---
title: "What Should Distributors Do When Facing Regional Transshipment?"
description: "The article discusses the issue of transshipment (diversion of goods across regions) in the FMCG industry, distinguishing between benign and malignant forms. It provides strategies for distributors and manufacturers to handle transshipment, emphasizing the importance of a clear stance and strict policies."
author: "沈彬松"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-03-13"
language: "en"
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# What Should Distributors Do When Facing Regional Transshipment?

> The article discusses the issue of transshipment (diversion of goods across regions) in the FMCG industry, distinguishing between benign and malignant forms. It provides strategies for distributors and manufacturers to handle transshipment, emphasizing the importance of a clear stance and strict policies.

Click to read the original article for details
> Source: Frozen Food Magazine
A well-known marketing expert once said: "Those who transship are shameless; those who are transshipped are incompetent." No matter how beautifully transshipment is dressed up, it is a tumor in the healthy development of a company's sales, differing only in whether it is a "benign tumor" or a "malignant tumor." But whether benign or malignant, it needs early treatment, otherwise it can harm health and even life. This is a troublesome but necessary problem to solve.

**Benign Transshipment**
Benign transshipment is normal market circulation, with little price fluctuation. The solution is relatively simple: point out the issue, clarify your stance, but avoid using coercive measures. The main types include:

**1. Incidental transshipment.** Usually, distributors handle multiple categories, and customers need service at the terminal level. This is not aimed at price-cutting but is incidental, such as carrying 30-50 cases along with a 500-case shipment. Generally, this does not have a malicious impact on the market.

**2. Transshipment into blank markets.** The market is undeveloped or in early development. Goods flow in because customers seek high margins from new products and do not maliciously undercut prices. Such transshipment can also spur local distributors to improve, but this situation should not be encouraged passively.

**3. Border area circulation.** When two markets are close, normal product circulation occurs with slight price differences within normal profit margins.

**4. Short-term inventory pressure transshipment.** Distributors may have excess inventory tying up capital, so they sell off goods to recover funds or avoid expiration dates. This is not habitual or malicious; prices are slightly lower but not undercutting, and it is not a long-term behavior.

The above issues have little impact on the market. Depending on the reaction of the local distributor, it is generally possible to take a clear stance but act slowly, with appropriate control, depending on the manufacturer's ability to manage. It is like removing a benign tumor: there is basically no aftereffect, at most a scar. If not removed, it might worsen or remain harmless for life.

**Malignant Transshipment**
Wherever there are best-selling products, there is transshipment; and among transshipment, there is always malignant transshipment. Malignant transshipment is like corruption in government agencies: if not addressed, it will eventually damage the entire administrative mechanism. Similarly, if malignant transshipment is not addressed, it will eventually become the "cancer" of the market. The main types of malignant transshipment include:

**1. Boosting sales to earn rebates.** Distributors keep prices normal in their own territory but disregard others' territories, using direct transshipment or indirect transshipment through secondary wholesalers, especially hidden transshipment, to boost sales and obtain special policies and rebates.

**2. Vendetta transshipment.** Two distributors have a "historical grudge" and want to "kill" each other. This is severely malignant transshipment, using the manufacturer's products as "cannon fodder," and must be addressed. Typical manifestations include: keeping local prices normal but undercutting prices in the opponent's market; or maliciously quoting prices, providing a small quantity of goods at prices far below the distributor's net price. This can occur between the manufacturer and distributor, or when the manufacturer's products are carried by distributors of other brands. This type is special and requires senior management intervention and multi-region coordination.

**3. Malicious incidental transshipment.** In territories not their own, distributors use the manufacturer's best-selling products at below-market prices to open the door, mixing in other generic brands to enter others' markets, ultimately sacrificing the price system of the best-selling brand to introduce high-margin generic products and gradually replace them.

**4. "Killing" best-selling products through transshipment.** When a best-selling product holds a large market share, hindering the expansion of other brands the distributor carries, the distributor disrupts the channel pricing of the best-selling product with the aim of "killing" it to promote other brands.

The above transshipment undermines distributors who genuinely want to do well and cultivate the market. For the healthy development of the market, these malignant transshipments must be resolved.

**Why Does Transshipment Occur?**

**1. Historical issues, especially regional ownership.** Before the manufacturer segmented the market, some "old-timer" distributors refuse to accept the regional division, claiming "this region has always been mine," acting shamelessly.

**2. Geographic issues.** The transshipping distributor is too close to the transshipped region, and nearby terminals have close business relationships.

**3. Price differences.** The transshipped region generally has prices that are too high.

**4. Policy differences.** The transshipped region does not enjoy the same favorable prices, policies, rebates, or hidden discounts as neighboring regions.

**5. Habitual transshipment.** Some distributors started their business through transshipment, are not down-to-earth, and do not stop when they see benefits.

**6. The manufacturer's attitude.** Does the manufacturer have the will to solve and govern? Has transshipment become serious enough that the manufacturer must deal with it? Has the contradiction between the shameless transshipper and the incompetent transshipped escalated to an irreconcilable point? If so, it must be resolved. The so-called resolution of contradictions first requires creating contradictions; the key to resolving contradictions is the manufacturer's attitude, which is the essential issue. Everything else is a false proposition.

**Which Distributors Like to Transship?**

**1. Meritorious contributors.** These are the financial backers from the manufacturer's early development stage. They believe they are above the manufacturer because they watched it grow, so they transship with impunity.

**2. Tycoons.** These clients have good capital accumulation, know the manufacturer's tactics well, and are good at asking for policy resources. These are good things, but once they get the policies, they become "five-clawed golden dragons" transshipping everywhere without being pragmatic. They are the nemesis of loyal and terminal distributors; others cultivate the market, and when it matures, the tycoons come with harvesters to reap.

**3. Vagrants.** These clients are in the transition stage to becoming regular forces. They use best-selling products to build their banner, gradually developing, and are ruthless in transshipping and undercutting prices.

**4. Imperial relatives.** They enjoy privileges when the system is not yet sound, holding a "charter of immunity" to do evil and harm ordinary people.

Where products sell well, there is transshipment; where there is transshipment, there is price undercutting; where there is price undercutting, there is interest; where there is interest, there is conflict. The transshipper is shameless, the transshipped is incompetent. When the contradiction between shamelessness and incompetence escalates to an irreconcilable point, the manufacturer's role as referee is crucial.

**How Should Manufacturers Handle Transshipment?**

When the manufacturer has developed to a considerable strength, for the healthy development of the market, it can no longer ignore the disorderly development of transshipment. The solutions include:

**1. Clear attitude and strict system.** Start with ideological education, publicize the manufacturer's determination to govern transshipment, start with internal team education, "to resist external aggression, one must first stabilize internal affairs," form a unified understanding internally, and then continuously instill it into the distributor team through the sales team, creating an atmosphere of strict governance. Use systems and clauses to deeply ingrain the principles, clarify territories, price systems, and rebate policy implementation. From publicity to action, tell the story that doing the market well makes money, while malicious transshippers are detained, sentenced, given life imprisonment, death with reprieve, or executed.

**2. Team adjustment and job rotation.** Transfer internal transshipment experts to blank markets, so that major transshippers have no enablers.

**3. Prevent major distributors from using policies to hold the manufacturer hostage, and adjust regional policies benignly.** Transshipment regions are usually mature markets. In mature markets, the distributor's total sales volume should be one of the assessment targets, not the sole criterion. Implement product differentiation promotion rewards, so that transshipping distributors have something to do, promote single products, and make money. Let distributors earn money from hard work in promoting products, not from dumping goods to get major distributor policies.

**4. Cut off the arm like a brave man.** Treat clients who have long-term malignant transshipment affecting the overall market health as tumors, and make an example of them to prevent future problems.

**5. Establish an inspection team.** Take action against the "imperial relatives" first, let ordinary people see hope, and publicize this widely as a good story.

**6. The manufacturer's actions should match its strength.** For example, cancel quotas, require cash on delivery, collect deposits or transshipment funds, deduct rebates, reduce policies, cut off policies, cut off single products, cut off supply, etc. Use whatever means are appropriate.

**7. In the age of information, collecting evidence of transshipment is not difficult; the key is characterization.** In the initial stage, handle gently: if a transshipped single product is found, reduce the policy on that product; if found again, cut off the policy on that product; if found again, cut off the supply of that product; if found again, reduce the policy on the entire product line; if found again, cut off several products. For those who repeatedly refuse to change, when other distributors in the region can reasonably structure and develop better, let the transshipping client enter the "cold palace" and slowly "freeze to death."

Transshipment is difficult to solve, but not impossible. The key depends on the manufacturer's attitude. Distributors do business ultimately to make money. They are downstream; if the upstream water is clear, the downstream will not be muddy.

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