationships will be the one they continue to work with.
III. Capital Flow In business, a distributor's two essential conditions are network and capital.
Distributors sit in the middle between manufacturers and terminals. Currently, manufacturers generally require cash on delivery, with few credit lines, while retail terminals often have accounts receivable. A distributor's financial strength often determines their development scale. Maintaining smooth cash flow in operations is essential to sustain normal business activities. Distributors should note the following points to keep cash flow smooth:
Control the number of products handled. Many distributors have the habit of "wanting too much"; the more products, the better. They think: first, more products mean fuller utilization of customer resources; second, distribution costs will decrease; third, new sales opportunities will arise. But too many varieties will disperse your operating funds and attention, weakening your core product advantage. Distributors should choose product varieties according to their capabilities; sometimes 1+1 is not necessarily greater than 2.
Selectively enter catering and supermarket systems with longer payment cycles. From the manufacturer's perspective, they want their products to enter all catering and supermarket systems in the distributor's operating area. But distributors must investigate each catering and supermarket system, examining their payment reputation, payment cycles, and operating conditions. Conduct effective evaluations, and prioritize entering those with short payment cycles and good business. The specific number to enter must be determined based on your financial situation and risk coefficient. Leave yourself some leeway. When you have cash flow problems, the manufacturer will not consider how much money you have tied up in supermarkets to allow you to owe.
Operate more cash-on-delivery terminal stores. Many small and medium-sized retail stores in various regions operate on a cash-on-delivery basis. Operating more of these stores may increase transportation costs, but the capital turnover speed is faster. As long as the distributor provides good service, the quantity of such stores can be large, and monthly sales can be quite considerable.
Manage inventory well. Distribution is not about hoarding; rapid capital turnover is sometimes more profitable than excessive profit. Therefore, to manage inventory well, distributors must classify inventory reasonably. Reasonable inventory is divided into three categories: first, fast-moving, low-profit, high-turnover inventory—this type can be increased, as larger purchases yield higher profits; second, high-profit, growth inventory—this type should be moved in and out quickly, never hoarded; third, high-profit but slow-moving long-tail inventory—for this type, no matter how good the policy, never stock up.
Establish an effective accounts receivable management mechanism and a customer credit system to reduce business risk.
IV. Manufacturer-Distributor Relations A distributor's development cannot be separated from the manufacturer. Establishing a good cooperative relationship with the manufacturer is beneficial for performance improvement, profit returns, channel improvement, and self-development. The relationship between distributor and manufacturer is both cooperative and competitive. Distributors should skillfully use this relationship to seek maximum benefits and progress in the cooperation and game with manufacturers.
Mutual understanding and communication are essential. Distributors must align their tactical execution with the manufacturer's long-term plans, and be adept at utilizing and integrating upstream manufacturer resources to strengthen their terminal network building. In the context of emerging channel changes, manufacturers hope that distributors' business thinking is highly coordinated with the company's philosophy, and that they can cooperate in implementing this philosophy in channels and terminals. Only then will manufacturers give distributors more support and investment. Therefore, distributors should maintain a proper attitude, cooperate closely with the manufacturer, and use their own resource advantages to jointly manage and operate the network with the manufacturer, achieving a true win-win situation.
Leveraging the manufacturer, distributors should also build good relationships with the manufacturer's local offices. Currently, major manufacturers often cannot manage their local offices comprehensively due to remote management, and most monitoring systems are inadequate, making it impossible to check whether all local offices are precisely executing the manufacturer's instructions. Distributors, however, can use their familiarity with local geography, customs, and habits to form good cooperation and close relationships with local office personnel, providing maximum help and advice in formulating market strategies and closely cooperating in business execution. Since the initiative for policy implementation basically lies with the manufacturer's local offices, and the interpretation of policies is also up to them, handling the relationship with local offices well can largely avoid conflicts with the manufacturer and also gain maximum market benefits.
V. Team Management Management is often a weak point for distributors, but good management can greatly enhance a distributor's ability to resist risks. Systematic management includes terminal planning, terminal visits, terminal promotions, personnel management and assessment, information feedback, risk warning, and other aspects.
The most important of these is building an excellent team, which is the foundation of systematic management.
Personnel management is a recognized challenge for distributors. Common issues include: how to retain and effectively use old employees; how to manage well and improve team execution; how to conduct management training, supervision, and assessment; and how to enhance team cohesion. These issues must be addressed one by one.
First, for old employees, address their concerns, such as purchasing pension insurance and medical insurance, and providing annual salary increases, however small, so employees have new hope each year.
Second, review company systems, formulate practical systems and procedures, and strictly implement them.
Third, have careful planning, and after execution, assessments, rewards, and punishments must be carefully considered.
Fourth, reduce the impact of human factors on the company by managing people with systems. This way, even if there is significant personnel turnover, it will not affect the distributor's development, and it also avoids the impact of internal cliques on management execution.
Finally, respect your employees, treat them well, and be good at listening to their voices, so that employees feel a sense of belonging and responsibility.
Of course, some management issues are difficult for distributors, and many distributors' current resources and capabilities may not fully meet them, but at least they can start with the easier aspects mentioned above and gradually improve. In short, as long as distributors maintain a good learning attitude and continuously strive for self-improvement and development, they can gradually complete systematic management.
VI. Trends and Opportunities Those who follow trends win the world. Being adept at grasping trends and insightfully perceiving opportunities and demands is often a key factor for a distributor's survival and development. The key is whether distributors can keenly perceive changes in consumer and customer needs and seize opportunities, often achieving breakthrough development.
Keen market insight. Be good at thinking and summarizing regular patterns. Changes in the industry environment, consumption environment, and the life cycles of your own products and competing brands are all things distributors must pay attention to. You must not only pull the cart but also look up at the road.
Be good at promoting new products. Many distributors think that product market promotion is the manufacturer's job and that they just need to cooperate. This view is one-sided. The successful promotion of a new product is the result of mutual cooperation and joint efforts between the manufacturer and distributor. From the manufacturer's perspective, if the distributor has strong market promotion capabilities, the manufacturer will designate their area as a key promotion area and allocate more funds. The success rate of new product promotion will be higher, benefiting both parties.
Be good at discovering new sales opportunities. Any opportunity arises from unmet or ignored needs, giving birth to new opportunities. Bengbu Yifajiu Tobacco and Alcohol Chain discovered that customers not only need the wine itself but also a convenient way to purchase it, so they launched a telephone sales path that delivers even two bottles, allowing their chain to expand rapidly. Similarly, in Shandong, there is Shunhe Liquor Store, which found that the markup rate for beverages in catering terminals is often as high as 100%, much higher than in supermarkets and liquor stores. So they launched the online "Wine to Home" website and telephone customer service to accept orders, and used the densely distributed Shunhe Liquor Stores for delivery, promising to deliver wine to the designated location within 29 minutes.
By seizing opportunities and development trends through the above methods, long-term development can often be achieved.
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