In 2025, I conducted field research on no fewer than 50 distributor owners and found many issues in their warehouse logistics, team management, and channel management. I will compile these into a series of articles; today, I will discuss the ten factors affecting distributor profits. In recent years, it is true that making money has become increasingly difficult for distributors, and while external environmental factors are the same, improvements in certain areas can indeed boost distributor profits. I will divide this into cost-cutting and revenue-increasing sections, starting with cost-cutting.**** Eliminate the 'Three Expenses' The 'three expenses' here refer to, under unreasonable zone division and route planning, 'wasted labor' (back-and-forth, time consumed on travel to visits), 'wasted vehicle' (vehicle sales without route planning, order-centric with erratic back-and-forth), and 'wasted fuel' (no expected planning for daily sales, loading a full truck and returning half empty). For vehicles, optimize delivery routes, arrange cargo loading reasonably, improve vehicle volume and weight utilization, and reduce ineffective transportation. In actual visits, I saw serious problems in many distributor teams' 'zone division + route planning', a common issue that is most prone to errors. For example, some teams simply divide zones by urban/rural or east-west/north-south, without studying the number of outlets in each zone or residents' income, leading to uneven workloads. Route planning does not balance the proportion of high-value outlets and ordinary outlets, nor the span of a route across four boundaries, causing daily workloads to be feast or famine. This is not difficult; it stems from managers' habitual thinking and lack of high-quality joint line visits.**** Large Aging Inventory Costs In FMCG, large aging inventory costs cannot be zero, but they can approach zero infinitely; the key is still the 'people' issue. Distributors have many solutions, such as one distributor adopting expense contracting, where a person's monthly handling cost for large aging inventory is capped at 3,000 yuan, with excess borne by the individual. Another distributor stipulates product recovery times, e.g., if recovered within a certain period, the salesperson bears no cost; if later, they bear 50%, etc. Many management systems are posted publicly, but results are not necessarily good. The level of large aging inventory handling costs is not a management issue but a guidance mechanism issue! Many distributors themselves act as salespeople on routes, and you'll find that their own stocked products incur very little large aging inventory cost. Why? Because they are the boss. Large aging inventory costs affect their own profits and long-term development in the area, but employees are different; they receive base salary plus commission or performance, with no concept of profit. Also, an employee mentality leads to a potential mindset of 'if I can't do it here, I'll go elsewhere', so management measures treat symptoms, not root causes. The core is guidance, making employees feel like owners, turning them into partners (profit sharing + equity), sharing the company's ups and downs. Excessive Promotions Excessive promotions only occur in two situations: promotions lasting too long or with too much intensity. They may seem to boost short-term sales, but in reality, they overdraw channel confidence, dilute brand value, and squeeze distributor and terminal profits. I won't elaborate further. In discussions with distributors, I found that most excessive promotions can be summarized in a few phrases: I don't want to promote, but competitors do; I don't want to promote, but online prices are lower, so I have to; I don't want to promote, but the brand forces me to, to ensure market position and survival space. It seems all are passive actions. I don't rule out these passive excessive promotions. Promotions can be proactive or reactive, but distributors should change their thinking: what intensity is appropriate? Case 1: For similar products, if a competitor's promotion is 1 yuan, must ours be greater than 1 yuan? Consider brand premium: if our brand premium is higher than competitors, our promotion intensity can be slightly lower. If sell-through is slow, first check how competitors are doing. Don't rush to increase intensity just because you feel sell-through is slow; in most cases, it's a temporary fluctuation in category capacity in the region, and losing money to gain attention won't help. Also, distributors should study e-commerce characteristics; many big promotions have rules. For example, online stores issue coupons to first-time buyers, platforms issue coupons for certain categories, consumers buy coupons, or certain products are limited to one special-price item. Combined intensities can be very cheap, and terminal store owners will use these combined intensities to negotiate with distributors. If you don't understand the underlying reasons, you'll be very passive and increase promotion intensity, losing profits. Case 2: Timing of promotions should be opportunistic. Is it necessary to run a promotion during a certain period? If a brand's e-commerce runs a 618 promotion, what should distributors do? Run simultaneously or after the wave? This requires thought, considering brand support and the maximum intensity you can afford. Accounts Receivable In the current business environment, accounts receivable are unavoidable for distributors, but the amount can be reduced through management. As for how to reduce it, distributors have their own methods. One point here: there is no process system for classifying customers with receivables; many are 'forgetful after eating'. Distributors should maintain a credit ledger for downstream customers, not rely on feelings for credit sales, or they'll regret it. How to maintain a credit ledger? I suggest dividing credit customers into four levels and handling them separately:

  1. Customers with money and willing to repay: Ensure normal settlement by sales staff; under no circumstances allow new receivables. Once the door opens, endless troubles follow.
  2. Customers with money but unwilling to repay: Increase collection frequency; have sales staff and supervisors stagger high-frequency reminders, cultivate cash-on-delivery habits like squeezing toothpaste, maintain a good attitude, and prepare for a long-term battle.
  3. Customers without money but willing to repay: Assess cooperation value, control supply quantity, offset debts with expenses, and use different expense support to pull limited funds toward your products.
  4. Customers without money and unwilling to repay: Under normal circumstances, use 'top-down' (collecting before delivery), reduce supply, and frequently chase payments; under abnormal circumstances, take necessary measures. In recent years, although distributors have sales volumes of millions or tens of millions, profits are declining. Don't let credit sales become a profit killer. So after the New Year, debt settlement should be planned, methodical, and result-oriented. Expense Investment Let's talk about market expenses first. Many distributors calculate big accounts but not small ones. For example, they usually calculate: this month's sales are 100,000 yuan, total display expenses are 2,000 yuan, so the overall expense rate is 2%. But there is no ledger management for this 2% expense. Are some outlets' investments abnormal? Has the expense nature changed, e.g., originally display, but operated as rebate? The core of market expenses is whether the distributor's expense management is deep enough. Now let's talk about personnel expenses. The biggest issue is controlling turnover in some distributor teams. Teams with high turnover won't make money, and potential profit losses are not noticed. Here's a real case: a distributor's team of 13 had an annual turnover rate of over 50%. It seems that when people leave, no salary is paid, so there's no book loss, but in reality, even a weak salesperson in a zone for a year brings more profit than a strong one who changes three or four times a year. The reason is simple: new hires have training risks, adaptation periods, outlet relationship building periods, and handover periods (expenses, payments, etc.). It's like the tortoise and the hare; FMCG requires a persistent team. The greater the turnover, the greater the profit loss. Of course, long-term underperformers also need optimization (especially watch for salespeople doing private work—order stealing). The core of personnel expenses is the reasonableness of turnover rate! Product Structure Brands typically classify products into four types: strategic products (winning the future); traffic products (winning the present); profit products (foundation for survival and development); and disruptive products (improving competitive landscape). Currently, balancing the proportion of traffic products and profit products is something distributors need to study, and it's also a point of profit loss. Specifically, pay attention to three points: First, without a reasonable product system, there is no profit structure system. Distributors look for new products every year, but even if they find a good one, it may not match existing products, failing to build a product structure that maximizes distributor profits. Second, profit products are heavily promoted to drive traffic, while traffic products are priced up for profit, leading to chaotic product structure management. Combine high-profit products with best-sellers and image products, use bundle promotions and package deals to increase customer purchase intent, and reduce marketing costs for single products. Third, low-efficiency products are not eliminated. Products with long-term low sales, thin margins, or inventory backlog are not promptly eliminated or adjusted, failing to release resources for more promising products. Operational Miscellaneous Expenses Regarding operational miscellaneous expenses, I see many distributors with the philosophy that money is earned, not saved. Office A4 paper, warehouse materials (tape, price tags), and daytime lighting are significant expenses. We should advocate thrift, which is also a corporate culture.
  5. Save water and electricity: Strengthen energy management in offices and warehouses, use lighting, air conditioning, and equipment reasonably to avoid waste. Adopt energy-saving equipment and technology to reduce consumption.
  6. Control communication and internet fees: Choose appropriate communication packages and internet services based on actual needs to avoid unnecessary expenses. Encourage employees to use internal communication tools to reduce external communication costs.
  7. Reduce office supply waste: Establish an office supply management system, purchase and use supplies reasonably to avoid over-purchasing and waste. Encourage employees to use paper, pens, and other supplies sparingly to reduce office costs. Empty Promises Many brand marketing personnel like to make empty promises, and at year-end, they default or delay with various excuses. Either they fulfill part, or they push it to the next year, counting it in next year's goods payments, not truly honoring it to distributors. This trickery also causes distributors to lose considerable profits. Especially in market support, distributors should be wary of companies 'packaging' at year-end and adopt a strategy of 'divide and conquer': request in batches, at different times, in small amounts, more frequently, and strive to have the company honor commitments within the agreed time, gradually dismantling the manufacturer's empty promises. Inventory Management Profit losses due to improper warehouse management are the most unworthy. Product losses from warehouse management mainly manifest in four forms: First, products not following FIFO or grid placement leading to near-expiry or expiry, affecting product value realization; Second, improper product placement leading to reduced work efficiency or increased capital turnover; Third, products not stacked according to standards leading to damage, affecting value realization. For example, improper stacking levels causing collapse and product damage; Fourth, improper warehouse management leading to leaks, rain, dampness, fire, theft, loss, etc., causing product damage and affecting value realization. Capital Costs The FMCG business is essentially bending down to 'pick up coins' with hard work, and capital costs are a major hidden profit killer. Profit losses due to capital costs for FMCG distributors mainly manifest in the following aspects:
  8. Increased interest expenses: If distributors rely on loans or financing to purchase goods, they must pay interest. For example, a 1 million yuan loan at 4% annual interest means 40,000 yuan in interest per year. If capital turnover is slow, interest costs accumulate further, directly eroding profits.
  9. Reduced capital turnover rate: Capital tied up in inventory or accounts receivable leads to a lower turnover rate. Suppose annual sales are 50 million yuan, and the capital turnover rate drops from 10 to 8 times, meaning additional capital is needed to maintain operations, increasing opportunity costs. For example, originally 1 million yuan could turn over 10 times, generating 50 million yuan in sales; after the turnover rate drops, 1.25 million yuan is needed to achieve the same sales, and the extra 250,000 yuan, if invested elsewhere, could generate additional returns.
  10. Inventory backlog costs: Excess inventory ties up capital and may lead to losses due to expiry or slow sales. For example, 1 million yuan of backlogged inventory, if not sold in time, may need price reductions or write-offs, directly losing profits. Meanwhile, inventory occupies storage space and management costs, further increasing operational burden.