---
title: "Three Strategies for Distributors to Make Money: Adjust Structure + Stabilize Prices + Maximize Rebates"
description: "The most discussed topic recently is that distributors are finding it hard to make money. But not all distributor businesses are failing; as Jack Ma said, 'It's not that the physical stores are failing, but that your physical store is failing.' Distributors must make clear judgments and dare to change to survive. This article shares personal views on how to adjust channel and product structure, stabilize market prices, and maximize manufacturer rebates."
author: "刘华明"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2020-05-29"
language: "en"
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# Three Strategies for Distributors to Make Money: Adjust Structure + Stabilize Prices + Maximize Rebates

> The most discussed topic recently is that distributors are finding it hard to make money. But not all distributor businesses are failing; as Jack Ma said, 'It's not that the physical stores are failing, but that your physical store is failing.' Distributors must make clear judgments and dare to change to survive. This article shares personal views on how to adjust channel and product structure, stabilize market prices, and maximize manufacturer rebates.

Recently, the most discussed topic is that distributors are finding it hard to make money. But are all distributor businesses failing? Obviously not. As Jack Ma once said, "It's not that the physical stores are failing, but that your physical store is failing." The same applies to distribution: it's not that distribution isn't profitable, but that your distribution isn't profitable. This era is cruel; distributors must make clear judgments about their business and dare to change to survive this "movement." So how exactly should they change? I will share my personal views from the following three aspects for your reference.
> **1. How to adjust channel structure and product structure?**
> **2. How to stabilize market prices?**
> **3. How to maximize manufacturer rebates?**

**-01- Adjust Structure**
The essence of not making money is insufficient profit. There are many ways to increase profit, but the two key ones are adjusting channel structure and product structure.

**Channels: Sell traditional, go to townships, expand immediate consumption**
According to data released by Kantar International, there are nearly 6.5 million small stores and over 200,000 large stores nationwide. From the data, it seems distributors should focus more on small stores. But the opposite is true; many distributors over-invest in large stores and rely heavily on modern channels. Indeed, traditional channels are hard work: many outlets, many tasks, heavy investment in manpower and money, and difficult management. Modern channels have fewer stores, higher sales per store, and higher gross margins, making small stores seem unnecessary. However, in recent years, everyone has seen that regardless of category or brand, growth in hypermarkets is very slow. Why? The base of modern channels is limited, growth is constrained, and they have reached a bottleneck. With nearly 6.5 million traditional small stores, no distributor can claim to cover all local small stores, and most sales still come from traditional small stores. Whether for incremental growth or market share, traditional channels cannot be abandoned. Traditional channels not only offer growth opportunities but are also key to enhancing and consolidating market competitiveness. This is the first step in adjusting channels: preserve traditional channels, then move to townships. Have you noticed that the bigger the brand, the more attention it pays to townships? Many big brands are increasing investment in townships. For example, Nongfu Spring has started signing tripartite agreements among Nongfu Spring, distributors, and sub-distributors in township markets with a few promising sub-distributors. But many distributors pay insufficient attention to townships. As living standards rise, the township market's capacity cannot be ignored. Distributors should proactively go down to townships, cover stores, or set up resident township sales staff to improve service levels and firmly grasp the township market. The final step is to expand immediate consumption channels. Many distributors may be unfamiliar with this: what are immediate consumption or immediate food channels? Examples include factory canteens, unit cafeterias, and dining outlets. These channels are either closed management with no choice and stable sales, or the product packaging is not visible because it's already opened by the time it reaches the table. Immediate consumption channels are excellent for handling products with older dates, as they increase sales without disrupting market prices.

**Products: Sell key items, promote new products**
The most important thing in distribution is profitability. Distributors should focus on core single products, especially the key products promoted by the company in stages. Old or basic products yield limited benefits, while core single products have higher overall profit and larger volumes, so they deserve key investment. Next is promoting new products. New products generally have higher profit margins and opaque pricing, making them good growth points. However, new products also face the issue of poor early sales. New product distribution is a technical task; don't start with full-channel, large-area distribution. New product distribution should start with large stores; don't let small 80 stores handle new products initially, as they likely won't sell through. Achieving distribution in the top 15% of stores will show whether it's effective. If effective, you can quickly expand; if not, you need to seek new strategies. Two points to emphasize: First, new product promotion requires more resources; after entering stores, quickly match with sell-through plans to encourage trial purchases and strengthen cooperative store owners' confidence. Second, ensure investment in key stores, create several model stores for new products, and leverage demonstration effects to enhance new product influence.

**-02- Stabilize Market Prices**
Stabilizing market prices is fundamental to product sell-through. If prices are unstable, forget making money; it's good if you don't lose money. Cross-regional selling (channel stuffing) is the source of price disruption and a chronic disease for product sell-through and survival. Therefore, don't be soft on cross-regional sellers; crack down hard. Combating cross-regional selling can't rely solely on distributors; educate terminal owners and analyze the pros and cons. Both distributors and small store owners aim to make money; if market prices are completely chaotic, no one can earn well. Reward those who report cross-regional selling to incentivize small store owners to fight it. For cooperative and rule-abiding customers, provide resource support; for non-cooperative customers, cancel preferential policies. Reduce cross-regional selling through interest binding. For malicious cross-regional selling, involve industry and commerce departments and resolutely resist. At the same time, establish a price control team to irregularly collect terminal retail prices; if low-price sales are found, stop terminal rebates and corresponding expense investments. Based on practical experience, we summarize several methods for reference:

**1) Cultivate relationships: develop local social connections.** For example, join local business clubs to enhance personal and market connections, forming a united front to stabilize market order.

**2) Gather evidence: address market price issues immediately, don't delay.** Because over time, cross-regional sellers become bolder; once it becomes habitual and more people engage in it, it's harder to handle. For example, a hypermarket engaged in cross-regional selling. After discovering it, the distributor had 49 salespeople buy goods, and when the store refused to settle, they blocked the checkout counter for three hours and called in media exposure. This made the entire local hypermarket industry aware of the consequences of cross-selling their brand, reducing cross-selling and boosting sales morale.

**3) Strong incentives: establish strict assessment and incentive policies for cross-regional selling.** Incentive policy: if a salesperson discovers cross-regional products in the market and immediately recovers them, reward 3 yuan per piece; logistics drivers get 0.3 yuan per piece for normal loading, and 0.5 yuan per piece for cross-regional goods. Strict assessment: if a supervisor finds cross-regional products during store visits but the salesperson didn't, the salesperson is fined 500 yuan for the first offense and fired for the second; similarly, if the boss finds cross-regional products during market visits but neither the supervisor nor the salesperson noticed, each is fined 500 yuan for the first offense and fired for the second.

**4) Differentiate internal and external: distinguish cross-regional products from your own so salespeople can identify them at a glance.**
   a. Reduce order frequency and use dates for identification. Place orders 2-3 times a month, preferably at the beginning of the month, so production dates are limited to two or three; cross-regional product dates rarely match your own, making it easy for salespeople to distinguish at terminals.
   b. Set hidden codes: punch holes or stick labels on boxes in different positions to indicate products sold to different regions/customers.

**5) Persistence: cross-regional selling won't be eliminated in one go; there will always be a next time.** Different markets face varying degrees of impact. Distributors must be tough and manage the market.

**-03- Maximize Rebates**
For distributors, maximizing manufacturer rebates is also an art. First, start with the basic logic: understand the rebate calculation rules. Is the manufacturer rebate monthly, quarterly, or annual? Are there tiers, such as 2% for achieving A sales, 3% for B, 5% for C, etc.? Another point worth noting: clarify the rebate calculation base, e.g., whether free goods or promotions deduct from sales. A previous client didn't know that free goods would deduct from sales; since free goods didn't count toward performance, they missed out on rebates. By pulling a few tens of thousands of yuan less in goods, they lost hundreds of thousands in sales bonuses. After familiarizing with the calculation rules, calculate how much to achieve. For example, with the ABC tiers mentioned above, consider sales, revenue, and costs to decide which tier is most cost-effective. Market demand changes, so you can't lock into one tier forever. If you force sales just for rebates, the goods pulled back require more expenses to handle, which is counterproductive. Therefore, it's best to calculate weekly how far you are from the target sales. If you exceed expectations, you can aim for a higher tier; if you fall short, lower the tier appropriately. After doing all this, the final step is to actually get the rebate. Some manufacturer rebates are tied to sales process metrics, such as distribution rate, display space, terminal maintenance, etc. For example, Yangyuan Zhihui has strict requirements for KA store displays; if not done well, rebates may be lost. So distributors must pay attention to whether rebates are tied to process indicators. If they are, plan ahead. For instance, if the manufacturer rebate is 200,000 yuan, the distributor can first invest 50,000 yuan as incentives for salespeople to meet process indicators, follow manufacturer requirements, and still earn 150,000 yuan after getting the rebate. Finally, be sure to conduct regular reviews, assess performance against targets, identify gaps, and make up for them promptly to ensure you get rebates every time and offset corresponding execution costs. In one sentence: Find gaps, calculate the total, and maximize benefits.

**Author Bio**: Liu Huaming, Partner and Senior Consultant at Sima Consulting, MBA from Sun Yat-sen University. Dedicated to helping consumer goods companies unlock marketing potential and solve regional expansion challenges.


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