2022 has arrived, and the state of the distributor market needs no further elaboration. Even for outstanding distributors in various regions, maintaining existing offline sales without decline is already the best possible state. Looking back at 2020, when the pandemic cast a shadow and sales declined, distributors hoped that 2021 would see the pandemic quickly pass and business gradually improve. But unexpectedly, business did not meet expectations. Facing various market 'difficulties,' many distributors are at a loss. In 2022, a new year, how should distributors plan their business to face market pressure? This article takes a fresh perspective on how distributors can plan their business. The Unsolvable Problems That Seem to Always Exist Before discussing distributor business planning, let me share two examples. In December, I gave a presentation at a brand's distributor annual meeting. Afterward, a distributor came up to me and asked, roughly: This year, due to a severe decline in foot traffic at offline stores, the pressure from accounts receivable has suddenly increased, and the financial pressure is particularly heavy. He asked if I had any good solutions. To be honest, when asked this question, I didn't know how to answer. The decline in foot traffic is a fact; retailers, facing reduced revenue, can only tighten their belts and extend payment cycles, which is understandable. With no other choice, I had to 'seek help' from other distributors. The answer I got was: Regarding accounts receivable management, the approach is to set a warning line and strictly enforce it. If it exceeds the company's internal 2-month cycle, directly cut off supply and retrieve the goods. A similar situation had occurred before, and the distributor took salespeople and drove directly to the store. In the end, the store had to 'surrender' and pay, and since then, such incidents have not recurred. When I got this answer, I suspect many distributors, like me, would wonder: Is it really that simple? Drive a truck to the store, and the store will pay you? But it really is that simple. Of course, I must mention a background here: This distributor supplies about 50% of the daily chemical products in that store. The method to solve the problem of long accounts receivable cycles is simple, but the premise for its effectiveness is that the distributor has relative bargaining power over the store. To put it bluntly, they must have the strength to 'overturn the table.' That's the first case. For the second case, if you ask distributors what problems trouble them the most, whether you ask this year or last year, one of the most frequently mentioned is: How to motivate their salespeople? I have also tried to find a standard answer to this question to help distributors resolve this confusion. But in fact, there really isn't one. Looking at outstanding distributors across the industry, each has their own complete set of salesperson incentive systems.

  1. Net profit dividend assessment
  2. Sales gross profit commission assessment (sales revenue - product cost - sales cost)
  3. Amoeba system assessment
  4. Sales commission + stage market action rewards ... Although each distributor's assessment system varies greatly, they are very effective in motivating employees in their own trading companies. Why is that? Because these distributors have done exceptionally well in their own markets. Because the market is doing well, they have gradually developed their own unique incentive measures. Many distributors attribute poor business performance to problems with salesperson incentives, thinking that if they design better employee incentive measures and methods, the market will improve. In fact, often it is first the market that performs well, and then better employee incentive measures emerge. Better incentive measures ultimately contribute to an even more outstanding market. Now, let's look at these two issues together. Frankly speaking, whether it's accounts receivable or employee incentives, these are common problems that have existed for a long time. It's just that because the external market environment has changed, certain issues have been highlighted and amplified. In a Harsh Environment, What Should Distributors Focus On? In 2022, clearly, the market will still not be very good, and distributors will face even greater business pressure. Whether it's accounts receivable, employee incentives, or adding a brand or dropping a brand's agency, these are all tactical issues. For a distributor that has passed the basic survival line (10-20 million in revenue), it's time to seriously think about strategy. What is the strategy of a trading company? I believe there is only one indicator: whether you can become TOP1. Can you make a brand the TOP1 in the local market? Can you make a category the TOP1 in a certain channel? Can you make a category the TOP1 in the local market? Can you become the TOP1 trading company in the local market? 'New Distribution' believes that in the current era of stock competition, only by becoming the first can you enjoy the resource tilt from upstream and downstream. If you can't be the first, sorry, distributors will continue to be squeezed from both ends. Returning to the earlier case of increased accounts receivable cycles: if your category's share in the store is high enough, you naturally have the confidence and bargaining power to get the store to pay you back promptly. The store doesn't lack money; it must allocate limited funds to strong distributors first to stabilize key accounts. As for employee incentives, if the market is doing well, compared to other distributors, you can offer better salaries and provide income levels over 20% higher. With competitive income, distributors can naturally have salespeople follow their wishes in the market. As long as the underlying logic of incentives is not wrong, the specific incentive mechanism doesn't matter. Clearly, when you become the number one, you have different resources: brand owners give you resources, stores give you policies, and employees have more confidence. At the same time, potential good brands will naturally gravitate toward you. Only by becoming the number one can you enjoy all the external dividends. Distributors Start with Being TOP1 in One Store At this point, many distributors might sneer: It's easy to say, but becoming the number one isn't that easy? Becoming the number one is often determined by the products given by upstream brands. Indeed, becoming the number one is not easy, but it is a strategic mindset that distributors must set for themselves in the current diverse market and business environment. At the same time, based on this strategic mindset, break it down to brands, regions, channels, and stores. Can you start with being TOP1 in one store? Can you start with being TOP1 in one area? Can you start with being TOP1 in one channel? Behind establishing the TOP1 indicator is actually establishing a base for your business. When you become TOP1 in a store's business, whether it's display fees or stack fees, you have a clear negotiation advantage and bargaining power compared to competing distributors. When you have 200 TOP1 stores in the local market, when executing the upstream brand's new product launch tasks, aren't you more likely to succeed in new product promotion? I believe many distributors understand that various categories have already reached their growth limits in the local market, and the demand capacity of categories has peaked. There is no incremental growth; only stock competition. How to compete for stock? By grabbing competitors' sales. When setting up a TOP1 strategic mindset, don't start with the entire market or a channel's TOP1. First, rank the store's capacity and your product's sales in that store, identify gaps, and focus on key breakthroughs. Stores with high capacity but low sales of your products should be the first targets. In the early stages of store conquest, when financial resources are not abundant, frontline salespeople should focus on these stores. If the previous visit frequency was once a week, adjust it to twice a week. When store sales rise, take a certain proportion of the profits generated from sales and invest in store displays and ground promotions. Then further, part-time shopping guides, full-time shopping guides, weekend roadshows, etc. The TOP1 strategic mindset is to have distributors treat each store as a fortress to be conquered, one by one. In the current market, distribution is no longer the core; the market and consumption are no longer such that just distributing goods will sell them. 'Activating' the market is very important. Summary: In fact, behind the TOP1 strategic mindset is a competitive market mindset. When all distributors are having a harder time, the number one distributor will always find it easier than the second, third, etc., to enjoy the market dividend of 'survival of the fittest.' Recently, I communicated with Mr. Nie from Shaanxi Baihui Trading, and he raised an interesting point: In the past, the market was growing, and everyone was happy; now, the market has stagnated, and it's about taking from others. At the beginning of 2022, I hope every distributor, when planning their business, will set aside tactical issues like whether to take on a brand, how to improve accounts receivable pressure, or how to motivate employees, and instead consider their business from a strategic dimension: how to become TOP1 locally. The execution path is: treat stores as fortresses to win market victories, conquer them one by one, starting with being TOP1 in one store. Focus on FMCG distributor new distribution/innovative consumer brand cases If you want to communicate, you can add WeChat by long-pressing. When adding, please indicate your company, position, and name. Are you 'watching' me?