Click to read the original article for details. Distributors are trapped in the vicious cycle of inventory pressure. Most distributors are starting to get busy, and the reason urging them to be busy is inventory pressure. With warehouses full of products, they have little time to rest during the Spring Festival, and even no joy, with worried faces. "If the goods don't sell out, this year's work is in vain!" This is the most common sigh distributors make after seeing their warehouses. It's also a problem they face every year, concerning their survival. The Vicious Cycle of Inventory Pressure That Distributors Can't Escape If ten years ago, when it came to inventory pressure, many distributors would gladly accept it because there was profit to be made. If five years ago, when it came to inventory pressure, most distributors would hesitate because their business was facing a test. Now, when it comes to inventory pressure, most distributors are disgusted, but few resist. Because distributors have fallen into the vicious cycle of inventory pressure and can't get out! In this cycle, manufacturers pressure distributors to stock up, distributors move inventory to terminals, and then continue to be pressured to stock up again. The warehouse never has a concept of zero inventory. In the era of goods shortage, distributors grew rapidly because of this. But the scary thing is that inventory pressure is not the end; it's just the beginning. To continuously push inventory, manufacturers come up with various reasons: price increases, shortages, policies, benefits, changing distributors, and other carrot-and-stick tactics. In the early years, a saying: "If you don't pressure inventory, distributors will have the chance to keep a mistress" was upheld as a classic by manufacturers. So, the annual increasing task volume and expanding inventory pressure continuously enlarge the distributor's warehouse capacity. But the market capacity has its limits, and development is not always smooth sailing. Thus, problems begin to appear: the speed of distributor sales cannot keep up with the speed of inventory pressure. The speed of terminal sales cannot keep up with the speed of inventory pressure, so products accumulate in warehouses, and distributor profits become thinner and thinner. When distributors want to resist, they are already unable to extricate themselves from this cycle. Old products support the channel and cannot be abandoned; new products relate to profits and future prospects, so they can't be cut either. They can only struggle in the cycle. Inventory Pressure: The Root of All Distributor Troubles The simple problem of inventory pressure is heavy, but the derived problems are the beginning of disaster for distributors. To push goods out, distributors have to engage in credit sales, just to seize terminals, occupy terminal warehouses, and occupy displays. But credit sales grow into a disaster for distributors. In the past two years, a saying has been popular: Money? Used to buy goods; Goods? Placed at terminals; Payment? Settled after selling; ... In the end, what remains in the distributor's hands is a pile of IOUs and payments that can never be collected. Besides these, there are endless return and exchange problems. After inventory pressure, if goods don't sell, they always need to be returned or exchanged. Terminals won't hold the goods themselves; since they haven't paid, they don't care if you take them back or not. Handling returns has become one of the main tasks for distributors. Besides returns, they also have to deal with the disposal of returned products, channel development, making work more cumbersome. To avoid this situation, salespeople also start to play tricks. They skip visits instead of following up, gradually giving up on troublesome customers to avoid spending time on non-business issues that affect their performance. As a result, many small terminals are neglected, leading to the resurgence of second-tier wholesalers in the past two years and the recent entry of new retail into terminal stores. Besides these, distributor management problems, cross-regional selling, promotions, and management issues almost all arise with inventory pressure. It's not an exaggeration to say that inventory pressure is the root of all distributor problems. Why Can't Distributors Refuse Inventory Pressure? Money, money, and more money! Old products maintain the channel, new products maintain profits... In rounds of squeezing, distributors have lost the ability to say "no"!!
They dare not refuse big brands because new brands have low survival rates in the market and can't stabilize the channel;
They dare not refuse new brands because the policies and profits are sufficient, and they can get some benefits;
They dare not refuse terminals because there is too much competition, and losing one sales point will cause all sales to drop;
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In this position, distributors have lost initiative and the ability to refuse. For profit, to support themselves, to survive, they can only hold a fluke mentality and linger in the cycle of inventory pressure. But what's the result? Did they really make money? In 2017, from the beginning to the end of the year, not a few distributors fled due to inventory pressure, including those of big brands. When New One Jia went bankrupt, hundreds of distributors suffered heavy losses, with the highest reaching tens of millions. By 2018, distributors could accept even less risk; a small supermarket bankruptcy could leave distributors with no way out. The original fleeing even escalated to suicide this year, just for payment. In 2019, are you still going to let inventory pressure continue to trouble you? Distributors should start saying no to manufacturer inventory pressure, no to terminal credit sales, and no to all obstacles hindering distributor development. Inventory pressure is the beginning, and also the beginning of solving everything. When manufacturers pressure inventory again, ask: If it doesn't sell, will you take it back? If it can't be pushed out, will you handle it? If manufacturers can't even handle these, can you expect them to bring you much development and profit? Be a rough distributor, meticulously cultivate every customer and every channel, don't do inventory pressure, but do sales, conquer terminals with sales, not credit. Let your salespeople make money, and don't let them leave because of low wages. Source: Internet