Preface Chinese marketing's contribution to global marketing is the creation of marketing terms with Chinese characteristics, which cannot be found in Western textbooks. For example, interactive marketing, opportunity, sales volume, channel, promotion, shopping guide, planning, selling, and product. This is not to say that Chinese marketing only focuses on these nine terms, but rather that these terms are very Chinese, and even their meanings have diverged from those in Western textbooks. It is precisely because of these special marketing terms that we find even students who excel in marketing at university are at a loss when they reach the front line, because Chinese marketing does not follow the playbook of Western textbooks. There are also other uniquely Chinese terms, such as distribution, deep distribution, terminal interception, terminal promotion, shelf management, second-tier wholesalers, and warehouse occupying. These terms were once very important at certain stages of Chinese marketing, but as Chinese marketing matures, they are gradually being phased out. Of course, the pace of exit varies across different markets. Below, I will discuss several Chinese marketing terms that are gradually disappearing.
01 Deep Distribution Deep distribution can be said to be the biggest feature of Chinese marketing. China has experienced a debate between "brand-driven" and "channel-driven" approaches. In reality, successful Chinese companies talk about brand but actually focus on channels. Because if it's purely about brand, how can they compete with multinational companies? Channel-driven, the classic approach is deep distribution. Because China's retail terminals are "small and scattered," only deep distribution can solve the problem of reaching terminals directly and getting close to consumers. Why can Chinese companies do deep distribution while multinational companies find it difficult? Because deep distribution is essentially a "channel human-wave tactic." Multinational FMCG companies that perform well in China, such as Procter & Gamble and Coca-Cola, actually also do deep distribution, but overall, multinational companies rely on brand power and have less need for deep distribution; on the other hand, deep distribution is a human-wave tactic, and multinational companies have high labor costs, making it unaffordable. Even for local companies that do deep distribution well, it is often "two steps forward, one step back," otherwise it really cannot be sustained. In fact, deep distribution works under three major premises: First, there is sufficient incremental space, and the increment can offset the increase in costs; second, there is room for channels to sink; third, labor costs are low enough. Now, the three premises for deep distribution have basically disappeared. Coupled with the industry reaching its peak, companies' focus is no longer on deep distribution but on heavy promotions. The resurgence of "second-tier wholesalers" and "provincial distributors" can be seen as a sign of the end of deep distribution. Large enterprises no longer need to do deep distribution, and small enterprises do not have the capability to do it. The human-wave deep distribution can no longer continue, but with the popularity of SaaS systems and B2B e-commerce, internet technology can already achieve the goals of deep distribution. From now on, the human-wave deep distribution will truly disappear from China's marketing dictionary. Of course, there are still a few companies persisting, but it is no longer mainstream.
02 Distribution The term "distribution" was once very critical. Companies often had "distribution rate" in their assessments, and new product launches always required distribution. Brands like Coca-Cola and Wrigley were very proud of having the highest distribution rates nationwide. Whether it's branded or non-branded products, as long as you distribute them, there will be sales. So the sales logic at that time was: Product → Channel (distribution) → Consumer. Even now, distribution remains an important task for companies. Recent cases may be very discouraging for those who are keen on distribution. During the process of product upgrading, it has been found that new-generation products no longer fit the original distribution logic. In the past, there was a period when basically distribution meant sales. I think there were two premises: First, the mainstream products at that time were "double-low products" (quality at the bottom line, price at the bottom), which were the mainstream and had little difference. As long as two conditions were met, they could basically sell: one was visibility (distribution); the other was promotional activities (sales promotion); Second, at the initial stage of distribution, there were usually sufficient policies, and new products could become the terminal's "first-recommended products" (high-margin products). Terminals were willing to recommend them to consumers, and the recommendation success rate was extremely high. The deterioration of distribution effectiveness is a major challenge for manufacturers launching new products. I believe there are three important reasons: First, for products undergoing mainstream shift, it becomes difficult for consumers to accept new products. Because the products of mainstream shift are not the current mainstream but the future mainstream. Currently, they are niche products, not all terminals can sell them, and terminal recommendations are not always effective; Second, with the supermarketization of terminals, proactive recommendations have decreased, and using profits to solve the "first-recommended product" no longer works; Third, internet communication has given birth to new promotion methods that are more effective than distribution plus promotion. Previously, in an article titled "Mainstream Shift: May Die on Traditional Paths," I discussed this issue. When manufacturers launch new products, they used to rely on "air advertising" + "ground distribution + terminal promotion," a set of methods that were once very effective but now no longer work. I am not saying that the concept of distribution no longer exists, but that the method of promoting new products through distribution is no longer effective. Of course, for products to be sold, distribution is definitely needed. If the terminal has no stock, how can products be sold? In the future, new product promotion may be reversed: first promote, then distribute. Distribution remains, but the logic has changed.
03 Terminal Interception and Terminal Promotion Terminal interception and terminal promotion are definitely Chinese characteristics. This method of interfering with consumers at the terminal has actually become widespread and has been accepted by international retail giants, showing how powerful the Chinese market is in changing world rules. Terminal interception and terminal promotion are also based on the human-wave tactic of Chinese marketing. In the future, any marketing method based on the human-wave tactic may gradually shrink or even disappear. The effectiveness of terminal interception and terminal promotion shows what? It shows that consumers are easily influenced. In the era when "double-low products" were mainstream, the differences between products of different brands were indeed not significant, and consumers were easily tempted by promotional policies. With the mainstream shift, this situation is about to change. The higher-end the consumer, the less easily they are influenced by policies, and the more they have their own consumption understanding. More importantly, the internet's involvement in marketing has given rise to new social marketing methods that almost completely change the logic of relying on human-wave tactics for terminal interception and terminal promotion, and they are very effective.
04 Shelf Management Shelf management was once a marketing job, with people dedicated to it. Shelf management still exists now, and in the short term, it may even strengthen. I predict that this job will also gradually phase out. The concept of shelf management stems from the idea that the larger the shelf space, the greater the sales. Just as "sales are squeezed out," sales are also squeezed out by shelf space. In China, shelf management is actually malicious interference with competitors. Compress the competitor's shelf space and expand your own. Competitors do the same in return. It is actually malicious competition. From the merchant's profit logic, the display that maximizes a manufacturer's sales is actually detrimental to the merchant. Unfortunately, not many Chinese merchants realize this problem. Instead, they harm their own profits under the guise of collecting display fees. Shelf management seems like the merchant is taking advantage of the manufacturer's labor, thinking they are clever, but they don't realize that the real victim is themselves. Because what is good for the manufacturer is not necessarily good for the consumer, nor necessarily good for the merchant. Of course, the gradual exit of shelf management is not due to the above reasons. I think there are two core reasons: First, visit-based sales is gradually replacing vehicle-based sales, and in the future, new marketing methods may replace visit-based sales, so there will be no one to do shelf management as a side task; second, with the increase in labor costs, this method that heavily relies on the human-wave tactic can no longer be sustained. Of course, this also takes time.
05 Warehouse Occupying Under the guise of promotion, actually occupying warehouse space in the channel is becoming widespread. Why do I say that warehouse occupying will disappear? I think this is precisely the last frenzy of warehouse occupying. Channel promotion, followed by warehouse occupying, to compete for channel funds and squeeze out competitors. This was the original purpose of promotional warehouse occupying, and those who did it well in the early days did achieve their goals. But now I find that all warehouse occupying is actually harming the manufacturers and distributors themselves. For example, manufacturers and distributors of short-shelf-life products now spend a lot of time dealing with near-expiry products. Why are there so many near-expiry products? This is the result of warehouse occupying. Products are pushed into the channel with strong policies, but the channel cannot digest them, so the manufacturers have no choice but to take back the near-expiry products. If they don't take them back, the problem is even more serious. During the process of warehouse occupying, manufacturers and distributors do two useless things: one is that warehouse occupying is useless; the other is that taking back near-expiry products is useless. In fact, a large number of near-expiry products are the result of warehouse occupying. In the past, warehouse occupying was based on a simple and naive belief: sales are squeezed out. In the years of industry growth, this logic held true. However, in the era of industry peaking, this logic does not hold. The complete disappearance of warehouse occupying may take time, but logically, it has entered its final frenzy. In the future, if we don't occupy warehouses, how do we do marketing? The current regional "unified warehousing and distribution" is being promoted. I think it will become widespread in a few years, ensuring that terminals always have stock, as long as terminals have products to sell. Using the minimum amount of capital to achieve maximum sales is the goal of future distribution. The terms I am discussing that are about to disappear from China's marketing dictionary do not mean they have already disappeared. If they had truly disappeared, I wouldn't be talking about them. I talk about their disappearance to represent a trend. If these terms have already disappeared in your company or work, it means you are saying goodbye to backwardness. By the way, if you think of any other marketing terms that are about to disappear, feel free to leave a comment after the article, and we can discuss together. Source: Teacher Liu's New Marketing -END-