Summary of the Key Points
The core message of this article is that the current market environment for the fast-moving consumer goods (FMCG) industry has become more challenging. Brands can no longer rely on their past practices of forcing dealers to stock up heavily and ignoring their interests. Instead, they must establish an equal and mutually beneficial partnership with dealers, focusing on their profitability and risks. Only by doing so can both parties weather the market downturn and maintain their channel advantages.
1. The Old “Brand-Dominant” Model No Longer Works
In the past, when business was booming, brands would ask dealers to stock up at the end of the month to meet sales targets, and dealers were willing to do so since they could still make a profit from the sales. But now? Dealers are much more cautious:
- They are hesitant to stock up heavily for fear that they won’t be able to sell the products and will have to deal with the subsequent returns;
- They even avoid dealing with brands that don’t offer after-sales services, as returning products can result in significant losses;
- Some dealers are choosing to shrink their operations, preferring not to expand and take risks with less reliable channels.
Why has this changed? The market environment has deteriorated, leaving dealers with very thin profits, so they are much more meticulous with their finances. Unreasonable demands from brands (such as no after-sales support or arbitrary fines) can easily erode their already meager profits, and dealers are no longer tolerating such behavior.
2. The Essence of Cooperation is “Mutual Success,” Not the Brand Leading Dealers to Profit
Many brands used to believe that they were responsible for the dealers’ success, leading to an arrogant attitude. However, the reality is:
- Without dealers distributing products across the country and keeping stores stocked and attracting customers, brands cannot establish a strong presence in consumers’ minds;
- Even if a product becomes popular temporarily, it will soon be forgotten if dealers don’t continue to promote it to consumers (who tend to prefer new things).
In short, brands provide good products and fair profit distribution, while dealers use their regional resources to sell those products. The relationship between them is one of mutual success; neither can function without the other. With dealers’ profit margins shrinking and business models becoming more fragile, any unequal cooperation will fail.
3. Dealers Are More Important Now Than Ever: Without Product Differentiation, Success Depends on Operations
In the past, brands could attract consumers through product innovation. However, with a lack of innovation, minimal product differentiation, and overcapacity, consumers have little reason to choose one brand over another. Therefore, dealers’ operational capabilities become crucial:
- In the same channels (such as supermarkets and new retail formats), can dealers place products in prominent positions? Can they organize promotional activities to attract customers? Can they plan sales strategically? These details directly affect a brand’s performance;
- Good dealers don’t just appear out of nowhere; they are the result of long-term collaboration. Brands need to cooperate in areas such as sales, marketing, and supply chain management, and provide financial and resource support (such as after-sales guarantees and promotional funds) to enable dealers to work effectively.
If brands continue to let dealers bear risks (e.g., not handling returns after they stock up products) or deny them necessary resources (e.g., not funding promotions), internal conflicts will arise, and it’s only a matter of time before brands lose market share.
4. The True Benefit of Supporting Dealers is Also Benefiting the Brands
“Supporting dealers” is not just about shouting slogans; it requires concrete actions:
- Provide after-sales guarantees to prevent dealers from worrying about unsold products;
- Offer financial support for marketing activities so dealers don’t have to foot the bill;
- Reduce unnecessary conflicts by avoiding unreasonable fines and terms, and work together to expand the market.
Why is this important? In a shrinking market, dealers’ stability at the retail level is essential for maintaining sales. Giving dealers confidence and support is like giving the brand its own foundation—after all, dealers are the brand’s “extremities,” and only with strong limbs can the brand stand firm.
5. The Next Five Years: Together to Survive the Challenges
The article concludes by stating that the FMCG industry will continue to experience a process of consolidation over the next five years, with declining sales and losses being the norm. For brands, it is more important than ever to build a team of capable and confident dealer partners who can help each other through difficulties rather than blaming each other.
Although times are tough, by establishing healthy and stable relationships with dealers, brands and dealers can together overcome these challenges and ensure the longevity of their businesses.
In One Sentence
Brands and dealers are not in a hierarchical relationship; they are allies. In today’s cold market, only by supporting each other and working towards mutual success can they survive. Brands should stop focusing on forcing dealers to stock up products and instead consider how to help them make profits—this is the path to long-term success.