I. Abandon Unethical Tactics Now almost all distributors say "business is difficult," and almost all attribute this to external factors like competition, without examining their own problems. Against the backdrop of manufacturers' marketing organizations and modern retail channel management having mastered advanced marketing methods, distributors still cling to outdated operational thinking from their wholesaler days. The "unethical tactics" used by distributors against manufacturers over the past 30 years were once their "profit model," but now they have become the "original sin" hindering distributors from "growing up"! Distributors commonly use four unethical weapons when dealing with manufacturers:

  1. Extorting Goods or Payments: Three common methods:
    • Directly demanding initial stock on credit. When the manufacturer needs to recover funds, if sales are poor, the distributor claims they also extended credit to channel customers and cannot collect; if sales are good, they fabricate a bunch of "verbal promises" of sales expenses to offset.
    • Demanding cash on delivery, then making excuses to delay payment once goods arrive at the warehouse—a deceptive way to get credit stock.
    • Using bank instruments to trap funds, exploiting time differences in bank transfers and policies protecting depositors. They issue a real draft, then time the arrival of goods, intercepting the remittance from the remitting bank during the gap between goods arrival and payment, using methods like reporting loss, canceling orders, or even colluding with bank staff.
  2. Skimming Promotional Expenses: Withholding sample products, selling promotional items, inflating promotional expenses, and taking media advertising commissions are routine for distributors. During the golden age of liquor sales in the 1990s, manufacturers' sales managers often encountered advertising company bosses at distributor offices. Some distributors even had their wives or mistresses run advertising companies, earning product profits upfront and advertising fees in the back—a lucrative scheme!
  3. Cross-Region Dumping: Exploiting regional sales differences and promotional policy variations, they buy from the front door and sell out the back, easily profiting from price differences without effort. This gradually lowers product prices, a process called "skimming the plate," compressing the product's profit margin until it's unprofitable and the brand collapses.
  4. Price Undercutting: This is often a retaliatory tactic by distributors against manufacturers. For example, selling a product normally priced at 20 yuan for 12 yuan, suddenly dragging down market channel prices, making it impossible to sell at normal prices. This is called "smashing the plate," where distributors use small losses to cause intermittent supply disruptions or even kill the product. These unethical tactics are essentially not illegal but fall within the realm of business ethics. While some distributors still profit from them, opportunities are dwindling, and as legal systems and awareness strengthen, the risks grow. These behaviors reflect distributor immaturity, harming their ability to build regional brands and become leaders. They are also the "original sin" leading many once-prosperous distributors to ruin!

II. Master the "Seven Weapons" Sun Tzu said: "All warfare is based on deception." Competition is not about feelings or emotions; it requires wisdom to win. Every battle needs weapons. We have crafted new "Seven Weapons" for distributors—a method and wisdom that, when known, brings strength; when used, brings victory; when mastered, brings dominance!

First Weapon: Guide Through Compliance Sun Tzu said: "In war, act when it benefits you; stop when it doesn't." The most common mistake distributors make when dealing with manufacturers is being arrogant before cooperation and submissive after payment. This is an ordinary person's mindset: arrogant when someone needs you, humble when you need them. If distributors shift perspective and negotiate from a platform of business opportunity, they won't show such attitude differences. Their goal is the final result: making money, not enjoying the process or saving face. Therefore, distributors must understand from the start: for any product, the initiative in sales and promotion always lies with the manufacturer, including seeking the first payment. From the negotiation stage, adopt a compliant attitude, listen carefully to the manufacturer's market analysis, plans, methods, and resources. By analyzing and validating the sales plan's reasonableness, reduce investment risk while assessing the manufacturer's true intentions, decision-making style, and sales strategies to make informed decisions. Distributors should spare no market effort but must pursue one outcome: profit. This is the central point in evaluating whether and how to cooperate. By examining the manufacturer's past sales performance or conducting simple market surveys to test channel and consumer attitudes, distributors can gauge product viability. Then, they need to analyze cooperation methods. Regardless of the cooperation model, seizing initiative and controlling risk are the distributor's unspoken goals, while seeking profit is the public slogan—two sides of the same coin, like the yin-yang taiji diagram. The Thirty-Six Stratagems' "Cross the Sea by Camouflaging Heaven" says: "Hide the yin within the yang, not opposite to it." If distributors don't learn to comply, manufacturers won't trust them with strong brands, and they can't achieve their goal of profitable control. Trust may not last forever, but without it, there's no business foundation, increasing communication costs. Even if manufacturers tolerate temporarily, they'll eventually seek change. Compliance within business rules is the foundation for guidance. If distributors grasp this, they can ensure cooperation develops within manageable risk.

Second Weapon: Turn the Enemy's Tactics Against Them Conflicts between manufacturers and distributors often lead to splits, but the first crack usually stems from differing market views. For instance, when a manufacturer shifts from mass distribution to modern channels or demands enhanced market services and channel refinement, if distributors don't align, the relationship becomes precarious. Distributors must analyze the manufacturer's market strategies and sales policies, including sales management systems, processes, and formats, and know them better than the manufacturer's own sales reps. Since manufacturers are organized and planned according to modern marketing concepts and managed by professional managers, distributors must also adopt professional management to seamlessly interface. Larger domestic distributors typically have market or brand departments dedicated to joint market analysis and planning with manufacturers. These departments handle negotiations and promotional planning with manufacturers externally and drive execution across business units internally, serving as a general staff. These distributor managers are familiar with modern marketing concepts and methods, have professional knowledge of manufacturers, and can communicate using different manufacturers' operational philosophies, aiming for win-win market outcomes and professional alignment. Only by thoroughly understanding the manufacturer's market strategies and management systems can distributors turn their tactics against them and seize the initiative.

Third Weapon: Create Dependency For manufacturers, the ideal distributor is a super "ATM" that pays whenever asked, without demanding excessive promotional support—like a wife who pays all bills without any vices. Distributors have similar expectations: manufacturers always provide market support without pushing for payments—like a husband who is handsome, wealthy, virtuous, and domestic. Manufacturers choose the distributor model partly to avoid risky resource investment, using distributors as pioneers. Initially, lacking local market knowledge, channel relationships, and sales teams, they opt for agency channels. This is precisely the manufacturer's weakness in the relationship, which distributors must exploit to maintain a balance of power. Distributors should build all channels for the manufacturer's products, block manufacturer interference, and be willing to break ties if manufacturers encroach on or strip their channel rights. Fundamentally, if a manufacturer is determined to operate directly with full resources, distributors can't stop them. Distributors should protect their channel resources and firmly oppose manufacturers implementing out-of-system distribution measures. But never withhold information; instead, proactively share brand channel sales data. Thus, creating manufacturer dependency on channels and cash flow is decisive for maintaining balance. Once this balance or its factors change, the manufacturer-distributor relationship shifts. Sun Tzu said: "The expert in creating momentum relies on advantage to control the situation." As authorized agents, distributors must leverage this balance to turn passivity into initiative and fully reap agency benefits!

Fourth Weapon: Use Barbarians to Control Barbarians This refers to balancing the product portfolio, judged by three criteria: sales volume, profit, and brand influence. Manufacturers often require distributors not to handle competing products or offer exclusive sales incentives to create closed distribution systems. For example, beer distributors can't handle other beer brands but can handle liquor and wine for complementarity; liquid milk is typically direct-operated or exclusive. How should distributors choose product combinations to reduce channel costs and enhance risk resistance? Complementarity is essential, mainly in three scenarios: peak/off-season complementarity, different tiers of similar products, and different categories in the same channel. The "use barbarians" strategy is less about pitting manufacturers against each other and more about controlling operational stability. A sound product mix principle: no brand's sales should exceed 40% of total turnover, and the second brand in each category or seasonal product should be at least 40% of the first brand's sales. Following this rule not only achieves the strategy but also ensures steady growth without putting all eggs in one basket.

Fifth Weapon: Sacrifice Small for Big Distributors often appear petty, seeking manufacturer support for fixed costs like channel salespeople and terminal promoters, while sacrificing profits on variable costs like trade promotions. They also avoid bearing market maintenance costs in off-seasons, causing disproportionate manufacturer input-output. In reality, channel sales teams and terminal promotion teams are distributors' two key assets. Distributors should firmly control them, not let manufacturers interfere, though they can charge manufacturers for these services. In off-seasons, when manufacturers face performance pressure, distributors should proactively plan market promotions, invite manufacturer sales managers to participate, and share costs, earning trust and support. The absolute cost is negligible compared to peak-season profits. Sun Tzu said: "The difficulty in military struggle is turning the circuitous into the direct, and adversity into advantage." If distributors have the foresight to recognize product potential, they can handle conflicts well. Understanding the strategy of using small to gain big requires deeper insight into conflicting interests.

Sixth Weapon: Emphasize Process In dealings with manufacturers, larger distributors focus on contracts, often challenging standard contracts, making negotiations difficult. They may feel smug about favorable clauses but relax risk control later. In fact, process control is crucial. Regardless of contract terms, operate according to normal business principles during cooperation: determine order quantities based on sellable stock, set safety stock based on consumption speed, settle market expenses clearly, avoid excessive promotional spending to boost sales, and prioritize capital safety. New-style distributors are not traditional profit-driven "middlemen" but "channel bridges" that bear independent responsibility and profit from their own value, helping manufacturers build brands cost-effectively and quickly. New-style distributors are not carriers of manufacturer brands; rather, manufacturer brands are, in specific periods, "vassals" of new-style distributors. Therefore, handling cooperation processes according to business logic is key to mutual development.

Seventh Weapon: Be Like a Dragon Showing Its Head but Not Its Tail In dealings with manufacturers, the distributor's biggest "chip" is not the channel network, capital, personnel, or vehicles, but the distributor boss themselves. The larger the business, the more distributors should rely on professional managers rather than gut feelings. To control the initiative, distributors must manage themselves. In negotiations, the boss should "listen more, speak less," even appearing as a ceremonial presence, letting managers take the lead. Since distributor decisions are autocratic without higher oversight, if the boss gets entangled in negotiations, they risk losing rational analysis and prematurely revealing company information (negotiation bottom lines) to the manufacturer. Distributors should focus on self-management. For manufacturers, negotiating directly with the boss is half the battle; for distributors, controlling the frequency of direct negotiations is key to maintaining initiative. This isn't about being mysterious or avoiding manufacturers, but about understanding one's vulnerabilities. Failing this leads to passivity.

These seven weapons are the "open strategies" for distributors to abandon unethical tactics and use wisdom to create favorable cooperative relationships. Over the past 30 years, manufacturers have extensively analyzed distributors to exploit and control them—Coca-Cola's "101 Model," P&G's "Distributor 2005 Plan," Tingyi's "Channel Refinement," Uni-President's "Co-marketing Model," Pepsi's "Direct Terminal Control"—most channel management models are from the manufacturer's perspective, leaving distributors in passive pursuit. With such incisive analysis, distributors have few secrets or tricks left, losing not only initiative but also independent judgment. "Logistics distributor" is the formal term for these distributors.

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