As supermarket enterprises enter a crisis, distributors are facing enormous operational risks. Suppliers have deeply felt the shift in the supply chain due to the rise of chain retail, moving from difficult business and declining profits to high risks. Some distributors even lament, 'Doing business with supermarkets is suicide, but not doing it is waiting to die.' Faced with high costs and increasing risks from supermarkets, how can distributors make structural adjustments to survive this crisis?
The supermarket industry itself is irreversibly entering a critical phase of survival of the fittest, accompanied by lower profits and higher risks, which supermarkets inevitably pass on to upstream distributors. Recently, the much-talked-about abolition of entry fees is actually an impossible task. Many supermarkets have abolished entry fees, but don't forget that sponsorship fees, management fees, and others have surfaced, and total costs have not decreased. As a distributor, don't fantasize about wolves eating grass; instead, focus on improving your own capabilities, quickly complete structural adjustments to form competitive advantages, and get through this long night.
To cope with the supermarket dilemma, distributors' structural adjustments should focus on the following aspects:
Adjusting the supermarket channel structure Facing rapid changes in supermarkets, we must deeply understand the trends and current situation of supermarket changes to know ourselves and the enemy. The most effective way is to conduct segmented research on supermarkets. Distributors can classify and manage supermarkets based on their scale and payment terms, adjust the supermarket structure, and bring the business structure into a reasonable range. For distributors, besides following large hypermarkets, they must also enter small and medium-sized stores with faster cash flow and certain sales volume to balance capital pressure and reduce operational risks. The ideal ratio is 60% of sales from hypermarkets and 40% from stores with fast cash flow. (The most reasonable is that your store's inventory pressure < manufacturer's distribution + monthly payment collection)
Reorganizing channel categories to balance risk pressure Besides the supermarket system, abandon the past approach of only doing one type of terminal and establish a professional mindset, enriching channel categories. The most important task now is to survive in a harsh environment with high risks, rather than empty talk about being an expert. Specialty stores, franchise stores, convenience stores, counters, and other channels compatible with product sales can serve as beneficial supplements to supermarket channels. As long as they have no payment terms and reasonable costs, they can be effective risk-balancing factors. Take the example of the Nanjing Zhengjue distributor I serve. Originally, 100% of his network was supermarkets, with hypermarkets accounting for 80%. Since 2012, with the rapid development of the supermarket industry, risks have increased. Therefore, by enriching channel categories and reducing the proportion of hypermarkets, by early 2015, the proportion of small and medium-sized stores rose to 40%, and non-supermarket terminals rose to 20%, effectively ensuring the speed of capital circulation.
Adjusting the product structure A good distributor should have three types of products: one for volume, one for advertising, and one for profit. As a client, you should reasonably divide your own product structure and handle the relationships between products.
Adjusting business philosophy and management system First, change the business philosophy. Abandon the old model of focusing solely on sales volume, special offers, discounts, and buy-one-get-one-free. Take product profit, cash flow, and operational risk as the main evaluation factors, and treat scale as a supporting form to achieve these factors, not the main purpose. In market promotion, pay attention to several basic levels.
A. Let well-known products that drive volume sell naturally, even if promotion is phased, and in certain specific cases, even adopt limited sales. The reason is simple: the more you sell, the more capital supermarkets occupy, and the greater your capital pressure and operational risk.
B. For products with medium profit, good quality, and the ability to generate a certain scale, concentrate main resources, maintain reasonable profits, and seek sales volume, aiming for both efficiency and scale.
C. For products with particularly high profit margins, adopt incidental sales forms, such as exchange purchases, only seeking profit without excessively pursuing scale. Some may disagree: why not promote high-profit products? Wouldn't that make more money? Personally, I think high-profit products generally have two major drawbacks: either they are basically similar to products on the market, just with extremely low prices, but quality assurance and manufacturer supply capacity are questionable. If promoted in large quantities, various adverse factors can easily arise, seriously affecting the distributor's credibility as a supplier; or they are differentiated products just entering the market, still in a market cultivation period. Unless the manufacturer provides extensive advertising support (but if there is extensive advertising support, there won't be much profit margin), you are still in an investment stage. Overall, the profit margin will not be particularly ideal, and sales volume will not increase significantly in the short term. In short, between product scale and efficiency, achieve the same profit with minimal cash pressure.
Second, establish a credit risk management system. Establish a credit rating for each supermarket terminal. If the credit limit is exceeded, take corresponding measures. As a distributor, establishing a credit risk management system is very necessary. When a supermarket's credit limit exceeds the specified limit, you must analyze the reasons and find solutions.
Finally, establish a market information feedback system. Any supermarket has many omens before bankruptcy. For example, suddenly changing the original settlement method, extending payment terms; special sales regardless of cost; well-known brands out of stock but not replenished; employee wages delayed; bosses or management evasive, etc., are all signs before bankruptcy. As long as distributors establish a standardized information feedback system and regularly feedback relevant information, they can reduce the risk of store bankruptcy to a certain extent. In fact, no information system is as accurate as information from supermarket internal personnel. Handling relationships with key supermarket personnel well will bring you maximum benefits in all aspects.
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