---
title: "What Should Distributors Do When They Encounter a 'Half-Baked Product'?"
description: "A distributor who invested in a jelly product with a well-known cartoon character brand faces broken promises from the manufacturer, thin margins, and a dead-end business model. Expert analysis suggests the core issue lies in the distributor's investment decision and category management, and offers three strategic directions to escape the dilemma."
author: "英昂林"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2015-04-28"
language: "en"
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# What Should Distributors Do When They Encounter a 'Half-Baked Product'?

> A distributor who invested in a jelly product with a well-known cartoon character brand faces broken promises from the manufacturer, thin margins, and a dead-end business model. Expert analysis suggests the core issue lies in the distributor's investment decision and category management, and offers three strategic directions to escape the dilemma.

I. A Distributor's Confusion
I am an FMCG distributor who previously handled daily chemicals and health products. I have been in this business for six years. My company is not very strong, with about 1 million yuan in self-owned funds, and business has become increasingly difficult over the past two years. Starting in 2003, I expanded the company's scope, invested 500,000 yuan, and introduced a jelly product branded with the protagonist of a well-known animated series. In terms of sales, the jelly product was operated separately from other businesses, with an independent sales team. A year after taking on this product, I began to regret it. The longer I represent it, the more confused I become. Here are the problems:
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 get them even if I ask. Over the years, I've become somewhat numb. Working so hard only to end up like this is really hurtful.
2. This product is mainly sold in supermarkets and hypermarkets by the manufacturer, and the settlement is also directly with the manufacturer. I have become a mere "porter," with only about 10% gross profit left for me. As they say in Cantonese, "毛毛雨" (a drizzle).
3. The profit from the manufacturer is just enough to cover my daily expenses, leaving almost nothing. Year after year, I'm like Yang Bailao (a character who owes debts). The pain is beyond words!
I want to stop representing this product, but I don't know what product to take on instead, and this product is maintaining my daily expenses. If I continue, it's not very meaningful. What should I do?
II. Expert Analysis and Solutions
Hello, your company's problems mainly involve two aspects:
1. The brand ignores the company's interests and fails to fulfill their policy 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 giving up because it still brings some profit, but not worth keeping because the profit is too small to contribute to development)? The first issue is how to obtain manufacturer policies; the second is how to enhance your own value and improve profitability. The root causes of both dilemmas are basically the same. Let's discuss this in two parts. The first part is an analysis of distributor investment decision habits and category management. The second part, combined with the conclusions of the first part, analyzes your current business predicament.
Let's start with the first part: Distributor Investment Decision Habits and Category Management Analysis
Your business situation and problems are very common. Countless distributors have grown through manufacturer support. By focusing on serving one manufacturer, they can receive targeted support and attention. We call this "傍大款" (leaning on a big shot). In the past, whether to "lean on a big shot" was a question of weighing investment opportunities.
Choosing a new product is choosing an investment opportunity. A distributor's 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 and is a distributor's strength, so problems rarely occur here. To some extent, the manufacturer is the distributor's partner. Choosing the wrong partner can lead to bankruptcy. Many distributors say they were "圈钱" (cheated out of money), 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 good luck. Another issue is the partner's sales model: wholesale distribution, terminal operation, or deep distribution? How large is the agency area? Is the settlement based on bottom price or other compound policies? How much exclusivity and dedication is required? Generally, these are strategic issues for a company. Most such companies are small or medium-sized, while some large and medium-sized enterprises manage by product category, with different operating approaches for different products. In that case, it's 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 cases where distributors work hard but don't make money occur here. This tests the distributor's understanding of consumer habits and market evaluation ability. The indicators for evaluating consumers and market types are the two vital elements of a distributor's life—cash flow and profit. The main question is 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 are generally not fast-moving, and they are mainly sold in supermarkets and hypermarkets. Therefore, their contribution to cash flow and profit is not significant, which affects the sustainable development of a startup company. Combined with the brand's operating model, the company handles settlement and market work, effectively sidelining the distributor. Without work, there is no profit. The distributor's growth ability and speed depend on this level.
Now let's move to the second part: Analysis of Your Current Business and Your Predicament and Way Out
You were undoubtedly wise in choosing your partner manufacturer, but you had a problem when 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 company also cut off the space for value-added services that could expand your profit sources. Therefore, your current business is in a difficult position: 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'm working for the business or the business is working for me." I believe many distributors face this confusion. This safe model is not suitable for someone with considerable experience like you, but for those just entering the industry. They have no experience and want to learn the market, so this safe model is undoubtedly suitable for them.
Next, let's look at your business model or profit sources to give you a clearer business concept.
There are many differences between the profit models of 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 clearly 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 clearly doesn't have the bargaining power. Extra policy support out of thin air is not impossible, but it requires a strong marketing planning function. Moreover, general policies are linked to sales volume, and small companies simply don't have the ability to benefit from this.
3. Value-added services. This is the best way for many small and medium distributors to accumulate initial capital. If "value-added services" is hard to understand, think of it as "selling your labor." 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, fully utilizing the functions of different products in terms of channels, terminals, consumer habits, market types, etc., can 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 gain profit. Or, with a non-seasonal product like jelly, match it with more seasonal products to increase cash flow, profit, and attractiveness. At the beginning, focus on building the network and cash flow, and you can start 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 quite a few distributors 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 companies can be divided into two categories: product operators and brand operators. Brand operators have long-term strategic planning and market design, while product operators are relatively more variable. You chose the brand-operating ** brand, which to a large extent avoids the danger of being cheated.
But the problem is that you also have the habit of relying on intuition, like ordinary distributors. You only see the general direction and lack the habit of re-analyzing details. Choosing a brand operator is correct in terms of partner selection, but you didn't clearly design how to select the specific product to operate, or how to fully utilize the partner's value or resources to expand your profitability and market space. Therefore, you encountered a problem, which is exactly the anxiety in your letter.
Based on your description of your own resources and capabilities, combined with Yingang's industry experience, here are three general 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 a porter for the manufacturer to actively solving market problems for them. 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 turnover of the ** brand.
3. When taking on new products, investigate: What is the sales model of this company 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/consolidate the network? If there isn't much room for play, it's okay as long as the profit is appropriate. If the profit is not high and the play space is limited, be careful with such products.
Small and medium distributors falling into the trap of representing products like ** brand is not a problem with the product itself, but rather that they haven't clearly designed their own business model and key management control points from the principles. If this problem is not solved, it doesn't matter what product they 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 can 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 really a magic weapon for small and medium distributors depends on how the distributors themselves view these products. There is no right or wrong in leaning on a big shot; the key is how you design your profit model.
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