In theory, manufacturer-dealer cooperation should be mutually beneficial. The manufacturer has products and brands, along with the ability to develop products, shape brands, and plan and operate the national market. The dealer, on the other hand, has local social resources and sales platforms, enabling more effective operation of local sales networks. By integrating resources and leveraging each other's strengths, both parties can amplify the brand's influence in the local market, improve the sales network, cultivate and consolidate consumer groups, achieve consumer brand-directed purchases at the point of sale, and continuously boost sales performance.

At the same time, through cooperation with the manufacturer, the dealer can optimize product portfolios and expand their local business. By leveraging the manufacturer's established brands, the dealer can also build their own company brand.

Calculated this way, everything seems fine, but (many things in the world go wrong with this "but"), overall, manufacturer-dealer relations are becoming increasingly tense, with mutual trust declining and complaints rising. Manufacturers lament that dealers are declining in quality, have outdated concepts, poor execution, and cannot keep up with the manufacturer's development pace. Meanwhile, dealers accuse manufacturers of being short-sighted, killing the goose that lays the golden eggs, and completely disregarding the dealer's survival, especially as the quality of mid- and low-level sales staff deteriorates.

We are all businesspeople, and problems between businesspeople usually stem from three factors:

  1. Interests: money, money, money—;
  2. Emotions: feeling disrespected or losing face;
  3. Asymmetry in communication and understanding: not being on the same page. To some extent, all conflicts in the world are caused by asymmetric understanding.

Objectively speaking, the tension in manufacturer-dealer relations is often influenced by the following aspects:

  1. Traditional manufacturer-dealer relations are more about transactional trade of money and goods. Manufacturers care about the sales volume and payment collection of their products from dealers, while dealers care about the policies and support provided by manufacturers and worry about the impact of manufacturer changes on them.
  2. Manufacturers and dealers have different perceptions of profit. Although both are in business to make money, they earn differently: manufacturers earn strategic profits (market building, brand, price system stability, product structure), while dealers earn tactical profits (current sales profit and payment collection). Moreover, both believe they bring profit to the other.
  3. Communication and cooperation between manufacturers and dealers are concentrated at the operational level. Even at the product level, each focuses on maximizing their own interests, leading to evasion and gamesmanship in cost sharing, responsibility, and task allocation.
  4. Influence of intermediaries. "The King of Hell is easy to see, but the little devils are hard to deal with." Direct communication between the bosses of both sides is relatively easy. However, during cooperation, both bosses are influenced by various intermediaries, such as the manufacturer's sales staff or the dealer's employees, who, due to their own abilities, personal interests, and responsibility issues, can negatively impact the cooperation.

In summary, although cooperation outweighs gamesmanship between manufacturers and dealers, minor frictions can still damage the quality of cooperation.

From an objective standpoint, in manufacturer-dealer cooperation, the manufacturer should take a more leading role. However, most manufacturers fail to do this well and do not play a leading and exemplary role, such as:

  1. Insufficient and incomplete understanding of dealers, especially regarding new problems and needs that arise within the dealer's own operations, with more focus on the dealer's sales performance.
  2. Insufficient attention to differences between manufacturers and dealers. There are differences in operational models, profit models, and development orientations, but manufacturers do not fully recognize these differences and overly insist on their own views and orientations.
  3. Manufacturers generally only interface with the dealer's front office (sales and marketing), rarely involving the back office (management and costs). That is, they only care about sales performance and gross profit, not the dealer's net profit.
  4. The manufacturer's sales team often has significant gaps in age, social experience, and business experience compared to dealers, but they often position themselves as managers or commanders, treating dealers as subordinates, making rigid demands, and even overdrawing dealer and market resources to complete tasks.
  5. Manufacturers and dealers fail to achieve strategic integration and alignment, operating only at the tactical level, lacking strategic consensus, and easily falling into tactical disputes.

Now let's talk about dealers. Domestic dealers, despite their outward appearance as companies, are essentially individual businesses. This is not to say that individual businesses are bad, but their form and operational model may not align with the current market context or the manufacturer's development pace. Specifically, the problems are as follows:

  1. Private dealers have long prioritized operations over management, leading to frequent internal management issues once the company and team reach a certain scale: employees are present but not productive, rules and regulations become dead letters, execution and innovation are insufficient, work efficiency declines, internal friction increases, and employee turnover continues to rise.
  2. Internal factors determine external factors. These internal problems lead to frequent issues in external operations, such as a shrinking number of effective customers, declining customer productivity, low survival rates for new products (especially high-end new products), increasing dependence on expenses, and declining cooperation efficiency with upstream and downstream customers. After all, a company's external operational capability largely depends on the support of its internal management system.
  3. From the perspective of operating costs and profitability, losses and costs caused by management chaos continue to increase, eating into profits, and the common phenomenon of increased volume without increased profit occurs.
  4. From a development perspective, changes in business formats such as e-commerce, KA stores, and channel integration and acquisitions make the future development of dealers full of uncertainties.
  5. Even if the dealer boss fully recognizes and accepts the manufacturer's operational plans and is determined to cooperate, due to limitations in internal management and team work quality, the agreements and market plans reached between the two parties are difficult to implement effectively.

In fact, dealer bosses are well aware of these problems, but they often cannot solve them themselves. Of course, why they cannot solve them is not elaborated here. If they could, dealers would have long kept pace with manufacturers. The reality is that dealers face problems, limitations, and bottlenecks that they cannot overcome or resolve on their own. In traditional manufacturer-dealer relations, these matters are considered the dealer's own business, and manufacturers do not interfere. After all, manufacturers care more about the dealer's payment collection and sales capability. If cooperation works this year, fine; if not, they can switch to another dealer next year. Some manufacturers even delegate the authority to develop and terminate dealers to the provincial level, arbitrarily developing and dismissing dealers, which further undermines the dealer's sense of security.

In traditional manufacturer-dealer relations, the dealer is merely a sales tool in the manufacturer's eyes. If it works, use it; if not, replace it. The problem is that most dealers lack the ability to solve their own problems and cannot adapt to or lead the market. If there were enough high-quality dealers, manufacturers could continue to switch, but the number of high-quality dealers in various industries is decreasing (the overall number of dealers is also declining). There are not many dealers to choose from, and the cost and risk of direct sales are too high. For a considerable period, manufacturers will still rely on dealers, especially those aiming for national coverage. These dealers' own problems will ultimately affect the manufacturers. Therefore, the traditional manufacturer-dealer relationship, which only involves cooperation at the product operation level, can no longer continue. Next, it is necessary to consider upgrading the manufacturer-dealer relationship, that is, upgrading from traditional trade relations to cooperative relations. Traditional trade relations are about money and goods, focusing on sales volume and short-term profit. Cooperative relations, on the other hand, are commercial partnerships formed at the strategic level based on the long-term development of both parties, caring about each other's overall growth, actively helping each other solve their own problems, and comprehensively considering and balancing factors such as market building, sales performance, product structure, gross profit, and net profit. At the same time, the manufacturer's sales staff must also be upgraded from traditional salespeople to consultant-type coaches, whose core work is to help dealers sort out sales and management tasks, promote smooth channel operations, reduce internal friction, and lower costs. If necessary, they can even directly join the dealer's company and take on full management responsibilities for a project or department.

Although traditional manufacturer-dealer relations are simple, they are no longer suitable for the current market environment. They cannot solve the dealer's own problems or truly lead the dealer in development. Therefore, if the manufacturer still intends to operate the market through dealers, upgrading the manufacturer-dealer relationship from trade to cooperation is inevitable.

[Author bio: The author comes from a private business background, has managed a family-owned dealer company for many years, and has concurrently served as a business manager and trainer in several manufacturing companies. Research focuses on internal management of small and medium-sized private enterprises, with main topics including personnel management, cost control, management back-office setup, and the integration of retired military personnel into private enterprises. The author has continuously broken down over 400 topics related to internal management of private enterprises and maintains ongoing collection of materials and updates to solutions.]

-END-