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Domestic traditional distributors are essentially just circulation channels. Their main functions are primarily positioned in warehousing and delivery. Because of the weakening of distributor functions, some companies even position distributors as "porters." The weakening of distributor functions is, on one hand, a helpless move by companies that find it difficult to select suitable distributors; on the other hand, it is the manufacturer's strengthening of channel control. In the game between manufacturers and distributors, the two sides are asymmetric. Large and powerful companies even bring distributors under their own management. Distributors, as a disadvantaged group, are in a passive and uncontrollable state. This brings two major issues to distributors: first, how can distributors achieve equal status and protect their legitimate rights? Second, what is the future path for domestic distributors?
The domestic market calls for "marketing expert" type distributors. Unfortunately, such distributors have not truly emerged. There are two reasons: first, the overall market environment makes it difficult to cultivate such distributors. Because manufacturers and distributors find it hard to build sufficient trust, they both cooperate and restrain each other. Even if a super-large distributor with sales exceeding one billion yuan emerges, it is only an expansion in scale; its functions have not fundamentally changed. Second, distributors are unwilling to position themselves this way. They feel that doing market development for others' products is like making wedding dresses for others. So after making their first pot of gold, some distributors either move upstream to develop their own products or move downstream to open their own supermarkets. Very few focus on the present. Under current circumstances, it is difficult for domestic distributors similar to "Baolong Foreign Firm" to emerge.
Based on the current market situation, distributors are having an increasingly hard time. The days when opening a shop would bring in money are gone. Distributors face various difficulties in their daily complex work, which can be categorized into the following ten major aspects:
1. Business Direction: Product Expert or Channel Expert? This involves positioning. How can distributors fully leverage their resource advantages and turn them into competitive advantages? Every distributor is under market pressure and competition from peers. There is a game of interests among manufacturers, peers, retail terminals, and sub-distributors. In each round of the game, the question is how many cards you hold to win. This requires distributors to establish their regional advantage in the industry.
There are two basic ways for distributors to gain industry advantage: first, become a specialist in a certain product category, a sales expert. As we often see in the market, there are "milk kings" and "cooking oil magnates." A milk distributor may carry almost all well-known domestic brands and products across price ranges. If a customer wants milk, they have everything. This makes them a category expert. This business model is favored by many distributors. Second, specialize in a certain channel, such as catering, supermarkets, or circulation. By focusing on one channel, they form their own channel advantage and become channel experts.
Both models have pros and cons. The advantages of being a product expert include: first, full integration and utilization of resources. Most supermarket buyers divide by category. Specializing in one category makes it easier to coordinate with retail terminals. Second, it allows adjusting channel models based on product characteristics, better integrating manufacturer resources and saving costs. Third, it creates competitive advantage within the industry, making it easier to obtain agency rights for quality products and squeeze competitors.
The disadvantages are also obvious: first, any fluctuation in the industry can harm the distributor, with poor risk resistance. Second, it is difficult to gain strong manufacturer support. Having all competing products' agency rights in one hand is a major taboo for manufacturers. Such distributors are used more than valued.
The advantages of being a channel expert include: first, easier internal management and attracting talent, strengthening channel control. Second, faster new product distribution and market cultivation. Third, better resource allocation and higher capital turnover.
The disadvantages are: first, due to single channel, it is hard to obtain total agency rights for a product in a region. Second, it is vulnerable to peer pressure and impact.
From the above analysis, we can conclude that when choosing their business direction, distributors should fully leverage their strengths, not spread too wide but focus on being refined. Specializing in a certain category and channel helps form advantages and achieve better economic benefits.
2. Enterprise Development: Profit or Volume? FMCG distributors all have a deep understanding: "Best-selling products don't make money; profitable products don't sell well." Products that are both profitable and sell well are rare. This is due to market competition and fast product turnover. This divides distributors into two schools: one refuses to handle products with gross margins below 10%. The other only earns 5 points on products they distribute, not more. These two attitudes are opposite but each has its rationale. The first school thinks: "No profit, no early rise." Why handle chicken-rib products that don't make money? If gross margin is below 10%, after deducting storage, labor, loss, taxes, etc., you're just a porter. The second school thinks: "Thin profit, fast turnover." Small profit but large volume still makes money.
Distributors may ask: Should enterprise development focus on profit or volume? I believe distributors must maintain appropriate operating profit while increasing volume. How to achieve this? Distributors should do the following: 1. Divide products into three categories. Category one: profitable but low volume, these are sunrise products, preparing to earn tomorrow's money. Category two: high volume but thin profit, these are sunset products, aimed at stabilizing customers. Category three: both volume and profit, these are golden products, maintain existing profit and increase volume. 2. Control these three categories in a 30-30-40% ratio. 3. For category one, focus on cultivation. For category two, appropriately control sales volume. For category three, do not easily reduce prices.
In short, distributors should learn to seize opportunities and earn all possible money.
3. Management Structure: How to Transform Family Management? The first generation of distributors mostly originated from family-run husband-and-wife shops. The husband handles external affairs, the wife internal; the sister-in-law does accounting, the father-in-law manages the warehouse. This family management model played an important role in the startup and development stages. The cohesion of kinship management helped the first generation complete primitive accumulation. But as enterprises grow and scale expands, the drawbacks of family enterprises are exposed. First, internal management systems are ineffective, and family conflicts directly affect development. Second, talent suppression. Employees form two groups: one is the special class with kinship to the boss, the other is ordinary employees. The conflict between these groups leads to loss of key personnel. Third, family enterprises cause interest disputes. At startup, they work together, but as scale grows, relatives inevitably clash over interests.
To make their enterprises bigger and stronger, distributors must change the current family management model and transition to institutionalized, systematic management. How to transform family enterprises? I think the following points should be done: 1. Retire some veteran employees, regardless of their relationship with you. Gradually let them stay home with pay. These people have become obstacles to development. Keeping them brings more harm than good. Better to spend money for peace. 2. Concentrate equity. If the company has multiple shareholders, buy back shares from relatives. Equity should be highly concentrated to have a say and avoid disputes on principle issues. 3. Let your wife go home, or you step back. The company can only have one core; multiple leaders cause chaos. 4. Dare to hire talent at high salaries. In key positions like sales, be willing to spend on capable people. 5. Establish a complete management system and operational processes, and ensure the seriousness of the system.
4. Personnel Management: How to Establish an Effective Performance Appraisal Mechanism? Most distributors' assessment of sales staff is relatively simple, usually basic salary plus sales commission. This model is simple and rough. In practice, it faces three problems: 1. Salespeople sell whatever sells well, which is not conducive to new product promotion. 2. In off-season, it causes laziness or even loss of excellent staff. 3. Capable salespeople leave and start their own businesses, increasing competition.
It should be said that most distributors offer limited salaries, making it hard to recruit excellent talent. The salespeople they use are mostly trained by themselves. Long-serving salespeople hold the company's customer resources. Once they leave, it greatly impacts the distributor. In this situation, establishing an effective performance appraisal and management system is particularly important.
How can distributors establish an effective performance management mechanism? I think the following changes should be made: 1. Transform from individual independent operation to team collaboration. Based on sales staff's abilities and personalities, divide work according to sales process links. Set up network expansion specialists, market maintenance personnel, dedicated collectors, etc. Salespeople support each other, leveraging their strengths to improve efficiency. 2. Develop assessment standards and reward/punishment measures based on each person's work content. 3. Set commission standards based on the product's position and profit rate in the company. 4. When setting monthly sales targets, not only set overall sales goals but also sub-targets by category. 5. Regular meetings and training systems. 6. Allow key sales staff to hold shares, with annual dividends based on company profits, enhancing their sense of belonging.
5. Inventory Management: How to Deal with Unreasonable Manufacturer Pressure to Stock Up? Manufacturer salespeople, to meet monthly sales targets or accelerate capital return, often require distributors to stock up unreasonably. This adds operational risk and affects normal capital turnover. Manufacturers force distributors to stock up mainly through: 1. Inducement with benefits. If distributors pay a lump sum, the company gives extra rebates. 2. Threatening to add new distributors. If monthly sales targets are not met, new distributors will be added. 3. Fabricating grand market prospects. Telling distributors about increased advertising and promotions to induce stocking.
On the basis of maintaining reasonable inventory, unreasonable stocking is more harmful than beneficial. But manufacturer salespeople are not easy to offend. How should distributors respond to unreasonable stocking pressure? I think the following methods can be used: 1. "Delay" tactic. Use excuses like supermarket payments not yet received to delay until month-end, and the manufacturer will give up. 2. "Say the ugly words first." If inventory exceeds the reasonable line, absolutely do not pay. Generally, inventory should be controlled at about 50% of monthly sales. Beyond that, think twice. 3. Make the manufacturer's salespeople back off. Propose harsh conditions for stocking; if not met, do not pay.
When resisting unreasonable stocking, distributors should argue on principle but also avoid conflict with the manufacturer. Try to resolve it tactfully. Cold handling is the best strategy.
6. Customer Management: How to Build Your Own Distribution Channel? To obtain agency rights in a region, distributors must establish their own distribution channel system. There is an opposite approach: not using sub-distributors but setting up offices at the county level. This is faster and gives more control, but it lengthens the management line and capital chain, increasing risk, and raises operating costs, reducing profitability. Unless the distributor's management capability and scale strength reach that level, I suggest not adopting this model.
How can distributors build their own distribution channels? 1. Establish a distribution cooperation alliance with sub-distributors, with appropriate rebates based on annual sales. 2. Establish a return and exchange system for slow-moving products. 3. Regularly hold sub-distributor networking events to build relationships. 4. Strengthen work guidance for sub-distributors. 5. Build a reserve of sub-distributors to replace unqualified or disloyal ones promptly.
7. Customer Negotiation: How to Push Back Against Unreasonable Supermarket Fees? For modern channels like KA supermarkets, most distributors have mixed feelings. For distributors, supermarket buyers are like dogs that can never be fed enough. There are numerous fees that increase every year. Especially at the beginning of the year when signing contracts, they face various unreasonable fees, which is a headache.
Distributors are already in a passive, asymmetric, and unequal relationship with KA stores. As a disadvantaged group, being squeezed by KA stores is inevitable. But distributors should not be lambs to the slaughter. When dealing with unreasonable supermarket fees, they should grasp the following principles: 1. Never be the first to speak out. When supermarkets add new sales fees, don't take a stance. Neither agree nor disagree. Delay for a few days and see how other companies react. If suppliers react strongly, supermarkets will adjust their fee standards. 2. Absolutely do not do loss-making business. In business, you don't need to worry about face. If there's no money, it's better to change than to "work for free for the supermarket and the enterprise." When supermarkets want to increase fees, clearly tell the buyer your bottom line. If exceeded, rather give up. The firmer your attitude, the more cautious the supermarket will be. 3. Increase your product's shelf presence in supermarkets. The larger your sales volume in the supermarket, the less likely they will dare to increase fees. 4. When negotiating with supermarkets, do not give in until the last moment. The easier you agree, the more unreasonable fees you'll face later.
Negotiating with supermarkets is often a game of interests. Distributors often think supermarkets' fees will be borne by them, but any manufacturer has a cost control rate. If manufacturers bear more costs in supermarkets, they provide less support elsewhere. The wool comes from the sheep's back. Every supermarket fee is your own money. You must grit your teeth and grasp the scale.
8. Resource Management: How to Get Maximum Manufacturer Support? Distributors cannot grow strong without manufacturer support. Manufacturers and distributors must support and cooperate with each other to open the market and achieve win-win. There are three major misunderstandings about manufacturer support: 1. "I don't need support; just give me a bare price." This avoids disputes. This model is often accepted by small manufacturers, but such products are usually short-term and have no future. 2. "The more support, the better." Strong manufacturer support means high expectations. If manufacturers are short-sighted and don't achieve their goals, they often abandon the market. So more investment is not necessarily better. 3. "The manufacturer's investment is my rightful profit; saving it is profit." So they try to deduct and inflate expenses. Because of these misunderstandings, it's difficult for distributors to get manufacturer support or the maximum reasonable support.
How can distributors get maximum manufacturer support? 1. Persuade the manufacturer to list your market as a key market. The higher the manufacturer's attention, the larger the investment ratio. 2. After confirming the market operation plan with the manufacturer's sales management, fully cooperate. The higher your cooperation, the greater the support. 3. Make market investment transparent. Spend expenses openly so the manufacturer sees results. 4. Appropriately increase your own investment to leverage greater manufacturer investment.
9. Fund Management: How to Control Accounts Receivable? In the course of business, distributors inevitably have accounts receivable. Many distributors prefer cash-on-delivery models; although profits are thinner, the money in hand is real. But competition is increasingly fierce, and achieving full cash-on-delivery is difficult, especially for distributors serving supermarkets, where accounts receivable are substantial.
How should distributors control accounts receivable? Pay attention to the following: 1. For customers who cannot do cash-on-delivery, an approval process must be established. Sales staff apply, and the boss approves. Without approval, no credit sales. 2. For customers with accounts receivable, set a credit limit. If exceeded and payment is not received, stop supply and investigate. 3. Review receivables weekly. Determine payment deadlines for due receivables. 4. For distributors with large receivables, assign dedicated personnel to manage them.
Every receivable is real money. Improper management of receivables directly causes losses and allows bad elements to exploit loopholes. Therefore, receivables management is a crucial part of distributor management.
10. Profit Analysis: How to Maximize Benefits? Distributors handle products with varying sales volumes and profit margins. They should differentiate and combine reasonably. High-volume products often have low profits and occupy large capital, so sales volume should be appropriately controlled. Low-volume products often have high profits and should be key promotion targets. Products with very small sales and low profits with no future should be eliminated.
Distributors should annually analyze the profit of their products and determine investment direction based on each product's profit contribution rate. Eliminate the bottom three contributors. Update the product mix annually to make it more rational and maximize benefits.
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