Deep distribution, which has long supported sales growth, has in recent years been simplified to just one task: channel stuffing. Whether it's the manufacturer's salespeople or the distributor's salespeople, their basic work revolves around stuffing the channel. Stuff, stuff, and stuff again. The channel is on the verge of collapse, and they're still stuffing. A few days ago, I attended a company's annual meeting. When the host mentioned the three major sales promotion activities for the year, I felt a sense of "long time no see." Isn't that right? Some basic channel work that was once very effective is now a thing of the past. If channel stuffing had some justification over a decade ago, now I want to say loudly: channel stuffing is a sin. The big companies that once thought they had strong brand power and were qualified to stuff the channel are now the ones with the biggest problems. Because big brands stuff the hardest. Channel stuffing has three major sins: it squeezes out manufacturer and distributor profits; it distorts the channel; and it distorts sales work. If they don't break free from channel stuffing, manufacturers will eventually be crushed by it.

How Did Channel Stuffing Go from Beneficial to Harmful?

The original purpose of channel stuffing was not sales volume, but to "squeeze the distributor's warehouse" and "occupy the distributor's funds." An expert once said vividly during training: "As long as distributors have spare cash, they will go and 'keep a mistress' (meaning take on new brands)." It should be said that this approach was very effective initially. So much so that some people said, "Sales are squeezed out," referring to the fact that channel stuffing can generate sales. It should be said that as long as there is incremental growth, channel stuffing is a very efficient sales method. Because other sales methods require time to accumulate, while channel stuffing can show results immediately. The method initially used by manufacturers to stuff distributors was later also used by distributors to stuff retail stores. Manufacturers gave the same stuffing policies that were originally for distributors directly to retail stores. As a result, the main target of stuffing shifted from distributors to retail stores. The turning point for channel stuffing was 2014, because in 2013, most FMCG industries reached their historical peak in sales, and in 2014, overall sales declined. What is the most efficient way to save declining sales? Of course, it's promotional stuffing. However, 2014 was different from the past. In the past, stuffing did not allow returns or exchanges; the goods stuffed to retail stores could basically be digested. After 2014, retail stores couldn't digest them, and if returns and exchanges weren't allowed, they simply couldn't be stuffed. So manufacturers compromised and allowed returns and exchanges. As long as returns and exchanges are allowed, no matter how much stock is stuffed, it can be pushed down, because retail stores don't worry about it. At this point, channel stuffing really changed in nature, from beneficial to harmful. So, when looking at things, we should view them from a historical perspective.

Channel Stuffing Squeezes Out Manufacturer and Distributor Profits

Channel stuffing, of course, requires stuffing policies. Now a phenomenon has emerged: no stuffing, no sales. In a month, several rounds of stuffing occur, and retail stores place orders several times. Retail stores have already calculated that manufacturers will inevitably stuff, and manufacturers are certainly more impatient than retail stores, because manufacturers have monthly sales assessments, while retail stores don't have that burden. Channel stuffing has now become more intense, with increasingly larger policy incentives. Therefore, stuffing policies erode profits. The biggest impact of stuffing on merchant profits is actually the price chaos after stuffing. Price chaos disrupts the channel price system, thereby reducing merchant profits. When stuffing indeed exceeds the merchant's sales capacity, some merchants will "transship" (sell outside their territory) or sell at low prices. This has a huge impact on channel prices. Even if only a portion of products have chaotic prices, it creates a ripple effect. The impact of price chaos on merchant profits is even greater than the impact of policy expenditures. In the end, channel stuffing leads to sales without profits. After two consecutive years without profits, many distributors simply quit. In the past, only manufacturers replaced distributors; this year, it's popular for distributors to replace manufacturers.

Channel Stuffing Creates a Bunch of Derivative Work

A few years ago, salespeople's terminal visit cycle was about one week; now it has extended to an average of more than half a month. Moreover, a lot of the deep distribution work that was done before has now been abandoned. After stuffing, there are returns; after returns, you need to find channels and pay a price to handle the returns; handling returns also affects normal sales. These things didn't exist before, but because of excessive stuffing, they have become the "new normal." There is a chamber of commerce in one county that was initially formed to unite merchants against terminals, but later found that the biggest use of the chamber was "collectively handling returns," and the momentum of handling returns is growing. Because the work generated by returns is rigid, especially for short-shelf-life products, this work squeezes out normal sales time. Currently, distributors are reducing staff, and because of stuffing and returns, a lot of work has arisen, squeezing out the normal work of distributors. When normal work is squeezed out, it naturally affects sales. When sales are affected, in the short term, only stuffing can make up for it. This is a vicious cycle. Another phenomenon of channel stuffing causing marketing work to deform is that salespeople's visits to terminals have changed from "sequential visits" to "skip visits." So-called sequential visits mean visiting every household without missing any terminal. So-called skip visits mean only visiting large accounts, not small ones. From sequential visits to skip visits, besides the impact of returns and exchanges on working time, it's also because stuffing usually doesn't reach small stores.

Channel Stuffing Distorts the Channel

For ten years, marketing has been advocating deep distribution. One characteristic of deep distribution is bypassing second-tier distributors and reaching terminals directly. In the first half of 2016, during market research, I found a strange phenomenon: "second-tier distributors" were making a comeback. I was very surprised by this. Why did second-tier distributors come back? Because the intensity of stuffing is increasing, and the stuffing policies are all tiered policies. Who do tiered policies favor? They favor large terminals and second-tier distributors, but not small stores. Small stores, because they order small quantities, can't get the tiered policies, so it's more cost-effective for them to buy from second-tier distributors. Thus, "second-tier distributors" made a comeback. The comeback of "second-tier distributors" has undone years of deep distribution work.

Let Sales Work Enter a New Normal

How should normal channel sales work be done now? When we criticize channel stuffing, we must find solutions. Some people think it should be more tightly managed deep distribution, for example, some companies use SaaS systems to manage salespeople more strictly to solve terminal sales promotion. I can only partially agree with this approach, because deep distribution is a human-wave tactic with low efficiency. Now that labor costs have increased, it's very difficult to go back to the human-wave deep distribution of the past. The real solution, I believe, is to rebuild the marketing system, mainly in two aspects: First, sales targets. Change from focusing on sales volume to focusing on value-added. Put main energy into promoting new mainstream products. Here's a case. A manufacturer has three generations of products: new products being promoted, best-selling products, and old products being phased out. I asked which type of product is most profitable? To my surprise, the products about to be phased out were the most profitable. Best-selling new products have high added value, but sales volume is small, and policy incentives are large, so they don't make money; best-selling products, to ensure they remain best-sellers, also need policies; old products about to be phased out, whether they sell or not, have no policies, so they are actually very profitable. This case tells us that the excessive stuffing is because we care too much and rely too much on the sales of old products. Only by developing the replacement products can we stop relying on stuffing old products. Second, precision distribution. The key to distribution is not stuffing, but sell-through. Sell-through depends on policies and personnel. Personnel are too expensive, so they must be used precisely. The key to precision distribution is big data. "Sequential visits" are inefficient, "skip visits" reduce sales, and only "precision visits" can solve this problem. The premise of precision visits is big data. With the widespread use of the internet, precision distribution is no longer a problem. Some companies are already doing this. This is what I consider the new normal for channel sales. -END- ★ Click the blue text below to view this month's popular articles ★ Click the blue text below to view this month's original articles FMCG Industry's Most Professional and Practical Knowledge Base 【 Reply with yellow numbers in the background to view the following keywords 】 | 001 Excellent Articles Selection | 002 Distributor Market Operations | 003 Terminal Visit Management | 004 Sales Supervisor Skills | 005 Sales Improvement Techniques | 006 Channel Expansion | 007 Managing Distributors | 008 Distributor Development | 009 Distributor Internal Operations Management | 010 Team Management | 011 Efficient Distribution Techniques | 012 Sales Manager's Eighteen Skills | 013 KA Operation Methods and Strategies | 014 First Lesson for New Salespeople | 015 Internet, Brands | 016 Distributor B2B Transformation |