Xiao Wang is a regional manager at a food company and was recently transferred to Region A. Upon arrival, he was full of ambition, determined to make achievements and live up to his leaders' expectations. Every day, he went to the market to run promotions and set up displays, busy and happy. However, after several days of market visits, he noticed many problems: the company's promotional resources were being intercepted by the distributor, product distribution rates were low, and the distributor mainly pushed mature products while giving only perfunctory attention to new products, ordering very little. Xiao Wang listed all the problems in his work notebook and went to discuss them with Distributor Huang. But when he met Huang, Huang complained about insufficient company resources, poor product sales, and low gross margins. Xiao Wang presented what he had seen in the market, and Huang promised to correct the issues. Yet months passed with no substantial progress, and the conflict between them deepened. Before coming to this market, Xiao Wang had heard that this distributor was a tough nut, with large overall sales. Because of this distributor, Xiao Wang was repeatedly criticized by company leaders for poor execution, but he couldn't complain without seeming to make excuses. In desperation, he sought my advice. Indeed, when a distributor becomes too big, the manufacturer can't control them, but if this continues, the company faces a dead end. If we replace the distributor, we risk a decline in regional sales. So, should we replace the distributor? And if so, how?
Conduct a comprehensive evaluation of the distributor Whether to replace the distributor should not be decided on a whim by the regional manager. First, conduct a comprehensive evaluation. A good distributor isn't necessarily one with many people, vehicles, or outlets. When a distributor grows, they handle more brands. Do they value your brand? Do they prioritize your products? Especially in market operations, do they identify with the manufacturer's business philosophy and market approach? If they are still aligned with the manufacturer in these aspects, then issues like intercepting promotional resources may indicate that the manufacturer's process management is lacking, leaving loopholes for the distributor to exploit. The manufacturer can only strengthen management and reduce loopholes. After all, if there's money to be made, who wouldn't take advantage? Management issues won't be solved by simply changing distributors. For distributors who only care about their own interests, disregard the manufacturer's survival, are not committed to the market, and don't identify with the manufacturer's philosophy, regardless of their size or network, the manufacturer should weaken their influence on the company's products in that region, or even replace them. Showing mercy to them is cruelty to yourself.
Several methods to deal with difficult distributors As in the case at the beginning, the distributor only operates mature products and gives perfunctory attention to new products. If this continues, mature products will eventually lose profitability due to high price transparency, and the distributor will abandon them. For new products, the distributor is unwilling to invest time and effort to cultivate them into bestsellers and profit growth points. There are many such distributors in reality. So how should we deal with them? First, analyze the distributor specifically. If they can still reach a certain tacit understanding with the company in market operations, then through coordination and communication, make them understand that launching new products requires time, effort, and resources. The company does this to make new products sell well and provide the distributor with a profit source. Selling only mature products yields thinner profits, and eventually, everyone will have no profit. Second, if the market doesn't develop, the manufacturer suffers the most. Also, our new products are based on thorough market research, with good prospects and potential. Make the distributor understand that cooperating with the company leads to a good market, if they are willing to follow. Of course, if communication fails, we must resort to force after reasoning. We can't be blamed for being ruthless; we can't watch the market slip away. Considering the distributor's significant influence in the region and their past contributions to the M product's market promotion, and since the company still relies on them for mature products, and they still identify with the company's management, we can consider reducing the company's over-dependence on this distributor. Generally, two methods can be used: 1. Separate product item distribution; 2. Designate distribution areas (or channels).
Separate product item distribution: That is, according to different product items, find a distributor for each item. This way, old and new distributors won't conflict on product prices and channels, each doing their own market. This effectively avoids a situation where one distributor becomes too dominant, and you can't control them. For example, most liquor companies now develop distributors separately by product item (or alcohol content).
Designate distribution areas (or terminals): The company's products are not separated, but based on the specific regional market situation, distribution areas (or terminals) are divided. Generally, companies divide distributors' business scope by channel. This division can effectively weaken the disobedient distributor's influence in the local market, making them feel that the company doesn't necessarily rely on them to develop the market. Our products can be distributed by anyone at any time, and we can replace them at any time. The old distributor will understand and restrain their behavior. The downside is that you'll often hear complaints about product prices and resource allocation. Companies like Lay's and Dove use this distribution model.
Develop new distributors to replace the original disobedient ones For distributors who don't identify with the company's market operation philosophy, or even go against it, they should be resolutely replaced. We must choose new distributors to replace the old ones, regardless of the old distributor's strength or network size. Otherwise, the market will lose control in the near future, or even be eliminated. Then, trying to rebuild would be a huge loss in manpower, materials, and finances.
When selecting new distributors, we must learn from past lessons. It's not that bigger is better. Many salespeople like to find distributors with many big brands, but facts often prove otherwise (how to recruit distributors has been detailed earlier). Recruitment should target distributors who can keep up with market changes, have market operation ideas, and identify with the company's market operation philosophy. Small distributors can be cultivated by instilling the company's advanced market operation ideas, supporting them, and helping them grow.
Details to note when replacing a distributor Deciding to replace a distributor is not a snap decision; many details need attention.
Understand the distributor's downstream customer count and the number of products they operate: This requires the resident salesperson to be diligent in daily customer visits, completing the company's customer visit record cards carefully, including detailed addresses, phone numbers, contacts, product items, and monthly sales records. Effort is all in normal times. If you clearly know the distributor's downstream customer information and have built relationships during visits, you'll find that changing distributors isn't difficult.
Clarify the distributor's debt situation: Before preparing to replace the distributor, check with finance to see if the distributor has any outstanding debts. Resolve the payment issue first before considering replacement, to avoid unnecessary losses.
Thoroughly check the distributor's inventory: This is important. Don't think that if the distributor has no receivables, you can proceed. If the original distributor has inventory, they might sell it at low prices, causing chaos for the new distributor and the market. We can use excuses like "poor production date" to transfer products to other regions, or "changing packaging" to return products to the factory.
How to solve leftover goods and terminal payments in the market: There will always be inventory in the market. First, coordinate with the new distributor on after-sales service issues, such as where returns go, who bears the price difference, and at what ratio.
Prepare relevant change documents: Changing distributors must be done with proper justification. Inform all customers selling the company's products who the new distributor is, and where they should go for future purchases and returns. It's not enough for just the distributor to know. I've seen cases where after changing distributors, retail customers went to the old distributor to return goods and then buy more. I don't need to say what the old distributor said and did.
Changing distributors is not a major event in regional sales, but it's not trivial either. Many details need attention, especially the pace of the change, to avoid over-aggressiveness and unnecessary trouble.
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