---
title: "What Should Distributors Do When They Encounter a Half-Baked Product?"
description: "A distributor shares his dilemma after investing 500,000 yuan in a jelly product with a well-known animated character as its brand. The manufacturer fails to honor promises, leaves only a 10% gross margin, and the distributor feels like a mere transporter. The article analyzes the issues and offers solutions, including category management and strategic adjustments."
author: "英昂林"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-08-08"
language: "en"
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# What Should Distributors Do When They Encounter a Half-Baked Product?

> A distributor shares his dilemma after investing 500,000 yuan in a jelly product with a well-known animated character as its brand. The manufacturer fails to honor promises, leaves only a 10% gross margin, and the distributor feels like a mere transporter. The article analyzes the issues and offers solutions, including category management and strategic adjustments.

**A Distributor's Dilemma**
I am a distributor of fast-moving consumer goods (FMCG), and business has become increasingly difficult over the past two years. In the last two years, our company expanded its business scope, invested 500,000 yuan, and introduced a jelly product, using a well-known animated character as the brand. In terms of sales, the jelly product is operated separately from other businesses, with an independent sales team. I started regretting this agency after one year, and the longer I represent this product, the more confused I become. The problems are as follows:
1. The manufacturer's promised policies and support are always delayed as much as possible, and after a while, they just fade away. I can't even get them when I ask. Over the years, I've become somewhat numb, but after working so hard, I feel hurt by this outcome.
2. This product is mainly sold through supermarkets and hypermarkets by the manufacturer, and the settlement with these retailers is also directly with the manufacturer. I have become a mere "porter," with a gross margin of only about 10%, which is "a drizzle" as they say in Cantonese.
3. The profit given by the manufacturer is just enough to cover my daily expenses, leaving almost nothing. Year after year, I work like Yang Bailao (a character known for being exploited), and the sadness is truly an unspeakable pain!
I want to terminate the agency for this product, but I don't know what product to find, and after all, this product is maintaining my daily expenses. If I continue to represent it, there's not much meaning. What should I do?
**Analysis and Solutions**
The distributor's problems mainly involve two aspects:
1. The brand ignores the company's interests and fails to fulfill their policies or service commitments.
2. The brand's operating model puts your business in a mere porter situation, making operations tiring and the future bleak.
These two problems are quite common: what should distributors do when they encounter a "chicken rib product" (a product that is not worth operating because it yields little profit, but if operated, the profit contributes little to the company's development)? The first issue is how to obtain manufacturer policies; the second is how to enhance your own value to improve profitability. The causes of these two dilemmas are basically the same. Below, we will discuss in two parts. The first part is an analysis of distributor investment decision habits and category management; the second part combines the conclusions of the first part to analyze your current business dilemma.
**First, let's talk about Part One: Distributor Investment Decision Habits and Category Management Analysis**
Your current business situation and problems are very common. Countless distributors have grown through manufacturer support. By serving one manufacturer wholeheartedly, they can receive targeted support and attention. We call this "leaning on a big shot." In the past, whether to "lean on a big shot" was a question of measuring investment opportunities.
Choosing a new product for distributors is choosing an investment opportunity. Distributor investment actually involves two levels of consideration:
1. **Examination of the investment target, i.e., the manufacturer**: This falls within the scope of manufacturer-distributor relations, which is a distributor's strength, and problems rarely occur here. To a certain extent, the manufacturer is the distributor's partner. If you choose the wrong partner, the distributor may go bankrupt. Many distributors say they were "ripped off," which refers to careless selection of partners. Distributors rely on experience and intuition in business, and this intuition is directed at the manufacturer. Intuition is important, but it doesn't always bring luck. Another issue is the sales model of the partner: wholesale distribution? terminal operation? deep distribution? How large is the agency area? Is the settlement based on bottom price or other compound policies? How high is the requirement for exclusivity and dedication? Generally, such issues are strategic in nature for enterprises, and most of these enterprises are small and medium-sized. Some large and medium-sized enterprises manage by product category, with different product lines having different operational approaches. That is no longer a strategic issue but a product category management issue.
2. **Examination of the investment product**: This falls within the scope of category management, and most problems where distributors work hard but don't make money occur here. This tests the distributor's understanding of consumer habits and their market assessment ability. The indicators for assessing consumers and market types are the two vital elements of a distributor's life: cash flow and profit. The main thing is to see whether the product is a fast-moving product and whether its channel or terminal model has the ability to quickly turn over cash flow. For example, jelly products generally do not belong to fast-moving products, and they are mainly operated in supermarkets and hypermarkets. Therefore, their contribution to cash flow and profit is not significant, affecting the sustainable development of entrepreneurial companies. Combined with the brand's operating model, where the enterprise handles settlement and market work, the distributor is actually sidelined. Without work, there is no profit. The distributor's growth ability and speed depend on this level.
**Next, let's discuss Part Two: Analysis of Your Current Business, Its Dilemmas, and Solutions**
You are undoubtedly wise in choosing the manufacturer, but you have problems in examining the product, especially in category selection. You chose a slow-moving product, and this product belongs to the supermarket terminal operation model, and the enterprise has also cut off the space for value-added services that could expand your profit sources. Therefore, for your current business, you face an uncomfortable situation: the business is undoubtedly safe, but the profit is only enough to cover daily expenses. We have encountered this situation in Guangdong and Dalian. Distributors helplessly say, "I really don't know if I work for the business or the business works for me." I believe this is a confusion faced by many distributors. This safe model is not suitable for someone with considerable experience like you, but for those who have just entered the industry, they have no experience and want to understand the market. This safe model is undoubtedly suitable for them.
Now, let's look at your business model or profit sources to give you a clearer business concept.
There are many differences in profit models between small and medium distributors and large distributors. **Small and medium distributors generally have three profit sources:**
1. Product price difference—profit = unit product price difference * sales volume. Without sales volume, it won't work. Jelly is obviously not a product that can generate high sales volume.
2. Manufacturer policies: To ask the manufacturer for policies, you need an equal status. Your current business scale obviously does not have the bargaining power. Extra policy support is not impossible, but it requires strong marketing planning functions. Moreover, general policies are linked to sales volume, and small companies have no ability to gain any advantage in this regard.
3. Value-added services: The so-called value-added services are the best way for many small and medium distributors to accumulate initial capital. It may be difficult to understand "value-added services," but it's clear when we say "selling hard work." There's no way around it. In the early stages of entrepreneurship, distributors can only find such business space to expand sales volume. Only when sales volume increases can profits increase. Rely on value-added services to expand the network and service area, thereby expanding the business foundation. There is a problem of product category addition and matching. Without appropriate category combinations, the entire channel resources will not be fully utilized. At the same time, for distributors, making full use of the functions of different products in terms of channels, terminals, consumer habits, market types, etc., can also consolidate the network while increasing profit space and capability. For example, use brand products to expand the network and share basic expenses, while using unknown products to obtain profits. Another example is to pair seasonal products with non-seasonal products like jelly, using seasonal products to increase cash flow, profits, and attractiveness. At the beginning, focus on building the network and cash flow, starting with small store delivery. The profit points of value-added services may come from the following aspects:
In the early stages of entrepreneurship, many distributors face a dilemma: investment safety vs. high returns, and many choose the direction you chose: investment safety. For investment safety, you did one thing right: you chose to represent a brand product.
In fact, in the Chinese market, from the perspective of enterprise operations, all enterprises can be divided into two categories: product operators and brand operators. Brand operators have long-term strategic planning and market design, while product operators have relatively more variables. You chose a brand operator, which to a considerable extent avoids the danger of being ripped off.
But the problem is that you have the habit of relying on intuition like ordinary distributors, seeing only the general direction and lacking the habit of re-analyzing details. Choosing a brand operator is correct in terms of partner selection, but you haven't clearly designed how to make full use of the partner's value or resources to expand your profitability and market space. Therefore, you have encountered a problem, which is exactly what you are anxious about in your letter.
Based on your description of your own resources and capabilities, combined with Yingang's industry experience, we can roughly provide three directions:
1. Continue to represent the brand product, use this product to expand your network, gradually increase the proportion of profitable products, expand your work or service space, accumulate capital through value-added services, and as your strength increases, increase your bargaining power with the manufacturer. Transform from being a porter to actively solving market problems for the manufacturer. You can also discuss joint procurement with other distributors of similar strength to obtain more policies, expand your network through channel promotions, and thus escape the current lukewarm dilemma.
2. Don't represent the brand product, but don't suddenly cut off support. Instead, gradually increase the agency share of other products, and reduce or stop increasing the brand's turnover.
3. When representing new products, investigate: What is the sales model of this enterprise or product? How much room do you have to play? How high is the profit margin they give you? What is the function of this product—is it for profit or to expand or consolidate the network? If there is not much room to play, it's okay if the profit is appropriate. If the profit is not high and the room is limited, be careful with such products.
Small and medium distributors falling into the dilemma of representing products like this brand is not the product's problem, but rather their failure to design their own business model and key management control points from the principles. If this problem is not solved, it doesn't matter what product you represent.
Small and medium distributors have limited strength and unequal bargaining power, so they often profit by "leaning on a big shot" (if they happen to find a good manufacturer, they gradually grow by relying on one manufacturer's products). There is considerable risk: is your fate in your own hands or in others'? Therefore, whether the so-called category merchant or professional merchant is a growth magic weapon for small and medium distributors depends on how distributors view these products. There is no right or wrong in leaning on a big shot; the key is how you design your profit model.
In response to the requests of many distributor friends, the fourth B-end e-commerce inspection class of this public platform will go to Nanjing and Hangzhou on August 15-18 to inspect two platforms: Qianmi.com and Alibaba Retail Link. Distributor friends who intend to transform can come with us for on-site inspection:
Activity Process:
Time: August 15-18
> 15th: Check in at designated hotel in Nanjing; 16th: On-site inspection of Qianmi.com, then take high-speed rail to Hangzhou in the afternoon; 17th: Participate in the "FMCG Distributor B2B Transformation Exchange Summit";
> 18th: On-site inspection of Alibaba Retail Link in Hangzhou.
**Distributor friends who intend to transform are welcome to join us to learn and inspect on-site:**
**Organization Form**
1. Company visit
2. Actual market case visit
3. On-site explanation
4. One-on-one communication
Participating distributor friends only need to pay a registration fee of 200 yuan.
Other expenses are self-covered.
Note: This inspection is limited to distributors only.
**Distributor friends who intend to participate can register by long-pressing the QR code below.**
**When adding, please note: "Fourth Registration".**
**Non-participants, please do not disturb.**
**Group Photos of Previous Inspections:**
**Group photo of the 3rd B-end e-commerce inspection, from top to bottom: Yunbao Shangmeng, Weijie Chengpei, Wanshang Yizhan.**
**Group photo of the 2nd B-end e-commerce inspection, from top to bottom: Jinhuobao, Caiba, Yishang.**
**Group photo of the 1st B-end e-commerce inspection, from top to bottom: Piduoduo, Beiquan, Yishang.**
-END-
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