In the first half of this year, many distributors have already started to incur losses or are on the brink of losses, and everyone is confused about future development. However, some distributors have seen their sales decline but profits increase, while others have seen both sales and profits grow. How did these distributors achieve this? For distributors, this year, offline snack chains, discount supermarkets, and regional supply chain companies will definitely divert some of their business, while Pinduoduo, Douyin, and community group buying are also seizing offline market share. Coupled with declining consumer purchasing power, these factors have led to a significant drop in distributor sales. The direct result is an increase in warehousing costs, transportation costs, and labor costs. However, these are all consequences of the external environment, and distributors basically cannot change them. Today, we attribute the causes internally, starting from the factors we can control, to see how to reduce losses and lower operating costs. All sales revolve around people, goods, and place, that is, products, channels, and personnel. Let's start with these three changeable factors to see if there is room for optimization and whether we can improve the company's operating conditions through our own efforts. First, Inspect Goods First, inspect the "goods," that is, the brands and products that the distributor represents. First, conduct a physical examination of all represented brands. Which brands are losing money and which are making money? Are the loss-making brands for channel expansion or strategic loss-making for traffic? Distributors should carefully analyze where the losses are. Generally, distributor losses are no more than the following situations:

  • Dumping goods at low prices to chase rebates;
  • Slow-moving products due to factory pressure to stock up;
  • Gross margins too low;
  • Brand price system issues causing negative gross margins;
  • Slow product turnover and excessive returns;
  • Factory arrears in fee payments. Category 1: For brands with low profits and pressure to stock up, and that cannot solve after-sales issues, in the current market situation, stop cooperation immediately. Category 2: Brands with chaotic price systems and inactive brand owners also need to stop cooperation. Such brands are basically impossible to make money from, unless you can get more favorable promotional policies than other distributors, in which case you can temporarily continue. Category 3: Brands with serious fee arrears must not be operated. Today, many major brands know that terminal sales are slow. Although they still pressure distributors to stock up, the intensity is reduced, and they invest more in promotional support for distributor distribution and terminal display. However, one thing distributors must consider is the timeliness and standards of brand fee verification. For unreliable business personnel or company management, you must obtain the company's promotional approval documents before operating; otherwise, you will be the one to suffer in the end. Old distributors know the specific reasons. Category 4: Some brands have good profits and meet sales targets, but have too many returns. For these brands, study which single products have high return rates, and control or stop purchasing these high-return products to reduce the return ratio. Mo Xiaoxian brand is responsible for after-sales. Last time when approving after-sales fees, I asked the salesperson to sort out the returned products from customers: the customer operated 17 single products, and 67% of the returns were caused by two single products. The customer's total annual returns were 370,000 yuan, less than 3%, but the return rate for these two products reached an alarming 23%. Without these two products, the return rate would be only about 1%. Later, we held a video conference with the distributor, reported our analysis, and everyone unanimously decided to reduce the channels and outlets for these two products. Although these two products had annual sales of over 1 million yuan, they were losses for both the brand and the distributor. Category 5: Products with monthly sales of only 10,000 to 20,000 yuan, no after-sales, no market investment, and no personnel maintenance. Handle these in two situations. If there is no growth potential, consider stopping losses because they involve procurement, finance, logistics, and sales energy, unless the gross margin is particularly good. If sales and profits are growing, these are potential brands that must be given key attention, increased investment, and amplified benefits. Because such brands are rare in today's market, they may become the core profit brand for your company in the next few years. Many distributors only focus on the sales of represented brands, not profits. In today's market environment, it should be the opposite: focus on profits first, then sales. Scale is useless; only a profitable company can last. Second, Inspect Channels Second, inspect the "place," that is, sales channels and outlets. Which channels are losing money? Is it due to uncollectible accounts, long payment terms, or high returns? Analyze the reasons clearly. First, conduct a profit-and-loss review of covered outlets, clearly identify which channels and outlets are losing money, and adjust in a timely manner. Last time I walked the market with a distributor, the customer said to me in front of a large supermarket: "We don't need to go in; we have stopped cooperation." He said: "This year, we conducted a profit-and-loss analysis of all the outlets we operate. Among more than 3,000 outlets, we stopped cooperation with over 180 stores due to excessive returns and untimely payments. We have been losing money on this supermarket for five consecutive years." I believe this single action will definitely reduce the distributor's losses by hundreds of thousands to millions of yuan a year. But how many distributors today have conducted financial accounting for the outlets and channels they operate? Have you counted how many outlets in your company are losing money? Second, monthly review of outlet activity rate and average sales per store are also core indicators. If the activity rate decreases, check which outlets are not stocking up. Is it due to poor store business, competitor suppression, poor store maintenance, too many old-date products, or best-selling products sold out while slow-moving products occupy shelves without timely adjustment, or the store owner not stocking up? If average sales per store decline, pay attention to: whether a snack store or discount supermarket has opened nearby causing an impact, or whether it's due to poor display, unreasonable prices, or missing products. If it's the latter, adjust in a timely manner to increase store sales. Distributors cannot be dismissed by a salesperson's phrase "poor sales." They must find the root cause of the problem, analyze it in a timely manner, and find countermeasures. Declining sales per store is a major trend, but if your maintenance is better than competitors, sales may not necessarily decline. Third, Inspect People Third, inspect "personnel." Analyze the output of each salesperson: who is making money and who is losing money. Is the money-maker's result due to their effort and ability, or are they lying flat due to company resource bias? Is the loss-maker's problem one of ability or attitude? If attitude is problematic and ability is insufficient, optimize in a timely manner; if attitude is good but ability is problematic, see if training and mentoring can improve them. The ability of sales personnel and team stability are the core of a distributor's business development and core assets. A good team will not have poor performance. This year, many distributors have seen sales decline, salespeople cannot get bonuses, and income decreases, leading to resignations, which directly causes instability in the distributor's sales team. Because team instability accelerates performance decline, causing core brands to stop cooperation, directly leading to distributor losses or bankruptcy. For today's distributors, team stability is more important than taking on new brands. If declining performance affects sales personnel income, distributors can negotiate "personnel incentive plans" with brand owners who have market investment. Through salespeople's distribution and display improvements, the brand owner can issue some rewards. I believe many brand owners are willing to invest, which can solve the problem of declining employee income without affecting their own profits. This issue is more important than sorting out brands and channels for distributors. I hope everyone pays attention! If distributors can do the above three aspects well, I believe they will reduce losses. However, to be profitable, it is still not enough. They also need to adjust the company's product structure, channel optimization, and service functions accordingly. Due to space limitations, there are many more valuable contents that cannot be detailed here. The author of this article, Mr. Wang Zhengqi, founder of Mo Xiaoxian, will attend the 6th China FMCG Conference and deliver a keynote speech titled "Changes and Opportunities in China's Offline Channels." Friends who are interested should not miss it!