30+ industry experts, 100+ B2B platform founders, and 800+ manufacturer and distributor friends gathered in Fuzhou to discuss the internet transformation of the FMCG industry.

The worst of times is also the best of times

When chatting with manufacturing bosses nowadays, if you want to have an effortless and pleasant conversation that they are willing to listen to, you need to talk about the internet and platforms, because these are things they don't understand and are curious about, so they will keep asking you. If you talk about lean manufacturing or systematic marketing engineering, first of all, they think they already know it, and even if they work hard, the immediate results may not be obvious. In the minds of most manufacturing bosses, there is a basic concept: when the economic environment is bad, going heavy-asset and doing fine management is asking for death.

Similarly, when you chat with distributors, they most hope you can tell them a trick to defeat the enemy with one move, a fatal blow, preferably making consumers come to the door voluntarily, washing their necks and waiting for the shopkeeper to strike. If you emphasize basic store work, sales groundwork, and operational details, they think it's far less efficient than the "Dongguan model"—pay, open the room, push down, exercise, pull up pants and leave. Many distributors still miss the good old days when they could earn money lying in bed, but they forget the famous saying of Teacher Cang (Cang Laoshi): Unless you can earn money in bed, don't stay in bed.

Most stock players chase highs, not lows. Before 2015, the stock prices of CSR and CNR remained at 3 or 4 yuan, hardly attracting buyers for years. After the merger of CSR and CNR in 2015, the stock price soared. A retail investor in Changsha used 1.7 million yuan with 4x financial leverage to chase CSR, but then the mid-year stock market crash hit. The stock opened and plummeted instantly, and he couldn't even sell. When the stock finished falling, he could only jump from the rooftop of his own residential building.

When even fools can make money, if you're not careful, you might become the biggest fool. Conversely, those who invest during the worst times, because of cost advantages, often have the capital to buy at the bottom.

In the 1990s, for houses outside Shenzhen's Guannei, salesgirls chased people to buy. For new Shenzheners who had just established themselves, those penniless gold rushers, the property policy not only had no purchase restrictions, but some properties not only required no down payment, but also gave a reward of 30,000 yuan per house. In other words, as long as you were willing to sign the contract and could repay on time, even the first year's monthly payments were waived. Today, the prices of these "unsellable houses" are measured in tens of thousands per square meter. Those who lament that working is not as good as speculating in real estate obviously missed the worst of times.

In 2008, the global subprime crisis hit China, and the construction and building materials industries were the first to be affected. Consumption declined, investment tightened, and almost overnight, the economic winter arrived. But my former boss at that time made a bold statement: When the industry is bad, our opportunity to expand territory has come. As a result, starting that year, we massively expanded industrial parks, bought entire buildings in Shanghai, and fully entered new channels. These investments, in just 5 or 6 years, multiplied in returns many times over, and only the parties involved know the exact figures.

During special times, distributors should make special attempts

Among our distributor community, there is a set of self-brainwashing rhetoric: Because the economic environment is bad, declining sales are inevitable; because e-commerce price impact is severe, the more you invest in physical stores, the greater the losses. More action, more mistakes; less action, fewer mistakes; no action, no mistakes. Many distributors have learned to be turtles, hiding their heads, and are well-versed in the secret of turtle longevity: life lies in stillness. Then... they just lie there waiting to live as long as possible.

When the economy is at its worst, that's the best time for those who understand. The first wave of people who went into business were mostly those who had their "iron rice bowl" broken in the system; the first wave of homebuyers were those who couldn't get housing from the system; the first wave of people who made a fortune on Taobao were those who didn't even have a legitimate distributor identity in offline channels. The ultimate beneficiaries may be those who were most unlucky during the worst economic times. Only those who can withstand the turmoil, or those who actively embrace it, can become the most favored during the worst economic period.

In fact, from the conclusion that the worst of times is the best of times, when this economic cycle ends, the ultimate beneficiaries may be exactly that batch of unlucky people. Perhaps this confirms the cyclical nature of economic development, which rises in a spiral; hitting bottom and rebounding, and extreme adversity turning into good fortune, is an inevitable result. But distributors need to be reminded that although economic development is spiral, its trend is upward, not simple repetition. So, the turtle strategy of life in stillness, waiting for good luck to fall on your head, is best not to think too much about.

Therefore, in such special times, I always suggest distributors make some special attempts.

First, try something related to strategic adjustment, such as introducing a new category or brand, especially one you never thought you would introduce.

When the economic environment is bad, it's also the best time to test and make mistakes, because the cost of trial and error is lowest at this time. For example, in terms of adjusting brand composition, the riskiest move is to introduce a brand that conflicts with your existing brands but that you have always been interested in.

Of course, for distributors, introducing a new brand is harder to decide than giving up an old one, because of the fear of the new and the adherence to existing interests. When the economy is bad, the cost of introducing a different brand is lower, and companies' requirements for distributors are not so harsh. As long as distributors adhere to the principle of innovation—introducing a new brand while phasing out an old one, keeping the total number of brands unchanged—often, unexpected choices can open another door for distributors.

Second, insist on small changes in internal management and evaluate the results.

When many distributors are longing for internetization, if we look back, many distributors' internal management is still stuck in feudal society: all major decisions are made by one person. Take the simplest standard of the seven elements of terminal management; if you really measure one by one, few stores can pass the passing mark. But many distributors don't take it seriously, thinking that not doing this or that is not important, but a little here and a little there adds up to a terrifying amount. Some distributors also think they have already done it, just not so standard, but it's about the same. Well, yes, the logos of Guangben (Guangqi Honda) and Acura are also about the same, but there's a price difference of several hundred thousand yuan in between.

When external competitive pressure decreases, internal self-generated motivation increases, which is an important opportunity for distributors to improve internal management. Set an improvement goal every week, and after three months, let a second party evaluate the results and give feedback, then adjust. Learn to play games with yourself; when it's dark, practice internal skills; when it's dawn, you'll have the strength to hit the road.

Third, use internet sales tools as tools, but don't rely on them.

Today, it's not a question of whether to do internet, but how to do it. I have emphasized the five stages of e-commerce development in many occasions. Some distributors think they missed the wind and it's too late to do it now. I think they misunderstand my point. E-commerce is a new channel, and the internet provides the lowest-cost promotional tool for this new channel. Even if e-commerce doesn't become your mainstream channel, it can still provide you with a free promotional tool. For example, renting a spot in a similar Taobao crown store, or opening a Taobao clearance store; there are many ways to play it differently.

When super hypermarkets came out, they clamored that they would sweep away specialty stores. What happened? Specialty stores had a phoenix-like rebirth, while hypermarkets peaked and declined. The two channels each do their own thing, and to this day, no one has seen the other necessarily eat the other.

Fourth, go against the grain and make some long-term investments.

When the economy is bad, distributors like to tighten their pockets and cut investments, but they forget that this is also a good time to buy at the bottom. If you have spare money, you must make some long-term investments, such as buying two storefronts, or introducing equipment you wanted to invest in earlier but delayed due to cost considerations. Or, sort out things in your industry that other distributors are unwilling to do but you think must be done for consumers or manufacturers, pick them out, evaluate them, and see if they can become your selling point or profit point, such as free water and electricity repair within three years in the building materials industry.

This also confirms the saying: "The traveler sees three years ahead; the sitter waits for the present."

Huang Runlin, focusing on channel development and distributor transformation research, personal WeChat: hrlandhyx. The article has been authorized for original publication by the author; please contact the original author for reprinting.

Source: Jinxiaoshang (Golden Distributor)

New Era · New Distribution

—— 2016 China "FMCG + Internet" Summit Forum ——

This is a grand event focused on how the FMCG industry channels should transform under the general trend of Internet+ transformation

Conference Agenda

09:00-09:30 Registration 09:30-09:35 Host opening 09:35-10:05 2016 China FMCG Industry Trend Analysis Report - Zhao Bo 10:05-10:25 FMCG Enterprise Transformation Strategy and Path - Liu Chunxiong 10:25-10:45 Opportunities and Challenges Brought by FMCG Channel Transformation - Liu Zhao, CEO of Waiqin365 10:45-11:25 Alibaba Retail Link All-round Empowerment - Guo Kunkun, Alibaba Retail Link 11:25-12:00 Roundtable Forum - Brand Transformation: Improvement vs. Reconstruction? (Guests TBD) 12:00-13:30 Lunch 13:30-14:00 Distributor Transformation: City Distribution Trend Development - Wang Qi, CEO of Weijie City Distribution 14:00-14:30 Roundtable Forum - Why Should Distributors Do Logistics in Transformation? 14:30-15:00 Detailed Explanation of Zhongshang Huimin's "One Machine, Two Wings" Strategy - Su Xiaoxin, Vice President of Zhongshang Huimin 15:00-15:30 Detailed Explanation of Zhanghe Cloud Factory Strategy - Yang Lixiang, Zhanghe Tianxia (Speech content TBD) 15:30-16:00 Supply Chain Finance: The Lubricant for B2B to Drive Traditional Business - Chen Xian, CEO of 51 Order 16:00-16:30 2B Investment Principles and Ideas - Xu Xiaoping, Founder of ZhenFund (Guest TBD) 16:30-17:00 Small Retail, Big Business Opportunities: China's Retail Transformation and Upgrade - Wang Jianfeng, General Manager of E-commerce Department, Yurun Group 17:00-17:30 Roundtable Forum - Who is the King of FMCG B2B Models? (Guests TBD) 18:00-20:00 Dinner

For manufacturers and distributors who want to transform, this grand event is not to be missed. Interested friends can long-press the QR code below or click "Read Original" to register.

Registration: Long-press the QR code below or click "Read Original"

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