---
title: "Why Do Distributors Often Fail with New Products and Earn Less?"
description: "In the previous post 'How Should Distributors Conduct Their Business in 2016 Amid Economic Downturn?', we discussed the issue of distributors selecting new products. Building on that, we now explore this topic from a different angle. A common phenomenon is that distributors often fail with new products and earn less from them; many articles also mention the difficulty of 'moving new products'. The reasons are complex, and we won't analyze them one by one. In fact, not only distributors but also larger brand companies face certain risks when launching new products."
author: "张德昭"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2015-12-26"
language: "en"
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# Why Do Distributors Often Fail with New Products and Earn Less?

> In the previous post 'How Should Distributors Conduct Their Business in 2016 Amid Economic Downturn?', we discussed the issue of distributors selecting new products. Building on that, we now explore this topic from a different angle. A common phenomenon is that distributors often fail with new products and earn less from them; many articles also mention the difficulty of 'moving new products'. The reasons are complex, and we won't analyze them one by one. In fact, not only distributors but also larger brand companies face certain risks when launching new products.

In the previous post 'How Should Distributors Conduct Their Business in 2016 Amid Economic Downturn?', we discussed the issue of distributors selecting new products. Building on that, we now explore this topic from a different angle.

There may be a common phenomenon: distributors often fail with new products and earn less from them; many articles also mention the difficulty of 'moving new products'. The reasons are complex, and we won't analyze them one by one. In fact, not only distributors but also larger brand companies face certain risks when launching new products. For the specific group of 'distributors', due to limitations in product selection, market operation methods and concepts, short-term profit-oriented business styles, and many other reasons, the risks of operating new products are undoubtedly much higher.

However, business must continue, the product lines to be represented must be continuously expanded, and the annual sugar and wine fair must be visited... 'Adding new products' is always something that must be considered. The problem we now face is: if we don't have a good hand, or if we initially thought the product selection was good but after a period of operation we find that the difficulties are greater than expected, how can we minimize the risks?

**1. Set Reasonable Business Goals and Review Them at Any Time**

When large enterprises launch new products, they often operate with the intention of not making money in the short term, and their budgets often include a certain amount of loss, even losses for several years. However, as a distributor, you obviously cannot take such risks. Although many distributors have the idea of 'no profit in the first year, break even in the second year, and profit in the third year', often the situation is not as expected: it is very likely that the new product cannot even survive until the second year...

1. Set stable financial goals and review them at any time

A common situation now may be: many distributors do not have a clear concept of monthly product profit and loss, and often they only calculate the total account at the end of the year. If they make a profit, it's fine; but if they incur a loss, where exactly the loss occurred is also a messy account. Moreover, new products often provide distributors with relatively large gross profit margins, which always makes distributors feel that their products can 'cover' the costs, so it is often vague—this habit is not conducive to controlling the financial performance of new products. Often, some problems that could have been discovered and solved in time are often delayed until the end of the year and break out collectively. In addition, the losses on new products may come from several aspects: (1) Channel investment, mainly some costs in modern channels, while traditional channels are relatively better; (2) Return and exchange of slow-moving products from customers; (3) Products already purchased from the manufacturer but piled up in their own warehouse.

Facing such a situation, I think the first step is to set a relatively stable and acceptable financial goal for yourself. Of course, this goal varies from person to person: some distributors may accept short-term losses (but there is a risk that cannot be reversed), while some distributors' bottom line is to break even. Secondly, the monthly product profit and loss statement is a very useful tool. If the distributor's informatization level is relatively high, this statement can be best issued by the financial system; if such conditions are not available, it can also be manually compiled according to their own situation. The basic structure of this form can refer to the sample table. Of course, this is only a reference; the specific form and expense items can be set according to the actual situation of the distributor.

Making the form is not the purpose; the purpose is to discover problems through the form. With this product profit and loss form, you can summarize monthly, quarterly rolling, and semi-annual rolling. Control the financial performance of new products at any time, discover problems in time, deal with them in time, and strive to minimize the financial risks of new products.

2. Clarify the business goals of new products

Using the high gross profit of new products to make money for the company is the ideal state, but as mentioned above, not all distributors can achieve this state with all their new products. Then, whether the new product succeeds or not, it has at least occupied the distributor's funds. If it cannot achieve profitability within a year—assuming it is break-even—what is the significance of operating this new product?

Therefore, at the very beginning of operating a new product, it is necessary to set some other goals besides profitability, so that this new product can at least contribute to the company's business within a certain period. Even if it cannot ultimately make a profit or even be represented anymore, it can still obtain the relatively maximum value of this product.

For example: use the high gross profit characteristics of new products to help share some personnel costs. This requires setting up a new salary structure so that while the overall compensation of sales personnel does not change much, part of the company's human resource costs are shared by new products. In this way, it can indirectly improve the financial performance of the original main products, and also enable new products to play a 'role' as early as possible when the prospects are unclear. Of course, similar business goals should be set according to the actual situation of the distributor. In short, when profitability is unclear, find ways to 'squeeze' more value from new products.

**2. Cooperate with Manufacturers to Develop Systematic Consumer Promotion Plans**

Give sufficient profits to channels, increase distribution rate, strengthen customer visits, and do a good job in terminal display: these basic sales actions are what all distributors will pay attention to and seriously implement; the 'difficulty in moving new products' is nothing more than the consumer level, which is also the area where distributors are relatively least skilled. However, even for new products of big brands, after overwhelming consumer promotions, it is uncertain whether they can be accepted by the market. So what about the 'miscellaneous brand' products represented by distributors?

In the article 'How Should Distributors Conduct Their Business in 2016 Amid Economic Downturn?', we mentioned that 'compared with the orderly consumer pull of large enterprises, the market pull of distributor enterprises appears random and opportunistic. The actual situation is: without the brand endorsement of large enterprises, sporadic ground promotional activities are extremely limited in helping a new product.' A more realistic situation may be: first, distributors are not accustomed to investing market resources at the consumer level (there is no budget for this), and they always like to spend a lot of money on channels, always thinking: if I give enough profits to the channels, the channels (especially terminal stores) will help me promote new products; second, manufacturers are often small enterprises and may not be good at formulating systematic consumer promotion plans, at most providing some promotional material support, and the specific matters rely on the distributor's own operation.

In fact, the now-popular self-media has brought considerable convenience for distributors to conduct consumer promotions and dissemination at low cost; of course, for FMCG, traditional offline promotion is also indispensable. In addition, considering the investment of resources, the form of promotional activities can adopt some 'small but beautiful' plans with topics, and offline activities can be spread through online channels to achieve the widest awareness in the shortest time. Furthermore, in the selection of offline promotion channels, there is a viewpoint that may be 'concentrate resources to thoroughly penetrate one channel'. My view is this: when a new product is launched, the breadth of consumers reached in the short term is more important than the loyalty of some consumers. Therefore, when resources are limited, I personally tend to favor promotional plans that increase consumer contact.

Of course, the premise of all activities is: there must be clear budget and profit and loss management, as mentioned above in the product profit and loss statement.

**3. Are You Sure You Don't Want to Represent It Anymore?**

This is the most unwilling situation to happen; but distributors are not responsible for building brands for manufacturers. Distributors represent new products to make a profit, or at least to achieve some of the goals mentioned above. Once these goals are not achieved, before the manufacturer proposes to terminate the contract—because many small manufacturers still value distributors with some strength—the distributor should consider this issue. If the new product has not achieved the preset goals (as mentioned above), and some trends show no signs of improvement (such as product backlog in the company warehouse, slow-moving channel inventory, poor terminal turnover, etc.), before the loss expands further, it is necessary to shake off this burden as soon as possible.

**Statement: This article has been authorized for original publication by the author. For reprinting, please contact the author.**

**-END-**

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