Jiangsu Lianyungang Yiheng Grain and Oil, primarily dealing in Yihai Kerry products, had only 20 restaurant clients before its transformation, focusing mainly on secondary wholesalers, KA channels, seasoning stores, and fresh food stores. After a year of transformation, it now serves 1,600 restaurant clients and has doubled its sales. How did they achieve this?

Recently, New Distribution had an in-depth exchange with Mr. Lu Yulong, General Manager of Yiheng Grain and Oil. As a second-generation successor to the distributor, Lu did not rely solely on his father's existing business but conducted market research at the end of 2018 to seek new opportunities in the market.

He believes that with channel saturation and intense market competition, existing channels are unlikely to bring more business opportunities. If he merely relied on existing channels, it would be difficult to achieve a breakthrough. Focusing on the "red ocean market," even with great effort, would only improve from 60 to 80 points.

If he opened a new battlefield, the same effort could yield far more than a 20-point improvement.

During the market research, he noticed another phenomenon: the number of restaurants in Lianyungang far exceeds that of ordinary distribution outlets, and the largest customers for grain and oil are restaurants. Of course, developing restaurant clients is a long process, maintenance is difficult, and customer loyalty is low, posing a significant challenge.

How to develop restaurant clients, capture restaurant terminals, and increase customer loyalty? Lu Yulong came up with the distribution-store model.

-01- What is a distribution store?

A distribution store serves both retail and distribution functions. Retail targets consumers, while distribution targets restaurant terminals.

Initially, Lu Yulong only cooperated with local mom-and-pop stores that engaged in both retail and wholesale-like operations, holding a certain number of restaurant clients and covering areas with a high concentration of restaurants within a one-kilometer radius. Later, to improve coordination and expand coverage, Lu transformed employees into distribution store owners and provided corresponding support.

Currently, Lu has established 8 distribution stores in Lianyungang (4 mom-and-pop stores and 4 converted from employees). In addition to the 200 restaurant terminals directly covered by the company, the remaining 1,400 are covered by these 8 distribution stores. That means each distribution store covers an average of 175 surrounding restaurants.

Of course, mom-and-pop stores sell brands other than those represented by Lu, and they cover a limited number of restaurant clients. To better incentivize them, Lu has implemented a series of incentive measures.

-02- Combined incentives

For cooperating mom-and-pop stores, Lu's team provides shelves and new storefronts to improve the store environment.

To encourage owners to stock up, Lu adopted a combined incentive approach.

Take one mom-and-pop store as an example: the owner originally had 50 restaurant clients. In addition to Yihai Kerry products, they also represented other products. To boost their enthusiasm, Lu provided a series of incentives.

First, there is an ordering incentive. For example, for Yuanbao oil, if a mom-and-pop store places a one-time order of 3,000 cases, they receive a corresponding reward.

In addition to order incentives, cumulative order rewards are also offered to mom-and-pop store owners.

For instance, if the store's cumulative purchases reach 10,000 cases, the owner is rewarded with an electric tricycle worth over 1,000 yuan. Of course, if the owner needs it, they can purchase the vehicle in advance, and once the cumulative order quantity is met, the company will reimburse the cost of the electric vehicle.

Order incentives encourage owners to proactively stock up. However, for mom-and-pop stores, to distribute more goods, they must develop restaurant clients. Since their development capacity is limited, the company will send service staff (employees) to assist owners in opening stores.

Service staff are another term for company sales representatives. Unlike sales reps, besides distribution and restaurant development, they take on more service roles, serving both distribution stores and restaurant clients.

Service staff salaries consist of base salary plus commission, but the base salary is linked to sales volume.

For example, an employee has a base salary of 3,000 yuan per month and is assigned a monthly sales target. If they achieve 100% of the target, they receive the full 3,000 yuan base salary plus corresponding commission.

If they only complete half the target, they receive only half the base salary and corresponding commission. However, if they exceed the base target by 50%, the base salary increases to 4,500 yuan, and in addition to the task commission, the extra sales commission is paid at 1x. If monthly sales exceed 100% of the target, the base salary reaches 6,000 yuan, and all commissions are multiplied by 1.5.

In other words, in addition to sales commissions, the employee's base salary also increases with sales volume.

This boosts the enthusiasm of sales staff, who retain customers through better service. For example, they help restaurant owners with promotional activities and even help wash dishes and serve food during peak hours.

To encourage restaurant orders, Yiheng Grain and Oil focuses on best-selling products and provides freebies such as aprons and dishwashing liquid.

At the same time, Lu encourages employees to allocate a portion of their bonuses to distribution store owners. That is, the more restaurant clients an owner develops, the more goods they sell, the higher the salesperson's salary, and the owner also receives corresponding fees.

The combined incentives create a reinforcing loop for distribution stores and company employees, driving monthly growth in sales and restaurant clients, while also generating more profit for distribution store owners and higher income for employees.

In addition to mom-and-pop stores, Lu has established a screening mechanism for training employees to become distribution store owners, following two criteria: First, they must identify with the company's philosophy and be able to get along harmoniously with team clients. Second, they are evaluated based on business capability and feedback from distribution stores and terminal owners.

The company provides them with start-up funds (including rent and ordering capital) to help employees transition roles and achieve better development.

Employee-run distribution stores receive the same ordering and reward policies as mom-and-pop stores, but to help them grow faster, these stores are given additional incentives. For example, if a product is about to increase in price, mom-and-pop distribution stores get one round of ordering before the increase, while employee-run stores can get two rounds based on inventory.

-03- Providing products based on restaurant needs

In Lianyungang, Yuanbao oil is highly favored by restaurant clients and is Lu's main product. However, besides oil, restaurants also use seasonings, dishwashing liquid, and more. If clients use other brands for these items, Lu offers free samples of the company's corresponding products when they order oil, allowing customers to try them.

If the restaurant client needs a product the company doesn't have, but a mom-and-pop store or their relatives do, Lu arranges for them to supply the restaurant, and through the mom-and-pop store owner, he also places oil in their relatives' stores.

This combination of best-selling products (oil) and essential items (dishwashing liquid, seasonings, rice) gradually opens up restaurant clients. Often, it takes only about a month to win over a store.

For restaurants that have not yet cooperated, staff also make regular visits, providing free promotional items and trial products.

-04- Differences between distribution stores and secondary wholesalers

Some might say this distribution store model is just like small secondary wholesalers. In fact, they differ from secondary wholesalers in several ways.

Traditional secondary wholesalers focus mainly on wholesale, earning margins through volume, and have minimum order requirements. For example, a minimum order might be ten cases. However, typical restaurants order small quantities, sometimes just one case. Such clients are usually not served by secondary wholesalers.

Secondly, secondary wholesalers are mostly "sitting merchants" who are used to customers coming to them; they do not proactively develop new clients.

In contrast, distribution stores offer flexible ordering and convenient delivery, as they only cover restaurants within a one-kilometer radius and can deliver according to restaurant requirements. Each day, a distribution store can deliver to 30 restaurants, and since each order is small, a single tricycle is sufficient.

Moreover, the biggest difference between distribution stores and secondary wholesalers is service. Distribution stores not only provide small-quantity delivery but also, together with Yiheng Grain and Oil employees, offer store services (traffic generation, kitchen help, gift delivery, new product trials).

After the distribution store model was promoted, only 7 additional vehicles were needed on top of the original 20+ to meet all channel delivery needs, while the number of restaurant terminals increased to over 1,400. Sales doubled.

New Distribution Commentary:

While other distributors are still developing new secondary wholesalers and expanding channels, Lu has already started capturing restaurant terminals. In the grain and oil category, restaurants are the group with the highest ordering frequency.

According to statistics, there are 8 million restaurants in China. However, in traditional retail or FMCG, small terminal stores are the channels everyone cares about. The restaurant industry has received little attention, with almost no effort spent. Yet restaurants account for a significant proportion of overall consumption and are expected to maintain high growth over the next decade.

However, restaurant development cycles are long, and relationship maintenance is difficult. Unlike traditional retail terminals, restaurants require more services. Providing more value-added services to restaurant owners is key to increasing customer loyalty. Value-added services require joint efforts from distributor employees and distribution store owners, and effective incentives are the driving force behind their service improvement.

The biggest difference between distribution stores and secondary wholesalers is that they provide retail services to B-end restaurants. Small, scattered product deliveries meet the daily needs of restaurants while avoiding occupying restaurant capital and space. Comprehensive additional services help small store owners solve thorny problems. Such relationship-building services enhance restaurant owners' trust in distribution stores.

However, the distribution store model is currently only suitable for distributors in third- and fourth-tier cities. First, rental costs are lower, so distributors have lower capital investment. Second, in third- and fourth-tier cities, most restaurants do not have centralized procurement and still rely on distributors or secondary wholesalers for supply.

Distributor transformation does not require lofty theoretical knowledge; it only requires distributors to find the right customers, identify their pain points, and solve them. Then growth will appear.

Tips will be paid 400-2000 yuan once adopted.