FMCG products are those we use frequently and consume quickly in our daily lives, so ensuring smooth distribution channels is crucial. After nearly four decades of development in the FMCG industry, the drawbacks of distribution channels have gradually emerged, and reform is urgently needed. This article will provide a detailed introduction and analysis of FMCG distribution channels:
FMCG Channel Classification ⊙Distribution Channels In the FMCG industry, distribution channels specifically refer to secondary wholesalers, wholesale markets, and similar channel areas. The main characteristics of FMCG distribution channels are: 1. Price-sensitive, not overly focused on per-case profit, maximizing total profit by increasing sales volume; 2. Low loyalty to manufacturers; 3. Ignoring manufacturers' pricing management order, only pursuing profit, often becoming the "culprit" that breaks the manufacturer's overall price system. ⊙KA Channels KA stands for Key Account, meaning "important customers." Based on sales area, customer traffic, and growth potential, KA is divided into: Cash & Carry (C&C), Hypermarkets (HM), Supermarkets (SM), etc. The main characteristics of KA channels are that each system has its own mature management processes and systems, including product procurement principles, product display principles, promotion principles, and supplier selection criteria. ⊙Special Channels Special channels are non-mainstream channels, referring to channels other than traditional ones like wholesale markets and KA channels. They can be divided into internal special channels, external special channels, and special project channels based on the degree of "closure." Internal special channels mainly include schools, military, prisons, etc.; external special channels include airports, train stations, bus station kiosks, gas station convenience stores, park kiosks, hotels, etc.; special project channels mainly refer to wedding, group buying, etc. ⊙"Mom-and-Pop Stores" "Mom-and-pop stores" refer to small retail outlets on street corners. Although each store's sales volume is small, the sheer number of these stores makes their overall sales impressive.
Current Status of FMCG Channels Currently, most FMCG distribution markets have achieved flattening, meaning manufacturers directly face regional distributors (at district/county level), who are responsible for the retail network in their area, and ultimately retailers sell products to consumers. This structure has clear levels, each meeting its own needs, and has operated for many years. However, with rapid economic changes, especially intensified market competition, reduced profit margins, and increased inventory, the problems of this structure are becoming more apparent:
- Information flow "breaks." Information is fragmented between levels. For example, to prove full terminal coverage and obtain related policies, more distributors choose to underreport terminal information to protect their interests; for some small and scattered terminals, distributors lack marketing enthusiasm and basically leave them to secondary wholesalers, and the completeness and credibility of such terminal information can be imagined.
- Capital is "tight." To complete sales tasks, distributors compete with each other, pressuring inventory down the chain, causing capital strain at all levels. Market information fragmentation leads to unreasonable ordering and production arrangements, resulting in unsold goods; to push inventory to terminals, distributors blindly promise return and exchange conditions, temporarily recovering funds, but when returns occur, the losses and capital pressure are passed back to distributors.
- Logistics is "scattered." This problem is not prominent in cities, but in rural markets, due to small order quantities per store, scattered regional distribution, and distributors operating independently, delivery efficiency is low and costs are high.
FMCG Distribution Trends ⊙Shift from production-led to consumer-led Because consumers' purchasing power and potential demand continue to grow, in the current market, grasping consumer demand must be done from the consumer's perspective, accurately understanding their real needs, especially analyzing and tapping into their potential needs. ⊙Shorten the value chain to achieve "flattening" Dispersed flattening: A "mountain king" style of flattening, upgrading original secondary distributors and wholesalers to distributors, dividing the market into smaller territories. Scale flattening: A "warlord" style of flattening, allowing fewer large distributors to control the market, with large distributors managing lower-level markets through branch offices. ⊙Move toward scale According to economic laws, market development inevitably leads to scale, concentration, and eventually relative monopoly. ⊙E-commerce and logistics factors enter distribution channels Only integration at the logistics level can bring true value. For example, if a region has over 300 vehicles from various consumer goods distributors delivering goods, after integration, fewer than 100 may be needed, and the savings create real value. ⊙More centralized terminal procurement, strengthened central control Regardless of the business format, central control management is the trend. The number of regional purchases will decrease, and communication and collaboration between brand owners and headquarters will become increasingly important.
How Distributors Can Strengthen Distribution Channel Management The primary issue for FMCG distributor marketing is to solve the problem of product and consumer meeting, and only then will there be purchase intention. How to make the "territory" they have worked hard to establish more stable and form a sound sales network is a common issue for manufacturers and distributors. So, how should distributors strengthen channel management? 1. Jointly Plan Channels 1.1 Planning strategies for distribution and modern trade channels. For the FMCG industry, reasonable channel planning is a prerequisite for market control. We can divide the market into distribution channels and modern trade channels based on specific market conditions, then find profit points within these channels and deploy resources accordingly to maximize terminal control. For example, in the baijiu industry, specialty stores are a special channel within distribution channels and often one of the key channels with high sales volume. We can invest resources with focus based on market foundation and consumption habits, either for image or sales. 1.2 Development and maintenance of special channels. Special channels are very attractive to distributors because they have concentrated consumer groups, low development thresholds, and low maintenance costs, making them popular among distributors. If traditional channels are the regular army, special channels are the flanks, providing defense for the overall situation. For distributors or agents with strength, consider setting up an independent department or dedicated personnel to maintain and follow up. 2. Refined Management 2.1 Channel segmentation. This is a further division under the overall channel division. Based on specific market conditions, divide the market into A, B, and C markets, and decide resource investment based on market performance. These markets can be classified as sales-oriented, investment-oriented, image-oriented, or sales-image-oriented. 2.2 Store management. In today's increasingly competitive society, distributors need to continuously adapt to market development needs, and store management is the most important part of refined management. How to do effective store management? First, establish detailed customer profiles to effectively understand the store's overall operations; second, conduct sales analysis to promptly understand market dynamics and adapt to market needs; third, make replenishment plans. 2.3 Personnel allocation and division. In practice, it is found that some distributors are casual about maintaining mature markets. The better the market foundation, the fewer personnel are often allocated, not realizing that because the market foundation is good, the sales staff's work is very simple, and long-term relaxation often leads to sales decline or competitor counterattacks causing sales to drop. 3. Logistics and Distribution 3.1 Choose an appropriate warehouse location. Timely delivery not only improves terminal customer satisfaction and trust but also prevents losses from stockouts due to untimely delivery. How to choose an appropriate warehouse location? First, set based on the demand of market stores. Second, choose based on the actual convenience of inbound, outbound, handling, and vehicle dispatch. 3.2 Good inventory management. How well inventory management is done directly affects the effectiveness of distribution. For distributors who directly control terminals, stockouts not only affect sales opportunities but also affect relationships with terminals. Distributors should pay attention to changes in their inventory and manage it in a timely manner.
Source: Zhoupu Distribution Research -END- The best domestic learning platform for FMCG distributors Focusing on providing professional, practical, and actionable tutorials for companies and distributors Committed to helping Chinese FMCG distributors grow rapidly The most professional and practical knowledge base in the FMCG industry Reply with the red number below to get corresponding content Reply with number 1 to view the complete knowledge base | 001 Excellent article 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 | [Long press QR code to follow]