[Market Symptoms] Manager Pan in Liuzhou, Guangxi, is recently troubled because his contract with Shacheng Wine is about to expire. However, when renewing the contract, the manufacturer's salesperson demanded that the first payment for goods must cover the total sales of the previous year, otherwise they would find another distributor. Pan is in a dilemma. On one hand, he does not want to give up the agency for this nationally known brand in Liuzhou, as he is the first distributor for the brand in the city. After a year of operation, although the brand has not been a blockbuster, it has shown some improvement. On the other hand, if he complies with the salesperson's request, it would strain the company's working capital and affect its development. He recalls that last year, when the manufacturer first entered the Liuzhou market, they offered many favorable terms, including no sales quotas. At that time, the salesperson promised, "You can order anytime, and in any quantity." Now that the brand has gained some market presence in Liuzhou, the manufacturer has changed its tune and raised the conditions for contract renewal. Pan feels that the manufacturer is deliberately burning bridges and being ungrateful. As the contract renewal is delayed, the brand's market performance is starting to suffer. What should Pan do?
Cause 1: Climbing the High Branch, Abandoning the Old Friend The problem is simple: they clearly don't want you to continue, but they won't say it, hoping you'll give up voluntarily.
[Cause] The manufacturer is risking losing the established market by proposing such harsh renewal conditions. I believe they are determined to replace the distributor. However, they cannot simply change distributors without reason, as it would affect their future recruitment. So they raise the renewal conditions, because not every distributor can afford to pay a year's worth of goods upfront. Distributors will naturally hesitate, especially if the new market sales are not high and the market is still in a growth phase. What if they can't sell the goods? The manufacturer assumes the distributor won't agree, allowing them to legitimately replace the distributor while maintaining their image. Since the manufacturer wants to change distributors, even if the distributor, as the weaker party, proposes to "negotiate," the manufacturer will not pay attention.
Why would the manufacturer want to change distributors? Isn't it because sales haven't increased? Does that mean they should be removed? Market development is phased; it's impossible to make a profit in the first year! I was a pioneer but became a martyr. New distributors with greater strength and better terminal networks are naturally preferred by manufacturers. This is exactly what the manufacturer is doing—burning bridges! (Mo Jinhong)
[Prescription 1] Persuade the Manufacturer; Communication is Key Many manufacturer-distributor breakups are due to poor communication. If you still want to continue, first negotiate to see if there's room for discussion. Understand the manufacturer's next steps and their requirements for you. Also, pay attention to changes in your partner and consider their perspective. We should practice empathy and analyze problems from the other side. If the market isn't performing, you can invest more; if distribution isn't enough, you can strengthen it. You can't expect the manufacturer to make all the concessions; both sides should give a little. In business, harmony is best. (Mo Jinhong)
[Prescription 2] Use Both Carrot and Stick On one hand, threaten him: "The mighty dragon is no match for the native serpent. I built this market, my network is still here, and I have good local relationships. If you really want to change, go ahead, I'm not afraid. I built this brand, like raising a child; I know its strengths and weaknesses."
On the other hand, appeal to the relationship: "We've cooperated for a long time; surely you can give me some face?" Maybe things will turn around. (Tang Weiqun)
[Prescription 3] Giving Up Can Also Be Beautiful Distributors should also reflect: why is the manufacturer being so harsh? Is it because of our own inadequacies? At this point, we need to thoroughly examine our market and network. Are there problems? What are the gaps in our network? What needs to be supplemented? Only then can we have a more objective understanding of the problem and solve it better.
If our capabilities are indeed insufficient, why bother holding onto this brand and hindering its development? Since you can't do well, let a more capable distributor take over. If they succeed, you get some credit for being the first distributor; if they fail, doesn't it prove that your giving up was farsighted? (Lai Yaoming)
Cause 2: Pressuring Funds to Ensure Loyalty Nowadays, you need to be careful when dealing with manufacturers. Even if you can digest that much stock, you shouldn't pay all at once, or you'll lose your say and be passive for the whole year.
[Cause] Many distributors handle both A-class and B-class brands of similar products. Competition between these brands often centers on which brand the distributor is willing to invest more funds in. The manufacturer uses the renewal conditions to coerce the distributor, mainly to occupy their funds and prevent them from distributing competing products.
The manufacturer often thinks, "Hmph, with all this stock in your warehouse, won't you push it seriously? After paying so much, you'll have to listen to me." Occupying the distributor's funds ensures their loyalty. (Wu Jinsheng)
[Prescription 1] Development Over Gains and Losses Smaller distributors are more easily bullied. Without investment and risk, how can you grow? If you don't grow, you'll always be at the manufacturer's mercy. At this point, don't dwell on gains and losses; focus on development. If the market is improving, even if the manufacturer increases demands, your profits will still rise because the overall pie is bigger. So, think long-term. Consider the glory of this brand being the only one in your market; this investment is nothing. (Lao Xiuhong)
[Prescription 2] Sales Growth Should Be Based on Market Reality When renewing contracts, manufacturers often propose a minimum sales target for the next year, usually higher than the current year's sales. This is based on the manufacturer's perspective that sales should grow gradually. The manufacturer may have proposed this to Pan because they believe the brand's sales can be further increased.
At this point, as a distributor who knows the local market well, you shouldn't fully comply with the manufacturer's terms. Instead, negotiate based on an assessment of market capacity. The manufacturer should also know that if the market cannot absorb more products, piling goods in the distributor's warehouse will increase inventory pressure, leading to extreme measures like price cuts to quickly offload stock, which could kill the brand's market. In this case, the distributor should explain the pros and cons to the manufacturer and work together to maintain the market. (Lai Yaoming)
[Prescription 3] Credibility as a Guarantee Distributors should use their years of cooperation and credibility to assure the manufacturer that they will not harm the brand's interests, will cooperate fully in market development, and strive for consensus. The manufacturer won't make things too difficult for the distributor, as maintaining an old distributor is easier than developing a new one. (Tang Weiqun)
[Prescription 4] Another Good Time to Ask for Support Manufacturer-distributor relations are inherently a game. It's common for manufacturers to pressure distributors. As a distributor, you should respond actively and not give up easily. If the manufacturer is sincere about developing the market and just wants the distributor to be more focused, then we can think of countermeasures with the goal of faster and better market development.
You want me to pay upfront? Fine, no problem! But what can you give me in return? First, more market support to balance input and output; second, a feasible market development plan, i.e., a solution to achieve sales targets.
If these two points are addressed, the market development should be healthy, and this investment is worthwhile. (Wang Rongyao)
Cause 3: Seeking Performance, Playing Tricks If the salesperson is trying to boost their performance, their words are largely a test, using the market to scare you. If you're scared, they benefit; if not, they can still say, "Let's operate as before."
[Cause] This situation could also be due to the salesperson's personal actions. Usually, at year-end, manufacturers assess salespeople's performance. This coincides with contract renewals. Since year-end is the peak season for alcohol sales, distributors won't give up a brand that has already succeeded in their market. Instead, they hope to continue operating it to generate substantial profits during the peak season. At this time, the salesperson might exploit this psychology to raise the renewal terms to improve their own performance. (Tang Weiqun)
[Prescription 1] Fight Fire with Fire Although I'm not a powerful distributor locally, if you try to play hardball with me, it won't work. Since he's scaring you, scare him back. Put on the posture of a local strongman and tell the salesperson directly, "I have connections in both the underworld and the legitimate world. If you try any tricks, I'll make sure you can't stay here! Your product won't move in my territory!" (Even if it's a bluff, say it with strong tone.) After bluffing, soften your tone and say, "Go back and discuss with your boss. Our cooperation last year was good, but I really can't pay that much. How about this: I won't make it hard for you; I'll pay for two months of peak season sales." (Use a soft tone and play poor when it comes to money. Let the salesperson know that paying an extra month is doing him a favor.) (Wang Rongyao)
[Prescription 2] Use His Superior to Pressure Him At this point, you can call the manufacturer to verify whether this adjustment is a company policy or the salesperson's own trick. If it's the latter, you can say to the salesperson, "How about this: I can discuss this directly with the head office to save you the trouble." Would a salesperson dare to let his superiors know about his little tricks? He'll naturally give up his schemes. And this approach won't damage the relationship you've built with him. (Mo Jinhong)
[Note] Depending on the cause, the above prescriptions can be taken individually or in combination for a composite treatment.
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