Why Distributors Are a "Ticket" That Can Be "Torn Up" at Any Time

Introduction: Distributors often accuse manufacturers of "burning bridges after crossing the river." In the future, don't complain, because I've been in marketing for over 20 years, and I've never seen a manufacturer that doesn't burn bridges after crossing. Distributors should also not feel indignant. Imagine if one day a manufacturer gets into trouble and is about to go under. Would a distributor be very loyal and say, "I'll die with the manufacturer, oyeah?"

Distributors are a "ticket" that can be "torn up" at any time

As I said before, more and more people will be doing terminal work, and market maintenance will become more and more detailed. This means that the trend for distributors is definitely toward smaller scale and specialization.

Smaller scale: Distributors' agency areas will become smaller and smaller. In developed cities in the Pearl River Delta and Yangtze River Delta, distributors have already expanded to the township level. Only when the distributor's area is small can they truly achieve intensive cultivation and market maintenance.

Specialization: Manufacturers will open several channel distributors in one area: distributors specializing in catering, distributors specializing in supermarkets, distributors specializing in circulation, distributors specializing in group buying...

What does this trend mean? It means that the distributor's area will further shrink, even to a specific channel in a county or even a township.

Distributors have become a "ticket" for manufacturers to continuously refine their market!

Just like a movie ticket, it's useful before entering, but after entering, it's often "torn up" — torn into small pieces, and finally possibly thrown away. The same principle applies: manufacturers must rely on distributors' strength to start new markets at low cost (using the ticket to enter). As the product grows in the local market, manufacturers will gradually increase local manpower and market control, and may also set up intensive distribution by adding distributors (tearing a big ticket into small pieces), and in some areas may go direct (possibly throwing away the movie ticket).

Too cruel! Burning bridges after crossing the river!

Distributors often accuse manufacturers of "burning bridges after crossing the river." In the future, don't complain, because I've been in marketing for over 20 years, and I've never seen a manufacturer that doesn't burn bridges after crossing.

Distributors should also not use moral kidnapping or feel indignant. Imagine if one day a manufacturer gets into trouble and is about to go under. Would a distributor be very loyal and say, "I'll die with the manufacturer, oyeah?"

Looking back at China's 30-plus years of marketing history, which manufacturer hasn't developed by burning bridges after crossing the river? This is the market game rule, an inevitable outcome.

[Case Study]

Over more than 30 years of market economy development, manufacturers have shouted several slogans, and each new slogan has made distributors "pack up and leave."

Around 1992, manufacturers shouted the first slogan: from big account agency to intensive distribution. Since then, the once-glorious North China general agents and South China general distributors have "rolled heads and left bloodstains." Now, not to mention general agents, even provincial-level distributors are rare.

Around 1995, some companies began to shout the slogan of terminal sales, and distributors' territorial areas became even smaller, and they had to go out to stock and do displays. Currently, in the consumer goods industry, most "sitting merchants" who stay at home waiting for business have "died in battle."

In 1997, with the "channel intensive cultivation" plans of several foreign consumer goods companies, the "pre-sale system" became more and more common. Manufacturers' sales representatives personally visited terminals to take orders and deliver goods to distributors, further "degrading" distributors into delivery drivers.

After 2000, with the vigorous development of hypermarkets, manufacturers began to force distributors to obtain general taxpayer qualifications, pay fees, and recruit promoters to do supermarket business. Distributors paid a lot of tuition and just learned how to do supermarkets. International chains then proposed direct cooperation with manufacturers, and more and more manufacturers began to directly operate hypermarkets. Many manufacturers chose a profit-after-rebate model with distributors as supermarket service providers: distributors deliver goods to supermarkets (the manufacturer "borrows" the distributor's goods to supply the supermarket), the supermarket pays the contract party (the manufacturer), and at the end of the month, the distributor reconciles accounts with the manufacturer based on the supermarket's receipt, and the manufacturer "returns goods" to the distributor, while also giving the distributor a few points of distribution service fee based on the delivery amount.

From "big account agency" to "intensive distribution" to "pre-sale system" to "profit after rebate," the manufacturer's hand has stretched further and further. Distributors have been "hollowed out" — previously the market was in the distributor's hands, but now the market is gradually dominated by the manufacturer. Manufacturers no longer rely on distributors for sales, but rather borrow their distribution and warehousing capabilities, as well as their financial pressure-bearing ability. Manufacturers say they let distributors complete distribution work, but in reality, "selling" is just a formality; "distributing" is the essence.

Previously, distributors were gods. Large distributors even dared to go to the factory and throw the general manager's cup, often making demands like "If you don't give me a few more points, I won't do it anymore." Now distributors are still gods, but they are no longer exclusive distributors, so there are more gods. Even a county town has two gods, and even the streets are full of gods. The former "gods" were very powerful, but the current "gods" are more passive — you must be obedient; only if you are obedient are you a god. If you are not obedient, the manufacturer may "torture" you, and finally may even "send you on your way."

Manufacturers, for their livelihood, must divide distributor areas into smaller pieces and refine the market; this is a commercial law. Supermarkets, for business, hope to cooperate directly with manufacturers to get more support; this is also forced by circumstances. The game between manufacturers and distributors, burning bridges after crossing the river, is an inevitable outcome. Everyone is forced to do it! Frogs must live, snakes must be full, Qin Xianglian and Princess Huanggu both have reasons, only Chen Shimei is not human! It's hard for distributors to become the bridge that is dismantled after crossing. No wonder distributors complain: The brand belongs to the manufacturer, the market belongs to the terminal, and we distributors are just "pimps." We are not afraid of the infighting among distributors; what we fear most is the manufacturer changing their mind, saying we can't sell, and then we have no profit. "After gathering all the flowers to make honey, I don't know for whom I work so hard, living from hand to mouth"!

How distributors should face their fate of being "burned bridges after crossing the river"

Option 1: Be foresighted, follow the trend, and build your core competitiveness in a small area and a specific professional channel with intensive cultivation. Countless facts and cases prove that distributors who intensively cultivate their small area will definitely gain more profit than those who manage a large market extensively.

Option 2: Structure determines function. In the future, the only reason a distributor can represent a larger area is not your large sales volume, but your ability to have enough team and capability to refine the market. So, plan ahead and ensure structural support: add people, add vehicles, open branch offices, or even strive to form a "joint sales body" with manufacturers, so that you can intensively cultivate a larger area and more channels. At the same time, tap internal management potential, and externally seek better product portfolios to absorb costs, ultimately to win a larger territory and living space for yourself.

Option 3: Open up new opportunities: forward development, such as building your own terminals or doing hypermarkets; backward development, such as OEM or even becoming a manufacturer; or entering new industries; or passively accepting elimination.

Remember, your reward is not related to your effort, but is proportional to your irreplaceability. When you have irreplaceable value in a certain field, burning bridges after crossing the river has nothing to do with you. Otherwise, this old ticket of yours won't get you on the manufacturer's broken ship.

This article is excerpted from Mr. Wei Qing's marketing monograph "Distributor Management Action Decomposition Upgrade Edition."

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