---
title: "What Sets Top-Performing Distributors Apart? They've Figured Out These 10 Questions!"
description: "As market competition intensifies, the FMCG industry has entered an era of razor-thin margins, yet downstream costs for distribution, labor, and warehousing keep rising, making life harder for distributors. Amid dramatic shifts in consumption and deepening channel reforms, distributors face unprecedented challenges. This article categorizes common operational and management difficulties distributors encounter and offers practical advice to help them navigate these issues."
author: "陈志平"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2020-01-16"
categories: "Dealer Operations"
language: "en"
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markdown: "https://xinjignxiao.com/en/articles/what-sets-top-performing-distributors-apart-they-ve-figured-out-these-10-3d022d55.md"
original_source: "https://mp.weixin.qq.com/s/SZrGu9h1Xk-9qAjhbyc6pQ"
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citation: "陈志平. “What Sets Top-Performing Distributors Apart? They've Figured Out These 10 Questions!.” New Distribution, 2020-01-16. https://xinjignxiao.com/en/articles/what-sets-top-performing-distributors-apart-they-ve-figured-out-these-10-3d022d55/"
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---

# What Sets Top-Performing Distributors Apart? They've Figured Out These 10 Questions!

> As market competition intensifies, the FMCG industry has entered an era of razor-thin margins, yet downstream costs for distribution, labor, and warehousing keep rising, making life harder for distributors. Amid dramatic shifts in consumption and deepening channel reforms, distributors face unprecedented challenges. This article categorizes common operational and management difficulties distributors encounter and offers practical advice to help them navigate these issues.

**Market competition is intensifying, and the entire FMCG industry has entered a true era of thin profits. However, downstream costs such as distribution, personnel, and warehousing are increasing year after year, making life increasingly difficult for distributors.**

Consumption patterns are changing dramatically, and with them, channel reforms and market adjustments are deepening. Distributors are facing unprecedented challenges.

Amid the daily grind of complex work, distributors encounter various operational and management difficulties. This article categorizes common problems that distributors universally face and offers some business suggestions, hoping to provide useful guidance for distributors' operations.

**-01- Business Direction**

**Product Expert or Channel Expert?**

This question touches on positioning. How can distributors fully leverage their resource advantages and convert them into competitive advantages? Every distributor is under pressure from market saturation and competition from peers.

There is a game of interests among manufacturers, peers, retail terminals, and sub-distributors. In each round of this game, the question is: how many cards do you hold to secure final victory? This requires distributors to establish their regional advantages within the industry.

**There are two basic ways for distributors to gain an advantage in the industry:**

**First, become a specialist in a specific product category—a product expert.** Examples commonly seen in the market include the "Milk King," "Beverage King," or "Famous Liquor Distributor." This business model is favored by many distributors.

**Second, specialize in a particular channel.** For instance, focusing exclusively on foodservice, supermarket, or distribution channels. By mastering one channel type, you build channel advantages and become a channel expert.

Both models have their pros and cons.

**Advantages of being a product expert:**

**1. Full integration and utilization of resources.** Most supermarket buyers organize by category. Specializing in one category facilitates better coordination with retail terminals.

**2. Easier to adjust channel models based on product characteristics.** This allows better integration of manufacturer resources and cost savings.

**3. Builds competitive advantages within a specific industry.** This makes it easier to secure agency rights for quality products and squeeze competitors.

**The drawbacks are also clear:**

**1. Any fluctuation in the industry can harm the distributor.** Poor risk resistance.

**2. Difficulty in obtaining strong manufacturer support.** When competing products' agency rights are held by one distributor, manufacturers see this as a major taboo. Such distributors are often used more than valued.

**Advantages of being a channel expert:**

**1. Facilitates internal management and attracts top talent; strengthens control over the channel.**

**2. Accelerates new product distribution and enables fine market cultivation.**

**3. Allows rational allocation of resources and improves capital turnover.**

**Drawbacks:**

**1. Due to channel singularity, it's hard to secure regional exclusive agency rights for products.**

**2. Vulnerable to peer pressure and risk of being squeezed out.**

From the above analysis, it's clear that when choosing a business direction, distributors should fully leverage their strengths. The product range should not be too broad but focused. Specializing in a specific category and channel helps form advantages and achieve better economic returns.

**-02- Enterprise Development**

**Profit-Driven or Volume-Driven?**

FMCG distributors all have a deep understanding: "Best-selling products don't make money; profitable products don't sell well." Products that are both profitable and fast-moving are rare. This is due to market competition and rapid product turnover.

This splits distributors into two camps: one refuses to handle products with gross margins below 10%; the other only earns 5 points on products they distribute, refusing to earn more. These two attitudes are diametrically opposed, but each has its rationale.

The first camp thinks: "No profit, no early rise." Why bother with unprofitable chicken ribs? If gross margin is below 10%, after deducting storage, labor, shrinkage, taxes, etc., you're just a porter.

The second camp thinks: "Thin margins, high volume." Small profits but large quantities still make money.

Distributors ask: Should enterprise development focus on profit or volume? I believe distributors must maintain appropriate operating profits while scaling up volume.

How to achieve this? Distributors should do the following: categorize their products into three types.

> **Type 1: High profit, low volume.** These are sunrise products. Operating them prepares you to earn tomorrow's money.
>
> **Type 2: High volume, thin profit.** These are sunset products. The purpose is to retain customers.
>
> **Type 3: High volume and high profit.** These are golden products. Maintain existing profits while increasing volume. These three categories should be controlled in a ratio of 30-30-40% of the product mix.

**Focus on nurturing Type 1 products. Control sales volume of Type 2 products appropriately. Never easily reduce prices on Type 3 products.**

In summary, distributors must learn to seize opportunities and earn all possible profits.

**-03- Management Structure**

**How to Transform Family Management?**

The first generation of distributors mostly originated from family-run mom-and-pop stores. **The husband handles external affairs, the wife handles internal affairs, the sister-in-law does the accounting, and the father-in-law manages the warehouse.** This family management model played a crucial role in the startup and development stages. The cohesion of kinship-based management helped the first generation complete their initial capital accumulation. However, as enterprises grow and scale expands, the drawbacks of family businesses become evident.

**First, internal management systems are often mere formalities.** Family conflicts directly affect enterprise development.

**Second, talent suppression.** Employees are divided into two factions: one is the special class with kinship ties to the boss, the other is ordinary employees without such ties. The struggle between these factions can lead to the loss of key personnel.

**Third, family businesses are prone to interest disputes.** At startup, everyone works together. As scale grows, relatives inevitably clash over interests.

To grow and strengthen their enterprises, distributors must change their current family management model and **transition to a systematic, institutionalized management model.**

**How to transform a family business?**

I suggest the following:

> **1. Retire some veteran employees.** Regardless of their relationship with you, gradually transition them to receiving salaries while staying at home. These individuals have become obstacles to company development. Keeping them brings more harm than good. It's better to spend money for peace.
>
> **2. Concentrate equity.** If the company has multiple shareholders, buy back shares distributed among relatives. Equity must be highly concentrated to maintain decision-making power and avoid disputes over principle issues.
>
> **3. Have your wife step back, or you step back to the second line.** A company can only have one core; multiple leaders cause chaos.
>
> **4. Dare to hire talent with high salaries.** In key positions like sales, be willing to invest in capable and skilled personnel.
>
> **5. Establish a comprehensive management system and operational processes, and ensure the seriousness of the system.**

**-04- Personnel Management**

**How to Establish an Effective Performance Appraisal Mechanism?**

Most distributors' assessment of sales staff is relatively simple, typically using a basic salary plus sales commission model. This model is simple and rough. In practice, it encounters the following three issues:

**1. Salespeople sell whatever sells well**, which is not conducive to new product promotion.

**2. During off-seasons, salespeople may become lazy, and even excellent staff may leave.**

**3. Capable salespeople may leave and start their own businesses**, increasing competition.

It's fair to say that most distributors offer limited salaries, making it difficult to recruit top talent. The sales staff they have are mostly trained from scratch. Long-serving salespeople hold the company's customer resources. Their departure significantly impacts the distributor. Under such circumstances, establishing an effective performance appraisal and management system is crucial.

How can distributors establish an effective performance management mechanism? I suggest the following changes:

> **1. Shift from individual independent operation to team collaboration.** Based on salespeople's abilities and personalities, divide responsibilities according to different aspects of sales work. Set up roles such as network expansion specialist, market maintenance personnel, and dedicated collectors. Salespeople support and assist each other, leveraging their strengths to improve efficiency.
>
> **2. Develop assessment standards and reward/punishment measures based on each person's job content.**
>
> **3. Set commission standards based on the product's position in the company and its profit margin.**
>
> **4. When setting monthly sales targets, not only set overall sales goals but also sub-targets by category.**
>
> **5. Hold regular meetings and training sessions.**
>
> **6. Allow key sales personnel to buy shares and receive annual dividends based on company profits, enhancing their sense of belonging.**

**-05- Inventory Management**

**How to Deal with Unreasonable Stock Pressure from Manufacturers?**

Manufacturers' sales staff often require distributors to stock up unreasonably to meet monthly sales targets or accelerate capital recovery. This adds operational risk and affects the normal turnover of funds.

Manufacturers use several tactics to force stock on distributors:

**1. Incentives.** Offer additional rebates for one-time payments.

**2. Threat of adding new distributors.** If monthly sales targets aren't met, they threaten to appoint new distributors.

**3. Exaggerated market prospects.** Claim increased advertising and promotions to induce stockpiling.

While maintaining reasonable inventory, unreasonable stock pressure does more harm than good. However, offending manufacturers' sales staff is not wise. How should distributors respond? Here are some methods:

> **1. The "delay" tactic.** Use excuses like unpaid supermarket payments to delay until month-end, causing manufacturers to drop the demand.
>
> **2. "Say the ugly words upfront."** If inventory exceeds reasonable levels, refuse to pay. Generally, inventory should be around 50% of monthly sales. Beyond that, think twice.
>
> **3. Make manufacturers' sales staff back off.** Propose stringent conditions for stockpiling; if not met, refuse to pay.

When resisting unreasonable stock pressure, distributors should assert their position but avoid conflict. Handle it tactfully and coolly.

**-06- Customer Management**

**How to Build Your Own Distribution Channel?**

To obtain agency rights in a region, distributors must establish their own distribution channel system. There is a contrasting approach: some distributors skip sub-distributors and set up offices at the county level.

This method is quicker and offers stronger control. However, it lengthens management lines and capital chains, increasing operational risk. It also raises operating costs and weakens profitability. Unless distributors have reached a certain level of management capability and scale, I advise against this model.

So how can distributors build their distribution channels?

> **1. Establish distribution cooperation alliances with sub-distributors.** Offer appropriate rebates based on annual sales.
>
> **2. Establish a return/exchange policy.** Allow sub-distributors to exchange slow-moving products.
>
> **3. Regularly hold sub-distributor networking events to build relationships.**
>
> **4. Strengthen work guidance for sub-distributors.**
>
> **5. Build a reserve of sub-distributors.** Replace unqualified or disloyal ones promptly.

**-07- Customer Negotiation**

**How to Push Back Against Unreasonable Supermarket Charges?**

Most distributors have mixed feelings about modern channels—KA supermarkets. They are both loved and hated. For distributors, supermarket buyers are like insatiable dogs. There are numerous fees that increase annually. Especially at the start of the year when signing contracts, they demand various unreasonable fees, causing headaches.

Distributors are in a passive, asymmetric, and unequal relationship with KA stores. As the weaker party, being squeezed by KA stores is inevitable. However, distributors should not be lambs to the slaughter. When dealing with unreasonable charges, adhere to the following principles:

> **1. Never be the first to react.** When supermarkets add new fees, don't take a stance. Neither agree nor disagree. Delay for a few days and observe others' reactions. If suppliers react strongly, supermarkets may adjust their fee standards.
>
> **2. Never do business at a loss.** In business, don't worry about face. If there's no profit, it's better to switch to something easier than working for free. When supermarkets want to increase fees, clearly state your bottom line. If exceeded, be willing to walk away. The firmer your stance, the more cautious supermarkets will be.
>
> **3. Increase your product's shelf presence in supermarkets.** The larger your sales volume, the less likely supermarkets will dare to impose additional fees.
>
> **4. When negotiating with supermarkets, never give in until the last moment.** The easier you agree, the more unreasonable fees you'll face later.

Negotiations with supermarkets are often a game of interests. Distributors often assume manufacturers will cover supermarket fees. But any manufacturer has cost control ratios. If they bear more supermarket costs, they'll reduce support elsewhere. The wool comes from the sheep's back. Every supermarket fee is your own money. You must hold firm and maintain the right balance.

**-08- Resource Management**

**How to Secure Maximum Manufacturer Support?**

Distributors cannot grow strong without manufacturer support. Mutual support and cooperation between manufacturers and distributors are essential to open up the market and achieve win-win outcomes.

There are three major misconceptions about manufacturer support:

> **1. "I don't need support; just give me a bare price."** This avoids disputes. This model is often accepted by small manufacturers, but such products are usually short-term and have no future.
>
> **2. "The more support, the better."** Greater manufacturer support means higher expectations. If those expectations aren't met, manufacturers often abandon the market. Therefore, more investment isn't always better.
>
> **3. "Manufacturer investment is my rightful profit."** Saving it is profit. So they skimp and inflate expenses. Because of these misconceptions, distributors find it difficult to secure manufacturer support or maximize it within reasonable limits.

How can distributors secure maximum manufacturer support?

> **1. Persuade manufacturers to list your market as a key market.** The higher the priority, the greater the investment ratio.
>
> **2. After agreeing on a market plan with manufacturer sales management, cooperate fully.** The higher your cooperation, the greater the support.
>
> **3. Make market investment costs transparent.** Spend money visibly so manufacturers see results.
>
> **4. Increase your own investment appropriately.** Use small investments to leverage larger manufacturer investments.

**-09- Fund Management**

**How to Control Accounts Receivable?**

In the course of business, distributors inevitably incur accounts receivable. Many prefer cash-on-delivery models; profits may be thinner, but the money earned is real. However, as competition intensifies, achieving full cash-on-delivery is increasingly difficult. Especially for distributors serving supermarkets, accounts receivable can be substantial.

How can distributors control accounts receivable? Pay attention to the following:

> **1. For customers who cannot do cash-on-delivery, establish an approval process.** Sales staff must apply, and the boss must approve. Without approval, no credit sales.
>
> **2. Set credit limits for customers with accounts receivable.** If they exceed the limit and cannot pay, stop supply and investigate.
>
> **3. Review receivables weekly.** Determine payment deadlines for due receivables.
>
> **4. For distributors with large receivables, assign dedicated personnel to manage them.** Every receivable is real money. Poor management can directly cause losses and allow bad actors to exploit loopholes. Therefore, receivables management is a critical part of distributor management.

**-10- Profit Analysis**

**How to Maximize Profits?**

Distributors' product portfolios vary in sales volume and profit margins. They must differentiate and combine products rationally. High-volume products often have low margins and tie up capital; control their sales volume. Low-volume products often have high margins; prioritize their promotion. Products with very low sales and low profits, with no future, should be eliminated.

Distributors should annually analyze the profit contribution of each product and determine investment direction based on contribution rates. Eliminate the bottom three contributors. Regularly update the product mix to make it more rational and achieve maximum profitability.

Source: Internet

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## Citation metadata

- Publisher: New Distribution
- Author: 陈志平
- Published: 2020-01-16
- Canonical: https://xinjignxiao.com/en/articles/what-sets-top-performing-distributors-apart-they-ve-figured-out-these-10-3d022d55/
- Original source: https://mp.weixin.qq.com/s/SZrGu9h1Xk-9qAjhbyc6pQ

## Copyright and AI use

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