Follow and star ↑↑『New Distribution』 See how many friends are following industry trends with you In early August, I visited some distributors and discovered many 'puffy' ones during communication: annual sales are not low, reaching 20-30 million in county markets and 50-60 million in prefecture-level cities, considered 'respectable' locally. But when asked about profits, compared to tens of millions in sales, profits are pitifully low; after a year's work, many have net profits below 500,000 yuan. Below is a conversation with a 'puffy' distributor in a county market. Foreword: Q: What's your annual sales? What's your gross margin? A: Annual sales are 35 million, but I haven't calculated gross margin. Q: Then what about your profit? A: Profit isn't high; I don't see money each year; it's all rolling in inventory. Q: You haven't calculated accounts, so how do you know if you made money this year? A: I basically calculate this way: the money earned from product price differences roughly offsets warehouse rent, staff wages, and vehicle wear. The final profit depends on whether I can get manufacturer rebates. If I don't get rebates, the year is basically in vain. ....... Q: How do you plan for future business? A: Either endure, or find ways to do high-margin products. Q: What does enduring mean? A: See who falls first. Now the secondary wholesalers below are hit hard by e-commerce (B2B platforms), price-cutting is fierce, and warehouse costs are rising. Wholesalers can't survive now. If wholesalers decrease, they'll have to order from me, so my days should get better. Q: But you don't have salespeople, so how do you get orders? A: The manufacturer will definitely add staff. If I deliver directly to wholesalers, there's only 1 yuan per box difference; if I deliver to terminal stores, it's definitely more than that. Q: I see. So how do you plan to do high-margin products? Will you hire salespeople? A: Now a salesperson costs over 6,000 yuan; I can't afford it. Q: Then how will you do it? A: Uh... The manufacturer's salespeople will do it; I'll ask the manufacturer for some policy support then. Frankly, this is a typical logistics distributor without commercial flow capabilities. Essentially, it's not doing distribution agency business. Will such distributors have a future? If they don't change, it's hard. Let's not mention that with the maturity of third-party FMCG city distribution, large-scale warehousing and distribution efficiency will definitely be higher than individual single-brand warehousing and distribution. If we only look at distributor profits, the profit part is just the brand paying the distributor's 'manager's salary.' After a hard year of coordinating loading and unloading, renting warehouses, hiring employees, and advancing funds, the brand says, 'You've worked all year; here's a bonus for you.' How should 'puffy' distributors transform their business model? Undoubtedly, being only a logistics distributor has no future. But it's also hard for distributors to develop distribution and commercial flow capabilities on their own, since the brand holds the dominant position in the business. Fortunately, in recent years, New Distribution has found that more and more brands are making efforts to help distributors transform from logistics warehousing and distribution to commercial flow promotion. In this process, New Distribution suggests distributors seize the opportunity to build commercial flow functions with the brand's support. Why? From the brand's perspective, the past 'office + distributor' model has completed its historical mission, mainly in two aspects: First, past distributors were non-professional; some hadn't even been in trade before. To capture the market fastest, the most appropriate way was for distributors to provide warehousing and capital, while brands used a human-wave tactic and deep distribution strategy to achieve the most efficient market coverage, completing distribution and terminal shelf occupation. Now, after nearly thirty years of iteration in the trade circulation field, today's distributors are either former manufacturer sales managers or have years of business experience, influenced by brands, clearly knowing how to do distribution and promotion. Their operational awareness, capability, and quality have greatly improved compared to the past. Second, with the maturity of mobile SFA (sales management systems), efficient management through tools becomes possible. Besides past distributors being non-professional, due to China's vast market with obvious depth, to hear frontline market voices timely, the most appropriate way was to set up offices everywhere for direct operation. Offices were hubs for information exchange. Now, with the popularity of mobile tools, manufacturers can get market information in real-time even without being on the frontline. Location-based photo taking, AI image recognition, product online, transaction online, data online, and standardized terminal execution actions can all be reflected in mobile apps. By putting sales management online through tools, efficiency naturally improves greatly. At the same time, it truly enables online management from distributor management to terminal management to frontline business management. Therefore, the popularity of mobile tools makes channel digitalization possible for brands, and also, in this round of channel reform, reduces communication costs between layers, lowers personnel costs, and improves operational efficiency. Whether for brands or distributors, it will ultimately achieve a win-win situation. Brands reduce communication layers and personnel expenses while also grasping frontline market voices in real-time; distributors regain true market distribution rights, not only with improved profits but also with more business opportunities once they have commercial flow capabilities. How can distributors improve their commercial flow capabilities? Of course, it's both opportunity and challenge. Brands won't lower requirements just because they hand over market operations to distributors. The annual growth targets previously set for offices will also be transferred to distributors. At this time, how should distributors respond to maintain existing volume and achieve more growth? Based on the above, for existing markets, products and outlets correspond to the work previously done by offices, which already has a set of standard methodologies. With brand support, the difficulty is relatively low. The key is testing the distributor's data operation capability and organizational management capability. With mobile tools, distributors must quickly learn to use data for business analysis: where to invest more, where to invest less; where single-store output is highest, where it's lowest. First, basic data must be available; then, use it; when problems arise, make targeted adjustments and optimizations. In the past, the core capability of distributors was resource allocation, such as capital use, warehouse allocation between peak and off-peak seasons, and hiring and dispatching drivers and workers. Now, the core capability is specific to sales management: how to compete for market share and terminals. The pursuit of incremental markets can be said to be the second-stage requirement for distributors. Besides increasing the distribution share of core brand high-priced new products, distributors often consider adding more product distribution agencies. At this time, the test for distributors rises another level: with multi-brand distribution, how to combine products and allocate resources to maximize operational efficiency. Additionally, in terms of outlet growth, increasing the number of outlets means reorganizing salesperson visits, broadening outlet types, especially special channel outlets, including not only conventional special channels like restaurants, gas stations, scenic spots, and hospitals, but also new retail scenarios such as Ele.me, Meituan Waimai, and community group buying. Finally, regarding personnel management, frankly, whether improving efficiency in existing markets or exploring opportunities in incremental markets, it all depends on the people behind. For distributors, the quality of product selection determines the profit structure, but the sustainable growth behind profits has only one key element: organizational management. The core of doing distributor organizational management well has only two points: First, partnership thinking; second, immediate feedback. Whether for frontline business or backend warehousing, designing rewards and assessments around these two points is how distributors can use, manage, and retain people well.